SUNSET REVIEW PUBLIC SAFETY OFFICER SURVIVING SPOUSE TAX CREDIT 2018 Sunset Review PUBLIC SAFETY OFFICER SURVIVING SPOUSE TAX CREDIT 2018 Prepared for the Committee on Legislative Research by the Oversight Division Kyle Rieman, Director Review Team: Jeani Hancock, MPA TABLE OF CONTENTS COMMITTEE ON LEGISLATIVE RESEARCH ......................... ii LETTER OF TRANSMITTAL ....................................... iii PURPOSE I OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 1 SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 1 METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 1 LEGISLATIVE HISTORY ...................................... page 2 PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 2 SUMMARY ................................................. page 10 Committee on Legislative Research Oversight Subcommittee THE COMMITTEE ON LEGISLATIVE RESEARCH COMMITTEE ON LEGISLATIVE RESEARCH Oversight Division, is an agency of the Missouri Gener~! Assembly as established in Chapter 23 of the Revised Statutes of Missouri. The programs and activities of the Senators: State of Missouri cost approximately $26.0 billion annually. Each year the General Assembly enacts laws Senator Bob Dixon, Chair which add to, delete or change these programs. To meet Senator Dan Brown the demands for more responsive and cost effective state Senator Mike Cunningham government, legislators need to receive infonnation Senator Jason Holsman regarding the status of the programs which they have Senator Denny Hoskins Senator Brian Munzlinger created and the expenditure of funds which they have authorized. The work of the Oversight Division provides Senator Jami/ah Nasheed Senator Scott Sifton the General Assembly with a means to evaluate state agencies and state programs. Senator Wayne Wallingford Senator Gina Walsh THE COMMITTEE ON LEGISLATIVE RESEARCH is a pennanent joint committee of the Missouri General Representatives: Assembly comprised of the chairman of the Senate Representative Dan Shaul, Vice-Chair Appropriations Committee and nine other members of the Senate and the chairman of the House Budget Committee Representative Donna Baringer and nine other members of the House of Representatives. Representative Mike Bernskoetter The Senate members are appointed by the President Pro Representative Pat Conway Tern of the Senate and the House members are appointed Representative Kevin Engler Representative Scott Fitzpatrick by the Speaker of the House of Representatives. No more than six members from the House and six members from Representative Marsha Haefner the Senate may be of the same political party. Representative Gina Mitten Representative Cody Smith Sunset reviews are assigned to the Oversight Division Representative Martha Stevens pursuant to Sections 23.250 to 23.298 RSMo. After August 28, 2003, any new program authorized by the General Assembly shall sunset not more than six years after its effective date unless re-authorized by the General Assembly. The Oversight Division shall conduct a performance evaluation of the program as set forth in statute and prepare a written report. The report shall make recommendations on the sunset, continuation, or reorganization of a program. 11 SENATORS: REPRESENTATIVES: BOB DIXON DAN SHAUL Chair Vice Chair DAN BROWN DONNA BARINGER MIKE CUNNINGHAM MIKE BERNSKOETTER JASON HOLSMAN PAT CONWAY DENNY HOSKINS KEVIN ENGLER BRIAN MUNZLINGER SCOTT FITZPATRICK JAM!LAH NASHEED MARSHA HAEFNER SCOTT SIFTON GINA MITTEN WAYNE WALLINGFORD CODY SMITH GINA WALSH MARTHA STEVENS COMMITTEE ON LEGISLATIVE RESEARCH STATE OF MISSOURI STATE CAPITOL JEFFERSON CITY, MISSOURI 65101 Members of the General Assembly: The Joint Committee on Legislative Research is required by Section 23.259.1(3), RSMo to conduct a performance evaluation of the Public Safety Office Surviving Spouse tax credit to determine and evaluate program performance in accordance with program objectives, responsibilities, and duties as set forth by statute or regulation. The report may include Oversight comments on (1) the sunset, continuation, or reorganization of the program, and on the need for the performance of the functions of the program; (2) the duplication of program functions; (3) the appropriation levels for each program for which sunset or reorganization is recommended; and ( 4) drafts of legislation necessary to carry out the committee's recommendations pursuant to (1) and (2) above. We hope this information is helpful and can be used in a constructive manner for the betterment of the state program to which it relates. You may obtain a copy of the report from the Oversight Division website at