By KENNETH KENTUCKYThe Associated PressAssociated Press – MANSFIELD, Miss.
(AP) The Mississippi Supreme Court on Friday ruled that the nonprofit corporation tax law known as the charitable deduction was unconstitutional.
Mississippi law allows charitable organizations to deduct charitable donations made in excess of the tax code limits, but not for tax-deductible expenses such as food and lodging.
A ruling is expected within the next few weeks.
The nonprofit tax law allows donors to deduct donations made on their own property, but no one can deduct the cost of food and beverages for a meal.
The state’s highest court ruled that a non-profit corporation must file a tax return showing the expenses for the meals and lodging to be the tax deduction.
The ruling means that the state can no longer claim the charitable contribution deduction.
The Mississippi Ethics Commission could take action, and the law allows the commission to deny the deduction.
State Attorney General Delbert Hosemann said the court’s decision is a win for taxpayers and their charities.
“I think it will help ensure that Mississippi taxpayers don’t have to pay a disproportionate amount of taxes, especially if they are the taxpayers that make the charitable contributions,” he said.
The Mississippi Supreme Judicial Court, which oversees the tax system, heard arguments from attorneys for the charities of several organizations.
The court also heard arguments in the case of a nonprofit that filed a $1.5 million tax return for a restaurant where more than 50 percent of the profits came from the sale of alcohol.
The tax return showed the nonprofit’s charitable contributions of $5,700 for food, $5 and $2,000 for lodging and $1,000 to support the food drive.
The IRS disputed that the amount was too small, saying it could not be considered a deduction because it was made from the taxpayer’s own personal income.
The charity also filed a tax-deferred form for the cost to pay for a lawyer to help it in the appeal.