On May 13, 2016, Mississippi Gov. Phil Bryant approved the Taxpayer Pay Raise Act of 2016, which repeals the state’s corporate franchise tax. The tax will be phased out by 2028.
Corporations currently pay a franchise tax of $2.50 per $1,000 of capital used, invested, or employed in Mississippi. Beginning in the 2018 tax year, the first $100,000 of capital employed in the state will be exempt from the franchise tax. Beginning in 2019, the franchise tax rate will be reduced by 25 cents every year until it is completely phased out in 2028. The tax has disproportionally affected Mississippi financial institutions due to their large capital base.
The act also includes a five-year phaseout of the 3 percent income tax bracket for corporations and individuals beginning in 2018 and a deduction for self-employed taxpayers, which will be phased in over three years and allow a deduction of one-half of self-employment taxes paid. The tax bracket phaseout provides a nominal tax benefit for most corporations.