Opinion ID: 2192493
Heading Depth: 1
Heading Rank: 3

Heading: income applicable for ezm & ezc determination

Text: In their second assertion of error, Taxpayers argue that section 135.220, RSMo Supp.1992, requires their EZM and EZC to be calculated from the entire Missouri taxable income of their S-corporation, not just from income by sources within Missouri. In support of this assertion, Taxpayers compare the language of section 135.220 before and after its amendment in 1992. Taxpayers argue that because post-amendment section 135.220 (which refers to section 135.100 as to what constitutes new business facility income) does not include the from sources in Missouri language contained in the previous version, the EZM must be computed from the corporation's entire Missouri taxable income. The principal rule of statutory construction is to ascertain the intent of the legislature. [9] When construing a statute, this Court must consider the object the legislature seeks to accomplish with an eye towards finding resolution to the problems addressed therein. [10] The provisions of a legislative act are not to be read in isolation, but are to be construed together and read in harmony with the entire act. [11] Taxpayers argue that they should not be required to apportion income from Missouri sources when calculating their EZM and EZC because S-corporations are not permitted to apportion income. They rely on Wolff v. Director of Revenue [12] and Lloyd v. Director of Revenue [13] for this proposition. These cases held that S-corporations are not subject to apportionment under section 143.431. [14] However, these cases do not address calculation of enterprise zone benefits for S-corporations. Because the corporations involved in this matter are S-corporations, they are governed by section 135.220.2, which refers back to subsection 1 for further guidance. [15] Section 135.220.1, RSMo Supp.1991, provided that the Missouri taxable income earned by the business located in the enterprise zone shall be determined by multiplying the business' Missouri taxable income from sources within Missouri by a fraction designed to apportion the income for purposes of calculating EZM and EZC. [16] Section 135.220.1 RSMo Supp.1992, differs from its predecessor in two important ways. [17] First, the 1992 version limits its application to that income earned from establishing a new business facility in the enterprise zone. Section 135.220.1, RSMo Supp.1992, defines that portion of income attributed to the new business facility as that determined according to paragraph (b) of subdivision (6) of section 135.100. [18] That paragraph provides the payroll factor, which is a fraction with total dollars paid to new business facility employees in the numerator and the total amount paid in the state for compensation in the denominator. Income eligible for EZM and EZC treatment is properly apportioned when this fraction is multiplied by the Missouri taxable income. The second difference is that the 1992 version does not include the from sources in Missouri language. By eliminating the from sources in Missouri language in the 1992 version, the legislature intends that the payroll factor be the method to apportion this income, without use of section 143.451 apportionment methods. To apply both section 135.220 and section 143.451 would double-apportion taxpayers' income. This plain reading of the statute is consistent with the purpose it seeks to accomplish. When enacting these enterprise zone benefits, the legislature's sought to redevelop areas with pervasive poverty, unemployment, and general distress. [19] By multiplying the Missouri taxable income by the payroll factor, the income is fairly apportioned and the tax benefits are applied only to the extent of the investment in the enterprise zone. Accordingly, the AHC's determination is reversed to the extent it requires Missouri taxable income to be apportioned prior to multiplication by the payroll factor.