MISSISSIPPI LEGISLATURE
2016 Regular Session
To: Public Health and Human Services; Revenue and Expenditure General Bills
By: Representatives Crawford, Wilson
AN ACT TO CREATE THE MISSISSIPPI ACHIEVING A BETTER LIFE EXPERIENCE (ABLE) ACT; TO DEFINE CERTAIN TERMS AND PHRASES RELATING TO THE MISSISSIPPI ABLE PROGRAM; TO ESTABLISH AND PRESCRIBE THE POWERS OF THE MISSISSIPPI ABLE BOARD OF DIRECTORS RELATING TO THE ADMINISTRATION OF THE MISSISSIPPI ABLE PROGRAM; TO PRESCRIBE CERTAIN TERMS OF ABLE TRUST AGREEMENTS ENTERED INTO UNDER THE PROGRAM; TO ESTABLISH THE ABLE TRUST FUND; TO EXEMPT PROPERTY IN THE TRUST FUND FROM TAXATION AND TO ESTABLISH DEDUCTIONS FOR PAYMENTS TO ABLE 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 REQUIRE THE BOARD TO ESTABLISH AND ADMINISTER THE MISSISSIPPI ABLE PROGRAM BY JULY 1, 2017; TO SPECIFY THE REQUIREMENTS THAT MUST BE MET BEFORE IMPLEMENTATION OF THE PROGRAM; TO REQUIRE A PARTICIPATION AGREEMENT FOR THE PROGRAM WHICH CONTAINS SPECIFIED PROVISIONS AUTHORIZING OTHER PROVISIONS THAT MAY BE INCLUDED IN THE AGREEMENT; TO PROVIDE FOR THE AMENDMENT OF THE AGREEMENT UNDER CERTAIN CIRCUMSTANCES; TO PROVIDE FOR THE USE OF THE BALANCE OF AN ABANDONED ABLE ACCOUNT BY THE BOARD; TO PROVIDE THAT A CONTRACT OR PARTICIPATION AGREEMENT ENTERED INTO BY THE BOARD OR AN OBLIGATION OF THE BOARD DOES NOT CONSTITUTE A DEBT OR OBLIGATION OF THE STATE OF MISSISSIPPI; TO AUTHORIZE THE BOARD TO CONTRACT WITH OTHER STATES FOR SPECIFIED PURPOSES UNDER CERTAIN CIRCUMSTANCES; TO PROVIDE FOR THE TERMINATION OF THE PROGRAM UNDER CERTAIN CIRCUMSTANCES AND FOR THE DISPOSITION OF CERTAIN ASSETS UPON TERMINATION; TO PROHIBIT THE STATE FROM LIMITING OR ALTERING THE SPECIFIED VESTED RIGHTS OF DESIGNATED BENEFICIARIES EXCEPT UNDER SPECIFIED CIRCUMSTANCES; TO REQUIRE THE BOARD TO ESTABLISH A COMPREHENSIVE INVESTMENT PLAN FOR THE PROGRAM; TO EXEMPT FUNDS PAID INTO THE PROGRAM'S TRUST FUND FROM THE CLAIMS OF SPECIFIED CREDITORS; TO PROVIDE FOR RECOVERY BY THE DIVISION OF MEDICAID OF CERTAIN MEDICAL ASSISTANCE PROVIDED TO A DECEASED DESIGNATED BENEFICIARY; TO PROVIDE FOR THE DISTRIBUTION OF THE BALANCE OF A DECEASED DESIGNATED BENEFICIARY'S ABLE ACCOUNT; TO REQUIRE THE BOARD TO ASSIST AND COOPERATE WITH THE APPROPRIATE AGENCY FOR HEALTH CARE ADMINISTRATION AND DIVISION OF MEDICAID PROGRAM IN OTHER STATES BY PROVIDING SPECIFIED INFORMATION; TO AMEND SECTION 27-7-15, MISSISSIPPI CODE OF 1972, TO EXCLUDE PAYMENTS TO AN ABLE ACCOUNT FROM THE DEFINITION OF GROSS INCOME FOR INCOME TAX PURPOSES; TO AMEND SECTIONS 27-7-17 AND 27-7-18, 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 Achieving a Better Life Experience (ABLE) Act."
