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S. B. No. 2311 *SS01/R692CS* ~ OFFICIAL ~ G3/5 17/SS01/R692CS PAGE 1
To: Finance MISSISSIPPI LEGISLATURE REGULAR SESSION 2017
By: Senator(s) Blackwell, Michel, Fillingane, Parker, Barnett, Massey, Caughman, McMahan, DeBar, Younger, Dearing
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 2311
AN ACT TO CREATE THE MISSISSIPPI ACHIEVING A BETTER LIFE 1 EXPERIENCE (ABLE) ACT; TO DEFINE CERTAIN TERMS AND PHRASES 2 RELATING TO THE MISSISSIPPI ABLE PROGRAM; TO ESTABLISH AND 3 PRESCRIBE THE POWERS OF THE MISSISSIPPI ABLE BOARD OF DIRECTORS 4 RELATING TO THE ADMINISTRATION OF THE MISSISSIPPI ABLE PROGRAM; TO 5 PRESCRIBE CERTAIN TERMS OF ABLE PARTICIPATION AGREEMENTS ENTERED 6 INTO UNDER THE PROGRAM; TO ESTABLISH THE ABLE TRUST FUND; TO 7 EXEMPT PROPERTY IN THE TRUST FUND FROM TAXATION AND TO ESTABLISH 8 DEDUCTIONS FOR PAYMENTS TO ABLE ACCOUNTS; TO PRESCRIBE THE 9 AUTHORITY OF THE BOARD OF DIRECTORS TO INVEST FUNDS IN THE TRUST 10 FUND; TO REQUIRE THE BOARD TO PROVIDE ANNUAL ACCOUNTING 11 STATEMENTS; TO REQUIRE THE BOARD TO ESTABLISH AND ADMINISTER THE 12 MISSISSIPPI ABLE PROGRAM OR TO ENTER INTO A CONSORTIUM WITH 13 ANOTHER STATE OR STATES TO PROVIDE MISSISSIPPI RESIDENTS ACCESS TO 14 ABLE ENROLLMENT BY JULY 1, 2018; TO SPECIFY THE REQUIREMENTS THAT 15 MUST BE MET BEFORE IMPLEMENTATION OF THE PROGRAM; TO REQUIRE A 16 PARTICIPATION AGREEMENT FOR THE PROGRAM WHICH CONTAINS SPECIFIED 17 PROVISIONS AUTHORIZING OTHER PROVISIONS THAT MAY BE INCLUDED IN 18 THE AGREEMENT; TO PROVIDE FOR THE AMENDMENT OF THE AGREEMENT UNDER 19 CERTAIN CIRCUMSTANCES; TO PROVIDE THAT A CONTRACT OR PARTICIPATION 20 AGREEMENT ENTERED INTO BY THE BOARD OR AN OBLIGATION OF THE BOARD 21 DOES NOT CONSTITUTE AN OBLIGATION OF THE STATE OF MISSISSIPPI; TO 22 AUTHORIZE THE BOARD TO CONTRACT WITH OTHER STATES FOR SPECIFIED 23 PURPOSES UNDER CERTAIN CIRCUMSTANCES; TO PROVIDE FOR THE 24 TERMINATION OF THE PROGRAM UNDER CERTAIN CIRCUMSTANCES AND FOR THE 25 DISPOSITION OF CERTAIN ASSETS UPON TERMINATION; TO PROHIBIT THE 26 STATE FROM LIMITING OR ALTERING THE SPECIFIED VESTED RIGHTS OF 27 DESIGNATED BENEFICIARIES EXCEPT UNDER SPECIFIED CIRCUMSTANCES; TO 28 EXEMPT FUNDS PAID INTO THE PROGRAM'S TRUST FUND FROM THE CLAIMS OF 29 SPECIFIED CREDITORS; TO PROVIDE FOR RECOVERY BY THE DIVISION OF 30 MEDICAID OF CERTAIN MEDICAL ASSISTANCE PROVIDED TO A DECEASED 31 DESIGNATED BENEFICIARY; TO PROVIDE FOR THE DISTRIBUTION OF THE 32 BALANCE OF A DECEASED DESIGNATED BENEFICIARY'S ABLE ACCOUNT; TO 33 REQUIRE THE BOARD TO ASSIST AND COOPERATE WITH THE APPROPRIATE 34
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AGENCY FOR HEALTH CARE ADMINISTRATION AND THE DIVISION OF MEDICAID 35 PROGRAM IN OTHER STATES BY PROVIDING SPECIFIED INFORMATION; TO 36 AMEND SECTION 27-7-15, MISSISSIPPI CODE OF 1972, TO EXCLUDE 37 PAYMENTS TO AN ABLE ACCOUNT FROM THE DEFINITION OF GROSS INCOME 38 FOR INCOME TAX PURPOSES; TO AMEND SECTIONS 27-7-17 AND 27-7-18, 39 MISSISSIPPI CODE OF 1972, IN CONFORMITY TO THE PROVISIONS OF THIS 40 ACT; AND FOR RELATED PURPOSES. 41
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI: 42
SECTION 1. This act shall be known and may be cited as the 43 "Mississippi Achieving a Better Life Experience (ABLE) Act." 44
SECTION 2. It is the intent of the Legislature to establish 45 a qualified Achieving a Better Life Experience (ABLE) Program in 46 this state which will encourage and assist the saving of private 47 funds in tax-exempt accounts in order to pay for the qualified 48 disability expenses of eligible individuals with disabilities. 49 The Legislature intends that the qualified ABLE Program be 50 implemented in a manner that is consistent with federal law 51 authorizing the program and that maximizes program efficiency and 52 effectiveness. 53
SECTION 3. As used in this act the following words and 54 phrases have the meanings ascribed in this section unless the 55 context clearly indicates otherwise: 56
(a) "Mississippi ABLE account" means an account established 57 and maintained under the Mississippi ABLE Program or entered into 58 through a participation agreement with another state that has 59 contracted with the Mississippi ABLE Board, or a consortium of 60 states that have agreed to provide ABLE accounts to the residents 61 of participating states. 62
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(b) "Board" or "board of directors" means the Mississippi 63 ABLE Board of Directors. 64
(c) "Contracting state" or "consortium" means a state or 65 group of states that have entered into a contract with the 66 Mississippi ABLE Board or a multistate Compact with the ABLE 67 Boards of several states to provide residents of Mississippi or, 68 in the case of a consortium, residents of participating states 69 with access to a qualified ABLE Program. 70
(d) "Designated beneficiary" means the eligible individual 71 who established an ABLE account or the eligible individual to whom 72 an ABLE account was transferred. 73
(e) "Eligible individual" has the same meaning as provided 74 in Section 529A of the Internal Revenue Code. 75
(f) "Mississippi ABLE Program" means the qualified ABLE 76 Program established and maintained under this section by the 77 Mississippi ABLE Board, and administered through the Mississippi 78 Department of Rehabilitation Services. 79
(g) "Internal Revenue Code" means the United States Internal 80 Revenue Code of 1986, as amended, and regulations adopted pursuant 81 thereto. 82
(h) "Participation agreement" means the agreement between 83 the Mississippi ABLE Board, and a participant in the Mississippi 84 ABLE Program. 85
(i) "Qualified ABLE Program" means the program authorized 86 under Section 529A of the Internal Revenue Code which may be 87
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established by a state or agency, or instrumentality thereof, to 88 allow a person to make contributions for a taxable year to an ABLE 89 account established for the purpose of meeting the qualified 90 disability expenses of the designated beneficiary of the ABLE 91 account. 92
(j) "Qualified disability expense" has the same meaning as 93 provided in Section 529A of the Internal Revenue Code. 94
(k) "Section 529A of the Internal Revenue Code" or "Section 95 529A" means 26 USCS Section 529A. 96
SECTION 4. (1) There is created the Mississippi ABLE Board 97 of Directors which shall consist of nine (9) members as follows: 98
(a) The State Treasurer, or his or her designee; 99
(b) The Executive Director of the Department of 100 Rehabilitation Services, or his or her designee; 101
(c) The Executive Director of the Department of Mental 102 Health, or his or her designee; 103
(d) Three (3) members of the public who, by reason of 104 his or her education and experience relating to disabilities or 105 financial planning, is qualified to serve, to be appointed by the 106 Governor one (1) of whom shall be appointed from each Supreme 107 Court District; 108
(e) The Executive Director, or his or her designee, of 109 an advocacy organization for citizens of all ages with cognitive, 110 intellectual and developmental disabilities and their families, to 111 be appointed by the Governor; 112
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(f) The Executive Director, or his or her designee, of 113 an advocacy organization for citizens of all ages with cross 114 disabilities and their families, to be appointed by the Governor; 115 and 116
(g) The Executive Director, or his or her designee, of 117 an advocacy organization for citizens with mental health 118 disabilities, to be appointed by the Governor. 119
(2) (a) Of the six (6) appointed members by the Governor: 120 One (1) member shall be appointed for an initial term of one (1) 121 year; one (1) member shall be appointed for an initial term of two 122 (2) years; one (1) member shall be appointed for an initial term 123 of three (3) years; one (1) member shall be appointed for an 124 initial term of four (4) years; one (1) member shall be appointed 125 for an initial term of five (5) years; and one (1) member shall be 126 appointed for an initial term of six (6) years. On the expiration 127 of any of the terms of office, successor appointees shall be 128 appointed for terms of five (5) years in each case. Ex officio 129 members of the board may be represented at official meetings by 130 their deputy, or other designee, and such designees shall have 131 full voting privileges and shall be included in the determination 132 of a quorum for conducting board business. 133
(b) Initial members of the board shall be appointed 134 within thirty (30) days after the effective date of this act, and 135 shall meet at the state office of the Department of Rehabilitation 136 Services, at a date to be fixed by the Executive Director of the 137
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Department of Rehabilitation Services, not later than thirty (30) 138 days after all appointments have been made, to organize and select 139 a chairman and vice chairman, and develop an implementation plan 140 for the Mississippi ABLE Program, which shall be completed on or 141 before October 1, 2017. The chairman shall preside over all 142 meetings. 143
(3) Successors to the appointed members shall serve for the 144 length of the term for each appointing official and shall be 145 eligible for reappointment, and shall serve until a successor is 146 appointed and qualified. Any person appointed to fill a vacancy 147 on the board shall be appointed in a like manner and shall serve 148 for only the unexpired term. 149
(4) Members of the board of directors shall serve without 150 compensation, but shall be reimbursed for each day's official 151 duties of the board at the same per diem as established by Section 152 25-3-69, and actual travel and lodging expenses as established by 153 Section 25-3-41. 154
(5) The board of directors shall annually elect one (1) 155 member to serve as chairman of the board and one (1) member to 156 serve as vice chairman. The vice chairman shall act as chairman 157 in the absence of, or upon the disability of the chairman, or in 158 the event of a vacancy of the office of chairman. 159
(6) A majority of the currently serving members of the board 160 shall constitute a quorum for the purposes of conducting business 161 and exercising its official powers and duties. Any action taken 162
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by the board shall be upon the vote of a majority of the members 163 present. 164
