By Ray McCarty and Matthew Smith
February 28, 2025 - Here is a quick recap of some of our activities working for you this week. Although we were active on many more bills, recapping all our activity would take you until this time next week to read, so we will hit the highlights.
Proposition A - Minimum Wage and Paid Sick/Domestic Violence Leave Revisions (AIM supports)
Last week, we told you Associated Industries of Missouri joined other business groups in supporting bills aimed at reducing the burden on employers due to the passage of Proposition A. This week, the House Commerce Committee passed HCS HB 567, 546, 758 & 958 (Gallick). The bill would move the next minimum wage hike from 1/1/26 to 1/1/28, remove the automatic inflation adjustment to the minimum wage, and remove all provisions related to paid sick leave and paid domestic violence leave.
Proposition A increased the state minimum wage and, absent legislative intervention, will require employers to provide paid sick and domestic violence leave while hampering employers' ability to control the use of such leave and allowing lawsuits against employers. AIM president Ray McCarty previously told committee members who expressed concern with "overturning the will of the people" that it was impossible to know what the will of the people was because three questions were combined into one: increasing minimum wage, requiring paid sick leave, and requiring paid domestic violence leave (which was not even included in the ballot summary voters saw when voting). The fact that this combination of all three separate subjects into one ballot question violated the Missouri Constitution is the subject of a lawsuit currently pending in the Missouri Supreme Court: Raymond McCarty, et al. vs. Missouri Secretary of State, et al., Case #SC100876. Oral arguments are scheduled for March 12 at 9:00 a.m.
Elimination of Local Manufacturing Exemption (AIM opposes)
HB 321 (Wolfin) would reapply local sales taxes to all items used in the manufacturing process! Not only would this be a dramatic $35 million tax increase on Missouri manufacturers, miners, processors and producers, the bill would endanger the ability of the state and local governments to collect sales/use taxes on internet purchases. This week, AIM met with Rep. Wolfin and Rep. Harbison (who filed a similar bill) prior to a hearing on HB 321 on Monday. At the hearing, county officials from Ste. Genevieve County complained that the loss of revenue from local sales tax on manufacturing inputs endangered a revenue stream supporting bonds for a community center and water park. In his testimony, McCarty pointed out the danger of throwing the state and local tax bases out of alignment and the potential loss of revenue to cities and counties ($370m) if the ability to use taxes on internet sales were successfully challenged as an undue burden on interstate commerce in violation of the Commerce Clause. McCarty pointed out local governments supported the Wayfair bill and the solution for Ste. Genevieve was to pass a local use tax that would more than offset their loss of sales tax revenue from manufacturing inputs. Ste. Genevieve officials said local voters had twice rejected the local use tax. A hearing was posted for the other bill, HB 1162 (Harbison) but the bill was not heard.
Last week, Ray McCarty was invited to address the Mo. Assn. of Counties board and explained the impact the bill would have on the ability of the state and local governments to collect sales/use taxes on internet sales, pointing out many counties supported the Wayfair bill that provided the full exemption when it passed four years ago. The exemption has been a full exemption for the last two years.
Today, McCarty gave a similar presentation to a large crowd in the County Commissioners Association of Missouri training session.
American Beer Bill (AIM Supports)
HB 1041 (Diehl) was heard in committee this week. Currently, the Department of Revenue collects $1.86 per barrel on all malt liquors, for the inspection and gauging of malt liquors. HB 1041 provides that, beginning January 1, 2026, the Department must collect $0.62 per barrel for all malt liquor manufactured in an American brewery, and $1.86 per barrel for all foreign import malt liquor. AIM supports the bill because it would provide a benefit to American breweries.
Eliminating the Capital Gains Tax (AIM Supports)
Associated Industries testified in support of HCS HB 594 & 508 (Rep. Perkins and Hruza) in the Senate General Laws Committee, which eliminates the capital gains tax in Missouri. This tax burdens industries in Missouri by taxing any entity that sells an asset that has appreciated. This includes stocks, bonds, or any equipment that industries manufacture. Currently, Missouri’s capital gains tax is the same rate as the income tax, at 4.7%. According to the bill’s fiscal note, the bill would save taxpayers around $335 million in FY 2026 and then would save around $233 million per year thereafter. This bill furthers AIM's goal of lessening the tax burden on businesses in Missouri.
Corporation Income Tax Phaseout (AIM Supports)
HB 425 (Vernetti) was returned by a rules committee to the House Special Committee on Tax Reform, indicating the bill needs more work before it advances.
