HLS 162ES-17 ORIGINAL
2016 Second Extraordinary Session
HOUSE BILL NO. 12
BY REPRESENTATIVE STOKES
TAX/CORP INCOME: Provides relative to the apportionment ratio for purposes of
computing corporate income tax and provides for the sourcing of sales (Item #44)
1 AN ACT
2To amend and reenact R.S. 47:287.95(A), (C)(1), (D), and (F)(2)(b) and to enact R.S.
3 47:287.95(L) and (M), relative to corporate income tax; to provide for the calculation
4 of apportionment income for certain businesses; to provide for the weighing of
5 certain ratios in the calculation of Louisiana income; to provide for the sourcing of
6 certain sales; to provide for applicability; to provide for an effective date; and to
7 provide for related matters.
8Be it enacted by the Legislature of Louisiana:
9 Section 1. R.S. 47:287.95(A), (C)(1), (D), and (F)(2)(b) are hereby amended and
10reenacted and R.S. 47:287.95(L) and (M) are hereby enacted to read as follows:
11 ยง287.95. Determination of Louisiana apportionment percent
12 A.(1) Air transportation. The Except as provided for in Paragraph (2) of his
13 Subsection, the Louisiana apportionment percent of any taxpayer whose net
14 apportionable income is derived primarily from the business of transportation by
15 aircraft shall be the arithmetical average of two ratios, as follows:
16 (1)(a) The ratio of the value of immovable and corporeal movable property,
17 other than aircraft, owned by the taxpayer and located in Louisiana to the value of
18 all immovable and corporeal movable property, other than aircraft, owned by the
19 taxpayer and used in the production of apportionable income.
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1 (2)(b) The ratio of the amount of gross apportionable income derived from
2 Louisiana sources to the total gross apportionable income of the taxpayer.
3 (2) For taxable periods beginning on or after January 1, 2016, and for the
4 purpose of this Subsection, the Louisiana apportionment percent of any taxpayer
5 whose net apportionable income is derived primarily from the business of
6 transportation by aircraft shall be computed by means of a single ratio consisting of
7 the ratio provided for in Subparagraph (1)(b) of this Subsection.
8 (3) For the purposes of this Subsection, gross apportionable income from
9 Louisiana sources shall include all gross receipts derived from passenger journeys
10 and cargo shipments originating in Louisiana and any other items of gross
11 apportionable income or receipts derived entirely from sources in this state.
12 * * *
13 C. Other transportation. (1)(a) The Except as provided in Subparagraph (b)
14 of this Paragraph, the Louisiana apportionment percent of any taxpayer whose net
15 apportionable income is derived primarily from the business of transportation, other
16 than by aircraft or pipeline, shall be the arithmetical average of two ratios, as
17 follows:
18 (i) The ratio of the value of immovable and corporeal movable property
19 owned by the taxpayer and located in Louisiana to the value of all immovable and
20 corporeal movable property owned by the taxpayer and used in the production of
21 apportionable income.
22 (ii) The ratio of the amount of gross apportionable income from Louisiana
23 sources to the total amount of gross apportionable income of the taxpayer.
24 (b) For taxable periods beginning on or after January 1, 2016, and for the
25 purpose of this Subsection, the Louisiana apportionment percent of any taxpayer
26 whose net apportionable income is derived primarily from the business of
27 transportation, other than by aircraft or pipeline, shall be computed by means of a
28 single ratio consisting of the ratio provided for in Subparagraph (1)(a)(ii) of this
29 Paragraph.
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1 (b)(c) For the purposes of this Subsection, the gross apportionable income
2 from Louisiana sources shall include all such income that is derived entirely from
3 sources within the state and a portion of revenue from transportation partly without
4 and partly within this state, to be prorated subject to rules and regulations of the
5 secretary, who shall give due consideration to the proportion of service performed
6 in Louisiana.
7 (c)(d) For the purposes of this Subsection, the value of immovable and
8 corporeal movable property owned by the taxpayer and used in Louisiana shall
9 include the value of all such property regularly situated in this state, plus a pro rata
10 of the value of all rolling stock and other mobile equipment owned by the taxpayer
11 and used in the production of apportionable income, whether within or without this
12 state, said proration to be made subject to rules and regulations of the secretary, who
13 shall give due consideration to the mileage operated and traffic density within and
14 without this state.
