Mississippi continues to provide an environment that is conducive to the expansion of existing and new businesses, including: (i) a stable state and local tax structure including relatively low income and franchise taxes; (ii) a variety of state and local economic development incentives; (iii) a quality workforce with a strong work ethic coupled with balanced labor and employment laws; (iv) a solid and expanding rail and highway transportation infrastructure; (v) a south central-US location with several well-established ports along the Mississippi River and Tennessee-Tombigbee River Waterways and two deep water ports located on the Gulf of Mexico; and (vi) a balanced legal system vastly improved since the passage of major tort reforms almost two decades ago.
ECONOMIC DEVELOPMENT INCENTIVES
Tax-exempt financing programs in Mississippi offer eligible companies below-market borrowing costs and other incentives. These programs are administered at two levels: statewide through the Mississippi Business Finance Corporation (MBFC) and the Mississippi Development Authority (MDA), and locally through cities, counties, regional planning and development districts, and economic development authorities.
The MBFC offers eligible companies variable and fixed rate financing and flow-through taxable and tax-exempt financing. MBFC taxable financing can also be used in designated areas in conjunction with state and federal new markets tax credits. MBFC debt issuances also provide certain related tax incentives, avoidance of contractor’s tax using structured purchasing procedures and sales/use tax exemptions for project purchases using bond proceeds; a bond amortization income tax credit; and, with municipal and county approval, abatement of a portion of property taxes on the project.
Property tax exemptions, with certain approvals, are also available for all types of projects. Projects over $60 million ($100 million in the case of MDA certified health care facilities) qualify for a special negotiated fee-in-lieu of property taxes instead of an exemption. Various new jobs and other income tax credits and new jobs income tax rebates are also available.
MDA administers the Community Development Block Grant Program (CDBG) to fund publicly owned infrastructure to aid with the construction, renovation, or expansion of businesses and industrial facilities.
Mississippi cities and counties may issue tax increment financing (TIF) bonds to encourage development within designated areas by financing public infrastructure improvements for public or private projects without issuing general obligation bonds. Private developers may also utilize a special public improvement district (PID) to finance various public infrastructure improvements that are repaid with tax assessments levied on real property within the PID.
Recent successes of the state’s aggressive economic development programs include landing a $1.45 billion and 2500 job investment from Continental Tire’s new manufacturing plant. Additionally, Area Development Magazine, a leading economic development trade publication, listed Mississippi in the top 10 of “Top States for Doing Business.”
LABOR AND EMPLOYMENT LAWS
Mississippi is both a right-to-work state, meaning that labor union membership cannot be required, and an at-will employment state, which means that employers may discharge for any reason as long as it does not violate federal law or an existing employment contract for a specific duration. A few narrow exceptions exist to this rule, including terminating an employee for refusing to engage in illegal activity or for reporting illegal activity. Mississippi law also holds that an employer’s handbook can create an implied contract for employment under certain rare circumstances, but an express disclaimer usually defeats such implied contracts.
CORPORATE INCOME AND FRANCHISE TAXES
The Mississippi Corporate Income Tax applies to the entire annual net income of a corporation if its business activity occurs only in Mississippi. The income of a multi-state corporation operating in Mississippi is allocated or apportioned to Mississippi for income tax purposes depending upon where the production of income takes place and whether it is classified as either business or non-business.
The “business income” of a multi-state corporation consists of (1) income arising from activities or transactions in the ordinary course of the taxpayer’s trade or business (the “transactional test”); and (2) income from the acquisition, management and/or disposition of tangible or intangible property provided such acquisition, management and/or disposition constitutes an integral part of the taxpayer’s regular trade or business operations (the “functional test”).
A multi-state corporation with business income must use applicable apportionment formulas to determine the portion of its business income that is subject to Mississippi income tax. Recent statutory changes limit the ability of the Department of Revenue to utilize arbitrary alternative apportionment methods. The non-business income of a multi-state corporation is generally allocated to the state where the income is earned.
Mississippi excludes from taxation any gain resulting from the sale by a Mississippi resident individual or an entity domiciled in Mississippi of equity interests in domestic corporations, limited partnerships (except limited liability partnerships) or limited liability companies if those interests have been held for more than one year. The exclusion equates to a net, after-tax incentive equal to almost four percent (4%) of the taxable gain. Transactions structured as asset sales no longer qualify for the gain exclusion.
The Mississippi Corporate Franchise Tax is an excise tax on the privilege of doing business in Mississippi in corporate form. This is imposed on all corporations and associations, joint-stock companies and partnerships that are treated as corporations for tax purposes. Organizations exempt from this tax include mutual savings banks, many non-profits, and business and civic leagues.
In 2016, a law was enacted that will gradually reduce and eventually repeal Mississippi’s franchise tax over an 11-year period. In 2017, the franchise tax was computed as it always had been calculated, at the rate of $2.50 for each $1,000 of the value of the taxable capital of the corporation. Taxable capital is measured by the sum of the corporation’s outstanding stock, paid-in capital, retained earnings and surplus plus deferred charges and income, and reserves for contingencies. Reserves for bad debts, accumulated depreciation, debts or other known obligations are excluded from taxable capital. In addition, where a corporation qualifies as a true “holding company,” its taxable capital does not include that of its subsidiaries. A multi-state corporation operating in Mississippi must apportion taxable capital between the states in which it operates using a two-factor formula consisting of the real and tangible personal property ratio and the gross receipts ratio.
In 2018, the first $100,000 in capital was immediately exempted from the tax, which will have the effect of exempting many small corporate taxpayers in that year and thereafter. Beginning in 2019, the franchise tax rate will be reduced by $0.25 per year until it is eliminated with respect to tax years beginning on or after January 1, 2028.
Almost two decades ago, Mississippi enacted three significant rounds of tort law reform. Among the most important changes were limits on both non-economic and punitive damages, and venue provisions that are more favorable to defendants. In February of 2013, the Fifth Circuit Court of Appeals upheld the State’s $1 million cap on non-economic damages. This decision, along with others, continues the multi-year trend of decreasing litigation, particularly mass torts, while enhancing Mississippi’s business and legal environment. Most recently, during its 2019 regular session, the State Legislature adopted the Landowners Protection Act (LPA), which became effective on July 1, 2019. See Miss. Code Ann. § 11-1-66.1 (2020). The Act codifies the essential elements of a tort claim and addresses what evidentiary proof may be considered when determining if a landowner (or property manager) may be found civilly liable for the criminal acts of third parties that injure individuals who are lawfully on the subject property. The Act also amends Miss. Code Ann. § 85-5-7 (2020) and permits a jury in such actions to allocate fault to those intentional tortfeasors who commit an act with a specific wrongful intent (like criminal assailants).