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Regular Session, 2012
SENATE BILL NO. 463
BY SENATORS WALSWORTH, ALARI O AND GARY SMITH
TAX/INCOME/CORPORATE. Establishes the Corporate Tax Apportionment Program for
the granting of contracts for certain businesses to utilize the single sales factor to compute
their taxable for income tax purposes and their taxable capital for franchise tax purposes.
(7/1/12)
AN ACT1
To enact Chapter 5 of Subtitle V of Title 47 of the Louisiana Revised Statutes of 1950, to2
be comprised of R.S. 47:4401, relative to corporation income and franchise tax; to3
authorize the establishment of the Corporate Tax Apportionment Program and to4
provide for the administration thereof; to provide for certain definitions; to provide5
for contracts; to provide for certain eligibility requirements, limitations, and6
restrictions of such program; to provide with respect to applications; to authorize the7
promulgation of rules and regulations; to provide for an effective date; and to8
provide for related matters.9
Be it enacted by the Legislature of Louisiana:10
Section 1. Chapter 5 of Subtitle V of Title 47 of the Louisiana Revised Statutes of11
1950, comprised of R.S. 47:4401, is hereby enacted to read as follows:12
CHAPTER 5. CORPORATE TAX APPORTIONMENT PROGRAM13
ยง4401. Corporate Tax Apportionment Program; definitions; eligibility14
requirements; contract approval15
A. Definitions. For purposes of this Section, the following words shall16
have the following meanings unless the context clearly indicates otherwise:17 SB NO. 463
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(1) "Board" shall mean the Board of Commerce and Industry.1
(2) "Business" shall mean any individual, firm, joint venture,2
association, corporation, estate, partnership, business trust, receiver, syndicate,3
or any other legal business entity.4
(3) "Department" shall mean the Department of Economic Development.5
(4) "Headquarter jobs" shall mean executive, administrative, or6
professional jobs based at a principal or regional office located in Louisiana, in7
which are located the principal or regional executive officers normally8
constituting a principal or regional headquarters providing corporate9
governance. Such principal or regional executive officers include but shall not10
be limited to chief executive officer, chief operating officer, and other senior11
level officers or appropriate regional equivalents.12
(5) "Program" shall mean the Corporate Tax Apportionment Program13
established pursuant to the provisions of this Section, under which a qualified14
business may utilize the single sales factor.15
(6) "Qualified business" shall mean a business certified by the secretary16
of the department as meeting the eligibility requirements of Subsection B of this17
Section and approved to participate in the program.18
(7) "Secretary" shall mean the secretary of the Department of Economic19
Development.20
(8) "Shared service center jobs" shall mean jobs based at a business21
located in Louisiana that perform specific corporate operational tasks for the22
business, or its affiliates, or customers, such as accounting, human resources,23
payroll, or purchasing.24
(9) "Significant positive economic benefit" means that net positive tax25
revenues to be generated as a result of the project taking into account direct,26
indirect, and induced impacts based on standard economic impact methodology27
utilized by the department and the value of the single-sales factor28
apportionment and any other state tax and financial incentives that are used by29 SB NO. 463
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the department to secure the qualified business.1
(10) "Single sales factor" shall mean the single sales factor2
apportionment percent for manufacturing, merchandising, and other businesses3
as provided for in R.S. 47:287.95(F)(2)(b) and R.S. 47:606(A)(3)(b).4
B.(1) Eligibility Requirements. A business shall be eligible for5
participation in the program if all of the following requirements are met:6
(a) At least fifty percent of the total annual sales of the business from a7
Louisiana site or sites is to out-of-state customers or buyers, or to in-state8
customers or buyers but the product or service is resold by the purchaser to an9
out-of-state customer or buyer for ultimate use, or to the federal government,10
or any combination thereof; and11
(b) The activities of the business at a Louisiana site or sites include12
corporate headquarters, logistics, warehousing, data center, clean technology,13
destination health care, research and development, renewable energy, digital14
media and software development, or other business sector targeted by the15
secretary as a focus of the department's economic development efforts.16
(2) The secretary, in his discretion, may include sales by affiliates of the17
business in determining the percentage of sales meeting the requirements of this18
Subsection. Except in the case of a business providing at least twenty-five new19
headquarter jobs or shared service center jobs, a business primarily engaged20
in retail sales, real estate, professional services, natural resource extraction or21
