United States: Legislating The Bizarre-Odd 2011 State Tax Bills

Jones Day State Tax Return Newsletter - March, 2011

In the past we have reported on state taxation of water, air, and even "quality of life."¹ Not to be outdone by the United States, Romania is now apparently taxing witches.² (Are you listening, New Hampshire? "I am not a witch.") What's next, you may ask? With most state budgets facing huge shortfalls, a depressing number of state tax bills have been introduced in the 2011 legislative sessions. In an effort to lighten the mood, we have summarized below some of the more bizarre and humorous (at least to the authors) pending state tax bills.

Oregon Organs: "It's alive!"

Have an extra kidney laying around? Not using all of that liver? Short on cash? Oregon is here to help. House Bill 2842, filed January 11, 2011, creates an individual income tax credit for a taxpayer who donates a kidney or partial liver in a transplant operation.³ The credit is available to residents and nonresidents, but it is nonrefundable, cannot be carried forward, and is limited to 50 percent of the individual's income tax liability or $1,000.⁴ One more catch―the taxpayer can't be deceased at the time of the transplant operation.⁵ We assume Dr. Frankenstein would vote yes. All joking aside, with hundreds of thousands of Americans in need of kidney and liver transplants, the Oregon legislature is nobly trying to help out its citizens in need. If passed, we hope the bill is at least as successful as Kansas's proposed transplant bill.

Kansas Kickbacks: "There's no place like home, there's no place like home, there's no place like home."

When Dorothy and Toto found themselves in the Land of Oz, all they really wanted to do was get home to Kansas. While the Kansas legislature can't offer nonresidents a pair of ruby slippers to click together to be magically transported to Kansas, they can create economic incentives encouraging them to relocate and experience all the wonders the state has to offer.⁶ Senate Bill 198, filed February 11, 2011, would allow an individual income tax credit equal to the amount of a resident's individual Kansas income tax liability for anyone who establishes domicile in certain rural Kansas counties between July 1, 2011, and January 1, 2016.⁷ To qualify, the individual must have been domiciled outside the state for the five years previous to establishing residency and cannot have had Kansas-source income of $10,000 or more per year during those five years.⁸ The bill would also allow counties to elect to participate in a program whereby participating counties would pay the new resident's outstanding student-loan balances, up to $15,000, over five years.⁹ With those kinds of incentives, new Kansans should be able to afford their own pair of slippers.

Montana Mountain Munitions: "Say hello to my lil' friend."

If rural Kansas doesn't seem like a good fit―say because you're concerned about the ability to purchase sufficient ammunition―Montana may soon be the place for you. Senate Bill 371, filed February 15, 2011, aims to ensure there is no shortage of ammunition in the "Land of Shining Mountains."¹⁰ The bill would exempt Montana businesses engaged primarily in the manufacture of ammunition from corporate license and income taxes, individual income taxes, educational-purpose property taxes, and business equipment taxes.¹¹ If the bill passes, Midwest residents should keep an eye out for Tony Montana passing through on the way to his new (and arguably rightful) home.

Minnesota Madness: "Money isn't everything, Mortimer."

If, instead of being short on cash, your bags of gold are dragging you down, Minnesota is here to help. Senate Bill 294, filed February 10, 2011,¹² would allow individuals to let the state decide how to spend even more of their hard-earned money. Aptly titled the "I'm Not Taxed Enough Already Fund Checkoff," the bill would allow any individual who files an income tax return or property tax refund claim to designate that $1 or more should be added to the tax or deducted from the refund amount.¹ No bill allowing business entities to do the same has been introduced―yet. Perhaps the Legislature is waiting for an IRS ruling on whether a state's characterization of a required tax imposed on taxpayers who elect to "check a box" on their return will be deemed to be a deductible state income tax. If the bill passes, only time will tell whether Minnesota's use of the extra money turns out to be a better investment than the Duke brothers' frozen orange juice futures.

Footnotes

^{1. In 2005, New Mexico enacted H336 allowing counties to impose a "quality of life" gross receipts tax after voter approval. Despite the ironic name, the tax is not imposed on quality of life, but instead on gross receipts to fund cultural programs, presumably to benefit as opposed to tax quality of life. See First Water, Then Air, Now Quality of Life! What Will New Mexico Tax Next?, 12 JONES DAY STATE TAX RETURN 4, Apr. 2005.}

^{2. For more about Romania's new tax on witches, see A Tax on Witches? A Pox on the President, THE ASSOCIATED PRESS, Jan. 6, 2011.}

^{3. H.B. 2842, 2011 Reg. Leg. Sess. (Or. 2011).}

^{4. Id.}

^{5. Id.}

^{6. Note―A not insignificant amount of sarcasm is intended. A certain author who graduated from Mizzou finds it hilarious that Kansans have resorted to bribing people to move to their state!}

^{7. S.B. 198, 2011 Leg. Sess. (Kan. 2011).}

^{8. Id.}

^{9. Id.}

^{10. S.B. 371, 62nd Leg., Reg. Sess. (Mont. 2011).}

^{11. Id.}

^{12. S.B. 294, 87th Leg., Reg. Sess. (Minn. 2011).}

^{13. Id.}

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