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2011 Mississippi Tax Update

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					                   2011 Mississippi Tax Update
                                      Revised as of
                                     March 21, 2011



                                         Presented by:


                                Louis G. Fuller
                  Brunini, Grantham, Grower & Hewes, PLLC
                              Jackson, Mississippi


The Update is not designed or intended to provide legal or professional advice, as any such
advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice
To ensure compliance with requirements imposed by the IRS, we inform you that, unless
specifically indicated otherwise, any tax advice contained in this communication (including any
attachments) was not intended or written to be used, and cannot be used, for the purpose of (i)
avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or
recommending to another party any tax-related matter addressed herein.
                             MISSISSIPPI STATE DEVELOPMENTS


Louis G. Fuller
Brunini, Grantham, Grower & Hewes, PLLC
190 East Capitol Street, Suite 100
Jackson, Mississippi 39201
P. O. Drawer 119
Jackson, Mississippi 39205
Phone: (601)948-3101
Direct: (601)960-6874
FAX: (601)960-6922
E-mail:lfuller@brunini.com
Website: www.brunini.com


I.      INCOME/FRANCHISE TAXES
           A. Legislative Developments
                1.         L. 2011, H754 extends the existing historic structure rehabilitation tax
credit that was set to expire December 31, 2011 to December 31, 2013. Effective February 1,
2011.
                2.         L. 2011, SB 2922 deletes the repeal date for the exemption from taxation
for cargo imported at Mississippi ports which was scheduled to expire July 1, 2011. Effective
July 1, 2010.
                3.         2010 Amendments to Major Economic Impact Act. The Mississippi
Major Economic Impact Act, Miss. Code Ann. §§ 47-75-1, et seq., provides extensive economic
and tax incentives for industrial development projects within the state representing significant
capital investment and increased employment. Such incentives include, inter alia, grants and
bond financing, jobs tax credits and withholding tax rebates, sales and property tax exemptions
and franchise tax fee-in-lieu agreements.
                      a.        H.B. 338, 2010 Reg. Sess. (Miss. 2010) adds to eligible projects
any enterprise owning or operating a facility for the manufacture of pipe with a private
investment of not less than $300,000,000.00 not later than December 31, 2015 from any source
other than the state of Mississippi and its subdivisions, and which will result in full-time
employment of not less than 500 persons within five years after the start of commercial




                                                  2
production and maintain such jobs for at least ten years, all with an average annual
compensation, excluding non-taxable benefits, of at least $32,000. Effective, January 12, 2010.
                       b.        S.B. 3189 2010 Reg. Sess. (Miss 2010) adds to the definition of
“project” in the Mississippi Major Economic Impact Act, Miss. Code Ann. §§ 47-75-1, et seq.,
any enterprise owning or operating a facility for manufacturing solar panels. The enterprise must
invest at least $132 million by the end of 2015 and create at least 500 new full-time jobs within
five years of starting commercial production. The jobs must be maintained for at least 10 years
and have an average annual compensation of $34,000, excluding exempt benefits. Effective
March 17, 2010.
               4.         Payment credit voucher in lieu of cash payment. S.B. 3184, 2010 Reg.
Sess. (Miss. 2010) authorizes the governor to issue to telecommunication enterprises that
contract with the state to provide broadband telecommunications service to institutions of higher
learning a payment credit voucher in lieu of cash payment pursuant to the terms of the contract
for services. The credit payment voucher entitles the telecommunications enterprise to a credit
against the aggregate tax liabilities of any related member, and if the related member is unable to
use the full amount of the credit voucher, any remaining amount will be refunded to the service
provider. This provision is repealed from and after July 1, 2018.
               5.         Early payment of withholding tax liability. H.B. 1059, 2010 Reg. Sess.
(Miss. 2010) delays until July 1, 2012 the implementation of the increase in the amount of the
average monthly liability that triggers the requirement for early payment of withholding tax
liability by certain taxpayers. Until July 1, 2012, the threshold is $20,000; after July 1, 2012, the
threshold will be $50,000.
               6.           Tax return information remains confidential. H.B. 704, 2010 Reg. Sess.
(Miss. 2010) maintains that tax return information must be maintained in a confidential manner
unless disclosure is required by a court order. The law, however, authorizes the Department of
Revenue (“DOR”) to release income tax information and records to the Department of Human
Services, Child Support Unit and Fraud Investigation Unit, for individuals who are delinquent in
child support payments.
               7.         Wildlife use credit. H.B. 1716, 2010 Reg. Sess. (Miss. 2010) allows a
yearly income tax credit of $5.50 per acre of land that taxpayers allow to be used as a natural




                                                  3
area preserve, wildlife refuge or habitat area, wildlife management area, or for the purpose of
providing public outdoor recreational opportunities.
               8.        Confidentiality of reports and returns applicable to MDA. Miss. Code
Ann. §27-3-73 and other related sections set forth the terms by which other state agencies may
enter into a confidentiality agreement with the DOR authorizing such agencies to discuss and
examine certain tax information at the Department of Revenue. S.B. 3082 authorizes the officers
and employees of the Mississippi Development Authority (“MDA”) to enter into such
confidentiality arrangements with DOR. The same prohibitions against disclosure that apply to
DOR will apply to the officers and employees of MDA. Effective July 1, 2010.
               9.        Exclusion from gross income amount converted from traditional IRA.
H.B. 1673, 2010 Reg. Sess. (Miss. 2010) amends Miss. Code Ann. § 27-7-15 to exclude income
amounts converted from a traditional individual retirement account to a Roth individual
retirement account from the definition of “gross income” for purposes of the state income tax
law during the 2010 taxable year and subsequent taxable years.         The law also makes the
exemption available to the spouse or other beneficiary at the death of the primary retiree.
Effective January 1, 2010.
               10.       Income tax credit for port charges on imports extended until July 1,
2011. Miss Code Ann §§ 27-7-22.23 and 27-7-22.24 grant an income tax credit to any taxpayer
utilizing the port facilities at state, county or municipal ports for certain charges paid by the
taxpayer on the import of cargo, provided certain conditions are met. This credit was set to
sunset on July 1, 2010, but the sunset has been extended by S.B. 3070, 2010 Reg. Sess. (Miss.
2010) to July 1, 2011.
               11.       Income tax credit for port charges extended through 2012. Miss. Code
Ann. § 27-7-22.7 grants an income tax credit to any taxpayer utilizing the port facilities at any
port for the export of cargo. The amount of the credit is equal to the total charges on export
cargo paid by the taxpayer for receiving into the port, handling to a vessel and wharfage. The
credit is limited to 50% of the taxpayer’s Mississippi income tax after reduction for all other
credits. Any unused credits may be carried forward for five years. This credit was set to sunset
on December 31, 2009, but the sunset has been extended by H.B. 14, 2009 Reg. Sess. (Miss.
2009) to December 31, 2012. Effective, July 1, 2009.




