MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Universities and Colleges; Appropriations

By: Senator(s) Hewes, Browning, Burton, Canon, Carmichael, Chamberlin, Chaney, Farris, Frazier, Gordon, Hamilton, Harden, Horhn, Hyde-Smith, Jackson, Johnson (38th), King, Lee, Little, Simmons, Smith, Thames, Walls, Williamson

AN ACT TO CREATE THE MISSISSIPPI AFFORDABLE COLLEGE SAVINGS (MACS) PROGRAM; TO DEFINE CERTAIN TERMS AND PHRASES RELATING TO THE MACS PROGRAM; TO PRESCRIBE THE POWERS OF THE BOARD OF DIRECTORS OF THE COLLEGE SAVINGS PLANS OF MISSISSIPPI TRUST FUNDS RELATING TO THE ADMINISTRATION OF THE MACS PROGRAM; TO PRESCRIBE CERTAIN TERMS OF SAVINGS TRUST AGREEMENTS ENTERED INTO UNDER THE PROGRAM; TO ESTABLISH THE MISSISSIPPI AFFORDABLE COLLEGE SAVINGS (MACS) TRUST FUND; TO EXEMPT PROPERTY IN THE TRUST FUND FROM TAXATION AND TO ESTABLISH DEDUCTIONS FOR PAYMENTS TO MACS ACCOUNTS; TO PRESCRIBE THE AUTHORITY OF THE BOARD OF DIRECTORS TO INVEST FUNDS IN THE TRUST FUND; TO REQUIRE THE BOARD TO PROVIDE ANNUAL ACCOUNTING STATEMENTS; TO AMEND SECTION 37-155-5, MISSISSIPPI CODE OF 1972, TO CHANGE THE NAME OF THE BOARD OF DIRECTORS OF THE MISSISSIPPI PREPAID AFFORDABLE COLLEGE TUITION PROGRAM TRUST FUND TO THE "BOARD OF DIRECTORS OF THE COLLEGE SAVINGS PLANS OF MISSISSIPPI TRUST FUNDS"; TO AMEND SECTION 37-155-9, MISSISSIPPI CODE OF 1972, IN CONFORMITY THERETO AND TO EXPAND THE BOARD'S INVESTMENT AUTHORITY; TO AMEND SECTION 27-7-15, MISSISSIPPI CODE OF 1972, TO EXCLUDE PAYMENTS TO A MACS ACCOUNT FROM THE DEFINITION OF GROSS INCOME FOR INCOME TAX PURPOSES; TO AMEND SECTIONS 27-7-17, 27-7-18, 75-71-113 AND 75-71-401, MISSISSIPPI CODE OF 1972, IN CONFORMITY TO THE PROVISIONS OF THIS ACT; AND FOR RELATED PURPOSES.

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

SECTION 1. This article shall be known and may be cited as the "Mississippi Affordable College Savings Program."

SECTION 2. The following are the purposes of this article:

(a) To provide a program of savings trust agreements to apply distributions toward qualified higher education expenses at eligible educational institutions, as defined in Section 529 of the Internal Revenue Code, as amended, or other applicable federal law.

(b) To provide for the creation of a trust fund, as an instrumentality of the State of Mississippi, to assist qualified students in financing costs of attending institutions of higher education.

(c) To encourage timely financial planning for higher education by the creation of savings trust accounts.

(d) To provide a choice of programs to persons who determine that the overall educational needs of their families are best suited to a prepaid tuition contract under the Mississippi Prepaid Affordable College Tuition (MPACT) Program, a savings trust agreement under this article, or both.

(e) To provide a savings program for those persons who wish to save to meet post secondary educational needs beyond the traditional baccalaureate curriculum.

SECTION 3. As used in this article, the following words and phrases have the meanings ascribed in this section unless the context clearly indicates otherwise:

(a) "MACS Program" means the Mississippi Affordable College Savings Program established under this article.

(b) "MACS Trust Fund" means a special fund in the State Treasury established under Section 6 of Senate Bill No. 2298, 2000 Regular Session, and administered by the Treasury Department.
(c) "Account owner" means a resident or nonresident person, corporation, trust, charitable organization or other entity which contributes to or invests money in a savings trust account under the MACS Program on behalf of a beneficiary and which is listed as the owner of the savings trust account.

(d) "Beneficiary" means a resident or nonresident beneficiary of a savings trust agreement who meets the requirements of Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law, and any regulations established by the board.

(e) "Institution of higher education" means an eligible educational institution as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or any other applicable federal law.

(f) "Tuition" means the quarter, semester or term charges and all required fees imposed by an institution of higher education as a condition of enrollment by all students.

(g) "Board" means the Board of Directors of the College Savings Plans of Mississippi Trust Funds established under Section 37-155-7.

(h) "Payor" means a person, corporation, trust, charitable organization or other such entity which contributes money or makes a payment to either a savings trust account established pursuant to this article or a prepaid tuition account established under Sections 37-155-1 through 37-155-27 on behalf of a beneficiary.

(i) "Savings trust account" means an account established by an account owner pursuant to this article on behalf of a beneficiary in order to apply distributions from the account toward qualified higher education expenses at eligible educational institutions, as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law.

(j) "Savings trust agreement" means the agreement entered into between the board and the account owner establishing a savings trust account.

(k) "Qualified higher education expense" means any higher education expense, as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law.

(l) "Qualified withdrawal" means a withdrawal by an account owner or beneficiary for qualified higher education expenses or as otherwise permitted under Section 529 of the Internal Revenue Code of 1986, as amended, without a penalty required under the Internal Revenue Code.

SECTION 4. In addition to those powers granted to the board by Section 37-155-1 through 37-155-27 and any other provisions of this article, the board shall have the powers necessary or convenient to carry out the purposes and provisions of this article, the purposes and objectives of the trust fund, and the powers delegated by any other law or executive order of this state, including, but not limited to, the following express powers:

(a) To adopt such rules and regulations as are necessary to implement this article, subject to applicable federal laws and regulations, including rules regarding transfers of funds between accounts established under prepaid tuition contracts and savings trust agreements;

(b) To impose reasonable requirements for residency for beneficiaries or account owners at the time of purchase of the savings trust agreement;

(c) To contract for necessary goods and services, to employ necessary personnel, and to engage the services of consultants and other qualified persons and entities for administrative and technical assistance in carrying out the responsibilities of the trust funds under terms and conditions of that the board deems reasonable, including contract terms for periods up to ten (10) years at which time a contract may be terminated, extended or renewed for a term determined by the board, not to exceed a term of ten (10) years at any one time;

(d) To solicit and accept gifts, including bequests or other testamentary gifts made by will, trust or other disposition grants, loans and other aids from any personal source or to participate in any other way in any federal, state or local governmental programs in carrying out the purposes of this article;

(e) To define the terms and conditions under which payments may be withdrawn or refunded from the trust fund established under this article to impose reasonable charges for a withdrawal or refund;

(f) To impose reasonable time limits on the use of savings trust account distributions provided by the MACS Program;

(g) To regulate the receipt of contributions or payments to the MACS Trust Fund;

