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Louisiana Legislature Passes Tax Relief Before Adjourning Sine Die

Posted on Oct. 27, 2020

Louisiana’s Republican-controlled Legislature passed tax breaks for the oil industry and other businesses before adjourning its second special session this year.

The Legislature also passed a bill that would provide some tax relief to families with children who are learning remotely as a result of the COVID-19 pandemic.

The special session, which began September 28, adjourned sine die October 23. The primary reason for the session was to tackle issues related to the COVID-19 pandemic, Hurricane Laura, and the state’s unemployment trust fund.

H.B. 20 would create a tax deduction for expenses paid or incurred from March 13 through December 31, 2020, “for expenses for an in-person facilitator of virtual education delivered by a public or approved nonpublic elementary or secondary school.” The deduction would be equal to the “actual amount of eligible educational coaching services paid by the taxpayer” up to $5,000 per eligible child, according to the bill. State revenues are expected to be reduced by an indeterminable amount, according to the bill’s fiscal note.

H.B. 29 would suspend severance taxes on oil production occurring from any newly drilled well, a completed well undergoing enhancements that require a state Department of Natural Resources permit, or an orphaned well. The exemption would be available for wells that start production between January 1, 2021, and December 31, 2023.

The bill is expected to decrease state revenues by about $38 million over five years, according to its fiscal note. The version of the bill that the House originally passed would have provided a tax break worth an estimated $157 million.

S.B. 1 would allow taxpayers with income and franchise tax credits for local ad valorem taxes paid on inventory to carry forward the nonrefundable portion of the credits for 10 years rather than the five allowed under current law.

The Legislative Fiscal Office said an estimate of the potential revenue losses from the bill is not possible because the Department of Revenue doesn’t have data on the amount of credit available for carryforward use or a schedule of how much might be expiring.

H.B. 37 would provide an income tax credit for annual and renewal license or permit fees paid by owners of bars and restaurants to the alcohol and tobacco control agency for 2020. To be eligible, a business's 2020 sales must be lower than in 2019, as a result of its operations being interrupted by the COVID-19 pandemic. Unused credits could be carried forward for three years.

It is expected to decrease state revenues by less than $4 million, according to the bill’s fiscal note.

H.B. 26 would establish a sales tax holiday on November 20 and 21 to aid the recovery from the COVID-19 pandemic and two recent hurricanes, Laura and Delta. The bill is expected to reduce state revenues by about $4.5 million, according to its fiscal note.

Notably, the Legislature also passed two measures related to the unemployment trust fund, S.C.R. 5 and S.C.R. 9. They were signed by the House speaker on October 23 and the Senate president on October 21.

The state’s unemployment trust fund, which had about $1.1 billion at the start of the pandemic, was expected to be insolvent by October 5.

S.C.R. 5 suspends a law until 60 days after the 2021 regular legislative session adjourns that would trigger a reduction in unemployment benefits and a tax increase on employers when the unemployment trust fund falls below a specified threshold.

S.C.R. 9 temporarily suspends the Louisiana Workforce Commission’s ability to impose a solvency tax on employers when the unemployment trust fund balance drops below $100 million. The suspension lasts until 60 days after the 2021 regular session adjourns.

S.B. 14, signed October 16 by Gov. John Bel Edwards (D), expands the Louisiana New Markets Job Act tax credit, available for investments in businesses in low-income communities. The expansion extends to investments made in businesses that aren’t located in low-income communities but are in recovery zones or parishes declared by the Federal Emergency Management Agency to be eligible for individual and public assistance because of Hurricane Laura.

Other notable bills that would provide tax relief to businesses affected by the COVID-19 pandemic or recent hurricanes include H.B. 89, S.B. 52, S.B. 72, S.B. 62, and S.B. 67.

Jason DeCuir, partner at Advantous Consulting LLC, told Tax Notes October 26 there has been discussion about more long-term tax reform in the 2021 regular session. Some ideas being discussed would decouple Louisiana from the federal income tax deduction, he said. The federal Tax Cuts and Jobs Act decreased the amount of income taxes paid at the federal level, which lessened Louisiana’s state-level deduction and required taxpayers to pay more tax at the state level, he explained.

DeCuir said he expects legislation to be introduced that would create a centralized sales and use tax collection system. A task force, chaired by DeCuir, charged with providing recommendations for the system, is vetting a legislative proposal from local tax collectors and stakeholders, which would put the state on par with the rest of the country, he said. Louisiana is among the handful of states that allow local governments to set their own sales tax rates and rules, which can make compliance difficult for businesses. The proposal would be designed to address the absence of centralized enforcement and collections.

The task force was established by H.R. 31 during a special session over the summer. The task force is supposed to submit a report to legislative leaders by November 1.

There has also been discussion about simplifying the state’s inventory tax regime, he said.

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