Income tax; exclude payment for property taken by eminent domain from gross income.

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To: Ways and Means
MISSISSIPPI LEGISLATURE REGULAR SESSION 2026

By: Representative Remak

HOUSE BILL NO. 489

AN ACT TO AMEND SECTION 27-7-15, MISSISSIPPI CODE OF 1972, TO 1
EXCLUDE FROM THE DEFINITION OF "GROSS INCOME" FOR PURPOSES OF THE 2
STATE INCOME TAX LAW AMOUNTS RECEIVED AS PAYMENT FOR COMPENSATION 3
OR DAMAGES FOR PROPERTY TAKEN BY EMINENT DOMAIN OR CONDEMNATION AS 4
AUTHORIZED BY LAW, PROVIDED THAT THE PURCHASE DATE FOR THE 5
PROPERTY IS NOT LESS THAN FIVE YEARS BEFORE THE DATE THE PROPERTY 6
IS TAKEN BY EMINENT DOMAIN OR CONDEMNATION; AND FOR RELATED 7
PURPOSES. 8
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI: 9
SECTION 1. Section 27-7-15, Mississippi Code of 1972, is 10
amended as follows: 11
27-7-15. (1) For the purposes of this article, except as 12
otherwise provided, the term "gross income" means and includes the 13
income of a taxpayer derived from salaries, wages, fees or 14
compensation for service, of whatever kind and in whatever form 15
paid, including income from governmental agencies and subdivisions 16
thereof; or from professions, vocations, trades, businesses, 17
commerce or sales, or renting or dealing in property, or 18
reacquired property; also from annuities, interest, rents, 19
dividends, securities, insurance premiums, reinsurance premiums, 20
considerations for supplemental insurance contracts, or the 21
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transaction of any business carried on for gain or profit, or 22
gains, or profits, and income derived from any source whatever and 23
in whatever form paid. The amount of all such items of income 24
shall be included in the gross income for the taxable year in 25
which received by the taxpayer. The amount by which an eligible 26
employee's salary is reduced pursuant to a salary reduction 27
agreement authorized under Section 25-17-5 shall be excluded from 28
the term "gross income" within the meaning of this article. 29
(2) In determining gross income for the purpose of this 30
section, the following, under regulations prescribed by the 31
commissioner, shall be applicable: 32
(a) Dealers in property. Federal rules, regulations 33
and revenue procedures shall be followed with respect to 34
installment sales unless a transaction results in the shifting of 35
income from inside the state to outside the state. 36
(b) Casual sales of property. 37
(i) Prior to January 1, 2001, federal rules, 38
regulations and revenue procedures shall be followed with respect 39
to installment sales except they shall be applied and administered 40
as if H.R. 3594, the Installment Tax Correction Act of 2000 of the 41
106th Congress, had not been enacted. This provision will 42
generally affect taxpayers, reporting on the accrual method of 43
accounting, entering into installment note agreements on or after 44
December 17, 1999. Any gain or profit resulting from the casual 45
sale of property will be recognized in the year of sale. 46
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(ii) From and after January 1, 2001, federal 47
rules, regulations and revenue procedures shall be followed with 48
respect to installment sales except as provided in this 49
subparagraph (ii). Gain or profit from the casual sale of 50
property shall be recognized in the year of sale. When a taxpayer 51
recognizes gain on the casual sale of property in which the gain 52
is deferred for federal income tax purposes, a taxpayer may elect 53
to defer the payment of tax resulting from the gain as allowed and 54
to the extent provided under regulations prescribed by the 55
commissioner. If the payment of the tax is made on a deferred 56
basis, the tax shall be computed based on the applicable rate for 57
the income reported in the year the payment is made. Except as 58
otherwise provided in subparagraph (iii) of this paragraph (b), 59
deferring the payment of the tax shall not affect the liability 60
for the tax. If at any time the installment note is sold, 61
contributed, transferred or disposed of in any manner and for any 62
purpose by the original note holder, or the original note holder 63
is merged, liquidated, dissolved or withdrawn from this state, 64
then all deferred tax payments under this section shall 65
immediately become due and payable. 66
(iii) If the selling price of the property is 67
reduced by any alteration in the terms of an installment note, 68
including default by the purchaser, the gain to be recognized is 69
recomputed based on the adjusted selling price in the same manner 70
as for federal income tax purposes. The tax on this amount, less 71