(h) To segregate contributions and payments to the MACS Trust Fund into various accounts and funds;

(i) To require and collect administrative fees and charges in connection with any transaction and to impose reasonable penalties for withdrawal of funds for nonqualified higher educational expenses or for entering into a savings trust agreement on a fraudulent basis;

(j) To procure insurance against any loss in connection with the property, assets and activities of the MACS Trust Fund or the board;

(k) To require that account owners of savings trust agreements or purchasers of Mississippi Prepaid Affordable College Tuition (MPACT) contracts under Sections 37-155-1 through 37-155-27 verify, under oath, any requests for contract conversions, substitutions, transfers, cancellations, refund requests or contract changes of any nature;

(l) To solicit proposals and to contract for the marketing of the MACS Program, provided that: (i) any materials produced by a marketing contractor for the purpose of marketing the program must be approved by the board before being made available to the public; and (ii) neither the state nor the board shall be liable for misrepresentation of the program by a marketing contractor;

(m) To delegate responsibility for administration of the comprehensive investment plan to a contractor or contractors or a consultant or consultants that the board determines is qualified;

(n) To make all necessary and appropriate arrangements with colleges and universities or other entities in order to fulfill its obligations under savings trust agreements;

(o) To establish other policies, procedures and criteria necessary to implement and administer this article; and

(p) To authorize the Treasury Department or the State Treasurer, or both, to carry out any or all of the powers and duties enumerated in this section for efficient and effective administration of the MACS Program and MACS Trust Fund.

SECTION 5. (1) The board shall make savings trust agreements available to the public, under which account owners or other payors may make contributions on behalf of qualified beneficiaries. Contributions and investment earnings on the contributions may be used for any qualified higher educational expenses of a designated beneficiary. The state does not guarantee that such contributions, together with the investment return on such contributions, if any, will be adequate to pay for qualified education expenses in full.

(2) Each savings trust agreement made pursuant to this article shall include the following terms and provisions:

(a) The maximum and minimum contribution allowed on behalf of each beneficiary for the payment of qualified higher education expenses at eligible institutions, both as defined in Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law;

(b) Provisions for withdrawals, refunds, transfers and any penalties;

(c) The name, address and date of birth of the beneficiary on whose behalf the savings trust account is opened;

(d) Terms and conditions for a substitution of the beneficiary originally named;

(e) Terms and conditions for termination of the account, including any refunds, withdrawals or transfers, and applicable penalties, and the name of the person or persons entitled to terminate the account;

(f) The time period during which the beneficiary must use benefits from the savings trust account;

(g) All other rights and obligations of the account owner and the MACS Trust Fund; and

(h) Any other terms and conditions that the board deems necessary or appropriate, including those necessary to conform the savings trust account with the requirements of Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law or regulations.

SECTION 6. (1) There is created a Mississippi Affordable College Savings Trust Fund as an instrumentality of the state to be administered by the Treasury Department. The MACS Trust Fund shall consist of state appropriations, monies acquired from other governmental or private sources and money remitted in accordance with savings trust agreements and shall receive and hold all payments, contributions and deposits intended for it as well as gifts, bequests, endowments or federal, state or local grants and any other public or private source of funds and all earnings on the fund until disbursed as provided under this section. The amounts on deposit on the trust fund shall not constitute property of the state. Amounts on deposit in the trust fund may not be commingled with state funds, and the state may have no claim to or interest in such funds. Savings trust agreements or any other contract entered into by or on behalf of the trust do not constitute a debt or obligation of the state, and no account owner is entitled to any amounts except for those amounts on deposit in or accrued to their account.

The MACS Trust Fund shall continue in existence as long as it holds any funds belonging to an account owner or otherwise has any obligations to any person or entity until its existence is terminated by the Legislature and remaining assets on deposit in the fund are returned to account owners or transferred to the state in accordance with unclaimed property laws.

(2) There are created the following three (3) separate accounts within the MACS Trust Fund: (a) the administrative account; (b) the endowment account; and (c) the program account. The administrative account shall accept, deposit and disburse funds for the purpose of administering and marketing the program. The endowment account shall receive and deposit accounts received in connection with the sales of interests in the MACS Trust Fund other than amounts for the administrative account and other than amounts received pursuant to a savings trust agreement. Amounts on deposit in the endowment account may be applied as specified by the board for any purpose related to the program or to otherwise assist Mississippi residents to attain a postsecondary education. The program account shall receive, invest and disburse amounts pursuant to savings trust agreements.

(3) The official location of the trust fund shall be the State of Mississippi Treasury Department, and the facilities of the Treasury Department shall be used and employed in the administration of the fund, including, but without limitation to, the keeping of records, the management of bank accounts and other investments, the transfer of funds and the safekeeping of securities evidencing investments. These functions may be administered pursuant to a management agreement with a qualified entity or entities.

(4) Payments received by the board on behalf of beneficiaries from account owners, other payors or from any other source, public or private, shall be placed in the trust fund, and the board shall cause there to be maintained separate records and accounts for individual beneficiaries, as may be required under Section 529 of the Internal Revenue Code of 1986, as amended, and any other applicable federal law.

(5) Account owners and any other payors or contributors shall be permitted only to contribute cash or any other form of payment or contribution as is permitted under Section 529 of the Internal Revenue Code of 1986, as amended, and approved by the board. The board shall cause the program to maintain adequate safeguards against contributions in excess of what may be required for qualified higher education expenses. The MACS Trust Fund, through the Treasurer, may receive and deposit into the trust fund any gift of any nature, real or personal property, made by an individual by testamentary disposition, including, without limitation, any specific gift or bequeath made by will, trust or other disposition to the extent permitted under Section 529 of the Internal Revenue Code of 1986, as amended. The MACS Trust Fund may receive amounts transferred from an UGMA, UTMA or other account established for the benefit of a minor if the trust beneficiary of such an account is identified as the legal owner of the MACS Trust Fund account upon attaining majority age.

(6) The account owner retains ownership of all amounts on deposit in his or her account with the program up to the date of distribution on behalf of a designated beneficiary. Earnings derived from investment of the contributions shall be considered to be held in trust in the same manner as contributions, except as applied for purposes of the designated beneficiary and for purposes of maintaining and administrating the program as provided in this article. Amounts on deposit in an account owner's account shall be available for expenses and penalties imposed by the board for the program as disclosed in the savings trust agreement.

(7) The MACS Trust Fund shall constitute a fund of an instrumentality of the state, and its property and income shall be exempt from all taxation by the state and by all of its political subdivisions.

(8) The assets of the MACS Trust Fund shall be preserved, invested and expended solely pursuant to and for the purposes of this article and shall not be loaned or otherwise transferred or used by the state for any other purpose.

SECTION 7. (1) All property and income of the MACS Trust Fund, as an instrumentality of the state, is exempt from all taxation by the state and by its political subdivisions.

