Louisiana Corporate Franchise Tax Reform Rhys Marsden, July 17, 2023July 17, 2023 Welcome to the realm of Louisiana’s corporate franchise tax reform, where the winds of change are reshaping the landscape of business taxation. In this article, we delve into the recent developments and implications of this transformative endeavor, shedding light on the newfound opportunities and challenges awaiting corporations in the Pelican State. So tighten your seatbelts, as we embark upon a journey through the exciting world of Louisiana’s corporate franchise tax reform. Table of Contents Toggle Louisiana Franchise Tax Rates and DeadlinesChanges to Louisiana Tax Law and Imposition of Franchise TaxNOL Limitations and Modifications in Louisiana Franchise TaxProposed Changes and Amendments to Louisiana Franchise Tax Louisiana Franchise Tax Rates and Deadlines – Corporations in Louisiana are subject to franchise taxes, which are separate from income taxes. – The franchise tax rate is based on a corporation’s net income, with a flat rate of 0.3% for most entities. – Certain exemptions and credits may apply, so it’s important to review the Louisiana Department of Revenue’s guidelines for eligibility. – The deadline for filing the franchise tax return is typically on or before May 15th of each year. – Late filings may incur penalties and interest, so it’s essential to meet the deadline. – The Louisiana Department of Revenue has a Shreveport Office that can provide information and assistance regarding franchise tax matters. – It’s recommended to consult with a tax professional or use the state’s online resources for accurate and up-to-date information on franchise tax rates and deadlines. Changes to Louisiana Tax Law and Imposition of Franchise Tax Louisiana has recently implemented changes to its tax laws, specifically related to the imposition of franchise tax. These changes have important implications for corporations and other business entities operating in the state. It is crucial for businesses to understand and comply with these changes to avoid any penalties or legal issues. Some of the key changes include modifications to the state franchise tax rates, exemptions, and credits. The new laws also affect the treatment of entities such as LLCs, holding companies, and partnerships. Additionally, there are changes to the filing deadlines and requirements for the franchise tax return. To ensure compliance, businesses should consult with a tax professional or the state tax authority. They should also be aware of the various state tax incentive programs and credits that may be available to them. NOL Limitations and Modifications in Louisiana Franchise Tax Limitations Modifications 1. Deduction for Net Operating Loss (NOL) Carryovers: 1. Addition of Backdrop Provision: – Louisiana allows NOL carryovers for up to 20 years. – The addition of a backdrop provision allows taxpayers to carry back any NOLs generated in tax years beginning on or after January 1, 2022, for up to three years. – NOLs generated in tax years beginning before January 1, 2016, can be carried forward indefinitely. – This modification provides taxpayers with additional flexibility in utilizing their NOLs and potentially receiving refunds for prior years’ taxes paid. – NOLs cannot exceed 72% of the taxpayer’s Louisiana taxable income for the year. – The backdrop provision is subject to certain limitations, including a cap on the refund amount and a requirement to file an amended return. 2. Exclusion of NOLs Generated by Pass-Through Entities: 2. Modification of NOL Carryback Period: – Louisiana does not allow NOLs generated by pass-through entities to be deducted for corporate franchise tax purposes. – The modification reduces the NOL carryback period from five years to three years. – NOLs generated by pass-through entities can only be used to offset income from the same type of pass-through entity. – This change aims to align the state’s NOL provisions with federal tax law changes and ensure consistency in NOL treatment. – The exclusion of pass-through NOLs limits the ability of corporate taxpayers to offset their income with losses incurred by pass-through entities. – The modification may result in increased tax liabilities for corporate taxpayers. Proposed Changes and Amendments to Louisiana Franchise Tax The proposed changes and amendments to Louisiana’s franchise tax aim to reform the current corporate franchise tax system. These changes will impact businesses operating in the state and could have significant implications for their tax obligations. Some of the key proposed changes include adjustments to the state franchise tax rates, changes to the calculation of franchise taxes based on net income, and the introduction of a flat rate for certain business entities. These changes are intended to simplify the tax filing process and provide clarity for businesses in determining their tax liabilities. Additionally, the proposed amendments may include updates to the state tax incentive programs, exemptions for certain business entities, and changes to the taxation of holding companies. These changes could potentially impact the tax credits and deductions available to businesses in Louisiana. It is important for businesses to stay informed about these proposed changes and amendments, as they may impact their tax planning and compliance strategies. Businesses should consult with their tax advisors or the state tax authority for specific guidance on how these changes may affect them. Overall, the proposed changes and amendments to the Louisiana franchise tax system seek to promote a more favorable business environment in the state and ensure that taxation is fair and equitable for all businesses. Rhys MarsdenWas this article helpful?YesNo LLC Taxation And Franchise Tax