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the previously paid tax on the recognized gain, is payable over 72
the period of the remaining installments. If the tax on the 73
previously recognized gain has been paid in full to this state, 74
the return on which the payment was made may be amended for this 75
purpose only. The statute of limitations in Section 27-7-49 shall 76
not bar an amended return for this purpose. 77
(c) Reserves of insurance companies. In the case of 78
insurance companies, any amounts in excess of the legally required 79
reserves shall be included as gross income. 80
(d) Affiliated companies or persons. As regards sales, 81
exchanges or payments for services from one to another of 82
affiliated companies or persons or under other circumstances where 83
the relation between the buyer and seller is such that gross 84
proceeds from the sale or the value of the exchange or the payment 85
for services are not indicative of the true value of the subject 86
matter of the sale, exchange or payment for services, the 87
commissioner shall prescribe uniform and equitable rules for 88
determining the true value of the gross income, gross sales, 89
exchanges or payment for services, or require consolidated returns 90
of affiliates. 91
(e) Alimony and separate maintenance payments. The 92
federal rules, regulations and revenue procedures in determining 93
the deductibility and taxability of alimony payments shall be 94
followed in this state. 95
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(f) Reimbursement for expenses of moving. There shall 96
be included in gross income (as compensation for services) any 97
amount received or accrued, directly or indirectly, by an 98
individual as a payment for or reimbursement of expenses of moving 99
from one (1) residence to another residence which is attributable 100
to employment or self-employment. 101
(3) In the case of taxpayers other than residents, gross 102
income includes gross income from sources within this state. 103
(4) The words "gross income" do not include the following 104
items of income which shall be exempt from taxation under this 105
article: 106
(a) The proceeds of life insurance policies and 107
contracts paid upon the death of the insured. However, the income 108
from the proceeds of such policies or contracts shall be included 109
in the gross income. 110
(b) The amount received by the insured as a return of 111
premium or premiums paid by him under life insurance policies, 112
endowment, or annuity contracts, either during the term or at 113
maturity or upon surrender of the contract. 114
(c) The value of property acquired by gift, bequest, 115
devise or descent, but the income from such property shall be 116
included in the gross income. 117
(d) Interest upon the obligations of the United States 118
or its possessions, or securities issued under the provisions of 119
the Federal Farm Loan Act of 1916, or bonds issued by the War 120
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Finance Corporation, or obligations of the State of Mississippi or 121
political subdivisions thereof. 122
(e) The amounts received through accident or health 123
insurance as compensation for personal injuries or sickness, plus 124
the amount of any damages received for such injuries or such 125
sickness or injuries, or through the War Risk Insurance Act, or 126
any law for the benefit or relief of injured or disabled members 127
of the military or naval forces of the United States. 128
(f) Income received by any religious denomination or by 129
any institution or trust for moral or mental improvements, 130
religious, Bible, tract, charitable, benevolent, fraternal, 131
missionary, hospital, infirmary, educational, scientific, 132
literary, library, patriotic, historical or cemetery purposes or 133
for two (2) or more of such purposes, if such income be used 134
exclusively for carrying out one or more of such purposes. 135
(g) Income received by a domestic corporation which is 136
"taxable in another state" as this term is defined in this 137
article, derived from business activity conducted outside this 138
state. Domestic corporations taxable both within and without the 139
state shall determine Mississippi income on the same basis as 140
provided for foreign corporations under the provisions of this 141
article. 142
(h) In case of insurance companies, there shall be 143
excluded from gross income such portion of actual premiums 144
received from an individual policyholder as is paid back or 145
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credited to or treated as an abatement of premiums of such 146
policyholder within the taxable year. 147
(i) Income from dividends that has already borne a tax 148
