As widely reported in state and national media, Louisiana has been facing severe budget shortfalls, estimated to be as high as $1.6 billion in 2015. The state enacted some tax increases to correct these deficits, but reportedly still faces a "fiscal cliff"¹ beginning July 1, 2018, when many of these revenue increases expire.

During the 2017 Regular Legislative Session, the Legislature was expected to enact structural tax reforms to help close these budget gaps before the fiscal cliff, but it appears it was unsuccessful during the session in achieving this goal.

The bills listed below have all been signed by the Governor and have either already taken effect or will take effect within the next year. Nearly all of the new laws will either extend current tax credits or allow for more deductions against taxable income.

Changes to Louisiana motion picture credit program

Act 309² (SB 254) makes significant changes to the Louisiana motion picture credit program. Under the new law, the maximum amount of credits that can be issued each fiscal year (July 1 to June 30) is $150 million for fiscal years beginning on or after July 1, 2017. Additionally, the state now offers five types of credits, including: (1) a base investment credit of 25% for projects over $300,000 or if the production is a Louisiana screenplay; (2) an additional base investment credit of 5% for projects filmed outside the New Orleans Metro Zone; (3) an additional base investment credit of 10% for certain expenditures equal to or greater than $50,000 but no greater than $5 million for projects meeting certain Louisiana screenplay requirements; (4) a 10% credit for Louisiana resident payroll expenditures; and (5) a 5% credit for certain Louisiana-based visual effects expenditures meeting certain requirements. SB 254 also ends the transfer of certain motion picture credits to third parties after December 31, 2017.

Extension of state R&D tax credit

Act 336³ (HB 300) extends the Louisiana R&D tax credit by two years to December 31, 2021. The law restores the refundability of credits in FY19 (tax year 2018) for firms receiving credits based on their federal Small Business Innovation Research (SBIR) award or federal Small Business Technology Transfer Program (SBTT) grant (made nonrefundable for all participants in 2015). Act 336 also reduces the R&D credit amounts that taxpayers may claim by lowering credit rates across the board. The new rates will be 30% for SBIR/SBTT firms (formerly 40%), 30% for firms with less than 50 employees (formerly 40%), 10% for firms with 50-100 employees (formerly 20%), and 5% for firms with more than 100 employees (formerly 8%).

Firms with more than 50 employees also will be subject to an 80% base amount spending threshold (formerly 70%). For the first time, firms with less than 50 employees must demonstrate an increase in their base amount before they can qualify for the credit. The bill applies to tax years beginning on and after January 1, 2017.

Extension of Enterprise Zone Program

Act 206⁴ (HB 237) extends the deadline of the Enterprise Zone Program from July 1, 2017 to July 1, 2021. The Enterprise Zone Program allows businesses to enter into contracts with the Board of Commerce and Industry to receive income tax credits or sales and use tax rebate plans in exchange for the creation of a certain number of jobs.

Provision for termination dates for select credit and incentive programs

Act 386⁵ (SB 183) sets termination dates for several credits. Major credit end dates include the Enterprise Zone Program (July 1, 2021), Quality Jobs Program (July 1, 2022), Competitive Projects Payroll Incentive Program (July 1, 2022), and severance tax rebates with mega-project for co-op endeavor agreements (July 1, 2022).

Deduction for dividends from related member in "regulated group of entities"

Act 352⁶ (HB 555), which applies to institutions subject to the Louisiana Bank Shares Tax, now provides a deduction against corporate income tax for amounts received as dividends from a related member in a "regulated group of entities." A "regulated group of entities" is a group in which one of the members is either a telecommunications provider or an electric utility in Louisiana. The Act takes effective January 1, 2018.

Expansion of construction contracts excluded from new sales and use taxes

Act 209⁷ (HB 264) expands the types of construction contracts excluded from the imposition of a new sales and use tax to include construction contracts for sales of materials or services in lump sum, unit price, fixed fee or guaranteed maximum price. The Act applies to any additional state sales and use tax enacted on or after July 1, 2017.

