Louisiana House Bill HB2

Louisiana 2024 3rd Special Session

• Introduced: 11/1/24
• Refer: 11/1/24
• Refer: 11/6/24

Caption

Provides for a flat rate for purposes of calculating corporate income tax and terminates certain corporate income tax exemptions, deductions, and credits (Item #4) (EN SEE FISC NOTE RV See Note)

Impact

The bill will fundamentally alter how corporate income is taxed in Louisiana, shifting from a tiered approach to a flat rate. Proponents argue that this will create a competitive environment for businesses and stimulate economic growth through lower taxes, providing an impetus for local job creation and investment. However, the bill also repeals various tax credits, including those for research and development, motion picture production, and low-income housing which may be seen as detrimental to certain sectors that previously benefitted from these incentives, potentially leading to pushback from affected industries.

Summary

House Bill 2 (HB2) proposes significant changes to Louisiana's corporate income tax structure by abolishing the current graduated tax rates in favor of a simpler flat rate. Beginning in taxable years after January 1, 2025 and before January 1, 2026, the corporate income tax rate will be set at 5.5%, subsequently reducing to 3.5% for taxable years starting on or after January 1, 2026. In conjunction with this change, the bill also seeks to establish deductions for bonus depreciation and amortization for specified qualified properties and expenditures, simplifying the tax compliance landscape for corporations operating in Louisiana.

Sentiment

The sentiment surrounding HB2 varies significantly among stakeholders. Supporters, which include some legislators and business advocates, view this reform as a necessary step to encourage business sustainability and state competitiveness. On the other hand, critics, including some legislators and community advocates, express concerns that the repeal of tax credits could hurt local economies and remove essential supports for various industries, raising issues about the overall adequacy of the state’s economic strategy.

Contention

Notably, the bill has faced scrutiny regarding its potential effects on industry-specific tax credits that support local businesses and job creation. With the proposed termination of several credits, there are fears of exacerbating inequalities in access to capital and growth opportunities across different sectors. The debate highlights a broader conflict over the priorities of tax policy in Louisiana, whether to favor streamlined tax processes focused on attracting businesses or to maintain incentives that support economic diversity and community resilience.