as dividend income under the provisions of this article, when such 149
dividends may be specifically identified in the possession of the 150
recipient. 151
(j) Amounts paid by the United States to a person as 152
added compensation for hazardous duty pay as a member of the Armed 153
Forces of the United States in a combat zone designated by 154
Executive Order of the President of the United States. 155
(k) Amounts received as retirement allowances, 156
pensions, annuities or optional retirement allowances paid under 157
the federal Social Security Act, the Railroad Retirement Act, the 158
Federal Civil Service Retirement Act, or any other retirement 159
system of the United States government, retirement allowances paid 160
under the Mississippi Public Employees' Retirement System, 161
Mississippi Highway Safety Patrol Retirement System or any other 162
retirement system of the State of Mississippi or any political 163
subdivision thereof. The exemption allowed under this paragraph 164
(k) shall be available to the spouse or other beneficiary at the 165
death of the primary retiree. 166
(l) Amounts received as retirement allowances, 167
pensions, annuities or optional retirement allowances paid by any 168
public or governmental retirement system not designated in 169
paragraph (k) or any private retirement system or plan of which 170
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the recipient was a member at any time during the period of his 171
employment. Amounts received as a distribution under a Roth 172
Individual Retirement Account shall be treated in the same manner 173
as provided under the Internal Revenue Code of 1986, as amended. 174
The exemption allowed under this paragraph (l) shall be available 175
to the spouse or other beneficiary at the death of the primary 176
retiree. 177
(m) National Guard or Reserve Forces of the United 178
States compensation not to exceed the aggregate sum of Five 179
Thousand Dollars ($5,000.00) for any taxable year through the 2005 180
taxable year, and not to exceed the aggregate sum of Fifteen 181
Thousand Dollars ($15,000.00) for any taxable year thereafter. 182
(n) Compensation received for active service as a 183
member below the grade of commissioned officer and so much of the 184
compensation as does not exceed the maximum enlisted amount 185
received for active service as a commissioned officer in the Armed 186
Forces of the United States for any month during any part of which 187
such members of the Armed Forces (i) served in a combat zone as 188
designated by Executive Order of the President of the United 189
States or a qualified hazardous duty area as defined by federal 190
law, or both; or (ii) was hospitalized as a result of wounds, 191
disease or injury incurred while serving in such combat zone. For 192
the purposes of this paragraph (n), the term "maximum enlisted 193
amount" means and has the same definition as that term has in 26 194
USCS 112. 195
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(o) The proceeds received from federal and state 196
forestry incentive programs. 197
(p) The amount representing the difference between the 198
increase of gross income derived from sales for export outside the 199
United States as compared to the preceding tax year wherein gross 200
income from export sales was highest, and the net increase in 201
expenses attributable to such increased exports. In the absence 202
of direct accounting, the ratio of net profits to total sales may 203
be applied to the increase in export sales. This paragraph (p) 204
shall only apply to businesses located in this state engaging in 205
the international export of Mississippi goods and services. Such 206
goods or services shall have at least fifty percent (50%) of value 207
added at a location in Mississippi. 208
(q) Amounts paid by the federal government for the 209
construction of soil conservation systems as required by a 210
conservation plan adopted pursuant to 16 USCS 3801 et seq. 211
(r) The amount deposited in a medical savings account, 212
and any interest accrued thereon, that is a part of a medical 213
savings account program as specified in the Medical Savings 214
Account Act under Sections 71-9-1 through 71-9-9; provided, 215
however, that any amount withdrawn from such account for purposes 216
other than paying eligible medical expense or to procure health 217
coverage shall be included in gross income. 218
(s) Amounts paid by the Mississippi Soil and Water 219
Conservation Commission from the Mississippi Soil and Water 220
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Cost-Share Program for the installation of water quality best 221
management practices. 222
(t) Dividends received by a holding corporation, as 223
