State Specific Tax Incentives

Mississippi

Mississippi Business Incentives

Mississippi Rural Economic Development Assistance Program
The Mississippi Rural Economic Development Assistance Program (RED), administered by the Mississippi Business Finance Corporation (MBFC), is a program designed to enhance projects which are to be financed through the Small Enterprise Development Program (SED) and the Industrial Development Revenue Bond Program (IRB). Companies that meet eligibility requirements to finance projects through the IRB and SED Programs may qualify to receive Mississippi corporate income tax credits and ad valorem exemptions under the RED Program. Eligible companies under the IRB Program are manufacturing facilities, processing facilities, certain warehouses and distribution centers, and certain telecommunication and data processing companies. Eligible companies under the SED Program are manufacturers and processors. Credit amounts available to an eligible company are a function of the company's project-related debt service. The annual debt service for a project includes all costs associated with the issuance of bonds, letters of credit, annual service fees, and principal and interest payments.

For companies eligible for the RED Program, a financing agreement addressing the provisions of the RED Program will be required as a part of the bond issue.

Corporate Income Tax Credit
A company will be allowed to reduce the amount of state income tax paid by the amount it pays in annual debt service on the bonds. The credit may be taken for up to a maximum of 80% of the company's state income tax liability in each year. If the annual debt service payments exceed corporate income tax credits allowed in any year, the company may apply those debt service payments against its taxes for up to three (3) years following the year in which the credits were earned. The trustee for the bonds will be required to report annually to MBFC and, if requested, to the State Tax Commission, the total debt service paid by the company.

Upon commencing payments of debt service, the company is authorized to adjust its estimated income tax payments to reflect the reduction in taxes expected to result from the application of tax credits connected with the RED Program.

Ad Valorem Exemptions
Ad valorem exemptions may be obtained under the RED Program under certain conditions. Requests for exemptions must be approved by the appropriate local political subdivision(s), which will be the county in all situations, and in some circumstances, will also include the local municipality. No exemption is available under any circumstance for the school tax portion of the ad valorem taxes. A resolution from the local political subdivision(s) authorizing any exemptions must be submitted to MBFC when the application for bond financing is filed.

Company Expansion Provisions
For bonds issued to finance the expansion of an existing facility, tax credits may be used to offset a certain percentage of the company's tax liability. That percentage is determined by MBFC using a formula that considers both increases in employment and investment. The formula is included in the RED Guidelines published by MBFC.

Mississippi Incentives Available for Distribution Centers

I. RED Credits Financing

A. Income Tax Credit
Warehouse and distribution center projects in Mississippi are eligible for industrial development revenue bond financing by the Mississippi Business Finance Corporation (MBFC). If so financed, the project company will be eligible for income tax credits based upon the debt service paid on the bonds. Eligible distribution centers are those making a employing at least 50 people or those making a capital investment of $5 million and employing at least 20 people. The credit is limited to 80 percent of the income tax liability attributable to the income generated by the economic development project. The income generated by the project is determined by a formula established by the MBFC that compares the company’s increased employment and capital in Mississippi attributable to the project to the company’s total employment and capital in Mississippi. Any excess credit may be carried forward for three years following the year in which the credit is earned.

B. Project Tax Exemptions
Facilities financed with RED Credit Bonds are exempt from property tax subject to the approval of the local authorities. The exemption is limited to ten years and applies to city and county taxes, but not school taxes.

C. Sales and Use Tax Exemptions
Property and taxable services paid for with the proceeds of RED Credit Bonds are exempt from Mississippi sales and use taxes. To be exempt, the property or services must be “sold to, billed to and paid for by” the project company. It is important to note that the exemption does not apply to the Mississippi Contractors Tax, a 3-1/2% tax on the contract price for the construction of the project. With proper planning and coordination, the project company may realize the exemption if it arranges to purchase material and services subject to the sales and use tax directly from the vendor or service provider rather than through the contractor.

II Property Tax Exemptions for New and Expanding Enterprises.

A. Ten-Year Property Tax Exemption
A ten-year property tax exemption is available for new or expanding warehouse and distribution centers. The exemption does not apply to school taxes, taxes on finished goods or taxes on rolling stock. Applications for the exemption must be filed with the local authorities by June 1 of the year immediately following the year in which the project is completed. Local authorities may, and often do, limit the exemption to less than ten years subject to a later exemption grant for subsequent periods not exceeding ten years in the aggregate.