SECTION 2. It is the intent of the Legislature to establish a qualified Achieving a Better Life Experience (ABLE) program in this state which will encourage and assist the saving of private funds in tax-exempt accounts in order to pay for the qualified disability expenses of eligible individuals with disabilities. The Legislature intends that the qualified ABLE program be implemented in a manner that is consistent with federal law authorizing the program and that maximizes program efficiency and effectiveness.
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) "ABLE account" means an account established and maintained under the Mississippi ABLE Program.
(b) "Board" or "board of directors" means the Mississippi ABLE Board of Directors.
(c) "Contracting state" means a state that has entered into a contract with Mississippi ABLE Board, to provide residents of Mississippi or that state with access to a qualified ABLE program.
(d) "Designated beneficiary" means the eligible individual who established an ABLE account or the eligible individual to whom an ABLE account was transferred.
(e) "Eligible individual" has the same meaning as provided in Section 529A of the Internal Revenue Code.
(f) "Mississippi ABLE program" means the qualified ABLE program established and maintained under this section by Mississippi ABLE Board, and administered through the Mississippi Department of Rehabilitation Services.
(g) "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended, and regulations adopted pursuant thereto.
(h) "Participation agreement" means the agreement between Mississippi ABLE Board, and a participant in the Mississippi ABLE Program.
(i) "Qualified ABLE program" means the program authorized under Section 529A of the Internal Revenue Code which may be established by a state or agency, or instrumentality thereof, to allow a person to make contributions for a taxable year to an ABLE account established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the ABLE account.
(j) "Qualified disability expense" has the same meaning as provided in Section 529A of the Internal Revenue Code.
(k) "Section 529A of the Internal Revenue Code" or "Section 529A" means 26 USCS Section 529A.
SECTION 4. (1) There is created the Mississippi Able Board of Directors which shall consist of thirteen (13) members as follows:
(a) The Executive Director of the Department of Treasury, or his or her designee;
(b) The Executive Director of the Department of Finance and Administration, or his or her designee;
(c) The Executive Director of the Department of Rehabilitation Services, or his or her designee;
(d) The Executive Director of the Department of Mental Health, or his or her designee;
(e) The Director of the Mississippi Association of Community Mental Health Centers, or his or her designee;
(f) A member of the public who, by reason of their education and experience relating to disabilities or financial planning, are qualified to serve, to be appointed by the Governor;
(g) A member of the public who, by reason of their education and experience relating to disabilities or financial planning, are qualified to serve, to be appointed by the Lieutenant Governor;
(h) A member of the public who, by reason of their education and experience relating to disabilities or financial planning, are qualified to serve, to be appointed by the Speaker of the House of Representatives;
(i) The Executive Director or his or her designee of an advocacy organization for citizens of all ages with cognitive, intellectual and developmental disabilities and their families, to be appointed by the Governor;
(j) The Executive Director or his or her designee of an advocacy organization for citizens of all ages with cross disabilities and their families, to be appointed by the Lieutenant Governor; and
(k) The Executive Director or his or her designee of an advocacy organization for citizens with mental health disabilities, to be appointed by the Speaker of the House of Representatives.
Of the six (6) appointed members by the Governor, Lieutenant Governor and Speaker of the House of Representatives: One (1) member shall be appointed for an initial term of one (1) year; one (1) member shall be appointed for an initial term of two (2) years; one (1) member for an initial term of three (3) years; one (1) member for an initial term of four (4) years; one (1) member for an initial term of five (5) years; and one (1) member shall be appointed for an initial term of six (6) years. On the expiration of any of the terms of office, the respective appointing official shall appoint successors for terms of five (5) years in each case. Ex officio members of the board may be represented at official meetings by their deputy, or other designee, and such designees shall have full voting privileges and shall be included in the determination of a quorum for conducting board business.
(b) Two (2) nonvoting, advisory members of the board shall be appointed by each of the following officers: the Lieutenant Governor and the Speaker of the House of Representatives.
(c) Members of the board shall be appointed within thirty (30) days after the effective date of this act, and shall meet at the state office of the Department of Rehabilitation Services, at a date to be fixed by the Executive Director of the Department of Rehabilitation Services, not later than thirty (30) days after all appointments have been made, to organize and select an active chairman and vice chairman, and develop an implementation plan for the Mississippi ABLE Program, which shall be completed on or before October 1, 2016. The active chairman shall preside over all meetings, in the absence of the Governor.
