Louisiana Supreme Court Rules on Local Exemption for Property Purchased for Rental Purposes

In 1999, the Louisiana Legislature passed an exemption from local sales and use tax on property purchased for rental purposes. The exemption requires a phase in on a percentage basis effective July 1, 1999.

The Louisiana Municipal Association (LMA), a lobbying group for municipal governments, filed suit declaring that the law was unconstitutional. The LMA pointed to the Louisiana Constitution, which prohibits passage of tax measures during odd-numbered years. The state District Court agreed with the LMA and ruled that the law was unconstitutional.

The decision was appealed to the Louisiana Supreme Court. The Supreme Court examined the 1993 constitutional amendment on the issue and the legislative intent by reviewing the discussions held in House and Senate committees. The Supreme Court concluded that a literal reading of the constitutional amendment would prohibit the legislature from enacting a local exemption in an odd-numbered year, but would allow for an enactment of local taxes. The Supreme Court ruled that the intent of the amendment was that the legislature could enact exemptions or local taxes in odd-numbered years, thus allowing the exemption on property purchased for rental purposes to stand.

The phase in of the exemption from local taxes is as follows:

July 1, 1999 to June 30, 2000: 25% Exempt
July 1, 2000 to June 30, 2001: 50% Exempt
July 1, 2001 to June 30, 2002: 75% Exempt
July 1, 2002 and after: 100% Exempt

NOTE: Property purchased for rental purposes at the state level is exempt.
If you have any questions regarding the matters discussed above, or require any assistance concerning Louisiana tax matters, please call Mr. Timmy Hulin, Manager, Louisiana Tax Services at 225.334.0040.