SECTION 5. In addition to those powers granted to the board 165 by any other provisions of this act, the Mississippi ABLE Board 166 shall have the powers necessary to carry out the purposes and 167 provisions of this act, the purposes and objectives of ABLE 168 accounts, and the powers delegated by any other law or executive 169 order of this state, including, but not limited to, the following 170 express powers: 171
(a) To adopt such rules and regulations as are 172 necessary to implement this act, subject to applicable federal 173 laws and regulations, including rules regarding transfers of funds 174 between ABLE accounts established under the provisions of this act 175 and independent personal bank accounts; 176
(b) To impose reasonable requirements for beneficiaries 177 or account owners at the time of enrollment in the Mississippi 178 ABLE Program; 179
(c) To consult with the Executive Director of the 180 Department of Rehabilitation Services and the State Treasurer for 181 the department's employment of a Mississippi ABLE Coordinator, who 182 shall: 183
(i) Coordinate meetings of the board and keep 184 minutes of its actions; 185
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(ii) Remain informed of developments in federal 186 rules and regulations affecting ABLE accounts and ensure that the 187 Mississippi ABLE Program remains in compliance; 188
(iii) Be authorized to enter into contracts, on 189 behalf of the Mississippi ABLE Board, with records administrators, 190 program managers, consultants and other qualified persons and 191 entities for administrative and technical assistance in carrying 192 out the responsibilities of the Mississippi ABLE Program; and 193
(iv) Perform such other duties as the board may 194 prescribe; 195
(d) To contract for necessary goods and services, to 196 employ necessary personnel, and to engage the services of 197 consultants and other qualified persons and entities for 198 administrative and technical assistance in carrying out the 199 responsibilities of the ABLE account funds under terms and 200 conditions that the board deems reasonable, including contract 201 terms for such consideration, and for such purposes as the board 202 deems advisable; 203
(e) To solicit and accept gifts, including bequests or 204 other testamentary gifts made by will, trust or other disposition 205 grants, loans and other aids from any personal source or to 206 participate in any other way in any federal, state or local 207 governmental programs in carrying out the purposes of this act; 208
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(f) To define the terms and conditions under which 209 payments may be withdrawn for qualifying expenses established 210 under this act and to impose reasonable transaction fees; 211
(g) To serve as an information clearinghouse for the 212 gathering, compilation and dissemination of educational and 213 programmatic materials relating to the design, operation and 214 benefits provided through ABLE accounts and access to entry into 215 the program; 216
(h) To regulate the receipt of contributions or 217 payments to the ABLE Trust Fund; 218
(i) To segregate contributions and payments to the ABLE 219 Trust Fund into various accounts and funds; 220
(j) To require and collect administrative fees and 221 charges in connection with any transaction and to impose 222 reasonable penalties for withdrawal of funds for nonqualified 223 expenses or for entering into a ABLE account agreement on a 224 fraudulent basis; 225
(k) To procure insurance against any loss in connection 226 with the property, assets and activities of the ABLE Trust Fund or 227 the board; 228
(l) To require that account owners of ABLE account 229 agreements verify, under sworn attestation, any requests for 230 contract conversions, substitutions, transfers, cancellations, 231 refund requests or contract changes of any nature; 232
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(m) To solicit proposals and to contract for the 233 marketing of the Mississippi ABLE Program, provided that: (i) any 234 materials produced by a marketing contractor for the purpose of 235 marketing the program must be approved by the board before being 236 made available to the public; and (ii) neither the state nor the 237 board shall be liable for misrepresentation of the program by a 238 marketing contractor; 239
(n) To delegate responsibility for administration of 240 the comprehensive investment plan to a contractor or contractors 241 or a consultant or consultants that the board determines is 242 qualified; 243
(o) To make all necessary and appropriate arrangements 244 with vendors, health care service providers, rehabilitation 245 specialists or other entities in order to fulfill its obligations 246 under ABLE account agreements; 247
(p) To establish other policies, procedures and 248 criteria necessary to implement and administer this act; 249
(q) To authorize the Department of Rehabilitation 250 Services with the advice of the State Treasurer, to carry out any 251 or all of the powers and duties enumerated in this section for 252 efficient and effective administration of the Mississippi ABLE 253 Program and ABLE Trust Fund; 254
(r) To develop a user-friendly website or access link 255 on the Department of Rehabilitation Services' website to serve as 256 a virtual program and access portal to information about the ABLE 257
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Program and how an individual might be able to enroll, whether in 258 the State of Mississippi or in a contracting state with whom 259 Mississippi has entered into a contractual relationship either 260 bilaterally or as part of an ABLE consortium; 261
(s) To provide an ABLE assistance helpline by which 262 those having inquires can be directed to the proper entity for 263 assistance in qualifying and enrolling in an ABLE Program; and 264
(t) To develop and provide an "Account Holder's Bill of 265 Rights" to each individual, who is a Mississippi resident, and who 266 enrolls in the ABLE Program whether such account is managed inside 267 or outside of the state. 268
SECTION 6. (1) There is created a Mississippi Achieving a 269 Better Life Experience (ABLE) Trust Fund as an instrumentality of 270 the state to be administered by the Department of Rehabilitation 271 Services in consultation with the Treasury Department. The ABLE 272 Trust Fund shall consist of state appropriations, monies acquired 273 from other governmental or private sources and money remitted in 274 accordance with ABLE participation agreements, and shall receive 275 and hold all payments, contributions and deposits intended for it 276 as well as gifts, bequests, endowments or federal, state or local 277 grants and any other public or private source of funds and all 278 earnings on the fund until disbursed as provided under this 279 section. The amounts on deposit in the trust fund shall not 280 constitute property of the state. Amounts on deposit in the trust 281 fund may not be commingled with state funds, and the state may 282
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have no claim to or interest in such funds. ABLE participation 283 agreements or any other contract entered into by or on behalf of 284 the trust do not constitute a debt or obligation of the state, and 285 no account owner is entitled to any amounts except for those 286 amounts on deposit in or accrued to their account. 287
The ABLE Trust Fund shall continue in existence as long as it 288 holds any funds belonging to an account owner or otherwise has any 289 obligations to any person or entity until its existence is 290 terminated by the Legislature based on the recommendation of the 291 Mississippi ABLE Board, and remaining assets on deposit in the 292 fund are returned to account owners or transferred to the state in 293 accordance with unclaimed property laws. 294
(2) There are created the following three (3) separate 295 accounts within the ABLE Trust Fund: 296
(a) The administrative account, which shall accept, 297 deposit and disburse funds for the purpose of administering and 298 marketing the program; 299
(b) The endowment account, which shall receive and 300 deposit accounts received in connection with the sales of 301 interests in the ABLE Trust Fund other than amounts for the 302 administrative account and other than amounts received pursuant to 303 a participation agreement. Amounts on deposit in the endowment 304 account may be applied as specified by the board for any purpose 305 related to the program; and 306
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(c) The program account, which shall receive, invest 307 and disburse amounts pursuant to participation agreements. 308
(3) Payments received by the board on behalf of account 309 owners from other payors or any other source, public or private, 310 shall be placed in the ABLE Trust Fund, or in the event ABLE 311 accounts are established in other states pursuant to an agreement 312 entered into with a contracting state or consortium state, and the 313 board shall cause there to be maintained separate records and 314 accounts for individual account owners, as may be required under 315 Section 529A of the Internal Revenue Code of 1986, as amended, and 316 any other applicable federal law. 317
(4) Account owners and any other payors or contributors 318 shall be permitted only to contribute cash or any other form of 319 payment or contribution as is permitted under Section 529A of the 320 Internal Revenue Code of 1986, as amended, and approved by the 321 board. 322
(5) The account owner retains ownership of all amounts on 323 deposit in his or her account with the Mississippi ABLE Program up 324 to the date of withdrawal of qualified disability expense 325 transactions. Earnings derived from investment of the 326 contributions shall be considered to be held in trust in the same 327 manner as contributions, except as applied for purposes of 328 maintaining and administrating the program as provided in this 329 act. Amounts on deposit in an account owner's account shall be 330
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available for expenses and penalties imposed by the board for the 331 program as disclosed in the ABLE participation agreement. 332
(6) The assets of the ABLE Trust Fund shall be preserved, 333 invested and expended solely pursuant to and for the purposes of 334 this act and shall not be loaned or otherwise transferred or used 335 by the state for any other purpose. 336
