Louisiana Law Blog

By Kevin C. Curry

On January 22, 2010, President Obama signed a law which allows taxpayers to claim a charitable deduction in the 2009 tax year for cash donations made through March 1, 2010 for the relief of victims in areas affected by the January 12, 2010 earthquake in Haiti. The IRS notice on this new law indicates that cash contributions eligible for the deduction against last years taxes include contributions made by text message, check, credit card or debit card. The law gives the taxpayer the option of deducting the cash contribution on his or her 2009 return or his or her 2010 return, but not both. The law does not change any of the other rules applicable to charitable donations such as the percentage limitations, the requirement that the charity be a qualified charity or the fact that the taxpayer must itemize in order to benefit from the deduction.

Each taxpayer should look at his or her own individual situation to determine whether or not the deduction should be claimed against 2009 income or 2010 income. Generally, the sooner the deduction the better but the taxpayer should consider his or her income in each year, tax rate in each year, and applicability of the itemized deduction phase out which is eliminated in 2010.

Further information regarding the deduction for Haiti earthquake relief donations and the identification of possible qualified charities can be found on the IRS website.
 

By Tokesha Collins

During the past few years, the Louisiana Legislature has adopted many “green” initiatives as part of climate and energy policies. The state has placed a strong emphasis on increasing both renewable energy generation and energy efficiency. The following is a list of some of these important initiatives:

• The Louisiana Renewable Energy Development Act allows Grid Tied Net Metering systems throughout the state, which allows electric utility customers, who wish to install a net metering facility, to reduce their monthly electricity bill by using electricity that is generated from solar, wind, hydroelectric, geothermal, or biomass resources. See La. R.S. 51:3061-51:3063 (2003).
   

By Christopher J. Dicharry and Jason R. Brown

On July 7, 2009, Louisiana Governor Bobby Jindal signed Act 442 (SB 9) into law, preserving Louisiana’s long-standing law excluding purchases, rentals and repairs of component parts of immovable property from state and local sales/use tax. Under a law enacted in 2008, purchases of several items previously considered non-taxable component parts of buildings and other immovables (e.g., installed commercial refrigerators and other commercial and industrial fixtures) could have been subjected to state and local sales/use tax. Many taxpayer representatives questioned the constitutionality of the 2008 Act and legislators agreed that it was not their intention to increase sales/use taxes during the 2008 Legislative Session. Act 442 became effective when it was signed by the governor and applies retroactively to all transactions occurring after the July 1, 2008 effective date of the 2008 Act.

by Christopher J. Dicharry

Owners of exempt property may be hurt by a recent Louisiana law change. Historically, the owners of tax exempt property did not have to confirm that the exemption was being respected by the Assessor by checking the tax rolls during the public inspection period. The owner of exempt property could challenge a tax bill by waiting to receive his tax bill, paying the bill under protest, and then filing a lawsuit in district court. This procedure used to be in La. R.S. 47:2110. As the result of a major rewrite of the Louisiana law on tax sales, La. R.S. 47:2110 was renumbered La. R.S. 47:2134.

By Charles S. McCowan, Jr.

This is the first of a three-part series related to Louisiana law and regulations pertaining to the accounting profession. This part focuses on the historical licensing and regulation of the profession by the State of Louisiana.

The Louisiana statutes and regulations governing accountants have become much more sophisticated and comprehensive through the years. In the early 1900s the State’s emphasis was on the qualifications and admission to the practice of public accounting. This continues to be a focus of the state¹s efforts; however, like other learned professions, the Louisiana legislature has adopted additional provisions recognizing the inevitable fact of life that: "Professions once seemingly inviolate from litigation are no longer sacrosanct. The age old axiom that physicians bury their mistakes, while attorneys and accountants file theirs away, has little relevance in modern day America.”

The purpose of this article is to provide an analysis of Louisiana statutes, regulations and jurisprudence regarding the accounting profession, as accountants, like others who practice skilled professions, are now full members of the “Krewe of Defendants” in the Louisiana litigation parade. The article does not include an analysis of other state or federal jurisdictions, regulatory bodies or professional standards and requirements.
 

