The inventory tax credit is the method used by Louisiana to reimburse taxpayers for the cost of the annual local property taxes paid on the value of inventories. Rather than providing an exemption from local property taxes on inventory, taxpayers pay the local property tax on the value of inventories and are reimbursed by means of a 100% refundable credit on their income and corporation franchise tax returns filed after the inventory tax is paid. If the inventory tax exceeds the income and corporation franchise tax due to the state, the Louisiana Department of Revenue issues a check for the balance of the credit.
Effective July 1, 2015, the refund of inventory taxes for eligible taxpayers whose ad valorem taxes paid to all political subdivisions in the taxable year is $10,000 or more will be limited to 75% of any excess credit instead of 100% of the excess credit. The remaining 25% of the excess credit is carried forward against income and corporation franchise tax for up to 5 years. Smaller taxpayers will continue to receive full refunds of inventory tax paid. La. Acts 2015 No. ___( HB No. 805 (Rep. Adams) amending La. R.S. 47:6006).
Under the bill, the inventory tax credit is curtailed based upon when a taxpayer’s return is filed. All claims for credit on any return filed on or after July 1, 2015 will be subject to the refund limit regardless of the taxable year to which the return relates. However, the filing of an amended return on or after July 1, 2015 amending a return filed before July 1, 2015 will receive the full inventory tax credit if the inventory tax credit was properly claimed on the original return. Thus, a late filed original 2013 return filed on or after July 1, 2015 will be subject to the reduced refund even though other taxpayers got full refunds for timely filed 2013 returns. Additionally, 2014 returns under extension will not get the full refund if the returns are not filed before July 1, 2015.
Taxpayers should consider filing income and corporation franchise tax returns for 2014 and earlier years before July 1, 2015 claiming the proper amount of the inventory tax credit even if the returns will have to be amended after July 1, 2015.
Note: HB 805 has not been signed by the Governor; however, it is very likely that HB 805 will become law prior to July 1, 2015.
The Louisiana Legislature made numerous changes to business exclusions, exemptions, deductions, and credits. Many of these changes are effective July 1, 2015. This article addresses only one of the major changes enacted by the Louisiana Legislature during the 2015 regular session.
For more information or questions about tax law changes during the 2015 regular session, contact Chris Dicharry.