Tax refunds possible if HB 253 goes into effect, says Koster | St. Louis Public Radio

Tax refunds possible if HB 253 goes into effect, says Koster

Aug 13, 2013

This article first appeared in the St. Louis Beacon: Missouri Attorney General Chris Koster, who has stayed out of the tax-cut debate, jumped in with a thud on Thursday when he issued a formal opinion stating that Missouri taxpayers could seek up to three years of back-tax refunds if lawmakers override Gov. Jay Nixon's veto of the bill.

If Missouri has to rebate taxes, Nixon has said it could throw the state into a budget crisis.

Koster’s analysis buttresses one of Nixon's main reasons for vetoing the bill known as HB253, which cuts income taxes for individuals and businesses.

Koster, a Democrat, issued the opinion at the request of House Speaker Tim Jones, R-Eureka.

At issue is a specific provision in HB 253 that would drop Missouri’s income tax a half of a percentage point upon enactment of the Federal Marketplace Fairness Act. That act -- which has yet to pass the U.S. House -- would allow states to collect sales taxes from out-of-state online retailers. The U.S. Senate approved the bill by a hefty margin.

In his veto letter, Nixon said that because of the way the bill was drafted, HB 253 "could enable taxpayers to seek refunds of taxes previously paid for up to three prior tax years (due to the three-year statute of limitations for filing amended returns).”

The result, Nixon argued, was an obligation to the state to pay out “tax refunds of approximately $300 million per year for taxes paid during the last three years – for an additional fiscal impact of $900 million – all coming in the same year as the immediate approximately $300 million loss described above.”

Nixon reaffirmed that view at a news conference here Thursday in which he told educators and parents in Richmond Heights that Koster's interpretation would mean that the state could lose an additional $1.2 billion in revenue in one year -- forcing drastic cuts -- to pay the refunds.

Some supporters of the bill – including Jones – have strongly disputed that view. House Budget Committee chairman Rick Stream, R-Kirkwood, has contended that it was unlikely that Congress would pass the FMFA anytime soon. 

Jones said in a statement earlier this summer that Nixon’s “claims of a retroactive tax cut that would generate a significant revenue shortfall are sensationalized talking points and not in any way based on statutory reality or legal precedent.”

Jones and others also argued that the Missouri Constitution prohibits retroactive laws. Jones then asked Koster to provide a legal opinion, adding in his formal request that “there is no language in HB 253, nor in existing statute, that would in any way authorize the income tax reduction to be applied retroactively.”

But in his response to Jones’ request, Koster wrote that “the plain language of the new legislation suggests that, if certain triggering events set forth in statute occur, taxpayers may seek refunds of taxes paid in the three preceding tax years.”

That statute, Koster noted, “establishes the base tax table for all tax years beginning on or before the later of Dec. 31, 2013.”

“Here, the plain language of the statute alters the tax rate not just for the year the new provision becomes effective and onward, but expressly alters the tax rates for tax years ‘before’ that year,” Koster wrote. “If the General Assembly did not intend that taxpayers should get any benefit from the backing-looking change, why include that language? Courts are loathe to render statutory language meaningless. To say that tax tables… apply only prospectively robs the phrase ‘or before’ of any meaning.”

With regard to the constitutional prohibition, Koster cited case law: “The state may constitutionally pass retrospective laws impairing its own rights, and may impose new liabilities with respect to transactions already past on the state itself.”

“Thus, the constitutional prohibition against the retrospective application of laws would not pose a barrier to taxpayers seeking refunds under these circumstances,” Koster wrote.

In a statement, Jones said he was disappointed Koster "chose not to show his independence on this important issue and instead sided with the liberal, tax-and-spend views of the governor and the president." 

"In doing so, he missed an opportunity to join Republicans in our defense of Missouri taxpayers," Jones said. "Going forward, we will continue to rely on the legal analysis of our independent, non-partisan Legislative Research department that clearly refutes the highly-partisan claims made by the governor and now the Attorney General.”

Earlier this week, Koster said that he was refraining from taking a public stance on HB253 because of Jones' request.