By Kevin C. Curry

Historically, the IRS has said that a disregarded entity could (and maybe should) use the owner's taxpayer identification number for income and other tax purposes. For employment tax reporting, the IRS issued Notice 99-6, 1999-1 CB 321 , which said that employment taxes for employees of a disregarded entity could be reported by a disregarded entity in one of two ways:

(1) Calculation, reporting, and payment of all employment tax obligations with respect to employees of a disregarded entity by its owner (as though the employees of the disregarded entity are employed directly by the owner) and under the owner's name and taxpayer identification number; or

(2) Separate calculation, reporting, and payment of all employment tax obligations by each state law entity with respect to its employees under its own name and taxpayer identification number.

by Christopher J. Dicharry

Local governments in Louisiana are authorized to impose annual ad valorem property taxes on immovable and corporeal movable property. La. Const. of 1974 art. 6, §§ 26, 27 & 30. Property owners are required to file annual renditions prior to April 1 of each year. La. R.S. 47:2324. Locally elected assessors annually determine the fair market value and assessed value of property based upon the status and condition of taxable property on January 1 of each tax year and are responsible for listing the assessments on the official assessment lists. La. R.S. 47:1952. The assessment lists are open for public inspection during a fifteen day period determined by the assessor. Generally, the fifteen day period must fall between August 15 and September 15 of each year. La. R.S. 47:1992(G). During the fifteen day period, taxpayers may confirm their assessments and discuss changes to the assessments with the assessor. La. R.S. 47:1992(A)(2). Within three days after the end of the public inspection period, the assessors must certify the assessments lists to the local boards of review, which consist of the parish governing authorities. Appeals to the boards of review must be filed with the boards of review no later than seven days prior to the board of review hearings. La. R.S. 47:1992(C). That is, the taxpayer must confirm the dates of the board of review hearings by checking for publication of the appeal dates in the official journal of the parish and making sure that any appeal is filed with the board of review no later than seven days prior to the board of review hearing. The board of review is authorized to increase or decrease the assessment in accordance with the fair market or use valuation determined by the board. La. R.S. 47:1992(C).

 By Chris Dicharry

Property taxes in Louisiana are based on the fair market value of taxable property. The assessors make the fair market value determination based upon the status and condition of property as of January 1 of each tax year. Certain types of immovable property are generally revalued every four years; however if market conditions suggest changes in fair market value, adjustments can be made during the four year cycle. Most equipment and personal property is valued annually. La. R.S. 47:1978 and La. R.S. 47:1978.1 provide relief provisions for property owners that sustain damage after January 1 due to flooding or a natural disaster.

by Jenny Norton Phillips

On May 22, 2007 the Department of Revenue issued a long-awaited Revenue Ruling detailing its position regarding the case of Word of Life Christian Center v. West, 936 So.2d 1226, 2004-1484 (La. Sup. Ct. 4/17/06). In Word of Life, the Supreme Court determined that two airplanes which were purchased out of state for use in interstate commerce were nevertheless subject to Louisiana use tax as they had become part of the mass of property of the state. The impact of this decision, however, is not limited to airplanes. Many companies purchase various items outside the territorial limits of Louisiana and thereafter import them into the state for use interstate commerce operations.

by Christopher J. Dicharry

In International Paper, Inc. vs. Cynthia Bridges, 42, 023 (La. App. 2^nd Cir. 4/4/07), 2007 WL 983965 (not designated for publication), the Louisiana Court of Appeal, Second Circuit, reinterpreted the “further processing” provision of the Louisiana sales tax law. Under the further processing provision, tangible personal property purchased for further processing into tangible personal property for sale at retail is not subject to Louisiana sales/use tax. La. R.S. 47:301(10)(c)(i)(aa). Historically, Louisiana law had applied a three part test to the identification of a nontaxable further processing material: (1) The further processing material must be a benefit to the end product; (2) The further processing material must be a recognizable and identifiable component of the end product, and (3) A purpose for purchasing the further processing material must have been for processing into the end product. 

by Hays M. Alexander

It is not uncommon for 501(c)(3) non-profit organizations, large and small, to have money making opportunities during their existence. For instance, a larger non-profit organization may have a talented IT department that creates software to benefit the organization, but which can later be marketed to other organizations. In addition, a non-profit organization may receive a bequest of income producing property. Since 501(c)(3) non-profit organizations must be created and operated exclusively for charitable purposes, and not to generate profits, should these organizations ignore these opportunities and miss out on the income that could benefit their just causes, or can they take action? The short answer is that action can be taken but with caution.

