United States

Mississippi moves forward with sweeping tax reform

Enacts multiple tax phase outs

TAX ALERT  | 

On May 13, 2016, Mississippi Gov. Phil Bryant signed Senate Bill 2858, providing sweeping tax reform aimed at creating a more business friendly environment in the state.

Significantly, Senate Bill 2858 phases out the franchise tax over a ten year period beginning for tax years on or after Jan. 1, 2018. The franchise tax, first levied in 1934, is a tax based on the value of the capital used, invested, or employed by taxable corporations doing business in the state. The tax remains at the current rate of $2.50 per $1,000 of subject capital for tax years beginning on or after Jan. 1, 2018. The phase out continues over the next ten years as follows:

Tax years beginning after:   

Amount per $1,000 of
subject capital

Jan. 1, 2019 $2.25
Jan. 1, 2020 $2.00
Jan. 1, 2021 $1.75
Jan. 1, 2022 $1.50
Jan. 1, 2023 $1.25
Jan. 1, 2024 $1.00
Jan. 1, 2025 $0.75
Jan. 1, 2026 $0.50
Jan. 1, 2027 $0.25
Jan. 1, 2028 Complete phase-out 

 

Additionally, the bill enacts an exemption on the first $100,000 of capital value for tax years beginning after Jan. 1, 2018.

Senate Bill 2858 also phases in a personal income tax exemption on the first $5,000 of taxable income. Through 2017, the personal income tax rate remains at three percent on the first $5,000, phasing out completely by 2022. Additionally, a new exemption for self-employed individuals permits a deduction from gross income of 17 percent of the federal self-employment taxes imposed on those individuals for taxable years ending in calendar year 2017; 34 percent for taxable years ending in 2018; and 50 percent for taxable years ending in 2019 and after.

The franchise tax, a target of frequent criticsm in recent years, exceeded $260 million in collections in the 2015 fiscal year. It is expected that Senate Bill 2858 will create tax reductions of over $400 million through the next 12 years.

AUTHORS


Subscribe to Tax Alerts

(* = Required fields)


How can we help you with state & local tax planning?