                                                4
               12.       Derivative tax liability of corporations and limited liability companies.
S.B. 2967, 2010 Reg. Sess. (Miss. 2010) amends Miss. Code Ann. §§ 27-7-307 and 27-65-55 to
provide that the liability of certain owners and members of corporations or limited liability
companies (“LLCs”) for income withholding tax and for sales tax is derivative of the corporation
or LLC and that the 3-year assessment period for the tax will begin to run after the liability of the
corporation or LLC becomes final. Effective July 1, 2011.
               13.       Individual income tax liability payable in installments. S.B. 2753, 2010
Reg. Sess. (Miss. 2010) amends Miss. Code Ann. § 27-7-53 to authorize the payment of
individual income tax liability in installments over a period of not to exceed sixty (60) months if
the amount of the tax liability does not exceed $3,000 and the taxpayer has entered into an
installment agreement with the IRS to pay federal income taxes on income earned during the
same taxable year for which the state income tax liability was incurred.
               14.       Upholstery manufacturing credit.      H.B. 1674, 2010 Reg. Sess. (Miss.
2010) authorizes a $2,000 annual job tax credit for enterprises that own or operate an upholstered
household furniture manufacturing facility for each full-time employee employed by such
manufacturer in a new cut and sew job. Unused credits may be carried forward for five years.
Credits under this law are in lieu of the job credits provided under Miss. Code Ann. § 57-73-21.,
Effective January 1, 2010.
               15.       Tax return preparer penalty. H.B. 1462, 2010 Reg. Sess. (Miss. 2010)
amends Miss. Code Ann. § 27-7-87 to provide that the penalty for grossly negligent preparation
of an income tax return by a preparer may be imposed for each return prepared by the preparer.
Prior to this change, the statutory language was mandatory. The amendment also states that paid
preparers who are assessed a penalty are liable for an additional $500 penalty if they fail to
legibly sign each return and include their federal employer identification number or IRS preparer
tax identification number. The law authorizes the Revenue Commissioner to make penalty
assessments and collections in the same manner provided for the assessment and collection of
income taxes. Effective July 1, 2010.
               16.       Tax return confidentiality, electronic filing and penalties for non-
compliance. H.B. 1460, 2010 Reg. Sess. (Miss. 2010) amends Miss. Code Ann. § 27-3-73 and
§ 27-3-83 to include as confidential information all system edits, thresholds, and other automated
system calculations used by the DOR in the processing of returns or statistics or those used to



                                                 5
determine the correct amount due for all taxes administered by the DOR. The law allows the
Commissioner of Revenue to specify by rule or regulation the manner and method, either
manually or electronically, by which tax returns, supporting schedules, information returns and
other tax documents and information may be filled with the DOR, although it exempts taxpayers
that do not have the capability to make the submissions electronically from any electronic filing
requirements. The law imposes a penalty of $25 for the first incidence and $500 for each
additional failure to comply with an electronic filing mandate, or failure to complete any return,
supporting schedule, information return or other tax document, or failure to submit any required
schedule or additional information. Effective July 1, 2010.
               17.      Business exemption on income, franchise, and sales and use tax         H.B.
1701, 2010 Reg. Sess. (Miss. 2010) grants exemptions from state income tax, franchise tax, and
for a period of ten years from any sales and use taxes (related to the purchase of component
building materials and equipment for initial construction or expansion) for certain business
enterprises that locate or expand in the state that own or operate a qualifying facility. Qualifying
facilities include those for the manufacture or assembly of systems or components used in
generation of clean energy, or for the aerospace industry, or those that operate data centers, or
provide research and development or job training services for such qualifying industries.


           B. Judicial Developments
               1.       The Supreme Court of Mississippi addresses the tolling period for
assessment of additional state income tax. In Buffington v. Mississippi State Tax Commission,
the Mississippi Supreme Court addressed Mississippi Code § 27-7-49, which provides that the
Mississippi Department of Revenue may issue an assessment for additional state income tax
when the IRS increases a taxpayer’s reported taxable income, but that such an assessment may
not be issued “after three (3) years from the date the Internal Revenue Service disposes of the tax
liability in question.” The taxpayer argued that the IRS “disposes of the tax liability in question”
on the date a written settlement between the IRS and the taxpayer is executed. In other words,
the taxpayer viewed the execution of a Form 4549 and the payment of the liability to constitute
disposition of the matter. The Supreme Court did not endorse this view, holding instead that the
IRS “disposes of the tax liability in question, for purposes of §27-7-49, on the date the
Mississippi Department of Revenue receives notice from the IRS via Form 3210 that the



                                                 6
taxpayer’s reported taxable income has been changed. Thus, the three-year period for assessing
additional state income tax as a result of an increase in the taxpayer’s taxable income by the IRS
begins running upon receipt of the Form 3210 by the Mississippi Department of Revenue from
the IRS. Buffington v. MS State Tax Comm., No. 2009-CA-01658-SCT (Sept. 9, 2010).
               2.       The Supreme Court of Mississippi determines that the State Tax
Commission is not a judgment creditor for purposes of 26 U.S.C. §6323(a) by virtue of issuing a
notice of a tax lien.   In Davis v. Mississippi State Tax Commission, the taxpayer died in
December 2004, having failed to pay federal or state taxes for the years 1997-2004. The IRS
assessed federal tax liabilities against the estate of the taxpayer in the time period of August 8,
2005 through October 3, 2005. On October 6, 2005 and November 15, 2005, the Mississippi
State Tax Commission filed notices of tax lien in the Chancery Court of Lee County for years
1997-2004. The estate was deemed insolvent and the assets were sold yielding an amount
insufficient to pay either the federal government or the state the amount owed in full. Each
taxing authority claimed priority. The chancery court noted that Mississippi Code §27-7-55 gives
an enrolled notice of tax lien the status of a judgment. Under 26 U.S.C. §6323(a), a “judgment
lien creditor” has priority over a federal tax lien. Based on these two provisions, the chancery
court found that the State Tax Commission had the priority claim to the funds. The Supreme
Court of Mississippi overturned. The Supreme Court stated that the definition of “judgment lien
creditor” for these purposes is determined under federal law. Under 26 C.F.R. §301.6323(h)-
1(g), the State Tax Commission did not meet the definition of a “judgment lien creditor” because
the enrolled notice of tax lien was based on an administrative determination rather than a court
judgment. As such, the Supreme Court of Mississippi determined that the IRS had priority over
the State Tax Commission. Davis v. MS State Tax Comm., No. 2009-CA-01739-SCT (Oct. 7,
2010).
           C. Administrative Developments
               1.       Gambling winnings income tax.           The Mississippi Department of
Revenue reminded taxpayers that gambling winnings reported on a W2G, 1099, or other
informational return from Mississippi casinos are subject to a 3% nonrefundable income tax. The
casinos withhold the amount at the time of payout, and the amount withheld is nonrefundable to
the taxpayer. Winnings from Mississippi casinos are not included in Mississippi income and no