defined in Section 27-13-1, from a subsidiary corporation, as 224
defined in Section 27-13-1. 225
(u) Interest, dividends, gains or income of any kind on 226
any account in the Mississippi Affordable College Savings Trust 227
Fund, as established in Sections 37-155-101 through 37-155-125, to 228
the extent that such amounts remain on deposit in the MACS Trust 229
Fund or are withdrawn pursuant to a qualified withdrawal, as 230
defined in Section 37-155-105. 231
(v) Interest, dividends or gains accruing on the 232
payments made pursuant to a prepaid tuition contract, as provided 233
for in Section 37-155-17. 234
(w) Income resulting from transactions with a related 235
member where the related member subject to tax under this chapter 236
was required to, and did in fact, add back the expense of such 237
transactions as required by Section 27-7-17(2). Under no 238
circumstances may the exclusion from income exceed the deduction 239
add-back of the related member, nor shall the exclusion apply to 240
any income otherwise excluded under this chapter. 241
(x) Amounts that are subject to the tax levied pursuant 242
to Section 27-7-901, and are paid to patrons by gaming 243
establishments licensed under the Mississippi Gaming Control Act. 244
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(y) Amounts that are subject to the tax levied pursuant 245
to Section 27-7-903, and are paid to patrons by gaming 246
establishments not licensed under the Mississippi Gaming Control 247
Act. 248
(z) Interest, dividends, gains or income of any kind on 249
any account in a qualified tuition program and amounts received as 250
distributions under a qualified tuition program shall be treated 251
in the same manner as provided under the United States Internal 252
Revenue Code, as amended. For the purposes of this paragraph (z), 253
the term "qualified tuition program" means and has the same 254
definition as that term has in 26 USCS 529. 255
(aa) The amount deposited in a health savings account, 256
and any interest accrued thereon, that is a part of a health 257
savings account program as specified in the Health Savings 258
Accounts Act created in Sections 83-62-1 through 83-62-9; however, 259
any amount withdrawn from such account for purposes other than 260
paying qualified medical expenses or to procure health coverage 261
shall be included in gross income, except as otherwise provided by 262
Sections 83-62-7 and 83-62-9. 263
(bb) Amounts received as qualified disaster relief 264
payments shall be treated in the same manner as provided under the 265
United States Internal Revenue Code, as amended. 266
(cc) Amounts received as a "qualified Hurricane Katrina 267
distribution" as defined in the United States Internal Revenue 268
Code, as amended. 269
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(dd) Amounts received by an individual which may be 270
excluded from income as foreign earned income for federal income 271
tax purposes. 272
(ee) Amounts received by a qualified individual, 273
directly or indirectly, from an employer or nonprofit housing 274
organization that are qualified housing expenses associated with 275
an employer-assisted housing program. For purposes of this 276
paragraph (ee): 277
(i) "Qualified individual" means any individual 278
whose household income does not exceed one hundred twenty percent 279
(120%) of the area median gross income (as defined by the United 280
States Department of Housing and Urban Development), adjusted for 281
household size, for the area in which the housing is located. 282
(ii) "Nonprofit housing organization" means an 283
organization that is organized as a not-for-profit organization 284
under the laws of this state or another state and has as one of 285
its purposes: 286
1. Homeownership education or counseling; 287
2. The development of affordable housing; or 288
3. The development or administration of 289
employer-assisted housing programs. 290
(iii) "Employer-assisted housing program" means a 291
separate written plan of any employer (including, without 292
limitation, tax-exempt organizations and public employers) for the 293
exclusive benefit of the employer's employees to pay qualified 294
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housing expenses to assist the employer's employees in securing 295
affordable housing. 296
(iv) "Qualified housing expenses" means: 297
1. With respect to rental assistance, an 298
amount not to exceed Two Thousand Dollars ($2,000.00) paid for the 299
purpose of assisting employees with security deposits and rental 300
subsidies; and 301
2. With respect to homeownership assistance, 302
an amount not to exceed the lesser of Ten Thousand Dollars 303
($10,000.00) or six percent (6%) of the purchase price of the 304
