Louisiana H.B. 567, signed into law by Governor Jeff Landry, increases the threshold for nonresident employee income tax and withholding from 25 to 30 days, effective January 1, 2026. This change allows nonresident employees to work in Louisiana for up to 30 days without triggering state income tax or employer withholding obligations.

Under legislation enacted in 2021 and effective January 1, 2022, SB 157 exempted employees from the state's nonresident income tax when they worked within the state for fewer than 25 days in the calendar year.

Details

Compensation paid to an employee is exempt from Louisiana nonresident income tax if all the following conditions are met:

• The employee performs services within the state for 25 (30 effective January 1, 2026) or fewer days in the calendar year.
• The employee performed employment duties in more than one state in the calendar year.
• The wages are not paid in the individual's capacity as a professional athlete, staff member of a professional athletic team, professional entertainer, public figure or qualified production employee.
• The employee's state of residence either provides a substantially similar exemption or does not impose a personal income tax.

Employers are not required to withhold Louisiana nonresident income tax from wages paid to employees for services within the state of 25 (30 effective January 1, 2026) or fewer days in the calendar year. If the working days in the calendar year exceed 25 (30 effective January 1, 2026), the employer is required to remit and withhold nonresident income tax from all wages for services performed within the state, including wages earned for the first 25 (30 effective January 1, 2026) days.

Employees are considered present and performing employment duties within Louisiana for a day if they perform more of their duties in Louisiana than in any other state during that day. Any portion of the day during which employees are in transit is not considered a working day within Louisiana.

Regarding income tax withholding for the first 25 (30 effective January 1, 2026) days when employees exceed the 25-day (30-day effective January 1, 2026) threshold in the calendar year, the Louisiana Department of Revenue will not require that employers pay penalties or interest for failure to withhold nonresident income tax providing one of the following two requirements is met:

• The employer, at its sole discretion, maintained a time-and-attendance system specifically designed to allocate employee wages for income tax purposes among all taxing jurisdictions in which the employee performs employment duties for the employer, and the employer relied on data from that system.
• The employer did not maintain a time-and-attendance system, and relied on either (1) its own records of the employee's work location maintained in the regular of course of business, or (2) the employee's reasonable determination of the time he or she expected to spend performing duties within Louisiana provided the employer has no actual knowledge the employee's determinations are fraudulent and the employer and employee do not collude to evade taxation in making the determination.

Ernst & Young LLP insights

Employers should review their Louisiana short-term business traveler withholding and reporting policy and make updates consistent with the updated tax law.