In vetoing S.B. 226, Republican Gov. Mike Parson called the measure's proposed property tax relief provisions too broad and potentially costly for local governments. The bill would have allowed property owners whose businesses faced certain restrictions — such as occupancy limitations — from local governments to seek a property tax refund or credit for the duration of the property use limitations, minus 15 days, starting Jan. 1, 2021.
In a veto message, Parson said that while he supports tax relief for businesses that were unable to operate amid the pandemic "due to excessive restrictions," the bill contains "significant unintended consequences that could greatly harm localities beyond its attempted protection of individuals and businesses impacted by COVID-19." The governor was referring to the respiratory illness caused by the coronavirus.
A fiscal note on the bill was unable to estimate how much tax revenue local governments could lose as whole, but said that St. Louis officials had indicated the bill could have an "exorbitant" impact on the city.
A representative of the Missouri Municipal League did not immediately respond to a request for comment.
Lawmakers could attempt to override the veto when they return for their veto session on Sept. 15. The bill received near-unanimous approval in the Republican-controlled General Assembly, with the House of Representatives passing the measure by a 142-1 vote and the Senate passing it by 32-1. To complete an override, two-thirds of lawmakers in each chamber would need to vote to enact the legislation.
The bill's primary sponsor, Sen. Andrew Koenig R-Manchester, told Law360 that it will be his call whether to bring the bill up for an override vote when lawmakers return to Jefferson City, but added that he hadn't yet read Parson's veto letter. If an override isn't attempted, Koenig said he would likely file a bill next year to permit the property tax refunds that would address Parson's concerns with S.B. 226's language.
The bill would also decouple the state from Internal Revenue Code Section 280E
, which prohibits businesses from taking a deduction for business expenses if their income is derived from trafficking of controlled substances. Missouri voters approved a ballot measure to legalize medical marijuana in 2018. More than 200 medical cannabis businesses are approved to operate in the state, according to the Missouri Medical Cannabis Trade Association.Parson didn't mention that provision of the bill in his veto message, focusing instead on his objections to other elements of the legislation. When asked if the governor had a stance on decoupling from Section 280E, his spokeswoman Kelli Jones told Law360 that the veto letter addresses "any concerns" that Parson had with the bill.
Dan Viets, the state coordinator for Missouri's chapter of the cannabis advocacy group NORML, told Law360 that he thought decoupling from Section 280E would allow businesses to deduct up to "a few thousand" dollars annually. He said that the impact on Missouri's fisc for allowing medical marijuana companies tax relief available to other businesses would be minimal when compared with the millions in tax revenue that is generated from medical cannabis sales.
"This little pittance that the state would lose by fixing what is clearly an unjust regulation is going to be a tiny fraction of what that industry is bringing into the state coffers," Viets said.
The bill's fiscal note was unable to provide an estimate of the revenue cost of that provision of the bill.
If the veto isn't overridden, Viets, a private lawyer who helped write the 2018 ballot measure and chaired the campaign committee that pushed its passage, said that he would expect lawmakers to pass the bill again next year, given the broad support that S.B. 226 received. He added that the governor hasn't indicated that he's against decoupling from Section 280E.
"There's no reason to believe that it was actually because of the medical marijuana provision," he said of the veto. "It's a shame."
The governor also took issue with another provision in the bill that would have allowed theaters and entertainment venues to retain the state's portion of sales tax levied on tickets and concession sales from Aug. 28, 2021, through June 30, 2023, given the pandemic's effects on the industry.
Parson said he disagreed with singling out tax relief for the entertainment sector because the pandemic also adversely affected other businesses. He added that allowing certain companies to pocket sales taxes "does not broadly serve Missouri's interests."
"This would result in individuals paying sales and use tax under the guise that their funds were being used to fund public services, but instead were maintained by the businesses that collected it as additional profit," Parson said in his letter.
That provision of the bill would cost the state $19 million to $23.7 million over the next two fiscal years, according to the bill's fiscal note.
--Editing by Neil Cohen.
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