July 28, 2022

House Bill 1691 of the 2022 Legislative Session was signed into law on April 14, 2022. This bill established an act to allow any partnership, S corporation or similar pass-through entity to elect to be taxed as an “electing passthrough entity” for state income tax purposes and to pay income tax at the entity level. Each owner, member, partner or shareholder of an electing pass-through entity shall report their pro rata or distributive share of the income from the electing pass-through entity and shall be allowed a credit against income taxes in an amount equal to his or her pro rata or distributive share of income tax paid by the electing pass-through entity for the corresponding taxable year. This bill is effective from and after January 1, 2022.

Eligibility for the Pass-Through Entity Election

For calendar year 2022 and each calendar year thereafter, any partnership, S corporation or similar pass-through entity desiring to be taxed as an electing pass-through entity must have a vote by or written consent of the members of the governing body of the entity, as well as a vote by or written consent of the owners, members, partners or shareholders holding greater than fifty percent (50%) of the voting control of the entity in order to make the election. Fiduciaries are not eligible to make a pass-through entity election.

Credit for Taxes Paid on the Electing Pass-Through Entity Return

Each owner, member, partner or shareholder of an electing PTE shall report their pro rata or distributive share of the income of the electing PTE on their separate income tax returns. The amount of credit for taxes paid on the electing PTE will be calculated by the entity and provided to the partner on the Mississippi K-1. A copy of the K1(s) received from the electing PTE must be attached to the partner’s separate return. The amount of credit allowed will be limited to the partner’s income tax due and any excess credit cannot be refunded or carried forward.

Individuals

Individuals will be allowed to take a tax credit for taxes paid to other states and/or the tax credit for taxes paid on the electing PTE return. Mississippi residents that are required to report income from other states to Mississippi will be allowed a tax credit for taxes paid to other states by filing the Tax Credit for Income Tax Paid to One Or More Other States, form 80-160, with a copy of the other state’s tax return(s) and/or K-1(s) attached to the Mississippi Individual Income Tax Return. For those states where the owners do not file a return, documentation of the amount of tax paid to another state on the taxpayer’s behalf by another entity, such as a K-1, must be attached to the
Mississippi return.

Businesses

Partnerships, S corporations or similar pass-through entities that are owners, members, partners or shareholders of an electing PTE can also take a tax credit for taxes paid on the electing PTE return on their separate Mississippi Pass-Through Entity Tax Returns, form 84-105. A copy of the K-1(s) received from the electing PTE must be attached to the partner’s separate Pass-Through Entity Tax Return.

Fiduciaries

Fiduciaries are not eligible to make a pass-through entity election. However, a fiduciary that is an owner, member, partner or shareholder of an electing PTE is allowed to take a tax credit in an amount equal to the pro rata or distributive share of income tax paid by the electing PTE for the corresponding taxable year. A copy of the K-1(s) received from the electing PTE should be attached to the fiduciary return.