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State and Local Tax

Mississippi Amends and Expands Cash Contribution Credits

· 8 minute read

· 8 minute read

by Ashleigh M. Paige

On April 19, 2023, Mississippi Governor Tate Reeves signed legislation amending existing tax credits and providing for new tax credits. The pregnancy resource act and the credit for contributions to charitable organizations are amended and expanded. Three new credits are enacted: a credit for voluntary cash contributions to transitional home organizations; a credit for voluntary cash contributions to low-income healthcare organizations; and a credit for employment-related expenses. (L. 2023, H1671, effective retroactively to 01/01/2023.)

Pregnancy resource act.

Ad valorem credit: From and after January 1, 2023, a credit is allowed against ad valorem taxes assessed and levied on real property for voluntary cash contributions made by a taxpayer during the tax year to an eligible charitable organization. For calendar year 2022, only taxpayers that were not operating as corporations were eligible for the ad valorem credit.

Eligible charitable organizations: The bill amends the definition of “eligible charitable organization” so that rather than a pregnancy resource center or pregnancy crisis center needing to be eligible to receive funding by the Choose Life Advisory Committee, eligible charitable organizations must certify that no more than 20% of contributions received will be spent on administrative purposes and must file its publicly available IRS filings annually with the Secretary of State.

Maximum credit: For calendar year 2023 and each year thereafter, the aggregate amount of tax credits that may be allocated by the Department during a calendar year is increased from a maximum of $3.5 million to $10 million. For credits allocated during a calendar year for contributions to eligible charitable organizations, no more than 25% of the credits (previously, 50%) may be allocated for contributions to a single eligible charitable organization; however, credits allocated before June 1 may be allocated without regard to the restriction for the same calendar year.

Credit for contributions to charitable organizations.  

Amount of credit: The bill revises the amount of credit that taxpayers are allowed to claim for voluntary cash contributions to qualifying charitable organizations and qualifying foster care charitable organizations. For calendar year 2023 and each calendar year thereafter, the amount of the allowable contribution is increased from the lesser of the amount of the contribution or $400 per tax year for a single individual or head of household to the lesser of the amount of the contribution or $1,200. For married couples filing a joint return, the amount of the allowable contribution increases from the lesser of the amount of the contribution or $800 to the lesser of the amount of the contribution or $2,400 in any tax year.

Ad valorem credit: From and after January 1, 2023, there is also a credit allowed against ad valorem taxes assessed and levied on real property for voluntary cash contributions made by the individual taxpayer during the tax year to a qualifying charitable organization. The amount of credit that may be utilized by the taxpayer in a tax year will be limited to an amount not to exceed 50% of the total tax liability of the taxpayer for ad valorem taxes assessed and levied on real property. Any credit claimed but not used in any tax year may be carried forward for five consecutive years from the close of the tax year in which the credits were earned.

Credit for cash contributions to eligible transitional home organizations.

A tax credit is authorized against income tax, insurance premium tax, and ad valorem tax for voluntary cash contributions by taxpayers to eligible transitional home organizations. The credit is available only to a taxpayer that is a business enterprise engaged in commercial, industrial, or professional activities and operating as a corporation, limited liability company, partnership, or sole proprietorship. A contribution to an eligible charitable organization for which a credit is claimed does not qualify for and must not be included in any credit that may be claimed for eligible low-income healthcare organizations.

Amount of credit: The amount of the credit may not exceed 50% of the total tax liability of the taxpayer for income and privilege taxes and 50% of the total tax liability of the taxpayer for ad valorem taxes assessed on real property. The credit may be carried forward for five consecutive years from the close of the tax year in which the credits were earned.

Maximum credit: The aggregate amount of tax credits that may be allocated during a calendar year must not exceed $10 million. No more than 25% of the credits may be allocated to a single eligible transitional home organization.

Definitions: “Eligible transitional home organization” means an organization that is exempt from federal income taxation under IRC § 501(c)(3) that provides transitional housing for homeless persons age 25 and under, homeless families, and/or homeless and/or referred unwed pregnant women. “Eligible transitional home organization” does not include any entity that provides, pays for, or provides coverage of abortions or that financially supports any other entity that provides, pays, for or provides coverage of abortions. It also does not include any entity that charges a fee for the services and/or benefits it provides as an eligible transitional home organization. The prohibition against charging a fee for services and/or benefits is limited to services and benefits the entity provides as an eligible transitional home organization and does not apply to any other services and/or benefits the entity may provide to persons not being served by the entity’s transitional home services.

“Transitional housing” means temporary housing, the purpose of which is to provide homeless persons age 25 and under, homeless families, and/or homeless and/or referred unwed pregnant women with temporary shelter and facilitate their movement to permanent housing within an amount of time that the eligible transitional home organization determines to be appropriate. “Transitional housing” includes a program designed by the eligible transitional home organization that offers structure, supervision, support, life skills, education, and training as the eligible transitional home organization determines to be appropriate for each individual and/or family to achieve and/or maintain independence.

Credit for contributions to low-income healthcare organizations.

A tax credit is authorized against income tax, insurance premium tax, and ad valorem tax for voluntary cash contributions by taxpayers to eligible charitable organizations that are exempt from federal income tax under IRC § 501(c)(3) and spend at least 50% of their budgets on contracting or making other agreements or arrangements with physicians and/or nurse practitioners to provide health care services to low-income residents of the state including those who are mothers and to their households. The credit is available only to a taxpayer that is a business enterprise engaged in commercial, industrial, or professional activities and operating as a corporation, limited liability company, partnership, or sole proprietorship.

Amount of credit: The amount of the credit may not exceed 50% of the total tax liability of the taxpayer for income and privilege taxes and 50% of the total tax liability of the taxpayer for ad valorem taxes assessed on real property. The credit may be carried forward for five consecutive years from the close of the tax year in which the credits were earned. A contribution to an eligible charitable organization for which a credit is claimed does not qualify for and must not be included in any credit that may be claimed for eligible transitional home organizations.

Maximum credit: The aggregate amount of tax credits that may be allocated during a calendar year must not exceed $3 million.

Definitions: “Eligible charitable organization” does not include any entity that provides, pays for, or provides coverage of abortions or that financially supports any other entity that provides, pays for, or provides coverage of abortions. “Low-income residents” means persons whose household income does not 185% of the federal poverty level converted to a modified adjusted gross income equivalent standard.

Credit for employment-related expenses.

Taxpayers that are allowed to claim a federal income tax credit under IRC § 21 for employment-related expenses incurred related to one or more qualifying individuals will be allowed a credit against income tax equal to 25% of the amount of the federal income tax credit claimed by the taxpayer for employment-related expenses on the taxpayer’s federal income tax return. The amount of the credit utilized in a tax year will be limited to an amount not to exceed the total tax liability of the taxpayer.

Limitations: In order to claim the credit, a taxpayer must claim the federal income tax credit on the taxpayer’s federal income tax return and have an adjusted gross income on the return of no more than $50,000. A copy of the return must be provided to the Department.

Definitions: “Employment-related expenses” means and has the same definition as in IRC § 21.

“Qualifying individual” means and has the same definition as in IRC § 21(b)(1)(A).

 

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