BATON ROUGE — On December 5, the Louisiana Supreme Court affirmed a lower court ruling that Act 109 of the 2015 regular legislative session is unconstitutional, violating the Commerce Clause of the US Constitution. The Louisiana Association of Business and Industry (LABI) President and CEO Stephen Waguespack notes: “This ruling should come as no surprise. LABI opposed Act 109 during the 2015 session because experts believed it unfairly taxes Louisiana income multiple times. The Court has proved that to be true.”
Sen. Barrow Peacock (R-Bossier City) shared the legal problems with the bill during debate on the Senate floor. Click below or HERE to watch.
Act 109 limited the tax credit for taxes paid to other states, disallowing credits for taxes imposed on net income paid to states that do not have a reciprocal credit. In effect, some Louisiana residents who own interests in certain LLCs or S corporations doing business here and in Texas became subject to multiple taxation on the same income because Texas has no income tax but does have an entity-level franchise tax based on gross receipts and business profits. The state collected more than $30 million annually from Louisiana taxpayers as a result of this legislation.
However, the Louisiana Supreme Court has now ruled that Act 109 double taxes income and that the total tax burden on interstate commerce was higher than the tax burden on business conducted within the state, thereby violating the Commerce Clause of the US Constitution.
Although the law was set to expire, the Louisiana Legislature recently extended it through Fiscal Year 2023. Act 6 of the second special session of 2018 also attempted to correct the legal problems with the law. However, the fix appears to only address one part of the problem that the Court has identified. More needs to be done.
Waguespack added: “LABI applauds the Court ruling and urges legislators to repeal this law in the 2019 fiscal session, restoring fairness to Louisiana taxpayers. The credit for taxes paid in other states must conform to the US Constitution.”