15 * * *
16 D.(1) Service enterprises. The Except as provided in Paragraph (2) of this
17 Subsection, the Louisiana apportionment percent of any taxpayer whose net
18 apportionable income is derived primarily from a service business in which the use
19 of property is not a substantial income-producing factor shall be the arithmetical
20 average of two ratios, as follows:
21 (1)(a) The ratio of the amount paid by the taxpayer for salaries, wages, and
22 other compensation for personal services rendered in Louisiana to the total amount
23 paid by the taxpayer for salaries, wages, and other compensation for personal
24 services in connection with the production of the net apportionable income.
25 (2)(b) The ratio of the gross apportionable income of the taxpayer from
26 Louisiana sources to the total gross apportionable income of the taxpayer.
27 (2) For taxable periods beginning on or after January 1, 2016, and for the
28 purpose of this Subsection, the Louisiana apportionment percent of any taxpayer
29 whose net apportionable income is derived primarily from a service business in
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1 which the use of property is not a substantial income-producing factor shall be
2 computed by means of a single ratio consisting of the ratio provided for in
3 Subparagraph (1)(b) of this Paragraph.
4 (3) For the purposes of this Subsection, the gross apportionable income from
5 Louisiana sources shall include the revenue from services performed in sourced to
6 this state, and any other gross income derived entirely from sources within this state.
7 * * *
8 F.
9 * * *
10 (2)
11 * * *
12 (b)(i) For taxable periods beginning on or after January 1, 2006, and for the
13 purpose of this Subsection, the Louisiana apportionment percent of any taxpayer
14 whose net apportionable income is derived primarily from the business of
15 manufacturing or merchandising shall be computed by means of a single ratio
16 consisting of the ratio provided for in Subparagraph (1)(c) of this Subsection.
17 (b)(ii) For taxable periods beginning on or after January 1, 2016, and for the
18 purpose of this Subsection, the Louisiana apportionment percent of any taxpayer
19 whose net apportionable income is derived primarily from transportation by pipeline
20 or from any business not included in Subsections A through E of this Section shall
21 be computed by means of a single ratio consisting of the ratio provided for in
22 Subparagraph (1)(c) of this Subsection.
23 * * *
24 L. Sourcing of certain sales.
25 (1) Sales other than sale of tangible personal property are to be sourced to
26 this state if the taxpayer's market for the sale is in this state. The taxpayer's market
27 for a sale is in this state and the sale is thus assigned to the state for the purpose of
28 this Section as follows:
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1 (a) In the case of sale, rental, lease or license of real property, if and to the
2 extent the property is located in the state.
3 (b) In the case of rental, lease or license of tangible personal property, if and
4 to the extent the property is located in the state.
5 (c) In the case of sale of a service, if and to the extent the service is delivered
6 to a location in the state. The delivery of a tangible medium representing the output
7 of a service does not control the sourcing of receipts from the underlying service.
8 (d) In the case of lease or license of intangible property, including a sale or
9 exchange of such property where the receipts from the sale or exchange derive from
10 payments that are contingent on the productivity, use or disposition of the property,
11 if and to the extent the intangible property is used in the state.
12 (e) In the case of the sale of intangible property, other than as provided in
13 Subparagraph (d) of this Paragraph, where the property sold is a contract right,
14 government license or similar intangible property that authorizes the holder to
15 conduct a business activity in a specific geographic area, if and to the extent that the
16 intangible property is used in or otherwise associated with the state; provided,
17 however, that any sale of intangible property, not otherwise described in this
18 Subparagraph and Subparagraph (d) of this Paragraph, shall be excluded from the
19 numerator and the denominator of the sales factor.
20 (2) In the case where the taxpayer's customer is an individual, the taxpayer
21 shall source receipts from the sale of a service as follows:
22 (a) In the case where a taxpayer's customer is a natural person and the
23 service provided is a direct personal service, the sale shall be sourced to the state
24 where the customer received the direct personal service.
