Major Legislation Awaiting Governor's Signature
Tuesday, June 16, 2015
Posted by: Ann Lupo
Major Pieces of Revenue Raising Legislation and Tax Code Changes Passed in the 2015 Louisiana Regular Legislative Session
The 2015 Louisiana regular legislative session will go down in history as the session where a Republican-dominated House and Senate passed the largest tax increases on businesses and individuals this century. On the final day of Louisiana’s 2015 legislative session, the bills we have highlighted in prior tax alerts that contain troubling effective date implications were approved by the legislature and have been sent to the Governor’s desk for his signature. The bills play a significant role in balancing the budget for next fiscal year and the Governor is expected to sign these bills into law.
As your partners in advocacy, we have prepared a summary of the major pieces of revenue raising legislation and tax code changes that will significantly affect our members and their clients or employers:
HCR 8 by Rep. Jack Montoucet, D-Crowley. This legislation suspends the exemption for business utilities 0.97 percent on the state’s sales and use tax levy for sales of steam, water, electric power or energy, and natural gas. The roughly 1 percent is suspended beginning July 1, 2015, through the 60th day after final adjournment of 2016 Louisiana Regular Legislative Session, which ends June 6, 2016. There were efforts to increase this to 2 percent and even 3 percent during the course of the session. Those efforts came in the House and not the Senate. Through the strong support of Senate President John Alario, Senate Finance Committee Chairman Jack Donahue and other members of the Senate, the House backed down. We should add that some 42 House members opposed the 1 percent and even more opposed two or three. The fiscal note is $103 million for the next fiscal year.
HB 119 by Rep. Harold Ritchie, D-Bogalusa. At one point in the session, this legislation would have increased the tax on cigarettes from $0.36 to the national average of $1.54. It went through several different versions as it made it through the process. At the end of the session, the cigarette tax increases 50 cents, from 36 cents per pack to 86 cents per pack. In addition, the legislation establishes a tax on “vapor products” and electronic cigarettes of 0.05 cents per milliliter of nicotine liquid solution or other similar materials containing nicotine. The fiscal note is $108 million for the next fiscal year.
HB 218 by Rep. Chris Broadwater, R-Hammond. This legislation eliminates the three-year carryback of the net operating loss deduction for the purpose of calculating corporate income tax liability and increases the carry forward period from 15 to 20 years. Americans for Tax Reform considered this measure to be revenue neutral because of the extension of the carry forward. The bill applies to all claims for the net operating loss deduction of any return filed on or after July 1, 2015, regardless of the taxable year to which the return relates. This prohibits application of the proposed law to an amended return on or after July 1, 2015, relating to a net operating loss deduction properly claimed on an original return filed prior to July 1, 2015. The fiscal note is $29 million for the next fiscal year.
HB 402 by Rep. Julie Stokes, R-Kenner. This legislation adds requirements for eligibility for the individual income tax credit for taxes paid to another state. Currently, Louisiana residents who earn income in other states are allowed a full credit against taxes paid on that income to the nonresident state. The law states the credit for taxes paid to another state shall not be allowable in an amount that is the lesser of the tax paid to the other state or the amount of Louisiana tax attributable to the income taxed to the other state. The provision shall not apply to an amended return timely filed on or after July 1, 2015, relating to an original return that was filed on or prior to July 1, 2015 and properly claimed an exemption, credit, rebate or deduction. Any claim for a credit not allowed by the provisions of the Act on a return filed after July 1, 2015 pursuant to an extension of time to file granted prior to July 1, 2015 shall be allowed in the following manner: One-third of any such credit not allowed by the provisions of this Act may be taken as a credit against tax only in each of the taxpayer’s tax years beginning during calendar years 2017, 2018 and 2019. The law sunsets on June 30, 2018. The fiscal note is $34 million for the next fiscal year.
HB 466 by Rep. Taylor Barras, R-New Iberia, provides for the eligibility of businesses to participate in the Enterprise Zone Program. This legislation removed certain entities from participation in the program. They are retail, restaurants and hotels. The fiscal note is $7 million for next year.
HB 549 by Rep. Major Thibaut, D-New Roads. This legislation changes the severance tax exemption for production of oil and natural gas from a horizontally drilled well or recompletion well by changing the amount of the exemption from 100 percent to an amount based on the price of oil and natural gas. This will have very little, if any, impact immediately. The incentive will phase out with the change in the legislation allowing for the incentive to be stepped down by certain percentages dependent on the price of oil and gas in the previous year. The fiscal note is $0 for the next fiscal year.
HB 624 by Rep. Katrina Jackson, D-Monroe. This legislation provides for a reduction of 28 percent on certain corporate income tax exclusions and deductions. The major provisions in the bill are net operating losses, depletion deductions and the exclusion of interest and dividend income. It adds an applicability provision that prohibits the Act from applying to an amended return filed on or after July 1, 2015, relating to an exclusion from taxable income or a claim for a deduction properly claimed on an original return filed prior to July 1, 2015. It also provides that if a return is filed after July 1, 2015, for which a valid filing extension has been allowed prior to July 1, 2015, then any portion of an exclusion or deduction disallowed by the provisions of Sections 1 or 2 of this Act shall be allowed as an exclusion or a deduction in the amount of one-third of the disallowed portion of the exclusion or deduction on the taxpayer's return for each of the taxable years beginning during calendar years 2017, 2018, and 2019. Also added is an effective date of July 1, 2015 for provisions relative to the reduction of deductions and exclusions. The law sunsets on June 30, 2018. The fiscal note is $87 million for the next fiscal year.
