Louisiana Taxpayers Not So Jazzed About State Income/Franchise Tax Law Changes
Author: Mary Reiser
The Louisiana State Legislature recently enacted various changes affecting both corporate and individual income tax returns filed on or after July 1, 2015, regardless of the taxable year of the return. These changes could directly impact those who haven’t filed their state income tax returns prior to the effective date. Taxpayers should consider filing returns by June 30, 2015, to receive the full benefit of existing laws prior to the changes detailed below.
Corporate Income/Franchise Tax Changes
HB218 – The state has eliminated the option to carry back net operating losses (NOL). Prior laws allowed corporations to carry back NOL deductions to each of the three taxable years preceding the taxable year of such loss. Corporations also could carry over NOL deductions to each of the 15 taxable years following the taxable year of such loss. On or after July 1, 2015, no carryback election will be allowed; NOLs now will carry over to each of the next 20 taxable years following the taxable year of such loss.
HB 624 and HB 629 – Major reductions also have been made to corporate income tax exclusions, deductions and credits. The affected tax exclusions and deductions for HB624 include public transportation corporations, oil and gas well allowances for depletion, NOLs, corporate income tax refunds, dividends from banking corporations, certain expenses disallowed for federal taxation, dividend income and hurricane recovery benefits for all claims filed on or after July 1, 2015. HB629 also reduces certain income and franchise tax credits by 28 percent for all claims for credits filed on or after July 1, 2015. Affected tax credits include the citizens assessment credit, education credit, new jobs credit, recycling credit, milk producers credit, alternative fuel credit for new vehicles, digital media tax credit, ports credits, import/export cargo credits, green jobs credit and modernization tax credit. If an extension was granted prior to the effective date, the denied portions of the exclusions, deductions and credits filed after the date will be included in one-third increments on returns filed for 2017, 2018 and 2019. The provisions for these changes expire July 1, 2018.
HB805 – In addition, changes are on the way for the inventory tax credit, natural gas tax credit and research and development credit. The state had allowed 100 percent of credit in excess of tax liabilities to be refunded to the taxpayer. All claims for these credits on any return filed on or after July 1, 2015, will result in 75 percent of the credit amount in excess of tax liabilities being refunded to the taxpayer; the remaining 25 percent will be carried forward and applied to future tax liabilities for the next five taxable years.
Individual Income Tax
HB402 – Credits toward individual income tax returns have similarly changed. The state has added requirements for the eligibility of credits for tax paid to other states. An individual can take a credit on their personal income tax return for taxes paid to other states only if the other state provides a similar credit for its residents. The bill recognizes reciprocity between other states for Louisiana residents to be eligible for credit on returns filed on or after July 1, 2015. Any denied credits pursuant to an extension allowed prior to the effective date also will be made in one-third increments applied over the next three taxable years beginning in calendar year 2017.
To learn more about how these changes could affect your organization, contact your BKD advisor.