SECTION 7. (1) All property and income of the ABLE Trust 337 Fund, as an instrumentality of the state, is exempt from all 338 taxation by the state and by its political subdivisions. 339
(2) Any contributor or payor to a Mississippi ABLE Program 340 account may deduct from their Mississippi taxable income any 341 contributions or payments to an account or accounts in the ABLE 342 Trust Fund up to a maximum annual amount limit established by 343 Congress for such accounts for single, joint and other filers. 344 Contributions or payments for such tax years may be made after 345 such calendar years but before the deadline for making 346 contributions to an individual retirement account under federal 347 law for such years. The earnings portion of any withdrawals from 348 an account that are not qualified withdrawals, as well as any 349 amounts included in such nonqualified withdrawals previously 350 deducted from taxable income under this section, shall be included 351 in the gross income of the recipient of the withdrawal for 352 purposes of the Mississippi Income Tax Law in the year of such 353 withdrawal. 354
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(3) Additionally, the participation of any Mississippi 355 resident in the Mississippi ABLE Program or any other qualified 356 ABLE Program, shall not preclude the resident from receiving any 357 benefit or assistance provided by the State of Mississippi for 358 which they are eligible. Funds in an individual's Mississippi 359 ABLE account or any other ABLE account shall be exempt from any 360 consideration when any agency or subdivision of the state is 361 determining an individual's eligibility for state-provided 362 assistance. Likewise, any tangible assets purchased with 363 Mississippi ABLE account funds or any other ABLE account funds 364 which are not otherwise disqualified as a countable resource of a 365 program participant shall be exempt from consideration when 366 determining such person's eligibility provided by the state, to 367 the extent allowable under federal law. 368
SECTION 8. (1) The board has authority to establish a 369 comprehensive investment plan for the purposes of this act, to 370 invest any funds of the ABLE Trust Fund in any instrument, 371 obligation, security or property that constitutes legal 372 investments for public funds in the state, and to name and use 373 depositories for its investments and holdings. The comprehensive 374 investment plan shall specify the investment policies to be 375 utilized by the board in its administration of the funds. The 376 board may authorize investments in any investment vehicle 377 authorized for the Mississippi Achieving a Better Life Experience 378 Program. 379
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(2) All investments shall be acquired by the board at prices 380 not exceeding the prevailing market values for such securities and 381 shall be marked clearly to indicate ownership by the system and, 382 to the extent possible, shall be registered in the name of the 383 system. 384
(3) Except as otherwise provided in this section, no trustee 385 or employee of the board may have any direct or indirect interest 386 in the income, gains or profits of any investment made by the 387 board, and such person may not receive any pay or emolument for 388 his services in connection with any investment made by the board. 389 No trustee or employee of the board may become an endorser or 390 surety or in any manner an obligor for money loaned by or borrowed 391 from the system. 392
(4) Under the authority granted in Section 5, the board may 393 establish criteria for investment managers, mutual funds or other 394 such entities to act as contractors or consultants to the board. 395 The board may contract, either directly or through such 396 contractors or consultants, to provide such services as may be a 397 part of the comprehensive investment plan or as may be deemed 398 necessary or proper by the board, including, but not limited to, 399 providing consolidated billing, individual and collective record 400 keeping and accounting, and asset purchase, control and 401 safekeeping. 402
(5) No account owner, contributor or payor may directly or 403 indirectly direct the investment of any account except as may be 404
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permitted under Section 529A of the Internal Revenue Code of 1986, 405 as amended. 406
SECTION 9. (1) On or before July 1, 2018, the Mississippi 407 ABLE Board shall establish and administer the Mississippi ABLE 408 Program or shall enter into a contractual relationship or into a 409 consortium with another state or states to provide qualifying 410 Mississippi residents access to enrollment in an operating ABLE 411 Program. Before implementing the program, the board shall obtain 412 a written opinion from counsel specializing in: 413
(a) Federal tax matters which indicate that the 414 Mississippi ABLE Program is designed to comply with Section 529A 415 of the Internal Revenue Code; and 416
(b) Federal securities law which indicate that the 417 Mississippi ABLE Program and the offering of participation in the 418 program are designed to comply with applicable federal securities 419 law and qualify for the available tax exemptions under such law. 420
(2) The Mississippi ABLE account participation agreement 421 must include provisions specifying that: 422
(a) The participation agreement is only an obligation 423 of the Mississippi ABLE Program and the ABLE Trust Fund and is not 424 an obligation of the state; 425
(b) Participation in the Mississippi ABLE Program does 426 not guarantee that sufficient funds will be available to cover all 427 qualified disability expenses for any designated beneficiary and 428
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does not guarantee the receipt or continuation of any product or 429 service for the designated beneficiary; 430
(c) The designated beneficiary must be a resident of 431 this state or a resident of a contracting or consortium state at 432 the time the ABLE account is established; 433
(d) The establishment of an ABLE account in violation 434 of federal law is prohibited; 435
(e) Contributions in excess of the limitations set 436 forth in Section 529A of the Internal Revenue Code are prohibited; 437
(f) The state is a creditor of ABLE accounts as, and to 438 the extent, set forth in Section 529A of the Internal Revenue 439 Code; and 440
(g) Material misrepresentations by a party to the 441 participation agreement, other than the board in the application 442 for the participation agreement or in any communication with the 443 board regarding the Mississippi ABLE Program may result in the 444 involuntary liquidation of the ABLE account. If an account is 445 involuntarily liquidated, the designated beneficiary is entitled 446 to a refund, subject to any fees or penalties provided by the 447 participation agreement and the Internal Revenue Code. 448
(3) The participation agreement may include provisions 449 specifying: 450
(a) The requirements and applicable restrictions for 451 opening an ABLE account; 452
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(b) The eligibility requirements for a party to a 453 participation agreement and the rights of the party; 454
(c) The requirements and applicable restrictions for 455 making contributions to an ABLE account; 456
(d) The requirements and applicable restrictions for 457 directing the investment of the contributions or balance of the 458 ABLE account; 459
(e) The administrative fee and other fees and penalties 460 applicable to an ABLE account; 461
(f) The terms and conditions under which an ABLE 462 account or participation agreement may be modified, transferred or 463 terminated; 464
(g) The disposition of abandoned ABLE accounts; and 465
(h) Any other terms and conditions determined to be 466 necessary or proper to conform the participation agreement with 467 the requirements of Section 529A of the Internal Revenue Code. 468
(4) The participation agreement may be amended throughout 469 its term for purposes that include, but are not limited to, 470 allowing a participant to increase or decrease the level of 471 participation and to change designated beneficiaries and other 472 matters authorized by this section and Section 529A of the 473 Internal Revenue Code. 474
(5) Notwithstanding any other provision of law, the 475 Mississippi ABLE Board, acting through the ABLE Coordinator, may 476 enter into an agreement with contracting states which either allow 477
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Mississippi residents to participate under the design, operation, 478 and rules of a contracting state's qualified ABLE Program or which 479 allows residents of a participating contracting state to 480 participate under the Mississippi ABLE Program. 481
(6) The Mississippi ABLE Program shall continue in existence 482 until terminated by law. If the Mississippi ABLE Board determines 483 that the program is financially infeasible, the board shall submit 484 its recommendation, in the form of a feasibility report, to the 485 Legislature to terminate the program. 486
SECTION 10. (1) The board shall furnish, without charge, to 487 each account owner an annual statement of the following: 488
(a) The amount contributed by the account owner under 489 the participation agreement; 490
(b) The annual earnings and accumulated earnings on the 491 ABLE account; and 492
(c) Any other terms and conditions that the board deems 493 by rule is necessary or appropriate, including those necessary to 494 conform the savings trust account with the requirements of Section 495 529 of the Internal Revenue Code of 1986, as amended, or other 496 applicable federal law or regulations. 497
(2) The board shall furnish an additional statement 498 complying with subsection (1) to an account owner or beneficiary 499 on written request. The board may charge a reasonable fee for 500 each statement furnished under this subsection. 501
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(3) (a) On or before November 1, 2018, the board shall 502 prepare a report on the status of the establishment of the 503 Mississippi ABLE Program. The report must also include, if 504 warranted, recommendations for statutory changes to enhance the 505 effectiveness and efficiency of the program. The board shall 506 submit copies of the report to the Governor, the Lieutenant 507 Governor, the Speaker of the House of Representatives, the State 508 Treasurer and to the Executive Director of the Department of 509 Rehabilitation Services. 510
