Source: https://www.bdo.com/insights/tax/state-and-local-tax/state-and-local-tax-alert-august-2015-(3)
Timestamp: 2019-04-23 04:34:05+00:00

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In June 2015, Louisiana Governor Bobby Jindal (R) signed into law several bills that, together, modify the state’s corporation income tax net operating loss (“NOL”) provisions, and reduce certain deductions/subtractions from gross income, expense deductions and credits that a taxpayer subject to corporation income tax may claim. It also imposes stricter limitations on the availability of the individual income resident credit for taxes paid to other states. Lastly, the new law significantly changes certain aspects of the penalty provisions.
These changes to the NOL carry forward and carry back provisions apply to an NOL deduction claimed on an original return filed after June 30, 2015. The change does not apply to an amended return filed on or after July 1, 2015, relating to a NOL deduction properly claimed on an original return filed prior to July 1, 2015.
A deduction for expenses disallowed under Section 280(C) of the Internal Revenue Code.
In addition, the new law reduces the allowance for depletion on oil and gas wells to 15.8% (previously 22%) of the gross income from the property during the taxable year, excluding from gross income 72% (previously 100%) of rents and royalties paid/incurred with respect to the property. The depletion deduction may not exceed 36% (previously 50%) of the net income from the property of the taxpayer.
These changes to the law generally apply to an original return filed after June 30, 2015 but before July 1, 2018. If the taxpayer filed a valid extension prior to July 1, 2015, one-third of any portion of a deduction/subtraction disallowed as a result of these law changes may be deducted on the taxpayer’s return for each of the taxable years beginning in 2017, 2018, and 2019.
Effective July 1, 2015, the new law makes the late payment penalty discretionary and removes the estimated tax safe harbor, thus, allowing assessment of late payment penalties even if 90% of the total tax due on the return is paid by the non-extended due date for the return.
Imposes a new 15% substantial underpayment penalty (20% in the case of willful attempt to disregard the tax).
Lastly, effective January 1, 2016, the new law removes the requirement that waiver of all penalties for individuals, and late payment and filing penalties for other taxpayers, in excess of $25,000 be approved by the Board of Tax Appeals, but subjects such waivers to oversight by the House Committee on Ways and Means and the Senate Committee on Revenue and Fiscal Affairs.
Tax Credits for Local Inventory Taxes Paid, R.S. § 47:6006 (Act 133/H.B. 805, June 19, 2015). Effective for a credit claimed on an original return filed after June 30, 2015, a credit in excess of the tax liability for the year is refundable if the amount paid to all political subdivisions in the taxable year was less than $10,000. If the amount paid was $10,000 or more, 75% of the excess credit is refundable and the remainder may be carried forward five (5) years.
Research and Development Tax Credit, R.S. § 47:6015 (Act 133/H.B. 805, June 19, 2015). Effective for credits claimed on an original return filed after June 30, 2015, a credit in excess of the tax liability for the year is now non-refundable with allowance for a five (5) year carryover.
Angel Investor Credit, R.S. § 47:6020 (Act 104/H.B. 244, June 19, 2015). The new law allows use of the Angel Investor Credit against the personal and corporate income tax and franchise tax through June 30, 2017 (previously July 1, 2017).
Enterprise Zone Credits and Rebates, R.S. § 51:1787 (Act 114/H.B. 466, June 19, 2015). A retail business assigned a North American Industry Classification Code (or NAICS) of 44, 45 or 72 (which generally pertain to retailers, restaurants, and hotels), and whose contract was not entered into before July 1, 2015, may not receive benefits under this program. The law allows a limited exception for a taxpayer that filed an advance notification form for its project before June 10, 2015.
Credit Repeals (Act 357/H.B. 749, June 29, 2015). Effective July 1, 2015, the employer tax credit for employee alcohol and substance abuse treatment programs (R.S. § 47:6010), the tax credit for certain overpayments (R.S. § 47:6028), the tax credit for conversion or acquisition of trailers which haul sugarcane (R.S. § 47:6029), and apprenticeship tax credits (R.S. § 47:6033) are repealed.
The credit is not allowed for income taxes paid to a state that allows a nonresident a credit for income taxes imposed by the state of residency.
The effective date of this change to the law is the same as the effective date of the reductions to the corporation income tax deductions and subtractions (See above).
Effective June 19, 2015, the new law creates a corporation and personal income tax deduction for an employer that provides continuous employment for certain individuals with intellectual, developmental, or service related disabilities within Louisiana for no less than an average of twenty (20) hours per week at a rate comparable to other employees performing the same task. The deduction is equal to 50% of the gross wages paid to the disabled employee for the first four (4) months of service and 30% for each subsequent month. The number of employees for which this deduction may be taken is capped at one hundred (100) qualifying employees for the entire program.
Beginning July 1, 2015, and ending 60 days after the final adjournment of the 2016 Regular Session of the Legislature of Louisiana, House Concurrent Resolution 8 suspends the exemption from the 1% sales and use tax imposed on the sale or use of steam, water, electric power or energy, and natural gas.
While the reductions in subtractions, deductions and credits will likely have the effect of increasing the corporation income tax liability of many taxpayers, these taxpayers may take solace in the fact that many of these changes will only impact original returns filed during the three (3) year period July 1, 2015 through July 30, 2018.Those taxpayers that filed extensions before July 1, 2015, will at least be able to take a deduction, subtraction, and/or credit for one-third of an amount that was disallowed on the extended return when preparing a return to be filed in 2017, 2018, and 2019.
All but one of these laws were enacted on June 19, 2015 (i.e., Act 357/H.B. 749 was enacted on June 29, 2015).Taxpayers should assess what, if any, impact these law changes would have on their existing deferred tax balances and adjust them accordingly as of the enactment date.These changes would be a Q2 event for calendar year end corporate taxpayers.
Removal of the requirement that certain penalty waivers in excess of $25,000 be reviewed by the Board of Tax Appeals may be one welcomed law change as this should streamline the process.However, removal of the 90% safe harbor related to estimated tax payments seems a bit harsh as this will put excessive pressure on taxpayers to accurately calculate estimated tax – and to even make overpayments – to avoid late penalties.
1 The amount of NOL deduction that may be taken by other taxpayers (e.g., partnerships and nonresident individuals) was reduced by 28% as well. However, it appears the reduction for these taxpayers applies to taxable years beginning after December 31, 2014.

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