Mississippi House, Senate move to eliminate June 25 advanced sales, use and payroll tax payments

Years ago the Mississippi Legislature “borrowed” certain sales, use and payroll tax collections from a subsequent fiscal year to close a then-current year budget gap.  Because Mississippi has a June 30 fiscal year end, the legislation required certain taxpayers having a monthly tax liability of $50,000 or more to accelerate 75% of their June tax liabilities to June 25 so the state could recognize that income in the current fiscal year, whereas the ordinary July 20 payment deadline would have pushed those funds into the following year.  Once enacted, that “temporary” fix was never removed due to the effect it would have on the budget.

On Thursday, the House of Representatives passed HB 1139 to repeal this prepayment requirement, meaning all June tax liabilities would be remitted in full by July 20 consistent with other monthly returns and payments.  The Senate passed a companion bill, SB 2843, that would phase out that requirement by 2024 in contrast to the House’s immediate repeal.  These bills would be effective July 1, 2021, although the Senate bill still contains a reverse repealer provision.  These bills are likely going to conference committee to be reconciled and finalized.

Andre Burvant featured on the cover of Louisiana CPA’s Lagniappe magazine

Our Jones Walker SALT partner, Andre Burvant, was featured on the cover of Louisiana CPA’s Lagniappe magazine. The edition also included Andre’s article “COVID-19 Conundrum: Unexpected State Tax Consequences of a Remote Workforce.”

Andre explains the state and local tax issues that should be considered by employers contemplating extending or making permanent their employees’ work from home options, and he encourages employers to watch for state and local guidance on this emerging topic.

Louisiana Extends Deadlines for Property Tax Rolls and Payments in Parishes Affected by Hurricane Laura

Governor John Bel Edwards, State of Louisiana, by Executive Proclamation, has extended the deadlines for property tax rolls and payments in the parishes affected by Hurricane Laura. Proclamation number 10-JBE-2021 states that for the impacted parishes of Calcasieu, Cameron, and Beauregard, the deadline for tax assessors to complete and file the tax roll of his or her parish found in La. R.S. 47:1993(0)(1) and the deadline for tax assessors to deliver to the appropriate tax collector the tax roll for the year 2020 found in La. R.S. 47:2126 are suspended until January 8, 2021. Additionally, the deadline found in La. R.S. 47:2127(A) for ad valorem tax payments in these parishes shall also be suspended for sixty calendar days from December 31, 2020 to March 2, 2021. As such, ad valorem tax payments must be made no later than March 2, 2021, without penalty, and interest shall not begin accruing on unpaid ad valorem taxes until March 3, 2021.

For the impacted parishes of Calcasieu, Cameron, and Beauregard, the deadline found in La. R.S. 47:21 53(A)(1 )(a) for the mailing of a notice of delinquency by the tax collectors shall be suspended until April 5, 2021; and the deadline found in La. R.S. 47:2153(A)(2)(a) for the tax collectors to search the mortgage and conveyance records of tax sale eligible properties for the purpose of identifying tax sale parties shall be suspended to May 3, 2021.

Louisiana Due Process is No Longer in “Jeopardy!”: Louisiana Supreme Court Denies LDR Writ Application in Due Process/Personal Jurisdiction Case

On January 20, 2021, the Louisiana Supreme Court denied the Louisiana Department of Revenue’s writ application in the closely-followed Louisiana due process / personal jurisdiction case of Robinson v. Jeopardy Productions, Inc., 2020-C-01343 (La. 1/20/21).  This case is now final.

A copy of the Louisiana Supreme Court’s writ denial ruling can be found here.

The Louisiana First Circuit Court of Appeal had previously ruled in favor of the taxpayer out-of-state Jeopardy! game show production company, Jeopardy Productions (“Jeopardy”), finding that Jeopardy lacked sufficient contacts with the State of Louisiana to allow the Department to sue Jeopardy to collect Louisiana corporate income and franchise taxes on royalty income earned from the licensing and distribution of Jeopardy’s intellectual property.

Jeopardy did not transact any business in Louisiana, and its sole source of revenue was in the form of royalties from licensing and distribution agreements with independent, non-Louisiana third-party entities, who subsequently distributed the Jeopardy! game show and merchandise to other separate third-party entities.  Jeopardy had no control over where the distribution companies distributed the game show and merchandise, and Jeopardy was not in a partnership, joint venture, or agency relationship with the distribution companies.  All of Jeopardy’s business decisions concerning the licensing agreements were made in California, where Jeopardy maintains its principal place of business.

The Department asserted that it could file suit to impose tax upon Jeopardy simply because the company received some of its revenue from royalty income that was ultimately derived from third-party licenses located in Louisiana.  The First Circuit, however, disagreed, affirming the district court’s ruling that Jeopardy lacked the requisite personal jurisdiction to be sued by the Department in Louisiana, and confirming that Jeopardy’s contacts through unrelated parties in Louisiana did not rise to the level of minimum contacts required by due process of law.

