Louisiana's governor has signed a slew of tax bills, including legislation that will temporarily suspend a portion of the state’s corporation franchise tax for small businesses.
Gov. John Bel Edwards (D) signed 14 tax bills July 13, all of which were introduced in the recent special session. They all were either based on the recommendations of or supported by Louisiana's Economic Recovery Task Force, a group of business leaders who were asked for suggestions to help the state recover from the COVID-19 crisis.
S.B. 6 will temporarily suspend the lower tier of the corporation franchise tax — also called a capital stock tax — for tax periods between July 1, 2020, and June 30, 2021. The tax is levied at a rate of $1.50 per $1,000 on the first $300,000 of taxable capital and $3 per $1,000 on taxable capital over $300,000. The bill will also temporarily suspend the initial $110 corporation franchise tax due during the same period. Both provisions will apply only to small business corporations with taxable capital of $1 million or less, according to the bill.
S.B. 6 is expected to reduce general fund revenue by about $7.5 million in fiscal 2021 and fiscal 2022, according to the bill’s fiscal note.
The Legislature passed a resolution during this year’s regular session (H.C.R. 66) to temporarily suspend the tax, but a least one lawmaker questioned its constitutionality. Recovery Task Force Chair Jason DeCuir told Tax Notes July 15 that S.B. 6 was filed to remove any doubts about the constitutionality of the resolution.
The governor also signed S.B. 24, which makes changes to the state's 25 percent angel investor tax credit. Under the bill, investments in businesses certified as Louisiana Entrepreneurial Businesses and located in federal Opportunity Zones will be eligible for an enhanced version of the credit: a 35 percent income or corporation franchise tax credit.
The bill also alters the terms of both types of the credit — the authorized percentage of the investment amount divided into equal portions that was formerly spread over three years will now be spread in equal amounts over two years. It also doubles the overall cap on the amount of credits that can be awarded each year to $7.2 million.
Under the bill, the sunset date of the enhanced credit program will be extended from July 1, 2021, to July 1, 2025. Another bill, S.B. 17, extends the sunset date for the regular 25 percent credit to July 1, 2023.
Edwards also signed H.B. 37, which provides relief for some taxpayers who were diagnosed with COVID-19 or who used a tax return preparer who was diagnosed with COVID-19 on or after March 11 and before July 15. The bill requires the Department of Revenue to waive all penalties and interest for those taxpayers for late tax returns and late payments on taxes due in or for 2019 and 2020 if the original due date was between March 11 and July 15 this year. The provision would not apply to any tax return filed or tax payment submitted after November 15.
H.B. 69 provides a tax break for winning bidders of census blocks in the federal Rural Digital Opportunity Fund Auction, which is designed to expand broadband internet access to underserved rural areas. The bill provides those businesses with a rebate on 50 percent of state and local sales and use taxes paid on fiber optic cable equipment. It will reduce state revenues by an unknown amount, according to the bill’s fiscal note.
The governor also signed legislation that will impose an 8 percent tax on the net revenue of fantasy sports contests (H.B. 64), which takes effect immediately.
Other notable tax bills signed include the following:
S.B. 16, which makes technical updates to the process of approving payments in lieu of ad valorem taxes;
H.B. 11, which allows taxpayers that are required to collect sales and use taxes to keep 1.05 percent as compensation;
H.B. 13, which extends enterprise zone benefits; and
H.B. 19, which extends eligibility requirements for the Quality Jobs Program.
Centralized sales tax collection is also on the task force's wish list. The House adopted a resolution (H.R. 31) establishing a study group to make recommendations to the Legislature about creating a centralized sales and use tax collection system to help simplify tax collection for businesses. The study group is required to provide a report to legislative leaders by November 1.