Cat’s Out the Bag: First Look at the Louisiana Secretary of Revenue’s Tax Reform Plan

Louisiana Department of Revenue logo

On July 11, 2024, the Secretary of Revenue for the State of Louisiana, Richard Nelson, briefed a joint meeting of the Louisiana House Ways and Means Committee and the Senate Revenue and Fiscal Affairs Committee on the administration’s tax proposals for a potential limited constitutional convention later this summer and the upcoming 2025 Louisiana Legislative Fiscal Session.

Though the Secretary did not detail every item in the legislative package, this briefing offered the clearest view to date of the administration’s plans. The Secretary focused on reducing tax rates across the board while addressing the expiration of the temporary .45% general state sales tax and 2% state sales tax on business utilities on June 30, 2025 (otherwise known as the Fiscal Cliff). In explaining his plans, the Secretary reiterated the need to hold and conclude a constitutional convention to rewrite the state Constitution’s tax provisions before August 23, 2024 so that the public can vote on any constitutional amendments in November and those changes can be implemented by the state’s fiscal year starting July 1, 2025.

Highlights of the tax reform plan include:

Individual Income Tax

  • Implementing a single, flat rate less than 3.5%
  • Increasing the standard deduction to $12,500 for individuals and $25,000 for married couples
  • Increasing the deduction for certain retirement income from $6,000 to $12,000

State Sales Tax

  • Eliminating or consolidating roughly 100 exemptions and exclusions
  • Expanding the tax base to include digital goods and certain personal services
  • Using increased sales tax collections to reduce the state sales tax rate and offset the individual income tax changes

Corporation Income & Franchise Tax

  • Eliminating the Corporation Franchise Tax
  • Eliminating some or all of the following credits and incentives to “buy-down” the Corporation Income Tax rate to less than 3.5%:
    • Inventory Tax Credit
    • Louisiana Quality Jobs Program
    • Motion Picture Investor Tax Credit
    • Historic Structures Tax Credit
    • Enterprise Zone
    • Digital Interactive Media & Software Tax Credit
    • Research & Development Tax Credit

Inventory Tax

  • Implementing wholesale ad valorem inventory tax reform by:
    • Eliminating or phasing out the tax through direct payments to local governments;
    • Allowing local governments to voluntarily exempt inventory from tax, possibly through a state incentive;
    • Eliminating the Inventory Tax Credit, while keeping the tax; or
    • Adopting some combination of the above

Severance Tax

  • Reducing the 12.5% oil severance tax rate
  • Shifting the oil severance tax base from price to volume
  • Phasing out exemptions, including the horizontal well exemption
  • Increasing the local share of severance tax revenue

Taxpayers should keep a close eye on any formal legislative proposals coming from the Secretary’s office. Of particular importance are which Corporation Income Tax credits/incentives and sales tax exclusions/exemptions are in the Secretary’s crosshairs as well as which currently nontaxable services could become subject to Sales Tax.

A copy of the Secretary’s presentation can be found HERE.

SAVE THE DATE for Jones Walker’s Annual State & Local Tax Seminar

WHEN: Thursday, October 3, 2024

WHERE: Four Seasons Hotel Houston

Please Save the Date for Jones Walker’s Annual State & Local Tax Seminar!

Be sure to check back for upcoming program details! This program is intended for industry tax professionals and will be recommended for Texas CPE and CLE.

Full brochure coming soon!

Questions? Contact Courtney Farley at cfarley@joneswalker.com

Jeffrey Birdsong Presents at IPT Annual Meeting

Jones Walker SALT Team partner Jeffrey Birdsong will present “Seaside Mergers & Acquisitions: Navigating the Waves of Strategies and Tax Traps” at the Institute for Professionals in Taxation 2024 Annual Meeting on June 25 in San Diego, CA.

Click here to register for the IPT Annual Meeting.

Katie Quinn Presents at IPT Annual Meeting

Jones Walker SALT Team partner Katie Quinn will present “Making Sense of the Complex Wave of Financial Transaction Taxation” at the Institute for Professionals in Taxation 2024 Annual Meeting on June 24 in San Diego, CA.