(2) Successors to the appointed members shall serve for the length of the term for each appointing official and shall be eligible for reappointment, and shall serve until a successor is appointed and qualified. Any person appointed to fill a vacancy on the board shall be appointed in a like manner and shall serve for only the unexpired term.
(3) Each member appointed shall possess knowledge, skill and experience in business or financial matters commensurate with the duties and responsibilities of ABLE accounts.
(4) Members of the board of directors shall serve without compensation, but shall be reimbursed for each day's official duties of the board at the same per diem as established by Section 25-3-69 and actual travel and lodging expenses as established by Section 25-3-41.
(5) The board of directors shall annually elect one (1) member to serve as chairman of the board and one (1) member to serve as vice chairman. The vice chairman shall act as chairman in the absence of or upon the disability of the chairman or in the event of a vacancy of the office of chairman.
(6) A majority of the currently serving members of the board shall constitute a quorum for the purposes of conducting business and exercising its official powers and duties. Any action taken by the board shall be upon the vote of a majority of the members present.
SECTION 5. In addition to those powers granted to the board by any other provisions of this article, the Mississippi ABLE Board shall have the powers necessary or convenient to carry out the purposes and provisions of this article, the purposes and objectives of ABLE accounts, 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 ABLE accounts established under the provisions of this article and independent personal bank accounts;
(b) To impose reasonable requirements for beneficiaries or account owners at the time of enrollment in the Mississippi ABLE Program;
(c) To consult with the Executive Director of the Department of Rehabilitation Services for the employment of an Mississippi ABLE Coordinator, who shall:
(i) Coordinate meetings of the board and keep minutes of its actions;
(ii) Remain informed of developments in federal rules and regulations affecting ABLE accounts and ensure that the Mississippi ABLE Program remains in compliance;
(iii) Be authorized to enter into contracts with records administrators, program managers, consultants and other qualified persons and entities for administrative and technical assistance in carrying out the responsibilities of the Mississippi ABLE Program; and
(iv) Perform such other duties as the board may prescribe;
(d) 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 ABLE account funds under terms and conditions 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;
(e) 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;
(f) To define the terms and conditions under which payments may be withdrawn for qualifying expenses established under this article and to impose reasonable transaction fees;
(g) To impose reasonable time limits on the use of savings trust account distributions provided by the Mississippi ABLE Program;
(h) To regulate the receipt of contributions or payments to the ABLE Trust Fund;
(i) To segregate contributions and payments to the ABLE Trust Fund into various accounts and funds;
(j) To require and collect administrative fees and charges in connection with any transaction and to impose reasonable penalties for withdrawal of funds for nonqualified expenses or for entering into a ABLE account agreement on a fraudulent basis;
(k) To procure insurance against any loss in connection with the property, assets and activities of the ABLE Trust Fund or the board;
(l) To require that account owners of ABLE account agreements verify, under sworn attestation, any requests for contract conversions, substitutions, transfers, cancellations, refund requests or contract changes of any nature;
(m) To solicit proposals and to contract for the marketing of the Mississippi ABLE 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;
(n) 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;
(o) To make all necessary and appropriate arrangements with vendors, health care service providers, rehabilitation specialists or other entities in order to fulfill its obligations under ABLE account agreements;
(p) To establish other policies, procedures and criteria necessary to implement and administer this article; and
(q) To authorize the Department of Rehabilitation Services with the advice of the State Treasurer, to carry out any or all of the powers and duties enumerated in this section for efficient and effective administration of the Mississippi Able Program and ABLE Trust Fund.
SECTION 6. (1) There is created a Mississippi Achieving a Better Life Experience (ABLE) Trust Fund as an instrumentality of the state to be administered by the Department of Rehabilitation Services in consultation with the Treasury Department. The ABLE Trust Fund shall consist of state appropriations, monies acquired from other governmental or private sources and money remitted in accordance with ABLE 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 in 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. ABLE 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 ABLE 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 ABLE Trust Fund:
(a) The administrative account, which shall accept, deposit and disburse funds for the purpose of administering and marketing the program;
(b) The endowment account, which shall receive and deposit accounts received in connection with the sales of interests in the ABLE 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; and
(c) The program account, which shall receive, invest and disburse amounts pursuant to savings trust agreements.
(3) The official location of the trust fund shall be the Mississippi Department of Rehabilitation Services, and the facilities of the 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 disability expenses. The ABLE Trust Fund, through the ABLE Coordinator, 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 ABLE 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 ABLE 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 withdrawal or qualified disability expense transactions. 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 ABLE trust agreement.