Establishment of new board to coordinate collection of sales and use taxes

Act 274⁸ (HB 601) establishes the Louisiana Uniform Local Sales Tax Board, whose main goal is to establish uniformity and efficiency for the collection and administration of sales and use taxes. The Board has the authority to support and advise local tax collectors, establish rules related to the collection of local sale and use taxes, and develop a coordinated multi-parish audit process, among other things.

Adoption of a wider definition of inventory

Act 338⁹ (HB 313) codifies the definition of "inventory" as set forth by the Louisiana Court of Appeals in its ruling in Louisiana Machinery,¹⁰ which states that items previously rented and, which in the good-faith and ordinary course of business are ultimately sold, may qualify as "inventory," for purposes of the inventory tax credit against ad valorem property taxes. The Act also defines short-term rentals and clarifies the definition of a retailer. Provisions of the Act apply retroactively to tax periods beginning on or after January 1, 2016.

Exclusion of wages from income for out-of-state employees performing disaster-related work in Louisiana

Act 358¹¹ (HB 639) excludes from Louisiana state income tax the compensation and wages of out-of-state employees and nonresident businesses that perform disaster or emergency-related work in Louisiana during a declared state disaster or emergency. This provision applies to all years beginning on and after January 1, 2018.

Requirement to pay taxes by electronic funds transfer

Act 150¹² (HB 333) allows the Louisiana Department of Revenue (LDR) to require payment of taxes by electronic funds transfer (EFT). Previously, the return had to exceed $5,000 to meet this requirement. HB 333 includes a hardship exception, whereby taxpayers can be excluded from the LDR requirement if they can prove that electronic filing and payment would create undue hardship. The provisions of Act 150 took effect June 12, 2017.

Extension of Angel Investor Tax Credit Program

Act 345¹³ (HB 454) extends the sunset of the Angel Investor Tax Credit Program from July 1, 2017 to July 1, 2021. The program authorizes a tax credit for certain investments in a qualifying "Louisiana Entrepreneurial Business," as defined by the Department of Economic Development.

Addition of criteria for the HMO insurance premium tax credit

Act 313¹⁴ (HB 664) adds criteria for a health maintenance organization (HMO) to qualify for the insurance premium tax credit for insurers that invest a portion of their total admitted assets in Louisiana financial institutions and investment products. The new requirements include that the HMO must offer fully insured commercial or Medicare Advantage products, be licensed and operating in Louisiana, maintain its primary corporate office and at least 70% of employees in Louisiana, and maintain its core business functions in Louisiana. These provisions take effect January 1, 2018.

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ENDNOTES

¹ See Julia O'Donoghue, "Louisiana Legislature leaves Capitol with budget — and little else," The Times-Picayune website, accessed July 13, 2017.

² Act 309 was signed by the governor on June 15, 2017.

³ Act 336 was signed by the Governor on June 22, 2017.

⁴ Act 206 was signed by the Governor on June 14, 2017.

⁵ Act 386 was signed by the Governor on June 23, 2017.

⁶ Act 352 was signed by the Governor on June 22, 2017.

⁷ Act 209 was signed by the Governor on June 14, 2017.

⁸ Act 274 was signed by the Governor on June 16, 2017.

⁹ Act 338 was signed by the Governor on June 22, 2017.

¹⁰ La. Mach. Co., LLC v. Bridges, 2015 La. App. Unpub. LEXIS 365 (La. App. 2015) writ denied 187 So. 3d 1003 (La. 2016).

¹¹ Act 358 was signed by the Governor on June 22, 2017.

¹² Act 150 was signed by the Governor on June 12, 2017.

¹³ Act 345 was signed by the governor on June 22, 2017.

¹⁴ Act 313 was signed by the governor on June 16, 2017.