Wednesday, May 29, 2024

Louisiana house passes legislation to cut corporate franchise tax

by BIZ Magazine

By Wes Muller, Louisiana Illuminator

Louisiana House lawmakers passed legislation Monday that would reduce the state’s corporate franchise tax revenue and offset the loss in state revenue by cutting a lucrative tax credit program.

Two proposals from Sen. Bret Allain, R-Franklin — Senate Bill 1 and Senate Bill 6, which both passed the House unanimously — are tied together as a tax-swap package. 

The initial version of Senate Bill 1 would have repealed the corporate franchise tax, which is essentially a privilege tax corporations pay in order to do business in the state. It is levied at a rate based on the value of a company’s stock. A full repeal would have decreased Louisiana’s revenues by approximately $1.033 billion over a five-year period. 

Allain amended the bill to reduce the franchise tax rather than outright appeal it. It provides for a 25% rate reduction each year combined corporation income and franchise tax collections exceed $600 million, with the money deposited into the state’s Revenue Stabilization Trust fund.

The bill’s latest fiscal note estimates a reduction of $631 million in franchise tax revenue over five years, though Senate Bill 6 offsets a significant chunk of that loss by slashing the Quality Jobs tax credit program. 

The Quality Jobs program, administered through Louisiana Economic Development (LED), offers payroll tax rebates to certain businesses for creating or retaining jobs. The incentive program costs the state millions every year.

Senate Bill 6 would reduce Quality Jobs tax credits 50% of their current value in any year the franchise tax is reduced. 

Combined, the legislation’s net impact on state revenues would be a $163 million loss over five years, according to the fiscal note

The package will return to the Senate before heading to Gov. John Bel Edwards for approval.

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