(7) The ABLE 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 ABLE 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 ABLE 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 Mississippi ABLE Program account may deduct from their Mississippi taxable income any contributions or payments to an account or accounts in the ABLE Trust Fund up to a maximum annual amount of Fourteen Thousand Dollars ($14,000.00) for single, joint 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 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 ABLE 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 Achieving a Better Life Experience Program. 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 ABLE 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 investor 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 ABLE 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, 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.
SECTION 9. (1) On or before July 1, 2017, the Mississippi ABLE Board shall establish and administer the Mississippi ABLE Program. Before implementing the program, the board shall obtain a written opinion from counsel specializing in:
(a) Federal tax matters which indicate that the Mississippi ABLE Program is designed to comply with Section 529A of the Internal Revenue Code; and
(b) Federal securities law which indicate that the Mississippi ABLE Program and the offering of participation in the program are designed to comply with applicable federal securities law and qualify for the available tax exemptions under such law. (2) The participation agreement must include provisions specifying that:
(a) The participation agreement is only a debt or obligation of the Mississippi ABLE Program and the ABLE Trust Fund and, as provided under subsection (6) of this section, is not a debt or obligation of the state;
(b) Participation in the Mississippi ABLE Program does not guarantee that sufficient funds will be available to cover all qualified disability expenses for any designated beneficiary and does not guarantee the receipt or continuation of any product or service for the designated beneficiary;
(c) The designated beneficiary must be a resident of this state or a resident of a contracting state at the time the ABLE account is established;
(d) The establishment of an ABLE account in violation of federal law is prohibited;
(e) Contributions in excess of the limitations set forth in Section 529A of the Internal Revenue Code are prohibited; (f) The state is a creditor of ABLE accounts as, and to the extent, set forth in Section 529A of the Internal Revenue Code; and
(g) Material misrepresentations by a party to the participation agreement, other than the board in the application for the participation agreement or in any communication with the board regarding the Mississippi ABLE Program may result in the involuntary liquidation of the ABLE account. If an account is involuntarily liquidated, the designated beneficiary is entitled to a refund, subject to any fees or penalties provided by the participation agreement and the Internal Revenue Code.
(3) The participation agreement may include provisions specifying:
(a) The requirements and applicable restrictions for opening an ABLE account;
(b) The eligibility requirements for a party to a participation agreement and the rights of the party;
(c) The requirements and applicable restrictions for making contributions to an ABLE account;
(d) The requirements and applicable restrictions for directing the investment of the contributions or balance of the ABLE account;
(e) The administrative fee and other fees and penalties applicable to an ABLE account;
(f) The terms and conditions under which an ABLE account or participation agreement may be modified, transferred or terminated;
(g) The disposition of abandoned ABLE accounts; and
(h) Any other terms and conditions determined to be necessary or proper.
(4) The participation agreement may be amended throughout its term for purposes that include, but are not limited to, allowing a participant to increase or decrease the level of participation and to change designated beneficiaries and other matters authorized by this section and Section 529A of the Internal Revenue Code.
(5) If an ABLE account is determined to be abandoned pursuant to rules adopted by the board, the Department of Rehabilitation Services, may use the balance of the account to operate the Mississippi ABLE Program.
(6) A contract or participation agreement entered into by or an obligation of Mississippi ABLE Board, on behalf of and for the benefit of the Mississippi ABLE Program does not constitute a debt or obligation of the state, but is only a debt or obligation of the Mississippi ABLE Program and the ABLE Trust Fund. The state does not have an obligation to a designated beneficiary or any other person as a result of the Mississippi ABLE Program. The obligation of the Mississippi ABLE Program is limited solely to amounts in the ABLE Trust Fund. All amounts obligated to be paid from the ABLE Trust Fund are limited to the amounts available for such obligation. The amounts held in the Mississippi ABLE Program may be disbursed only in accordance with this section.
(7) Notwithstanding any other provision of law, the Mississippi ABLE Board, acting through the ABLE Coordinator, may enter into an agreement with a contracting state which allows the board to participate under the design, operation, and rules of the contracting state's qualified ABLE program or which allows the contracting state to participate under the Mississippi ABLE Program.
