Proposed Corporate Tax Amendment Wins Task Force Support

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Nushin Huq

Oct. 27 — A Louisiana Tax Task Force announced its support for a proposed constitutional amendment to eliminate a major corporate income tax deduction, the Louisiana Department of Revenue said.

The Nov. 8 ballot measure would eliminate the corporate tax deduction for federal taxes paid. If the measure passes, it would trigger a change in the corporate tax rate to a flat 6.5 percent rate. The state currently has a graduated corporate income tax rate from 4 to 8 percent.

The Louisiana Tax Force on Structural Changes in Budget and Tax Policy is a thirteen-member panel of tax experts tasked by the Legislature to come up with recommendations on making structural changes to Louisiana’s sales and income tax policies. The task force decided at its Oct. 26 meeting to make its position on the ballot proposition known because early voting in the state is underway.

The proposed amendment would decouple the state’s tax base from federal tax changes, creating a more stable tax structure, Kimberly Robinson, Louisiana’s secretary of revenue and co-chair of the task force said in a statement.

“The constitutional amendment, along with task force recommendations that will be released next week, will move Louisiana toward a more fair, simple and broad-based tax structure,” she said.

Passage Uncertain

Tax practitioners told Bloomberg BNA that they were skeptical that voters would approve the amendment because they might not understand what the changes actually do and might be averse to eliminating any type of tax deduction.

The question voters will read on the Nov. 8 ballot is “Do you support an amendment to eliminate the deductibility of federal income taxes paid in computing state corporate income taxes? (effective January 1, 2017).”

The proposed changes are the result of two bills passed during the 2016 first special session. If the amendment is adopted, both Act 8 and Act 30 would go into effect.

Act 30 eliminates the corporate federal tax deduction if voters approve it in November. Act 8 eliminates the graduated tax bracket and puts in place the flat 6.5 percent tax rate on all taxable corporate income if Act 30 is adopted. The amendment would become effective January 1, 2017.

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

To contact the reporter on this story: Nushin Huq in Houston at nHuq@bna.com

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