employee's principal residence that is paid for the purpose of 305
assisting employees with down payments, payment of closing costs, 306
reduced interest mortgages, mortgage guarantee programs, mortgage 307
forgiveness programs, equity contribution programs, or 308
contributions to homebuyer education and/or homeownership 309
counseling of eligible employees. 310
(ff) For the 2010 taxable year and any taxable year 311
thereafter, amounts converted in accordance with the United States 312
Internal Revenue Code, as amended, from a traditional Individual 313
Retirement Account to a Roth Individual Retirement Account. The 314
exemption allowed under this paragraph (ff) shall be available to 315
the spouse or other beneficiary at the death of the primary 316
retiree. 317
(gg) Amounts received for the performance of disaster 318
or emergency-related work as defined in Section 27-113-5. 319
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(hh) The amount deposited in a catastrophe savings 320
account established under Sections 27-7-1001 through 27-7-1007, 321
interest income earned on the catastrophe savings account, and 322
distributions from the catastrophe savings account; however, any 323
amount withdrawn from a catastrophe savings account for purposes 324
other than paying qualified catastrophe expenses shall be included 325
in gross income, except as otherwise provided by Sections 326
27-7-1001 through 27-7-1007. 327
(ii) Interest, dividends, gains or income of any kind 328
on any account in the Mississippi Achieving a Better Life 329
Experience (ABLE) Trust Fund, as established in Chapter 28, Title 330
43, to the extent that such amounts remain on deposit in the ABLE 331
Trust Fund or are withdrawn pursuant to a qualified withdrawal, as 332
defined in Section 43-28-11. 333
(jj) Subject to the limitations provided under Section 334
27-7-1103, amounts deposited into a first-time homebuyer savings 335
account and any interest or other income earned attributable to an 336
account and monies or funds withdrawn or distributed from an 337
account for the payment of eligible costs by or on behalf of a 338
qualified beneficiary; however, any monies or funds withdrawn or 339
distributed from a first-time homebuyer savings account for any 340
purpose other than the payment of eligible costs by or on behalf 341
of a qualified beneficiary shall be included in gross income. For 342
the purpose of this paragraph (jj), the terms "first-time 343
homebuyer savings account," "eligible costs" and "qualified 344
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beneficiary" mean and have the same definitions as such terms have 345
in Section 27-7-1101. 346
(kk) Amounts paid by an agricultural disaster program 347
as compensation to an agricultural producer, cattle farmer or 348
cattle rancher who has suffered a loss as the result of a disaster 349
or emergency, including, but not limited to, the following United 350
States Department of Agriculture programs: 351
(i) Livestock Forage Disaster Program; 352
(ii) Livestock Indemnity Program; 353
(iii) Emergency Assistance for Livestock, Honey 354
Bees and Farm-raised Fish Program; 355
(iv) Emergency Conservation Program; 356
(v) Noninsured Crop Disaster Assistance Program; 357
(vi) Pasture, Rangeland, Forage Pilot Insurance 358
Program; 359
(vii) Annual Forage Pilot Program; 360
(viii) Livestock Risk Protection Insurance 361
Program; and 362
(ix) Livestock Gross Margin Insurance Plan. 363
(ll) Amounts received as advances and/or grants under 364
the federal Coronavirus Aid, Relief, and Economic Security Act, 365
the Consolidated Appropriations Act of 2021 and the American 366
Rescue Plan Act. 367
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(mm) Any and all cancelled indebtedness provided for 368
under the Coronavirus Aid, Relief, and Economic Security Act and 369
the Consolidated Appropriations Act of 2021. 370
(nn) Amounts received as payments under Section 371
27-3-85. 372
(oo) Amounts received as grants under the 2020 COVID-19 373
Mississippi Business Assistance Act. 374
(pp) Amounts received as grants under Section 57-1-521. 375
( * * *qq) Amounts received as grants under the 376
Shuttered Venue Operators Grant Program and Restaurant 377
Revitalization Fund authorized by the Economic Aid to Hard-Hit 378
Small Businesses, Nonprofits, and Venues Act, and amended by the 379
American Rescue Plan Act. 380
( * * *rr) Amounts received as grants under the 381
Mississippi Agriculture Stabilization Act. 382
(ss) Amounts received as payment for compensation or 383
damages for property taken by eminent domain or condemnation as 384
authorized under Section 11-27-1 et seq., Sections 65-1-301 385
through 65-1-347, or any other provision of law, provided that the 386