(8) The Mississippi ABLE Program shall continue in existence until terminated by law. If the state determines that the program is financially infeasible, the state may terminate the program. Upon termination, amounts in the ABLE Trust Fund held for designated beneficiaries shall be returned in accordance with the participation agreement.
(9) The state pledges to the designated beneficiaries that the state will not limit or alter their rights under this section which are vested in the Mississippi ABLE Program until the program's obligations are met and discharged. However, this subsection does not preclude such limitation or alteration if adequate provision is made by law for the protection of the designated beneficiaries pursuant to the obligations of the board, and does not preclude termination of the Mississippi ABLE Program if the state determines that the program is not financially feasible. This pledge and undertaking by the state may be included in participation agreements.
SECTION 10. (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) (a) On or before November 1, 2017, the board shall prepare a report on the status of the establishment of the Mississippi ABLE Program. The report must also include, if warranted, recommendations for statutory changes to enhance the effectiveness and efficiency of the program. The board shall submit copies of the report to the Governor, the Lieutenant Governor, the Speaker of the House of Representatives and to the Executive Director of the Department of Rehabilitation Services.
(b) 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 to the Executive Director of the Department of Rehabilitation Services. The accounts of the fund shall be subject to annual audits by the State Auditor or his designee.
SECTION 11. The Mississippi ABLE Board and the Executive Director of the Department of Rehabilitation Services, in consultation with the Treasury Department, shall establish a comprehensive investment plan for the Mississippi ABLE Program. The comprehensive investment plan must specify the investment policies to be used by the board in its administration of the program. The board may place assets of the program in investment products and in such proportions as may be designated or approved in the comprehensive investment plan. Such products shall be underwritten and offered in compliance with the applicable federal and state laws or regulations or exemptions therefrom. A designated beneficiary may not direct the investment of any contributions to the Mississippi ABLE Program, unless specific fund options are offered by the board. Directors, officers, and employees of the Department of Rehabilitation Services, as well as the Mississippi ABLE Coordinator, employed to administer the program, may enter into participation agreements, notwithstanding their fiduciary responsibilities or official duties related to the Mississippi ABLE Program.
SECTION 12. Monies paid into or out of the ABLE Trust Fund by or on behalf of a designated beneficiary are exempt from all claims of creditors of the designated beneficiary if the participation agreement has not been terminated. Monies paid into the Mississippi ABLE Program and benefits accrued through the program may not be pledged for the purpose of securing a loan.
SECTION 13. (1) Upon the death of the designated beneficiary, the appropriate health care administration agency and the Division of Medicaid for another state may file a claim with the Mississippi ABLE Program for the total amount of medical assistance provided for the designated beneficiary under the Medicaid program, less any premiums paid by or on behalf of the designated beneficiary to a Medicaid buy-in program. Funds in the ABLE account of the deceased designated beneficiary must first be distributed for qualified disability expenses followed by distributions for the Medicaid claim authorized under this paragraph. Any remaining amount shall be distributed as provided in the participation agreement required under Section 10 of this act.
(2) The Mississippi ABLE Coordinator, shall assist and cooperate with the appropriate health care administration agency and the Division of Medicaid in other states by providing the agency and divisions with the information needed to accomplish the purpose and objective of this section.
SECTION 14. The Mississippi Department of Health, the Department of Rehabilitation Services, the Division of Medicaid, the Department of Humans Services Division of Family and Children's Services and the State Department of Education shall assist, cooperate and coordinate with the Mississippi ABLE Board in the provision of public information and outreach for the Mississippi ABLE Program.
SECTION 15. 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 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 unless a transaction results in the shifting of income from inside the state to outside the state.
(b) Casual sales of property.
(i) Prior to January 1, 2001, federal rules, regulations and revenue procedures shall be followed with respect to installment sales except they shall be applied and administered as if H.R. 3594, the Installment Tax Correction Act of 2000 of the 106th Congress, had not been enacted. This provision will generally affect taxpayers, reporting on the accrual method of accounting, entering into installment note agreements on or after December 17, 1999. Any gain or profit resulting from the casual sale of property will be recognized in the year of sale.
