Analysis of the Purpose of the Job Requirement within the Mississippi Research and Development Skills Tax Credit

The Purpose of the Job within the Mississippi Research and Development (R&D) tax credit framework is a mandatory narrative disclosure that defines a role’s specific contribution to scientific or technical innovation. This description serves as the legal nexus used by the Department of Revenue to certify that an employee’s activities meet statutory requirements for high-skilled research employment.1

The Mississippi Research and Development Skills Tax Credit is a specialized economic incentive codified under Section 57-73-21(6) of the Mississippi Code, designed to foster a high-tech workforce by providing a direct tax offset for the creation of research-intensive positions.3 Unlike the federal R&D tax credit, which primarily focuses on incremental qualified research expenses (QREs) such as wages, supplies, and contract research, the Mississippi credit is uniquely tied to the “skills” and “purpose” of the specific individual jobs created.4 To access this incentive, a business must demonstrate to the Mississippi Department of Revenue (MDOR) that the “Purpose of the Job” aligns with the legislative intent of advancing the state’s scientific and technical capabilities.1 This requirement moves beyond a mere job title, such as “Engineer” or “Chemist,” and demands an exhaustive articulation of how the role’s fundamental existence is predicated on research and development activities.7 In the context of state revenue office guidance, this narrative is the cornerstone of the certification process, as it provides the evidentiary basis for determining if the position requires a bachelor’s degree in a technical field, if the employee is working in their area of expertise, and if the compensation is commensurate with professional-level R&D work.5

Statutory Authority and Legislative Framework

The Research and Development Skills Tax Credit is established as an “additional” credit within the broader Economic Development Reform Act.3 This signifies that the credit is intended to sit atop existing job tax incentives, acting as a “kicker” for positions that meet higher thresholds of technical complexity.5

Mississippi Code Annotated Section 57-73-21(6)

The core legal authority resides in Miss. Code Ann. § 57-73-21(6), which mandates that “any job requiring research and development skills (chemist, engineer, etc.) shall qualify for an additional One Thousand Dollars ($1,000.00) credit for each net new full-time employee”.3 The inclusion of specific examples like “chemist” and “engineer” within the statute provides the MDOR with a clear mandate to prioritize hard sciences and engineering disciplines.3 However, the use of “etc.” allows for administrative flexibility, which is where the “Purpose of the Job” becomes the critical deciding factor for emerging fields such as biotechnology, computer science research, and aerospace component design.3

The statute specifically excludes certain industries from this benefit. For instance, medical cannabis establishments, as defined in the Mississippi Medical Cannabis Act, are explicitly prohibited from claiming the R&D Skills Tax Credit, regardless of the technical nature of their staff’s roles.3 This highlights that the “Purpose of the Job” must also be situated within a qualifying “permanent business enterprise,” typically defined as manufacturers, processors, wholesalers, distributors, or research and development facilities.2

Regulatory Definitions under Title 35

While the statute provides the broad strokes, the Mississippi Administrative Code, Title 35, Part X, Chapter 03, provides the granular detail required for compliance.1 Under regulation 35.X.03.100, the MDOR clarifies that the $1,000 credit is available for the first five years of each net new full-time job, provided the employee is “engaged in research and development activities”.6

The regulatory guidance defines the minimum qualifications for these roles with significant specificity:

• Educational Threshold: The role must require at least a Bachelor’s degree in a scientific or technical field from an accredited four-year college or university.5
• Area of Expertise: The employee must be employed in their specific area of expertise, meaning a chemist must be doing chemistry, not general management.5
• Compensation: The employee must be compensated at a “professional level,” which the MDOR interprets based on prevailing market rates for technical talent in the region.5
• Experience: The position must require at least two years of related job experience, a standard that ensures the credit subsidizes skilled professionals rather than entry-level trainees.5

Interpreting the “Purpose of the Job” Requirement

In the eyes of the Mississippi Department of Revenue, the “Purpose of the Job” is the answer to the fundamental question: Why does this specific role exist within the company’s innovation strategy?.9 This requirement is part of a larger documentation package that includes the job title, education requirements, experience requirements, hours worked, and salary.1

Narrative vs. Title

A job title like “Software Engineer” is often insufficient for the R&D Skills Tax Credit because software development can range from routine maintenance (non-qualifying) to the creation of novel algorithms or architectures (qualifying).4 The “Purpose of the Job” narrative must explicitly state that the role is dedicated to “research and development activities”.6

