House Bill 1563

AN ACT TO AMEND SECTION 27-7-20, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT NET CASUALTY LOSS DEDUCTIONS MAY BE CARRIED BACK MORE THAN THREE YEARS IF OTHERWISE PROVIDED UNDER THE INTERNAL REVENUE CODE; TO AMEND SECTION 27-7-49, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT THE THREE-YEAR EXAMINATION PERIOD FOR STATE INCOME TAX RETURNS SHALL NOT APPLY WHERE THE REPORTABLE TAXABLE INCOME OF A TAXPAYER HAS BEEN DECREASED BY THE CARRYBACK OF A NET CASUALTY LOSS DEDUCTION OR NET OPERATING LOSS DEDUCTION INSOFAR AS THE STATE INCOME TAX LIABILITY IS AFFECTED BY THE CARRYBACK OF THE APPLICABLE DEDUCTION; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 27-7-20, Mississippi Code of 1972, is amended as follows:

27-7-20. Casualty losses of individuals shall be computed and allowed in accordance with the provisions of the Internal Revenue Code, rules, regulations and revenue procedures relating to casualty and theft losses and disaster losses not in direct conflict with the provisions of the Mississippi Income Tax Law.

The State Tax Commission shall apply a special rule with respect to any loss attributable to a disaster occurring in an area subsequently determined by the President of the United States to warrant assistance by the federal government under the Disaster Relief Act of 1974. In lieu of the net operating loss carryover provision, a "net casualty loss" deduction may result when itemized deductions, including the original casualty loss, exceed gross income. The "net casualty loss" shall be computed with the following modifications:

(a) No other net casualty loss deduction shall be allowed.

(b) No net operating loss deduction shall be allowed.

(d) Allowable deductions which are not attributable to a taxpayer's trade or business shall be allowed only to the extent of the amount of the gross income not derived from such trade or business.

The "net casualty loss" is allowed as a deduction from gross income and may be carried back to each of the three (3) years preceding the tax year in which the original casualty loss is claimed or as otherwise provided under the Internal Revenue Code. If the net casualty loss deduction is not exhausted within the three (3) preceding years or as otherwise provided under the Internal Revenue Code, any net casualty loss remaining shall be carried over to each of the seven (7) years following the tax year in which the original casualty loss is claimed. In determining the amount of any net casualty loss carryback or carryover to any tax year, the necessary computations involving any other tax year shall be made under the law applicable to such other tax year.

SECTION 2. Section 27-7-49, Mississippi Code of 1972, is amended as follows:

27-7-49. (1) Returns shall be examined by the commissioner or his duly authorized agents within three (3) years from the due date or the date the return was filed, whichever is later, and no determination of a tax overpayment or deficiency shall be made by the commissioner, and no suit shall be filed with respect to income within the period covered by such return, after the expiration of said three-year period, except as hereinafter provided.

(2) When an examination of a return made under this article has been commenced, and the taxpayer notified thereof, either by certified mail or personal delivery by an agent of the commissioner, within the three-year examination period provided in subsection (1) of this section, the determination of the correct tax liability may be made by the commissioner after the expiration of said three-year examination period, provided that said determination shall be made with reasonable promptness and diligence.

(3) Where the reported taxable income of a taxpayer has been increased or decreased by the Internal Revenue Service, the three-year examination period provided in subsection (1) of this section shall not be applicable, insofar as the Mississippi income tax liability is affected by the specific changes made by said Internal Revenue Service. However, no additional assessment or no refund shall be made under the provisions of this article after three (3) years from the date the Internal Revenue Service disposes of the tax liability in question.

(4) The three-year examination period provided in subsection (1) of this section shall not be applicable in the case of a false or fraudulent return with intent to evade tax.

(5) A taxpayer may apply to the commissioner for revision of any return filed under this article at any time within three (3) years from the due date, or if an extension of time to file was granted, three (3) years from the date the return was filed. If the return is not filed by the time authorized by the extension, then the three (3) years begin to run from the final day of the extension period.

(6) Where the reportable taxable income of a taxpayer has been decreased by the carryback of a net casualty loss deduction under Section 27-7-20 or the carryback of a net operating loss deduction under Section 27-7-17, the three-year examination period provided under subsection (1) of this section shall not be applicable insofar as the Mississippi income tax liability is affected by the carryback of the net casualty loss deduction or the carryback of the net operating loss deduction.

SECTION 3. This act shall take effect and be in force from and after January 1, 2007.