Louisiana House Bill HB73

Louisiana 2016 1st Special Session

• Introduced: 2/17/16
• Refer: 2/17/16

Caption

Requires that certain deductible items be added-back on certain corporate income tax returns (Item #5) (OR INCREASE GF RV See Note)

Impact

The proposed legislation seeks to clarify the treatment of expenses that corporations can deduct when calculating their income tax, particularly focusing on transactions involving related entities. This would potentially bring in additional revenue to the state by preventing what could be perceived as tax loopholes. However, the bill does allow for exceptions where the corporation can demonstrate that the corresponding income was already subjected to a tax in Louisiana, another state, or a foreign nation, thus placing some limits on the additional tax liabilities imposed by this change.

Summary

House Bill 73 aims to amend the calculation of corporate income tax liability in Louisiana by requiring corporations to add back certain interest and intangible expenses that are usually considered deductible. The bill specifies that these expenses relate to transactions with one or more related members. This change is intended to ensure that corporations cannot unnecessarily reduce their taxable income through these transactions, which could lead to tax avoidance. The provisions apply to tax years commencing on or after January 1, 2016.

Sentiment

The general sentiment around HB 73 appears to be mixed among stakeholders. Supporters may argue that the bill serves the purpose of fairness in taxation and could lead to more state revenue, thereby benefiting public services. Conversely, opponents might believe that the bill adds complexity to tax computations for businesses and could discourage transactions between related corporate entities, potentially impacting economic activity and corporate structures negatively.

Contention

Notable points of contention include concerns from businesses regarding the administrative burden and potential impact on economic growth. Companies may worry that stringent regulations on deducting related party expenses could impede their operational flexibility and increase costs. Moreover, the bill invokes discussions about tax fairness and the balance between preventing tax avoidance and fostering an attractive business environment.