                                                7
income tax credit is allowed for the amount of withholding. A nonresident taxpayer with only
Mississippi gambling winnings or losses should not file a Mississippi tax return.
               2.         2010 W-2/1099 filing information.      The Mississippi Department of
Revenue has announced that starting January 6, 2011, W-2’s and 1099’s may be uploaded to the
DOR website, and may also be mailed using a disk or CD, or taxpayers may directly enter W-2
information on the DOR website by way of a new internet application program. If more than 50
W-2’s or 1099’s are to be filed, the forms must be filed electronically.
               3.         Due date for tax returns. The Mississippi Department of Revenue will
follow the federal extension of the calendar year 2010 due date for income tax returns to April
18, 2011.
               4.         Combined income filings for corporations. The Mississippi Department
of Revenue issued guidelines clarifying that every corporation, other than a qualified subchapter
S subsidiary, either registered to do business or doing business in Mississippi must file a
combination income and franchise tax return and an affiliated group of corporations may elect to
file on a combined basis for income tax purposes. Every member of a combined group, other
than the reporting corporation, must file a combination income and franchise tax return on a
separate company basis, and each return must be signed, stapled or clipped separately, and use
Form 83-105 as the face of the return. In general, a corporation is required to make four quarterly
estimated tax payments of at least 90% of its income tax liability. A payment by one corporation
cannot be claimed by another corporation regardless of whether they are members of a combined
income tax filing.
               5.         Board of Tax Appeal Review. S.B. 3075, 2010 Reg. Sess. (Miss. 2010)
amended Miss. Code Ann. § 27-4-3, 27-3-73, 27-19-123 and related sections to authorize the
Board of Tax Appeals (the “BTA”) to obtain, review, receive into evidence, examine and
consider applications, returns, reports and any particulars described or disclosed in any
application, report or return required on any taxes collected by reports received by the DOR and
any other documents and information received, generated and maintained by the DOR. The law
also clarifies that certain confidential information may be provided by the DOR to the BTA.
Effective July 1, 2010.
               6.         Taxability of Gulf oil spill payments. The DOR has issued a notice
informing taxpayers that payments received from BP for income lost as a result of the Gulf oil



                                                 8
spill are to be included in gross income and reported in the same way that lost business income
would be reported.     Taxpayers making quarterly estimated payments should include the
payments in the calculation to determine the amount of quarterly estimates due. Payments
received to compensate for damage or destruction of property are not required to be included in
gross income unless the payments exceed the adjusted basis of the damaged or destroyed
property. The gain may be deferred if the damage or destruction qualifies as an involuntary
conversion. The tax basis of damaged property should be reduced for payments received for the
damage or destruction of property.
              7.        Relief for May 1, 2010, storm and flood victims.        The DOR has
announced that it will follow federal extensions granted for taxpayers directly affected by the
severe storms, tornadoes and flooding that began on May 1, 2010, within the Mississippi
counties designated as federally declared disaster areas and who cannot meet their filing and or
paying obligations. The extension applies to any tax return and or tax payment with an original
or extended due date falling on or after May 1, 2010, and on or before the extension due date of
June 30, 2010. The DOR will abate interest and any late filing or late payment penalties that
otherwise apply. The federally declared disaster areas are Alcorn, Benton, Lafayette, Tippah,
and Tishomingo Counties.
              8.        Relief for April 23, 2010, storm and flood victims. The DOR has
announced that it will follow federal extensions granted for taxpayers directly affected by the
severe storms, tornadoes and flooding that began on April 23, 2010, within the Mississippi
counties designated as federally declared disaster areas and who cannot meet their filing and or
paying obligations. The extension applies to any tax return and or tax payment with an original
or extended due date falling on or after April 23, 2010, and on or before the extension due date
of June 22, 2010. The DOR will abate interest and any late filing or late payment penalties that
otherwise apply. The federally declared disaster areas are Attala, Choctaw, Holmes, Monroe,
Oktibbeha, Union, Warren, and Yazoo Counties.


   II.     TRANSACTIONAL TAXES
           A. Legislative Developments
              1.        Exemption for construction component materials and equipment from
renewable crude oil production facilities. L. 2010, H8 (2nd Extra Session) exempts the sales of



                                               9
component materials used in the construction of or additions or improvements to any building
and the sale or lease of any machinery or equipment occurring within 3 months of the completion
of such construction which machinery or equipment is used in operating a facility producing
renewable crude oil from biomass harvested or produced in whole or in part in Mississippi from
sales tax. Effective September 3, 2010.
               2.        Exemption for school transport vehicles. H.B. 1677, 2010 Reg. Sess.
(Miss. 2010) exempts from sales and use taxation the retail sales of buses and other motor
vehicles, and parts and labor used to maintain and repair the buses and motor vehicles, to an
entity that has entered into or renewed a contract with a school board on or after July 1, 2010, for
the transportation of students to and from schools and the entity uses or will use the buses and
other motor vehicles for such transportation purposes. Effective July 1, 2010.
               3.        Emergency telephone service charge. S.B. 2938, 2010 Reg. Sess. (Miss.
2010) imposes a $1.00 service charge on all retail prepaid wireless transactions occurring in
Mississippi for emergency telephone services. The service charge is to be collected from the
customer by the retailer and remitted to the DOR along with the retailer’s sales and use taxes.
The retailer may take an administrative deduction of 2% of the collected service charges.
Additionally, the Board of Supervisors of any county may levy an emergency telephone service
charge not to exceed $1.00 per month for residential users and $2.00 per month for business
users of Voice over Internet Protocol telephone services.
               4.        Derivative tax liability of corporations and limited liability companies.
S.B. 2967, 2010 Reg. Sess. (Miss. 2010) amends Miss. Code Ann. §§ 27-7-307 and 27-65-55 to
provide that the liability of certain owners and members of corporations or limited liability
companies (“LLCs”) for income withholding tax and for sales tax is derivative of the corporation
or LLC and that the 3-year assessment period for the tax will begin to run after the liability of the
corporation or LLC becomes final. Effective July 1, 2011.
               5.        Farmers’ Market exemption to sales tax.     Miss. Code Ann. § 27-65-103
exempts from Mississippi sales tax certain agricultural products. H.B. 1566, 2010 Reg. Sess.
(Miss. 2010) adds to this list an exemption for sales of food products that are grown, made, or
processed in Mississippi and sold from farmers markets that have been certified by the
Mississippi Department of Agriculture and Commerce. Effective April 1, 2010.




