The original instrument and the following digest, which constitutes no part of the
legislative instrument, were prepared by Riley Boudreaux.
DIGEST
SB 270 Original 2015 Regular Session Adley
Proposed law authorizes the secretary to add back the following deductible expenses of a
corporation subject to Louisiana income or franchise tax which has either corporate gross revenues
everywhere of $8 billion or $8 million of assets everywhere:
(1)Otherwise deductible "intangible expense" directly or indirectly paid, accrued or incurred in
connection with one or more direct or indirect transactions with one or more "related
members". "Intangible expense" are defined as expenses, losses and costs related
to"intangible property" such as patents, patent applications, trade names, trademarks, service
marks, copyrights, mask works, trade secrets and similar types of intangible assets to the
extent such amounts are in any way allowed as deductions or costs in determining taxable
income under the Internal Revenue Code (IRC).
(2)Otherwise deductible "interest expense" paid, accrued or incurred to a related member during
the taxable year. "Interest expense" is defined as amounts directly or indirectly allowed as
deductions under the IRC for purposes of determining taxable income under the IRC.
"Related member" is defined as a person that, with respect to the taxpayer during all or
any portion of the taxable year, is any of the following:
(1)A "related entity".
(2)A "component member" as defined in the (IRC).
(3)A person to or from whom there is attribution of stock ownership in accordance with the
IRC.
(4)A person that, notwithstanding its form of organization, bears the same relationship to the
taxpayer as a person described in proposed law.
"Related entity" is defined as any of the following:
(1)A stockholder who is an individual, or a member of the stockholder's family set forth in the
IRC if the stockholder and the members of the stockholder's family own, directly, indirectly,
beneficially or constructively, in the aggregate, at least 50% of the value of the taxpayer's
outstanding stock.
(2)A stockholder, or a stockholder's partnership, limited liability company, estate, trust or
corporation (hereafter, "stockholder's entity"), if the stockholder and the stockholder's entity own directly, indirectly, beneficially or constructively, in the aggregate, at least 50% of the
value of the taxpayer's outstanding stock.
(3)A corporation, or a party related to the corporation in a manner that would require an
attribution of stock from the corporation to the party, or from the party to the corporation,
under the attribution rules of the IRC if the taxpayer owns, directly, indirectly, beneficially
or constructively, at least 50% of the value of the corporation's outstanding stock. The
attribution rules of the IRC shall apply for purposes of determining whether the ownership
requirements of this definition have been met.
Proposed law requires the secretary to make the following adjustments to the add back which
represent the following:
(1)Similar taxes paid or incurred to another jurisdiction by the "related member" or taxes that
would have been paid by the "related member" with respect to that portion of its income
representing the "intangible expenses" or "interest expense" paid to the "related member" if
that portion of the "related member's" income had not been offset by expenses or losses or
if the tax liability had not been offset by a credit or credits.
(2)Direct or indirect payments made, accrued, or incurred by the "related member" during the
same taxable year to a person that is not a "related member" on a transaction giving rise to
the "intangible expense" or "interest expense" between the taxpayer and the "related
member" that was undertaken for a "valid business purpose".
(3)"Interest expense" paid, accrued or incurred to a related party using terms that reflect an arm's
length relationship.
"Valid business purpose" is defined as one or more business purposes, other than the
avoidance or reduction of taxation, which alone or in combination constitute the primary
motivation for a business activity or transaction, which activity or transaction changes in a
meaningful way, apart from tax effects, the economic position of the taxpayer. The economic
position of the taxpayer includes an increase in the market share of the taxpayer or the entry
by the taxpayer into new business markets.
Applicable to corporate income tax years beginning on and after January 1, 2015, and corporate
franchise tax years beginning on and after January 1, 2016.
Effective upon signature of the governor or lapse of time for gubernatorial action.
(Adds R.S. 47:287.94.1.)