BSW Tax Blog

Federal and Louisiana Taxes

Category Archives: Louisiana Income Tax Credit

Taxpayers File Suit Against the Cap On Louisiana Solar Tax Credits.

Thousands of Louisiana residents purchased expensive solar systems, incentivized by a state tax credit equal to 50% of the cost, up to $12,500.  The Louisiana Legislature retroactively capped the solar tax credit statewide at $25,000,000, making it available to taxpayers when they filed their returns on a first filed, first served basis.  Prior to June 19 2015, there was no cap on the solar credits and  a more generous deadline to install the solar systems, however, taxpayers that would have qualified for the credit prior to the new law were eventually denied, and left holding the bag. Naturally, the deprived taxpayers are looking for answers or their refunds.

With the combined legal skills of New Orleans lawyers, Larry Centola of Martzell, Bickford & Centola, and Heidi Mabile Gould, and Baton Rouge lawyer, Nicole Gould Frey of Breazeale, Sachse & Wilson, suit was filed on September 9, 2015 to challenge the constitutionality of the legislation in the matter entitled Gwen and Justin Ulrich & Raymond and Pam Alleman v. La. Dept. of Revenue, 19th JDC, dkt# 651,300, Section 25.

solar

 

 

Advertisements

Christmas Gift for Taxpayers

giftThe purchasers of flex fuel vehicles receive a Christmas gift from the Louisiana First Circuit Court of Appeal upholding the La. Board of Tax Appeals judgment in Bolotte v. LDR (BTA 8007 5/14/2014), which held they qualify for the $3,000 refundable income tax credit under La. RS 47:6035.

Picture 074

Taxpayers take Round Two!

boxing glovesThe Louisiana Department of Revenue has lost round two in its fight against the refundable $3,000 income tax credit for the purchase of flex fuel vehicles (FFV).  Judge Scott Gardner ruled for the taxpayers on December 22, 2014 at the 22nd JDC, affirming the decision granting the La. R.S. 47:6035 credit to FFVs in Bolotte v. LDR, 8007 (Bd. Tax App., May 14, 2014).  While we wait for this lead case to complete its appeal process, anyone purchasing a FFV in 2010 has until December 31, 2014 to amend their 2010 tax return to claim the credit.  2011 purchasers have until December 31, 2013 to amend.

Taxpayer’s Right to Claim Refund Held Open By Collector’s Suit

Ordinarily, claims for additional taxes or for a refund of taxes paid prescribe within 3 years from the year in which the taxes were due. It is not uncommon, however, for tax collectors and taxpayers to agree, during the course of an audit, to suspend the running of prescription as to potential claims by both parties in order to give them additional time within which to resolve their differences. In a matter handled by our State and Local Tax (SALT) group, the Louisiana Board of Tax Appeals was called upon to review an agreement to suspend prescription and has now rendered a decision which may be of benefit to any taxpayer currently litigating its tax liability.

The taxpayer was audited for corporate income taxes for numerous years. During the audit, the parties executed several of the Department’s stock agreement to suspend the running of prescription. The first agreement was executed in the year the first audit period would have prescribed. Subsequent agreements would include the years included in the prior agreements and any year about to prescribe.

Under the terms of the agreement prescription was suspended as to the claims of both parties until December 31 of the year after the year of execution. The last agreement extended the period of suspension until December 31, 2008. In December of 2008, the Department filed suit against the taxpayer for additional taxes.

While preparing for trial, the taxpayer discovered that its gain on the sale of an asset had been overstated. Under Louisiana law this overpayment could not be raised as a defense in the Department’s suit against the taxpayer. Rather, the only way the overpayment could be recovered was by filing a refund claim. After the trial court’s decision (which abated the assessment) but before it became final, the taxpayer filed its claim with the Department.

The Department failed to act on the claim within a year of its filing, so the taxpayer filed suit at the BTA asking that the Department be ordered to refund the amount claimed. The Department filed an exception of prescription. It was the Department’s position that, under the terms of the agreement, the taxpayer’s claim had to be filed no later than December 31st of 2008. Since the claim wasn’t filed until 2012 it was, according to the Department, untimely. The BTA disagreed.

Ordinarily, the filing of suit by the Department against a taxpayer does not extend the time within which a claim for refund must be filed., The BTA found, however, that under the agreement, the taxpayer agreed to never plead prescription if suit was filed prior to December 31, 2008 and the Department agreed that the period of prescription for claiming a refund was “extended in accordance with the terms of the agreement.” The BTA ruled that what was good for the goose was good for the gander and since the filing of the Department’s suit had interrupted prescription as to its right to seek additional taxes, so too did it interrupt prescription as to the taxpayer’s refund claim.

