Senate Bill 2311

AN ACT TO AMEND SECTION 27-7-51, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT IF AN EXAMINATION OF AN INCOME TAX RETURN BY THE DEPARTMENT OF REVENUE INDICATES THAT A TAXPAYER HAS MADE AN UNDERPAYMENT OF INCOME TAX AND OWES ADDITIONAL TAXES, THE TAXPAYER WILL NOT BE LIABLE FOR ADDITIONAL TAXES DETERMINED TO BE OWED BEFORE THE DATE OF SUCH AUDIT IF A PREVIOUS EXAMINATION BY THE DEPARTMENT OF REVENUE IMMEDIATELY PRECEDING SUCH AUDIT DETERMINED THE TAXPAYER TO BE PROPERLY PAYING INCOME TAX, THE PRACTICES OR CIRCUMSTANCES THAT INDICATE THE TAXPAYER IS LIABLE FOR ADDITIONAL TAXES IN THE CURRENT EXAMINATION ARE THE SAME PRACTICES OR CIRCUMSTANCES DETERMINED TO BE PROPER IN THE PREVIOUS EXAMINATION AND THE STATUTES PROVIDING THE TAXPAYER'S LIABILITY WERE NOT CHANGED SINCE THE MOST RECENT PREVIOUS AUDIT IN SUCH A MANNER AS TO MAKE THE TAXPAYER LIABLE FOR THE ADDITIONAL TAX; TO AMEND SECTION 27-65-37, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT IF AN AUDIT BY DEPARTMENT OF REVENUE INDICATES THAT A TAXPAYER HAS MADE AN UNDERPAYMENT OF SALES TAX AND OWES ADDITIONAL TAXES, THE TAXPAYER WILL NOT BE LIABLE FOR ADDITIONAL TAXES DETERMINED TO BE OWED BEFORE THE DATE OF SUCH AUDIT IF A DEPARTMENT OF REVENUE AUDIT IMMEDIATELY PRECEDING SUCH AUDIT DETERMINED THE TAXPAYER TO BE PROPERLY COLLECTING SALES TAX, THE PRACTICES OR CIRCUMSTANCES THAT INDICATE THE TAXPAYER IS LIABLE FOR ADDITIONAL TAXES IN THE CURRENT AUDIT ARE THE SAME PRACTICES OR CIRCUMSTANCES DETERMINED TO BE PROPER IN THE PREVIOUS AUDITS AND THE STATUTES PROVIDING THE TAXPAYER'S LIABILITY TO COLLECT SALES TAX WERE NOT CHANGED SINCE THE MOST RECENT PREVIOUS AUDIT IN SUCH A MANNER AS TO MAKE THE TAXPAYER LIABLE FOR THE ADDITIONAL TAX; AND FOR RELATED PURPOSES.

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

SECTION 1. Section 27-7-51, Mississippi Code of 1972, is amended as follows:

27-7-51. (1) (a) If, upon examination of a return made under the provisions of this article, it appears that the correct amount of tax is greater or less than that shown in the return, the tax shall be recomputed.

(b) Any overpayment of tax so determined shall be credited or refunded to the taxpayer. If the correct amount of tax is greater than that shown in the return of the taxpayer, the commissioner shall make his assessment of additional tax due by mail or by personal delivery of the assessment to the taxpayer, which assessment shall constitute notice and demand for payment; however, if the examination of a return indicates that the correct amount of the tax is greater than that shown in the return and the taxpayer owes additional taxes, the taxpayer shall not be liable for additional taxes determined to be owed before the date of the examination if:

(i) The return of the taxpayer was examined by the department on a previous occasion immediately preceding the examination that indicates the taxpayer owes additional taxes and the previous examination determined the taxpayer to be paying taxes in compliance with this article;

(ii) The practices or circumstances that indicate the taxpayer is liable for additional taxes in the current examination are the same practices or circumstances determined to be in compliance with this article in the previous examination; and

(iii) The statutes providing the taxpayer's liability were not changed since the most recent previous examination in such a manner as to make the taxpayer liable for the additional tax.

(c) The taxpayer shall be given a period of sixty (60) days from the date of the notice in which to pay the additional tax due, including penalty and interest as hereinafter provided, and if the sum is not paid within the period of sixty (60) days, the commissioner shall proceed to collect it under the provisions of Sections 27-7-55 through 27-7-67, provided that within the period of sixty (60) days the taxpayer may appeal to the board of review as provided by law.

