Did the Missouri AG approve the ballot summary for Gerald Peterson's petition 2020-026 reinstating the corporate franchise tax?

Plain-English summary

Missouri repealed its corporate franchise tax (Chapter 147 of RSMo) effective for tax year 2016. Gerald Peterson's initiative petition 2020-026 proposed to reinstate the tax at 1 percent of outstanding shares plus surplus for corporations whose combined value exceeded $10 million. The revenue would have been earmarked: 40 percent for state highways, 50 percent for elementary and secondary schools serving high-poverty districts (12 percent poverty level or above, with funding penalties for certain non-compliant uses), and 10 percent for college scholarships for low-income students.

This 2019 opinion is the AG's § 116.334 approval of the Secretary of State's summary statement for the petition. The summary uses a bullet list to lay out each element of the proposal: the franchise tax reinstatement (with the $10 million threshold), the 40/50/10 revenue split, the high-poverty earmark with penalties, and the scholarship use for income-restricted students.

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What was the corporate franchise tax Missouri used to have?

A tax on corporations based on the value of outstanding shares and surplus. It functioned somewhat like a franchise or capital-stock tax: corporations paid for the privilege of operating in Missouri, scaled to their capitalization. Missouri repealed the tax effective tax year 2016 as part of broader tax-cut legislation.

Who would the new tax hit?

Only corporations whose outstanding shares and surplus combined to more than $10 million. The petition's threshold targeted larger Missouri corporations and the in-state operations of out-of-state corporations meeting the same threshold. Small and mid-sized corporations would be exempt.

Why the elaborate 40/50/10 revenue split?

Earmarking is a common tool in Missouri initiative petitions because it makes the revenue use tangible to voters. Highway funding (40 percent), high-poverty school aid (50 percent), and need-based college scholarships (10 percent) all appeal to broad coalitions. The earmarks also lock in the use against future legislative diversion.

What is the "12 percent poverty level with funding penalties" language?

The summary statement is a compressed version of the petition's eligibility test. Schools serving districts with poverty rates of 12 percent or higher would qualify for the K-12 share. The "funding penalties" language likely refers to a clawback or matching requirement that conditions distribution on certain school behaviors (the underlying petition text would have the details).

Does this petition affect anyone besides large corporations?

Yes, indirectly. The petition would have changed how Missouri funds highways and schools by adding a new dedicated revenue source. Voters and policymakers concerned about general-fund alternatives or about the incidence of the franchise tax (some of which would likely have been passed on to consumers, workers, or shareholders) would have had a stake.

Background and statutory framework

Missouri's initiative process runs through Chapter 116. § 116.334 governs AG review of summary statements. The substantive proposal targets Chapter 147 of RSMo (the historical corporate franchise tax statute, repealed effective 2016). The constitutional initiative process is in Mo. Const. art. III, §§ 49 to 53.

Citations

• § 116.334, RSMo (AG review of summary statement)
• Chapter 147, RSMo (corporate franchise tax, repealed effective 2016)
• Mo. Const. art. III, §§ 49 to 53 (initiative and referendum process)
• Initiative Petition 2020-026 (Peterson, Chapter 147 corporate franchise tax reinstatement)

Source

• Landing page: https://ago.mo.gov/other-resources/ag-opinions/
• Original PDF: https://ago.mo.gov/wp-content/uploads/attachments/43-2019.pdf?sfvrsn=2

Original opinion text

ATTORNEY GENERAL OF MISSOURI
ERIC SCHMITT
JEFFERSON CITY
P.O. Box 899
ATTORNEY GENERAL
65102
(573) 751-3321

February 7, 2019

OPINION LETTER NO. 43-2019

The Honorable John R. Ashcroft
Missouri Secretary of State
James C. Kirkpatrick State Information Center
600 West Main Street
Jefferson City, MO 65101

Dear Secretary Ashcroft:

This opinion letter responds to your request dated January 28, 2019, for our review under § 116.334, RSMo, of a proposed summary statement prepared for the petition submitted by Gerald Peterson regarding a proposed amendment to amend Chapter 147, Revised Statutes of Missouri (2020-026). The proposed summary statement is as follows:

Do you want to amend Missouri law to:

• reinstate the corporate franchise tax for corporations which have outstanding shares and surplus exceeding $10 million at 1% of that value;
• use 40% of the revenues for constructing and maintaining state highways;
• use 50% of the revenues for early childhood, elementary and secondary schools with at least a 12% poverty level, with certain funding penalties; and
• use 10% of revenues for scholarships to Missouri public colleges and universities for students with an income below 12% poverty level and for certain other scholarships or student loan aid?

Pursuant to § 116.334, RSMo, we approve the legal content and form of the proposed statement. Because our review of the statement is mandated by statute, no action that we take with respect to such review should be construed as an endorsement of the petition, nor as the expression of any view regarding the objectives of its proponents.

Very truly yours,

ERIC S. SCHMITT
Attorney General

OP-2019-0033