Missouri: Recently-Enacted Legislation Decouples from IRC section 163(j) Limitations

On July 11, 2019, Governor Parsons signed Missouri Senate Bill 87 into law. This bill includes various tax changes, including decoupling Missouri from the federal limitations on the deductibility of interest expense under IRC section 163(j). Specifically, for all tax years beginning on or after January 1, 2018, interest expenses paid or accrued in the current taxable year, but not allowed as a deduction for federal tax purposes, will be subtracted from a taxpayer's federal adjusted gross income in computing Missouri adjusted gross income. Interest expenses paid or accrued in a previous taxable year, but allowed as a deduction in the current taxable year for federal tax purposes because they were carried forward, will be added to a taxpayer's federal adjusted gross income in calculating Missouri adjusted gross income. Although decoupling from the 163(j) limits applies retroactively to tax years beginning on or after January 1, 2018, the overall law is not effective until August 28, 2019. The effective date is controlled by the Missouri Constitution, which provides that unless specified in the bill, laws shall be effective ninety days from the time the legislature recesses. Please contact Derek Love at 816-802-5220 with questions on Senate Bill 87.