Louisiana House Bill HB604

Louisiana 2019 Regular Session

• Introduced: 4/17/19
• Refer: 4/22/19
• Report Pass: 4/29/19

Caption

Provides relative to state income taxation of Subchapter S corporations and other flow through entities (EG SEE FISC NOTE GF RV See Note)

Impact

If enacted, HB 604 will change the landscape of state taxation for Subchapter S corporations significantly. It would allow these entities to elect to be taxed as C corporations at a reduced rate. Furthermore, the bill ensures that income is reported on the individual tax returns of partners or members, effectively streamlining the taxation process and potentially increasing revenue from individuals rather than corporations. The proposed law will also eliminate the annual election that previously allowed S corporations to flow tax credits to shareholders, centralizing the deduction for any federal income taxes paid at the entity level instead.

Summary

House Bill 604 proposes significant changes to the taxation of Subchapter S corporations and other flow-through entities in Louisiana. The legislation reduces the state income tax rates applicable to these corporations by aligning them with the lower thresholds of the individual income tax rates. While the existing rate structure imposed higher rates on S Corporations based on income brackets, this bill establishes a simplified rate that aims to lower the tax burden on these entities, thereby encouraging compliance and bolstering business viability within the state.

Sentiment

Support for HB 604 primarily comes from business advocates who believe that reducing the tax burden on flow-through entities will foster economic growth and promote a more favorable business environment in Louisiana. On the other hand, critics express concerns that the changes may disproportionately benefit larger corporations while neglecting smaller businesses that may struggle with compliance under the new structure. The bill appears to reflect an ongoing legislative ambition to create a more competitive tax landscape, yet it raises important questions regarding equitable taxation across different business sizes.

Contention

Notable points of contention center around the reform's implications for local economies and the nature of corporate contributions to state revenues. Some legislators argue that the tax relief provided by the bill could lead to diminished state resources for crucial public services funded through state revenues. Additionally, the potential for preferential treatment of larger corporations over smaller enterprises raises arguments about fairness in tax policy, suggesting ongoing debates about balancing economic growth with equitable taxation.