(2) Any contributor or payor to a MACS Program account may deduct from their Mississippi taxable income any contributions or payments to an account or accounts in the MACS Trust Fund up to a maximum annual amount of Twenty Thousand Dollars ($20,000.00) for joint filers and Ten Thousand Dollars ($10,000.00) for single and other filers. Contributions or payments for such tax years may be made after such calendar years but before the deadline for making contributions to an individual retirement account under federal law for such years. The earnings portion of any withdrawals from an account that are not qualified withdrawals, as well as any amounts included in such nonqualified withdrawals previously deducted from taxable income under this section, shall be included in the gross income of the resident recipient of the withdrawal for purposes of the Mississippi Income Tax Law in the year of such withdrawal.

SECTION 8. (1) The board has authority to establish a comprehensive investment plan for the purposes of this article, to invest any funds of the MACS Trust Fund in any instrument, obligation, security or property that constitutes legal investments for public funds in the state, and to name and use depositories for its investments and holdings. The comprehensive investment plan shall specify the investment policies to be utilized by the board in its administration of the funds. The board may authorize investments in any investment vehicle authorized for the Mississippi Prepaid Affordable College Tuition (MPACT) Program under Section 37-155-9. However, the restrictions in Section 37-155-9 as to percentages of the total fund that may be invested in any category of authorized investment shall not apply to the MACS Trust Fund. The program account, in its discretion, may invest in obligations of the state or any political subdivision of the state or in any business entity in the state.

Notwithstanding any state law to the contrary, the board shall invest or cause to be invested amounts on deposit in the MACS Trust Fund, including the program account, in a manner reasonable and appropriate to achieve the objectives of the program, exercising the discretion and care of a prudent person in similar circumstances with similar objectives. The board shall give due consideration to the risk, expected rate of return, term or maturity, diversification of total investments, liquidity and anticipated investments in and withdrawals from the MACS Trust Fund.

(2) All investments shall be acquired by the board at prices not exceeding the prevailing market values for such securities.

(3) Any limitations set forth in this section shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be marked clearly to indicate ownership by the system and, to the extent possible, shall be registered in the name of the system.

(4) Subject to the terms, conditions, limitations and restrictions set forth in this section, the board may sell, assign, transfer and dispose of any of the securities and investments of the system if the sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services, or other such services as determined by the board to be necessary for the effective and efficient operation of the system.

(5) Except as otherwise provided in this section, no trustee or employee of the board may have any direct or indirect interest in the income, gains or profits of any investment made by the board, and such person may not receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board may become an endorser or surety or in any manner an obligor for money loaned by or borrowed from the system.

(6) Under the authority granted in Section 4 of Senate Bill No. 2298, 2000 Regular Session, the board may establish criteria for investment managers, mutual funds or other such entities to act as contractors or consultants to the board. The board may contract, either directly or through such contractors or consultants, to provide such services as may be a part of the comprehensive investment plan or as may be deemed necessary or proper by the board, including, but not limited to, providing consolidated billing, individual and collective record keeping and accounting, and asset purchase, control and safekeeping.

(7) No account owner, contributor, payor or beneficiary may directly or indirectly direct the investment of any account except as may be permitted under Section 529 of the Internal Revenue Code of 1986, as amended.

(8) The board may approve different investment plans and options to be offered to participants to the extent permitted under Section 529 of the Internal Revenue Code of 1986, as amended, and consistent with the objectives of this article and may require the assistance of investment counseling before participation in different options.

(9) Interests or accounts in the MACS Trust Fund and transactions in such interests or accounts shall be exempt from Sections 75-71-113 and 75-71-401.

SECTION 9. (1) The board shall furnish, without charge, to each account owner an annual statement of the following:

(a) The amount contributed by the account owner under the savings trust agreement;

(b) The annual earnings and accumulated earnings on the savings trust account; and

(c) Any other terms and conditions that the board deems by rule is necessary or appropriate, including those necessary to conform the savings trust account with the requirements of Section 529 of the Internal Revenue Code of 1986, as amended, or other applicable federal law or regulations.

(2) The board shall furnish an additional statement complying with subsection (1) to an account owner or beneficiary on written request. The board may charge a reasonable fee for each statement furnished under this subsection.

(3) The board shall prepare or cause to be prepared an annual report setting forth in appropriate detail an accounting of the funds and a description of the financial condition of the program at the close of each fiscal year. Such report shall be submitted to the Governor, the Lieutenant Governor, the Speaker of the House of Representatives and members of the Board of Trustees of State Institutions of Higher Learning, the State Board for Community and Junior Colleges and the State Board of Education. In addition, the board shall make the report available to account owners of savings trust agreements. The accounts of the fund shall be subject to annual audits by the State Auditor or his designee.

SECTION 10. This article is not a promise or guarantee that the beneficiary will be:

(a) Admitted to any institution of higher education;

(b) Admitted to a particular institution of higher education after admission;

(c) Allowed to continue enrollment at an institution of higher education; or

(d) Graduated from an institution of higher education.

SECTION 11. Nothing in this article or in any savings trust agreement entered into pursuant to this article shall be construed as a promise or guarantee by the state or any agency or instrumentality of the state that either qualified higher education expenses in general or any specific qualified higher education expense shall be covered in full by contributions or earnings on any savings trust account. Savings trust accounts and agreements entered into pursuant to this article are not guaranteed by the full faith and credit of the State of Mississippi.

SECTION 12. Notwithstanding any state law to the contrary, no monies on deposit in either the MACS or MPACT Programs shall be considered an asset of the parent, guardian or student for purposes of determining an individual's eligibility for a need-based grant, need-based scholarship or need-based work opportunity offered or administered by any state agency except as may be required by the funding source of such financial aid.

SECTION 13. The provisions of this article are severable. If any part of this article is declared invalid or unconstitutional, such declaration shall not affect the parts of this article which remain.

SECTION 14. Section 37-155-5, Mississippi Code of 1972, is amended as follows:

37-155-5. As used in this article, the following terms have the meanings ascribed to them in this section, unless the context clearly indicates otherwise:

(a) Prepaid Tuition Contract. A contract entered into between the Board of Directors of the College Savings Plans of Mississippi Trust Funds and a purchaser pursuant to this chapter.

(b) Trust fund. There is created a special fund in the State of Mississippi Treasury Department to be designated as the "Mississippi Prepaid Affordable College Tuition Trust Fund" (hereinafter referred to as the trust fund or fund) and to be administered by the State of Mississippi Treasury Department. The fund shall consist of state appropriations, monies acquired from other governmental or private sources, and money remitted in accordance with prepaid tuition contracts. In the event that dividends, interest and gains exceed the amount necessary for program administration and disbursements, the board may designate a percentage of the fund to serve as a contingency fund.

(c) Purchaser. A person, corporation, trust, charitable organization or other such entity that makes or is obligated to make advance payments in accordance with a prepaid tuition contract entered into pursuant to this chapter.

(d) Beneficiary. (i) The beneficiary of a prepaid tuition contract must be eighteen (18) years of age or younger at the time the purchaser enters into the contract and must be: (A) a resident of this state at the time the purchaser enters into the contract; or (B) a nonresident if the purchaser is a resident of this state at the time that the contract is entered into.

(ii) The board may require a reasonable period of residence in this state for a beneficiary or the purchaser.

(iii) A beneficiary is considered a resident for purposes of tuition regardless of the beneficiary's residence on the date of enrollment.