(b) The board, in its discretion as to frequency, shall 511 cause to be prepared annual reports setting forth in appropriate 512 detail an accounting of the funds and a description of the 513 financial condition of the program, which shall be submitted no 514 later than ninety (90) days after the end of each fiscal year. 515 Such report shall be submitted to the Governor, the Lieutenant 516 Governor, the Speaker of the House of Representatives, the State 517 Treasurer and to the Executive Director of the Department of 518 Rehabilitation Services. The accounts of the fund shall be 519 subject to annual audits by the State Auditor or his designee. 520
SECTION 11. Monies paid into or expended out of the ABLE 521 Trust Fund by or on behalf of a designated beneficiary are exempt 522 from all claims of creditors of the designated beneficiary if the 523 participation agreement has not been terminated. Monies paid into 524 the Mississippi ABLE Program and benefits accrued through the 525 program may not be pledged for the purpose of securing a loan. 526
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SECTION 12. (1) Upon the death of the designated 527 beneficiary, the appropriate health care administration agency and 528 the Division of Medicaid of another state in which the beneficiary 529 received services may file a claim with the Mississippi ABLE 530 Program for the total amount of medical assistance provided for 531 the designated beneficiary under the Medicaid program since the 532 inception of the Mississippi ABLE account, less any premiums paid 533 by or on behalf of the designated beneficiary to a Medicaid buy-in 534 program. Funds in the ABLE account of the deceased designated 535 beneficiary must first be distributed for qualified disability 536 expenses followed by distributions for the Medicaid claim 537 authorized under this paragraph. Any remaining amount shall be 538 distributed as provided in the participation agreement required 539 under Section 10 of this act. 540
(2) The Mississippi ABLE Coordinator shall assist and 541 cooperate with the appropriate health care administration agency 542 and the Division of Medicaid in other states which have provided 543 services to a Mississippi ABLE account beneficiary, by providing 544 the agency and divisions with the information needed to accomplish 545 the purpose and objective of this section. 546
SECTION 13. The Mississippi Department of Health, the 547 Department of Rehabilitation Services, the Division of Medicaid, 548 the Department of Child Protection Services and the State 549 Department of Education shall assist, cooperate and coordinate 550
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with the Mississippi ABLE Board in the provision of public 551 information and outreach for the Mississippi ABLE Program. 552
SECTION 14. The provisions of this act are severable. If 553 any part of this act is declared invalid or unconstitutional, such 554 declaration shall not affect the parts of this act which remain. 555
SECTION 15. Section 27-7-15, Mississippi Code of 1972, is 556 amended as follows: 557
27-7-15. (1) For the purposes of this article, except as 558 otherwise provided, the term "gross income" means and includes the 559 income of a taxpayer derived from salaries, wages, fees or 560 compensation for service, of whatever kind and in whatever form 561 paid, including income from governmental agencies and subdivisions 562 thereof; or from professions, vocations, trades, businesses, 563 commerce or sales, or renting or dealing in property, or 564 reacquired property; also from annuities, interest, rents, 565 dividends, securities, insurance premiums, reinsurance premiums, 566 considerations for supplemental insurance contracts, or the 567 transaction of any business carried on for gain or profit, or 568 gains, or profits, and income derived from any source whatever and 569 in whatever form paid. The amount of all such items of income 570 shall be included in the gross income for the taxable year in 571 which received by the taxpayer. The amount by which an eligible 572 employee's salary is reduced pursuant to a salary reduction 573 agreement authorized under Section 25-17-5 shall be excluded from 574 the term "gross income" within the meaning of this article. 575
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(2) In determining gross income for the purpose of this 576 section, the following, under regulations prescribed by the 577 commissioner, shall be applicable: 578
(a) Dealers in property. Federal rules, regulations 579 and revenue procedures shall be followed with respect to 580 installment sales unless a transaction results in the shifting of 581 income from inside the state to outside the state. 582
(b) Casual sales of property. 583
(i) Prior to January 1, 2001, federal rules, 584 regulations and revenue procedures shall be followed with respect 585 to installment sales except they shall be applied and administered 586 as if H.R. 3594, the Installment Tax Correction Act of 2000 of the 587 106th Congress, had not been enacted. This provision will 588 generally affect taxpayers, reporting on the accrual method of 589 accounting, entering into installment note agreements on or after 590 December 17, 1999. Any gain or profit resulting from the casual 591 sale of property will be recognized in the year of sale. 592
(ii) From and after January 1, 2001, federal 593 rules, regulations and revenue procedures shall be followed with 594 respect to installment sales except as provided in this 595 subparagraph (ii). Gain or profit from the casual sale of 596 property shall be recognized in the year of sale. When a taxpayer 597 recognizes gain on the casual sale of property in which the gain 598 is deferred for federal income tax purposes, a taxpayer may elect 599 to defer the payment of tax resulting from the gain as allowed and 600
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to the extent provided under regulations prescribed by the 601 commissioner. If the payment of the tax is made on a deferred 602 basis, the tax shall be computed based on the applicable rate for 603 the income reported in the year the payment is made. Except as 604 otherwise provided in subparagraph (iii) of this paragraph (b), 605 deferring the payment of the tax shall not affect the liability 606 for the tax. If at any time the installment note is sold, 607 contributed, transferred or disposed of in any manner and for any 608 purpose by the original note holder, or the original note holder 609 is merged, liquidated, dissolved or withdrawn from this state, 610 then all deferred tax payments under this section shall 611 immediately become due and payable. 612
(iii) If the selling price of the property is 613 reduced by any alteration in the terms of an installment note, 614 including default by the purchaser, the gain to be recognized is 615 recomputed based on the adjusted selling price in the same manner 616 as for federal income tax purposes. The tax on this amount, less 617 the previously paid tax on the recognized gain, is payable over 618 the period of the remaining installments. If the tax on the 619 previously recognized gain has been paid in full to this state, 620 the return on which the payment was made may be amended for this 621 purpose only. The statute of limitations in Section 27-7-49 shall 622 not bar an amended return for this purpose. 623
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(c) Reserves of insurance companies. In the case of 624 insurance companies, any amounts in excess of the legally required 625 reserves shall be included as gross income. 626
(d) Affiliated companies or persons. As regards sales, 627 exchanges or payments for services from one to another of 628 affiliated companies or persons or under other circumstances where 629 the relation between the buyer and seller is such that gross 630 proceeds from the sale or the value of the exchange or the payment 631 for services are not indicative of the true value of the subject 632 matter of the sale, exchange or payment for services, the 633 commissioner shall prescribe uniform and equitable rules for 634 determining the true value of the gross income, gross sales, 635 exchanges or payment for services, or require consolidated returns 636 of affiliates. 637
(e) Alimony and separate maintenance payments. The 638 federal rules, regulations and revenue procedures in determining 639 the deductibility and taxability of alimony payments shall be 640 followed in this state. 641
(f) Reimbursement for expenses of moving. There shall 642 be included in gross income (as compensation for services) any 643 amount received or accrued, directly or indirectly, by an 644 individual as a payment for or reimbursement of expenses of moving 645 from one residence to another residence which is attributable to 646 employment or self-employment. 647
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(3) In the case of taxpayers other than residents, gross 648 income includes gross income from sources within this state. 649
(4) The words "gross income" do not include the following 650 items of income which shall be exempt from taxation under this 651 article: 652
(a) The proceeds of life insurance policies and 653 contracts paid upon the death of the insured. However, the income 654 from the proceeds of such policies or contracts shall be included 655 in the gross income. 656
(b) The amount received by the insured as a return of 657 premium or premiums paid by him under life insurance policies, 658 endowment, or annuity contracts, either during the term or at 659 maturity or upon surrender of the contract. 660
(c) The value of property acquired by gift, bequest, 661 devise or descent, but the income from such property shall be 662 included in the gross income. 663
(d) Interest upon the obligations of the United States 664 or its possessions, or securities issued under the provisions of 665 the Federal Farm Loan Act of 1916, or bonds issued by the War 666 Finance Corporation, or obligations of the State of Mississippi or 667 political subdivisions thereof. 668
(e) The amounts received through accident or health 669 insurance as compensation for personal injuries or sickness, plus 670 the amount of any damages received for such injuries or such 671 sickness or injuries, or through the War Risk Insurance Act, or 672
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any law for the benefit or relief of injured or disabled members 673 of the military or naval forces of the United States. 674