                                                 10
               6.        Establishment of new tax rates on machinery and construction activity at
refineries. H.B. 1684, 2010 Reg. Sess. (Miss. 2010) creates Miss. Code Ann. § 27-65-24 to levy
a tax on the sale of manufacturing or processing machinery to be installed or used at a refinery
and on the performance of construction activities at or in regard to a refinery in Mississippi. The
tax imposed by the law, is in the amount of (1) 1.5% on the gross proceeds of sales of
manufacturing or processing machinery without any regard as to whether or not the machinery
retains its identity as tangible personal property after installation; and (2) 3.5% of 103.5% of the
total contract price or compensation paid for the performance of a construction activity. The
owner of the refinery shall furnish a direct pay permit issued by the DOR under Section 27-65-
93, if the owner holds such a permit, and the seller or person performing the construction shall be
relieved of the duty to collect the taxes listed above. The owner of the refinery shall pay the tax
in the manner required by rule and regulation promulgated by the commissioner. The bill also
exempts construction activity at refineries from the contractor’s tax imposed under Miss. Code
Ann. § 27-65-24. Effective July 1, 2010 through June 30, 2011. Judicial Developments.
           B. Judicial Developments
               1.        Supreme Court of Mississippi considers notice required to owners of
mineral interests for valid tax sale under due process. In Aarco Oil and Gas Co. v. EOG
Resources, Inc., 20 So.3d 662 (Miss. 2009), the Supreme Court of Mississippi held that the
publication and notice to surface owners of a 1942 tax sale for delinquent property taxes was
sufficient to meet state and federal due process constitutional requirements, thereby validating
the tax sale to the predecessors of the current owner, defendant gas company. The Court, after
holding that the State’s Supreme Court was not prohibited from considering an argument that the
original conveyees of mineral rights did not receive notice of the tax sale sufficient to comply
with due process, found that the state lawfully sold the entire estate, including the mineral rights,
as required to support findings that the owners of the mineral rights were conveyees of
subsequent purchasers of the estate form the tax sale.




                                                 11
       The Court noted that under Mullane v. Central Hanover Bank & Trust Company, 339
U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950) and Mennonite Board of Missions v. Adams, 462
U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983), that actual notice of sale is not required and
publication and constructive notice will suffice to meet due process for those individuals whose
identity or location could not be ascertained with due diligence. The Court reiterated that
whether a particular method of notice is reasonable depends on the particular circumstances, and
that a governmental body is not required to undertake extraordinary efforts to discover the
whereabouts of a mortgagee whose identity is not in the public record.
           C. Administrative Developments
               1.        Livestock feed exemption. Mississippi Department of Revenue issued
guidance clarifying that the sales tax exemption for livestock feed applies to feed labeled as
livestock feed or other feed sold for livestock use, such as hay or silage. The exemption does not
apply to food products not regularly sold for livestock use regardless of the ultimate end use of
the product nor any feed labeled for non-livestock use.
               2.        2010 sales tax holiday. Mississippi’s second “Back to School” sales tax
holiday took place from Friday, July 30, 2010, until midnight Saturday, July 31, 2010. During
the sales tax holiday, the 7% sales tax is not be collected on clothing and footwear meant to be
worn next to the body that cost $100 of less per item. Jewelry, handbags, wallets, watches,
backpacks, and similar accessories as well as cleats and items worn in conjunction with an
athletic or recreational activity are not eligible. School supplies and computers are not included.
The DOR has a list of non-eligible clothing and footwear items on its website.               Some
municipalities opted out of the 2010 “Back to School” holiday and all retail businesses within
their corporate limits were required to collect and remit sales tax as normal.
               3.        DOR      issues   notice     to   retailers   selling   prepaid   wireless
telecommunications. Beginning July 1, 2010, retailers must collect the $1 Prepaid Wireless
E911 charge on every retail sale of prepaid wireless telecommunication services, and remit the
collected charges to the DOR by the 20th of the month following the reporting period. The
reporting period is the same as the retailer’s Mississippi sales tax return and returns for the
Prepaid Wireless E911 charge are available on the DOR’s website.
               4.        Commission amends rules on direct pay permits. Effective February 1,
2010, the Commission has amended Miss. Admin. Code 35.IV.01.01 (Direct Payment of Sales or



                                                 12
Use Tax to the State in Lieu of Payment to Seller). The rule was amended to clarify that, under
the rule on direct payment of sales or use tax to the state in lieu of payment to a seller, in order to
receive an exemption, the exempt items must be sold directly to, billed or invoiced directly to,
and be paid for directly by the entity receiving the exemption. If a person improperly uses a
direct pay permit or letter granting the authority to make tax exempt purchases, that person may
still be liable for tax that would normally have been paid to the vendor.
               5.         Commission amends rules on wrecker or towing services. Effective
February 1, 2010, the Commission has amended Miss. Admin. Code 35.IV.04.01 (Gasoline
Distributors and Service Stations) and Miss. Admin. Code 35.IV.06.01 (Electric Power, Light,
Gas and Other Fuel Distributors). The MSTC has adopted amendments to the rules regarding
gasoline distributors and service stations to provide that wrecker or towing services where no
other taxable services (such as repairs, storage or other similar services) are provided are exempt
from sales tax. When wrecker or towing services are provided in connection with other services
that are taxable, the total amount is subject to the regular retail rate of tax. The separate
invoicing of the wrecker or towing services would not affect the taxability of the charges. The
taxability of wrecker or towing services is determined for each instance that includes this service
and not for the business as a whole.
               6.        Commission amends rules on rates applicable to agricultural equipment.
Effective February 1, 2010, the Commission has amended Miss. Admin. Code 35.IV.08.02
(Agriculture).The rules were amended to remove conflicts with legislation and make formatting
changes. Under the amended rule, parts and labor used to maintain or repair farm tractors or farm
implements are also subject to the special rate of 1½ % rate, provided the tractors or implements
would be subject to the special rate of 1½ % rate. Sale of materials to a dairy producer used in
the repair, renovation, addition to, expansion or improvement of buildings and related facilities
used by a dairy producer shall be taxed at the rate of 3½ %. When an item subject to the regular
retail rate such as a trailer for highway use is traded as part payment on a tractor or other item
subject to the special 1½ % rate, the net difference is taxable at the special 1½ % rate and the
subsequent sale of the trailer for highway use is taxable at the regular retail rate.
               7.        Commission amends rules applicable to construction contractors relating
to the treatment of apartments and condominiums. Effective February 1, 2010, the commission
has amended Miss. Admin. Code 35.IV.10.01. (Construction Contractors) to define an apartment



                                                  13
as a collection of four or more dwellings with kitchen facilities all with common ownership on
contiguous land, rented to tenants rather than transients. Under the amended definition, groups
of single family homes do not constitute apartments.           It is in the discretion of the Tax
Commission to separate out residential housing from a construction contract for nonresidential
purposes.
               8.           Commission amends rules on sales of motor vehicles for repairing,
storage or towing costs. Effective February 1, 2010, the Commission has amended Miss. Admin.
Code 35.VII.06.05 (Sale of Motor vehicles for Repair, Storage or Towing Costs) to provide the
approved procedures for the sale or other disposition of abandoned motor vehicles that were
taken in for repair, towing, or storage under Miss. Code Ann. § 63-23-1 et seq.


