MS HB1457

Defines "valid business purpose" in Mississippi income tax law as one or more business purposes that improve the taxpayer's economic position apart from tax effects, as further defined by regulation.

Requires taxpayers to add back otherwise deductible interest expenses and intangible expenses paid to related members, unless the taxpayer can establish the expenses meet specific exemption criteria.

Exempts interest and intangible expenses from the add-back requirement if: (1) the related member paid the amount to an unrelated party in the same year, or (2) the transaction has valid business purpose and economic substance with arm's-length terms, tax avoidance is not a significant motivation, and the related member is not primarily engaged in intangible property acquisition or disposition.

Clarifies that if development or purchase costs for intangible property were shared, the paying party must have been compensated at fair market arm's-length price, or the expenses are not deductible.

Effective January 1, 2013.