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Lobbyist Money Help  

Loophole bill wins House vote

January 28, 2004
By: Christie Smythe
State Capital Bureau

JEFFERSON CITY - A bill that would close a corporate tax loophole on Gov. Bob Holden's hit list was cleared for final passage in the House on Wednesday. But the resulting bill doesn't fall quite in line with the governor's recommendations.

The loophole allows national corporations to transfer revenues to holding companies in other states and write them off on Missouri tax returns as franchise costs such as trademarks and copyrights -- which allows them to avoid Missouri taxes. It's named the "Geoffrey Loophole" after the mascot for Toys "R" Us, one national corporation operating in Missouri.

The governor's recommendation would have applied to all corporations transferring funds to holding companies in other states, including amounts paid in fees for franchise costs. The governor's office estimated that would have netted $11.3 million in revenue for the state.

The loophole elimination now up for a final vote in the House would not apply to all companies paying franchise fees, only companies writing off excessive costs. The change potentially reduces the number of corporations that would be taxed under the bill -- making its capabilities as a revenue-generator for the state uncertain, said bill supporter Ray McCarty, director of fiscal affairs for the Missouri Chamber of Commerce.

Bill sponsor Rep. Shannon Cooper, R-Clinton, said he was proud of the bill, which he said closed the loophole while still being fair to business.

"That's what was wrong with the governor's bill," he said. "It punished legitimate business for legitimate business transactions." The bill was not meant to be a "revenue-generator," he said.

Fairness, however, was one reason why Rep. Jeff Harris, D-Columbia, said he voted against the bill. Allowing big businesses to continue to avoid paying corporate income taxes, Harris said, would leave small businesses at a considerable disadvantage to large corporations.

Harris said he thought the intentions behind the bill hardly reflected what he thought the intentions should be.

"My concern, based on everything I know and learned about the bill, was that there was a gulf between what the proponents said it would do and what it would actually do," Harris said.