In a professional setting, the “Purpose” statement should align with the concept of a “Permitted Purpose” found in the federal R&D four-part test, which stipulates that the activity must relate to a new or improved function, performance, reliability, or quality of a business component.5 If the purpose of the job is merely to support production or conduct routine quality control, it will likely fail to meet the MDOR’s standard for the credit.5

The Role of Technical Uncertainty

A critical element of a qualifying “Purpose” is the resolution of technical uncertainty.5 The narrative provided to the state should describe how the employee uses their scientific or technical expertise to discover information that eliminates uncertainty concerning the development or improvement of a product or process.5 For an engineer, the purpose might be to “evaluate alternative structural designs for aerospace components to maximize heat resistance while minimizing weight”.1 This statement proves the role is engaged in a “process of experimentation,” which is the hallmark of R&D.5

Local State Revenue Office Guidance: The Application Process

The Mississippi Department of Revenue is the primary authority for awarding and administering these credits.7 The guidance provided in MDOR’s official incentive booklets and technical bulletins outlines a strict “Certification-First” protocol.1

Step 1: Certification of Economic Development Incentives

Before a taxpayer can claim the R&D Skills Tax Credit on a state income tax return, they must obtain a written letter of authorization from the MDOR.1 To initiate this, the business must submit the “Application for Certification of Economic Development Incentives” along with a detailed supplemental letter.1

The MDOR requires that the supplemental letter include the following for each position:

1. Job Title: The formal designation.1
2. Purpose of the Job: A detailed narrative of R&D activities.1
3. Educational Requirements: Specification of the required scientific/technical degree.1
4. Experience Requirements: Verification of the 2-year minimum requirement.1
5. Compensation and Hours: Proof of professional-level salary and full-time status.1
6. Expected Hire Date: To establish the “net new” baseline.1

Step 2: Review and Authorization

The MDOR reviews these narratives to ensure they meet the definitions under Title 35.1 They may request additional information, such as university transcripts or project-specific documentation, to substantiate the “Purpose”.1 Once satisfied, the Commissioner of Revenue issues a letter of authority.1

Step 3: Filing and Reporting

After receiving the authorization letter, the business may claim the credit. When filing the Mississippi income or franchise tax return, the taxpayer must attach:

• A copy of the MDOR approval letter.1
• A completed Form 80-401 (Mississippi Tax Credit Summary Schedule).1

The specific credit code for the Research and Development Skills Tax Credit is 07.1

Financial Impact and Credit Limitations

Understanding the financial mechanics of the R&D Skills Tax Credit is essential for effective tax planning. The credit is nonrefundable and subject to a strict 50% liability cap.4

The 50% Rule

The total amount of the R&D Skills Tax Credit—when combined with the Jobs Tax Credit and the Headquarters Credit—cannot exceed 50% of the company’s state income tax liability for that year.5 This limitation prevents high-tech firms from entirely eliminating their state tax burden through incentives alone, ensuring the state retains a portion of the tax revenue generated by the business activity.12

Carryforward Provisions

If the credit amount exceeds the 50% cap or the total tax liability, the excess may be carried forward for five successive years from the year in which the excess credit could not be used.4 The MDOR requires the use of the earliest year’s unexpired credit first (FIFO method).5

Example: Application of the “Purpose of the Job” in a Technical Role

To clarify how the MDOR guidance applies to a real-world scenario, consider the case of a biotechnology startup, “Gulf Coast Biologics,” located in a Tier 2 county in Mississippi.

Position: Senior Synthesis Chemist

The company creates a new position for a chemist to lead a project developing a new enzyme-based catalyst for industrial manufacturing.

1. Narrative of “Purpose of the Job”:

“The Senior Synthesis Chemist exists to direct the discovery and experimental testing of novel enzymatic catalysts. The purpose of this role is to utilize advanced organic chemistry principles to eliminate technical uncertainties regarding catalyst stability and reaction yields in high-pressure environments. The chemist will design and execute iterative experiments to optimize molecular structures for improved performance and reliability in industrial applications”.1

2. Substantiation of Qualifications:

• Education: PhD in Organic Chemistry (Exceeds Bachelor’s requirement).6
• Experience: 4 years of post-doctoral research (Meets 2-year requirement).5
• Compensation: $110,000 annually (Professional level).5
• Full-Time Status: 40 hours/week.3

3. Credit Calculation:

As a Tier 2 county project, the company might already be earning a Jobs Tax Credit equal to 5% of their total payroll.3 By qualifying this specific chemist under the R&D Skills Tax Credit, the company adds a flat $1,000 credit to their tax pool.3