25 (b) Services that are not direct personal services that are delivered to
26 customers who are natural persons with a Louisiana billing address shall be sourced
27 to this state.
28 (c) In the case where the sourcing methodology specified by Subparagraphs
29 (a) or (b) of this Paragraph fails to clearly reflect the taxpayers market in this state,
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1 the taxpayer may utilize, or the department may require, the use of other criteria and
2 methodologies that will reasonably approximate the taxpayer's market in this state.
3 If an alternate approach is utilized, the taxpayer shall attach to the tax return a
4 detailed explanation of why it was unreasonable to utilize the methodology specified
5 by Subparagraphs (a) or (b) of this Paragraph and an explanation of the methodology
6 used. If the taxpayer fails to make such a disclosure on the return, the taxpayer shall
7 be presumed to consent to the sourcing as detailed in Subparagraphs (a) or (b) of this
8 Paragraph as applicable.
9 (3) In the case where the taxpayer's customer is an entity that is unrelated to
10 the taxpayer, the taxpayer shall source receipts from the sale of a service as follows:
11 (a) To the extent a service is provided to an unrelated entity and the service
12 being provided has a substantial connection to a specific geographic location, the
13 income shall be sourced to Louisiana if the geographic location is in this state. If the
14 service receipts have a substantial connection to geographic locations in more than
15 one state, the sales shall be reasonably sourced between those states.
16 (b) To the extent a service is provided to an unrelated entity and the service
17 being provided does not have a substantial connection to a specific geographic
18 location, sales from services delivered to unrelated entities shall be sourced to the
19 commercial domicile of the taxpayer.
20 (c) In the case where the sourcing methodology specified by Subparagraphs
21 (a) or (b) of this Paragraph fails to clearly reflect the taxpayers market in this state,
22 the taxpayer may utilize, or the department may require, the use of other criteria and
23 methodologies that will reasonably approximate the taxpayer's market in this state.
24 If an alternate approach is utilized, the taxpayer shall attach to the tax return a
25 detailed explanation of why it was unreasonable to utilize the methodology specified
26 by Subparagraphs (a) or (b) of this Paragraph and an explanation of the methodology
27 used. If the taxpayer fails to make such a disclosure on the return, the taxpayer shall
28 be presumed to consent to the sourcing as detailed in Subparagraphs (a) or (b) of this
29 Paragraph as applicable.
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1 (d) The secretary shall promulgate rules pursuant to the Administrative
2 Procedure Act concerning the sourcing of the sales of services between related
3 entities.
4 (e) As used in this Subsection, a related entity shall include:
5 (i) A stockholder, or a stockholder's partnership, or juridical person, if the
6 stockholder and the stockholder's partnerships, or juridical persons, own directly,
7 indirectly, beneficially or constructively, including as provided for under Title 26,
8 Section 318 of the U.S. Code, in the aggregate, at least fifty per cent of the value of
9 the taxpayer's outstanding stock.
10 (ii) A corporation, or a party related to the corporation in a manner that
11 would require an attribution of stock from the corporation to the party or from the
12 party to the corporation under the attribution rules of Title 26, Section 318 of the
13 U.S. Code if the taxpayer owns, directly, indirectly, beneficially or constructively,
14 at least fifty percent of the value of the corporation's outstanding stock.
15 (iii) "Related party" means any member of a controlled group of corporations
16 as defined in Title 26, Section 1563 of the U.S. Code, or any other person that would
17 be a member of a controlled group if rules similar to those in Title 26, Section 1563
18 of the U.S. Code were applied to that person.
19 (5) Whenever a taxpayer is subjected to different sourcing methodologies
20 regarding intangibles or services, by the department and one or more other state
21 taxing authorities, the taxpayer may petition for, and the department shall participate
22 in, and encourage the other state taxing authorities to participate in, non-binding
23 mediation in accordance with rules promulgated in accordance with the
24 Administrative Procedure Act.
25 M. If the taxpayer is not taxable in a state to which a sale is assigned or if the
26 state of assignment cannot be determined or reasonably approximated pursuant to
27 this Section and the regulations thereunder, the sale shall be excluded from the
28 numerator and the denominator of the sales factor.