by Kyle B. Beall

Many companies in Louisiana may be aware of the beneficial tax exclusion authorized in La. R.S. 47:301 and LAC 61:I.4302 for pollution reduction projects. What they may not be aware of, however, is the broader scope of Louisiana’s program than most other states. Unlike other states, Louisiana’s exclusion applies to both pollution control devices and pollution control systems. Thus, the Louisiana legislature intended to apply the program to more than simply “end of the pipe” control technology. This more expansive scope may make certain projects in Louisiana more attractive for multi-state companies competing for the same project dollars. 

by Kevin C. Curry

On February 16, 2007, the IRS issued a formal ruling approving a sale of a life insurance policy to a grantor trust. This ruling is a rare formal ruling by the IRS in the grantor trust area. Grantor trusts, or intentionally defective grantor trusts, are used often in a variety of estate planning situations. Grantor trusts are typically used in estate planning situations where the parties want the income of the trust to be taxed to the grantor of the trust (the person who set up the trust) or where they want the grantor to be deemed to be the owner of the trust property for income tax purposes.

by Christoper J. Dicharry

Beginning with the 2006 ad valorem tax year, Louisiana's Assessors have been required to send notice when the taxable assessment of property for a tax year increases by 15% or more from the prior year.  Written notice must be mailed by the Assessor to the address that receives the tax bill no later than the first day of the public exposure period.  La. R.S. 47:1987(B).  The public exposure period is a fifteen day period which must occur between August 15 and September 15 of each year. La. R.S. 47:1992(F).  Valuation and uniformity appeals to the local Boards of Review must be filed shortly after the public exposure period. The new written notice requirement provides a useful tool that will make it easier for taxpayers to manage compliance in Louisiana and reliance on the notice provides the taxpayer with a defense against a claim for additional taxes, interest and penalties.

by Christopher J. Dicharry

The Louisiana Supreme Court recently denied the writ application of Crosstex LIG, LLC relating to its 2005 ad valorem property tax disputes with Rapides and Ouachita parishes. Crosstex had appealed the values because Ouachita adjusted for obsolescence but did not use the service factor formula set forth in the Louisiana Tax Commission (“LTC”) Rules and Regulations, and Rapides denied obsolescence as a matter of “standard operating procedure.”

In its decision, the LTC held that when using the cost approach to value pipeline properties, the decision to adjust for obsolescence rests with the “sound discretion” of the assessor, but once the assessor makes the decision, he must use the service factor formula to calculate. By denying the writ, the Supreme Court allows the LTC to circumvent the constitutional and statutory requirements of ad valorem property taxation based upon fair market value, statewide uniformity, and the proper application of the cost approach. 

by Christopher J. Dicharry and Jenny N. Phillips

In Susan Orillion v. Crawford, 2005-0559 (La. App. 1 Cir. 9/1/06), 2006 WL 2521450, Orillion disputed the imposition of Louisiana individual income taxes on prejudgment interest received in connection with an automobile accident in 1988. The state paid its half of the damage award judgment in connection with the accident, with accrued judicial interest. Relying on tax laws current at the time, the Orillions paid no state or federal income taxes on their damage awards.

As described by the court, “The issue of whether prejudgment interest was taxable under 26 U.S.C.A. §104(a)(2) came to the forefront in federal court beginning with an unpublished case arising out of Michigan, entitled Kovacs vs. C.I.R., 25 F.3d 1048 (6th Cir. 1994), cert. denied, 513 U.S. 963, 115 S.Ct. 424, 130 L.Ed.2d 338 (1994). It was quickly and subsequently followed by a series of cases that held that prejudgment interest was not excluded from taxation under 26 U.S.C.A. §104(a)(2).” Thus, beginning in 1994 the treatment of prejudgment interest for federal tax purposes became clear. Orillion, however, contended that La. R.S. 47:46 precluded the imposition of the Louisiana individual income tax on prejudgment interest. In pertinent part, La. R.S. 47:46 provides, “gross income does not include: * * * (2) the amounts of any damages received (whether by suit or agreement) on account of personal injuries or sickness * * *.”

