Income tax; increase amount of National Guard compensation excluded from gross income.

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To: Ways and Means
MISSISSIPPI LEGISLATURE REGULAR SESSION 2026

By: Representatives Carpenter, Harris, Hall

HOUSE BILL NO. 693

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