Mississippi Tax Credits

Skills Training Tax Credit

​​The Skills Training Income Tax Credit is an incentive for a business to offer training to their Mississippi employees. For expenses to qualify for the Skills Training Credit, the training program must be offered by, or be approved by, the community or junior college in the district where the business is located, but the training does not have to be held on the community or junior college campus to qualify for the credit. The training offered must enhance skills related to the job that the employee is performing, improve job performance, or relate to a career path that is anticipated for the employee. Life enrichment type training will not qualify. Pre-employment training that involves skills training may be eligible for the credit, but it must be directly related to the employment of these individuals.

Training that is not specifically related to the employee’s job, but is required by a governmental entity may be used in computing the credit to the extent it is required by the governmental entity. Training in excess of the requirements may not be included in the expenses used to calculate the credit. Example – if OSHA requires a certain number of employees to be certified for CPR, then the training for those employees may be included, but training for any employee in excess of the required number may not be included.

The expenses that qualify for this credit include expenses relating to instructors, instructional materials and equipment, and the construction and maintenance by an employer of facilities designated for training purposes. These expenses may include travel, accommodations, rental of facilities, cost of copies, etc. The eligible amounts are those that are deductible in the employer’s Mississippi income tax return. For the purposes of this credit, maintenance means repairs to the physical facility, not janitorial, landscaping, electricity, water and other similar expenses.

Tuition reimbursement programs will qualify as long as they are related to the employee’s job and there is an agreement between the employer and employee that the employee must work for the employer for a reasonable period of time after the tuition reimbursement program has been completed so that the training may be utilized. The expenses that qualify are net of any reimbursement or paybacks to the employer. If an employee begins a program and is terminated for cause by the employer, the employer does not have to recapture the amount previously taken as a credit, unless the employee has to repay the employer. If so, the employer has to recapture those amounts. 

​The Skills Training Tax Credit can be used in combination with any other credit. The credit equals fifty percent (50%) of the amount of expenses the business incurs in that training. The credit is allowed up to fifty percent (50%) of the income tax liability attributable to the income derived from the operations in Mississippi for that year. The amount of training credit cannot exceed $2,500 per Mississippi employee per year. The credit is not refundable. It can only be used against the income tax liability. Any excess credit amount can be carried forward for up to five (5) years from the original year in which the excess credit could not be used. It is more advantageous to use the earliest year's unexpired credit first.

The skills training expenses cannot be used both as a credit and a deduction. If the expense is used as a basis for a credit, then the amount of the credit taken must be added back to Mississippi taxable income in the year the credit is used to reduce the amount of expense used as a deduction. The credit may be claimed only in the tax year in which the expenses are actually paid.

Only the business or corporation that actually incurred the expenses qualifying for the credit can receive the credit. Credit received by a partnership, LLC or an S-Corporation may be passed through to offset tax due from the activity that created the credit. The credit is subject to the same limitations that the pass through entity would have had. The tax due on salaries or wages paid by an S-Corporation and guaranteed payments to partners by a partnership cannot be offset by the credit. 

​An income tax credit is available equal to the expense of providing skills training to Mississippi employees for the following businesses:
• manufacturers              • processors                               • distributors
• wholesalers                  • research and development      • warehouses

The following must receive a letter from MDA certifying them as qualified as one of these types of businesses before applying to the MDOR for a certification of their training credit:

• air transportation and maintenance facilities
• telecommunication enterprises
• computer software developers
• movie industry studios
• data or information processing
• any technology intensive facility
• recreational facilities that impact tourism
• final destination or resort hotels with more than 150 guest rooms

EXCEPTION: No business for the transportation, handling, storage, processing or disposal of hazardous waste is eligible to receive this credit. 

Jobs Tax Credit

​The Jobs Income Tax Credit is a credit that is available to businesses that increase employment by a specified minimum amount. The minimum amount depends on the location of the jobs created. It is not available to businesses that move from one location within the state to another location within the state without increasing employment.