(f) Income received by any religious denomination or by 675 any institution or trust for moral or mental improvements, 676 religious, Bible, tract, charitable, benevolent, fraternal, 677 missionary, hospital, infirmary, educational, scientific, 678 literary, library, patriotic, historical or cemetery purposes or 679 for two (2) or more of such purposes, if such income be used 680 exclusively for carrying out one or more of such purposes. 681
(g) Income received by a domestic corporation which is 682 "taxable in another state" as this term is defined in this 683 article, derived from business activity conducted outside this 684 state. Domestic corporations taxable both within and without the 685 state shall determine Mississippi income on the same basis as 686 provided for foreign corporations under the provisions of this 687 article. 688
(h) In case of insurance companies, there shall be 689 excluded from gross income such portion of actual premiums 690 received from an individual policyholder as is paid back or 691 credited to or treated as an abatement of premiums of such 692 policyholder within the taxable year. 693
(i) Income from dividends that has already borne a tax 694 as dividend income under the provisions of this article, when such 695 dividends may be specifically identified in the possession of the 696 recipient. 697
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(j) Amounts paid by the United States to a person as 698 added compensation for hazardous duty pay as a member of the Armed 699 Forces of the United States in a combat zone designated by 700 Executive Order of the President of the United States. 701
(k) Amounts received as retirement allowances, 702 pensions, annuities or optional retirement allowances paid under 703 the federal Social Security Act, the Railroad Retirement Act, the 704 Federal Civil Service Retirement Act, or any other retirement 705 system of the United States government, retirement allowances paid 706 under the Mississippi Public Employees' Retirement System, 707 Mississippi Highway Safety Patrol Retirement System or any other 708 retirement system of the State of Mississippi or any political 709 subdivision thereof. The exemption allowed under this paragraph 710 (k) shall be available to the spouse or other beneficiary at the 711 death of the primary retiree. 712
(l) Amounts received as retirement allowances, 713 pensions, annuities or optional retirement allowances paid by any 714 public or governmental retirement system not designated in 715 paragraph (k) or any private retirement system or plan of which 716 the recipient was a member at any time during the period of his 717 employment. Amounts received as a distribution under a Roth 718 Individual Retirement Account shall be treated in the same manner 719 as provided under the Internal Revenue Code of 1986, as amended. 720 The exemption allowed under this paragraph (l) shall be available 721
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to the spouse or other beneficiary at the death of the primary 722 retiree. 723
(m) National Guard or Reserve Forces of the United 724 States compensation not to exceed the aggregate sum of Five 725 Thousand Dollars ($5,000.00) for any taxable year through the 2005 726 taxable year, and not to exceed the aggregate sum of Fifteen 727 Thousand Dollars ($15,000.00) for any taxable year thereafter. 728
(n) Compensation received for active service as a 729 member below the grade of commissioned officer and so much of the 730 compensation as does not exceed the maximum enlisted amount 731 received for active service as a commissioned officer in the Armed 732 Forces of the United States for any month during any part of which 733 such members of the Armed Forces (i) served in a combat zone as 734 designated by Executive Order of the President of the United 735 States or a qualified hazardous duty area as defined by federal 736 law, or both; or (ii) was hospitalized as a result of wounds, 737 disease or injury incurred while serving in such combat zone. For 738 the purposes of this paragraph (n), the term "maximum enlisted 739 amount" means and has the same definition as that term has in 26 740 USCS 112. 741
(o) The proceeds received from federal and state 742 forestry incentive programs. 743
(p) The amount representing the difference between the 744 increase of gross income derived from sales for export outside the 745 United States as compared to the preceding tax year wherein gross 746
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income from export sales was highest, and the net increase in 747 expenses attributable to such increased exports. In the absence 748 of direct accounting, the ratio of net profits to total sales may 749 be applied to the increase in export sales. This paragraph (p) 750 shall only apply to businesses located in this state engaging in 751 the international export of Mississippi goods and services. Such 752 goods or services shall have at least fifty percent (50%) of value 753 added at a location in Mississippi. 754
(q) Amounts paid by the federal government for the 755 construction of soil conservation systems as required by a 756 conservation plan adopted pursuant to 16 USCS 3801 et seq. 757
(r) The amount deposited in a medical savings account, 758 and any interest accrued thereon, that is a part of a medical 759 savings account program as specified in the Medical Savings 760 Account Act under Sections 71-9-1 through 71-9-9; provided, 761 however, that any amount withdrawn from such account for purposes 762 other than paying eligible medical expense or to procure health 763 coverage shall be included in gross income. 764
(s) Amounts paid by the Mississippi Soil and Water 765 Conservation Commission from the Mississippi Soil and Water 766 Cost-Share Program for the installation of water quality best 767 management practices. 768
(t) Dividends received by a holding corporation, as 769 defined in Section 27-13-1, from a subsidiary corporation, as 770 defined in Section 27-13-1. 771
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(u) Interest, dividends, gains or income of any kind on 772 any account in the Mississippi Affordable College Savings Trust 773 Fund, as established in Sections 37-155-101 through 37-155-125, to 774 the extent that such amounts remain on deposit in the MACS Trust 775 Fund or are withdrawn pursuant to a qualified withdrawal, as 776 defined in Section 37-155-105. 777
(v) Interest, dividends or gains accruing on the 778 payments made pursuant to a prepaid tuition contract, as provided 779 for in Section 37-155-17. 780
(w) Income resulting from transactions with a related 781 member where the related member subject to tax under this chapter 782 was required to, and did in fact, add back the expense of such 783 transactions as required by Section 27-7-17(2). Under no 784 circumstances may the exclusion from income exceed the deduction 785 add-back of the related member, nor shall the exclusion apply to 786 any income otherwise excluded under this chapter. 787
(x) Amounts that are subject to the tax levied pursuant 788 to Section 27-7-901, and are paid to patrons by gaming 789 establishments licensed under the Mississippi Gaming Control Act. 790
(y) Amounts that are subject to the tax levied pursuant 791 to Section 27-7-903, and are paid to patrons by gaming 792 establishments not licensed under the Mississippi Gaming Control 793 Act. 794
(z) Interest, dividends, gains or income of any kind on 795 any account in a qualified tuition program and amounts received as 796
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distributions under a qualified tuition program shall be treated 797 in the same manner as provided under the United States Internal 798 Revenue Code, as amended. For the purposes of this paragraph (z), 799 the term "qualified tuition program" means and has the same 800 definition as that term has in 26 USCS 529. 801
(aa) The amount deposited in a health savings account, 802 and any interest accrued thereon, that is a part of a health 803 savings account program as specified in the Health Savings 804 Accounts Act created in Sections 83-62-1 through 83-62-9; however, 805 any amount withdrawn from such account for purposes other than 806 paying qualified medical expenses or to procure health coverage 807 shall be included in gross income, except as otherwise provided by 808 Sections 83-62-7 and 83-62-9. 809
(bb) Amounts received as qualified disaster relief 810 payments shall be treated in the same manner as provided under the 811 United States Internal Revenue Code, as amended. 812
(cc) Amounts received as a "qualified Hurricane Katrina 813 distribution" as defined in the United States Internal Revenue 814 Code, as amended. 815
(dd) Amounts received by an individual which may be 816 excluded from income as foreign earned income for federal income 817 tax purposes. 818
(ee) Amounts received by a qualified individual, 819 directly or indirectly, from an employer or nonprofit housing 820 organization that are qualified housing expenses associated with 821
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an employer-assisted housing program. For purposes of this 822 paragraph (ee): 823
(i) "Qualified individual" means any individual 824 whose household income does not exceed one hundred twenty percent 825 (120%) of the area median gross income (as defined by the United 826 States Department of Housing and Urban Development), adjusted for 827 household size, for the area in which the housing is located. 828
(ii) "Nonprofit housing organization" means an 829 organization that is organized as a not-for-profit organization 830 under the laws of this state or another state and has as one of 831 its purposes: 832
1. Homeownership education or counseling; 833
2. The development of affordable housing; or 834
3. The development or administration of 835 employer-assisted housing programs. 836
(iii) "Employer-assisted housing program" means a 837 separate written plan of any employer (including, without 838 limitation, tax-exempt organizations and public employers) for the 839 exclusive benefit of the employer's employees to pay qualified 840 housing expenses to assist the employer's employees in securing 841 affordable housing. 842
(iv) "Qualified housing expenses" means: 843
1. With respect to rental assistance, an 844 amount not to exceed Two Thousand Dollars ($2,000.00) paid for the 845
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purpose of assisting employees with security deposits and rental 846 subsidies; and 847