purchase date for the property is not less than five (5) years 387
before the date the property is taken by eminent domain or 388
condemnation. 389
(5) Prisoners of war, missing in action-taxable status. 390
(a) Members of the Armed Forces. Gross income does not 391
include compensation received for active service as a member of 392
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the Armed Forces of the United States for any month during any 393
part of which such member is in a missing status, as defined in 394
paragraph (d) of this subsection, during the Vietnam Conflict as a 395
result of such conflict. 396
(b) Civilian employees. Gross income does not include 397
compensation received for active service as an employee for any 398
month during any part of which such employee is in a missing 399
status during the Vietnam Conflict as a result of such conflict. 400
(c) Period of conflict. For the purpose of this 401
subsection, the Vietnam Conflict began February 28, 1961, and ends 402
on the date designated by the President by Executive Order as the 403
date of the termination of combatant activities in Vietnam. For 404
the purpose of this subsection, an individual is in a missing 405
status as a result of the Vietnam Conflict if immediately before 406
such status began he was performing service in Vietnam or was 407
performing service in Southeast Asia in direct support of military 408
operations in Vietnam. "Southeast Asia," as used in this 409
paragraph, is defined to include Cambodia, Laos, Thailand and 410
waters adjacent thereto. 411
(d) "Missing status" means the status of an employee or 412
member of the Armed Forces who is in active service and is 413
officially carried or determined to be absent in a status of (i) 414
missing; (ii) missing in action; (iii) interned in a foreign 415
country; (iv) captured, beleaguered or besieged by a hostile 416
force; or (v) detained in a foreign country against his will; but 417
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does not include the status of an employee or member of the Armed 418
Forces for a period during which he is officially determined to be 419
absent from his post of duty without authority. 420
(e) "Active service" means active federal service by an 421
employee or member of the Armed Forces of the United States in an 422
active duty status. 423
(f) "Employee" means one who is a citizen or national 424
of the United States or an alien admitted to the United States for 425
permanent residence and is a resident of the State of Mississippi 426
and is employed in or under a federal executive agency or 427
department of the Armed Forces. 428
(g) "Compensation" means (i) basic pay; (ii) special 429
pay; (iii) incentive pay; (iv) basic allowance for quarters; (v) 430
basic allowance for subsistence; and (vi) station per diem 431
allowances for not more than ninety (90) days. 432
(h) If refund or credit of any overpayment of tax for 433
any taxable year resulting from the application of this subsection 434
(5) is prevented by the operation of any law or rule of law, such 435
refund or credit of such overpayment of tax may, nevertheless, be 436
made or allowed if claim therefor is filed with the Department of 437
Revenue within three (3) years after the date of the enactment of 438
this subsection. 439
(i) The provisions of this subsection shall be 440
effective for taxable years ending on or after February 28, 1961. 441
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ST: Income tax; exclude payment for property
taken by eminent domain from gross income.
(6) A shareholder of an S corporation, as defined in Section 442
27-8-3(1)(g), shall take into account the income, loss, deduction 443
or credit of the S corporation only to the extent provided in 444
Section 27-8-7(2). 445
SECTION 2. Nothing in this act shall affect or defeat any 446
claim, assessment, appeal, suit, right or cause of action for 447
taxes due or accrued under the income tax laws before the date on 448
which this act becomes effective, whether such claims, 449
assessments, appeals, suits or actions have been begun before the 450
date on which this act becomes effective or are begun thereafter; 451
and the provisions of the income tax laws are expressly continued 452
in full force, effect and operation for the purpose of the 453
assessment, collection and enrollment of liens for any taxes due 454
or accrued and the execution of any warrant under such laws before 455
the date on which this act becomes effective, and for the 456
imposition of any penalties, forfeitures or claims for failure to 457
comply with such laws. 458
SECTION 3. This act shall take effect and be in force from 459
and after January 1, 2026. 460