June 30, 2016
Recap: Louisiana's Second Extraordinary Legislative Session
The Louisiana Legislature completed its second special session of the year on taxes last Thursday. According to legislative records,lawmakers spent more legislative session days in Baton Rouge this year than ever before.Between the first special session, the regular session and the just completed special session, they were here for 19 weeks attempting to avoid budget deficits for the current and next fiscal year. The current fiscal year ends June 30 and the next fiscal year begins July 1st. These special sessions were necessary to raise additional revenue or cost-reductions to meet the budget shortfall, since the regular session was a non-tax session.
Gov. John Bel Edwards and lawmakers raised a total of $1.5 billion dollars in taxes during the special sessions this year.After the new governor and legislature was sworn in this January, the governor had indicated a shortage of $2 billion in state money needed to balance the budget, which is now $26 billion dollars. In the special session that ended last week, the governor had indicated he needed to raise $600 million dollars. He didn’t. The lawmakers approved $263 million in additional revenue raisers at the end of business.The following legislation passed:.
- HB 20 by Rep. Gene Reynolds, D-Minden, changes the method for calculating corporate income taxes for certain industries.The bill is expected to raise more money, a projected increase of $53.6 million a year. Changes the apportionment percent for income derived to single ratio calculation (ratio of gross apportionable income derive from Louisiana sources to the total gross apportionable income of the taxpayer). Oil and gas falls under a different criteria and uses a four point ratio, which includes property, sales, and labor. Requires sales other than tangible personal property to be sourced to Louisiana if the taxpayer’s market for the sale is in Louisiana. Applicable to tax periods beginning January 1, 2016.
- HB 24 byRep. Andy Anders, D-Vidalia, exempts health maintenance organization from the five percent reduction to the insurance premium tax credit made inAct 10of the first special session of 2016 and provides for qualifying Louisiana investments.
- HB 25 by Rep. Rodney Lyons, D-Harvey, lessens the tax break for homeowners and renters who are charged an assessment on property insurance to cover debts of the state-run Louisiana Citizens Property Insurance Corp. Currently, the rebate is 72 percent of the Citizens assessment charged on property insurance bills, That drops to 25 percent, retroactive to Jan. 1. Estimated revenue raised: $17 million for the financial year that begins July 1 and $139.6 million over five years.
- HB 27 by Rep. Chris Broadwater, R-Hammond, passed after business withdrew its opposition and a protracted negotiation between local, state, and manufacturing attorneys and tax specialists. This was an attempt by local and state government to overcome a recent decision by the Louisiana Supreme Court in a case involving a Lake Charles area utility company byproduct. The legislation as originally written would have opened up a number of raw materials used in manufacturing and other types of businesses in additional sales taxes. The legislation was narrowed through the process, but still is not narrowed to the specific byproduct in question. As a result, this may need more work in next year’s legislative session and the author of the bill has agreed to work with manufacturing if that turns out to be the case. There was no fiscal note on this piece of legislation.
- HB 29 by Rep. Ed Price, D-Gonzales, changes the calculation of interest on tax overpayments.Estimated revenue raised: $16.3 million in state general fund money for the financial year begins July 1 and $94.3 million over five years. It affects corporations and individuals; interest will not accrue 3 years back from when amended return is filed; Changes the date that interest begins to accrue on tax overpayments to 90 days after the date the return was due, the return claiming overpayment was filed, or the tax was paid, whichever is later; includes severance tax overpayments. Effective for refunds paid September 1, 2016 regardless of the taxable period.
- HB 35 by Rep. Andy Anders, D-Ferriday, increases the annual tax on certain health care organizations known as HMOs from 2.25 percent to 5.5 percent. Estimated revenue raised: $157.4 million in the financial year that begins July 1 and more than $600 million over five years. Applicable tax periods beginning January 1, 2016.
- HB 47 by Rep. Chris Broadwater, R-Hammond, clarifies that the provisions of Act No. 123 of the 2015 R.S. and Act No. 6of the 2016 first special session. which reduced the amount of the net operating loss deduction for corporate income taxes shall not apply to an amended return filed on or after July 1, 2015, relating to a claim for a net operating loss deduction properly claimed on an original return filed prior to July 1, 2015.
- HB 50 by Rep. Jack Montoucet, D-Crowley, originally reduced the individual income tax deduction for net capital gains by 50 percent.Applicable to tax periods beginning January 1, 2016. In the bill’s final form, it creates a tiered system in which the individual selling the business can quality for the deduction depending on the number of years the business has operated in Louisiana. The amendment removed opposition.
