Missouri Private Letter Ruling No. LR 8234 dated March 30, 2023 was published May 5, 2023 and provides an update and clarification regarding the Missouri S corporation resident credit enacted as part of House Bill 2400 in June 2022 (see FORsights™ article, “Newly Signed Missouri Bill Includes R&D Credit & Pass-Through Entity Tax.”)
Under Section 143.081.3(2), RSMo, a credit is permitted to a resident S corp shareholder in the amount equal to the Missouri individual income tax imposed on the shareholder’s pro rata share of the income from the S corp, provided that the following items are satisfied:
- The S corp originated the income from sources in another state, political subdivision, or D.C.;
- The income is subject to an income tax under Chapter 143, RSMo, either at the S corp level or the individual shareholder level; and
- The income is not subject to tax in the other jurisdiction, either at the S corp level or the individual shareholder level.
Missouri residents and shareholders of a Missouri S corp and retailer (tax entity) are eligible to claim a credit for their shares of Missouri income tax imposed on the tax entity’s income originating in other states without an income tax. However, the Texas franchise tax is considered an income tax in Missouri, so the credit is not allowed based on income derived from Texas.
In addition, the taxpayers are eligible for the credit when the tax entity ships products to another state that does have an income tax, but that state does not tax the tax entity’s income due to federal Public Law (PL) 86-272 protections. PL 86-272’s protections would apply to prohibit the imposition of an income tax on the tax entity’s income in the other states or political subdivision, both at the S corp level and after the income is passed through to the taxpayers.
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