Because it was a fiscal session, the Louisiana Legislature enacted a number of key tax changes in the 2023 Regular Session that concluded on June 8, 2023. Below you will find the important substantive tax updates and their implications for taxpayers, which are addressed by tax type. A number of these changes represent welcome relief for taxpayers and improvements to the climate for business in this state. Highlights of the legislative session are discussed below.
Corporation Franchise Tax
Although the Louisiana corporation franchise tax (“CFT”) was roundly disliked by the courts, the Department of Revenue and the business community as a result of its significant complexity and potential to discourage capital investment in the state, the tax nonetheless proved difficult to kill and, has in fact, survived the most recent attempt to rid the State of this tax. In what appears to have been a bipartisan effort in this most recent legislative session, the franchise tax was slated for eventual repeal. The CFT was to be phased out at the cost of certain reductions to incentive programs, discussed below. The phase-out would have begun in the 2025 CFT year (which is the 2024 income tax year) and would have been reduced by 25% for each year in which overall corporate tax collections (from the CFT and the Corporation Income Tax) exceed $600 million. The reduction was to take effect in the year following such excess. The first 25% reduction was expected to occur within the next two years and would have resulted in significant savings for corporations currently subject to the tax, with a potential for complete elimination of the tax by the 2029 CFT year. While these amendments passed both the House and Senate, on June 27, 2023, the Governor vetoed SB1 and returned it to the Senate. However, if the Legislature goes back into session, it can override the veto if House and Senate each vote by a two-thirds majority to approve SB1. In that case, SB1 will become law without the Governor’s approval. While this would be a welcome development, there is not yet any firm indication that there will be such a special session.
As noted above, if the CFT repeal had gone into effect, a portion of the cost of the phase-out would have been offset by a reduction of the sales/use tax rebate and the project facility expense rebate under the Quality Jobs program, to the extent of 50% of the CFT reduction for that year. This reduction would have only affected projects for which advance notifications under the Quality Jobs program are filed after December 31, 2023, which would have been an important planning point for projects intending to apply. While these amendments, set out in SB6, passed both the House and Senate, their provisions were rendered moot by the Governor’s veto of the CFT repeal legislation, and on June 28, 2023, the Governor also vetoed SB6.
SB3 was introduced with SB1 and SB6 to change the month for the annual determination of automatic rate reductions for corporation income and franchise tax from April to January. This amendment has been signed into law and applies from January 1, 2024 onwards.
Corporation Income Tax
L. 2023 HB631 (Act 430) – The “Throwout Rule” Has Been Thrown Out
The sourcing rules used to determine the sales factor for Louisiana corporation income tax apportionment have been amended to repeal the “throwout rule,” which previously excluded certain sales of intangible property from both the numerator and denominator of the sales factor. Also, sales that are now classified as generating allocable income (rental/lease/license of immovable and tangible personal property, lease/license of intangible property) have been removed from the apportionment-related sourcing provisions. The amendments have been signed into law and apply to tax years beginning on or after January 1, 2024.
Individual Income Tax
L. 2023 SB89 (Act 242) – The LDR Must Promulgate Regulations Related to the Net Capital Gain Deduction for Sale of a Louisiana Business
Act 242 requires the Louisiana Department of Revenue (“LDR”) to promulgate regulations related to the individual income tax exclusion of net capital gains arising from the sale or exchange of an equity interest or substantially all of the assets of a non-publicly traded corporation, partnership, limited liability company, or other business organization commercially domiciled in Louisiana. In addition to reducing the administrative requirements for claiming the deduction, the regulations are also expected to restrict eligibility for the deduction where a majority of the physical assets of the business organization are located outside Louisiana or where the transactions are between related parties. These amendments have been signed into law and apply for taxable periods on or after January 1, 2023.
L. 2023 HB618 (Act 413) – Still No Taking All the Credit for Taxes Paid to Other States
Restrictions on the availability of a credit for net income taxes paid in another state have been extended – (i) the credit is limited to the amount of Louisiana income tax that would have been imposed if the income earned in the other state had been earned in Louisiana, (ii) the credit is not allowed for tax paid on income that is not subject to tax in Louisiana, and (iii) the credit is not allowed for income taxes paid to a state that allows a nonresident a credit for taxes paid or payable to the state of residence. Act 413 also provides that any deductions claimed by an individual partner/shareholder/member for another state’s entity level tax are in lieu of the credit and not in addition to it, i.e., no double benefit will be allowed.
In addition, the requirement of reciprocity in order to take a credit for taxes paid to another state (i.e., that the other state must grant a similar credit against Louisiana individual income tax) is eliminated. These amendments have been signed into law and will apply to taxable years beginning on or after January 1, 2023.