- HB 51 by Rep. Jim Morris, R-Oil City, this legislation reinstates specific exemptions and exclusions which were allegedly removed accidentally by Acts 25 and 26 of the first special legislative session.They include a number in the health area, education, non-profit events, and specifically of interest the only exemption directly related to the manufacturing sector is the re-instatement of the isolated and occasional sale exemption. This particular bill decreases revenue for all years with no actual amount attached.
- HB 53 by Rep. Neil Abramson, D-New Orleans, provides with respect to taxes and charges imposed upon sales of taxable services and tangible personal property at a domed stadium, baseball facility, or other facility owned by the state or a political subdivision. This is cleanup legislation to avoid unintended consequences of legislation passed in the previous special session.
- SB 6 by Sen. JP Morrell, D-New Orleans, restores 100 percent of refundable inventory tax credit for small and medium-sized Louisiana businesses.It also eliminates refundablity for inventory tax credits more than $1 million and instead establishes a 5-year carryforward provision. This legislation is estimated to raise $17 million a year.Applicable to any return filed on or after July 1, 2016; shall not apply to an amended return filed on or after July 1, 2016 provided credits properly claimed on original return.
- SB 10 by Sen. Rick Ward, R-Port Allen, converts the state inventory tax credit from a refundable credit to a non-refundable credit with a 5-year carryforward provision for taxes paid on inventory by manufactures that also receive the ad valorem property tax exemption. The revised fiscal note on this bill shows it will generate $57 million a year.Applicable to any return filed on or after July 1, 2016; shall not apply to an amended return filed on or after July 1, 2016 provided credits properly claimed on original return.
- SB 15 by Sen. J.P. Morrell retains provisions the suspension of several state sales tax exemptions relating to sales by nonprofit organizations from April 1, 2016, to June 30, 2018, for purposes of the 2 percent sales tax imposed by R.S. 47:302, and from April 1, 2016, to June 30, 2016, for purposes of each of the 1 percent state sales tax levies in R.S. 47:321 and 331. These exemptions will be fully restored on July 1, 2018, but requires that certain nonprofits that sell exempt tangible personal property and services be subject to an annual reporting requirement based on transactions occurring during the previous fiscal year, beginning July 1st of the preceding year and ending on June 30th of the current year.
ON THE OTHER HAND…
A bunch of bad bills also either did not move through the system or got killed. They included a number of efforts to further reduce exemptions and exclusions of property and services, further elimination of ad valorem tax credits, and further reduction of certain income and corporate franchise tax credits.
Recap: Louisiana's Regular Legislative Session
Following is a brief run-down of legislation that passed in the 2016 Regular Louisiana Legislative Session. The bills of interest are based on those discussed by the CPA Legislative Committee during its legislative review.
- HB 284 b yRep. Franklin Foil and Sen. Danny Martiny changes present law to require a corporation to include the entire text of the original articles of incorporation when filing restated articles of incorporation relative to the Business Corporation Act and removes the existing 30-day grace period for annual reports.
- HB 289 by Rep. Ray Garofalo and Sen. Rick Ward provides that a terminated corporation’s juridical personality continues for the purpose of disposing of immovable property.The law adds disposal of immovable property owned by the corporation pursuant to a resolution of the board of directs to the existing list of purposes for which a corporation’s juridical personality will continue after the corporation terminates; to reserve the corporation’s name, to conclude any proceeding to which the corporation is a party at the time of termination, and to continue in ownership of any undistributed corporate assets and to owe any corporate obligations or liabilities.
- HB 608 by Rep. Bryan Adams and Sen. Dale Erdey increases the rate of the fee the Louisiana Tax Commission is authorized to levy on the assessment of public service properties from 1/100 of one percent to 4/100 of one percent of the accessed value of such properties. The law is scheduled to sunset June 30, 2018.
- HB 711 by Rep. Rob Shadoin and Sen. Walsworth provides procedures for the issuance of a TRO or injunction to bar the release of an audit report prepared by the legislative auditor. The law provides that a an application can be made to a court of competent jurisdiction for a temporary restraining order, preliminary injunction, or permanent injunction barring the release of the audit.
- HB 714 by Rep. Franklin Foil and Sen. Dan Claitor revises the Business Corporation Act.The law provides exception from existing requirements of a qualified director to those who are qualified with respect to offering potential opportunities to the corporation, as well as several other changes to the requirements for a qualified director.
