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Mississippi Chancery Court again holds dividends received exclusion statute violates Commerce Clause

The Chancery Court of Hinds County, Miss., recently has held that the state’s corporate income tax dividends received exclusion statute violates the Commerce Clause of the U.S. Constitution because the exclusion is limited to dividends received from affiliates that are doing business in Mississippi and file income tax returns in the state. The Court held that the statute does not allow the exclusion of dividends received from an affiliate that does not do business in Mississippi. As a result, the Court determined that the dividend exclusion statute is discriminatory because it clearly favors domestic corporations over foreign competitors. The Court held that the statute is unconstitutional and granted the taxpayer’s motion for summary judgment. The decision is substantially similar to a 2006 decision that the Court issued to the same taxpayer, which ultimately was overturned by the Mississippi Supreme Court on procedural grounds.

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