   III.     PROPERTY TAXES
            A. Legislative Developments
               1.           Costs for cleaning certain property to be added to tax bills. H.B. 1412,
2010 Reg. Sess. (Miss. 2010) authorizes costs and penalties assessed by a municipal governing
authority to clean private property to be added to ad valorem tax bills and to be collected by the
tax collector. The tax collector is authorized to sell the property when such costs and penalty are
not paid.
               2.           Title fees increase effective July 1, 2010. H.B. 1151, 2010 Reg. Sess.
(Miss. 2010) increase title fees for motor vehicles, ATVs, trailers, manufactured homes, and
mobile homes to $9.00. Designated agents may add $1.00 to the transaction as their fee for
services rendered. These increases will not affect the Fast Track title program. Fast Track titles
will still be available for an additional fee of $30.00, for a total due of $39.00 for a Fast Track
title effective July 1, 2010.
            B. Judicial Developments
               1.           Tax Sales.
                       a.        Holly Springs Realty Group, LLC v. BancorpSouth Bank, Miss. Ct.
App., Dkt. No. 2009-CA-00923-COA (Miss. App. 2010). Tax sale of a condominium to a
purchase was void as to the bank that held a mortgage on the property because the chancery
court clerk failed to give notice to the bank after the tax sale and before the expiration of the
redemption period. The tax sale being void, the bank’s mortgage lien was unaffected , and the



                                                  14
bank was entitled to foreclose on the property but had to reimburse the purchaser for the real
property taxes the purchase paid for during the tax sale.
                       b.        C.F.P. Properties, Inc. v. Roleh, Inc., Miss App. Ct., Dkt. No.
2009-CA-00391-COA (Miss App. 2010). The Mississippi Court of Appeals held that the tax
sale of commercial building was void because there no compliance with the statutory notice
requirements. The statutes require that notice be served by the sheriff and by registered or
certified mail. At the time the tax sale deed was executed, the tax-sale record lacked both the
sheriff’s return of process and an affidavit from the chancery clerk detailing the acts of diligent
search and inquiry used to determine the correct address of the property owner. Statutory notice
requirements are strictly construed in favor of landowners because public policy favors and
protects them from the sale of their land for unpaid taxes.
                       c.        Rebuild America, Inc. v. Estate of Daniel A. Wright, Miss App. Ct.,
Dkt No. 2009-CA-00126-COA (Miss App. 2010). The Mississippi Court of Appeals in this case
ruled that a chancery clerk’s affidavit detailing acts of search and inquiry made by the clerk in an
effort to ascertain owner’s address was not a cure for lack of personal service of notice on a
property owner. The court noted that although the owner was properly served by mail and by
publication, Miss. Code Ann. § 27-43-3 requires that redemption notice be given by personal
service, by mail and by publication. The court noted that all three requirements must be met in
order for notice to be complete under the statute.
               2.           Tax Assessments.
                       a.        3545 Mitchell Road, LLC v. Bd. Of Supervisors of Lee County,
Miss., Dkt No. 2009-CT-00292-SCT (Miss. 2010). The Mississippi Supreme Court held that the
taxpayers did not forfeit the availability of a statutory lower rate of ad valorem taxation for
affordable rental housing properties when they failed to comply with the corresponding
requirement to provide the county tax assessor, on or before April 1, with a statement of the
actual net operating income for the previous year. In this case, the Board of Supervisors
reassessed affordable rental housing complexes because of a failure on the part of the taxpayers
to submit proper documentation of net operating income which would entitle the taxpayers to a
more favorable assessment formula. The more favorable formula was initially applied despite
the taxpayers’ failure to submit the required documentation. The Board of Supervisors
subsequently reassessed the taxpayers using the standard assessment formula, drastically



                                                  15
increasing the ad valorem property taxes owed by the taxpayers. The Board of Supervisors relied
on Miss. Code Ann. § 27-35-143(11) for authority for the reassessment. The Supreme Court
held, however, that § 27-35-143(11) applies to authorize a reassessment when property has been
incorrectly categorized. The Supreme Court found no evidence that the taxpayers’ property was
incorrectly categorized as “affordable rental housing.” The Supreme Court held that the incorrect
valuation that had occurred when the Board of Supervisors mistakenly applied the favorable
assessment formula initially did not amount to an incorrect categorization that would allow for a
reassessment under § 27-35-143(11). The Supreme Court also held that the Board of Supervisors
could not rely on Miss. Code Ann. § 27-35-147(4) for authority for the reassessment, which
allows for an increase in an assessment when land was listed on the assessment roll as tax
exempt, but was subject to assessment and taxation on the preceding tax lien date. The Supreme
Court held that the specialized, favorable assessment formula applied to affordable rental
housing did not rise to the level of tax exemption, and thus there was no authority for the
reassessment under § 27-35-147(4).
           C. Administrative Developments
               1.       Abatements under municipal home rule. There is no specific Mississippi
law that authorizes a municipality to grant a tax abatement to businesses to offset costs incurred
from replacing signs in order to comply with a new sign ordinance. Such a power could not arise
from Miss. Code Ann. § 27-17-5, the “home rule” statute, because such an abatement would
reduce or nullify in part a tax levy authorized by state law and would thus be in direct conflict
with the statutes authorizing the levy. There is no indication in the “home rule” statute or
elsewhere that the legislature intended to authorize municipalities to grant tax abatements or tax
exemptions other than those specifically authorized by state law (Attorney General Opinion,
2010-00632, 11/29/2010).
               2.       Tax sale redemption in bankruptcy. Under Miss. Code Ann. § 27-45-5,
chancery clerks may accept partial payments from a Chapter 13 bankruptcy trustee towards the
redemption of pre-petition property tax sales, but the property will not be considered redeemed
unless all amounts have been paid within the 2-year limitation period, which is not tolled or
suspended by the bankruptcy filing (Attorney General Opinion, 2010-00625, 11/15/2010).
               3.       City-owned property leased to a private non-profit is taxable.        The
State’s Attorney General opined that a private leasehold interest in city-owned property is not



