MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Finance

By: Senator(s) Minor

AN ACT TO REQUIRE ENTITIES THAT ARE REQUIRED TO FILE AND REPORT FOR FEDERAL INCOME TAX PURPOSES ON THE ACTIVITY CONDUCTED IN MISSISSIPPI FOR QUALIFIED SUBCHAPTER S SUBSIDIARIES AND SINGLE MEMBER LIMITED LIABILITY COMPANIES, SHALL BE REQUIRED TO FILE MISSISSIPPI COMBINATION RETURNS OF INCOME AND FRANCHISE TAX; TO AMEND SECTION 27-13-1, MISSISSIPPI CODE OF 1972, TO REVISE THE DEFINITION OF THE TERM "DOING BUSINESS" IN THE CORPORATION FRANCHISE TAX LAW TO PROVIDE THAT AN ENTITY THAT IS REQUIRED TO FILE AND REPORT FOR FEDERAL INCOME TAX PURPOSES THE ACTIVITY CONDUCTED BY CERTAIN SUBCHAPTER S SUBSIDIARIES AND CERTAIN LIMITED LIABILITY CORPORATIONS SHALL BE CONSIDERED AS DOING BUSINESS IN THIS STATE; TO AMEND SECTION 27-13-51, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT ENTITIES THAT ARE REQUIRED TO FILE AND REPORT FOR FEDERAL INCOME TAX PURPOSES ON THE ACTIVITY CONDUCTED BY CERTAIN SUBCHAPTER S SUBSIDIARIES AND CERTAIN LIMITED LIABILITY CORPORATIONS AND SUCH SUBSIDIARIES AND COMPANIES SHALL BE JOINTLY AND SEVERALLY LIABLE FOR FRANCHISE TAXES LEVIED BY THIS CHAPTER; AND FOR RELATED PURPOSES.

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

SECTION 1. (1) An entity that is required to file and report for federal income tax purposes the activity conducted in Mississippi of a qualified subchapter S subsidiary, shall be required to file a Mississippi combination return of S Corporation income and franchise tax.

(2) An entity that is required to file and report for federal income tax purposes on the activity conducted in Mississippi of a single member limited liability company which is not classified as a corporation, and thus disregarded, shall be required to file a Mississippi combination return of corporation income and franchise tax even if such entity is included in a consolidated corporation income tax return filed for federal purposes.

SECTION 2. Section 27-13-1, Mississippi Code of 1972, is amended as follows:

27-13-1. The words, terms and phrases when used in this chapter shall have the following meanings ascribed to them:

(a) "Commission" means the State Tax Commission of the State of Mississippi.

(b) "Commissioner" means the Chairman of the State Tax Commission.

(c) "Taxpayer" means any corporation, association or joint stock company liable for or having paid any tax to the State of Mississippi under the provisions of this chapter or any corporation, association or joint stock company subject to the provisions of this chapter.

(d) "Domestic," when applied to a corporation or association, means created or organized under the laws of the State of Mississippi.

(e) "Foreign," when applied to a corporation or association, means created or organized under some authority other than the laws of the State of Mississippi.

(f) "Accounting period" or "accounting year" means a period of twelve (12) months ending on the last day of the month of December, known as a calendar year, or a period of twelve (12) months ending on the last day of any month other than December, known as a fiscal year.

(g) "Corporation," "association" or "joint stock company" means and includes each and every form of organization for pecuniary gain, having authorized capital stock, whether with or without par value, having privileges not possessed by individuals or partnerships; and whether organized with or without statutory authority; and may be referred to as "organizations." When any form of organization is treated as a corporation for federal income tax purposes it shall be treated as a corporation for purposes of this chapter.

(h) "Doing business" means and includes each and every act, power or privilege, including any income-producing activities, exercised or enjoyed in this state as an incident to, or by virtue of, the powers and privileges acquired by the nature of such organization, whether the form of existence be corporate, associate, joint stock company or common law trust. An entity that is required to file and report for federal income tax purposes the activity conducted in Mississippi of a qualified subchapter S subsidiary shall be considered to be doing business in this state for purposes of this chapter. An entity that is required to file and report for federal income tax purposes on the activity conducted in Mississippi of a single member limited liability company which is not classified as a corporation, and thus disregarded, shall be considered to be doing business in this state for purposes of this chapter.

(i) "Holding corporation" means a corporation, association or joint stock company: (i) owning capital stock of one or more other corporations, associations or joint stock companies, which stock ownership represents at least eighty percent (80%) of the value and at least eighty percent (80%) of the combined voting power of all classes of issued and outstanding capital stock of such other corporation, association or joint stock company; except that for purposes of this definition the term "stock" does not include nonvoting stock which is limited and preferred as to dividends; and (ii) deriving at least ninety-five percent (95%) of its gross receipts from dividends, interest, royalties, rents, services provided to members of an affiliated group (as defined in Section 27-7-37(2)(d)) to the extent of the cost of providing such services, and from such additional sources as the commissioner may specify by regulation. The definition of the various sources of gross receipts referred to herein shall be governed by applicable provisions of Chapter 7, Title 27, Mississippi Code of 1972, and regulations thereunder and shall include only passive categories of receipts in the computation of gross receipts.

(j) "Subsidiary corporation" means a corporation, association or joint stock company of which at least eighty percent (80%) of the value and at least eighty percent (80%) of the combined voting power of all classes of its issued and outstanding capital stock is owned by a holding corporation, except that for purposes of this definition the term "stock" does not include nonvoting stock which is limited and preferred as to dividends.

(k) "Stock or securities" means any share of stock, certificate of stock, or interest in a corporation, note, bond, debenture, or evidence of indebtedness, or any evidence of an interest in or right to subscribe to or purchase any of the foregoing.

SECTION 3. Section 27-13-51, Mississippi Code of 1972, is amended as follows:

27-13-51. (1) The tax provided by this chapter, together with all interest, increases and penalties, is in addition to all other taxes, and shall become, from the time it is due and payable, a personal debt, from the organization liable to pay the same, to the State of Mississippi.

(2) An entity that is required to file and report for federal income tax purposes on the activity conducted in Mississippi of a qualified subchapter S subsidiary which is subject to income taxation in the manner prescribed in Section 27-8-7, and the qualified subchapter S subsidiary, shall each be jointly and severally liable for franchise taxes levied by this chapter together with damages and interest when such taxes are due and unpaid.

(3) An entity that is required to file and report for federal income tax purposes on the activity conducted in Mississippi of a single member limited liability company which is not classified as a corporation (and thus disregarded) which is subject to tax in the manner prescribed in Section 79-29-112, and the single member limited liability company, shall each be jointly and severally liable for franchise taxes levied by this chapter together with damages and interest when such taxes are due and unpaid.

SECTION 4. Section 1 of this act shall be codified in Chapter 13, Title 27, Mississippi Code of 1972.

SECTION 5. This act shall take effect and be in force from and after January 1, 2000.