If the company has a state tax liability of $20,000 and total job-based credits (Jobs Tax Credit + R&D Skills Credit) of $12,000, the “50% Rule” would limit the claim to $10,000 for the current year, with $2,000 carried forward.5

Interaction with Mississippi’s County Tier System

Mississippi’s economic development strategy heavily utilizes a county ranking system to determine the baseline for job incentives.3 While the R&D Skills Tax Credit is a flat $1,000 per employee, its utility is often dictated by the job creation thresholds of the primary Jobs Tax Credit.3

Ranking and Designation

Every year by December 31, the MDOR ranks all 82 counties based on unemployment rates and per capita income for the most recent 36-month period.3 They are divided into three equal groups:

• Tier Three (Less Developed): Highest incentives, lowest job thresholds.
• Tier Two (Moderately Developed): Mid-range.
• Tier One (Developed): Lowest incentives, highest job thresholds.

Sources: 3

For a business to effectively utilize the R&D Skills Tax Credit, they must generally be part of a project that meets the minimum job increase thresholds for their county’s tier to qualify for the primary Jobs Tax Credit.3 However, the R&D Skills Credit itself technically has “no minimum number of positions” that must be created to qualify, meaning even a small firm with a single qualifying scientist could apply for the $1,000 credit, though its practical impact is maximized when used alongside other state incentives.5

The SMART Business Act: An Alternative R&D Incentive

While the R&D Skills Tax Credit targets the workforce, the Strengthening Mississippi Academic Research Through Business (SMART) Act targets collaborative research.5

The Research Rebate

Under the SMART Business Act, a corporation that partners with a Mississippi public university for R&D purposes is eligible for a 25% rebate of the total research costs.5

• Rebate Limit: $1 million per investor per fiscal year.5
• Aggregate Cap: $5 million total for all investors per fiscal year.5
• Administration: Administered by the Mississippi Institutions of Higher Learning (IHL) rather than solely by the MDOR.8

This rebate is fundamentally different from the Skills Tax Credit because it is a cash-back incentive for external expenditures, whereas the Skills Credit is a tax-offset incentive for internal hiring.5 A sophisticated business strategy involves maximizing the $1,000 per-employee credit for in-house staff while leveraging the 25% rebate for specialized research conducted at institutions like Mississippi State University or the University of Southern Mississippi.5

Comprehensive Statistical Overview and Strategic Implications

The 2024 and 2025 MDOR guidance reflects a state-wide push toward industries that require high concentrations of R&D skills. The aerospace and biotechnology sectors have been identified as key drivers of growth.5

Tax Rates and Business Climate

Mississippi is currently in a phase of individual income tax reduction, which enhances the “professional level” compensation appeal for technical talent.18

• 2024 Tax Rate: 4.7% for income over $10,000.18
• 2025 Tax Rate: 4.4% for income over $10,000.18
• 2026 Tax Rate: 4.0% for income over $10,000.18

For a corporation, the tax rate is generally 5% on taxable income in excess of $10,000.19 The $1,000 per-employee credit essentially offsets the state tax on $20,000 of corporate income per researcher.7

Relocation and Headquarters Incentives

For companies moving their R&D operations to Mississippi, the state offers relocation credits ranging from $500 to $2,000 per job, depending on wage levels.3 These relocation credits have an annual state-wide cap of $1 million.3 When these are layered with the R&D Skills Credit, the “Purpose of the Job” must be clearly bifurcated: one purpose for relocation eligibility (headquarters support) and another for R&D eligibility (scientific innovation).2

Audit Risks and Compliance Traps

The “Purpose of the Job” is a frequent area of focus in state tax audits.1 Because the definition of “research and development” can be subjective, businesses must be vigilant.

Common Compliance Pitfalls

1. Routine Maintenance vs. Research: If the MDOR determines the “Purpose” of an engineer’s job is routine maintenance or minor cosmetic changes to existing products, the credit will be denied.5
2. Inadequate Education Documentation: Claiming the credit for a self-taught developer or an engineer with an unaccredited degree will result in disqualification.5
3. Hazardous Waste Exclusion: Businesses engaged in the storage, handling, or disposal of hazardous waste are generally ineligible for the R&D Skills Credit, regardless of their technical staff’s qualifications.8
4. Transferability: The credit cannot be used by any business enterprise or corporation other than the one that actually created the qualifying jobs.11 However, credits earned by pass-through entities (LLCs, S-Corps, Partnerships) can flow through to the individual owners to offset tax on the income generated by the activity.11

Audit Defense Strategies

To defend the “Purpose of the Job” during an audit, firms should maintain:

• Contemporaneous project notes signed by the technical lead.4
• Evidence of “failed” experiments, which strongly substantiates the “uncertainty” and “experimentation” requirements.5
• Detailed organizational charts showing the researcher’s role within the R&D department vs. the production department.2

Analysis of “Scientific or Technical Field of Study”

A critical component of the R&D Skills Tax Credit’s “Purpose” is the educational requirement. The MDOR explicitly mentions “chemist” and “engineer” as benchmarks, but what other degrees qualify?.3

Qualifying Disciplines

Based on MDOR’s focus on “scientific or technical” fields, the following disciplines typically qualify for the credit if the job purpose is aligned:

• Physical Sciences: Physics, Chemistry, Geology, Astronomy.6
• Biological Sciences: Biology, Microbiology, Biochemistry, Genetics.6
• Engineering: Mechanical, Electrical, Chemical, Aerospace, Civil, Biomedical.3
• Computer and Data Sciences: Software Engineering, Artificial Intelligence Research, Data Architecture (when focused on novel development).6

The Professional Level Requirement

The MDOR does not set a hard salary floor, but it requires “compensation at a professional level”.5 This is interpreted within the context of the job’s purpose. For an R&D engineer, a “professional” salary in Mississippi would typically be expected to be significantly higher than the state’s median wage, reflecting the scarcity and value of the specialized skill set.7

Comparison with Other States: Georgia, Maryland, and Maine

To understand the nuance of Mississippi’s “Purpose of the Job” requirement, it is helpful to look at how other states handle similar incentives.22

Georgia: Job Tax Credit (JTC)

Georgia’s program is primarily designed to increase employment in distressed counties.22 While it has a “job tax credit,” its “Purpose” is focused on location and industry type (e.g., manufacturing, telecommunications) rather than the specific technical purpose of each individual job.22 Mississippi’s R&D Skills credit is much more surgical, focusing on the individual’s role rather than just the company’s sector.3

Maryland: Job Creation Tax Credit

Maryland’s stated purpose is to encourage the expansion and attraction of private sector enterprises.23 Like Mississippi, it uses a certification process, but it focuses heavily on the “number” of jobs created and the “wages” paid rather than the “scientific or technical research” purpose of those jobs.23

Maine: R&D Tax Credit

Maine offers a credit equal to 24% of incremental research expenditures (more like the federal model).24 Interestingly, Maine allows for a refund of 75% of the excess credit for small businesses with fewer than 150 employees.24 Mississippi, by contrast, is strictly nonrefundable and focuses on the existence of the job rather than the dollar amount spent on research expenses.4

Sources: 4

Strategic Planning for Mississippi Businesses

For a business to successfully claim and maintain the R&D Skills Tax Credit, it must integrate the “Purpose of the Job” into its human resources and tax departments.14

Integrated HR and Tax Workflow

1. Recruitment: When drafting a job description for a new engineer or scientist, HR should ensure the description emphasizes “research and development activities” and specifies the required technical degree.2
2. Onboarding: Collect and file a copy of the employee’s degree and verify at least two years of previous relevant experience.6
3. Letter of Request: Immediately upon hire (or even before), the tax department should draft the MDOR certification letter using the HR job purpose as a base.1
4. Form 80-401: Ensure the individual tax credit summary schedule is accurately completed and that the 50% liability limit is calculated using the total of all job-related credits.1

The Importance of Timing

The MDOR is clear: the credit should not be taken until the letter of authorization is issued.1 Because the “Purpose of the Job” must be reviewed and approved, taking the credit prematurely can lead to penalties and interest if the MDOR subsequently denies the position’s R&D status.4

Conclusion: The “Purpose” as an Economic Engine

The Research and Development Skills Tax Credit represents a sophisticated evolution of Mississippi’s economic development policy. By moving beyond generic job creation and focusing on the “Purpose of the Job,” the state has created a mechanism to specifically subsidize the intellectual capital required for a modern economy.17 For the taxpayer, the $1,000 per employee annual credit—totaling $5,000 over five years—is a significant reward for investing in high-skilled talent.5

The success of a claim rests entirely on the clarity and technical depth of the “Purpose of the Job” narrative. It must bridge the statutory requirements of Section 57-73-21 with the administrative rigors of Title 35, proving that each researcher is not just an employee, but a driver of technological discovery.3 As Mississippi continues to lower its tax rates and refine its incentive packages through programs like MFLEX, the R&D Skills Tax Credit remains a foundational tool for businesses that are “engaged in the systematic process of experimentation” to solve the technical challenges of tomorrow.5

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