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 523 Original 2019 Regular Session Ivey
Abstract: Phase-out the corporate franchise tax and repeals certain income and corporate franchise
tax credits.
Present law (R.S. 47:601 et seq.) establishes the corporation franchise tax which is levied on every
domestic and foreign corporation exercising its charter, qualified to do business, or actually doing
business in La. The corporation franchise tax is also levied on any domestic or foreign corporation
owning or using any part of its capital, plant, or other property in La.
Present law provides that the tax shall be levied at the following rates:
(1) $1.50 per $1,000 of taxable capital, up to $300,000.
(2) $3 per $1,000 of taxable capital above $300,001.
Present law levies the corporation franchise tax on a corporation when any of the following occurs:
(1) An organization does business within this state in a corporate form.
(2) A corporation exercises its charter or the continuance of its charter within La.
(3) An entity owns or uses part or all of its capital, plant, or other property in La. in a corporate
capacity.
Present law provides for the determination of taxable capital for purposes of levying the corporation
franchise tax as well as the tax treatment of capital stock, surplus and undivided profits, and the
allocation of taxable capital. Present law further provides for the administration of the tax as well
as the collection and payment of the tax.
Proposed law provides for the phase-out of the corporate franchise tax for taxable years beginning
on or after Jan. 1, 2020, by reducing the amount of the tax by 25% each year until no tax is levied
on the taxable capital of corporations for tax years beginning on or after Jan. 1, 2023.
Present law requires every corporation or other entity subject to the franchise tax to pay only an
initial tax of $110 in the first accounting period in which it becomes subject to the tax. After the first
closing of the corporate books, the tax is payable as provided in present law.
Proposed law retains present law but clarifies that no initial tax shall be levied or collected by the
state nor paid by domestic or foreign corporations for taxable years beginning on and after Jan. 1,
2023. Proposed law applies to all corporate franchise tax periods beginning on and after Jan. 1 2020.
Present law (R.S. 47:6006) provides for an income or corporation franchise tax credit for ad valorem
taxes paid to political subdivisions on inventory held by manufacturers, distributors, and retailers and
on natural gas held, used, or consumed in providing natural gas storage services or operating natural
gas storage facilities.
Present law requires full refundability of any amount in excess of the taxpayer's state tax liability for
taxpayers whose total payments of ad valorem tax eligible for the credit is less than $500,000 and
for taxpayers formed or first registered to do business in La. after April 1, 2016 whose payments of
ad valorem taxes paid to all political subdivisions was less than $10,000.
Present law requires that 75% of any amount in excess of the taxpayer's state tax liability be refunded
and the remaining 25% be carried forward as a credit against subsequent tax liability for five years
for the following taxpayers:
(1)Taxpayers whose total payments of ad valorem tax eligible for the credit is at least $500,000,
but less than or equal to $1M.
(2)Taxpayers first registered to do business in La. after April 1, 2016, and whose total payments
of ad valorem tax is at least $10,000 or more, but no more than $1M.
Present law requires that, for taxpayers whose total payments of ad valorem taxes eligible for the
credit is $1M or more, 75% of the first $1,000,000 of excess credit shall be refunded and the
remaining amount shall be carried forward as a credit against subsequent tax liability for five years.
Present law requires that, 75% of the first $1,000,000 of excess credit be refunded and the remaining
amount be carried forward as a credit against subsequent tax liability for five years.
Present law requires taxpayers that are members of a federal consolidated group combine their ad
valorem taxes paid in order to determine the amount of the excess credit that is refundable.
Proposed law changes present law and makes the excess credit for any taxpayer nonrefundable.
Further requires the remaining amount to be carried forward as a credit against subsequent tax
liability for five years.
Present law defines "manufacturer" as one of the following:
(1)A person engaged in the business of working raw materials into wares suitable for use or
which give new shapes, qualities, or combinations to matter which already has gone through
some artificial process.
(2)A person who meets the qualifications of (1) and who claimed the ad valorem exemption
under present constitution during the taxable year in which the local inventory taxes were
levied. Proposed law repeals the portion of present law defining a manufacturer as one who claimed the ad
valorem exemption under present constitution during the taxable year in which the local inventory
taxes were levied.
Present law requires any excess credit claimed by a manufacturer who received an ad valorem tax
exemption under present constitution to be carried forward as a credit against subsequent tax liability
for five years. This carry-forward requirement is applicable to all related parties, affiliates,
subsidiaries, parent companies, or owners of the manufacturer that held inventory related to the
business of the manufacturer.
Proposed law repeals present law.