exploration, financial services, or venture capital funds, shall not be eligible for22
this program. No business engaged in gaming or gambling shall be eligible for23
the program.24
C.(1) Applications. At the invitation of the secretary, a business may25
apply for participation in the program by submitting to the department26
certified statements and substantiating documents as the department may27
require.28
(2) Certification. The secretary may certify the eligibility of the business29 SB NO. 463
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and request board approval of a contract providing for its participation in the1
program on terms and conditions specified by the secretary, if the secretary2
determines that the business meets the eligibility requirements provided for in3
Subsection B of this Section, that participation in the program is needed in a4
highly competitive site selection situation to encourage a new business to locate5
in the state or to encourage an existing business to expand in this state, and that6
securing the project will result in a significant positive economic benefit to the7
state.8
(3) Contract Approval. (a) The board shall review the secretary's9
certification of the business and may approve the contract for participation in10
the program for an initial term of up to twenty years, renewable at the11
discretion of the secretary for up to an additional twenty years. Upon the12
board's approval of the secretary's certification of eligibility, the business shall13
be qualified for participation in the program and may utilize the single sales14
factor in the same manner as provided for in R.S. 47:287.95(F)(2)(b) and R.S.15
47:606(A)(3)(b). The department shall submit a copy of the approved16
certification, and any renewals thereof, to the Department of Revenue.17
(b) No new contracts shall be approved on or after July 1, 2017, but18
contracts existing on that date may continue and be renewed.19
D. Annual Certification of Eligibility. Prior to utilization of the single20
sales factor for a particular tax year, the qualified business shall submit to the21
department certification that it met the eligibility requirements for22
participation in the program and all performance obligations of the contract for23
that year, which certification shall be subject to audit by the department. If a24
qualified business fails to maintain the eligibility requirements for participation25
in the program or fails to meet all performance obligations of the contract, the26
secretary may suspend or terminate its participation in the program. If the27
secretary suspends or terminates a qualified business' participation in the28
program, the secretary shall notify the Department of Revenue that the business29 SB NO. 463
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is not qualified to utilize the single sales factor.1
E. The department may promulgate rules and regulations after approval2
of the House Committee on Ways and Means and the Senate Committee on3
Revenue and Fiscal Affairs meeting jointly within forty-five days of the4
publication of such proposed rules and regulations in the State Register.5
Section 2. The provisions of this Act shall become effective on July 1, 2012, and6
shall be applicable to all corporate income tax periods beginning on or after January 1, 2013,7
and to all corporation franchise tax periods beginning on or after January 1, 2014.8
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Riley Boudreaux.
DIGEST
Walsworth (SB 463)
Present law requires many businesses to use the arithmetical average of three ratios to
compute how much of their "apportionable income" or "taxable capital" will be subject to
Louisiana corporate income and franchise taxation:
1. The ratio of the value of property owned in Louisiana to the value of all property
owned by the taxpayer.
2. The ratio of the amount paid by the taxpayer for compensation for personal services
rendered in this state to the total amount paid by the taxpayer for such compensation.
3. The ratio of net sales made in the regular course of business and other gross
apportionable income attributable to Louisiana to such total net sales and other gross
apportionable income.
However, R.S. 47:287.95(F)(2)(b) and R.S. 47:606(A)(3)(b) allow those in the business of
manufacturing or merchandising to compute their taxable income and taxable capital by
means of the single ratio in (3) above.
Proposed law establishes a program for the granting of contracts for an initial term of up to
20 years (renewable for another 20) for the business to utilize the single sales factor in the
same manner as provided for in R.S. 47:287.95(F)(2)(b) and R.S. 47:606(A)(3)(b), if the
business is certified by the secretary of DED and approved by the State Board of Commerce
and Industry. R.S. 47:287.95(F)(2)(b) and R.S. 47:606(A)(3)(b) allow those in the business
of manufacturing or merchandising to compute their taxable income and taxable capital by
means of the single ratio in (3) above. No new contracts may be approved on or after July
1, 2017, but contracts existing on that date may continue and be renewed.
