April 2, 2014 10:48:38 AM
JACKSON -- Lawmakers are moving ahead with tax collection changes that the state Department of Revenue warns could ultimately cost Mississippi more than $100 million a year.
Supporters, though, say the department's tax collection powers put taxpayers at an unfair disadvantage, especially after a recent state Supreme Court decision. They also dispute whether the bill will decrease revenue by as much as the collection agency says that it will.
The House and Senate passed House Bill 799 by large margins Tuesday, sending it to Gov. Phil Bryant for his consideration.
A key part of the bill could make it harder for the state to rule that multistate corporations are paying too little in taxes to Mississippi. It says the Department of Revenue would have to present clear and convincing proof before it could reapportion how a company splits its income among states, and only do so in "limited and unique, nonrecurring circumstances."
"The policy change that's been made will make it more difficult compared with what the policy had been," Revenue Commissioner Ed Morgan said.
The department had fought the changes, but Morgan said lawmakers ultimately must choose how the state collects taxes.
"It's a balancing act the policymakers must do," he said.
The bill grew out of a reaction to a 2013 Mississippi Supreme Court decision that credit bureau Equifax Inc. had to prove that it didn't earn any taxable income in the state. The Revenue Department examined Equifax's income and allocated some to Mississippi, ruling it owed taxes and penalties.
Mississippi collected $600 million in corporate income tax last year, but some states don't collect income taxes.
Scott Waller, Mississippi Economic Council's chief operating officer, said that decision left taxpayers too little room to assert their legal rights.
"There were really some serious issues on whether the taxpayer had due process," Waller said Tuesday.
The Revenue Department estimates the restrictions of reapportionment would cost $25 million a year, and some lawmakers warned the state is giving big corporate taxpayers a gift.
"We've got something here where we're giving away money," said Sen. Bill Stone, R-Ashland.
"It's not giving away anything," replied Senate Finance Committee Chairman Joey Fillingane, R-Sumrall. "Giving away something presupposed it belongs to the state. I believe it is the taxpayer's money, and I believe we collect the part that is rightfully due."
The bill also makes a number of other changes. Over a series of years, it steps down the interest rate imposed on overdue taxes and penalties from 12 percent a year to 6 percent. The department estimates that change will cut state collections by more than $38 million when it's fully in effect in 2020.
Most in dispute is a section that regulates how the state penalizes businesses for failing to collect sales taxes. The department said it will cost $39.2 million a year. Waller, though, said negotiators tried to address the concerns and were told at one point by the department that agreed-on changes would reduce costs to zero.
Online: House Bill 799: http://bit.ly/1mxWIOn
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