Bad debts

From the 2024 DOR Tax Exemption Study

82.04.4284 - Bad debts Description Businesses may deduct bad debts from the measure of B&O tax if the tax was previously paid. "Bad debts" has the same meaning as defined in the internal revenue code (26 U.S.C. Sec. 166). "Bad debts" does not include: - Amounts due on property that remains with the seller until fully paid for. - Debt collection expenses. - Retail sales or use tax paid to a seller. - Repossessed property. Purpose Provides equal tax treatment between businesses using accrual basis accounting and cash basis accounting. Taxpayer ($ in millions): savings FY 2024 FY 2025 FY 2026 FY 2027 State Taxes $17.270 $17.960 $18.710 $19.520 Local Taxes $0.000 $0.000 $0.000 $0.000 Repeal of Repealing this deduction would increase revenues. exemption Potential ($ in millions): revenue gains FY 2024 FY 2025 FY 2026 FY 2027 from full repeal State Taxes $0.000 $16.460 $18.710 $19.520 Local Taxes $0.000 $0.000 $0.000 $0.000 Assumptions - This repeal takes effect July 1, 2024, and impacts 11 months of collections in fiscal year 2025. - Growth rate mirrors the B&O taxable activity growth rate reflected in the Economic and Revenue Forecast Council's March 2023 forecast. Data Sources - Depar