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 604 Original 2019 Regular Session Stefanski
Abstract: Reduces the state income tax rate for S Corporations and other flow through entities that
elect to be taxed at the corporation level.
Present law requires Subchapter S corporations to pay La. income tax using the corporate income
tax rate and bracket schedule as follows:
(1)4% on the first $25,000 of La. taxable income.
(2)5% on La. taxable income above $25,000 but not in excess of $50,000.
(3)6% on La. taxable income above $50,000 but not in excess of $100,000.
(4)7% on La. taxable income above $100,000 but not in excess of $200,000.
(5)8% on all La. taxable income in excess of $200,000.
Proposed law requires income from flow through entities such as limited liability companies that
elect federal partnership treatment and partnerships (referred to as "flow through entities") to be
reported on the partner or member's individual income tax return.
Proposed law provides an election that authorizes S corporations and other flow through entities to
file and pay tax on their La. income as if they were C corporations.
Proposed law changes the Subchapter S corporation state income tax rates to the married individual
income tax rates and brackets for S corporations that elect to be taxed at the corporate level as
follows:
(1) 2% on the first $25,000 of La. taxable income.
(2)4% on La. taxable income above $25,000 but not in excess of $100,000.
(3) 6% on La. taxable income in excess of $100,000.
Proposed law applies the married individual income tax rates and brackets to the income of all flow
through entities that elect to be taxed as corporations for La. tax purposes.
Present law provides a deduction for federal income tax paid on state income for the taxable year. Proposed law authorizes Subchapter S corporations and other flow through entities that elect to file
and pay La. income tax as if they were a corporation a deduction for the amount of federal income
tax the entities would have paid on its La. income if it had been taxed as a C corporation for federal
income tax purposes.
Present law provides a corporation income tax exclusion for Subchapter S income that is reported
on a La. individual resident or nonresident income tax return.
Proposed law retains the present law Subchapter S exclusion for S corporations not making the
proposed law election and further provides an individual income tax exclusion for La. Subchapter
S income and flow through entity income that is included in La. individual income taxpayer's federal
adjusted gross income for that taxable year.
Present law requires individual income taxpayers to inform the secretary of revenue of federal
income tax adjustments.
Proposed law retains present law and requires individual income taxpayers who use the proposed
law S corporation and flow through entity exclusion to notify the secretary if changes are made to
their federal income tax return due to adjustments to an S corporation's income or losses.
Present law provides that credits earned by flow through entities shall flow through to partners or
members as provided in the operating agreement of the entity.
Proposed law provides that credits earned by flow through entities that have made the proposed law
election shall not flow through to the partners or members but shall be applied at the entity level.
Present law requires S corporations to use corporation income tax credits at the corporation level
unless the S corporation annually elects to flow corporation income tax credits to shareholders.
Proposed law retains present law requiring S corporations to use credits at the corporation level and
ends the annual election to flow through credits on Jan. 1, 2019.
Proposed law applies to all taxable years beginning on or after Jan. 1, 2019.
Effective upon signature of the governor or lapse of time for gubernatorial action.
(Amends R.S. 47:287.732(B)(1), 293(10), and 1675(G); Adds R.S. 47:287.732(B)(6), 287.732.2,
293(9)(a)(xviii), 297.14, and 1675(F)(4))