State to give $16 million tax refund to businesses

Friday, March 8, 2002

JEFFERSON CITY, Mo. -- The state must refund more than $16 million in taxes and interest to big businesses because of a recent Missouri Supreme Court ruling that overturned the state's interpretation of a tax law.

The tax refunds are an unexpected hit to the state budget at a time when Gov. Bob Holden and lawmakers already are cutting services to avoid running a deficit.

Budget officials said Thursday it was unclear whether the money will be refunded in this fiscal year or after the 2003 fiscal year, which begins July 1.

Officials at the Department of Revenue only recently finished calculating the tax returns resulting from the Feb. 26 Supreme Court ruling.

In that decision, the state's highest court said clothier Eddie Bauer Inc. and Boise Cascade Corp., which makes paper and wood products, were wrongly denied applications for state income tax refunds for 1995-1997. The ruling also will trigger tax refunds for 26 other companies who have subsidiaries doing business in Missouri, said Carole Iles, general counsel for the state Department of Revenue.

Altogether, the companies will receive about $12.5 million in tax refunds and about $4 million in interest on those refunds, she said. Iles declined to identify the other companies receiving refunds, saying that information was confidential under tax laws.

The refunds stem from a 1973 state law allowing an affiliated group of corporations to file a consolidated state income tax return only if they derive at least half of their income in Missouri.

That meant some companies that filed consolidated federal tax returns had to split their Missouri tax returns among their various subsidiaries. As a result, the parent companies were not able to balance the gains of some subsidiaries against the losses of others.

Some companies ended up paying more Missouri taxes than if they had been able to file consolidated state returns.

In 1998, the Missouri Supreme Court overturned the state's 50 percent income threshold for consolidated tax returns, saying it violated interstate commerce laws.

Eddie Bauer and Boise Cascade had filed separate tax returns and, after the 1998 ruling, sought to amend their three previous years' returns to file consolidated returns.

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