Mississippi upholds taxpayer alternative franchise tax base

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August 2020


The Mississippi Supreme Court found that distortion existed when the Department of Revenue (1) included capital of non-unitary subsidiaries in Comcast’s franchise tax base and (2) excluded unitary subsidiaries in Comcast’s franchise tax apportionment.

The Court recognized that Comcast could utilize the franchise tax statutes’ alternative relief mechanism because the standard method produced a distortive or unreasonable result. Accordingly, Comcast was allowed to remove non-unitary subsidiaries from its capital base and include unitary subsidiary amounts in its apportionment factor, resulting in a reduction of Mississippi franchise tax.

The takeaway

Unlike several other states, Mississippi generally does not provide a reduction to the tax base for investments in subsidiaries.  As a result, the Mississippi franchise tax has had the possibility of being distortive for taxpayers with significant investments in subsidiaries and/or passive investments with minimal connection to Mississippi.  This case shows that there can be an opportunity to overcome this distortion, and taxpayers should consider whether they could benefit from a similar fact pattern. 

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Peter Michalowski

State and Local Tax Leader, PwC US

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