The district court found that the third-party activities constituted arms-length transactions that did not support a decision that Jeopardy purposefully directed business on its behalf in Louisiana.  The trial court concluded that to maintain personal jurisdiction over Jeopardy in Louisiana would violate the notions of fair play and substantial justice.

On appeal, the First Circuit agreed with the district court, asserting that personal jurisdiction may be asserted only as long as due process is not offended.  Citing relevant U.S. Supreme Court precedent, the First Circuit explained that due process requires the nonresident defendant to have certain “minimum contacts” with the forum state, such that maintaining a suit against the defendant does not offend traditional notions of fair play and substantial justice.  The First Circuit further explained that the minimum contacts prong of the due process test is satisfied when the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws and allowing the defendant to reasonably anticipate being hailed into court in the forum state.

The First Circuit concluded that Jeopardy made no intentional or direct contact with Louisiana, and the random, fortuitous, and attenuated contacts with Louisiana, initiated by the independent activities of third parties, were simply not sufficient to establish personal jurisdiction over Jeopardy in Louisiana.

The First Circuit, therefore, affirmed the district court’s judgment granting Jeopardy’s declinatory exception of lack of personal jurisdiction and dismissing the Department’s petition to collect taxes.

A copy of the First Circuit’s prior opinion in the Jeopardy case can be found here.

Jay Adams and Andre Burvant of the Jones Walker SALT Team represented Jeopardy in this tax case.

Mississippi Should Follow New Federal Treatment of PPP Deductions

When Congress recently passed Consolidated Appropriations Act of 2021, it explicitly reversed the IRS’s earlier position that expenses paid with non-taxable forgiven PPP loan proceeds could not be deducted.  As a result of this legislation, the IRS recently issued Revenue Ruling 2021-2 confirming that the act reversed its prior guidance in Notice 2020-32 and Rev. Rul. 2020-27 which purported to deny a “double-dip” with those deductions.  Thus, for federal income tax purposes the expenses paid with those funds should be fully deductible even if the forgiven PPP loans are non-taxable.

Mississippi should follow the new federal treatment due to legislation passed in 2020.  House Bill 1748 was enacted to explicitly deny “a deduction for otherwise deductible payments paid with funds received under the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, but only to the extent those payments are not allowed as deductions for federal income tax purposesTo the extent such payments are allowed as deductions for federal income tax purposes, those expenses shall be deemed to have been incurred in connection with earning and distributing taxable income, notwithstanding that such payments resulted in forgiveness of loans received.”

This provision has since been codified as a new Section 27-7-109 in the tax code.  (NOTE: as of this writing it does not appear this new statute is included in all reporting services, including the version provided to the public for free on the Mississippi Legislature’s website.)

The broad language in the new Section 27-7-109 should preclude the Department from taking the position that the expenses were incurred in generating non-taxable income and therefore non-deductible, as those types of expenses are generally disallowed via Miss. Code Ann. Section 27-7-17(1)(a) (“Expense incurred in connection with earning and distributing nontaxable income is not an allowable deduction”).

With the 2021 Legislature currently in session, however, taxpayers should monitor proposed legislation in the event a bill is introduced to re-establish that non-deductibility.

Jones Walker LLP Authors:

John Fletcher, Partner

Walt Terry, Associate

Jones Walker’s SALT Team Presents Webinar: The Time is Now – 2020 Tax Traps and 2021 Planning

‘Tis the season for the final 2020 Jones Walker SALT Team webinar, titled “The Time Is Now – 2020 Tax Traps And 2021 Planning.” In this year-end state & local tax webinar, the Jones Walker SALT Team will help to ensure that you’re making a list, checking it twice… and doing it correctly, or it won’t be nice!

Please join us for a discussion of various year-end action items, planning opportunities, deadlines, obstacles, and potential “foot faults” that companies should be aware of and consider in their year-end state and local tax activities, including those concerning:

  • Audits and related prescription (statute of limitations) issues and waiver considerations/requirements
  • Refund claims and related prescription (statute of limitations) issues and requirements
  • Workforce planning/locations and related nexus or tax reporting issues and considerations
  • Credits and incentives requirements
  • Property tax issues, such as taxability, property location, and valuation (including informational support for issues such as obsolescence, etc.)

As the old holiday saying goes, “the best way to spread tax department cheer is planning now, instead of next year!”

When: Thursday, December 10, 2020 | 12:00 – 1:00 p.m. CST


Webinar Registration Details: Registration is complimentary. Contact cfarley@joneswalker.com

This program is intended for intermediate to advanced practitioners in state and local tax administration and those doing business in Louisiana and Mississippi. The full day’s program has been recommended for 1 hour of Texas and Louisiana CPE. This course or a portion thereof has been approved by the Mandatory Continuing Legal Education Committee of the Louisiana State Bar Association for a maximum of 1 hour credit. An application for accreditation of this activity has been submitted to the MCLE Committee of the State Bar of Texas and is pending.

