- Downstream Consequences Coming into Focus a Year after Mississippi’s AT&T Dividend Decision
- November 3, 2017 | Author: John F. Fletcher
- Law Firm: Jones Walker LLP - Jackson Office
In October 2016, the Mississippi Supreme Court issued its long-awaited decision in Mississippi Department of Revenue v. AT&T Corporation, concluding the state’s dividend exclusion statute violated the Commerce Clause of the United States Constitution. The statute, Miss. Code Ann. Section 27-7-15(4)(i), unconstitutionally discriminated against interstate commerce by excluding from Mississippi gross income any dividends received from subsidiaries doing business and filing income tax returns in the state, while taxing identical dividends received from “non-nexus” subsidiaries having no Mississippi presence.
Following the AT&T decision, effectively no dividends remain taxable for Mississippi corporate income tax purposes. Longstanding Department of Revenue regulations classify dividends from foreign subsidiaries as non-business income, so the Court’s decision expanding the Section 27-7-15(4)(i) exclusion to encompass non-nexus dividends now renders virtually all domestic dividends exempt.
That practically universal dividend exclusion, however, has produced several important downstream consequences over the past year that could reduce the benefit from that decision, in many recent cases having resulted in material income and franchise tax audit adjustments.For details on those consequences, continue reading this post on our Cooking with SALT blog.