HLS 162ES-77 ENGROSSED
2016 Second Extraordinary Session
HOUSE BILL NO. 50
BY REPRESENTATIVE MONTOUCET
TAX/INCOME TAX: Reduces the individual income tax deduction for net capital gains
(Item #41)
1 AN ACT
2To amend and reenact R.S. 47:293(9)(a)(xvii), relative to individual income tax; to provide
3 for certain deductions for purposes of calculating individual income tax liability; to
4 reduce the deduction for certain net capital gains; to provide for an effective date;
5 and to provide for related matters.
6Be it enacted by the Legislature of Louisiana:
7 Section 1. R.S. 47:293(9)(a)(xvii) is hereby amended and reenacted to read as
8follows:
9 ยง293. Definitions
10 The following definitions shall apply throughout this Part, unless the context
11 requires otherwise:
12 * * *
13 (9)(a) "Tax table income", for resident individuals, means adjusted gross
14 income plus interest on obligations of a state or political subdivision thereof, other
15 than Louisiana and its municipalities, title to which obligations vested with the
16 resident individual on or subsequent to January 1, 1980, and less:
17 * * *
18 (xvii) Income from net capital gains, which shall be limited to gains
19 recognized and treated for federal income tax purposes as arising from the sale or
20 exchange of an equity interest in or substantially all of the assets of a nonpublicly
Page 1 of 4
CODING: Words in struck through type are deletions from existing law; words underscored
are additions. HLS 162ES-77 ENGROSSED
HB NO. 50
1 traded corporation, partnership, limited liability company, or other business
2 organization commercially domiciled in this state. The provisions of this Item shall
3 apply only to a business in which the taxpayer was employed or in which the
4 taxpayer materially participated for five years and which has been held for a
5 minimum of five years immediately prior to its sale. The amount of the deduction
6 shall be limited as follows:
7 (I) For the sale or exchange of an equity interest of an entity domiciled in the
8 state for five years or greater, but less than ten years, prior to the sale or exchange,
9 the capital gains deduction shall be fifty percent.
10 (II) For the sale or exchange of an equity interest of an entity domiciled in
11 the state for ten years or greater, but less than fifteen years, prior to the sale or
12 exchange, the capital gains deduction shall be sixty percent.
13 (III) For the sale or exchange of an equity interest of an entity domiciled in
14 the state for fifteen years or greater, but less than twenty years, prior to the sale or
15 exchange, the capital gains deduction shall be seventy percent.
16 (IV) For the sale or exchange of an equity interest of an entity domiciled in
17 the state for twenty years or greater, but less than twenty-five years, prior to the sale
18 or exchange, the capital gains deduction shall be eighty percent.
19 (V) For the sale or exchange of an equity interest of an entity domiciled in
20 the state for twenty-five years or greater, but less than thirty years, prior to the sale
21 or exchange, the capital gains deduction shall be ninety percent.
22 (VI) For the sale or exchange of an equity interest of an entity domiciled in
23 the state for thirty years or greater, the capital gains deduction shall be one hundred
24 percent.
25 * * *
26 Section 2. The provisions of this Act shall be applicable to sales or exchanges in
27equity interests that occur on or after the effective date of this Act.
28 Section 3. This Act shall become effective upon signature by the governor or, if not
29signed by the governor, upon expiration of the time for bills to become law without signature
Page 2 of 4
CODING: Words in struck through type are deletions from existing law; words underscored
are additions. HLS 162ES-77 ENGROSSED
HB NO. 50
1by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
2vetoed by the governor and subsequently approved by the legislature, this Act shall become
3effective 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 50 Engrossed 2016 Second Extraordinary Session Montoucet
Abstract: Requires a business be domiciled in La. for a minimum of five years prior to the
sale of the business to be eligible for the net capital gains deduction and provides a
tiered individual income tax deduction for net capital gains.
Present law provides for a deduction from tax table income for income derived from net
capital gains, which shall be limited to gains recognized and treated for federal tax purposes
as arising from the sale or exchange of an equity interest in or substantially all of the assets
of a nonpublicly traded corporation, partnership, limited liability company, or other business
organization commercially domiciled in the state.
Proposed law requires a business to be domiciled in the state for a minimum of five years
prior to becoming eligible to claim the deduction. Further reduces the amount of the
deduction in the following tier percentage rates:
(1)50% for a business domiciled in the state for 5 years or more, but less than 10 years.
(2)60% for a business domiciled in the state for 10 years or more, but less than 15 years.
(3)70% for a business domiciled in the state for 15 years or more, but less than 20 years.
(4)80% for a business domiciled in the state for 20 years or more, but less than 25 years.
(5)90% for a business domiciled in the state for 25 years or more, but less than 30 years.
(6)100% for a business domiciled in the state for 30 years or more.
Applicable to sales and exchanges occurring on or after the effective date of proposed law.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:293(9)(a)(xvii))
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Ways and Means to the
original bill:
1. Delete provisions of proposed law reducing the amount of the net capital gains
deduction from 100% to 50%.
2. Require a business be domiciled in the state for a minimum of five years to be
eligible to claim the deduction.
Page 3 of 4
CODING: Words in struck through type are deletions from existing law; words underscored
are additions. HLS 162ES-77 ENGROSSED
HB NO. 50
3. Reduce the amount of the deduction in the following tiers:
a. 50% for a business domiciled in the state for 5 years or more, but less than 10
years.
b. 60% for a business domiciled in the state for 10 years or more, but less than
15 years.
c. 70% for a business domiciled in the state for 15 years or more, but less than
20 years.
d. 80% for a business domiciled in the state for 20 years or more, but less than
25 years.
e. 90% for a business domiciled in the state for 25 years or more, but less than
30 years.
f. 100% for a business domiciled in the state for 30 years or more.
4. Change applicability date from taxable years beginning on or after Jan. 1, 2016,
to sales and exchanges occurring on or after the effective date of this Act.
Page 4 of 4
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.