(2) In the case of an overpayment of tax, interest shall be computed under the provisions of Section 27-7-315. In the case of an underpayment of tax, interest at the rate of one percent (1%) per month from the due date of the return may be added or assessed in addition to the additional tax due as hereinabove provided in subsection (1) of this section.

(3) In case of failure to pay any additional taxes as assessed under this section, there may be added to the additional amount assessed a penalty of one-half of one percent (1/2 of 1%) of the amount of the additional tax if the failure is for not more than one (1) month, with an additional one-half of one percent (1/2 of 1%) for each additional month or fraction thereof during which the failure continues, not to exceed twenty-five percent (25%) in the aggregate.

(4) Where the reported net income of a taxpayer is increased by the Internal Revenue Service, a taxpayer who, without action by the commissioner, amends a return filed under this article on the basis of a change in taxable income made by the Internal Revenue Service, and pays the additional tax due within thirty (30) days after agreeing to the federal change (and has received statement of the federal changes to which agreement has been made or payment thereof), shall add interest to the additional tax at the rate of one percent (1%) per month from due date of the original return. If the additional tax, based on changes in taxable income by the Internal Revenue Service, is assessed by the commissioner under subsection (1) of this section, in addition to the interest there may be added a penalty of one-half of one percent (1/2 of 1%) of the additional tax due if the failure is for not more than one (1) month, with an additional one-half of one percent (1/2 of 1%) for each additional month or fraction thereof during which the failure to pay continues, not to exceed twenty-five percent (25%) in the aggregate, unless it is shown that the failure is due to reasonable cause and not due to willful neglect.

(5) In the case of a taxpayer who files a bond when appealing the decision of the Board of Tax Appeals instead of paying the amount of the additional tax found to be due by the Board of Tax Appeals, and the tax assessment or a part of the assessment is upheld by the chancery court and/or the Supreme Court, the assessment shall bear interest at the rate of one percent (1%) per month from the due date until paid.

(6) (a) Nothing in this section shall be construed as authorizing a refund of taxes for claims pursuant to the United States Supreme Court decision of Davis v. Michigan Department of Treasury, 109 S.Ct. 1500 (1989). These taxes were not incorrectly and/or erroneously collected as contemplated by this chapter.

(b) In the event a court of final jurisdiction determines the above provision to be void for any reason, it is hereby declared the intent of the Legislature that affected taxpayers shall be allowed a credit against future income tax liability as opposed to a tax refund.

SECTION 2. Section 27-65-37, Mississippi Code of 1972, is amended as follows:

27-65-37. (1) If adequate records of the gross income or gross proceeds of sales are not maintained or invoices preserved as provided herein, or if an audit of the records of a taxpayer, or any return filed by him, or any other information discloses that taxes are due and unpaid, the commissioner shall make assessments of taxes, damages, and interest from any information available, which shall be prima facie correct. However, if an audit of the records of a taxpayer indicates that the taxpayer has made an underpayment of taxes and owes additional taxes, the taxpayer shall not be liable for additional taxes determined to be owed before the date of the audit if:

(a) The taxpayer was audited by the department on a previous occasion immediately preceding the audit that indicates the taxpayer owes additional taxes and the previous audit determined the taxpayer to be collecting taxes in compliance with this chapter;

(b) The practices or circumstances that indicate the taxpayer is liable for additional taxes in the current audit are the same practices or circumstances determined to be in compliance with this chapter in the previous audit; and

(c) The statutes providing the taxpayer's liability to collect the tax were not changed since the most recent previous audit in such a manner as to make the taxpayer liable for the additional tax.

(2) The commissioner shall give notice to the taxpayer of the assessments and demand payment of the tax, damages and interest within sixty (60) days from the date of the notice. The notice shall be sent by regular mail or delivered by an agent of the commissioner either to the taxpayer or someone of suitable age and discretion at the taxpayer's residence or place of business.

(3) If the taxpayer shall fail or refuse to comply with the notice of assessment or shall fail to petition for a hearing, the commissioner shall proceed as provided in Section 27-65-39.

SECTION 3. This act shall take effect and be in force from and after January 1, 2012.