1997 Regular Session
To: Ways and Means
By: Representative Williams
House Bill 1540
(As Passed the House)
AN ACT TO AMEND SECTION 27-7-37, MISSISSIPPI CODE OF 1972, TO MAKE IT CLEAR THAT THE CHAIRMAN OF THE STATE TAX COMMISSION MAY REQUIRE A CORPORATION THAT IS TAXABLE UNDER THE INCOME TAX LAWS OF THIS STATE THAT IS AFFILIATED WITH ONE OR MORE CORPORATIONS THAT ARE NOT TAXABLE UNDER THE INCOME TAX LAWS OF THIS STATE, TO FILE A CONSOLIDATED INCOME TAX RETURN; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 27-7-37, Mississippi Code of 1972, is amended as follows:
27-7-37. (1) In general. Every corporation subject to taxation shall make a separate return, stating specifically the items of its gross income and the deductions and credits allowed by this article. The return shall be signed by either the president, vice-president, secretary or treasurer.
(2) Consolidated or combined returns by affiliated corporations.
(a) An affiliated group of corporations shall have the privilege of making, or the commissioner may require, a consolidated or combined return with respect to the income tax imposed by this article for the taxable year in lieu of separate returns in the following cases:
(i) Corporations taxable solely in Mississippi. Two (2) or more members of an affiliated group of corporations may elect to file a consolidated income tax return when all the business activities of the group of affiliated corporations included in the consolidated return are carried on and are taxable solely in Mississippi.
(ii) Multistate corporations. Two (2) or more members of an affiliated group of corporations taxable in Mississippi and where one or more are taxable in another state may elect to file a combined income tax return. Multistate corporations electing to file combined returns under this section shall determine the Mississippi net business income (or loss) on an individual corporate member basis as required in Section 27-7-23 and, if applicable, Sections 27-7-24, 27-7-24.1, 27-7-24.3, 27-7-24.5 and 27-7-24.7. The Mississippi net business income (or loss) so computed for each individual member shall be combined to determine the Mississippi net business income (or loss) of the affiliated group of corporations. To the amount so determined shall be added nonbusiness income directly allocable to Mississippi to determine Mississippi taxable income.
(iii) The commissioner may require a corporation taxable under this article that is affiliated with one or more corporations that are not taxable under this article to file a combined or consolidated return with the affiliated corporation or corporations if he believes that the intercompany transactions of such taxable corporation have resulted in the shifting of taxable income from itself to another member or members of its affiliated group not subject to tax under this article. Also, the commissioner may require a group of affiliated corporations taxable under this article to file a combined or consolidated return if he believes that the intercompany transactions of such corporations have resulted in the shifting of taxable income between members of the included affiliated group. In the event that * * * a combined return is required, the net income or loss of each member of the group required to be combined, shall be combined pursuant to regulations prescribed by the commissioner to determine the total combined taxable income and the Mississippi taxable income of the group. The tax imposed by this article shall be computed and assessed upon the Mississippi taxable income of the combined group which shall be treated as the taxpayer. In the event that such consolidated return is required, federal consolidating rules and regulations shall be followed in consolidating the group of corporations. The resulting net income or loss will be allocated and/or apportioned pursuant to Section 27-7-23 and pursuant to regulations prescribed by the commissioner. For the purposes of this item (iii), a consolidated return may include a combination of corporations that are solely taxable, partly taxable and that would not otherwise be taxable in Mississippi, except for the shifting of income.
(b) The privilege to file consolidated or combined returns shall be limited to members of an affiliated group of corporations which are subject to taxation under the provisions of this article. The privilege of making a consolidated or combined return may be exercised only if all corporations subject to taxation under this article which were members of the affiliated group at any time during the taxable year consent to a consolidated or combined return prior to the last day prescribed by law for the filing of such return. The making of a consolidated or combined return shall be considered as such consent. In the case of a taxable corporation which is a member of the affiliated group for a fractional part of the year, the consolidated or combined return shall include the income of such corporation for such part of the year as it is a member of the affiliated group.
(c) The commissioner shall prescribe such regulations as he may deem necessary in order that the tax liability of any affiliated group of corporations making a consolidated or combined return and of each corporation in the group, both during and after the period of affiliation, may be returned, determined, computed, assessed, collected and adjusted, in such manner as clearly to reflect the income tax liability and the various factors necessary for the determination of such liability, and in order to prevent avoidance of such tax liability.
(d) As used in this article, the term "affiliated group" means one or more corporations connected through stock ownership with a common parent corporation where at least eighty percent (80%) of the voting power of all classes of stock and at least eighty percent (80%) of each class of the nonvoting stock of each of the member corporations, except the common parent corporation, is owned directly by one or more of the other member corporations; and the common parent corporation owns directly stock possessing at least eighty percent (80%) of the voting power of all classes of stock and at least eighty percent (80%) of each class of the nonvoting stock of at least one (1) of the other member corporations. As used in this subsection, the term "stock" does not include nonvoting stock which is limited and preferred as to dividends.
(e) If a corporation elects or is required to file returns on a combined or consolidated basis, all subsequent returns shall be made upon the same basis unless permission to change the basis is granted by the commissioner, or unless the commissioner requires a change in the basis.
(3) Foreign corporations. If any foreign corporation has no office or place of business in this state but has an agent in this state, the returns shall be made by the agent.
(4) Receiver; Trustee. In the case of a receiver, trustee in bankruptcy, or assignees operating the property or business of a corporation, such receiver, trustee or assignee shall make returns for such corporation in the same manner and form as corporations are required to make returns; and any tax due on the basis of such returns shall be collected in the same manner as if collected from the corporation of whose business or property they have custody or control.
SECTION 2. This act shall take effect and be in force from and after its passage.