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1 Section 2. The provisions of this Act shall be applicable to all taxable periods
2beginning on and after January 1, 2016.
3 Section 3. This Act shall become effective upon signature by the governor or, if not
4signed by the governor, upon expiration of the time for bills to become law without signature
5by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
6vetoed by the governor and subsequently approved by the legislature, this Act shall become
7effective on the day following such approval.
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 12 Original 2016 Second Extraordinary Session Stokes
Abstract: Changes the apportionment percent for apportionable income derived for certain
transportation and service industry sectors to a single ratio calculation.
Transportation By Aircraft
Present law provides that the La. apportionment percent of any taxpayer whose net
apportionable income is derived primarily from transportation by aircraft shall be calculated
from the average of the following ratios:
(1)The ratio of the value of immovable and movable property, other than aircraft,
owned by the taxpayer located in La. to the value of all immovable and movable
property, other than aircraft, owned by the taxpayer used in the production of
apportionable income.
(2)The ratio of gross apportionable income derived from La. sources to the total gross
apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after
Jan. 1, 2016, the La. apportionment percent of these taxpayers shall be computed by using
the single ratio as provided in (2).
Present law provides that gross apportionable income from La. sources shall include all gross
receipts derived from passenger journeys and cargo shipments originating in La. and other
items of gross apportionable income or receipts derived entirely from sources in La.
Transportation Other Than Aircraft Or Pipeline
Present law provides that the La. apportionment percent of any taxpayer whose net
apportionable income is derived primarily from transportation other than by aircraft or
pipeline, shall be calculated from the average of the following ratios:
(1)The ratio of the value of immovable and movable property owned by the taxpayer
located in La. to the value of all immovable and movable property owned by the
taxpayer used in the production of apportionable income.
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(2)The ratio of gross apportionable income from La. sources to the total amount of
gross apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after
Jan. 1, 2016, the La. apportionment percent of these taxpayers shall be computed by using
the single ratio as provided in (2).
Present law provides that gross apportionable income from La. sources shall include all
income derived entirely from sources within the state and a portion of revenue from
transportation partly in and partly outside this state, prorated with deference given to the
proportion of service performed in La.
Present law further provides that the value of immovable and movable property owned by
the taxpayer used in La. shall include the value of property regularly situated in this state
plus a pro rata of the value of all rolling stock and other mobile equipment owned by the
taxpayer used in the production of apportionable income, with deference given for the
mileage operated and traffic density inside and outside of this state.
Present law provides for special provisions for trucking companies.
Service Enterprises
Present law provides that the La. apportionment percent of any taxpayer whose net
apportionable income is derived primarily from a service business in which the use of
property is not a substantial income-producing factor shall be calculated from the average
of the following ratios:
(1)The ratio of the amount paid by the taxpayer for salaries, wages, and other
compensation for personal services rendered in La. to the total amount paid by the
taxpayer for salaries, wages, and other compensation for personal services in
connection with the production of the net apportionable income.
(2)The ratio of the gross apportionable income of the taxpayer from La. sources to the
total gross apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after
Jan. 1, 2016, the La. apportionment percent of these taxpayers shall be computed by using
the single ratio as provided in (2).
Present law provides that gross apportionable income from La. sources shall include revenue
from services performed in this state, and any other gross income derived entirely from
sources within this state.
Manufacturing And Merchandising
Present law provides that the La. apportionment percent of a taxpayer whose net
apportionable income is derived primarily from the transportation by pipeline or from any
business not included in other provisions of present law (manufacturing and merchandising)
shall be calculated from the average of the following three ratios:
(1)The ratio of the value of the immovable and movable property owned by the
taxpayer located in La. to the value of all immovable and movable property owned
by the taxpayer used in the production of the net apportionable income.
(2)The ratio of the amount paid by the taxpayer for salaries, wages, and other
compensation for personal services rendered in this state to the total amount paid by
the taxpayer for salaries, wages, and other compensation for personal services in
connection with the production of net apportionable income.
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(3)The ratio of net sales made in the regular course of business and other gross
apportionable income attributable to this state to the total net sales made in the
regular course of business and other gross apportionable income of the taxpayer.
