BHBM Tax Law Alert 07/29/11

Posted on by bhbmlaw

Federal

Various Federal Topics

The IRS announced a mid-year adjustment to the 2011 mileage rates to reflect an increase in gasoline prices.  The standard mileage rate for 2011 has now been raised to $0.55 per mile.  The standard mileage rate was previously $0.51 per mile.

In President Obama’s 2012 budget, there are several proposals which would adjust the corporate tax system.  One such proposal is the elimination of last-in, first-out (“LIFO”) as a way of tracking inventory and cost of goods sold.  The repeal would be effective for all years beginning after 2012 and would require companies using LIFO on January 1, 2012 to switch to the first-in, first-out (“FIFO”) method of inventory.

State

Louisiana Research and Development Tax Credit

On July 5, 2011, Governor Jindal signed S.B. 135 as part of the 2011 legislative package, which extends Louisiana’s Research and Development Tax Credit (“R&D Tax Credit”) program through 2019.  Since 2009, Louisiana’s R&D Tax Credit has been a refundable tax credit.

The Louisiana R&D Tax Credit provides refundable credits to Louisiana taxpayers who incur research and development expenses, which helps to offset state income and corporate franchise tax.  The R&D Tax Credit can be as high as forty percent (40%) of a taxpayer’s expenditures.

Louisiana Department of Economic Development provides that approximately 200 companies have utilized the R&D Tax Credit program.

Angel Investor Tax Credit

Governor Jindal signed H.B. 597 into law which revived the Angel Investor Tax Credit program.  This program originally expired at the end of 2009.  The legislation that Governor Jindal signed makes this program effective January 1, 2011 through July 1, 2015.  The program offers a tax credit equal to thirty-five percent (35%) of money invested in certain early-stage businesses located in Louisiana.  Angel investors are used by entrepreneurs to finance certain businesses that banks and other financers are unwilling to finance.

While the original Angel Investor Tax Credit was fully refundable, the new tax credit is not.  However, the new tax credit is transferable.  The Angel Investor Tax Credit program also allows taxpayers to carry unused credits forward for up to ten (10) years.

There are other restrictions on the size of the business, the operations of the business and the net worth of the business.

Private Letter Rulings Suspension Lifted

Louisiana issued Revenue Information Bulletin 11-012 on July 26, 2011.  The purpose of the bulletin is to end the Louisiana Department of Revenue’s temporary suspension of private letter rulings.  Effective September 1, 2011, the Louisiana Department of Revenue will begin accepting requests for private letter rulings.

If a private letter ruling is appropriate, taxpayers must submit a request to the Policy Services Division of the Louisiana Department of Revenue by email at policy@la.gov or mail to the following address: Policy Service Division, Louisiana Department of Revenue, P.O. Box 44098, Baton Rouge, LA 70804-4048.

For more information, please see Revenue Information Bulletin 11-012.

Annual Sales Tax Holiday

The 2011 Louisiana Annual Sales Tax Holiday occurs on August 5th and 6th.  During this two-day span, consumers will not have to pay the four percent (4%) state sales tax on the first $2,500 of the purchase price of each eligible item of tangible personal property which is purchased for non-business use.

This sales tax holiday applies if the customer buys and accepts delivery; if the customer places property on layaway; if the customer acquires property that was previously placed on layaway; or if the customer places an order for immediate delivery, even if the delivery is delayed, provided that the customer has not requested delayed shipment.

The sales tax holiday does not apply to vehicles subject to license and title and several other specific items.

There is also a credit available for retailers for reprogramming cash registers in preparation for the sales tax holiday.  The credit is $25 per register.

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