By Caitie Burkes – June 3, 2020
Corporate franchise taxes for small businesses will be suspended for the next year under a resolution adopted in the final hours of the Louisiana Legislature’s regular session Monday.
The resolution applies to small businesses that have up to $500,000 of taxable capital. (They’ll also see the suspension of a first-time initial tax of $110.) Once the suspension kicks in July 1, it’s expected to cost the state some $6 million by the time of its June 30, 2021, sunset, according to its legislative fiscal note.
But efforts are already underway to convert the one-time resolution into a statutory change during the ongoing special legislative session, as evidenced by the recent filings of two bills—one authored by Rep. Stuart Bishop, R-Lafayette, who sponsored the original resolution, and another by Sen. Bret Allain, R-Jeanerette.
While the two proposals share many similarities, one key difference is that Allain’s expands small business eligibility to include those that have taxable capital of up to $1 million. Moreover, Bishop’s proposal would suspend the corporate franchise tax through June 30, 2024, while Allain’s would apply only to the coming year.
Still, Jim Patterson, director of taxation and finance for LABI, which has been instrumental in pushing for the suspension of the tax, says he expects the legislators to work together to ensure a statutory measure passes this special session, and remains “hopeful” something will be signed into law.
“These bills were introduced, in part, because there were concerns that the rule suspension might not necessarily work because it was amending only part of a law as opposed to an entire law, so they were questioning its constitutionality,” Patterson says. “Lawmakers are acting in an abundance of caution. [LABI] would be fine with either approach.”
Suspending the corporate franchise tax has also been a top priority of the Louisiana Economic Recovery Task Force, which ultimately aims to phase out the tax altogether—a position that’s drawn some bipartisan support.
Regardless, the suspension of the tax should offer at least some reprieve to the state’s small businesses, many of which are still suffering from the impacts of COVID-19, says Patterson, noting that more bills tied to alleviating taxes, fees and licenses are slated to be filed soon.
“We anticipate that as the Legislature warms up to the fact that they’re in a special session, we’ll begin to see more of these bills accumulate,” he says.