2. With respect to homeownership assistance, 848 an amount not to exceed the lesser of Ten Thousand Dollars 849 ($10,000.00) or six percent (6%) of the purchase price of the 850 employee's principal residence that is paid for the purpose of 851 assisting employees with down payments, payment of closing costs, 852 reduced interest mortgages, mortgage guarantee programs, mortgage 853 forgiveness programs, equity contribution programs, or 854 contributions to home buyer education and/or homeownership 855 counseling of eligible employees. 856
(ff) For the 2010 taxable year and any taxable year 857 thereafter, amounts converted in accordance with the United States 858 Internal Revenue Code, as amended, from a traditional Individual 859 Retirement Account to a Roth Individual Retirement Account. The 860 exemption allowed under this paragraph (ff) shall be available to 861 the spouse or other beneficiary at the death of the primary 862 retiree. 863
(gg) Amounts received for the performance of disaster 864 or emergency-related work as defined in Section 27-113-5. 865
(hh) The amount deposited in a catastrophe savings 866 account established under Sections 27-7-1001 through 27-7-1007, 867 interest income earned on the catastrophe savings account, and 868 distributions from the catastrophe savings account; however, any 869 amount withdrawn from a catastrophe savings account for purposes 870
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other than paying qualified catastrophe expenses shall be included 871 in gross income, except as otherwise provided by Sections 872 27-7-1001 through 27-7-1007. 873
(ii) Interest, dividends, gains or income of any kind 874 on any account in the Mississippi Achieving a Better Life 875 Experience (ABLE) Trust Fund, as established in Sections 1 through 876 14 of this act, to the extent that such amounts remain on deposit 877 in the ABLE Trust Fund or are withdrawn pursuant to a qualified 878 withdrawal, as defined in Section 6 of this act. 879
(5) Prisoners of war, missing in action-taxable status. 880
(a) Members of the Armed Forces. Gross income does not 881 include compensation received for active service as a member of 882 the Armed Forces of the United States for any month during any 883 part of which such member is in a missing status, as defined in 884 paragraph (d) of this subsection, during the Vietnam Conflict as a 885 result of such conflict. 886
(b) Civilian employees. Gross income does not include 887 compensation received for active service as an employee for any 888 month during any part of which such employee is in a missing 889 status during the Vietnam Conflict as a result of such conflict. 890
(c) Period of conflict. For the purpose of this 891 subsection, the Vietnam Conflict began February 28, 1961, and ends 892 on the date designated by the President by Executive Order as the 893 date of the termination of combatant activities in Vietnam. For 894 the purpose of this subsection, an individual is in a missing 895
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status as a result of the Vietnam Conflict if immediately before 896 such status began he was performing service in Vietnam or was 897 performing service in Southeast Asia in direct support of military 898 operations in Vietnam. "Southeast Asia," as used in this 899 paragraph, is defined to include Cambodia, Laos, Thailand and 900 waters adjacent thereto. 901
(d) "Missing status" means the status of an employee or 902 member of the Armed Forces who is in active service and is 903 officially carried or determined to be absent in a status of (i) 904 missing; (ii) missing in action; (iii) interned in a foreign 905 country; (iv) captured, beleaguered or besieged by a hostile 906 force; or (v) detained in a foreign country against his will; but 907 does not include the status of an employee or member of the Armed 908 Forces for a period during which he is officially determined to be 909 absent from his post of duty without authority. 910
(e) "Active service" means active federal service by an 911 employee or member of the Armed Forces of the United States in an 912 active duty status. 913
(f) "Employee" means one who is a citizen or national 914 of the United States or an alien admitted to the United States for 915 permanent residence and is a resident of the State of Mississippi 916 and is employed in or under a federal executive agency or 917 department of the Armed Forces. 918
(g) "Compensation" means (i) basic pay; (ii) special 919 pay; (iii) incentive pay; (iv) basic allowance for quarters; (v) 920
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basic allowance for subsistence; and (vi) station per diem 921 allowances for not more than ninety (90) days. 922
(h) If refund or credit of any overpayment of tax for 923 any taxable year resulting from the application of this subsection 924 (5) is prevented by the operation of any law or rule of law, such 925 refund or credit of such overpayment of tax may, nevertheless, be 926 made or allowed if claim therefor is filed with the Department of 927 Revenue within three (3) years after the date of the enactment of 928 this subsection. 929
(i) The provisions of this subsection shall be 930 effective for taxable years ending on or after February 28, 1961. 931
(6) A shareholder of an S corporation, as defined in Section 932 27-8-3(1)(g), shall take into account the income, loss, deduction 933 or credit of the S corporation only to the extent provided in 934 Section 27-8-7(2). 935
SECTION 16. Section 27-7-17, Mississippi Code of 1972, is 936 amended as follows: 937
27-7-17. In computing taxable income, there shall be allowed 938 as deductions: 939
(1) Business deductions. 940
(a) Business expenses. All the ordinary and necessary 941 expenses paid or incurred during the taxable year in carrying on 942 any trade or business, including a reasonable allowance for 943 salaries or other compensation for personal services actually 944 rendered; nonreimbursable traveling expenses incident to current 945
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employment, including a reasonable amount expended for meals and 946 lodging while away from home in the pursuit of a trade or 947 business; and rentals or other payments required to be made as a 948 condition of the continued use or possession, for purposes of the 949 trade or business of property to which the taxpayer has not taken 950 or is not taking title or in which he had no equity. Expense 951 incurred in connection with earning and distributing nontaxable 952 income is not an allowable deduction. Limitations on 953 entertainment expenses shall conform to the provisions of the 954 Internal Revenue Code of 1986. 955
(b) Interest. All interest paid or accrued during the 956 taxable year on business indebtedness, except interest upon the 957 indebtedness for the purchase of tax-free bonds, or any stocks, 958 the dividends from which are nontaxable under the provisions of 959 this article; provided, however, in the case of securities 960 dealers, interest payments or accruals on loans, the proceeds of 961 which are used to purchase tax-exempt securities, shall be 962 deductible if income from otherwise tax-free securities is 963 reported as income. Investment interest expense shall be limited 964 to investment income. Interest expense incurred for the purchase 965 of treasury stock, to pay dividends, or incurred as a result of an 966 undercapitalized affiliated corporation may not be deducted unless 967 an ordinary and necessary business purpose can be established to 968 the satisfaction of the commissioner. For the purposes of this 969 paragraph, the phrase "interest upon the indebtedness for the 970
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purchase of tax-free bonds" applies only to the indebtedness 971 incurred for the purpose of directly purchasing tax-free bonds and 972 does not apply to any other indebtedness incurred in the regular 973 course of the taxpayer's business. Any corporation, association, 974 organization or other entity taxable under Section 27-7-23(c) 975 shall allocate interest expense as provided in Section 976 27-7-23(c)(3)(I). 977
(c) Taxes. Taxes paid or accrued within the taxable 978 year, except state and federal income taxes, excise taxes based on 979 or measured by net income, estate and inheritance taxes, gift 980 taxes, cigar and cigarette taxes, gasoline taxes, and sales and 981 use taxes unless incurred as an item of expense in a trade or 982 business or in the production of taxable income. In the case of 983 an individual, taxes permitted as an itemized deduction under the 984 provisions of subsection (3)(a) of this section are to be claimed 985 thereunder. 986
(d) Business losses. 987
(i) Losses sustained during the taxable year not 988 compensated for by insurance or otherwise, if incurred in trade or 989 business, or nonbusiness transactions entered into for profit. 990
(ii) Limitations on losses from passive activities 991 and rental real estate shall conform to the provisions of the 992 Internal Revenue Code of 1986. 993
(e) Bad debts. Losses from debts ascertained to be 994 worthless and charged off during the taxable year, if sustained in 995
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the conduct of the regular trade or business of the taxpayer; 996 provided, that such losses shall be allowed only when the taxpayer 997 has reported as income, on the accrual basis, the amount of such 998 debt or account. 999
(f) Depreciation. A reasonable allowance for 1000 exhaustion, wear and tear of property used in the trade or 1001 business, or rental property, and depreciation upon buildings 1002 based upon their reasonable value as of March 16, 1912, if 1003 acquired prior thereto, and upon cost if acquired subsequent to 1004 that date. 1005
(g) Depletion. In the case of mines, oil and gas 1006 wells, other natural deposits and timber, a reasonable allowance 1007 for depletion and for depreciation of improvements, based upon 1008 cost, including cost of development, not otherwise deducted, or 1009 fair market value as of March 16, 1912, if acquired prior to that 1010 date, such allowance to be made upon regulations prescribed by the 1011 commissioner, with the approval of the Governor. 1012
