Eliminates sunset provision on credit for taxes paid in other states. (Item #5)(gov sig) (EG +$33,600,000 GF RV See Note)
The bill will affect Louisiana's approach to handling taxes paid to other states, solidifying the measurements for tax credits that residents can claim. By eliminating the sunset provision, it protects taxpayers from potential future losses in tax credits that could arise if the limits were allowed to expire. This change can encourage residents who earn income in multiple states to file and pay taxes in Louisiana, potentially leading to a more favorable business and economic environment within the state.
Senate Bill 1 (SB1) seeks to make permanent the limitations on the individual income tax credit for taxes paid to other states, which were originally set to expire on June 30, 2018. The bill amends existing tax law by repealing the sunset provision, ensuring that residents can benefit from these credits continuously. It establishes a framework where the credit cannot exceed the proportion of income taxes incurred in the other state that are also taxable in Louisiana. Furthermore, it introduces a provision allowing individual partners to deduct their share of entity-level taxes paid to other states that do not have a capital component.
The sentiment surrounding SB1 appears to be largely supportive among legislators focused on maintaining revenue for the state while also protecting the financial interests of individual taxpayers. Proponents argue that making these tax credits permanent is a fair approach to taxation for residents who operate across state lines. However, there may be concerns regarding the long-term fiscal implications of the bill, especially regarding how it could limit state revenue in the future if substantial income is earned out of state.
While there is broad support for the intent of SB1, there may be contention around the specifics of how the credit calculations are enforced, particularly regarding taxpayers with more complex financial situations. Some members may raise issues about how these changes could impact the equity of the state's tax system, as it could disproportionately benefit higher earners with diversified income sources across states. The nuances of tax code amendments always generate debate on who benefits and the potential losses to state-funded programs.