Louisiana Tax Commission Sets Dates for 2023 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 attached notice. If you have any questions, contact Jay Adams or any member of the Jones Walker SALT Team.

John Fletcher Addresses Graduates at Delta State’s 95th Commencement Ceremony

I was honored as the President of the Delta State University Alumni Association to address the new graduates at Delta State’s 95th Commencement Ceremony last Friday. Pictured with me are DSU President William LaForge and the keynote speaker, alumnus Walt Bettinger II, CEO of The Charles Schwab Corporation.  Not pictured but also on stage was alumnus David Abney, former CEO and Chairman of UPS, who hooded Bettinger as he received an honorary Ph.D. from the University.

 

Mississippi Enacts Pass-Through Entity Income Tax Election/ SALT Cap Workaround

Mississippi recently passed a SALT cap workaround in the form of a flow-through entity election. Consistent with the roughly 26 other states having adopted similar schemes, the Mississippi bill presents several grey areas and questions that will need to be addressed through Department of Revenue guidance or possible technical corrections.

H.B. 1691, signed into law by Governor Reeves on April 14, authorizes certain pass-through entities to pay an entity-level income tax in lieu of the partners/owners paying income tax on those amounts at the individual level, thereby freeing up other state and local taxes for the limited federal itemized deduction (the SALT Cap). An “electing pass-through entity” is defined as a partnership, S Corporation or similar pass-through entity having made an election pursuant to the new code section (not yet codified or designated). The election will be made by submitting a designated form to the Department of Revenue on or before the 15th day of the third month following the close of the tax year (typically, March 15).  Once made, the election is binding for all subsequent years until formally revoked by the entity.

The bill contains an interesting approval process that may override the internal voting procedures for many entities. To make or revoke an election, there must be “a vote by or written consent of the members of the governing body of the entity as well as a vote by or written consent of the owners, members, partners or shareholders holding greater than fifty percent (50%) of the voting control of the entity, within the time prescribed in this subsection.” Thus, the approval must be made at two levels even though management decisions may be centralized in a board or other governing body, the vote must pass by a specified threshold that may not be consistent with other voting rights/thresholds provided under an entity’s governance documents, and the votes must take place within a specified time frame.  A strict reading of the vote requirement may also pose questions whether a simple manager governance structure constitutes a centralized board or “other governing body.”

Once made, each “owner, member, partner or shareholder” (not explicitly limited to individuals) will report his or her distributive share of the entity’s pass-through income, but that income will be exempt at the owner level. Each such owner, etc. in turn shall be allowed a credit against the taxes imposed under this chapter in an amount equal to his or her pro rata or distributive share of tax paid by the electing pass-through entity with respect to the corresponding taxable year. It is unclear why an individual Mississippi credit would be required with respect to this income given that it is explicitly exempt from tax, but one would assume no double benefit was intended.

The adjusted basis of the owners, members or partners of an electing pass-through entity in their ownership interests in the electing pass-through entity shall be calculated without regard to the election under this new provision.

Several additional details may need to be addressed under the new legislation:

  • It is unclear how this new provision will operate in a tiered structure containing multiple pass-through entities, specifically whether the owner-level exemption is contingent on a tax payment having been made by that immediate pass-through entity as opposed to one further up the chain;
  • Presumably income distributable to a corporate owner will be exempt as well as that received by individuals;
  • It is unclear whether paying tax at the entity level will sever nexus for any corporate owners whose sole contact with the state is via that pass-through entity;
  • The basis calculation rules in theory should help minimize federal/state differences in gain or loss calculations on a sale of an ownership interest;
  • The bill does not appear to remove the existing option of filing composite returns on behalf of nonresident partners;
  • The bill does not appear to alter how Mississippi apportions partnership income at the entity level, or the method of “flowing up” the entity’s apportionment factors for franchise tax purposes;
  • Additional issues may arise as to how a resident partner claims the credit for income taxes paid to other states on any income exempt in Mississippi under this new law.

The bill is effective January 1, 2022, but the deadline for making an election for the 2021 tax year had already lapsed prior to passage so unless a technical correction is passed, it effectively is available for the 2022 year and thereafter.

Jones Walker LLP will continue to monitor this issue and will pass along any additional guidance that might be issued by the Department.

SAVE THE DATE for Jones Walker’s 14th Annual State and Local Tax Seminar

WHEN: TUESDAY, SEPTEMBER 20, 2022

WHERE: HILTON AMERICAS-HOUSTON

Please Save the Date for Jones Walker’s 14th Annual State & Local Tax Seminar! We will be back for our live, in-person program in Houston!

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

Full brochure coming soon!

Questions? Contact Courtney Farley at cfarley@joneswalker.com

Jay Adams’ Team Fleur De Que Again Named Top Fundraising Team at Annual Hogs for the Cause BBQ Competition

Team Fleur De Que was once again named the Top Fundraising Team at the Annual Hogs for the Cause barbecue festival and competition. Jones Walker SALT Team leader, Jay Adams, has been a proud member of Team Fleur De Que for several years and helps his team raise money to contribute to the needs of families with children fighting pediatric brain cancer. This year, Jay was joined in the festivities by Jones Walker SALT partner Bill Backstrom and Jones Walker SALT associate Jeff Birdsong.

Please click here to learn more about Hogs for the Cause and how you can contribute.

Louisiana Tax Commission Issues Statewide Advisory Regarding Severe Weather Event on March 22

As we have written before, any property owner whose property has been damaged or rendered non-operational as a result of an emergency declared by the governor can seek a reduction in the value of their affected property even though January 1st has passed. See La. R. S. 47:1978.1. On March 23, 2022, Louisiana Governor John Bel Edwards declared a statewide state of emergency due the severe storm that spawned several tornadoes. As such, if your property was damaged, destroyed, or rendered non-operational as a result of the storms, you have the right to seek a reassessment of your affected properties. The Louisiana Tax Commission issued Statewide Advisory No. 01-2-22 regarding the declaration.

If you have any questions or wish to discuss, please contact Jay Adams or any other member of the Jones Walker SALT Team.

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