MS HB650

Amends Mississippi income tax law Section 27-7-17 to define "valid business purpose" for deducting intangible expenses and interest paid to related members as business activity that improves the taxpayer's economic position apart from tax effects.

Requires taxpayers to add back otherwise deductible interest expenses and intangible expenses paid to related members unless the expenses meet specific exceptions, including that the related member paid the amount to an unrelated party or the transaction had valid business purpose with economic substance comparable to arm's-length transactions.

Establishes that tax avoidance must not be a significant motivation for transactions between related parties for deductions to be allowed, and requires fair market compensation if costs related to intangible property were shared between parties.

Prohibits deductions for interest and intangible expenses paid to related members primarily engaged in acquiring, maintaining, managing, owning, or disposing of intangible property.

Effective January 1, 2013.