Louisiana House Bill HB406

Louisiana 2015 Regular Session

• Introduced: 4/2/15
• Refer: 4/2/15
• Refer: 4/13/15

Caption

Reduces the amount of certain corporate income tax exclusions, deductions, and credits

Impact

The intent behind HB 406 is primarily fiscal, aiming to increase state revenue by limiting the tax benefits that corporations can receive under Louisiana law. Supporters argue that this bill will provide the state with a more stable revenue stream while still allowing corporations to benefit from reduced tax rates, albeit to a lesser degree than before. This move reflects a broader trend of states seeking to balance fiscal responsibility with the need to attract and retain businesses. However, the actual long-term impact on business growth and economic performance remains to be seen as it may also discourage corporate investment in Louisiana if the changes are perceived as unfavorable.

Summary

House Bill 406, introduced by Representative Thibaut, aims to amend existing corporate income tax regulations by reducing certain corporate income tax exclusions, deductions, and credits. The bill specifically preserves the exclusion for S corporations but modifies it to cover only 98% of Louisiana net income, effectively lowering the amount that S corporations can exclude from taxation based on their net income. Similarly, the proposed changes also apply to deductions for interest and dividends, limiting them to 98% of the amounts included in federal income tax calculations. Additionally, the corporate tax credit for bone marrow donor expenses will be reduced from 25% to 24.5%. These changes are set to take effect on January 1, 2016.

Sentiment

General sentiment towards HB 406 appears to be mixed. Proponents view the bill as a necessary adjustment to ensure that corporations contribute a fair share to state revenues, especially in light of needs for funding public services. Critics, on the other hand, argue that reducing tax benefits for corporations could hamper economic growth and deter potential investment in Louisiana. The discussion reflects a broader debate about tax equity and the responsibilities of businesses within the state, with differing opinions on what constitutes an appropriate tax burden for corporate entities.

Contention

Notable points of contention include the balance between maintaining attractive tax incentives for businesses and ensuring adequate funding for state needs. Some advocates have raised concerns that reducing these exclusions and deductions may disproportionately affect smaller S corporations that rely on these tax benefits for their financial health. Additionally, the revisions to the tax credit for bone marrow donations, while minor, have been questioned by healthcare advocates who fear this could diminish support for important altruistic initiatives. The bill has sparked dialogue about the role of corporate taxation in Louisiana's economy and the trade-offs inherent in adjusting tax policy.