Thank you for subscribing to our firm’s Tax Law Alert. In this alert you will find an overview of some important tax legislation passed during the Louisiana Legislature 2017 Regular Session. If you have any questions pertaining to this information, please contact Jeannette Waring, Leon Rittenberg III, Jennifer Rigterink or Andrew Sullivan at (504) 569-2900.
Many of the key (and somewhat controversial) state tax measures proposed during Louisiana’s 2017 Regular Legislative Session (such as the proposed tax on business gross receipts and the proposed striking of the federal income tax deduction for individual and corporate state income tax) failed to advance. Nevertheless, some important tax legislation was passed during the recent session, which is summarized below.
Changes to Qualified Investment Amount and Permissible Transfers for the Angel Investor Tax Credit
HB 454 modifies the Angel Investor Tax Credit Program, which awards tax credits for certain investments in a qualifying “Louisiana Entrepreneurial Business.” HB 454 extends
the sunset date of the program to July 1, 2021. The total amount of authorized credits granted by the state continues to be capped at $3.6 million per year.
There are two main revisions to the program in addition to the noted extension. First, HB 454 reduces the amount of the qualified investment on which the credit is calculated from an annual limit of $1,000,000 to $720,000 per business and a total limit of $2,000,000 to $1,440,000 per business. The bill also reduces the amount of the credit from 35% to 25% of the qualified investment and the period over which the credit is divided from five to three years.
Second, although prior law required the recapture of a credit if the investor transfers the equity received in connection with the qualified investment within three years of the issuance of the credit certificate unless the transfer results from certain circumstances, HB 454 adds an exception from recapture for the transfer to an entity, trust or other organization under the control of the investor.
Changes to Percentage Limitations for the Research and Development Tax Credit
HB 300 modifies the Research and Development Tax Credit Program, which awards tax credits to companies that have paid or incurred qualified research expenses while conducting qualified research in Louisiana. The bill makes a number of important changes to the program:
(i) it extends the sunset date of the program to December 31, 2021;
(ii) reduces the percentage of the annual increase in qualified research expenses on which the credit is calculated (from 8% to 5% for taxpayers that employ 100 or more persons; from 20% to 10% for taxpayers that employ 50-99 persons and from 40% to 30% for taxpayers that employ less than 50 persons); and
(iii) increases/decreases the base amount on which the annual increase in qualified research expenses is calculated based on the number of persons employed by the taxpayer.
Additional Requirements for HMOs Seeking Insurance Premium Tax Credit
Act 313 modifies the credit against the insurance premium tax for health maintenance organizations (HMOs) who invest a portion of their admitted assets in “qualified Louisiana investments” by adding additional requirements for the HMOs to qualify for the credit.
The new law requires that in order for an HMO to qualify for the premium tax credit for a qualified Louisiana investment, an HMO must:
(i) offer fully insured commercial or Medicare Advantage products;
(ii) be domiciled, licensed and operating in Louisiana;
(iii) maintain its primary corporate office and at least 70% of its employees in Louisiana; and
(iv) maintain its core business functions in Louisiana.
The definition of “qualified Louisiana investments” otherwise remains the same as under prior law.
Constitutional Exemption from Ad Valorem Tax for Component Parts Delivered to Construction Project Sites
SB 140 proposes a constitutional amendment that exempts from ad valorem tax all property delivered to a construction project site for the purpose of incorporating the property into any tract of land, building or other construction as a component part, including property that may be deemed to be a component part once placed on an immovable for its service and improvement pursuant to the provisions of the Louisiana Civil Code.
The exemption is effective until the construction project is complete. A project is deemed “complete” when construction is finished to the extent that the project can be used or occupied for its intended purpose. A project is not “complete” during its inspection, testing or commissioning stages, as defined by reasonable industry standards.
The exemption does not apply to property on any portion or phase of a project that is complete on the date assessed, nor to any public service properties.
The proposed amendment will be submitted to the voters at the statewide election to be held on October 14, 2017.
Louisiana House Bill Allows Vessel Owners to Contest Ad Valorem Taxes
HB 425 allows a vessel owner to contest ad valorem taxes assessed on vessels (based upon assessed value issues or based upon other grounds, such as the location of the vessel or the constitutionality of the tax) by paying the ad valorem taxes under protest while preserving the taxpayer’s rights to the Louisiana state tax credits for ad valorem taxes.
Under prior law, only ad valorem taxes paid without protest were eligible for the credit. Thus, under prior law, one who challenged the imposition of the ad valorem taxes lost the ability to receive an income or franchise tax credit from the State of Louisiana.
The new law will apply to income tax periods beginning on and after January 1, 2017 and corporate franchise tax periods beginning on and after January 1, 2018.
Expansion of Construction Contract Exemption from Additional State Sales and Use Taxes
Act 209 increases the types of construction contracts that are excluded from additional state sales and use taxes.
Prior law excludes from any new sales and use tax levy the sales of materials and services involved in lump sum or unit price construction contracts entered into in writing either: (i) before the effective date of the new levy; or (ii) within 90 days of the effective date of the new levy if the contractual obligations were undertaken prior to the effective date and were computed and bid based on prior tax rates.
Act 209 extends the application of this exclusion to any fixed rate and/or guaranteed maximum price construction contracts entered into prior to or within 90 days of the effective date of any new state sales and use taxes levy after July 1, 2017.
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The information contained within this newsletter does not constitute legal advice and is not intended to create an attorney-client relationship. You should consult an attorney for individual advice regarding your own particular situation.