Present law provides for the following income and corporation franchise tax credits:
(1)R.S. 47:34 Corporation tax credit
(2)R.S. 47:287.749 Jobs credit
(3)R.S. 47:297(H) Reduction to tax due for small town doctors
(4)R.S. 47:297.6 Credit for rehabilitation of residential structures
(5)R.S. 47:6005 Qualified new recycling manufacturing equipment and service contracts
(6)R.S. 47:6009 Louisiana Basic Skills Training Tax Credit
(7)R.S. 47:6012 Employer tax credits for donations of materials, equipment, advisors, or
instructors
(8)R.S. 47:6019 Credit for rehabilitation of historic structures (commercial)
(9)R.S. 47:6020 Angel Investor tax credit program
(10)R.S. 47:6023 Sound recording investor tax credit
(11)R.S. 47:6025 Credit for La. Citizens Property Insurance Corp. assessment
(12)R.S. 47:6034 Musical and theatrical production income tax credit
(13)R.S. 47:6035 Credit for conversion of vehicles to alternative fuel usage
(14)R.S. 51:2354 Technology commercialization credit
(15)R.S. 51:2399.3 Modernization tax credit Present law (R.S. 47:34 and R.S. 47:287.749) provides for an income tax credit to be used against
the tax liability of corporate income taxpayers who generate new full-time and part-time jobs in the
state. This tax credit is allowed in lieu of any tax exemptions granted pursuant to the Louisiana
Enterprise Zone Act, any ad valorem property tax exemptions for business or industry, or any ad
valorem tax exemption allowed through the State Board of Commerce and Industry pursuant to La.
Const. Art. VII, Sec. 21(F). The amount of the credit is equal to the number of new employees
multiplied by varying amounts.
Present law (R.S. 47:297(H)) provides for an income tax credit for certain medical doctors and
dentists who practice in designated rural areas.
Present law (R.S. 47:297.6) provides for an income tax credit for individual income tax for the
amount of eligible costs and expenses incurred during the rehabilitation of an owner-occupied
residential or owner-occupied mixed use structure located in certain specific locations.
Present law (R.S. 47:6005) provides an income tax or corporation franchise tax credit for taxpayers
who purchase qualified new recycling manufacturing or process equipment or qualified service
contracts to be used or performed exclusively in the state.
Present law (R.S. 47:6009) provides for an income or corporation franchise tax credit for a La.
business or industry that supports and encourages employee basic skills training by satisfying criteria
established in present law and that submits proper and complete applications.
Present law (R.S. 47:6012) provides for an income and corporation franchise tax credit for employers
within the state to donate materials, equipment, or instructors to public training providers registered
with the La. Workforce Commission, or community colleges to assist in the development of training
programs designed to meet industry needs.
Present law (R.S. 47:6019) provides for an income or corporation franchise tax credit for the amount
of eligible costs and expenses incurred during the rehabilitation of a historic structure located in a
downtown development district or a cultural district.
Present law (R.S. 47:6020) provides for an income tax credit for qualifying individuals or entities
that invest in a La. Entrepreneurial Business. This income tax credit is known as the Angel Investor
tax credit.
Present law (R.S. 47:6023) provides for an income or franchise tax credit for La. taxpayers for
investment in state-certified productions for sound recordings earned at the time expenditures are
made on a state-certified production.
Present law (R.S. 47:6025) provides an income tax credit against La. income tax for 25% amount
of surcharges, market equalization charges, or assessments paid by a taxpayer for the La. Citizens
Property Insurance Corporation assessments due to Hurricanes Katrina and Rita.
Present law (R.S. 47:6034) provides for an individual or corporate income tax credit for qualified production expenditures on investments in a state-certified musical or theatrical production or
infrastructure project.
Present law (R.S. 47:6035) provides for an income tax credit for qualified clean-burning motor
vehicle fuel property purchased and installed on certain motor vehicles.
Present law (R.S. 51:2354) provides an income and corporation franchise tax credit for investments
by the taxpayer in commercialization costs for certain business locations.
Present law (R.S. 51:2399.3) provides for an income or corporation franchise tax credit for amounts
of qualified expenditures incurred by an employer for modernization.
Applicable to income tax periods beginning on or after Jan. 1, 2020 and franchise tax periods
beginning on or after Jan. 1, 2020.
Effective Jan. 1, 2020, if the proposed amendment of Article VII of the Constitution of La. contained
in the Act which originated as House Bill No. ___of this 2019 R.S. of the Legislature is adopted at
a statewide election and becomes effective.
(Amends R.S. 47:601(A), (B), and (C)(2) and 6006(B), (C)(3), and (D)(5); Adds R.S.
47:611(C) and 6006(D)(6); Repeals R.S. 47:34, 297(H), 297.6, 6005, 6009, 6012, 6019, 6020, 6023,
6025, 6034, 6035, R.S. 51:2351-2364 and 2399.1-2399.6)