AIM for Good Business Week in Review
Nathan Dampf, AIM Director of Communications, 5/19/2011
Associated Industries of Missouri (AIM) is pleased the Missouri legislature took action this year to eliminate the corporation franchise tax and extend state oversight of water pollution programs, but overall legislative results for employers were mixed. One of the biggest successes of this session was defeating a major employer tax and cost increase bill that was backed by one other business organization and the trial bar.
Employers were optimistic this session, but the legislature was only able to get two high priority bills to the governor’s desk. Governor Nixon signed Senate Bill 19 to cap the Missouri Corporation Franchise Tax and phase it out over the next five years. In the same week, he vetoed another priority that would have aligned Missouri’s employment law with the federal Human Rights Act – an action that became necessary following several anti-business judicial rulings over the past several years.
“While Associated Industries is disappointed only one of the priorities made it into law, we applaud the General Assembly for giving full support to the employment law reforms, environmental fee extensions and corporation franchise tax cuts,” said AIM President Ray McCarty. “Policy makers have tried for years to eliminate Missouri’s Corporation Franchise Tax - which is the ultimate example of double-taxation - but now Missouri corporations will finally benefit from the certainty of the phase-out of this onerous tax. They will be able to use the dollars saved to expand and create jobs.”
The legislature provided limited relief to employers by passing House Bill 163, a bill that reduced the number of weeks that must be paid to unemployed workers from 26 weeks to 20 weeks. Because the average duration of unemployment benefits in 2010 was 19.6 weeks, according to the Missouri Department of Labor, this provision will produce little financial benefit to Missouri employers. Because the legislature did not include allowing more time for redemption of bonds that would be issued to repay federal unemployment benefits, employers now face FUTA tax credit losses in 2012. This means employers will pay higher federal unemployment tax of around $19.50 per employee, regardless of their experience rating. This amount will increase to around $39 per employee in 2013, $58.50 per employee in 2014, and will continue to increase until the federal loans have been repaid.
Another legislative priority of Associated Industries addressed recent court decisions that could affect coverage of accidents at work and occupational diseases under the Missouri Worker’s Compensation system.
In a 2010 ruling, a judge opined that occupational diseases (such as repetitive motion, diseases due to long term exposure to materials or chemicals, etc.) were not covered under the worker’s compensation system unless they were directly related to a specific injury in the workplace. Occupational diseases rarely occur because of a specific incident, but rather develop over a long period of time, causing concern among employers that these cases would not be covered by their workers compensation insurance.
In a separate 2010 ruling, a judge ruled an injured employee who had received a worker’s compensation settlement was able to sue a co-worker for negligence in the accident that injured him. Defense lawyers claimed the worker’s compensation system should have been the exclusive remedy because there was no question the accident was a work-related accident; however, the court ruled the case could proceed because the defendant was not the employer.
Fixing these two issues was a top priority for Associated Industries and a broad coalition of employer representatives. The issues were mixed together with the second injury fund “reforms”/tax increase at one point during discussions. Ultimately, we were unable to pass the worker’s compensation legislation.
As mentioned, an idea to raise taxes on Missouri employers to pay claims against Missouri’s Second Injury Fund was promoted heavily by one business organization and trial attorneys. The taxes, surcharges and costs that would have increased under the proposal would have been the largest tax increase on Missouri employers ever. The next largest tax increase was in 1993, when taxes were increased for education. A key problem with the plan was the proposed inclusion of all claims that are presently made against the Second Injury Fund, including previous injuries and conditions that are not related to work, in the worker’s compensation system.
“The worker’s compensation system should only address work-related injuries, not sports injuries or conditions such as diabetes, high blood pressure, and obesity,” said Ray McCarty, President of Associated Industries. “The ill-conceived plan pushed by one business organization would have been used to increase settlements for work related injuries, using these non-work related injuries and conditions. This is absolutely unacceptable, especially when coupled with the largest tax increase on employers in Missouri history.” A broad coalition of employer groups representing more than 14,000 Missouri employers, including Associated Industries of Missouri, worked hard to defeat this plan. Our solution: End or dramatically reform the Second Injury Fund without increasing costs for employers, and without burdening the worker’s compensation system with non-work related injuries and conditions.
As discussed earlier, Governor Nixon vetoed another workplace priority that would have changed Missouri’s discrimination laws to be more closely aligned with federal human rights laws. Senate Bill 188 would have required discrimination to be a motivating factor in dismissal of an employee, shielded supervisors from personal liability, and required a dismissed employee claiming “whistleblower” protection to actually be notifying authorities of an illegal act.
AIM lobbied actively for three major tax reforms: Tax amnesty, a business income tax deduction, and the Corporation Franchise Tax phase-out.
The tax amnesty provision would have brought in a projected $70 million to the state. Amnesty provisions were included in several bills, and the generated income was included when legislators approved the state’s $23 billion budget. Ultimately, however the language was not included in the final version of any of the tax bills that passed the General Assembly. Also proposed by Associated Industries was a business income tax deduction that would allow businesses of all types and sizes to deduct 50 percent of their business incomes. The plan would have been phased-in over five years and would have cost the state $25 million in its first year. The plan was approved by a Senate committee, but due to fiscal restraints, it was never brought up for debate on the Senate floor. AIM will push for this legislation again next year.
Other tax issues included refund provisions that would ensure Missouri businesses could recover erroneously paid taxes from vendors, legislation allowing non-certified appraisers to present evidence in property tax appeals cases at the Board of Equalization level, and legislation that would have reinforced the intent of the AIM/TRIM manufacturing inputs exemption passed in 2007. None of these issues passed this year.
On the Thursday before the end of session, the General Assembly approved House Bill 89 which contained several environmental issues, including fee extensions to some state programs. The bill forced Missouri’s Department of Natural Resources to comply with new transparency measures and real-time water quality testing provisions, apparently in reaction to the Lake of the Ozarks e. coli controversy. Companies seeking a mining permit will no longer have the burden of proof when filing a permit. And new provisions protecting Missouri companies that operate within their permits from fines when they operate within the limits of those permits were also included in the legislation.
DNR’s water, battery and hazardous waste fees were all extended. Many in the business community believed if such fees were not extended, the programs would have been susceptible to enforcement by the EPA, which is much more inclined to levy fines and penalties than to help businesses comply with the law.
Several other important issues were discussed this legislative session. Ameren and a consortium of energy providers pushed for legislative approval to recoup up to $45 million worth of costs associated with acquiring an Early Site Permit to build a second nuclear facility in Callaway County. Consumers, including large industrial users, challenged the plan and debate continued until the final minutes of the legislative session when a compromise bill was announced in the Senate. Several senators had questions regarding the compromise, but due to a lack of time, the Senate was unable to pass the bill to the House in the final minutes of session.
While Governor Nixon vetoed one business priority, he also vetoed a bill that redrafted the congressional district lines to shift Missouri from a nine-district state to an eight-district state. A compromise was heavily debated for weeks and sent to the governor in late April. Nixon vetoed the bill, but the General Assembly overrode his veto. Most likely, the courts will now determine the constitutionality of the newly drafted map.
Generally, the 2011 session was a positive year for business. While the business coalition only passed one-sixth of the proposed agenda and received legislative approval of our employment law reforms, unfortunately the latter fell victim to Nixon’s veto. Associated Industries of Missouri will continue to participate and lead discussions between now and the beginning of the next session in January 2012. We invite your comments and your help as we represent your business in the Missouri Capitol.