(ii) From and after January 1, 2001, federal rules, regulations and revenue procedures shall be followed with respect to installment sales except as provided in this subparagraph (ii). Gain or profit from the casual sale of property shall be recognized in the year of sale. When a taxpayer recognizes gain on the casual sale of property in which the gain is deferred for federal income tax purposes, a taxpayer may elect to defer the payment of tax resulting from the gain as allowed and to the extent provided under regulations prescribed by the commissioner. If the payment of the tax is made on a deferred basis, the tax shall be computed based on the applicable rate for the income reported in the year the payment is made. Except as otherwise provided in subparagraph (iii) of this paragraph (b), deferring the payment of the tax shall not affect the liability for the tax. If at any time the installment note is sold, contributed, transferred or disposed of in any manner and for any purpose by the original note holder, or the original note holder is merged, liquidated, dissolved or withdrawn from this state, then all deferred tax payments under this section shall immediately become due and payable.
(iii) If the selling price of the property is reduced by any alteration in the terms of an installment note, including default by the purchaser, the gain to be recognized is recomputed based on the adjusted selling price in the same manner as for federal income tax purposes. The tax on this amount, less the previously paid tax on the recognized gain, is payable over the period of the remaining installments. If the tax on the previously recognized gain has been paid in full to this state, the return on which the payment was made may be amended for this purpose only. The statute of limitations in Section 27-7-49 shall not bar an amended return for this purpose.
(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 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 paragraph (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) National Guard or Reserve Forces of the United States compensation not to exceed the aggregate sum of Five Thousand Dollars ($5,000.00) for any taxable year through the 2005 taxable year, and not to exceed the aggregate sum of Fifteen Thousand Dollars ($15,000.00) for any taxable year thereafter.
(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 maximum enlisted amount 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 a qualified hazardous duty area as defined by federal law, or both; or (ii) was hospitalized as a result of wounds, disease or injury incurred while serving in such combat zone. For the purposes of this paragraph (n), the term "maximum enlisted amount" means and has the same definition as that term has in 26 USCS 112.
(o) The proceeds received from federal and state forestry incentive 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 paragraph (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 in Sections 37-155-101 through 37-155-125, 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 37-155-105.
(v) Interest, dividends or gains accruing on the payments made pursuant to a prepaid tuition contract, as provided for in Section 37-155-17.
(w) Income resulting from transactions with a related member where the related member subject to tax under this chapter was required to, and did in fact, add back the expense of such transactions as required by Section 27-7-17(2). Under no circumstances may the exclusion from income exceed the deduction add-back of the related member, nor shall the exclusion apply to any income otherwise excluded under this chapter.
(x) Amounts that are subject to the tax levied pursuant to Section 27-7-901, and are paid to patrons by gaming establishments licensed under the Mississippi Gaming Control Act.
(y) Amounts that are subject to the tax levied pursuant to Section 27-7-903, and are paid to patrons by gaming establishments not licensed under the Mississippi Gaming Control Act.
(z) Interest, dividends, gains or income of any kind on any account in a qualified tuition program and amounts received as distributions under a qualified tuition program shall be treated in the same manner as provided under the United States Internal Revenue Code, as amended. For the purposes of this paragraph (z), the term "qualified tuition program" means and has the same definition as that term has in 26 USCS 529.
(aa) The amount deposited in a health savings account, and any interest accrued thereon, that is a part of a health savings account program as specified in the Health Savings Accounts Act created in Sections 83-62-1 through 83-62-9; however, any amount withdrawn from such account for purposes other than paying qualified medical expenses or to procure health coverage shall be included in gross income, except as otherwise provided by Sections 83-62-7 and 83-62-9.
(bb) Amounts received as qualified disaster relief payments shall be treated in the same manner as provided under the United States Internal Revenue Code, as amended.
(cc) Amounts received as a "qualified Hurricane Katrina distribution" as defined in the United States Internal Revenue Code, as amended.
(dd) Amounts received by an individual which may be excluded from income as foreign earned income for federal income tax purposes.
(ee) Amounts received by a qualified individual, directly or indirectly, from an employer or nonprofit housing organization that are qualified housing expenses associated with an employer-assisted housing program. For purposes of this paragraph (ee):
(i) "Qualified individual" means any individual whose household income does not exceed one hundred twenty percent (120%) of the area median gross income (as defined by the United States Department of Housing and Urban Development), adjusted for household size, for the area in which the housing is located.
(ii) "Nonprofit housing organization" means an organization that is organized as a not-for-profit organization under the laws of this state or another state and has as one of its purposes:
1. Homeownership education or counseling;
2. The development of affordable housing; or
3. The development or administration of employer-assisted housing programs.
(iii) "Employer-assisted housing program" means a separate written plan of any employer (including, without limitation, tax-exempt organizations and public employers) for the exclusive benefit of the employer's employees to pay qualified housing expenses to assist the employer's employees in securing affordable housing.