Pass-Through Entity Tax
L. 2023 HB428 (Act 450) – Expanded Access to the Pass-Through Entity Exclusion for Partnerships, Estates and Trusts
The pass-through entity exclusion (the “SALT cap workaround”) has been extended to partnerships, estates, and trusts, which will enable such entities to exclude net income or losses received from a related entity in which the partnership, estate or trust is a shareholder, partner, or member, provided that payor entity properly filed an entity-level Louisiana tax return that included the net income or loss in question. The exclusion will not apply to any amount attributable to income that does not bear the entity-level tax for any reason. Previously, this exclusion was only available to individuals. These amendments have been signed into law and will apply to taxable years beginning on or after January 1, 2023.
Sales and Use Tax
L. 2023 HB171 (Act 15) – Thresholds Modified for Remote Sellers and Marketplace Facilitators
Previously, the Louisiana threshold for a remote seller or marketplace facilitator to register, report and remit use tax (both state and local) was gross revenue for sales delivered into Louisiana in excess of $100,000, or more than 200 transactions. Act 15 repeals the 200-transaction threshold. This development comes on the heels of South Dakota repealing the same transaction threshold earlier this year – that threshold was acknowledged in Wayfair as one of the benchmarks to determine if a remote seller availed itself of the substantial privilege of carrying on business in a state so as to justify an obligation to remit the tax.
Act 15 also provides that only remote retail sales (and not excluded transactions such as resales) would be counted towards the $100,000 threshold for marketplace facilitators. These amendments have been signed into law and take effect from August 1, 2023.
Interestingly, Halstead Bead Inc., a small out-of-state retailer that challenged Louisiana’s decentralized local sales and use tax administration in federal court, informed the U.S. Court of Appeals for the Fifth Circuit that this amendment rendered its pending appeal moot because it does not expect to cross the higher $100,000 threshold and will therefore not be liable to report and remit tax in Louisiana. But the parishes in the matter counter-argued that the challenge was only mooted to the extent of the 200-transaction threshold but not the $100,000 threshold, and also that the new law would not take effect until August 1, 2023, ostensibly in a bid to persuade the court not to dismiss the matter and to issue a decision that Louisiana’s decentralized system is constitutional. The Fifth Circuit ultimately issued a decision on July 7, 2023 that Halstead Bead Inc.’s challenge to the Louisiana tax system was barred by the Tax Injunction Act.
L. 2023 HB558 (Act 375) – Centralized Remittance and Reporting of Local Sales and Use Tax
The Uniform Local Sales Tax Board (“ULSTB”) has been tasked with setting up a uniform return and remittance system where a taxpayer can file returns and deposit all local sales/use taxes electronically within a single portal. This responsibility previously lay with the LDR but the ULSTB already has experience with setting up similar uniform programs for multi-parish audits, refunds and voluntary disclosure in a bid to simplify local tax administration. The new uniform return and remittance system must be available for use no later than January 1, 2026, and once implemented, should ease compliance with Louisiana local sales/use tax although its exact features remain to be seen. The new system will also include information on the applicable tax rates and exemptions, which is to be provided to the ULSTB by the parish collectors, and any rate changes are to be notified in advance. A taxpayer’s reliance on the rates and exemptions in the new system will be an absolute defense against any claim for a taxing authority’s sales and use tax. These appear to be “hold harmless” clauses designed to protect taxpayers and parish collectors when parish sub-jurisdictions delay reporting boundary changes or rate changes. These amendments have been signed into law and will take effect on January 1, 2024.
L. 2023 HB629 (Act 382) – Sales and Use Tax Exemption for Certain Topical Drugs
The exemption from local sales and use tax for prescription drugs administered exclusively to a patient in a medical clinic (as defined) has been extended to cover those administered by topical system. In addition, drugs for neuropathic pain have also been included under the exemption. These amendments have been signed into law and will take effect on July 1, 2023.
L. 2023 HB161 (Act 62) – Sales and Use Tax Exemptions Benefitting the Seafood Industry
The exemption for various materials and supplies to commercial fisherman as well as related seafood processing facilities has been made mandatory for local sales and use tax. Previously, each parish could determine whether and to what extent to adopt the exemption. The amendment effects uniform treatment for such transactions at a state and local level. The scope of the exemption is fairly wide – covering materials and supplies necessary for repairs to the vessel or facility that become a component part of the vessel or facility, materials and supplies that are loaded upon the vessel or delivered to the facility for use or consumption in the maintenance and operation, and repair services performed upon the vessel or facility – and may therefore be relevant to a number of industries. This amendment has been signed into law and will take effect on August 1, 2023.
L. 2023, SB8 (Act 249) – No Interest When Local Sales/Use Taxes Paid Under Protest
In a welcome move, interest is no longer payable where a collector prevails against an unsuccessful taxpayer in a suit in which the taxpayer has paid the taxes under protest. This amendment repeals the interest liability that was introduced just last year as part of the 2022 Regular Session and was roundly criticized as double-dipping by collectors who could invest the disputed funds while the matter was pending resolution. It should also be noted that there is no interest liability when it comes to state sales/use tax and the amendment reintroduces parity on that count.