(e) Institution of higher education. Any public institution of higher learning or public community or junior college located in Mississippi.

(f) Tuition. The quarter, semester or term charges and all required fees imposed by an institution of higher education as a condition of enrollment by all students.

(g) Board or board of directors. The Board of Directors of the College Savings Plans of Mississippi * * * Trust Funds as provided in Section 37-155-7.

(h) Legislature. The Legislature of Mississippi.

SECTION 15. Section 37-155-9, Mississippi Code of 1972, is amended as follows:

37-155-9. In addition to the powers granted by any other provision of this chapter, the board of directors shall have the powers necessary or convenient to carry out the purposes and provisions of this chapter, the purposes and objectives of the trust fund and the powers delegated by any other law of the state or any executive order thereof, including, but not limited to, the following express powers:

(a) To adopt and amend bylaws;

(b) To adopt such rules and regulations as are necessary to implement the provisions of this chapter;

(c) To invest any funds of the trust fund in any instrument, obligation, security or property that constitutes legal investments for public funds in the state and to name and use depositories for its investments and holdings;

(d) To execute contracts and other necessary instruments;

(e) To impose reasonable requirements for residency for beneficiaries at the time or purchase of the contract;

(f) To impose reasonable limits on the number of contract participants in the trust fund at any given period of time;

(g) To contract for necessary goods and services, to employ necessary personnel, and to engage the services of consultants for administrative and technical assistance in carrying out the responsibilities of the trust fund;

(h) To solicit and accept gifts, including bequeathments or other testamentary gifts made by will, trust or other disposition, grants, loans and other aids from any personal source or to participate in any other way in any federal, state or local governmental programs in carrying out the purposes of this chapter. Any gifts made to the board under this subsection * * * shall be deductible from taxable income of the state in the tax year;

(i) To define the terms and conditions under which payments may be withdrawn or refunded from the trust fund, including, but not limited to, the amount paid in and an additional amount in the nature of interest at a rate that corresponds, at a minimum, to the prevailing interest rates for savings accounts provided by banks and savings and loan associations and impose reasonable charges for such withdrawal or refund;

(j) To ensure applicability to private and out-of-state tuitions:

(i) Under the program, a state purchaser may enter into a prepaid tuition contract with the board under which the purchaser agrees to attend a public institution of higher education in Mississippi;

(ii) If the beneficiary of a plan described by Section 37-155-11 enrolls in any in-state or out-of-state regionally accredited private four- or two-year college or an out-of-state regionally accredited, state-supported, nonprofit four- or two-year college or university, the board shall pay to the institution an amount up to, but not greater than, the tuition and required fees that the board would have paid had the beneficiary enrolled in an institution of higher education covered by the plan selected in the prepaid tuition contract. The beneficiary is responsible for paying a private institution or an out-of-state public institution the amount by which the tuition and required fees of the institution exceed the tuition and required fees paid by the board;

(k) To impose reasonable time limits on the use of the tuition benefits provided by the program;

(l) To provide for the receipt of contributions to the trust fund in lump sums or installment payments;

(m) To adopt an official seal and rules;

(n) To sue and be sued;

(o) To establish agreements or other transactions with federal, state and local agencies, including state universities and community colleges;

(p) To appear in its own behalf before boards, commissions or other governmental agencies;

(q) To segregate contributions and payments to the fund into various accounts and funds;

(r) To require and collect administrative fees and charges in connection with any transaction and impose reasonable penalties, including default, for delinquent payments or for entering into an advance payment contract on a fraudulent basis;

(s) To procure insurance against any loss in connection with the property, assets and activities of the fund or the board;

(t) To require that purchasers of advance payment contracts verify, under oath, any requests for contract conversions, substitutions, transfers, cancellations, refund requests or contract changes of any nature;

(u) To administer the fund in a manner that is sufficiently actuarially sound to meet the obligations of the program. The board shall annually evaluate or cause to be evaluated the actuarial soundness of the fund. If the board perceives a need for additional assets in order to preserve actuarial soundness, the board may adjust the terms of subsequent advance payment contracts to ensure such soundness;

(v) To establish a comprehensive investment plan for the purposes of this section. The comprehensive investment plan shall specify the investment policies to be utilized by the board in its administration of the fund. The board may authorize investments in:

(i) Bonds, notes, certificates and other valid general obligations of the State of Mississippi, or of any county, or of any city, or of any supervisors district of any county of the State of Mississippi, or of any school district bonds of the State of Mississippi; notes or certificates of indebtedness issued by the Veterans' Home Purchase Board of Mississippi, provided such notes or certificates of indebtedness are secured by the pledge of collateral equal to two hundred percent (200%) of the amount of the loan, which collateral is also guaranteed at least for fifty percent (50%) of the face value by the United States government, and provided that not more than five percent (5%) of the total investment holdings of the system shall be in Veterans' Home Purchase Board notes or certificates at any time; real estate mortgage loans one hundred percent (100%) insured by the Federal Housing Administration on single family homes located in the State of Mississippi, where monthly collections and all servicing matters are handled by Federal Housing Administration approved mortgagees authorized to make such loans in the State of Mississippi;

(ii) State of Mississippi highway bonds;

(iii) Funds may be deposited in federally insured institutions domiciled in the State of Mississippi or a custodial bank which appears on the State of Mississippi Treasury Department's approved depository list and/or safekeeper list;

(iv) Corporate bonds of investment grade as rated by Standard & Poor's or by Moody's Investment Service, with bonds rated BAA/BBB not to exceed five percent (5%) of the book value of the total fixed income investments; or corporate short-term obligations of corporations or of wholly owned subsidiaries of corporations, whose short-term obligations are rated A-3 or better by Standard and Poor's or rated P-3 or better by Moody's Investment Service;

(v) Bonds of the Tennessee Valley Authority;

(vi) Bonds, notes, certificates and other valid obligations of the United States, and other valid obligations of any federal instrumentality that issues securities under authority of an act of Congress and are exempt from registration with the Securities and Exchange Commission;

(vii) Bonds, notes, debentures and other securities issued by any federal instrumentality and fully guaranteed by the United States. Direct obligations issued by the United States of America shall be deemed to include securities of, or other interests in, any open-end or closed-end management type investment company or investment trust registered under the provisions of 15 USCS Section 80(a)-1 et seq., provided that the portfolio of such investment company or investment trust is limited to direct obligations issued by the United States of America, United States government agencies, United States government instrumentalities or United States government sponsored enterprises, and to repurchase agreements fully collateralized by direct obligations of the United States of America, United States government agencies, United States government instrumentalities or United States government sponsored enterprises, and the investment company or investment trust takes delivery of such collateral for the repurchase agreement, either directly or through an authorized custodian. The State Treasurer and the Executive Director of the Department of Finance and Administration shall review and approve the investment companies and investment trusts in which funds may be invested * * *;

(viii) Interest-bearing bonds or notes which are general obligations of any other state in the United States or of any city or county therein, provided such city or county had a population as shown by the federal census next preceding such investment of not less than twenty-five thousand (25,000) inhabitants and provided that such state, city or county has not defaulted for a period longer than thirty (30) days in the payment of principal or interest on any of its general obligation indebtedness during a period of ten (10) calendar years immediately preceding such investment;