(iv) "Qualified housing expenses" means:
1. With respect to rental assistance, an amount not to exceed Two Thousand Dollars ($2,000.00) paid for the purpose of assisting employees with security deposits and rental subsidies; and
2. With respect to homeownership assistance, an amount not to exceed the lesser of Ten Thousand Dollars ($10,000.00) or six percent (6%) of the purchase price of the employee's principal residence that is paid for the purpose of assisting employees with down payments, payment of closing costs, reduced interest mortgages, mortgage guarantee programs, mortgage forgiveness programs, equity contribution programs, or contributions to home buyer education and/or homeownership counseling of eligible employees.
(ff) For the 2010 taxable year and any taxable year thereafter, amounts converted in accordance with the United States Internal Revenue Code, as amended, from a traditional Individual Retirement Account to a Roth Individual Retirement Account. The exemption allowed under this paragraph (ff) shall be available to the spouse or other beneficiary at the death of the primary retiree.
(gg) Amounts received for the performance of disaster or emergency-related work as defined in Section 27-113-5.
(hh) The amount deposited in a catastrophe savings account established under Sections 27-7-1001 through 27-7-1007, interest income earned on the catastrophe savings account, and distributions from the catastrophe savings account; however, any amount withdrawn from a catastrophe savings account for purposes other than paying qualified catastrophe expenses shall be included in gross income, except as otherwise provided by Sections 27-7-1001 through 27-7-1007.
(ii) Interest, dividends, gains or income of any kind on any account in the Mississippi Achieving a Better Life Experience (ABLE) Trust Fund, as established in Sections 1 through 15 of this act, to the extent that such amounts remain on deposit in the ABLE Trust Fund or are withdrawn pursuant to a qualified withdrawal, as defined in Section 6 of this act.
(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 this subsection (5) * * * 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
Department of Revenue 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)(3)(I).
(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 (3)(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 paragraph (p) of this subsection or subsection (3)(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 as in effect at the taxable year end or on December 31, 2000, whichever is earlier.
A net operating loss for any taxable year ending after December 31, 2001, and taxable years thereafter, shall be a net operating loss carryback to each of the two (2) 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 two (2) taxable years preceding the taxable year of the loss, then there shall be a net operating loss carryover to each of the twenty (20) taxable years following the taxable year of the loss beginning with any taxable year after the taxable year of the loss.
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 Department of Revenue 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 - real estate investment trusts. "Real estate investment trust" (hereinafter referred to as REIT) shall have the meaning ascribed to such term in Section 856 of the federal Internal Revenue Code of 1986, as amended. A REIT is allowed a dividend distributed deduction 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. In addition:
(i) A dividend distributed deduction shall only be allowed for dividends paid by a publicly traded REIT. A qualified REIT subsidiary shall be allowed a dividend distributed deduction if its owner is a publicly traded REIT.
(ii) Income generated from real estate contributed or sold to a REIT by a shareholder or related party shall not give rise to a dividend distributed deduction, unless the shareholder or related party would have received the dividend distributed deduction under this chapter.
(iii) A holding corporation receiving a dividend from a REIT shall not be allowed the deduction in Section 27-7-15(4)(t).
(iv) Any REIT not allowed the dividend distributed deduction in the federal Internal Revenue Code of 1986, as amended, shall not be allowed a dividend distributed deduction under this chapter.
The commissioner is authorized to promulgate rules and regulations consistent with the provisions in Section 269 of the federal Internal Revenue Code of 1986, as amended, so as to prevent the evasion or avoidance of state income tax.
(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 37-155-113. 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.
(p) Contributions of human pharmaceutical products. To the extent that a "major supplier" as defined in Section 27-13-13(2)(d) contributes human pharmaceutical products in excess of Two Hundred Fifty Million Dollars ($250,000,000.00) as determined under Section 170 of the Internal Revenue Code, the charitable contribution limitation associated with those donations shall follow the federal limitation but cannot result in the Mississippi net income being reduced below zero.
(q) Contributions to ABLE trust fund accounts. Contributions or payments to a Mississippi Achieving a Better Life Experience (ABLE) Program account are deductible as provided under Section 7 of this act.