Utility Construction Work in Process (CWIP) (AIM opposes)
HCS HB 376 (Black), a bill allowing CWIP for small modular nuclear electricity generation projects was advanced from the House Utilities Committee this week, and many of our suggested changes were made to the bill. However, the bill still does not provide a refund to consumers with interest if a project is never built. Associated Industries of Missouri opposes removing the prohibition against utility companies using "construction work in process" (CWIP) to pass costs of projects to consumers through rates before the project produces any energy unless strong consumer protections are enacted. This bill could cause Missouri utility consumers, including commercial and industrial ratepayers, to be liable for costs of projects undertaken by utilities but never put into production. Current law allows recovery of such costs ONLY AFTER the project begins producing energy.
This flawed CWIP approach hurt ratepayers in Florida, Georgia and South Carolina. In fact, the CEO of South Carolina's SCANA Corporation was convicted for intentionally defrauding ratepayers and creating what one U.S. Attorney described as an "$11 billion nuclear ghost town."
AIM suggested requiring refunds with interest if the project has dramatic cost overruns or if the project is never placed in service. HCS HB 376 provides such refunds if the utility makes imprudent expenditures, but omits language requiring refunds if the project is never placed in service. We will work to include this language in the House version of the bill as it moves forward. A similar provision was included in SB 4 passed by the Senate and now awaiting action in the House.
On Jan. 31, 2024, the NuScale small modular reactor program was terminated. The Utah Associated Municipal Power Systems in 2015 began the project to construct 12 reactor modules capable of a combined 600mw in generation with a target date of 2023 at a cost of $3B. The plan was modified in 2018 to increase to a combined 700mw plant to "lower the cost." Cost of the project went from $3B to $4.2B in 2018, $6.1B in 2020, and finally $9.3B after it was scaled back to 462mw in 2021. We need to be sure our Missouri electricity consumers are protected.
Protecting Thousands of Businesses from Local Regulations (AIM Supports)
SB 231 (Sen. Brown) seeks to preempt local laws, ordinances, orders, rules, or regulations enacted by a county, municipality, or other political subdivisions from regulating the sale of tobacco products, alternative nicotine products, or vapor products. This bill addresses local rules, like a proposed rule by Kansas City to ban flavored tobacco products, that would cripple thousands of businesses in Missouri. The vast majority of sales from alternative tobacco products are flavored products. If a local jurisdiction decides to ban these products, then it would risk putting these operations out of business. We believe that an such regulations should be set at the state level to provide uniformity across the state.
Protecting Innovators Against Frivolous Litigation (AIM Supports)
HB 918 (Rep. Black) establishes protection for businesses and innovators by requiring that in any civil action for personal injury, death, or property damage caused by a product, the plaintiff must prove that the defendant designed, manufactured, sold or leased the actual product that caused the injury.
This bill seeks to protect those who have been sued because of an alleged injury from a “knock-off” product. Businesses and innovators should not be on the hook for a product they had no part of manufacturing. We believe that this bill, like all other tort reform bills in the Missouri legislature, is a commonsense solution.
Preventing Double Recovery in Civil Damages (AIM Supports)
HB 952 (Rep. Overcast) seeks to increase fairness in the courts by requiring amounts paid by the plaintiff's insurance to be offset against amounts that a plaintiff may recover in the cost recovery part of the trial. For example, if the total amount a plaintiff had to pay was $100,000, but the plaintiff's insurance had already paid the plaintiff $20,000, then the total recovery would be $80,000. This bill provides plaintiffs will be made whole, but not double compensated.
Child Care Incentive Package (AIM Supports)
HB 269 (Shields) containing several incentives to boost the availability of quality child care, was passed by the House and sent to the Senate this week:
"Child Care Contribution Tax Credit" - Beginning January 1, 2026, a taxpayer may claim a tax credit for verified contributions to a child care provider in an amount up to 75% of the contribution. The tax credit issued must not be less than $100, and must not exceed $200,000 per tax year;
"Employer Provided Child Care Assistance Tax Credit Act" - Beginning January 1, 2026, a taxpayer
with two or more employees may claim a tax credit in an amount equal to 30% of the qualified child care expenditures paid or incurred with respect to a child care facility. The maximum amount of any tax credit issued must not exceed $200,000 per taxpayer per tax year; and,
"Child Care Providers Tax Credit Act" - Beginning January 1, 2026, a child care provider with three
or more employees may claim a tax credit in an amount equal to the child care provider's eligible employer withholding tax, and may also claim a tax credit in an amount up to 30% of the child care
provider's capital expenditures.
The program would expire December 31, 2031.
Broadband Equipment (AIM supports)
AIM supports bills exempting broadband equipment from sales and use taxes. Most of this equipment is already used to provide telecommunications services and is already exempt, but the bills would ensure a future tax auditor does not attempt to apply tax to equipment that is used for broadband internet service. One of the bills, SB 185 (Cierpiot), was passed by the Senate committee this week.
We intend to provide these legislative updates to you on a weekly basis on Fridays as we track the progress of these and other bills affecting Missouri businesses.