On February 14, 2016, the Louisiana Legislature will convene for 25 calendar days in a special session called by newly inaugurated Governor John Bel Edwards to address the state’s looming $1.9 billion budget shortfall for fiscal years 2016 and 2017.
In his call for the special session, Governor Edwards gave the Legislature specific items to consider for bridging the budget gap. Most are proposed tax increases, including the following:
- “Clean Penny” State Sales Tax: This proposal would add 1% to the current 4% state sales tax. However, the additional penny tax would apply to all sales except for certain constitutionally exempt items, such as groceries, prescription drugs, and residential utilities.
- Business Utilities Sales Tax Exemption: Businesses would pay a 4% sales tax on utilities, and the rate would be indexed to the price of natural gas so that the tax will decrease when the price goes up.
- Ad Valorem Tax Credits: Refundable ad valorem tax credits would be suspended for business inventory, offshore vessels, and public service properties for telephone companies. A permanent change is being proposed for fiscal year 2017 and beyond to cap credits at 80% of ad valorem taxes paid and allow businesses to receive only 75% of any amount that would be refundable.
- Net Operating Loss (NOL) Deduction. Corporate income tax deductions for NOLs would be suspended for the current year, and the Legislature is being asked to consider permanently capping the deduction at 50% of the taxable income. Currently, a corporate taxpayer can claim up to 72% of an NOL on a state tax return.
- Extend Corporate Franchise Tax to any pass through entity that elects to be treated as a corporation at the federal level.
- Enact add-back provision for corporate income tax.
- Change apportionment formula for calculating corporate income tax, possibly double-weighting sales.
- Flat Tax for Corporations: Currently, corporations are taxed at five rates (4%, 5%, 6%, 7%, or 8%) based on taxable income at various tiers. A flat tax would eliminate the tiers and reduce the five tax rates to one single rate of tax.
- To make permanent temporary tax changes that were passed by the Legislature in 2015 by removing the 2019
- 28% reduction in certain corporate income tax exclusions and deductions that were to apply only from July 1, 2015 to June 30, 2018.
- 28% reduction to certain income and corporate franchise tax credits and incentives that were to apply from July 1, 2015 to June 30, 2018.
- Limit on availability of credit for sales taxes paid in other states from July 1, 2015 to June 30, 2018.
- 20% reduction to certain tax rebates that were to apply from July 1, 2015 to June 30, 2018; permanently excludes retail and food service from the Enterprise Zone Program.
Ryan’s Public Affairs practice will have a full team of professionals engaged in tracking and monitoring all tax policy issues.
To learn more about what to expect in the session, watch Ryan’s on-demand webinar on the special session.
TECHNICAL INFORMATION CONTACTS:
Susan Traylor Bittick
Principal
Ryan
512.476.0022
susan.bittick@ryan.com
Jason DeCuir
Director
Ryan
225.334.0040
jason.decuir@ryan.com
Gwen Evans
Manager
Ryan
972.934.0022
gwen.evans@ryan.com