(ix) Shares of stocks, common and/or preferred, of corporations created by or existing under the laws of the United States or any state, district or territory thereof; provided:

(A) The maximum investments in stocks shall not exceed fifty percent (50%) of the book value of the total investment fund of the system;

(B) The stock of such corporation shall:

1. Be listed on a national stock exchange, or

2. Be traded in the over-the-counter market, provided price quotations for such over-the-counter stocks are quoted by the National Association of Securities Dealers Automated Quotation System (NASDAQ);

(C) The outstanding shares of such corporation shall have a total market value of not less than Fifty Million Dollars ($50,000,000.00);

(D) The amount of investment in any one (1) corporation shall not exceed three percent (3%) of the book value of the assets of the system; and

(E) The shares of any one (1) corporation owned by the system shall not exceed five percent (5%) of that corporation's outstanding stock;

(x) Bonds rated Single A or better, stocks and convertible securities of established non-United States companies, which companies are listed on only primary national stock exchanges of foreign nations; and in foreign government securities rated Single A or better by a recognized rating agency; provided that the total book value of investments under this paragraph shall at no time exceed twenty percent (20%) of the total book value of all investments of the system. The board may take requisite action to effectuate or hedge such transactions through foreign banks, including the purchase and sale, transfer, exchange or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments, notwithstanding any other provisions of this chapter to the contrary;

(xi) Covered call and put options on securities traded on one or more of the regulated exchanges;

(xii) Institutional investment trusts managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of directors, and institutional class shares of investment companies and unit investment trusts registered under the Investment Company Act of 1940 where such * * * funds or shares are comprised of common or preferred stocks, bonds, money market instruments or other investments authorized under this section. * * * Any investment manager or managers approved by the board of directors shall invest such * * * funds or shares as a fiduciary;

(xiii) Pooled or commingled real estate funds or real estate securities managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of directors. Such investment in commingled funds or shares shall be held in trust; provided that the total book value of investments under this paragraph shall at no time exceed five percent (5%) of the total book value of all investments of the system. Any investment manager approved by the board of directors shall invest such commingled funds or shares as a fiduciary * * *;

(w) All investments shall be acquired by the board at prices not exceeding the prevailing market values for such securities;

(x) Any limitations herein set forth shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time. All investments shall be clearly marked to indicate ownership by the system and to the extent possible shall be registered in the name of the system;

(y) Subject to the above terms, conditions, limitations and restrictions, the board shall have power to sell, assign, transfer and dispose of any of the securities and investments of the system, provided that the sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services or other such services as determined by the board to be necessary for the effective and efficient operation of the system;

(z) Except as otherwise provided herein, no trustee and no employee of the board shall have any direct or indirect interest in the income, gains or profits of any investment made by the board, nor shall any such person receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board shall become an endorser or surety, or in any manner an obligor for money loaned by or borrowed from the system;

(aa) All interest derived from investments and any gains from the sale or exchange of investments shall be credited by the board to the account of the system;

(bb) To delegate responsibility for administration of the comprehensive investment plan to a consultant the board determines to be qualified. Such consultant shall be compensated by the board. Directly or through such consultant, the board may contract to provide such services as may be a part of the comprehensive investment plan or as may be deemed necessary or proper by the board or such consultant, including, but not limited to, providing consolidated billing, individual and collective record keeping and accounting, and asset purchase, control and safekeeping;

(cc) To annually prepare or cause to be prepared a report setting forth in appropriate detail an accounting of the fund and a description of the financial condition of the program at the close of each fiscal year. Such report shall be submitted to the Governor, the Lieutenant Governor, the President of the Senate, the Speaker of the House of Representatives, and members of the Board of Trustees of State Institutions of Higher Learning, the State Board for Community and Junior Colleges and the State Board of Education on or before March 31 each year. In addition, the board shall make the report available to purchasers of advance payment contracts. The board shall provide to the Board of Trustees of State Institutions of Higher Learning and the State Board for Community and Junior Colleges by March 31 each year complete advance payment contract sales information including projected postsecondary enrollments of beneficiaries. The accounts of the fund shall be subject to annual audits by the State Auditor or his designee;

(dd) To solicit proposals for the marketing of the Mississippi Prepaid Affordable College Tuition Program. The entity designated pursuant to this paragraph shall serve as a centralized marketing agent for the program and shall solely be responsible for the marketing of the program. Any materials produced for the purpose of marketing the programs shall be submitted to the board for review. No such materials shall be made available to the public before the materials are approved by the board. Any educational institution may distribute marketing materials produced for the program; however, all such materials shall have been approved by the board prior to distribution. Neither the state nor the board shall be liable for misrepresentation of the program by a marketing agent; and

(ee) To establish other policies, procedures and criteria necessary to implement and administer the provisions of this chapter.

For efficient and effective administration of the program and trust fund, the board may authorize the State of Mississippi Treasury Department and/or the State Treasurer to carry out any or all of the powers and duties enumerated above.

SECTION 16. Section 27-7-15, Mississippi Code of 1972, is amended as follows:

27-7-15. (1) For the purposes of this article, except as otherwise provided, the term "gross income" means and includes the income of a taxpayer derived from salaries, wages, fees or compensation for service, of whatever kind and in whatever form paid, including income from governmental agencies and subdivisions thereof; or from professions, vocations, trades, businesses, commerce or sales, or renting or dealing in property, or reacquired property; also from annuities, interest, rents, dividends, securities, insurance premiums, reinsurance premiums, considerations for supplemental insurance contracts, or the transaction of any business carried on for gain or profit, or gains, or profits, and income derived from any source whatever and in whatever form paid. The amount of all such items of income shall be included in the gross income for the taxable year in which received by the taxpayer. The amount by which an eligible employee's salary is reduced pursuant to a salary reduction agreement authorized under Section 25-17-5 shall be excluded from the term "gross income" within the meaning of this article.

(2) In determining gross income for the purpose of this section, the following, under regulations prescribed by the commissioner, shall be applicable:

(a) Dealers in property. Federal rules, regulations and revenue procedures shall be followed with respect to installment sales.

(b) Casual sales of property. Federal rules, regulations and revenue procedures shall be followed with respect to installment sales.

(i) The term "installment sale" means a disposition of property where at least one (1) payment is to be received after the close of the taxable year in which the disposition occurs.

(ii) The term "installment method" means a method under which the income recognized for any taxable year from the disposition is that proportion of the payments received in that year which the gross profit (realized or to be realized when payment is completed) bears to the total contract price.

(c) Reserves of insurance companies. In the case of insurance companies, any amounts in excess of the legally required reserves shall be included as gross income.

(d) Affiliated companies or persons. As regards sales, exchanges or payments for services from one to another of affiliated companies or persons or under other circumstances where the relation between the buyer and seller is such that gross proceeds from the sale or the value of the exchange or the payment for services are not indicative of the true value of the subject matter of the sale, exchange or payment for services, the commissioner shall prescribe uniform and equitable rules for determining the true value of the gross income, gross sales, exchanges or payment for services, or require consolidated returns of affiliates.