(2) Restrictions on the deductibility of certain intangible expenses and interest expenses with a related member.
(a) As used in this subsection (2):
(i) "Intangible expenses and costs" include:
1. Expenses, losses and costs for, related to, or in connection directly or indirectly with the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange or any other disposition of intangible property to the extent such amounts are allowed as deductions or costs in determining taxable income under this chapter;
2. Expenses or losses related to or incurred in connection directly or indirectly with factoring transactions or discounting transactions;
3. Royalty, patent, technical and copyright fees;
4. Licensing fees; and
5. Other similar expenses and costs.
(ii) "Intangible property" means patents, patent applications, trade names, trademarks, service marks, copyrights and similar types of intangible assets.
(iii) "Interest expenses and cost" means amounts directly or indirectly allowed as deductions for purposes of determining taxable income under this chapter to the extent such interest expenses and costs are directly or indirectly for, related to, or in connection with the direct or indirect acquisition, maintenance, management, ownership, sale, exchange or disposition of intangible property.
(iv) "Related member" means an entity or person that, with respect to the taxpayer during all or any portion of the taxable year, is a related entity, a component member as defined in the Internal Revenue Code, or is an entity or a person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code.
(v) "Related entity" means:
1. A stockholder who is an individual or a member of the stockholder's family, as defined in regulations prescribed by the commissioner, if the stockholder and the members of the stockholder's family own, directly, indirectly, beneficially or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;
2. A stockholder, or a stockholder's partnership, limited liability company, estate, trust or corporation, if the stockholder and the stockholder's partnerships, limited liability companies, estates, trusts and corporations own, directly, indirectly, beneficially or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;
3. A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation, if the taxpayer owns, directly, indirectly, beneficially or constructively, at least fifty percent (50%) of the value of the corporation's outstanding stock under regulation prescribed by the commissioner;
4. Any entity or person which would be a related member under this section if the taxpayer were considered a corporation for purposes of this section.
(b) In computing net income, a taxpayer shall add back otherwise deductible interest expenses and costs and intangible expenses and costs directly or indirectly paid, accrued to or incurred, in connection directly or indirectly with one or more direct or indirect transactions with one or more related members.
(c) The adjustments required by this subsection shall not apply to such portion of interest expenses and costs and intangible expenses and costs that the taxpayer can establish meets one (1) of the following:
(i) The related member directly or indirectly paid, accrued or incurred such portion to a person during the same income year who is not a related member; or
(ii) The transaction giving rise to the interest expenses and costs or intangible expenses and costs between the taxpayer and related member was done primarily for a valid business purpose other than the avoidance of taxes, and the related member is not primarily engaged in the acquisition, use, maintenance or management, ownership, sale, exchange or any other disposition of intangible property.
(d) Nothing in this subsection shall require a taxpayer to add to its net income more than once any amount of interest expenses and costs or intangible expenses and costs that the taxpayer pays, accrues or incurs to a related member.
(e) The commissioner may prescribe such regulations as necessary or appropriate to carry out the purposes of this subsection, including, but not limited to, clarifying definitions of terms, rules of stock attribution, factoring and discount transactions.
(3) Individual nonbusiness deductions.
(a) The amount allowable for individual nonbusiness itemized deductions for federal income tax purposes where the individual is eligible to elect, for the taxable year, to itemize deductions on his federal return except the following:
(i) The deduction for state income taxes paid or other taxes allowed for federal purposes in lieu of state income taxes paid;
(ii) The deduction for gaming losses from gaming establishments;
(iii) The deduction for taxes collected by licensed gaming establishments pursuant to Section 27-7-901;
(iv) The deduction for taxes collected by gaming establishments pursuant to Section 27-7-903.
(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.
(4) 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 37-155-113. 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.
(5) (a) Unreimbursed travel expenses, lodging expenses and lost wages an individual incurred as a result of, and related to, the donation, while living, of one or more of his or her organs for human organ transplantation, are deductible from gross income. The deduction from gross income authorized by this subsection may be claimed for only once and may not exceed Ten Thousand Dollars ($10,000.00).
(b) As used in this subsection, "organ" means all or part of a liver, pancreas, kidney, intestine, lung or bone marrow.
(6) Contributions or payments to a Mississippi Achieving a Better Life Experience (ABLE) Program account are deductible from gross income as provided in Section 7 of this act.
SECTION 19. This act shall take effect and be in force from and after its passage.