Mississippi Governor Proposes Elimination of Individual Income Tax

In a Monday press conference on Facebook Live, Mississippi Governor Tate Reeves laid out an ambitious plan to eliminate the state’s individual income tax in the upcoming legislative session starting in January.  The tax, levied at a maximum rate of 5%, was trimmed in 2016 when the Legislature eliminated the 3% tax bracket levied on the first $5,000 of income.  That phase out is scheduled to be complete by 2022, after which time Mississippi will levy a 4% tax on income from $5,000 to $10,000, and a 5% tax on all amounts in excess of $10,000, with the first $5,000 of income not taxed.  The elimination of the 3% bracket and the remaining rate brackets apply to both corporate and individual taxpayers.

Under the Governor’s plan, the state would phase out the existing 4% rate bracket over the next five years, and then the top 5% bracket by 2030, after which there would be no individual income tax.

Individual income tax receipts in the upcoming 2021 fiscal year are expected to account for just over $2 Billion – roughly 35% – of the state’s total $5.5 Billion in tax revenue.  When coupled with the ongoing phase-out of the corporate franchise tax, elimination of the individual income tax will put significantly more pressure on the sales and corporate income taxes to fund the state’s coffers.

Adams and Backstrom Author Oilman Magazine Article on the Impact of Refinery Closures

Jay Adams and Bill Backstrom authored the Oilman Magazine article “Squeezing the (Remaining) Golden Geese: Refinery Closures May Lead to Increased Tax Scrutiny on Operating Facilities” on the effects that closed refinery facilities may have on owners, local community, and state and local governmental authorities as well as strategies businesses can use to maintain property tax responsibilities and opportunities. Jay and Bill emphasize that in local jurisdictions, where a large facility closes, owners of continuing businesses must create proactive strategies to lessen tax burdens without causing harm to the relationships within their communities. The two attorneys also outline steps to attain lower local property taxes and improved cash flow.

REMINDER: Alabama Department of Revenue Now Requires Annual Renewal of Alabama Tax Licenses, Beginning November 1, 2020

This is a reminder to all businesses registered in Alabama for sales, rental, sellers use, lodgings, utility gross receipts, or simplified sellers use tax purposes and who are required under current law to obtain a corresponding license from the Alabama Department of Revenue (ADOR) that you are now required to renew these licenses annually beginning November 1, 2020, according to the Notice of Annual Renewal of Alabama Tax Licenses issued by the ADOR on October 1, 2020.

The ADOR has implemented this new process pursuant to Alabama Administrative Rule 810-6-5-.01.01, which became effective February 2020.

The ADOR also issued a subsequent press release on October 28, 2020 regarding this issue.

Beginning November 1, 2020, each calendar year a business entity must apply for a new tax license, which will be generated by the ADOR when the business applies for renewal during the applicable annual renewal period (November 1–December 31 of each year). Thus, beginning this year, the tax licenses will only be valid for one year and must be renewed again each year.

The new Notice was quietly issued by the ADOR, but it should not be ignored. Beginning November 1, taxpayers will have two months (until December 31) to provide the applicable information to the ADOR and request renewal of any current tax licenses.

Businesses can utilize the My Alabama Taxes (MAT) portal/website to verify or update their applicable business information in order to generate a new tax license for the upcoming year.

The ADOR has also now published a detailed set of Step by Step Instructions for License Renewal to assist impacted taxpayers with their respective tax license renewals via the MAT portal/website.

In addition, the ADOR has published FAQs addressing this issue.

According to the ADOR’s Notice, the purpose for such annual tax license renewals is so that the ADOR can verify the business is continuing to operate in the same business entity type for which the existing tax license was issued. If the business’ entity type has changed, then the business will need to apply for a new tax license.

If a tax license is not renewed, the license will expire (and be canceled) after December 31 of that year, and the business will no longer be able to engage in transactions permitted under the previous license (such as the use of the tax license to make tax-exempt purchases for resale or rental purposes).

The ADOR will require the following information to be reviewed and/or updated for purposes of the tax license renewal (and will not renew the business’ tax license until the required information has been provided to the ADOR):

  • Current legal name – must be reviewed
  • Owner/officer/member information – must be reviewed and/or updated
  • Phone number(s) – must be reviewed and/or updated
  • Social security security numbers/FEINs – must be reviewed
  • Location address(es) including d/b/a names for each location – must be reviewed and/or updated
    • Main address must be reviewed
    • Location address(es) must be reviewed and/or updated

To reiterate, businesses will be required to renew Alabama tax licenses for the following tax types:

  • Sales tax
  • Rental tax
  • Sellers use tax
  • Lodgings tax
  • Utility gross receipts tax
  • Simplified sellers use tax

The Jones Walker State and Local Tax team will continue to monitor this new tax license renewal process in Alabama, and we will provide updates as any new issues arise.

Jones Walker LLP Authors:

Matt Mantle, Partner

Walt Terry, Associate