Proposed law changes present law to provide that for taxable periods beginning on or after
Jan. 1, 2016, the La. apportionment percent of taxpayers whose apportionable income is
derived primarily from transportation by pipeline or from any business not included in other
provisions of present law shall be computed by using the single ratio as provided in (3).
Present law provides that since Jan. 1, 2006, the La. apportionment percent of any taxpayer
whose net apportionable income is derived primarily from manufacturing or merchandising
shall be computed by a single ratio of net sales made in the regular course of business and
other gross apportionable income attributable to this state to the total net sales made in the
regular course of business and other gross apportionable income of the taxpayer.
Proposed law retains present law as it relates to the apportionment ratios for manufacturing
or merchandising sectors.
Sourcing of Sales
Proposed law requires sales other than sales of tangible personal property to be sourced to
La. if the taxpayer's market for the sale is in this state. Further provides specific provisions
for the sourcing of sales to La. as follows:
(1)In the case of a sale, rental, lease or license of real property or rental, lease or license
of tangible personal property, if and to the extent the property is located in the state.
(2)In the case of sale of a service, if and to the extent the service is delivered to a
location in the state.
(3)In the case of lease or license of intangible property, including a sale or exchange of
property where receipts from the sale or exchange derive from payments contingent
on the productivity, use or disposition of the property, if and to the extent the
intangible property is used in the state.
(4)In the case of the sale of intangible property where the property sold is a contract
right, government license, or similar intangible property that authorizes the holder
to conduct a business activity in a specific geographic area, if and to the extent that
the intangible property is used in or otherwise associated with the state.
Proposed law provides that if the taxpayer's customer is an individual, the taxpayer shall
source receipts from the sale of a service as follows:
(1)If the customer is a natural person and the service is a direct personal service, the
sale shall be sourced to the state where the customer received the direct personal
service.
(2)Services that are not direct personal services that are delivered to customers who are
natural persons with a La. billing address shall be sourced to this state.
(3)If the sourcing methodology in proposed law fails to clearly reflect the taxpayers
market in this state, the taxpayer may utilize, or the department may require, the use
of other criteria and methodologies to approximate the taxpayer's market in this state.
Proposed law specifies requirements for a taxpayer to follow if an alternate approach
is utilized and consequences if a taxpayer fails to fulfill those requirements.
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Proposed law provides that if the taxpayer's customer is an entity unrelated to the taxpayer,
the taxpayer shall source receipts from the sale of a service as follows:
(1)If a service is provided to an unrelated entity and the service has a substantial
connection to a specific geographic location, the income shall be sourced to La. if the
geographic location is in this state. Service receipts that have a substantial
connection to geographic locations in multiple states shall be reasonably sourced
between those states.
(2)If the service provided to an unrelated entity does not have a substantial connection
to a specific geographic location, sales from services delivered to unrelated entities
shall be sourced to the commercial domicile of the taxpayer.
(3)If the sourcing methodology in proposed law fails to reflect the taxpayers market in
this state, the taxpayer may utilize, or the department may require, the use of other
criteria and methodologies to approximate the taxpayer's market in this state.
Proposed law specifies requirements for a taxpayer to follow if an alternate approach
is utilized and consequences if a taxpayer fails to fulfill those requirements.
Proposed law requires the secretary of DOR to promulgate rules in accordance with the APA
concerning the sourcing of the sales of services between related entities.
Proposed law defines a "related entity" and "related party" for purposes of calculating the
sourcing of sales.
Proposed law authorizes a taxpayer to petition for and requires DOR to participate in non-
binding mediation when a taxpayer is subjected to different sourcing methodologies
regarding intangibles or services by La. and one or more other state taxing authorities.
Proposed law provides that if the taxpayer is not taxable in a state to which a sale is assigned
or if the state of assignment cannot be determined or reasonably approximated then the sale
shall be excluded from the numerator and the denominator of the sales factor.
Applicable to all taxable periods beginning on and after Jan. 1, 2016.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:287.95(A), (C)(1), (D), and (F)(2)(b); Adds R.S. 47:287.95(L) and (M))
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