Legislation could mean higher state corporate income taxes

by Associated Press

Published: March 2,2012

Tags: bill, income taxes, law, lawmakers, legislation, legislative branch, Legislature, loopholes, state government, taxes

JACKSON — Corporations could end up paying around $30 million more in income taxes under changes to the tax code approved yesterday by the Mississippi House Ways and Means Committee.

But it’s not a tax increase, said Rep. Jerry Turner, R-Baldwyn, who helped shepherd the bill in committee.

“As this income is made off the citizens of the state of Mississippi, I would like to refer to it as a tax collection bill, rather than a tax increase,” Turner said.

Ed Sivak, director of the liberal-leaning Mississippi Economic Policy Center, agreed with Turner.

“Closing this loophole boosts Mississippi’s economy by reducing tax avoidance by large corporations and freeing resources for education, transportation and other building blocks of jobs and growth,” Sivak said.

The bill has two prongs. One would close a current provision that allows a company to reduce its taxes in Mississippi by paying royalties to an affiliated company in a state with no corporate income tax. For example, firms have set up units in the tax haven of Delaware that charge fees for the use of things like logos and trademarks, and payments that flow there reduce the level of taxable income in Mississippi. Other states have already moved to close that loophole, some years ago.

A second provision would allow Mississippi to collect income taxes on companies that make money providing services in Mississippi even if they don’t have a physical presence. The measure targets firms that solicit business in the state, issue credit cards in the state, have independent contractors or franchisees in the state or provide services from outside the state to people in Mississippi.

Associate Revenue Commissioner Randy Ladner said both moves would modernize state tax rules. He said that the tax code didn’t originally contemplate taxing firms without a physical office in Mississippi, but noted that the rise of business conducted remotely allows companies to do a lot of business in the state without actual employees here.

The bill is backdated to take effect Jan. 1, meaning it could begin raising more money for the state in the current budget year, which ends June 30. State revenues are already running ahead of projections, but more money could allow lawmakers to ease budget cuts proposed by Republican Gov. Phil Bryant.

The bill now goes to the full House.

The bill is House Bill 970.

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