State and Local Taxation

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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.Continue Reading NON-PROFIT ORGANIZATIONS SHOULD PROCEED WITH CAUTION WHEN ENGAGING IN MONEY MAKING OPERATIONS

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.
Continue Reading Untapped Benefits of Louisiana’s Pollution Tax Exclusion

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.
Continue Reading IRS Issues New Grantor Trust Ruling

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…

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 * * *.”Continue Reading State Income Tax on Prejudgment Interest? No, Says First Circuit

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.
Continue Reading A Sigh of Relief: Business Entities Enjoying Pass-Through Taxation Can Now Breathe a Little Easier Following the Initial Scare of Decision

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.
Continue Reading Go Zone and Bonus Depreciation

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.
Continue Reading INTERSTATE AIRPLANES OTHER TRANSPORTATION EQUIPMENT SUBJECT TO LOUISIANA USE TAX

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.
Continue Reading What is the Gulf Opportunity Zone?