The amount of the credit is based on the number of new jobs created and the county where the jobs are created. Jobs created in less developed counties are eligible for a greater percentage of payroll for each job created while fewer jobs are needed to establish the minimum. The credit is good for a period of five (5) years. This credit may be used in combination with any of the other credits. However, the total of the Jobs Tax Credit, the National or Regional Headquarters Tax Credit and the Research and Development Skills Tax Credit is limited to fifty percent (50%) of the income tax liability attributable to the income derived from operations in this state for that year. Any credit claimed but not used in a taxable year may be carried forward for five (5) years.

Each year the MDOR ranks the counties in Mississippi as Tier Three (less developed), Tier Two (moderately developed), and Tier One (developed). The counties are evaluated and ranked based on the unemployment rate and per capita income of each county. They are then divided into the three previously mentioned groups with one-third of the counties in each group. This ranking is used to determine the minimum number of jobs a business must create in a given year before it qualifies for the credit and the amount of credit per job allowed. The ranking for a specific county can change from year to year based on this evaluation. The amount of Jobs Tax Credit per employee and the job levels for each county ranking are as follows:

County Ranking                                    Req. Job Incr                                    Credit Per Job
Tier One (developed)                                      20                                               2.5% of payroll
Tier Two (moderately developed)                   15                                               5.0% of payroll

Tier Three (less developed)                            10                                             10.0% of payroll 

The number of jobs must be created within one (1) year and is measured at the end of the fiscal year. To determine when the new full-time jobs are created, the business compares the average number of full-time positions in one fiscal year with the average for the prior year. When dealing with a short period, compare the short period to the same period of the prior year. Jobs cannot be accumulated over several years to qualify. The credit is available for each net new full- time job created as long as the minimum number has been achieved and maintained. The credit is for full-time positions only. Part-time jobs may not be combined to add up to a full-time job. The credit is based on filled positions and the employees must be employed in this state and subject to Mississippi Withholding Tax. A “full-time job” is a job of at least thirty-five (35) hours a week and includes leased employees from an entity that is in the business of leasing employees as long as all other requirements are met.

The number of jobs must be created within one (1) year and is measured at the end of the fiscal year. To determine when the new full-time jobs are created, the business compares the average number of full-time positions in one fiscal year with the average for the prior year. When dealing with a short period, compare the short period to the same period of the prior year. Jobs cannot be accumulated over several years to qualify. The credit is available for each net new full- time job created as long as the minimum number has been achieved and maintained. The credit is for full-time positions only. Part-time jobs may not be combined to add up to a full-time job. The credit is based on filled positions and the employees must be employed in this state and subject to Mississippi Withholding Tax. A “full-time job” is a job of at least thirty-five (35) hours a week and includes leased employees from an entity that is in the business of leasing employees as long as all other requirements are met.

The credit may be taken each fiscal year for five (5) years beginning in years 2 through 6 after the creation of the jobs. The year the jobs are created is Year 1.

Example: A manufacturer expands and creates 50 new jobs in a developed county. The minimum number of jobs in a developed county is 20 and the amount of credit per job is 2.5% of the payroll of those 50 new jobs. The payroll for those new jobs equals $2,500,000. The credit available for the 50 jobs would be $62,500. The credit can be used in Years 2 through 6 on the taxpayer's income tax return. Credit is available each year (Years 2 - 6) for the 50 jobs created, plus any unused credit that has been carried forward.

The Jobs Tax Credit is earned at a given level of employment for one five (5) year period. If, after qualifying for one five (5) year period, the business increases the number of jobs substantially enough to qualify again for another five (5) year period, they may apply for a second five (5) year period. Each five (5) year period is accounted for separately.

Jobs created within an existing (5) five year period that do not meet the minimum number of jobs required to qualify for an additional (5) five year period are allowed to be included within the existing (5) five year period.

