Legislative look: What is, and isn't changing, for businesses in 2012

Tuesday, December 20, 2011
Workforce specialist Karla Pfefferkorn assists Ronald Schoffner in this file photo as he files a new unemployment form at the Missouri Career Center in Cape Girardeau. (Fred Lynch)

Missouri businesses will pay less in taxes in 2012 due to reforms passed by the Missouri Legislature this year. However, measures advocated for by business groups to address employee discrimination lawsuits and payment to workers permanently disabled on the job were not successful in the 2011 legislative session.

Franchise tax eliminated

After 10 years of business groups pushing for the repeal of Missouri's corporate franchise tax, the measure was signed by Gov. Jay Nixon in 2011. Business groups viewed the tax as excessive because businesses pay franchise tax on assets and inventory in addition to property and income taxes. Senate Bill 19 will reduce the franchise for the next several years before eliminating it for the 2016 tax year. The bill also freezes what businesses are required to pay under the tax so that firms would not pay more than what they paid in 2010. Eliminating the franchise tax will result in a loss of $87.5 million in general revenue by the time it is phased out, according to the fiscal note attached to the bill.

Unemployment insurance changes

Changes to Missouri's unemployment insurance program will also save businesses money in the coming year. The state will reduce the number of weeks it pays unemployment benefits from 26 weeks to 20 weeks, saving Missouri employers $108 million annually. House Bill 163 also included provisions to prevent unemployment benefit fraud. Benefits will no longer be paid to workers who owe penalties or must repay undeserved benefits, saving an estimated $16 million annually. While this is good news for businesses, the unemployment insurance measure passed by the legislature in 2011 did not address how the state will pay back the $725 million it has borrowed from the federal government to fund its unemployment insurance claims over the past two years. The IRS allows businesses to take a tax credit for the state unemployment taxes they pay to the Missouri Department of Revenue, but starting Nov. 10 all Missouri employers will see a 0.3 percent reduction in their Federal Unemployment Tax Act credits for each year the state's loans remain outstanding. That will amount to about $21 per employee the first year. It will double to $42 the second year, $63 the third year and $126 the fourth year, said Tracy King, vice president of governmental affairs with the Missouri Chamber of Commerce Industry. The increased unemployment tax rate will apply to all employers regardless of size.

Second Injury Fund insolvency

Missouri's Second Injury Fund is broke. The Second Injury Fund provides supplemental insurance for employers to encourage them to hire people with disabilities or pre-existing injuries because it shields them from liability if the employee is reinjured. But the fund's liabilities are outpacing its income. Missouri businesses pay a 3 percent surcharge on their workers' compensation insurance to support the fund, which in March stopped paying people who were granted permanent total disability awards by a judge. Legislative attempts to fix the flailing Second Injury Fund failed during the 2011 session, although several bills were debated. "The problem just keeps getting bigger and bigger. Until the law changes, we're going to be in this situation," said Richard Moore, assistant general counsel and director of regulatory affairs for the Missouri Chamber of Commerce and Industry. By the end of this year, Moore said 170 people won't be receiving payments owed to them from the Second Injury Fund totaling $13 million. By statute, the state has to pay 9 percent interest on those late payments as well, he said. The fund also pays the medical expenses of injured employees whose employers failed to obtain workers' compensation insurance, but Attorney General Chris Koster recently stopped paying those claims as well. Since the attorney general's office stopped settling cases against the fund in 2009, more than 30,000 cases are now pending and about 700 cases are filed each month waiting to be adjudicated. Not counting those cases, the fund's estimated liability for awards already approved by judges is $1 billion. Moore said the Missouri Chamber will advocate to limit the Second Injury Fund to only those who have a previous workers comp injury or those who were injured during active duty military service. Businesss will also have to be willing to pay more, temporarily, he said. The chamber will advocate to raise the surcharge from 3 percent to 4.5 percent through the year 2020.

Employment law changes vetoed

During a ceremony on the steps of the Old Courthouse in downtown St. Louis, Nixon vetoed changes to the state's employment laws that business groups said would improve the state's business climate. Advocates said Senate Bill 188 would bring Missouri in line with the federal Civil Rights Act and cap damages in employment discrimination lawsuits. Under Missouri's Human Rights Act, discrimination must be a contributing factor in the case for an employer to be liable. Federal law sets a higher standard, saying discrimination must be the motivating factor. "The veto was huge," said Rich AuBuchon, general counsel for the Missouri Chamber of Commerce and Industry. "Missouri employers have been working on that legislation for six years, pushing for one nationwide standard applied here in Missouri as well." AuBuchon said the employment law changes proposed would have made Missouri more competitive in attracting businesses. The Missouri Association of Trial Attorneys was vocally opposed to the employment law changes included in this legislation.

"Gov. Nixon did the right thing by vetoing this pro-discrimination law," said Cape Girardeau attorney Laura Clubb, who specializes in employment law. "The legislation would have made it easier for companies to get away with discrimination and given a 'get out of jail free' card to individual perpetrators of discrimination. It was one of the worst pieces of legislation passed in 2011 and anyone who works in Missouri should be grateful that the legislation died."

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