Click here to register for the IPT Annual Meeting.

Chris Lutz Presents at IPT Annual Meeting

Jones Walker SALT Team partner Chris Lutz will present “Diving Into the Taxability of Services” at the Institute for Professionals in Taxation 2024 Annual Meeting on June 25 in San Diego, CA.

Click here to register for the IPT Annual Meeting.

Louisiana Heads Toward Fiscal Cliff – Time for Tax Reform

As Louisiana heads towards a fiscal cliff, the Department of Revenue has been tasked with developing a plan to avoid the cliff and to address long called-for tax reform. Richard Nelson, Secretary of the Department of Revenue, reports that his Department is 1) reviewing approximately 200 sales tax exemptions for possible amendment, 2) reviewing the possibility of taxing digital goods and services and 3) considering the taxation of additional services that are not currently subject to sales tax. He also discussed the possibility of decreasing personal and corporate income taxes. His presentation to members of the state legislative committees that are responsible for drafting tax legislation is part of the administration’s preparation for the upcoming 2025 fiscal session, or possibly a special session to deal with the fiscal cliff. A spokesman for the Department indicated that the Secretary would recommend that a number of sales tax exemptions be eliminated or modified. 

The Jones Walker SALT Team will provide updates as they become available. If you have any questions, please contact Jay Adams or anyone on the Jones Walker SALT Team.

Louisiana Tax Commission Sets Dates for 2025 Rules and Regulations Sessions

For anyone interested in Louisiana property tax issues, the Louisiana Tax Commission has given notice of the dates for its annual Rules and Regulations hearings. Any interested party can submit a proposal to amend the current regulations to the Commission during this process. The Commission accepts written proposals that are presented in an open Commission meeting, followed by rebuttals from any opposing interests. The Commission announces any changes during an adoption hearing. The submission deadlines and hearing dates are set forth in the linked notice. If you have any questions, contact Jay Adams or any member of the Jones Walker SALT Team.

Jones Walker Houston Maritime Seminar

The Jones Walker LLP Maritime Industry Team hosted a maritime industry seminar for professionals operating in the offshore and maritime industries and trade.

Seminar topics ranged from OFAC and Sanctions, Tax, Employment Law Compliance, Marine Finance, Maritime Transactions & Jones Act Compliance.

Jones Walker Tax Practice Group leader, Bill Backstrom, presented “Charting a Course for Taxation Navigation” which discussed how maritime operations in the US present unique state and local tax implications. Navigating the sometimes-choppy waters of state and local taxation can be tricky or even treacherous. Other times, state and local tax laws may lead to buried treasures. This session provided attendees with current developments in the world of state and local taxation of maritime operations. Attendees also learned about certain unique aspects of state and local taxation of maritime businesses that could help professionals avoid tricks and traps or take advantage of tax benefit opportunities.

Jones Walker SALT Partners Present at TEI Minnesota 38th Annual President’s Seminar

Chris Lutz, Katie Quinn, and Jeff Birdsong, partners on the state and local tax team, presented at the TEI Minnesota Chapter 38th Annual President’s Seminar in Saint Paul, Minnesota, on April 23, 2024. Their presentation “Don’t Forget the Man Behind the Curtain: A Discussion on State Audit Policies and Developments,” was a part of a larger discussion on state and local tax at the seminar.

Bill Backstrom to Present at 2024 COST Spring Conference in Boston

Jones Walker SALT Team partner, Bill Backstrom, will present on the “In-House and Outside Counsel Privilege – How to Protect It” panel at the COST Spring Conference. What is the impact of the Supreme Court’s dismissal of In re Grand Jury on privilege? This session will discuss communications involving legal and non-legal advice from both an in-house attorney and outside counsel perspective, when is that communication protected. More importantly, what should a taxpayer consider in terms of the work-product doctrine, attorney-client privilege, and how to best protect your tax positions. Click here for additional information and to register for the conference!

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