One can expect the Department to try and effectively overrule this decision by rewriting the agreement to make it more one sided in the goose’s favor. Until then, a taxpayer who is defending a suit filed by a tax collector may have an unexpected opportunity for a refund.

If you have questions please contact one of our attorneys in the Breazeale, Sachse & Wilson, L.L.P. state and local tax controversy team.

How To Preserve Your Flex Fuel Vehicle Income Tax Claim

A taxpayer who purchased a new FFV between 2010 and July 1, 2013, may claim the La. alternative fuel vehicle income tax credit (10% of the purchase price up to $3,000) through an amended Louisiana income tax return.   The right to claim a refund for income tax year 2010 will prescribe on December 31, 2014, 2011 in 2015, and so on.

When LDR denies the refund claim (or disallows the credit taken), the taxpayer should promptly file a petition for review with the Louisiana Board of Tax Appeals, as the right to do so prescribes in 60 days from the denial. The petition is very simple and should not have a filing fee. You can see the instructions for filing same at the Board’s website. Taxpayers may be represented at the BTA by a lawyer, a CPA or by themselves.  Because the FFV tax credit issue is still working its way through appeal, the newly filed BTA appeals should simply sit and wait.

If a taxpayer failed to appeal the LDR appeal timely, s/he may still file a claim against the state with the Board of Tax Appeals, which has the same prescriptive period as claiming the refund itself.  For example, a person making a 2012 claim for the FFV credit for a 2010 FFV purchase was more than likely denied in March 2013.  If it wasn’t appealed within 60 days, the taxpayer cannot appeal the denial now but must instead file a claim against the state for the credit.  The Board has provided instructions for this on it website as well.  The biggest difference between this action and one appealing a refund denial is that a refund will be promptly paid by LDR but a claim against the state must be paid by way of appropriation by the legislature.

If you have any questions, do not hesitate to call us.  While some taxpayers have the time and ability to handle such a matter on their own, we are presently representing a group of clients who prefer to have representation through the process.

Louisiana Flex Fuel Credit Allowed at Board of Tax Appeals

On May 14, 2014, the Board of Tax Appeals granted the first flex fuel credit in that matter Bolotte v. LDR, BTA #8007. The decision essentially states that because LDR interpreted La. R.S. 47:6035 as including flex fuel vehicles and that law did not change until July 2013, which was to specifically remove the flex fuel vehicle from qualifying, the credit must be allowed until the July 2013 amendement. One of the 3 board members dissented on the grounds that he does not think the flex fuel vehicle ever qualified for the credit and his opinion generally includes a concern about the overall cost of the credit to the state.

It is certain that the state will appeal.

Should the matter be fully resolved in favor of the taxpayers, those individuals with pending claims will be entitled to their refund.  For those persons that purchases a flex fuel vehicle from 2010 through July 2013, your right to amend your tax return to claim the credit is still available.  LDR will deny it and you would have to appeal within 60 days of the denial in order to preserve your rights.  If you have already claimed your credit and did not appeal the denial, you may file a claim against the state.  Louisiana income tax year 2010 will close on December 31, 2014.

 

Proposed Changes to State Income Tax Credits for Wind or Solar Energy Systems

Nicole Gould

The Louisiana Department of Revenue (LDR) has noticed its intent to revise the regulations affecting the state income tax credits for wind and solar energy systems (Wind/Solar Credits). The Wind/Solar Credits can be generally taken by the owner of a Louisiana residence or residential rental apartment for 50% of the first $25,000 for the purchase and installation costs of the wind or solar energy systems. The changes are not yet effective, but for those people in the planning stages of large projects, this could be critical information. The biggest change in the Wind/Solar Credit is to no longer qualify multiple systems per residence or residential apartment dwelling for the credit. The existing regulation permits the Wind/Solar Credits for each complete system upon a residence or apartment, and industry custom has used this to construct multiple complete systems in order to stack the credit for total construction costs in excess of $25,000. The proposed revision makes clear that only one wind or solar system will qualify for the credit. The other reductions to the credit include:

  1. The deletion of the ability to include uncapitalized finance costs as qualified system costs.
  2. Any replacement items added to an existing system cannot qualify for the credit. The credit will only apply to the purchase and installation of complete system.
  3. Tree trimming and removal costs are also being excluded from qualified system costs.
  4. Shared inverters are no longer a stated exception to having a complete system. Arguably, a system is incomplete and does not qualify if it shares an inverter with another system, a likely scenario with apartments.
  5. Solar energy systems will have additional construction and certification requirements before qualifying.