by Jenny N. Phillips

The Louisiana Third Circuit Court of Appeal caused quite a stir in the Louisiana business community in December, 2005 when it rendered its decision in Doland v. ACM, 921 So.2d 196 (La.App. 3 Cir. 12/30/05). In Doland, the Court was called upon to resolve a heated dispute over the termination of a lease of video poker machines. The video poker machines were being leased by ACM [FN1] for use in the Pat’s of Cameron Restaurant. Upon the expiration of the original three year term, written notice had been given of the restaurant’s desire to retain possession of the machines on a day-to-day basis, and to continue as such until the restaurant was able to obtain different machines, either through direct purchase or through another lessor. The restaurant had the machines disabled by the Louisiana State Police after ACM refused to remove the machines after removal was requested by the restaurant. Because of ACM’s refusal to remove them, the video poker machines remained disabled but on the premises of the restaurant, preventing the installation of new video poker machines, for roughly three months. During this time, the restaurant experienced a decrease in revenue not only from the lack revenue generated from the video poker machines themselves, but also from a decline in restaurant sales due to a lack of patronage. 

            The Gulf Opportunity Zone Act of 2005 (“GO Zone”) created a number of business incentives to help Louisiana and the other areas impacted by Hurricane Katrina. One of the key elements of the GO Zone legislation is the 50 percent bonus depreciation provision. This provision has been getting a great deal of coverage in the media and among the various investment circles. However, until guidance is issued by the IRS, there are some areas of uncertainty in this legislation. 

by Chris Dicharry

The Louisiana Supreme Court has ruled that interstate airplanes and other interstate transportation equipment will be subject to Louisiana state and local use taxes if a taxable moment outside of use in interstate commerce is found. The Court overruled cases which had previously found that transportation equipment used in interstate commerce would not be subject to use tax unless the equipment was used for intrastate transportation.
In Word of Life Christian Center vs. Mark West, Administrator, Ascension Parish Sales and Use Tax Authority, 04-1484 (La. 4/17/2006), _____ So.2d______, the Louisiana Supreme Court reviewed the taxability of airplanes purchased by the Word of Life Christian Center.

Many C-Level executives and small business owners have heard of the Gulf Opportunity Zone (the GO Zone Act) and know that it does something for Louisiana businesses, but they do not know if or how the new law can help them and their employees. Kean Miller has prepared a comprehensive summary of the GO Zone Act and its sister law, the Katrina Emergency Tax Relief Act of 2005 ("KETRA"). This summary describes the key legislative provisions and explains how Louisiana-area businesses, both large and small, can maximize the GO Zone benefits available to them.

The annual gift tax exclusion for the federal gift tax has increased to $12,000 for 2006. The annual exclusion had been $11,000. The annual exclusion is the amount any individual can give another individual per year without triggering a taxable gift for federal gift tax purposes.

by Christopher J. Dicharry

The Senate Revenue and Fiscal Affairs Committee has reported to the full Senate HB 148 (Rep. Arnold), which appears to be a compromise between the assessors and local government on the revaluation of property due to damage or destruction because of the hurricanes.

HB 148 (Rep. Arnold) must now be voted on by the full Senate and the House must vote to accept the Senate amendments or to send the bill to a conference committee.

HB 148 as amended would preserve the revaluation provisions dealing with flooded property (immovable and corporeal movable (i.e. real estate and tangible personal property) in current law, La. R.S. 47:1978. That is, flooded property must be revalued. Property destroyed, uninhabitable, or non-operational due to other hurricane related causes will be revalued as follows: If the local taxing jurisdictions vote to use pro-ration, the tax bill will be prorated for 2005 based on the number of days the property was "habitable". This pro-ration provision cannot be used by Jefferson, Orleans, Plaquemines, and St. Bernard. If the local taxing jurisdictions do not vote to use pro-ration and in Jefferson, Orleans, Plaquemines, and St. Bernard the property will be revalued in its damaged state for the entire year.

by Christopher J. Dicharry:

Three different bills dealing with revaluations because of hurricane damage are working their way through the Legislature.

Existing law, La. R.S. 47:1978 requires the revaluation of flooded property in the year of the flood even if the assessment rolls have been certified.

HB 148 (Rep. Arnold)

Revaluations

Creates a new La. R.S. 47:1978.1 that complements La. R.S. 47:1978. It expands on La. R.S. 47:1978 by requiring revaluation not only in the case of floods, but also in the case of property damaged or destroyed during a declared disaster or emergency.

by Christopher J. Dicharry

The Senate versions of the Sales Tax on Machinery and Equipment and Corporate Franchise Tax bills are better than the House versions:

SB 39 (Sen. Mount) - Providing for a full state sales tax exclusion for equipment purchased to replace or repair equipment damaged in connection with the hurricanes, including damage from water, wind, fire, or criminal acts. Unlike HB 39 (Rep. Hammett), this bill does not require that the damaged equipment be uninsured or under insured.