B. Fees in Lieu of Taxes
New or expanded projects involving expenditures exceeding $100 million may enter into fee in lieu of taxes agreements with the local authorities. The period of the agreement cannot exceed ten years and the amount of the fee cannot be less than one-third of the ad valorem taxes, including school taxes, that would otherwise apply to the project.

C. Freeport Warehouse Exemptions
Warehouses and distribution centers are eligible for a “freeport warehouse” exemption. Freeport warehouses are exempt from ad valorem taxes on property stored in Mississippi, but destined for shipment outside the state. A qualifying warehouse must apply to the local authorities for a freeport warehouse license. License-holders must then report to the local tax assessor and collector their inventory balance as of the beginning of each year and the percentage of inventory shipped out of state during such year. The first report is due by March 1 of each year and the second report is due at the end of the year.

III. Growth and Prosperity Exemption

If the warehouse and distribution center is located in a “Growth and Prosperity Area” within Mississippi, the project will be eligible for local exemptions from Mississippi taxes for a period of ten years. The purpose of the exemptions is to encourage businesses to locate in areas that have a certain percentage of their population below the federal poverty level or have an unemployment rate that is 200 percent of the stated average unemployment rate. Businesses locating within those areas may apply to the Mississippi Development Authority (the MDA) for approval and must enter into an agreement with the MDA setting out the performance requirements for the business. Approved businesses are entitled to exemptions from:

A. Sales and use taxes on component materials, equipment and machinery for the construction or expansion of the business

B. Income tax on income generated by the business in the GAP area

C. Franchise tax on the value of capital used, invested or employed by the business in the GAP area

D. County and city ad valorem taxes except on taxes for schools and fire and police protection

The GAP franchise and income tax exemptions are limited to the capital invested in or income generated by the project. If the company is doing business both within and without a GAP area, it must determine the capital and income eligible for exemption based on apportionment formulas established by the Tax Commission.

GAP areas in Mississippi include the Counties of Tunica, Coahoma, Quitman, Tallahatchie, Bolivar, Sunflower, Leflore, Washington, Humphreys, Holmes, Sharkey, Yazoo, Claiborne, Jefferson, Wilkinson, Walthall, Jefferson Davis, Choctaw, Noxubee, Webster, and Clarke Counties. Eligible districts are Yalobusha – District 4, Lowndes – District 4, Attala – District 4, Franklin – Districts 1 and 2, Adams – District 4, Amite – Districts 2 and 3, and Winston – District 4.

IV. Jobs Tax Credits

An income tax credit is available to warehouse and distribution centers for each newly-created job provided the business creates a minimum number of jobs. The specific minimum job requirement varies depending upon the MDA ranking of the county in which the project is located. Such counties are designated by the MDA as Tier 1, 2 or 3 areas based upon the county’s relative unemployment rate and per capita income. In Tier 1 (developed) counties, a warehouse or distribution center must create at least 20 new jobs for an annual credit of $500 for each job. In Tier 2 (moderately developed) counties, such business must create at least 15 new jobs for an annual credit of $1000 for each job and in Tier 3 (less developed) counties such business must create at least 10 new jobs for an annual credit of $2000 for each job. The qualifying minimum jobs must be created within one year and the credits are available as long as this minimum number of jobs is maintained. The credit may be claimed in each of the five fiscal years beginning after the creation of the job.

V. Advantage Jobs

Qualifying businesses may apply to the MDA for an incentive in the form of a rebate of state withholding taxes for a period of ten years. Retail establishments and gaming businesses are not eligible. Qualifying businesses must:

A. Create new jobs, the average salaries for which exceed 125 percent of the lower of the average annual wage of the state or of the county in which the project is located.

B. Create within a 24-month period a minimum of ten jobs in counties where the unemployment rate is 150 percent of the state unemployment rate and twenty-five new jobs in all other counties.

C. Provide a basic health benefits plan for all employees.

D. The amount of the incentive payments is limited to the lesser of:

The actual amounts withheld, or
The estimated economic benefits to the state from the project as calculated by the MDA (which cannot exceed four percent (4%) of the company’s gross payroll).

State Specific Tax Incentives
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