- HB 735 by Rep. Neil Abramson and Sen. Dan Claitor changes the filing deadline for income tax returns made and filed by corporate and partnership taxpayers.Claims made on the basis of the calendar year must be filed on or before May 15 rather than the existing April 15 deadline. Similar language applies the same change to filing returns.
- HB 737 by Rep. Neil Abramson and Sen. Conrad Appel changes the deadline for the submission of annual reports to the Department of Revenue regarding deductions and withholdings of employee wages from the first business day following February 27 to January 31 of each year.
- HB 756 by Rep. Neil Abramson and Sen. Conrad Appel requires the electronic filing of all schedules and invoices for claims for refunds for overpayment of sales tax if the claim for a refund is $25,000 or more or if the claim for a refund is made by a tax preparer on behalf of the taxpayer, regardless of the amount. Additionally, the law authorizes the secretary to exempt any taxpayer from the provision if the taxpayer can demonstrate electronic filing would create an undue hardship.
- HB 783 by Rep. Neil Abramson and Sen. Mike Walsworth provides relative to a sales and use tax rebate and a project facility expense rebate through the Louisiana Quality Jobs Program and extends the termination date of the program. The law replaces additional existing benefits that an employer is entitled to receive through the Enterprise Zone Program with a sales and use tax rebate for the purchases of materials used in the construction, addition, or improvement of a building used to house the business or its equipment and a project facility expense rebate equal to 1.5 percent of the qualified capital expenditures for the facility.
- HB 794 by Rep. Neil Abramson and Sen. Mike Walsworth replaces additional benefits in the Enterprise Zone Program with a sales and use tax rebate for the purchases of materials used in the construction, addition, or improvement of a building used to house the business or its equipment. In addition, the law extends the termination date of the program from July 1 2017 to July 1 2018.
- HB 806 by Rep. Neil Abramson and Sen. Danny Martiny authorizes the dissolution by affidavit of a limited liability company that owns no immovable property.
- HB 870 b yRep. Julie Stokes and Sen. Danny Martiny revises the Louisiana Accountancy Act to allow for CPA firm mobility, change the timing requirements of being able to sit for the CPA exam, clarify the definition of "attest,” add a definition of "CPA-Retired,” and other terms.Additionally, the law changes present law to increase the cap on compensation of board officers and those charging fees for "reinstatement applications” and other services.
- HB 876 by Rep. Walt Leger and Sen. Danny Martiny provides for online filing of documents required to be filed with the secretary of state.
- HB 978 by Rep. Mike Danahay and Sen. Ronnie Johns Establishes procedures and requirements related to the enforcement and adjudication of various state and local taxes,including changes to the funding for, membership, and authority of the Board of Tax Appeals.
- HB 1103 by Rep. Julie Stokes and Sen. Dale Erdey provides that a physical copy of a taxpayer's IRS form requesting an extension of time to file their federal income tax return shall be sufficient to request an extension of time to file the taxpayer's La. individual income tax return.
- HB 1120 by Rep. John Schroder and Sen. Karen Peterson creates the Louisiana Tax Institute within the Department of Revenue as an advisory body on tax related matters.
- HB 1121 by Rep. Walt Leger and Sen. Troy Carter requires annual notifications to purchasers and the Dept. of Revenue by remote retailers who make sales in La. in excess of $50,000 per year.
- SB 72 by Sen. Barrow Peacock and Rep. Kenny Cox authorizes a private employer to adopt an employment policy that gives preference in hiring to honorably discharged veterans, and spouses of disabled or deceased veterans.
- SB 99 by Sen. Gary Smith and Rep. Greg Miller exempts minors engaging in sales of less than $500 per year from payment of occupational license taxes.
- SB 144 by Sen. Danny Martiny and Rep. Thomas Carmody provides relative to state banks’ accounting for immovable property.The law requires that banks reflect the correct valuation in accordance with generally accepted accounting principles.
- SB 205 by Sen. Troy Carter and Rep. Gary Carter requires a tobacco seller designated as a "wholesale dealer” only if 50 percent of the seller’s total tobacco sales are to retail stores.
- SB 220 by Sen. Barrow Peacock and Rep. Thomas Carmody provides for powers of the estate of a deceased or incompetent member of a corporation if designated in the articles of organization or a writer operating agreement.
View a complete summary of the bills of interest
from the 2016 Regular Legislative Session.
This summary was prepared by Jim Harris, Harris DeVille & Associates.
Questions about the content of this Alert should be directed to Linda Babin.