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July 17, 2024 |  By: Rudi Keller - Missouri Independent

Missouri taxpayers hit with penalties, interest after claims exceed cap on food pantry tax credit

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By Rudi Keller - Missouri Independent

For the third year in a row, taxpayers claiming Missouri’s food pantry tax credit found they didn’t get the full value when the state Department of Revenue reviewed their returns.

The credit, up to $2,500 per taxpayer for 50% of qualifying donations to food pantries, homeless shelters and soup kitchens, is capped at $1.75 million annually. 

But this year about $2 million was claimed.

That means every taxpayer using the credit got only 87.8% of the amount claimed. And unless a taxpayer paid extra, anticipating that the full credit may not be available, the disallowance notice also stated they had to cover the difference, plus interest and penalties on the unused portion.

The law creating the credit “does not provide provisions to waive interest and penalties due to the apportionment of the food pantry tax credit,” department spokeswoman Anne Marie Moy said in an email to The Independent. “Interest is statutory and cannot be waived.”

In each of the previous two years, less than 75% of each individual credit claim was allowed, Moy said.

“The champion for children tax credit has also been apportioned in the past,” Moy said. “It was last apportioned in fiscal year 2019.”

The cap on the champion for children tax credit, which helps agencies that support children involved in court cases or family crises, was $1 million in fiscal 2019 and has since been increased to $1.25 million.

A bill to stop the interest and penalties until a taxpayer has been given a chance to pay or make arrangements to cover the difference didn’t get very far this year. State Rep. Brenda Shields, a Republican from St. Joseph, said she was surprised to find out that people who thought they had paid in full were getting bills with interest and penalties.

“I had one constituent contact me, and when they contacted me and told me they received this, I said, ‘Oh, we don’t do that.’,” Shields said. “And sure enough, come to find out, we do.”

The food pantry tax credit is one of about a dozen that encourage charitable donations to organizations that promote adoptions, help victims of domestic violence, provide diapers and food for people in poverty and perform other tasks lawmakers wish to support. The credit is generally 50% or more of a donation and can only be used by the donor to offset their own state taxes.

If a portion of the credit can’t be claimed in the year it is issued, the remainder can be carried over for up to three years.

But that doesn’t excuse the interest and penalties. The maximum credit is $2,500, so a return that claimed the maximum would have been allowed $2,195. If the $305 remainder was not paid when the return is filed, the initial charge of interest and penalties would be $21.35.

“It’s annoying,” Shields said. “It discourages people from doing what we want them to do, which is to contribute to our local food pantries.”

Shields’ bill would give a taxpayer a grace period of 60 days after receiving notice that the food pantry tax credit has been disallowed to pay the balance or make arrangements to pay. Her bill includes a grace period for the champion for children credit, which also does not include an exemption for penalties and interest.

Many donors to food pantries, she said, are people who have used the free groceries to feed their families.

“We need to give them that grace period of figuring out the payment plan,” she said, “because they might not have extra $50 within five days to be able to pay that right back.”