UPDATEOn January 20, 2023 the Louisiana Department of Revenue revised the proposed regulations.  The revisions modify the previous Notice of Intent to amend the regulations relating to the new automatic extension. The revisions to the proposed rule no longer contain language requiring the Secretary to grant a “reasonable” extension because the statutory provisions already mandate the length of the extension. The revisions also provide that taxpayers can retain other evidence of their federal filing extension approval, which need not be limited to Form 6513. This blog post was originally published in December 2022 and has been updated to reflect these changes.

Act 410 (SB 54) of the 2022 Regular Session amended Louisiana law[1] and granted an automatic extension to individuals, partnerships, and fiduciaries (estates and trusts) to file state income tax returns for taxable periods beginning on or after January 1, 2022. The extension is automatically granted for six months from the May 15 deadline[2] for filing returns, or until the extended due date of the federal return, whichever is later, to accommodate fiscal year filers. For calendar year filers, the extended due date is November 15 or the first business day thereafter. The legislation does not extend the time to pay any tax due.

For corporations, the amendments provide that the Secretary of the Louisiana Department of Revenue (the “Secretary”) “shall” grant a six-month extension (or until the extended due date of the federal return, whichever is later) for the filing of state corporate income tax returns where the taxpayer has timely requested an extension to file its federal tax return with the Internal Revenue Service (the “IRS”). But it should be noted that the Secretary does not appear to be required to grant a similar extension for corporation franchise tax returns because the relevant franchise tax statute only provides that the Secretary “may” grant an extension of time to file.[3] Since the Louisiana corporation income and franchise tax returns are prepared and filed on the same form (Form CIFT-620), it is likely the Louisiana Department of Revenue (the “Department”) will recognize the same extended due date for each return but it is possible the Department could adopt another policy.

The automatic extensions are contingent on the taxpayer filing the state return on or before the extended due date. If the taxpayer fails to do so, the deadline reverts to the original due date, and delinquent filing penalties are calculated accordingly.

Procedural Changes Under the Rules

The Department has issued a Notice of Intent[4] to amend the applicable regulations[5] in line with the new automatic extension provisions. The proposed amendments to the regulations provide that individuals, partnerships and fiduciaries are not required to submit an extension request for taxable periods beginning on or after January 1, 2022.

For corporations, the proposed amendments to the regulations would require a taxpayer to mark the box on the Corporation Income and Franchise Tax Return indicating that they have timely applied for a federal extension for the same taxable period. If approved for a federal extension, the taxpayer should retain a copy of their approval. If the federal extension is not approved, the state extension is also null and void, and as a result, delinquent filing penalties will be assessed from the original due date for the return.[6]

The proposed amended regulations would also provide that a taxpayer that files a corporation franchise tax return without a corporate income tax return is ineligible for a filing extension.

Implications for Taxpayers

Previously, under these provisions, the Secretary had the discretionary power to grant a reasonable extension of time for filing state returns that could not exceed six months[7], or the extended due date of the federal income tax return, whichever was later. For the purpose of granting the extension, the Secretary could either accept a physical copy of the form filed by the taxpayer with the IRS requesting an extension on their federal tax return, or alternatively, provide for an automatic extension on the state tax returns without requiring the filing of an additional state form.

In practice, taxpayers filed an extension request with the state using one of the following methods: filing an electronic application on the Department’s website, filing an electronic application via the Department’s interactive voice response (“IVR”) phone system, filing a paper request, submitting a copy of the federal paper extension, or using the options in the tax preparation software for an electronically-filed return.[8]

Act 410 changes the law and makes the automatic extension mandatory for taxable periods beginning on or after January 1, 2022, and does not require a taxpayer to file an extension request with the state, or require action on the part of the Secretary. A corporate taxpayer must timely file a request for extension with the IRS for that tax period but need not file a separate state extension request. As noted above, the text of the franchise tax laws do not require the Secretary to grant an extension of time to file. The proposed regulations appear to apply the automatic extension to the common form for filing both corporation income and franchise tax returns but it is possible the Department could adopt a different policy in the future.

As with respect to federal tax extension rules, taxpayers relying on the automatic extension should bear in mind that taxes continue to be due by May 15th[9], and that failure to file returns within the extended period will trigger delinquent filing penalties that will run from the original due date of the return.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441, or Divya Jeswant at (504) 293-5766.

[1] La. R.S. 47:103(D), 47:287.614(D), 47:612.

[2] La. R.S. 47:103(A), 47:287.614(A), 47:609. Returns for taxpayers that file on a fiscal year basis are usually due on or before the fifteenth day of the fifth month following the close of the fiscal year.

[3] La. R.S. 47:612.

[4] La. Register 48:2689 (October 2022).

[5] La. Admin. Code 61:I.2501, 2503, 2505, 2507.

[6] Proposed amendments to the regulations contain additional requirements if the IRS denies the taxpayer’s request for a federal extension and the taxpayer requests a reconsideration of their denied federal extension.

[7] Seven months, in the case of a corporation. La. R.S. 47:287.614(D)(1).

[8] https://revenue.louisiana.gov/Faq/Details/1000; https://revenue.louisiana.gov/CorporationIncomeAndFranchiseTaxes#Extension.

[9] La. R.S. 47:105(A), La. R.S. 47:287.651(A), La. R.S. 47:609(A). Where the taxpayer files returns on a fiscal year basis, tax is usually due on or before the fifteenth day of the fifth month following the close of the fiscal year.