On June 1, 2018, Missouri enacted legislation (S.B. 884) that, effective for tax years beginning on or after January 1, 2020, reduces the corporate income tax rate from 6.25% to 4%, requires the use of a single-sales factor apportionment formula, and requires market-based sourcing for sale of other than tangible personal property. In addition, the legislation requires the elimination of transactions between affiliated group members on a consolidated state income tax return and eliminates the requirement that an affiliated group must derive at least 50% of its income from in-state sources in order to file a consolidated return.
The market sourcing provisions taking effect in 2020 are similar but not identical to those in effect for electing taxpayers. The pre-2020 rules provided for a broader ‘throw-out’ rule where the state of assignment cannot be determined or reasonably approximated. Throw-out will apply in a more limited context in 2020.
Other Missouri tax bills that have yet to be signed by the governor include a measure (H.B. 2540) that would increase the pass-through entity income deduction, lower the top personal income tax rate, and phase out the federal tax deduction.