www.legislativeoversight.mo.gov. Respectfully, Chair OVERSIGHT DIVISION Sunset Review Surviving Spouse Tax Credit Purpose/O bj ectives The General Assembly has provided by law that the Joint Committee on Legislative Research, Oversight Division conduct performance evaluations of programs subject to the Missouri Sunset Act. The committee shall consider the criteria as listed in Section 23 .268, RSMo in determining whether a public need exists for the continuation of a program, or for the performance of the functions of the program. A sunset review is the regular assessment of the continuing need for a state program to exist. A sunset review answers the basic questions of what has happened to this program since its inception and does the State of Missouri continue to "need" the services provided by the program. The Joint Committee on Legislative Research directed the Oversight Division to conduct a Sunset Review of the Public Safety Office Surviving Spouse Tax Credit, Section 135.090, RSMo. This report provides the status on the Public Safety Officer Surviving Spouse Tax Credit as created by Senate Bill 30 (2007) and fulfills the requirements as established by Section 23.268, RSMo. The Oversight Division previously reported on this program in 2013, at which time the sunset date on the program was extended to its current date of December 31, 2019. The Oversight Division review addressed, but was not limited to the following: 1. Compiling and reviewing data related to the program since its inception. 2. Analyzing related events and changes to the program since its inception. Scope The Oversight Division obtained and reviewed information from the Department of Revenue on the Public Safety Officer Surviving Spouse Tax Credit from 2007 through June 2018. Methodology The Oversight Division obtained information on the Public Safety Officer Surviving Spouse Tax Credit through correspondence and interviews with the Department of Revenue. The Department of Labor and Industrial Relations and the Department of Higher Education provided information on other survivor benefits available to spouses. 1 OVERSIGHT DNISION Sunset Review Surviving Spouse Tax Credit Legislative History Senate Bill 30 (2007) created the Public Safety Officer Surviving Spouse Tax Credit in Section 135.090, RSMo. The program allows the surviving spouse of a qualified public safety officer who was killed in the line of duty to claim a refundable tax credit equal to the amount of property taxes paid by the surviving spouse on the surviving spouse's homestead. The provisions in Section 135.090, RSMo included an automatic sunset six years from the effective date; and the program was to sunset on August 28, 2013, unless the program was re authorized by an act of the General Assembly. Senate Bill 979 (2008) changed Section 135.090, RSMo, to allow a surviving spouse to claim the credit for each tax year beginning the year of death of the public safety officer until such time as the surviving spouse remarries. This bill did not change the sunset date. In 2013, the Oversight Division published a sunset review report on the Surviving Spouse Tax Credit which was scheduled to sunset on August 28, 2013. Senate Bills Nos. 20, 15 & 19 (2013) extended the sunset to December 31, 2019 along with adding language to clarify that the Department of Revenue is not limited or impaired from redeeming tax credits authorized before the sunset date or for the surviving spouse from redeeming previously issued credits after the sunset date. HB 1355 (2018) was passed into law and expanded those eligible for the program to include emergency medical responders; however, it did not change the sunset date of December 31, 2019. While several bills during the 2018 legislative session were introduced to extend the sunset date of the Surviving Spouse Tax Credit, none were adopted. Program The Public Safety Office Surviving Spouse Tax Credit program allows the surviving spouse of a public safety officer killed in the line of duty to claim a refundable tax credit against individual income taxes imposed by Chapter 14 3, in an amount equal to the property taxes paid on the surviving spouse's homestead ( a dwelling in Missouri surrounded by up to five acres, is used as a home and is not occupied by more than two families). The surviving spouse may claim the credit each year until such time as the surviving spouse remarries. The tax credit is refundable; therefore, if the tax credit amount exceeds the amount of tax due from the surviving spouse, the excess will be refunded to the taxpayer. There is no cap on this program. Section 135.090, RSMo, defines an eligible public safety