REBATE EXPECTED TO BE EXEMPT

JEFFERSON CITY, Mo. - State revenue officials are waiting for the General Assembly to consider exempting federal income tax rebates from state taxes before developing a plan to collect the revenue should lawmakers fail to act.

The Missouri Department of Revenue estimates that Missourians will collect $771 million from the federal government under the retroactive tax relief plan signed into law this year by President Bush. The Internal Revenue Service already has started mailing rebate checks of up to $300 for single taxpayers and $600 for married filers.

Missourians typically have to pay state taxes on federal refunds. However, state lawmakers in both parties advocate allowing state taxpayers to keep every dime of what they get back from Uncle Sam this summer.

Gov. Bob Holden plans to authorize the General Assembly to consider legislation shielding the rebates from state taxation during a September special session.

If the legislation fails, the state's share would be approximately $29 million, or 3.76 percent of the total rebates.

While most statehouse observers predict the one-time exemption will be a slam dunk in the Legislature, legislative success can't be taken for granted.

Still, Department of Revenue spokeswoman Susanne Medley said the department has no contingency plan for how to collect the revenue if the legislation doesn't pass.

"Until they meet, it's really difficult for us to determine what needs to be done," Medley said.

Though the governor hasn't yet officially called for a special session, Holden spokesman Jerry Nachtigal said "it is going to happen."

In the context of the $19 billion state budget, the $29 million the state would lose by not taxing the rebates is a pittance. However, with Holden asking most state agencies to withhold spending to trim $200 million from the current budget, the extra revenue could slightly ease potential cuts.

Nachtigal said the governor never seriously considered that an option for easing the state's budget woes.

"Governor Holden believes Missourians should not be taxed on this federal rebate," Nachtigal said.