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February 12, 2014
Mississippi House Approves Bill to Prevent Another Equifax
by Ted Carter

Full Text Published by Tax Analysts®

The Mississippi House on February 7 approved a bill to undo what supporters perceive as damage to the state's "business friendly" reputation from last summer's state supreme court ruling in Equifax Inc. et al. v. Dep't of Revenue.
HB 799 was approved 113 to 2. The bill would allow the Department of Revenue to impose alternative apportionment methods only when it can present "clear and convincing evidence" that the standard apportionment method does not fairly represent the taxpayer's activity.

It now goes to the State Senate, where a similar bill, SB 2487, has already passed the Senate Finance Committee and is on the calendar for a floor vote.

Both bills would also force the state's DOR to present "clear and convincing evidence" to support requests for out-of-state companies with operations in Mississippi to provide the DOR with combined tax returns.

The DOR, in appearing before the Senate Finance Committee, projected that creating hurdles to applying the market standard on tax apportionment would cause the state to lose "significant" tax revenue.

The proposals are a response to Equifax, which upheld the tax commissioner's use of market-based standards in assessing tax liabilities for multistate companies such as Equifax. Using the standard UDITPA cost-of-performance method, Equifax had computed its tax liability as zero. The DOR later declared the standard method did not properly reflect the company's business activities in the state. The result: A tax bill for the year of more than $700,000. (Prior coverage 2014 STT 16-1: News Stories.)

Senate Finance Chair Joey Fillingane (R) acknowledged the revenue trade-off associated with SB 2487 but emphasized that his measure would ensure that the state is "not too onerous" in its pursuit of tax revenue from multistate businesses.

With the Equifax case likely closed -- the taxpayer's last chance to reverse the ruling would require intervention by the U.S. Supreme Court -- Fillingane said he and others, including the Mississippi Economic Council, which serves as the state's chamber of commerce, decided that the impact of the ruling must be mitigated.

"The issue that the Equifax case was about affects many businesses across the state," Fillingane said.

He said he expects some of the fiscal impact on the state's treasury will be eased through negotiations underway with the DOR, as the Mississippi Economic Council tries to work out compromise language with the DOR.

Ron AldridgeMississippi state director of the National Federation of Independent Business, welcomed the House and Senate bills as a way to give businesses certainty at tax time. In the Equifax case, the credit reporting company followed the standard set by the state but "they were punished for it," said Aldridge, alluding to the interest and penalties Equifax sustained.

The 3,400-member NFIB/Mississippi is especially eager to see passage of provisions in the bills that would give the DOR discretion to waive the 10 percent penalty against businesses that challenge use of the alternative apportionment standard. Likewise, the group wants passage of the provision that limits penalties and taxes to the amount still owed -- not on the entire amount in dispute.

Aldridge also said he is pleased that the measures would cut the current 1 percent per month interest on disputed tax bill amounts to 0.5 percent.

Another provision Aldridge hopes will survive would eliminate the requirement that a business challenging a tax bill post a bond or be forced to "pay under protest."

Sen. David Blount (D) tweeted after the House vote that "craziness continues: House passes HB 799, which would make it much harder for MS to keep corporations from avoiding income tax."

In a later interview, Blount said he thinks the halving of the interest penalty and assessing interest and penalties only on the amount owed are fair measures.

The other provisions leave him plenty to worry about, however.

"We need to move very cautiously," Blount said, adding that the bills "have the potential for a major impact on the fair share of taxes that the state is due."

Lt. Gov. Tate Reeves (R), who also serves as Senate president, is taking a close look at the legislation. "He supports all efforts ensuring that our regulations don't place unfair burdens on businesses," said Laura Hipp, Reeves's spokeswoman.

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