Changes the definition of salaries, wages, commissions, and other compensation for local earnings tax purposes
Summary
HB1170 repeals and replaces section 92.113, RSMo, to change how “salaries, wages, commissions, and other compensation” are defined for purposes of Missouri local earnings taxes. The bill specifies that this term does not include contributions to deferred compensation plans, including salary reduction plans, cafeteria plans, or similar arrangements that defer receipt of compensation, when those contributions are not subject to Missouri state income tax at the time they are made. It also excludes payments made under such plans when those payments are not subject to Missouri state income tax when paid.
In practical terms, the bill narrows the base of compensation that local earnings taxes may reach by excluding certain deferred compensation amounts from taxable compensation. The change applies to both residents and nonresidents and is aimed at aligning local earnings tax treatment with state income tax treatment for deferred compensation arrangements.
Impact
HB1170 would amend Missouri law governing local earnings taxes by revising the statutory definition used in section 92.111 and related provisions. It would affect municipalities and other local jurisdictions that impose earnings taxes, as well as employers and employees participating in deferred compensation, salary reduction, cafeteria, and similar plans. The bill would likely reduce local tax liability on certain deferred compensation contributions and payments that are not subject to Missouri state income tax at the relevant time.
Sentiment
Based on the available context, the bill appears to be a technical tax clarification measure rather than a highly controversial policy proposal. There is no recorded committee debate or vote history in the provided materials, so no clear partisan or stakeholder split is documented. The caption suggests the bill was framed as a definitional change for local earnings tax purposes, which typically indicates a targeted statutory adjustment.
Contention
The main point of potential contention is the revenue effect on local governments that rely on earnings taxes, since excluding deferred compensation from the tax base could reduce collections. Employers and taxpayers participating in deferred compensation plans would likely support the clarification because it may simplify withholding and reduce tax exposure, while municipalities may be concerned about narrowing the tax base. No specific objections or supporters are identified in the provided transcripts or votes.