(e) Alimony and separate maintenance payments. The federal rules, regulations and revenue procedures in determining the deductibility and taxability of alimony payments shall be followed in this state.

(f) Reimbursement for expenses of moving. There shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment.

(3) In the case of taxpayers other than residents, gross income includes gross income from sources within this state.

(4) The words "gross income" do not include the following items of income which shall be exempt from taxation under this article:

(a) The proceeds of life insurance policies and contracts paid upon the death of the insured. However, the income from the proceeds of such policies or contracts shall be included in the gross income.

(b) The amount received by the insured as a return of premium or premiums paid by him under life insurance policies, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract.

(c) The value of property acquired by gift, bequest, devise or descent, but the income from such property shall be included in the gross income.

(d) Interest upon the obligations of the United States or its possessions, or securities issued under the provisions of the Federal Farm Loan Act of July 17, 1916, or bonds issued by the War Finance Corporation, or obligations of the State of Mississippi or political subdivisions thereof.

(e) The amounts received through accident or health insurance as compensation for personal injuries or sickness, plus the amount of any damages received for such injuries or such sickness or injuries, or through the War Risk Insurance Act, or any law for the benefit or relief of injured or disabled members of the military or naval forces of the United States.

(f) Income received by any religious denomination or by any institution or trust for moral or mental improvements, religious, Bible, tract, charitable, benevolent, fraternal, missionary, hospital, infirmary, educational, scientific, literary, library, patriotic, historical or cemetery purposes or for two (2) or more of such purposes, if such income be used exclusively for carrying out one or more of such purposes.

(g) Income received by a domestic corporation which is "taxable in another state" as this term is defined in this article, derived from business activity conducted outside this state. Domestic corporations taxable both within and without the state shall determine Mississippi income on the same basis as provided for foreign corporations under the provisions of this article.

(h) In case of insurance companies, there shall be excluded from gross income such portion of actual premiums received from an individual policyholder as is paid back or credited to or treated as an abatement of premiums of such policyholder within the taxable year.

(i) Income from dividends that has already borne a tax as dividend income under the provisions of this article, when such dividends may be specifically identified in the possession of the recipient.

(j) Amounts paid by the United States to a person as added compensation for hazardous duty pay as a member of the Armed Forces of the United States in a combat zone designated by Executive Order of the President of the United States.

(k) Amounts received as retirement allowances, pensions, annuities or optional retirement allowances paid under the federal Social Security Act, the Railroad Retirement Act, the Federal Civil Service Retirement Act, or any other retirement system of the United States government, retirement allowances paid under the Mississippi Public Employees' Retirement System, Mississippi Highway Safety Patrol Retirement System or any other retirement system of the State of Mississippi or any political subdivision thereof. The exemption allowed under this paragraph (k) shall be available to the spouse or other beneficiary at the death of the primary retiree.

(l) Amounts received as retirement allowances, pensions, annuities or optional retirement allowances paid by any public or governmental retirement system not designated in subsection (k) or any private retirement system or plan of which the recipient was a member at any time during the period of his employment. Amounts received as a distribution under a Roth individual retirement account shall be treated in the same manner as provided under the Internal Revenue Code of 1986, as amended. The exemption allowed under this paragraph (l) shall be available to the spouse or other beneficiary at the death of the primary retiree.

(m) Compensation not to exceed the aggregate sum of Five Thousand Dollars ($5,000.00) for any taxable year received by a member of the National Guard or Reserve Forces of the United States as payment for inactive duty training, active duty training and state active duty.

(n) Compensation received for active service as a member below the grade of commissioned officer and so much of the compensation as does not exceed the aggregate sum of Five Hundred Dollars ($500.00) per month received for active service as a commissioned officer in the Armed Forces of the United States for any month during any part of which such members of the Armed Forces (i) served in a combat zone as designated by Executive Order of the President of the United States; or (ii) was hospitalized as a result of wounds, disease or injury incurred while serving in such combat zone.

(o) The proceeds received from federal and state forestry incentives programs.

(p) The amount representing the difference between the increase of gross income derived from sales for export outside the United States as compared to the preceding tax year wherein gross income from export sales was highest, and the net increase in expenses attributable to such increased exports. In the absence of direct accounting the ratio of net profits to total sales may be applied to the increase in export sales. This item (p) shall only apply to businesses located in this state engaging in the international export of Mississippi goods and services. Such goods or services shall have at least fifty percent (50%) of value added at a location in Mississippi.

(q) Amounts paid by the federal government for the construction of soil conservation systems as required by a conservation plan adopted pursuant to 16 USCS 3801 et seq.

(r) The amount deposited in a medical savings account, and any interest accrued thereon, that is a part of a medical savings account program as specified in the Medical Savings Account Act under Sections 71-9-1 through 71-9-9; provided, however, that any amount withdrawn from such account for purposes other than paying eligible medical expense or to procure health coverage, shall be included in gross income.

(s) Amounts paid by the Mississippi Soil and Water Conservation Commission from the Mississippi Soil and Water Cost-Share Program for the installation of water quality best management practices.

(t) Dividends received by a holding corporation, as defined in Section 27-13-1, from a subsidiary corporation, as defined in Section 27-13-1.

(u) Interest, dividends, gains or income of any kind on any account in the Mississippi Affordable College Savings Trust Fund, as established under Senate Bill No. 2298, 2000 Regular Session, to the extent that such amounts remain on deposit in the MACS Trust Fund or are withdrawn pursuant to a qualified withdrawal, as defined in Section 3 of Senate Bill No. 2298, 2000 Regular Session.

(v) Interest, dividends or gains accruing on the payments made pursuant to a prepaid tuition contract, as provided for in Section 37-155-17.

(5) Prisoners of war, missing in action-taxable status.

(a) Members of the Armed Forces. Gross income does not include compensation received for active service as a member of the Armed Forces of the United States for any month during any part of which such member is in a missing status, as defined in paragraph (d) of this subsection, during the Vietnam Conflict as a result of such conflict.

(b) Civilian employees. Gross income does not include compensation received for active service as an employee for any month during any part of which such employee is in a missing status during the Vietnam Conflict as a result of such conflict.

(c) Period of conflict. For the purpose of this subsection, the Vietnam Conflict began February 28, 1961, and ends on the date designated by the President by Executive Order as the date of the termination of combatant activities in Vietnam. For the purpose of this subsection, an individual is in a missing status as a result of the Vietnam Conflict if immediately before such status began he was performing service in Vietnam or was performing service in Southeast Asia in direct support of military operations in Vietnam. "Southeast Asia" as used in this paragraph is defined to include Cambodia, Laos, Thailand and waters adjacent thereto.

(d) "Missing status" means the status of an employee or member of the Armed Forces who is in active service and is officially carried or determined to be absent in a status of (i) missing; (ii) missing in action; (iii) interned in a foreign country; (iv) captured, beleaguered or besieged by a hostile force; or (v) detained in a foreign country against his will; but does not include the status of an employee or member of the Armed Forces for a period during which he is officially determined to be absent from his post of duty without authority.