Renewals are at the discretion of the secretary of DED.
Proposed law provides that a business is eligible for participation in the program if all of the
following requirements are met:
1. At least 50% of the total annual sales of the business from a Louisiana site or sites,
which may include, at the secretary of DED's discretion sales by affiliates of the
business, is to any of the following: SB NO. 463
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a. Out-of-state customers or buyers.
b. In-state customers or buyers but the product or service is resold by the
purchaser to an out-of-state customer or buyer for ultimate use.
c. The federal government.
d. Any combination of the above.
2. The activities of the business at a Louisiana site or sites include corporate
headquarters, logistics, warehousing, data center, clean technology, destination
healthcare, research and development, renewable energy, digital media and software
development, or other business sector targeted by the secretary of DED as a focus
of the department's economic development efforts.
Proposed law provides that businesses primarily engaged in retail sales, real estate,
professional services, natural resource extraction or exploration, financial services, or
venture capital funds are not eligible for the program, unless it is a business providing at
least 25 new "headquarter jobs" or "shared service center jobs".
"Headquarters jobs" is defined as executive, administrative, or professional jobs based at a
principal or regional office located in Louisiana, in which are located the principal or
regional executive officers normally constituting a principal or regional headquarters
providing corporate governance. Such principal or regional executive officers include but
are not limited to chief executive officer, chief operating officer, and other senior level
officers or appropriate regional equivalents.
"Shared service center jobs" means jobs based at a business located in Louisiana that
performs specific corporate operational tasks for the business or its affiliates or customers,
such as accounting, human resources, payroll or purchasing.
Proposed law permits businesses to apply for participation in the program at the invitation
of the secretary of DED by submitting to the department such certified statements and
substantiating documents as the department may require. If the secretary determines all of
the following he may certify the businesses eligibility and request approval of State Board
of Commerce and Industry:
1. That the business meets the eligibility requirements.
2. That participation in the program is needed in a highly competitive site selection
situation to encourage a new business to locate in the state or to encourage an
existing business to expand in this state.
3. That securing the project will result in a "significant positive economic benefit to the
state." "Significant positive economic benefit" is defined as net positive tax revenues
estimated to be generated as a result of the project taking into account direct,
indirect, and induced impacts based on standard economic impact methodology
utilized by DED and the estimated value of the rebate and any other state tax and
financial incentives that are used by the department to secure the qualified business.
Proposed law specifies that gaming or gambling businesses are not eligible for the program.
Proposed law requires annual certification to DED of eligibility and contract performance
from the business prior to utilization of the single sales factor for a particular tax year. The
certification is subject to audit by the department. If a qualified business fails to maintain
the eligibility requirements or fails to meet all performance obligations, the secretary may
suspend or terminate its participation in the program and he notifies the Department of
Revenue that the business is not qualified to utilize the single sales factor. SB NO. 463
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Proposed law allows DED to promulgate rules and regulations after approval of the House
Ways and Means and Senate Revenue and Fiscal Affairs meeting jointly within 45 days of
their publication in the State Register.
Effective July 1, 2012, and applicable to corporate income tax years beginning on and after
January 1, 2013 and corporate franchise tax years beginning on and after January 1, 2014.
(Adds R.S. 47:4401)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Revenue and Fiscal
Affairs to the original bill.
1. Prohibits granting new contracts on and after July 1, 2017, but allows
contracts existing on that date to continue and be renewed.
2. Authorizes the contracts under the program to also grant to an eligible
business the use of the single sales factor to calculate its corporate franchise
tax as well as using it to calculate its corporate income tax.
3. Defines "significant positive economic benefit" which the secretary must find
in order to grant the use of the single sales factor for calculating income and
franchise tax to an eligible business.
4. Changes the procedure by which DED may promulgate regulations from that
which is in the APA to committee approval prior to adoption of the
regulations at a joint meeting within 45 days of their publication in the State
Register.
5. Specifies that gaming or gambling businesses are not eligible for the
program.
6. Specifies that the program is applicable to corporate franchise tax years
beginning on and after January 1, 2014.