(h) Contributions or gifts. Except as otherwise 1013 provided in paragraph (p) of this subsection or subsection (3)(a) 1014 of this section for individuals, contributions or gifts made by 1015 corporations within the taxable year to corporations, 1016 organizations, associations or institutions, including Community 1017 Chest funds, foundations and trusts created solely and exclusively 1018 for religious, charitable, scientific or educational purposes, or 1019 for the prevention of cruelty to children or animals, no part of 1020
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the net earnings of which inure to the benefit of any private 1021 stockholder or individual. This deduction shall be allowed in an 1022 amount not to exceed twenty percent (20%) of the net income. Such 1023 contributions or gifts shall be allowable as deductions only if 1024 verified under rules and regulations prescribed by the 1025 commissioner, with the approval of the Governor. Contributions 1026 made in any form other than cash shall be allowed as a deduction, 1027 subject to the limitations herein provided, in an amount equal to 1028 the actual market value of the contributions at the time the 1029 contribution is actually made and consummated. 1030
(i) Reserve funds - insurance companies. In the case 1031 of insurance companies the net additions required by law to be 1032 made within the taxable year to reserve funds when such reserve 1033 funds are maintained for the purpose of liquidating policies at 1034 maturity. 1035
(j) Annuity income. The sums, other than dividends, 1036 paid within the taxpayer year on policy or annuity contracts when 1037 such income has been included in gross income. 1038
(k) Contributions to employee pension plans. 1039 Contributions made by an employer to a plan or a trust forming 1040 part of a pension plan, stock bonus plan, disability or 1041 death-benefit plan, or profit-sharing plan of such employer for 1042 the exclusive benefit of some or all of his, their, or its 1043 employees, or their beneficiaries, shall be deductible from his, 1044 their, or its income only to the extent that, and for the taxable 1045
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year in which, the contribution is deductible for federal income 1046 tax purposes under the Internal Revenue Code of 1986 and any other 1047 provisions of similar purport in the Internal Revenue Laws of the 1048 United States, and the rules, regulations, rulings and 1049 determinations promulgated thereunder, provided that: 1050
(i) The plan or trust be irrevocable. 1051
(ii) The plan or trust constitute a part of a 1052 pension plan, stock bonus plan, disability or death-benefit plan, 1053 or profit-sharing plan for the exclusive benefit of some or all of 1054 the employer's employees and/or officers, or their beneficiaries, 1055 for the purpose of distributing the corpus and income of the plan 1056 or trust to such employees and/or officers, or their 1057 beneficiaries. 1058
(iii) No part of the corpus or income of the plan 1059 or trust can be used for purposes other than for the exclusive 1060 benefit of employees and/or officers, or their beneficiaries. 1061
Contributions to all plans or to all trusts of real or 1062 personal property (or real and personal property combined) or to 1063 insured plans created under a retirement plan for which provision 1064 has been made under the laws of the United States of America, 1065 making such contributions deductible from income for federal 1066 income tax purposes, shall be deductible only to the same extent 1067 under the Income Tax Laws of the State of Mississippi. 1068
(l) Net operating loss carrybacks and carryovers. A 1069 net operating loss for any taxable year ending after December 31, 1070
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1993, and taxable years thereafter, shall be a net operating loss 1071 carryback to each of the three (3) taxable years preceding the 1072 taxable year of the loss. If the net operating loss for any 1073 taxable year is not exhausted by carrybacks to the three (3) 1074 taxable years preceding the taxable year of the loss, then there 1075 shall be a net operating loss carryover to each of the fifteen 1076 (15) taxable years following the taxable year of the loss 1077 beginning with any taxable year after December 31, 1991. 1078
For any taxable year ending after December 31, 1997, the 1079 period for net operating loss carrybacks and net operating loss 1080 carryovers shall be the same as those established by the Internal 1081 Revenue Code and the rules, regulations, rulings and 1082 determinations promulgated thereunder as in effect at the taxable 1083 year end or on December 31, 2000, whichever is earlier. 1084
A net operating loss for any taxable year ending after 1085 December 31, 2001, and taxable years thereafter, shall be a net 1086 operating loss carryback to each of the two (2) taxable years 1087 preceding the taxable year of the loss. If the net operating loss 1088 for any taxable year is not exhausted by carrybacks to the two (2) 1089 taxable years preceding the taxable year of the loss, then there 1090 shall be a net operating loss carryover to each of the twenty (20) 1091 taxable years following the taxable year of the loss beginning 1092 with any taxable year after the taxable year of the loss. 1093
The term "net operating loss," for the purposes of this 1094 paragraph, shall be the excess of the deductions allowed over the 1095
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gross income; provided, however, the following deductions shall 1096 not be allowed in computing same: 1097
(i) No net operating loss deduction shall be 1098 allowed. 1099
(ii) No personal exemption deduction shall be 1100 allowed. 1101
(iii) Allowable deductions which are not 1102 attributable to taxpayer's trade or business shall be allowed only 1103 to the extent of the amount of gross income not derived from such 1104 trade or business. 1105
Any taxpayer entitled to a carryback period as provided by 1106 this paragraph may elect to relinquish the entire carryback period 1107 with respect to a net operating loss for any taxable year ending 1108 after December 31, 1991. The election shall be made in the manner 1109 prescribed by the Department of Revenue and shall be made by the 1110 due date, including extensions of time, for filing the taxpayer's 1111 return for the taxable year of the net operating loss for which 1112 the election is to be in effect. The election, once made for any 1113 taxable year, shall be irrevocable for that taxable year. 1114
(m) Amortization of pollution or environmental control 1115 facilities. Allowance of deduction. Every taxpayer, at his 1116 election, shall be entitled to a deduction for pollution or 1117 environmental control facilities to the same extent as that 1118 allowed under the Internal Revenue Code and the rules, 1119 regulations, rulings and determinations promulgated thereunder. 1120
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(n) Dividend distributions - real estate investment 1121 trusts. "Real estate investment trust" (hereinafter referred to 1122 as REIT) shall have the meaning ascribed to such term in Section 1123 856 of the federal Internal Revenue Code of 1986, as amended. A 1124 REIT is allowed a dividend distributed deduction if the dividend 1125 distributions meet the requirements of Section 857 or are 1126 otherwise deductible under Section 858 or 860, federal Internal 1127 Revenue Code of 1986, as amended. In addition: 1128
(i) A dividend distributed deduction shall only be 1129 allowed for dividends paid by a publicly traded REIT. A qualified 1130 REIT subsidiary shall be allowed a dividend distributed deduction 1131 if its owner is a publicly traded REIT. 1132
(ii) Income generated from real estate contributed 1133 or sold to a REIT by a shareholder or related party shall not give 1134 rise to a dividend distributed deduction, unless the shareholder 1135 or related party would have received the dividend distributed 1136 deduction under this chapter. 1137
(iii) A holding corporation receiving a dividend 1138 from a REIT shall not be allowed the deduction in Section 1139 27-7-15(4)(t). 1140
(iv) Any REIT not allowed the dividend distributed 1141 deduction in the federal Internal Revenue Code of 1986, as 1142 amended, shall not be allowed a dividend distributed deduction 1143 under this chapter. 1144
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The commissioner is authorized to promulgate rules and 1145 regulations consistent with the provisions in Section 269 of the 1146 federal Internal Revenue Code of 1986, as amended, so as to 1147 prevent the evasion or avoidance of state income tax. 1148
(o) Contributions to college savings trust fund 1149 accounts. Contributions or payments to a Mississippi Affordable 1150 College Savings Program account are deductible as provided under 1151 Section 37-155-113. Payments made under a prepaid tuition 1152 contract entered into under the Mississippi Prepaid Affordable 1153 College Tuition Program are deductible as provided under Section 1154 37-155-17. 1155
(p) Contributions of human pharmaceutical products. To 1156 the extent that a "major supplier" as defined in Section 1157 27-13-13(2)(d) contributes human pharmaceutical products in excess 1158 of Two Hundred Fifty Million Dollars ($250,000,000.00) as 1159 determined under Section 170 of the Internal Revenue Code, the 1160 charitable contribution limitation associated with those donations 1161 shall follow the federal limitation but cannot result in the 1162 Mississippi net income being reduced below zero. 1163
(q) Contributions to ABLE trust fund accounts. 1164 Contributions or payments to a Mississippi Achieving a Better Life 1165 Experience (ABLE) Program account are deductible as provided under 1166 Section 7 of this act. 1167
(2) Restrictions on the deductibility of certain intangible 1168 expenses and interest expenses with a related member. 1169
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(a) As used in this subsection (2): 1170
(i) "Intangible expenses and costs" include: 1171
1. Expenses, losses and costs for, related 1172 to, or in connection directly or indirectly with the direct or 1173 indirect acquisition, use, maintenance or management, ownership, 1174 sale, exchange or any other disposition of intangible property to 1175 the extent such amounts are allowed as deductions or costs in 1176 determining taxable income under this chapter; 1177
2. Expenses or losses related to or incurred 1178 in connection directly or indirectly with factoring transactions 1179 or discounting transactions; 1180
3. Royalty, patent, technical and copyright 1181 fees; 1182
4. Licensing fees; and 1183