(e) "Active service" means active federal service by an employee or member of the Armed Forces of the United States in an active duty status.

(f) "Employee" means one who is a citizen or national of the United States or an alien admitted to the United States for permanent residence and is a resident of the State of Mississippi and is employed in or under a federal executive agency or department of the Armed Forces.

(g) "Compensation" means (i) basic pay; (ii) special pay; (iii) incentive pay; (iv) basic allowance for quarters; (v) basic allowance for subsistence; and (vi) station per diem allowances for not more than ninety (90) days.

(h) If refund or credit of any overpayment of tax for any taxable year resulting from the application of subsection (5) of this section is prevented by the operation of any law or rule of law, such refund or credit of such overpayment of tax may, nevertheless, be made or allowed if claim therefor is filed with the State Tax Commission within three (3) years after the date of the enactment of this subsection.

(i) The provisions of this subsection shall be effective for taxable years ending on or after February 28, 1961.

(6) A shareholder of an S corporation, as defined in Section 27-8-3(1)(g), shall take into account the income, loss, deduction or credit of the S corporation only to the extent provided in Section 27-8-7(2).

SECTION 17. Section 27-7-17, Mississippi Code of 1972, is amended as follows:

27-7-17. In computing taxable income, there shall be allowed as deductions:

(1) Business deductions.

(a) Business expenses. All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; nonreimbursable traveling expenses incident to current employment, including a reasonable amount expended for meals and lodging while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition of the continued use or possession, for purposes of the trade or business of property to which the taxpayer has not taken or is not taking title or in which he had no equity. Expense incurred in connection with earning and distributing nontaxable income is not an allowable deduction. Limitations on entertainment expenses shall conform to the provisions of the Internal Revenue Code of 1986.

(b) Interest. All interest paid or accrued during the taxable year on business indebtedness, except interest upon the indebtedness for the purchase of tax-free bonds, or any stocks, the dividends from which are nontaxable under the provisions of this article; provided, however, in the case of securities dealers, interest payments or accruals on loans, the proceeds of which are used to purchase tax-exempt securities, shall be deductible if income from otherwise tax-free securities is reported as income. Investment interest expense shall be limited to investment income. Interest expense incurred for the purchase of treasury stock, to pay dividends, or incurred as a result of an undercapitalized affiliated corporation may not be deducted unless an ordinary and necessary business purpose can be established to the satisfaction of the commissioner. For the purposes of this paragraph, the phrase "interest upon the indebtedness for the purchase of tax-free bonds" applies only to the indebtedness incurred for the purpose of directly purchasing tax-free bonds and does not apply to any other indebtedness incurred in the regular course of the taxpayer's business. Any corporation, association, organization or other entity taxable under Section 27-7-23(c) shall allocate interest expense as provided in Section 27-7-23(c)(4)(H).

(c) Taxes. Taxes paid or accrued within the taxable year, except state and federal income taxes, excise taxes based on or measured by net income, estate and inheritance taxes, gift taxes, cigar and cigarette taxes, gasoline taxes, and sales and use taxes unless incurred as an item of expense in a trade or business or in the production of taxable income. In the case of an individual, taxes permitted as an itemized deduction under the provisions of subsection (2)(a) of this section are to be claimed thereunder.

(d) Business losses.

(i) Losses sustained during the taxable year not compensated for by insurance or otherwise, if incurred in trade or business, or nonbusiness transactions entered into for profit.

(ii) Limitations on losses from passive activities and rental real estate shall conform to the provisions of the Internal Revenue Code of 1986.

(e) Bad debts. Losses from debts ascertained to be worthless and charged off during the taxable year, if sustained in the conduct of the regular trade or business of the taxpayer; provided, that such losses shall be allowed only when the taxpayer has reported as income, on the accrual basis, the amount of such debt or account.

(f) Depreciation. A reasonable allowance for exhaustion, wear and tear of property used in the trade or business, or rental property, and depreciation upon buildings based upon their reasonable value as of March 16, 1912, if acquired prior thereto, and upon cost if acquired subsequent to that date.

(g) Depletion. In the case of mines, oil and gas wells, other natural deposits and timber, a reasonable allowance for depletion and for depreciation of improvements, based upon cost, including cost of development, not otherwise deducted, or fair market value as of March 16, 1912, if acquired prior to that date, such allowance to be made upon regulations prescribed by the commissioner, with the approval of the Governor.

(h) Contributions or gifts. Except as otherwise provided in subsection (2)(a) of this section for individuals, contributions or gifts made by corporations within the taxable year to corporations, organizations, associations or institutions, including Community Chest funds, foundations and trusts created solely and exclusively for religious, charitable, scientific or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inure to the benefit of any private stockholder or individual. This deduction shall be allowed in an amount not to exceed twenty percent (20%) of the net income. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the commissioner, with the approval of the Governor. Contributions made in any form other than cash shall be allowed as a deduction, subject to the limitations herein provided, in an amount equal to the actual market value of the contributions at the time the contribution is actually made and consummated.

(i) Reserve funds - insurance companies. In the case of insurance companies the net additions required by law to be made within the taxable year to reserve funds when such reserve funds are maintained for the purpose of liquidating policies at maturity.

(j) Annuity income. The sums, other than dividends, paid within the taxpayer year on policy or annuity contracts when such income has been included in gross income.

(k) Contributions to employee pension plans. Contributions made by an employer to a plan or a trust forming part of a pension plan, stock bonus plan, disability or death-benefit plan, or profit-sharing plan of such employer for the exclusive benefit of some or all of his, their, or its employees, or their beneficiaries, shall be deductible from his, their, or its income only to the extent that, and for the taxable year in which, the contribution is deductible for federal income tax purposes under the Internal Revenue Code of 1986 and any other provisions of similar purport in the Internal Revenue Laws of the United States, and the rules, regulations, rulings and determinations promulgated thereunder, provided that:

(i) The plan or trust be irrevocable.

(ii) The plan or trust constitute a part of a pension plan, stock bonus plan, disability or death-benefit plan, or profit-sharing plan for the exclusive benefit of some or all of the employer's employees and/or officers, or their beneficiaries, for the purpose of distributing the corpus and income of the plan or trust to such employees and/or officers, or their beneficiaries.

(iii) No part of the corpus or income of the plan or trust can be used for purposes other than for the exclusive benefit of employees and/or officers, or their beneficiaries.

Contributions to all plans or to all trusts of real or personal property (or real and personal property combined) or to insured plans created under a retirement plan for which provision has been made under the laws of the United States of America, making such contributions deductible from income for federal income tax purposes, shall be deductible only to the same extent under the Income Tax Laws of the State of Mississippi.

(l) Net operating loss carrybacks and carryovers. A net operating loss for any taxable year ending after December 31, 1993, and taxable years thereafter, shall be a net operating loss carryback to each of the three (3) taxable years preceding the taxable year of the loss. If the net operating loss for any taxable year is not exhausted by carrybacks to the three (3) taxable years preceding the taxable year of the loss, then there shall be a net operating loss carryover to each of the fifteen (15) taxable years following the taxable year of the loss beginning with any taxable year after December 31, 1991.

