State and Local Tax Alert - May 2016

May 2016

Mississippi Enacts Franchise Tax Phase-out and Minimum Taxable Capital Threshold

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Summary

On May 13, 2016, Mississippi Governor Phil Bryant (R) signed into law S.B. 2858, which enacts a phase-out of the Corporation Franchise Tax via a gradual rate reduction starting with taxable years beginning in 2019 and ending with taxable years beginning in 2027.  S.B. 2858 also implements a $100,000 minimum taxable capital threshold starting with taxable years beginning on or after January 1, 2018.
 

Details

Franchise Tax Phase-Out
The current Corporation Franchise Tax rate is $2.50 for each $1,000 of taxable capital.  Under S.B. 2858, the Corporation Franchise Tax rate is scheduled to phase-out as follows. 
 
Taxable Year Beginning on
or After
Rate Imposed
January 1, 2019 $2.25 for each $1,000 of taxable capital
January 1, 2020 $2.00 for each $1,000 of taxable capital
January 1, 2021 $1.75 for each $1,000 of taxable capital
January 1, 2022 $1.50 for each $1,000 of taxable capital
January 1, 2023 $1.25 for each $1,000 of taxable capital
January 1, 2024 $1.00 for each $1,000 of taxable capital
January 1, 2025 $0.75 for each $1,000 of taxable capital
January 1, 2026 $0.50 for each $1,000 of taxable capital
January 1, 2027 $0.25 for each $1,000 of taxable capital
 
 
Minimum Taxable Capital Requirement
Starting with taxable years beginning on or after January 1, 2018, Mississippi will impose the Corporation Franchise Tax only on taxable capital in excess of $100,000.  The $25 minimum tax applies, regardless.
 

BDO Insights

  • It appears that Mississippi is following Pennsylvania’s lead, which phased-out its Capital Stock/Foreign Franchise Tax through a gradual rate reduction as of taxable years beginning after December 31, 2015.  Hopefully, Mississippi will not also periodically delay the phase-out of its franchise tax.
  • Since the new law was enacted on May 13, 2016, Mississippi Corporation Franchise Tax taxpayers should assess what, if any, impact these law changes may have on their existing contingent liability balances, and adjust accordingly as of the enactment date.
 

For more information, please contact one of the following regional practice leaders:
 

West:   Atlantic:
Rocky Cummings
Tax Partner

 
  Jeremy Migliara
Tax Senior Director

 
Paul McGovern
Tax Senior Director
  Jonathan Liss
Tax Senior Director

 
Northeast:   Central:
Janet Bernier 
Tax Partner

 
  Angela Acosta
Tax Senior Director

 
Matthew Dyment
Tax Principal

 
  Nick Boegel
Tax Senior Director

 


Southeast:
  Joe Carr
Tax Principal

 
Ashley Morris
Tax Senior Director

 
  Mariano Sori
Tax Partner

 
Scott Smith
Tax Senior Director
  Richard Spengler
Tax Senior Director

 
    Southwest:
    Gene Heatly
Tax Senior Director

 
    Tom Smith
Tax Partner