On the downside, where interest is payable on a refund of tax paid under protest (i.e., when a taxpayer prevails), the interest rate has been reduced from 12% per annum to the judicial interest rate (currently, 6.5% per annum). These amendments have been signed into law and will take effect on August 1, 2023. Based on a 2015 change to the law, where a parish collector has deposited the monies into an interest-bearing escrow account, the taxpayer will be paid only the interest actually earned and received by the collector.
Ad Valorem Tax
L. 2023, SB5 (Act 284) – New Alternatives to Payment Under Protest When Challenging Property Tax Assessments
Taxpayers are no longer forced to pay ad valorem property taxes under protest in order to contest legality or correctness before the Board of Tax Appeals or a district court. Instead, a taxpayer may timely file a rule for bond or other security (which includes a pledge, collateral assignment, lien, mortgage, factoring of accounts receivable, or other encumbrance of assets). The Board of Tax Appeals or district court may permit the posting of a bond or other security for all or part of the taxes at its discretion. No collection action will be taken in relation to the assessment of tax and interest unless the taxpayer fails to furnish such bond or security. Note that if a bond or other security is posted and the taxpayer is ultimately unsuccessful, interest will run until the date the taxes are paid (because there was no payment under protest to stop the interest clock).
The amendments also clarify that a taxpayer challenging the correctness of an assessment before the Louisiana Tax Commission (“LTC”) does not need to pay the tax or post security, including during an appeal against the LTC’s determination by any other party. If the taxpayer appeals against the LTC’s determination, the amount of the payment under protest or alternate security will be based upon the LTC’s determination. These amendments have been signed into law and will take effect on August 1, 2023.
L. 2023 HB279 (Act 161) – Modification to Rules on Confidentiality of Assessment Information Provided to the LTC
The provisions relating to confidentiality of information submitted to the LTC have been modified. Any current-year assessment information submitted to the LTC on or after January 1, 2024, may be provided to any individual or other entity for use in a business unless it is deemed or designated confidential by an assessor, or relates to public service properties. For assessment information submitted to the LTC prior to January 1, 2024, historical information held by the LTC and viewable from the LTC’s website that is at least one year old may be provided to a taxpayer in electronic form. The one-year requirement will not apply to assessment information submitted to the LTC on or after January 1, 2024. This amendment has been signed into law and will take effect on January 1, 2024.
Common Administrative Provisions for State Taxes
L. 2023, SB75 (Act 289) – Deadline for Payment under Protest of Self-Assessed State Taxes
In recent case Barron, Heinberg & Brocato, LLC vs. Louisiana Department of Revenue, State of Louisiana, the Board of Tax Appeals recently held that a taxpayer can choose to pay under protest any state tax self-assessed on a return, finding that there was no clear deadline in the applicable statute. Act 289 substantively changes the law in relation to the Barron decision and requires a taxpayer to pay self-assessed taxes under protest within 60 calendar days of the date of a notice of tax due going forward. The notice must be sent by certified mail where the amount due exceeds $1,000. The provisions of Act 289 apply to assessments and notices mailed on or after October 1, 2023.
This year’s regular session was particularly contentious, but the Legislature nonetheless came together to address a number of important tax matters including the eventual elimination of the franchise tax and the imposition of interest on taxes paid under protest at the local level in certain circumstances. Unfortunately, the governor vetoed the franchise tax repeal but other changes became law. The list above is not exclusive. It’s important to keep an eye on developments as they occur. For questions or to discuss any of the foregoing, please contact Kean Miller’s tax team: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441, Phyllis Sims at (225) 389-3717, or Divya Jeswant at (504) 293-5766.
 Our colleague, William J. Kolarik, II, wants you to know that he is not celebrating the Governor’s veto as a public policy matter. While we had mentioned earlier that he is in the minority in that he would have missed the franchise tax, having figured it all out at this point, as we have spent a significant part of our careers assisting clients with franchise tax issues, he nonetheless understands that its unwieldy structure and anti-economic development policy was not good for the State.
 Interestingly, a 25% reduction based on current collections would arguably never have resulted in complete repeal in that simply reducing the tax by 25% each time the condition is met results in a continuously diminishing fraction which, while producing almost negligible tax liability, would nonetheless never reach zero.
 La. R.S. 47:297.14.
 South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).
 Halstead Bead, Inc. v. Richard, 5th Cir., No. 22-30373.
 A rate change includes a new tax, a change in the rate of tax, a change in the boundary of a parish sub-jurisdiction, the introduction/repeal/modification of an exemption etc.
 Who own, lease or exclusively contract a vessel operated primarily for the conduct of commercial fishing as a trade or business.
 La. R.S. 47:1576.
 Within the usual appeal deadline in the case of a correctness challenge, and before the taxes are due in the case of a legality challenge.
 No. 12963C c/w 12984C, (La. Bd. Tax App. July 13, 2022).
 La. R.S. 47:1568. Note that the initial proposal was for a thirty-day deadline but was amended to ensure that a taxpayer had sufficient time to make payment after receiving the notice of tax due.