HB 629 by Rep. Jackson. This legislation reduces income and corporation franchise tax credits. This is the most complex of the bills, having over 46 pages and numerous amendments. Basically each of the credits listed are reduced by 28 percent for returns filed after July 1, 2015. The law sunsets the provisions relative to reducing the amount of the tax credits on June 30, 2018 and reinstates the provisions of present law on July 1, 2018. The provisions relative to reducing the amount of the tax credits shall apply to claims for credits on any return filed on or after July 1, 2015, but before June 30, 2018, regardless of the taxable year to which the return relates. The provisions relative to reducing the amount of the tax credits shall not apply to an amended return filed on or after July 1, 2015, but before June 30, 2018, relating to a credit properly claimed on an original return filed prior to July 1, 2015. If a return is filed after July 1, 2015, but before June 30, 2018, for which a valid filing extension has been allowed prior to July 1, 2015, then any portion of the credit reduced by the provisions of proposed law relative to reducing the amount of the tax credits shall be allowed as a credit in the amount of one-third of the reduced portion of the credit on the taxpayer's return for each of the taxable years beginning during calendar years 2017, 2018, for which a valid filing extension has been allowed prior to July 1, 2015, then any portion of the credit reduced by the provisions of proposed law relative to reducing the amount of the tax credits shall be allowed as a credit in the amount of one-third of the reduced portion of the credit on the taxpayer's return for each of the taxable years beginning during calendar years 2017, 2018, and 2019. Some of the more pertinent credits cut back by this bill are:
• Corporate tax credit for new employees
• Neighborhood assistant credit
• Credit for contribution of computer equipment to schools
• Corporate re-re-entrant jobs credit
• Jobs credit
• Credit for bone marrow donors
• Credit for employee and dependent health insurance coverage
• Credit for physically and mentally incapable dependents
• Credit for rehabilitation of residential structures on National Registry
• Sound recording investor tax credit
• Credit for LA Citizens Property Insurance Corp assessment
• Musical and theatrical production income tax credit
• Angel Investor Credit
Please understand that this only a partial list of impacted credits. Numerous other minor credit revisions are included. The fiscal note is $26 million for the next fiscal year.
HB 635 by Rep. Jackson. This legislation reduced by 20 percent all tax rebates. The bill does not affect existing contracts or those credits where advanced notification has been provided to the Louisiana Department of Economic Development, and only applies to rebates after July 1, 2015. The bill was amended in committee to exempt the private school tuition rebate, as well as a rebate that funds cancer research centers and universities. This law sunsets on June 30, 2018. The fiscal note is $0 for the next fiscal year.
HB 779 by Rep. Erich Ponti, R-Baton Rouge. This legislation reduces solar energy systems tax credits to $10,000 for 2016 and 2017 and $5,000 for 2018 on a system installed after June 30, 2015. Limited to $10 million of credits prior to July 1, 2017, and $5 million prior to July 1, 2017. The fiscal note is $19 million for the next fiscal year.
HB 805 by Rep. Bryan Adams, R-Gretna. This legislation is the inventory tax credit bill. It changes the refundable portion of the inventory tax. For returns filed on or after July 1 2015, if the amount of the inventory credits exceeds the tax liability for the year, 75 percent of the excess credit will be refunded and 25 percent of the excess credit will be carried forward as a credit against subsequent Louisiana tax liability. However, property tax amounts of less than $10,000 will be refunded 100 percent. These provisions do not apply to an amended return. The fiscal note is $118 million for the next fiscal year.
HB 829 by Rep. Joel Robideaux, R-Lafayette. This legislation limits the amount of motion picture credits that can be claimed as income tax credits, or transferred (redeemed) to the state at $180 million annually through June 30, 2018. There is no language about how this will be administered. The fiscal note is $70 million for next fiscal year.
As the July 1 effective date is upon us, we urge you to carefully examine the details of the aforementioned legislation to determine your best course of action.
Likewise, LCPA's advocacy work continues as we review all the last minute legislation maneuvering that occurred prior to the session's close in order to understand any further potential impact on the CPA profession. We will issue additional Tax Alerts as we learn more. After the review is complete, our focus will shift toward the administration process and all of the issues associated with the execution of the new laws. We plan to work closely with the Louisiana Department of Revenue in this regard.
We want to know your thoughts on implementation and the challenges you and your clients or employer encounter so that we can communicate accordingly with LDR. Please send comments to Linda Babin, LCPA’s State & Government Relations Director.
LCPA would like to thank SGR team members: Jim Harris of HDA & Associates and Bill Potter of P&N for their assistance in compiling the content of this Tax Alert.
Ron Gitz, CPA, CGMA
LCPA Executive Director