Reported favorably by the Senate Revenue and Fiscal Affairs Committee and awaiting action on the Senate floor.

By Christopher J. Dicharry

Here are summaries of some of the important tax bills currently under consideration in the 2005 First Extraordinary Legislative Session. With the breadth of the agenda before the legislators and the limited time available, expect daily changes in the composition and/or fate of these bills.

HB 24 (Rep. Hammett)-Makes modifications to the individual and corporation income taxes to adjust the federal income tax deduction so that the amount of the deduction is not reduced because of federal income tax credits enacted as a result of the hurricanes. This bill insures that Louisiana income taxes do not increase as a result of the federal credits enacted because of the hurricanes.

Reported favorably from the House Ways & Means Committee and awaiting action on the House floor.

The IRS has granted various extensions to taxpayers in areas affected by Hurricane Katrina. Generally, this relief extends the due dates for any business or individual return due on or after August 29, 2005 until January 3, 2006.

The Louisiana Department of Revenue released a bulletin today relating to state treatment of Hurricane Katrina related federal tax relief.

By Christopher J. Dicharry

Assessors are charged with the duty of determining the fair market value of business and residential property in Louisiana so that annual ad valorem property taxes can be imposed. This duty to determine fair market value is modified by a duty to insure that assessments are uniform. That is, similar properties should have similar assessments.

The Louisiana Legislature has passed legislation designed to undo the Willis-Knighton decision (i.e. the Louisiana Supreme Court case which abolished the "societal expectations" test, thereby strongly suggesting that doors and toilets, for example, are movable). The bill will not be law until the delays for the governor to veto it have passed.

Here's a link to the text of the enrolled bill as adopted. Senate Bill 196.

By Lolly White

In-house counsel who are employed in Louisiana but are not licensed to practice law here have until July 1, 2005 to file an application for limited licensure to practice under the Louisiana Supreme Court's new In-House Counsel Rule.

By Chris Dicharry

The Louisiana Legislature will have a busy 2005 "fiscal" session as it works its way through a number of tax proposals and, due to rule changes, will consider a number of non-fiscal bills.

By Alan J. Berteau

The agonizing uncertainty over the fate of "societal expectations" under La. C.C. art. 466, component parts of an immovable, continues. Will the "societal expectorants" legislatively overrule Willis-Knighton? Will the "plain texters" legislatively solidify Willis-Knighton?

by Alan J. Berteau

From the uniformly excellent Harris DeVille & Associates newsletter, "HDA Issues," comes an alert that the Louisiana legislature has leapt into action to "fix" the startling Louisiana Supreme Court decision, Willis-Knighton Medical Center v. Caddo-Shreveport Sales & Use Tax Commission, 2004-C-0473, 4/1/05). There is an earlier post on the Louisiana Law Blog discussing the decision. Essentially, the majority decided that "component parts" of an immovable - i.e., those things that become part of the immovable -- are no longer gauged by "societal expectations," but by the degree of damage caused by their removal.

The Louisiana legislature is on the case.

By Alan J. Berteau

In a remarkable decision featuring something less than seamless harmony among the justices, the Louisiana Supreme Court recently considered the meaning of "component parts" of an immovable under Louisiana Civil Code Article 466, Component Parts of Buildings or Other Constructions. The issue in the case was whether nuclear cameras at a hospital had become "immobilized," and thus not subject to local sales and use taxes. The decision carries far-reaching implications which have already stirred the Louisiana legislature into activity to deal with the potential fall-out from the decision.

By Chris Dicharry

In an unprecedented hearing today, the Louisiana Tax Commission ruled to give 90% obsolescence to Future Utility wells, reversing the Commission's adopted rule of 60% for Future Utility wells published in the January Louisiana Register.

LIOGA President Don Briggs, Daron Frederickson and Ken Cariker of Affiliated Tax Consultants, and Chris Dicharry of Kean Miller, all testified on behalf of LIOGA and the industry in today's hearing. There are approximately 10,200 Future Utility wells in the state of Louisiana. The reversal of the Tax Commission from 60% obsolescence to 90% obsolescence is a major victory for industry.