If the number of jobs falls below the minimum required within a year, the credit is lost for that year and cannot be recovered. If the minimum number of jobs is achieved again, the credit is available for the remainder of the original five (5) year period. The original period is not extended. There are no recapture rules for the credit taken prior to the period of time that the number of jobs fell below the minimum.

Same Ownership
If an employer constructs a new facility or expands an existing facility, without other decreases in employment, then the facility would qualify for the jobs tax credit as long as the other requirements are met.

If an employer retains ownership of a facility that has been shut down for five (5) years and then is reopened, even producing the same or similar product, any increases in employment will create the jobs tax credit as though it is a new facility. If the facility is closed for less than five (5) years, then the jobs tax credit is not available until the employment levels exceed the previous peak levels. Exceptions may be considered on a case by case basis.

If an employer retains ownership of a facility and replaces some, or all, of the existing equipment, but makes the same or a similar product, then the base employment level is not affected by the equipment replacement.

If an employer closes an old facility and opens a new facility making the same or a related product, then the employment level at the old facility would be used to determine whether employment increases at the new facility qualify for the jobs tax credit.

If an employer retains ownership of a facility, suspends operations and retools the production floor with ninety-five percent (95%) new equipment that makes a new product not similar to the old product, then the facility will be treated as a new facility.

Different Ownership
If an employer sells a plant to a related party, then the related party will be treated the same as the employer.

If an employer sells a facility to an unrelated third party, and the new owner continues the old operations, then the new owner must exceed the old owner’s peak employment by a qualifying increase in order to receive any jobs tax credit.

If an employer sells a facility to an unrelated third party and the new owner suspends operations to retool the production floor, then the facility will be treated as a new facility for the new owner. However, the retooling must include replacing ninety-five (95%) of the equipment to make a new product that is not similar to the old product.

If an employer ceases operations at a facility for a year or more and sells the facility to an unrelated third party, then the facility will be treated as a new facility for the new owner, even if the same or a similar product is being made. If the new owner has shut down a facility with similar operations at the same time, then the facility will not be treated as a new facility. If a completely different product is being made, the one-year shut down requirement may be shortened. This will be considered on a case by case basis.

If, in any of the above examples, the facility requesting the incentive produces a product that was manufactured at a facility that was closed, then the requesting facility will not earn the jobs tax credit unless the employment levels exceeds any previous high at the closed facility. If the requesting facility is located in this state, it will be able to earn the jobs tax credit, but only to the extent that its level of employment plus the level of the original location (up to any previous high level of employment at the old location before the closing or retooling level) combined is in excess of any previous high level of employment at the original location. The definition of original product will include upgrades and modifications of a normal product line.

Calculating the Minimum Number of Jobs to Qualify
To determine whether a business at an existing facility has created the minimum number of jobs to qualify for the credit, a comparison of the average annual employment level for the previous year with the average annual employment in the current year must be made. If the amount of the increase exceeds the minimum required, then the business would qualify for the credit. This allows the credit for businesses that have not constructed a new facility, but have substantially increased employment at an existing facility.

To determine whether a business with a construction for a new facility qualifies for the credit, the average employment for the portion of the year after production was started should be compared with the same period for the previous year. If the increase exceeds the minimum, then the business would qualify for the credit.  

The eligible businesses include:

• manufacturers                            • processors                                • distributors
• wholesalers                                • research and development       • warehouses

The following types of businesses require a designation from MDA prior to taking the Jobs Tax Credit:
• air transportation and maintenance facilities • telecommunication enterprises
• computer software developers
• recreational facilities that impact tourism
• movie industry studios • data or information processing
• any technology intensive facility • final destination or resort hotels with more than 150 guest rooms

EXCEPTION: No business for the transportation, handling, storage, processing or disposal of hazardous waste is eligible to receive this credit.[page6image21104] [page6image22824]