08.11.15 |
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Louisiana Legislature Modifies Tax Credit Provisions

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At the close of its current legislative session, the Louisiana legislature passed the following tax bills affecting credits and incentives, which were signed into law by Governor Bobby Jindal on June 19, 2015.  These bills were:

  • H.B. 629, which imposes temporary reductions in credit and incentive benefits.
  • H.B. 635, which further restricts retail eligibility for the Enterprise Zone program and temporarily reduces the benefit rate for the Quality Jobs Credit.
  • H.B. 805, which makes excess research and development credits nonrefundable, and excess inventory property tax credits only partially refundable.

Additionally, the legislature also passed the following general tax measures:

  • H.B. 218, which increases the Louisiana net operating loss carryforward period from 15 years to 20 years, and eliminates the net operating loss carryback provision.
  • H.B. 624, which imposes a temporary 28 percent reduction in certain deductions and exclusions from income.

The key provisions impacting tax credits and incentives are summarized below.

Temporary Reduction in Certain Credit Amounts

H.B. 629 reduces various credit amounts by 28 percent, effective for tax returns filed on or after July 1, 2015 (some other incentives are reduced by differing percentage amounts).  Among the credits impacted by H.B. 629 are the following:

  • Job Tax Credit – Amount of credit is reduced as follows:[1]
    • From $100 to $72 for eligible new employee.
    • From $200 to $144 for eligible new economically disadvantaged employee.
    • From $225 to $162 for new employee who is a resident of an eligible neighborhood.
    • Credit amount is limited to 36 percent (previously 50 percent) of state tax liability.
  • Neighborhood Assistance Credit[2] – Amount of credit is reduced to 50 percent (previously 70 percent) of investment in approved programs. Maximum credit per taxpayer is reduced from $250,000 to $180,000 per year.
  • Credit for Contributions to Educational Institutions[3] – Amount of credit is reduced to 29 percent (previously 40 percent) of the value of the property contributed.
  • Basic Skills Training Tax Credit[4] – Amount of credit is reduced to $180 (previously $250) per participating employee, with the total credit per taxpayer limited to $21,600 (previously $30,000).

A full list of credits impacted by H.B. 629 can be found in Louisiana Department of Revenue Information Bulletin 15-021.

These reductions are effective for tax returns filed on or after July 1, 2015, and before July 1, 2018.[5]  For returns filed after July 1, 2018, the credit amounts revert to the original statutory amounts.  The reductions do not apply to amended returns filed after July 1, 2015 relating to an original return filed prior to July 1, 2015.[6]

If a return is filed after July 1, 2015 for which a valid filing extension has been allowed prior to July 1, 2015, any portion of the credit reduced by H.B. 629 shall be allowed as a credit in the amount of one-third of the reduced portion for each of the tax years beginning in calendar years 2017 through 2019.[7]

Temporary Reduction in Quality Jobs Credit

Under the Louisiana Quality Jobs program, a taxpayer can enter into a contract with the State of Louisiana to receive a cash rebate based on a percentage of gross payroll, provided that contractual terms are met with respect to job creation.[8]  H.B. 635 reduces the rebate to the contracted benefit rate multiplied by 80 percent of gross payroll.[9]  The 20 percent reduction in payroll base is effective for projects for which an advance notification was filed on or after July 1, 2015.[10]  The payroll base reverts back to 100% of gross payroll on July 1, 2018.[11]

Inventory Property Tax Credit Made Partially Refundable

Historically, any excess credit for local property taxes paid on the value of inventory has been fully refundable to taxpayers whose credit amount exceeded income and franchise tax liability.  H.B. 805 makes the following changes to the Inventory Property Tax Credit:[12]

  • For taxpayers with less than $10,000 in property taxes paid to all political subdivisions in any taxable year, any excess credit remains fully refundable.
  • For all other taxpayers, 75 percent of any excess credit shall be refundable. The remaining 25 percent of the excess credit may be carried forward for up to five years.

The change to the Inventory Property Tax Credit applies to tax returns filed on or after July 1, 2015.[13]

Research and Development Credit Made Nonrefundable

Since 2009, any excess Louisiana Research and Development Credit has historically been fully refundable to taxpayers whose credit amount exceeded income and franchise tax liability.  H.B. 805 makes the Research and Development Credit nonrefundable.[14]  Any excess credit may be carried forward for up to five years.[15]

The change to the Research and Development Credit applies to tax returns filed on or after July 1, 2015.[16]

Further Retail Restrictions Added to Enterprise Zone Program

For taxpayers who employ more than 100 employees nationwide and who are assigned a North American Industry Classification Code of 44 or 45 (pertaining to retail trade), pre-existing Enterprise Zone statute restricts participation to grocery stores and pharmacies located in enterprise zones.[17]  H.B. 635 further restricts retail eligibility.  Under the new restriction, any retail business that has not entered into an Enterprise Zone contract with the state before July 1, 2015 shall be ineligible to receive Enterprise Zone benefits, unless an advance notification was filed before July 1, 2015.[18]  If the otherwise-eligible taxpayer filed the advance notification before July 1, 2015, the taxpayer must file any related claims for benefits on or after July 1, 2016.[19]

 
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The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.

 

[1], 2, 3, 4 See La. Act No. 125, § 2 (HB 629) (2015).

[5], 6, 7 See La. Act No. 123, §§ 5-6 (HB 624) (2015).

[8] http://www.opportunitylouisiana.com/page/quality-jobs

[9], 10  See La. Act No. 126, § 2 (HB 635) (2015).

 [11] See La. Act No. 126, § 6 (HB 635) (2015).

[12] See La. Act No. 133, § 1 (HB 805) (2015).

[13] See La. Act No. 133, § 2 (HB 805) (2015).

[14], 15 See La. Act No. 133, § 1 (HB 805) (2015).

 [16] See La. Act No. 133, § 2 (HB 805) (2015).

[17] See La. Rev. Stat. Ann. § 51:1787.B(3)(b).

[18], 18 See La. Act No. 126, § 1 (HB 635) (2015).


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