                                               16
exempt from taxation unless expressly authorized or provided by law. Specifically, when land
owned by the city is leased to a nonprofit operator for use as a golf course, the leasehold interest
is taxable by the county. In assessing the value of the leasehold interest, the tax assessor must
determine the true value of the leasehold, based upon the current use of the property. OAG
2010-00195, May 21, 2010.
               4.       Definition of “approved project of the municipality” for historic property
exemption. The State’s Attorney General opined that an “approved project of the municipality”
for purposes of qualifying for a historic property exemption for a privately owned new structure
or a renovation of an existing structure means a project that adheres to specific plans and/or
designs, with definitive goals, intended to develop the central business district and/or preserve
and revitalize historic landmark sites or historic preservation districts. The plans and designs
must be approved by the governing authorities and be in effect when the work is performed.
There is no statutory limit on when applications can be submitted and approved for the
exemption; but since the grant of the tax exemption is discretionary, the governing authorities
may adopt an order or ordinance restricting the approval of future tax exemptions to projects
completed within 12 months prior to the date of application for the exemption. OAG 2010-
00173, May 7, 2010.
               5.       Past due ad valorem taxes run with the land. The State’s Attorney
General opined that past due ad valorem taxes assessed on real and personal property run with
the land and survive foreclosure. OAG 2010-00178, April 23, 2010.
               6.       Property tax exemption for Housing Authority property.         Miss. Code
Ann. § 43-33-37 exempts certain property owned or acquired by a housing authority from all
taxes levied by the city, the county, the state or any political subdivision thereof. The State’s
Attorney General opined that the South Delta Regional Housing Authority is exempt from all
taxes levied by the county so long as the property in question is used for essential public and
governmental purposes as determined by the Tax Assessor, subject to judicial review. OAG
2009-00652, December 28, 2009.
               7.       Record owner of January 1 liable for entire year’s ad valorem taxes.
Miss. Code Ann. § 27-35-1 sets forth the procedure for attachment of tax liens for taxes assessed
upon lands or personal property. The State’s Attorney General found that ad valorem taxes are
assessed upon real property on January 1 of each tax year and the record owner on that date is



                                                17
liable for the entire ensuing year’s taxes, even if the property is sold after January 1. Therefore,
for that year’s tax assessment purposes, the tax records as of January 1 cannot be altered. OAG
2009-00691, December 11, 2009.
               8.       Interest payments on delayed refunds to tax sale purchaser.          When
property sold for taxes is redeemed, Miss. Code Ann. §§ 27-45-1 and 27-45-5 require chancery
clerks to pay an individual purchaser the full amount due them and provides for penalties for
failure to make such payments in a timely manner. The State’s Attorney General concluded that
where funds in the land redemption fund were insufficient to make such payments, the county
must first transfer any available county funds into the land redemption fund and then make the
required payments. With regard to interest due, the State’s Attorney General reiterated a prior
opinion that there is no authority for a tax sale purchaser to be paid interest for the time period
between the time a property bought in a tax sale is redeemed by the owner and the time the
refund is paid to the tax sale purchaser, and concluded that the interest due to the purchaser at a
tax sale ceases to accrue when the owner redeems his property. OAG 2009-00638, October 28,
2009.
               9.       Taxes on donated property.        The State’s Attorney General issued an
opinion that a municipality may accept a donation of real property but a municipality does not
have the authority to remit or release liability for taxes that are due and owing on the property to
be donated. A municipality may, however, agree as part of a purchase contract to pay as
consideration a certain amount of money, up to the fair market value of the property, to offset the
land owner’s tax liability. Once a municipality has accepted donated property, such property is
exempt from all ad valorem taxes. OAG 2009-00579, October 2, 2009.
               10.      Improvements to leased airport property not subject to ad valorem taxes
on real or personal property. Section 61-5-11 of the Mississippi Code grants a municipality
operating an airport which it owns, leases, or controls the authority enter into leases with regard
portions of the real property constituting the airport and to contract for the provision of goods
and services to the airport facility. That Section further provides that such contracts, leases and
other arrangements “entered into pursuant to this section,” and any structures, improvements or
other facilities installed in connection therewith, are free and exempt from all state, county, and
municipal ad valorem taxes on real property and personal property. In a recent opinion, the
Attorney General of Mississippi concluded that such a lease or contract need not directly



                                                18
reference the relevant Code Section in order to be deemed to have been “entered into pursuant
to” § 61-5-11, and thus to exempt the resulting improvements or structures from ad valorem
taxes. If there is credible evidence that the contract was entered into pursuant to the authority
granted by § 61-5-11, property tax exemption will be granted under the Section even though the
contract or lease related to the property makes no mention of § 61-5-11. The Attorney General
stated that such credible evidence includes the minutes of the governing authority which make
reference to § 61-5-11 in the course of approval of the underlying contract or lease. OAG 2010-
00370, July 23, 2010.
               11.       No minimum amount of fee can be set by an authority which grants a
fee-in-lieu of taxes but states the fee as a fraction or percentage of the ad valorem taxes that
would be owed. Section 27-31-104 of the Mississippi Code gives county boards of supervisors
and municipal authorities the power to grant a fee-in-lieu of taxes for projects totaling over
$100,000,000.00. The fee-in-lieu of taxes may be stated as a fraction or percentage of the ad
valorem taxes otherwise payable or may be a set, stated dollar amount. If the fee-in-lieu is stated
as a fraction or percentage of ad valorem taxes otherwise owed, it may increase or decrease from
year to year based on changes in millage rate or assessed value. In a recent opinion, the Attorney
General of Mississippi clarified that the granting authority can not set a floor value for the
project in order to prevent a potential loss in tax revenue. The statute does not allow the authority
to set a minimum amount of fee to be collected in the event that the fee is calculated as a fraction
or percentage of the ad valorem tax that would otherwise be owed. In the event that the fee is a
set, stated dollar amount, that statute provides that the actual fee collected must be the greater of
that stated dollar amount or one-third of the total amount of all ad valorem taxes otherwise
payable each year. OAG 2010-00348, July 23, 2010.
               12.       Chancery clerk has no authority to void a tax sale once it has been made.
The Attorney General of Mississippi recently published an opinion clarifying that the chancery
clerk has no authority to void a tax sale due to a defect in the sale procedure after the time for
redemption has passed but before the issuance of a tax deed. Once the redemption period has
expired, the chancery clerk is required, under §27-45-23 of the Mississippi Code, to issue a deed
to an individual who purchased the land at a tax sale. If, however, the tax sale is struck off to the
State of Mississippi because there was no purchaser at the tax sale, the chancery clerk can
request the authority to strike the tax sale pursuant to §29-1-29 of the Mississippi Code.



                                                 19
   IV.     OTHER TAXES
           A. Fuels and Minerals.
               1.           Administrative Developments
                       a.        Environmental protection fee on petroleum products reinstated.
Effective June 1, the environmental protection fee of 4/10 of 1¢ per gallon is reinstated for all
automotive gasoline, aviation gasoline, undyed diesel fuel, dyed diesel fuel, kerosene, jet fuel,
and fuel oil sold by a licensed distributor to a retail dealer or end user. The environmental
protection fee returns for June are due on or before July 20, 2010, and must be filed
electronically along with the other petroleum tax returns. The fee is reinstated because the
unobligated balance of the state Groundwater Protection Trust Fund has fallen below the $6
million statutory threshold.