5. Other similar expenses and costs. 1184
(ii) "Intangible property" means patents, patent 1185 applications, trade names, trademarks, service marks, copyrights 1186 and similar types of intangible assets. 1187
(iii) "Interest expenses and cost" means amounts 1188 directly or indirectly allowed as deductions for purposes of 1189 determining taxable income under this chapter to the extent such 1190 interest expenses and costs are directly or indirectly for, 1191 related to, or in connection with the direct or indirect 1192 acquisition, maintenance, management, ownership, sale, exchange or 1193 disposition of intangible property. 1194
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(iv) "Related member" means an entity or person 1195 that, with respect to the taxpayer during all or any portion of 1196 the taxable year, is a related entity, a component member as 1197 defined in the Internal Revenue Code, or is an entity or a person 1198 to or from whom there is attribution of stock ownership in 1199 accordance with Section 1563(e) of the Internal Revenue Code. 1200
(v) "Related entity" means: 1201
1. A stockholder who is an individual or a 1202 member of the stockholder's family, as defined in regulations 1203 prescribed by the commissioner, if the stockholder and the members 1204 of the stockholder's family own, directly, indirectly, 1205 beneficially or constructively, in the aggregate, at least fifty 1206 percent (50%) of the value of the taxpayer's outstanding stock; 1207
2. A stockholder, or a stockholder's 1208 partnership, limited liability company, estate, trust or 1209 corporation, if the stockholder and the stockholder's 1210 partnerships, limited liability companies, estates, trusts and 1211 corporations own, directly, indirectly, beneficially or 1212 constructively, in the aggregate, at least fifty percent (50%) of 1213 the value of the taxpayer's outstanding stock; 1214
3. A corporation, or a party related to the 1215 corporation in a manner that would require an attribution of stock 1216 from the corporation to the party or from the party to the 1217 corporation, if the taxpayer owns, directly, indirectly, 1218 beneficially or constructively, at least fifty percent (50%) of 1219
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the value of the corporation's outstanding stock under regulation 1220 prescribed by the commissioner; 1221
4. Any entity or person which would be a 1222 related member under this section if the taxpayer were considered 1223 a corporation for purposes of this section. 1224
(b) In computing net income, a taxpayer shall add back 1225 otherwise deductible interest expenses and costs and intangible 1226 expenses and costs directly or indirectly paid, accrued to or 1227 incurred, in connection directly or indirectly with one or more 1228 direct or indirect transactions with one or more related members. 1229
(c) The adjustments required by this subsection shall 1230 not apply to such portion of interest expenses and costs and 1231 intangible expenses and costs that the taxpayer can establish 1232 meets one (1) of the following: 1233
(i) The related member directly or indirectly 1234 paid, accrued or incurred such portion to a person during the same 1235 income year who is not a related member; or 1236
(ii) The transaction giving rise to the interest 1237 expenses and costs or intangible expenses and costs between the 1238 taxpayer and related member was done primarily for a valid 1239 business purpose other than the avoidance of taxes, and the 1240 related member is not primarily engaged in the acquisition, use, 1241 maintenance or management, ownership, sale, exchange or any other 1242 disposition of intangible property. 1243
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(d) Nothing in this subsection shall require a taxpayer 1244 to add to its net income more than once any amount of interest 1245 expenses and costs or intangible expenses and costs that the 1246 taxpayer pays, accrues or incurs to a related member. 1247
(e) The commissioner may prescribe such regulations as 1248 necessary or appropriate to carry out the purposes of this 1249 subsection, including, but not limited to, clarifying definitions 1250 of terms, rules of stock attribution, factoring and discount 1251 transactions. 1252
(3) Individual nonbusiness deductions. 1253
(a) The amount allowable for individual nonbusiness 1254 itemized deductions for federal income tax purposes where the 1255 individual is eligible to elect, for the taxable year, to itemize 1256 deductions on his federal return except the following: 1257
(i) The deduction for state income taxes paid or 1258 other taxes allowed for federal purposes in lieu of state income 1259 taxes paid; 1260
(ii) The deduction for gaming losses from gaming 1261 establishments; 1262
(iii) The deduction for taxes collected by 1263 licensed gaming establishments pursuant to Section 27-7-901; 1264
(iv) The deduction for taxes collected by gaming 1265 establishments pursuant to Section 27-7-903. 1266
(b) In lieu of the individual nonbusiness itemized 1267 deductions authorized in paragraph (a), for all purposes other 1268
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than ordinary and necessary expenses paid or incurred during the 1269 taxable year in carrying on any trade or business, an optional 1270 standard deduction of: 1271
(i) Three Thousand Four Hundred Dollars 1272 ($3,400.00) through calendar year 1997, Four Thousand Two Hundred 1273 Dollars ($4,200.00) for the calendar year 1998 and Four Thousand 1274 Six Hundred Dollars ($4,600.00) for each calendar year thereafter 1275 in the case of married individuals filing a joint or combined 1276 return; 1277
(ii) One Thousand Seven Hundred Dollars 1278 ($1,700.00) through calendar year 1997, Two Thousand One Hundred 1279 Dollars ($2,100.00) for the calendar year 1998 and Two Thousand 1280 Three Hundred Dollars ($2,300.00) for each calendar year 1281 thereafter in the case of married individuals filing separate 1282 returns; 1283
(iii) Three Thousand Four Hundred Dollars 1284 ($3,400.00) in the case of a head of family; or 1285
(iv) Two Thousand Three Hundred Dollars 1286 ($2,300.00) in the case of an individual who is not married. 1287
In the case of a husband and wife living together, having 1288 separate incomes, and filing combined returns, the standard 1289 deduction authorized may be divided in any manner they choose. In 1290 the case of separate returns by a husband and wife, the standard 1291 deduction shall not be allowed to either if the taxable income of 1292
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one of the spouses is determined without regard to the standard 1293 deduction. 1294
(c) A nonresident individual shall be allowed the same 1295 individual nonbusiness deductions as are authorized for resident 1296 individuals in paragraph (a) or (b) of this subsection; however, 1297 the nonresident individual is entitled only to that proportion of 1298 the individual nonbusiness deductions as his net income from 1299 sources within the State of Mississippi bears to his total or 1300 entire net income from all sources. 1301
(4) Nothing in this section shall permit the same item to be 1302 deducted more than once, either in fact or in effect. 1303
SECTION 17. Section 27-7-18, Mississippi Code of 1972, is 1304 amended as follows: 1305
27-7-18. (1) Alimony payments. In the case of a person 1306 described in Section 27-7-15(2)(e), there shall be allowed as a 1307 deduction from gross income amounts paid as periodic payments to 1308 the extent of such amounts as are includible in the gross income 1309 of the spouse as provided in Section 27-7-15(2)(e), payment of 1310 which is made within the person's taxable year. 1311
(2) Unreimbursed moving expenses incurred after December 31, 1312 1994, are deductible as an adjustment to gross income in 1313 accordance with provisions of the United States Internal Revenue 1314 Code, and rules, regulations and revenue procedures thereunder 1315 relating to moving expenses, not in direct conflict with the 1316 provisions of the Mississippi Income Tax Law. 1317
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(3) Amounts paid after December 31, 1998, by a self-employed 1318 individual for insurance which constitute medical care for the 1319 taxpayer, his spouse and dependents, are deductible as an 1320 adjustment to gross income in accordance with provisions of the 1321 United States Internal Revenue Code, and rules, regulations and 1322 revenue procedures thereunder relating to such payments, not in 1323 direct conflict with the provisions of the Mississippi Income Tax 1324 Law. 1325
(4) Contributions or payments to a Mississippi Affordable 1326 College Savings (MACS) Program account are deductible from gross 1327 income as provided in Section 37-155-113. Payments made under a 1328 prepaid tuition contract entered into under the Mississippi 1329 Prepaid Affordable College Tuition Program are deductible as 1330 provided in Section 37-155-17. 1331
(5) (a) Unreimbursed travel expenses, lodging expenses and 1332 lost wages an individual incurred as a result of, and related to, 1333 the donation, while living, of one or more of his or her organs 1334 for human organ transplantation, are deductible from gross income. 1335 The deduction from gross income authorized by this subsection may 1336 be claimed for only once and may not exceed Ten Thousand Dollars 1337 ($10,000.00). 1338
(b) As used in this subsection, "organ" means all or 1339 part of a liver, pancreas, kidney, intestine, lung or bone marrow. 1340
(6) In the case of a self-employed individual, there shall 1341 be allowed as a deduction from gross income an amount equal to: 1342
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(a) Seventeen percent (17%) of the federal 1343 self-employment taxes imposed on such individual for taxable years 1344 ending in calendar year 2017; 1345
(b) Thirty-four percent (34%) of the federal 1346 self-employment taxes imposed on such individual for taxable years 1347 ending in calendar year 2018; and 1348
(c) Fifty percent (50%) of the federal self-employment 1349 taxes imposed on such individual for taxable years ending in 1350 calendar year 2019 and thereafter. 1351
(7) Contributions or payments to a Mississippi Achieving a 1352 Better Life Experience (ABLE) Program account are deductible from 1353 gross income as provided in Section 7 of this act. 1354
SECTION 18. This act shall take effect and be in force from 1355 and after its passage. 1356