For any taxable year ending after December 31, 1997, the period for net operating loss carrybacks and net operating loss carryovers shall be the same as those established by the Internal Revenue Code and the rules, regulations, rulings and determinations promulgated thereunder.

The term "net operating loss," for the purposes of this paragraph, shall be the excess of the deductions allowed over the gross income; provided, however, the following deductions shall not be allowed in computing same:

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

(ii) No personal exemption deduction shall be allowed.

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

Any taxpayer entitled to a carryback period as provided by this paragraph may elect to relinquish the entire carryback period with respect to a net operating loss for any taxable year ending after December 31, 1991. The election shall be made in the manner prescribed by the State Tax Commission and shall be made by the due date, including extensions of time, for filing the taxpayer's return for the taxable year of the net operating loss for which the election is to be in effect. The election, once made for any taxable year, shall be irrevocable for that taxable year.

(m) Amortization of pollution or environmental control facilities.

Allowance of deduction. Every taxpayer, at his election, shall be entitled to a deduction for pollution or environmental control facilities to the same extent as that allowed under the Internal Revenue Code and the rules, regulations, rulings and determinations promulgated thereunder.

(n) Dividend distributions - investment trusts. Dividends distributed by an investment trust defined in Section 79-15-3, if the dividend distributions meet the requirements of Section 857 or are otherwise deductible under Section 858 or 860, federal Internal Revenue Code of 1986, as amended. The deductions allowed in this paragraph shall be effective for the 1985 taxable year of the investment trust and for each taxable year thereafter.

(o) Contributions to College Savings Trust Fund Accounts Contributions or payments to a Mississippi Affordable College Savings Program account are deductible as provided under Section 7, Senate Bill No. 2298, 2000 Regular Session. Payments made under a prepaid tuition contract entered into under the Mississippi Prepaid Affordable College Tuition Program are deductible as provided under Section 37-155-17.

(2) Individual nonbusiness deductions.

(a) The amount allowable for individual nonbusiness itemized deductions for federal income tax purposes, except the deduction for state income taxes paid, where the individual is eligible to elect, for the taxable year, to itemize deductions on his federal return; or

(b) In lieu of the individual nonbusiness itemized deductions authorized in paragraph (a), for all purposes other than ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, an optional standard deduction of:

(i) Three Thousand Four Hundred Dollars ($3,400.00) through calendar year 1997, Four Thousand Two Hundred Dollars ($4,200.00) for the calendar year 1998 and Four Thousand Six Hundred Dollars ($4,600.00) for each calendar year thereafter in the case of married individuals filing a joint or combined return;

(ii) One Thousand Seven Hundred Dollars ($1,700.00) through calendar year 1997, Two Thousand One Hundred Dollars ($2,100.00) for the calendar year 1998 and Two Thousand Three Hundred Dollars ($2,300.00) for each calendar year thereafter in the case of married individuals filing separate returns;

(iii) Three Thousand Four Hundred Dollars ($3,400.00) in the case of a head of family; or

(iv) Two Thousand Three Hundred Dollars ($2,300.00) in the case of an individual who is not married.

In the case of a husband and wife living together, having separate incomes, and filing combined returns, the standard deduction authorized may be divided in any manner they choose. In the case of separate returns by a husband and wife, the standard deduction shall not be allowed to either if the taxable income of one of the spouses is determined without regard to the standard deduction.

(c) A nonresident individual shall be allowed the same individual nonbusiness deductions as are authorized for resident individuals in paragraph (a) or (b) of this subsection; however, the nonresident individual is entitled only to that proportion of the individual nonbusiness deductions as his net income from sources within the State of Mississippi bears to his total or entire net income from all sources.

(3) Nothing in this section shall permit the same item to be deducted more than once, either in fact or in effect.

SECTION 18. Section 27-7-18, Mississippi Code of 1972, is amended as follows:

27-7-18. (1) Alimony payments. In the case of a person described in Section 27-7-15(2)(e), there shall be allowed as a deduction from gross income amounts paid as periodic payments to the extent of such amounts as are includible in the gross income of the spouse as provided in Section 27-7-15(2)(e), payment of which is made within the person's taxable year.

(2) Unreimbursed moving expenses incurred after December 31, 1994, are deductible as an adjustment to gross income in accordance with provisions of the United States Internal Revenue Code, and rules, regulations and revenue procedures thereunder relating to moving expenses, not in direct conflict with the provisions of the Mississippi Income Tax Law.

(3) Amounts paid after December 31, 1998, by a self-employed individual for insurance which constitute medical care for the taxpayer, his spouse and dependents, are deductible as an adjustment to gross income in accordance with provisions of the United States Internal Revenue Code, and rules, regulations and revenue procedures thereunder relating to such payments, not in direct conflict with the provisions of the Mississippi Income Tax Law.

(4) Contributions or payments to a Mississippi Affordable College Savings (MACS) Program account are deductible from gross income as provided in Section 7, Senate Bill No. 2298, 2000 Regular Session. Payments made under a prepaid tuition contract entered into under the Mississippi Prepaid Affordable College Tuition Program are deductible as provided in Section 37-155-17.

SECTION 19. Section 75-71-113, Mississippi Code of 1972, is amended as follows:

75-71-113. The Secretary of State, by rule or order, may require the filing of any prospectus, pamphlet, circular, form letter, advertisement, or other sales literature or advertising communication addressed or intended for distribution to prospective investors, including clients or prospective clients of an investment adviser, unless the security or transaction is exempted under Article 3 of this chapter or Section 8 of Senate Bill No. 2298, 2000 Regular Session, or is a federal covered security.

SECTION 20. Section 75-71-401, Mississippi Code of 1972, is amended as follows:

75-71-401. Except as provided for in Section 75-71-109(a), it is unlawful for any person to offer or sell any security in the State of Mississippi unless: (1) it is registered under this chapter or Section 8 of Senate Bill No. 2298, 2000 Regular Session; (2) the security or transaction is exempted under Article 3 of this chapter, or (3) it is a federal covered security.

SECTION 21. Sections 1 through 13 of this act shall be codified as a separate article in Chapter 155, Title 37, Mississippi Code of 1972.

SECTION 22. Nothing in this act shall affect or defeat any claim, assessment, appeal, suit, right or cause of action for taxes due or accrued under the income tax laws before the date on which Sections 16 through 18 of this act become effective, whether such claims, assessments, appeals, suits or actions have been begun before the date on which Sections 16 through 18 of this act become effective or are begun thereafter; and the provisions of the income tax laws are expressly continued in full force, effect and operation for the purpose of the assessment, collection and enrollment of liens for any taxes due or accrued and the execution of any warrant under such laws before the date on which Sections 16 through 18 of this act become effective, and for the imposition of any penalties, forfeitures or claims for failure to comply with such laws.

SECTION 23. Sections 1 through 15 and 19 through 23 of this act shall take effect and be in force from and after July 1, 2000. Sections 16 through 18 of this act shall take effect and be in force from and after January 1, 2000.