DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part of the
legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of the law
or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 531 Original 2015 Regular Session Stokes
Abstract: Requires corporations to add-back otherwise deductible interest expenses and costs
incurred in connection with transactions with one or more related members.
Proposed law provides that for purposes of computing a corporation's La. net income, a corporation
shall add back otherwise deductible interest expenses and costs and intangible expenses and costs
directly or indirectly paid, accrued, or incurred to, or in connection with one or more direct or
indirect transactions, with one or more related members. However, to the extent a corporation shows
that the corresponding item of income was, in the same taxable year, either subject to a tax based on
or measured by the related member's net income in La. or any other state or, was subject to a tax
based on or measured by the related member's net income by a foreign nation with an enforceable
income tax treaty with the U.S.
Proposed law defines the term "subject to a tax based on or measured by the related member's net
income" as the receipt of payment by the recipient related member is reported and included in
income for purposes of a tax on net income, and not offset or eliminated in a combined or
consolidated return which includes the payor. Any portion of an item of income not attributed to the
taxing jurisdiction, as determined by that jurisdiction's allocation and apportionment methodology
shall not be considered subject to a tax. That portion of an item of income attributed to a taxing
jurisdiction having a tax on net income shall be considered subject to a tax even if no actual taxes
are paid on the item of income in the taxing jurisdiction by reason of deductions.
Proposed law adds provisions for when the adjustments required in proposed law shall not apply
such as if a corporation establishes that the transaction giving rise to the interest expenses and costs
or the intangible expenses and costs between the corporation and the related member did not have
as a principal purpose the avoidance of any La. income tax and the related member is not primarily
engaged in the acquisition, use, licensing, maintenance, management, ownership, sale, exchange, or
any other disposition of intangible property, or in the financing of related entities.
Proposed law exempts from the mandatory adjustments for interest expenses and costs and intangible
expenses and costs that the corporation establishes was paid, accrued or incurred, directly or
indirectly, by the related member during the same taxable year to a person that is not a related
member.
Proposed law requires the adjustments to these deductions to be made unless the corporation and the
secretary agree in writing to the application or use of alternative adjustments and computations. Applicable to all tax years beginning on and after Jan. 1, 2015.
(Adds R.S. 47:287.82)