           B. Insurance Premium Tax.
               1.           Legislative Developments
                       a.        Annual reconciliation report now due March 1 each year. S.B.
2620, 2009 Reg. Sess. (Miss. 2009) amended Miss. Code Ann. § 27-15-107 to provide that
insurance companies liable for the payment of insurance premium taxes must file an annual
reconciliation statement on or before March 1 of each year. Prior law required such filing by
February 1. Effective, March 16, 2009.
                       b.        Qualified equity investments under Mississippi’s new markets
premium tax credits do not have to be designated by the CDFI; the credit is available to offset
premium retaliatory tax. Mississippi allows an income and insurance premium tax credit for
qualified equity investments in community development entities under a program similar to the
Federal new markets tax credit program. Miss. Code Ann. § 57-105-1. Under the program,
Mississippi taxpayers may claim a credit against their income or insurance premium tax equal to
8% of the qualified equity investment each year for three years beginning in the year the
investment is made. Prior to its amendment, “qualified equity investment” for Mississippi
purposes had the same meaning as provided in I.R.C. § 45D. H.B. 1577, 2009 Reg. Sess. (Miss.
2009) changes this definition to eliminate the requirement that the investment be designated as a
qualified equity investment by the Community Development Financial Institutions Fund as long



                                                 20
as it otherwise meets the definition in I.R.C. § 45D. The bill also clarifies the administrative
position that any available credits may be used to offset both the regular premium tax and the
premium retaliatory tax. This paves the way for state level designations of qualified equity
investments. Effective, March 26, 2009.
           C. Tobacco Tax.
               1.       Conference Committee agrees on tobacco tax increase. H.B. 364, Reg.
Sess. (Miss. 2009), imposes a 50 cent per pack increase in the cigarette tax effective May 15,
2009. The Bill contains a floor tax on inventory existing on May 15, 2009. Any tobacco
wholesaler who has unaffixed stamps in excess of a 60-day supply were required to return such
excess stamps within 21 days, or by June 5, 2009, for a credit against the cost of new stamps.
Partial rolls could not be returned. The floor tax was due on or before June 15, 2009.
               2.       Fee on cigarettes sold by non-settling manufacturers in Mississippi. The
Mississippi Department of Revenue issued a notice reminding taxpayers that Miss. Code Ann. §
27-70-7(2) provides that on January 1 of each year, the nonsettling-manufacturer (NSM) fee
increases by the greater of three percent (3%) or the most recent annual revised Consumer Price
Index for all Urban Consumers as published by the Federal Bureau of Labor Statistics of the
United States Department of Labor. Accordingly, on January 1, 2011, the fee increased from
1.25 for each non-settling manufacturer cigarette to 1.30 for each cigarette. This will result in an
increase of $0.10 per carton.


   V.      OTHER NOTES OF INTEREST
           A. MISSISSIPPI STATE TAX COMMISSION REORGANIZATION.                            Effective
July 1, 2010, S.B. 2712, 2009 Reg. Sess. (Miss. 2009) reorganizes the State Tax Commission by
placing its administrative functions in a Department of Revenue and its authority over
administrative appeals in an independent Board of Tax Appeals.              Specifically, the Bill
establishes the Board of Tax Appeals “as an independent agency which shall not in any way be
subject to the supervision or control of the Department of Revenue."
               1.       The Board of Tax Appeals.         The Board will have three members,
consisting of a chairman and two associate members, appointed by the Governor subject to the
advice and consent of the Mississippi Senate. The members must have a bachelor’s degree from
an accredited college or university and possess special knowledge of taxation and revenue in



                                                21
Mississippi. The commissioners will not be full time employees of the state, but they may not
engage in any other occupation or business interfering with or inconsistent with official duties.
       The members’ will serve six year, staggered terms commencing July 1, 2010 The
Chairman’s term will expire June 30, 2016, one associate commissioner’s term will expire June
30, 2014 and the other associate commissioner’s term will expire June 30, 2012. Thereafter,
each Commissioner will serve six year terms. The existing associate members of the State Tax
Commission will become the initial members of the Board with terms corresponding to their
current terms. The current Chairman’s term is scheduled to expire on June 30, 2010, so he will
either be reappointed or a new Chairman will be appointed.
       The Board will have the power to adopt, amend or repeal rules and regulations of the
Board, including its procedural rules and will have jurisdiction over all administrative appeals
from the Board of Review and hearing officers of the Revenue Department. The Board will
meet at least one day each month.
       The Bill also provides for the appointment of Executive Director, who must be a lawyer
licensed to practice in Mississippi. The Executive Director will keep the minutes and make a
record of all official orders, findings and acts of the Board, will direct and supervise the
preparation of a record of hearings for filing in any court, and will handle other administrative
duties. The current Secretary of the Commission shall be the initial Executive Director.
               2.           The Department of Revenue. The Bill confers upon the Department of
Revenue all duties and powers of the former State Tax Commission other than the duties and
powers now assigned to the Board of Tax Appeals. The executive officer of the Department of
Revenue is the “Commissioner of Revenue.” The “State Tax Commission” or the “Commission”
will now be known as the “Department of Revenue.”
               3.           Appeals.   The Bill makes significant changes in the substantive
provisions involving the conduct of taxpayer appeals. These provisions are generally found in
MCA §§ 27-77-1, et seq.
                       a.        Appeals to Board of Review. The Board of Review is retained as
the sole administrative review body within the Department of Revenue. The time for filing an
appeal to the Board of Revenue by any taxpayer aggrieved by an action of the Department is
increased from thirty (30) days to sixty (60) days. Miss. Code Ann. § 27-77-5(1) is also
amended to provide, “Even after an appeal is filed with the board of review, the agency retains



                                                 22
the authority to change the assessment, the denial of refund claim or the denial of tag penalty
being appealed.” In my experience this is merely a codification of existing practice.
                        b.        Appeals to Board of Tax Appeals. Appeals from the Board of
Review are now appealed outside the administrative agency to the newly established Board of
Tax Appeals. The time for filing an appeal to the Board of Tax Appeals is sixty (60) days, an
increase in the thirty (30) day appeal period applying to appeals to the State Tax Commission in
its former role as the second level of administrative appeals. The appeal is filed with the
Executive Director of the Board of Tax Appeals with a copy to the Board of Review. Miss.
Code Ann § 27-77-5(4) also now provides, “Even after an appeal is filed with the Executive
Director of the Board of Tax Appeals, the board of review retains the authority to amend and/or
correct the order being appealed at any time prior to a decision by the Board of Tax Appeals on
the appeal.” In my experience this is also a codification of existing practice.
                        c.        Appeals to Chancery Court. As under current law, appeals from an
adverse decision of the Board of Tax Appeals are appealed to Chancery Court for a de novo
review.
                                       a. The time for filing a petition to appeal from an adverse
determination by the Board of Tax Appeals to the chancery court is increased from thirty (30)
days to sixty (60) days.
                                       b. As something of a quid pro quo for establishing an
independent Board of Tax Appeals, the Bill provides that appeals may now be taken by either the
taxpayer or the department. Prior to this change, only the taxpayer could appeal. Consistent
with this change, the Bill allows cross-appeals, which must be filed within thirty (30) days from
the date of service of the petition.
                                       c. As under prior law, a petition for appeal is filed in the
chancery court of the county or judicial district in which the taxpayer resides or has a place of
business or in the Chancery Court of the First Judicial District of Hinds County, Mississippi, the
seat of state government. If both the Department and the taxpayer file an appeal, the appeals will
be consolidated and the chancery court where the taxpayer filed its appeal will have jurisdiction.
                4.           Pay to Play.
                        a.        A petition filed by a taxpayer from an adverse decision of the
Board of Tax Appeals must be accompanied by a bond for one-half the amount in controversy.