officer as "any firefighter, police officer, capitol police officer, parole officer, probation officer, correctional employee, water 2 OVERSIGHT DIVISION Sunset Review Surviving Spouse Tax Credit patrol officer, park ranger, conservation officer, commercial motor vehicle enforcement officer, emergency medical responder, as defined in section 190.100, emergency medical technician, first responder, or highway patrolman employed by the State of Missouri or a political subdivision thereof who is killed in the line of duty, unless the death was the result of the officer's own misconduct, or abuse of alcohol or drugs." HB 135 5 (2018) added emergency medical responders, as defined in section 190.100, to the list of those eligible. Individuals claiming the credit must complete the Miscellaneous Income Tax Credits form (MO-TC) and the Public Safety Officer Surviving Spouse Credit form (MO-SSC), and attach those forms and a copy of their paid property tax receipt to their individual income tax return. If the homestead includes more than five acres, only a portion of the property tax paid is eligible for the tax credit and an Assessor Certification (FORM 948) must be attached to document the applicable percentage. The Department considers the definition of homestead to be the dwelling or residence of the claimant. Therefore, they would not allow a claimant to claim the credit if they have left the state. The Department confirmed that no returns have been filed in which this credit was awarded to an address out of state. Claims Processing With the following responses, officials from the DOR state they perform a manual review of each claim submitted each year . "In the initial year of the claim, the surviving spouse is permitted to file a Married Filing Combined return with their deceased spouse. The technician reviewing the claim would ensure the 'deceased' indicator is checked on the return. The individual processing the claim would then verify that the Form SSC has been completed correctly. " "If not completed correctly, the Department would disallow the credit and request a completed copy ofF orm SSC " "The processor would verify the deceased individual in fact passed away in the line of duty using the [Officer Down Memorial PageJ website and the [National Fallen Firefighter Foundation] website." "If a property tax receipt is not included, the technician would request the claimant provide a copy of the receipt, and may also research the county collector's website to verify property taxes paid The technician would ask the claimant to supply additional documentation to substantiate the claim if any required information cannot be verified " 3 OVERSIGHT DIVISION Sunset Review Surviving Spouse Tax Credit "If the property tax receipt was attached and verified, the processor would continue reviewing the claim. " "The processor would make sure that the individual has not since re-married Ifr e married, the claim would be disallowed Ifn ot remarried, the individual would continue processing the claim. The verification ofr e-marriage would be done so on the tax return itself The taxpayer must file indicating their marital status. " "If the Department determines that the claim was filed incorrectly, the Department would adjust the taxpayer's return and bill the taxpayer for any underpayment or refund what is owed, less the credit. " "If the Department determines that the claim was filed correctly, they would allow the claim on the return and push the return through the system to post and issue a refund or balance due. " Program Activity Department of Revenue officials state they do not have any information which would allow them to predict the future use of the program in any given year. The Department was able to provide the following information regarding the number of credits claimed and the amounts redeemed for each fiscal year. YEAR CLAIMS CREDITS AVERAGE FILED REDEEMED CREDIT PER CLAIM FY2009 fewer than $9,583 N.A. 7 FY 2010 12 $22,363 $1,864 FY 2011 11 $16,861 $1,533 FY2012 14 $32,793 $2,342 FY2013 34 $61,132 $1,798 FY2014 37 $76,533 $2,068 FY 2015 22 $70,941 $3,225 FY 2016 34 $117,554 $3,457 FY 2017 33 $89,502 $2,712 Source: Department of Revenue 4 OVERSIGHT DIVISION Sunset Review Surviving Spouse Tax Credit TAX YEAR SMALLEST LARGEST CLAIM CLAIM 2008 $2,609 $3,218 2009 $775 $2,940 2010 $1,214 $3,062 2011 $460 $23,151 * 2012 $659 $4,454 2013 $301 $5,744 2014 $796 $47,246* 2015 $703 $21,129* 2016 $31 $8,919 2017 $537 $4,937 Source: Department of Revenue * Oversight confirmed with the Department of Revenue that these payments were verified and accurate based on the circumstances of the claimant. 5