As a result of a $900 million budget shortfall, Louisiana lawmakers have passed the following tax measures aimed at bridging the revenue gap. Some of the more important changes are as follows:
Income/Franchise Tax Changes (effective 1/1/2017):
- Expansion of franchise tax:
- “Domestic Corporation” now includes partnerships, joint ventures, and LLCs electing to be taxed as C Corporations for federal income tax purposes.
- Expansion of franchise tax nexus for out of state taxpayers – nexus for corporations that own interest in partnerships with Louisiana operations.
- Net Operating Loss (NOL) Reduction – NOL deduction cannot exceed 72% of Louisiana taxable income.
- NOL Carryover ordering – must use loss carryovers starting with the loss for the most recent taxable year. Older NOLs may expire since taxpayers would have to first use newer NOLs.
- Modification of corporation income tax rate to flat rate of 6.5% (contingent).
- Addback of intercompany interest, intangible expenses and management fees unless certain exceptions are met.
- Modification of federal income tax deduction (contingent).
Sale/Use Tax Changes:
- Effective 4/1/16 through 6/30/2018, the legislation increases the sales tax rate by 1% (bringing the rate to 5%). Referred to as the “Clean Penny” Legislation, the legislation includes its own set of exclusions and exemptions apart from the exclusions and exemptions that apply to the original 4% sales tax rate (referred to as “Old Penny”).
- Old Pennies (the original 4% sales tax) – law modifies the list of exclusions and exemptions, specifically as they relate to the 2% basic rate (sub component of the 4% tax). It is important to note the inconsistencies between the exclusions and exemptions offered under the Clean Penny and Old Penny laws.
- Affiliate Nexus provisions – the legislations drastically expands the definition of a “dealer.”
For additional background regarding the legislation, please visit the tax foundation website.