The Mississippi Department of Revenue recently issued Notice 80-19-001 providing guidance on Mississippi’s treatment of certain provisions of the Tax Cuts and Jobs Act. The Notice observes that many aspects of the federal legislation will not affect Mississippi taxpayers as Mississippi has its own statutory provisions for many of the changes. With respect to Mississippi’s treatment of federal corporate income tax changes, the notice confirms that Mississippi will not follow 100 percent bonus depreciation, the federal limits on use of net operating losses, and changes to the definition of a charitable contribution. Moreover, the state will not conform to the federal limitations under IRC section 163(j) because a Mississippi statute specifically allows an unlimited business interest deduction. The Notice confirms that Mississippi will follow the new federal provisions for section 179 expensing and the changes to federal deductions for entertainment expenses, meals, fringe benefits, fines and penalties. With regard to changes to IRC section 1031 like-kind exchanges, exclusions of gain for Mississippi purposes will not be limited to exchanges involving real property not held primarily for sale.
The Notice also provides guidance on IRC section 965 income and GILTI. Under Mississippi law, section 965 income will be treated as a foreign-sourced dividend, which will be characterized as non-business income potentially allocated to Mississippi. GILTI will also be considered foreign-sourced, non-business income. The guidance also addresses the effect on Mississippi individual income taxpayers. Notably, for purposes of individual income taxes, an individual taxpayer will not be allowed the 20 percent deduction for qualified business income from pass-through entities on its Mississippi return. Please stay tuned to TWIST for additional state guidance on the state implications of federal tax reform.