                                                   23
This is a reduction from the requirement of a bond for double the amount in controversy. The
chancellor may, upon notice and hearing, reduce or dispense with the bond entirely “if he finds
that the interest of the state to obtain payment of the taxes, penalties and interest in issue in the
appeal are otherwise protected.”
                       b.        The Bill retains the current law option for taxpayers to pay the
amount of tax in issue under protest. However, the Bill adds a requirement that the taxpayer or
the agency must pay or refund any tax included in the assessment or claim that it is not
contesting and this payment must be made prior to the expiration of the sixty (60) day appeal
period or the taxpayer’s appeal or cross-appeal being dismissed with prejudice and with
judgment being entered granting the agency the relief it requested.” THIS IS A TRAP FOR
THE UNWARY.


            B. Mississippi Revised Limited Liability Company Act. H.B. 683, 2010 Reg. Sess.
(Miss. 2010) revised Mississippi’s Limited Liability Company Act.            The Revised Limited
Liability Company Act (“Revised Act”) revises and clears up uncertainty in the existing laws and
adds new sections including provisions from the Delaware LLC Act and the Revised Uniform
LLC Act.
                1.          Items added to LLC Act.
                       a.        Allows, but does require, LLCs to have officers with traditional
corporate titles.
                       b.        Sets forth certain items that must be addressed in an operating
agreement to the extent that the members seek to avoid the default provisions of the Act with
regard to those items, including limitations of liability of members and managers, modifications
to statutory standards of conduct of members and managers, appraisal rights, admission,
withdrawal and expulsion of members, member voting, rights on bankruptcy of members,
nonjudicial dissolution and arbitration.
                       c.        Adds a default rule requiring majority approval by the members
before the sale of an LLCs assets outside of the ordinary course of business.
                       d.        Eliminates concept of dissociation since it is no longer required
under tax laws.




                                                 24
                          e.        Heirs of a deceased members become members by default (does
not apply to professional LLCs).
                          f.        Provides for “in-name” only members that do not vote and do not
share in profits.
                          g.        Provides default rule that member voting is based on profit sharing
percentage.
                   2.          Requires domestic and foreign LLCs to file annual reports. Foreign
LLCs must also pay an annual filing fee of $250. Authorizes administrative dissolution for
failure to file.
                   3.          Effective date is January 1, 2011 for new entities. Existing entities must
begin filing annual reports effective January 1, 2011, but the remaining provisions are not
effective for existing entities until January 1, 2012.


             C. Information Concerning Audit Procedures and Appeal Process. In light of the
reorganization of the Mississippi State Tax Commission referenced above, the Mississippi
Department of Revenue has posted a web notice detailing audit procedures and the appeals
process     in      the   restructured      organization.    The    notice    can    be     accessed    at
http://www.dor.ms.gov/info/rules/appealprocessforauditsandassessments.htm.                Generally,   the
notice describes the audit process, noting that an initial appointment letter will advise the
taxpayer of the audit date and other general information, and that the audit will generally cover a
3-year period of time. It is the responsibility of the taxpayer to provide the records and other
information necessary to determine the correct tax liability. Once the field audit is complete, the
taxpayer receives a form notice of assessment, which could assess additional taxes and penalties,
assess a zero amount, or provide for a credit. From the date of this notice, the taxpayer has 60
days to pay the liability. If the taxpayer does not agree with the assessment, they may request a
meeting with the auditor’s supervisor, and, if the issue remains unresolved, may then appeal the
assessment and request a hearing before the Review Board. This appeal must be filed within 60
days of the receipt of the notice of assessment. The Review Board will mail the taxpayer a notice
of the date of the hearing, and the taxpayer has 10 days from the date of the notice to advise the
Board if that date is inconvenient. Any protests to the date after the 10-day period has passed are
reviewed at the sole discretion of the Chairman of the Review Board. The taxpayer has the



                                                      25
option to submit their position in writing rather than appearing at the hearing in person. At the
hearing before the Review Board, the taxpayer is not limited to presenting information included
in the written protest to the assessment, and may present any additional information and facts at
the hearing. If the taxpayer fails to attend a scheduled hearing or fails to timely file a written
position, the appeal will be considered withdrawn and the assessment will not be subject to
further review. After the hearing, the Review Board will mail the taxpayer an order informing
the taxpayer of its decision. The taxpayer then has 60 days from the date of the order to make a
written request for a hearing before the Board of Tax Appeals. Either the taxpayer or the
Department of Revenue may appeal a decision of the Board of Tax Appeals to the Chancery
Court within 60 days of the date of the order of the Board of Tax Appeals. When petitioning to
the Chancery Court, the taxpayer will be required to show that the assessment has been paid in
protest or will be required to post a bond in an amount equal to half the amount due. Decision of
the Chancery Court are then appealable to the Mississippi Supreme Court.




                                               26
PROVIDER’S BRIEF BIOGRAPHY/RESUME
       Louis Fuller is the Firm's senior tax attorney, with broad experience in individual and
corporate taxation, including income and transfer taxes. In addition, a significant portion of his
practice involves state and local taxation, where he represents both Mississippi and non-
Mississippi individual and corporate taxpayers in administrative and judicial appeals of state and
local income, franchise, sales, use, and property tax assessments. He also advises clients on
available tax incentives for new and expanding businesses in Mississippi.

       Louis graduated from the University of Mississippi with a degree in accounting and from
Southern Methodist University Law School.

       Louis is a Member of the Hinds County, Mississippi and American Bar Associations and
has been an active member in the Taxation and Estates and Trusts Sections. He is a former Chair
of the Section of Taxation of the Mississippi Bar Association. Louis has been a Trustee and
Chairman of the Mississippi Tax Institute, an affiliate of the Society. He is currently an advisory
board member of the Paul Hartman Institute on State and Local Taxation, Nashville, Tennessee
and a member of the National Association of Bond Lawyers. Louis is also a frequent speaker on
taxation topics at Mississippi Bar programs, Mississippi Society of CPA programs, and other
seminars.




The Update is not designed or intended to provide legal or professional advice, as any such
advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice
To ensure compliance with requirements imposed by the IRS, we inform you that, unless
specifically indicated otherwise, any tax advice contained in this communication (including any
attachments) was not intended or written to be used, and cannot be used, for the purpose of (i)
avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or
recommending to another party any tax-related matter addressed herein.



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