But where something is taken away, something is given. The credit currently permits “mounting systems” as part of eligible costs for the solar energy system credit. The regulation revision will specifically allow costs for a free-standing, ground-mounted solar energy system, which is a separate structure from the residence. The revision permits costs for the structure and its foundation that are necessary to mount the solar energy system to the specified height. The allowed structure costs do not include additional walls, interior finishes, foundations, roofing structures not directly related to the solar energy system, or any other any other addition not directly related to the solar energy system. If you’re thinking of gazebos, car/boat ports, and the like, then you see the added benefit to the revision. The LDR will hold a hearng on the proposed changes on September 27, 2012, and if there are no objections or changes, the revisions will eventually take effect.

UPDATE: These changes were promulgated at LAC 61.I.1907

Louisiana Alternative Fuel Vehicle Income Tax Credit UPDATED

In May 2012, a tax alert was issued discussing state and   federal income tax credits for alternative fuel vehicles. On April 30,   2012, the Louisiana Department of Revenue issued an emergency rule providing   for a presumption that the vehicles listed with the United States Department   of Energy as alternative fuel vehicles qualify for the state alternative fuel   income tax credit. However, on June 14, 2012, Governor Jindal rescinded   the April 30, 2012 emergency rule, stating in a press release that the   emergency rule exceeded the scope of the enacted tax credit and the financial   impact in reality would dwarf that originally projected.On June 19, 2012, Jane Smith, Acting Secretary for the   Louisiana Department of Revenue, issued a press release stating quite simply   that any credit postmarked on or before June 14, 2012 will be granted and any   refund already paid will be honored. The question remains, then, ‘what   alternative fuel vehicles qualify for the credit?’

La. R.S. 47:6035 provides that any person or corporation   purchasing “qualified clean-burning motor vehicle fuel property”   shall be allowed a refundable income tax credit for:

i.)  new vehicles purchased at retail and registered in   Louisiana that are originally equipped with “qualified clean-burning   motor vehicle fuel property,”

ii.) existing Louisiana-registered vehicles converted to   “qualified clean-burning motor vehicle fuel property” by a   qualified technician, and

iii.)  property directly related to the delivery of   alternative fuel into the fuel tank of the motor vehicles propelled by   alternative fuel.

“Qualified clean-burning motor vehicle fuel property”   is defined as equipment necessary for a motor vehicle to operate on an   alternative fuel and shall not include equipment necessary for operation of a   motor vehicle on gasoline or diesel. The credit is equal to 50% of the   cost of the “qualified clean-burning motor vehicle fuel property”   and its installation, or, in the case of a new vehicle, 10% of the vehicle   purchase price up to $3,000.

It is easy to see how the income tax credit exists, however,   taxpayers must prove the new vehicle purchased is propelled by alternative   fuel. Importantly, the statute does not exclude new vehicles that are   propelled on both alternative fuel and gasoline or diesel.

Alternative Fuel Vehicle Credit

Lance J. Kinchen, J.D., L.L.M., C.P.A.
Corporate, Tax and Estate Planning

Partner—Baton Rouge
Phone: 225.381.8053 lance.kinchen@bswllp.com

Nicole F. Gould, M.B.A., J.D.
State and Local Tax Controversy

Of Counsel—Baton Rouge
Phone:
225.381.3165 nicole.gould@bswllp.com

The Louisiana refundable income tax credit for 10%, up to $3,000, of the acquisition price of a new alternative fuel vehicles received recent attention.  The Louisiana Department of Revenue issued a “Frequently Asked Questions”  Revenue Information Bulletin on May 3, 2012.  Anyone in the business of selling new alternative fuel vehicles, converting vehicular gasoline or diesel engines to alternative fuel systems , or any person or business procuring new alternative fuel vehicles should take a moment to review the RIB 12-025  together with the Department of Energy’s  list of vehicles assumed to qualify.  While many nuances to the refundable credit exist, it is important to keep in mind that the lessor of 10% of the cost price of the new vehicle or $3,000 can be used to offset the new vehicle acquisition cost.   As much as 50% of the cost of clean burning fuel equipment may qualify for the credit in fuel system conversions.

Please refer to the U.S. Department of  Energy to find a new vehicle presumed to qualify for the credit at:  http://www.afdc.energy.gov/afdc/vehicles/index.html

Please refer to the Louisiana Department of Revenue for more information on how to take and qualify for the credit at:

Revenue Information Bulletin No. 12-025 – Frequently Asked Questions Relating to the Emergency Rule on Alternative Fuel Credit

Revenue Information Bulletin No. 12-026 – Amended Frequently Asked Questions Relating to the Emergency Rule on Alternative Fuel Credit.

LAC:61.I.1912, found at  http://www.revenue.louisiana.gov/forms/lawspolicies/Emergency%20Rule%20-%20Alternative%20Fuel%20Credit.pdf