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Category Archives: Louisiana Income Tax

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.

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Louisiana Tax Amnesty 2014

It’s back, and better than ever.  Louisiana will waive penalties and half of interest if you qualify for tax amnesty during October 15, 2014 through November 14, 2014.  This year even permits installment agreements.  You should consult your SALT advisor to be sure it is right for you.

More information was provided by LDR at RIB 14-017.

 

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.

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.

 

Sell a Business and Did Not Get La. Capital Gains Tax Exemption?

If you paid Louisiana individual income tax as a resident or nonresident on the capital gain on the sale of an equity interest in or substantially all of the assets of a pass-through entity (nonpublicly traded corporation, partnership, LLC, or other business entity type), you may qualify for a tax refund.

In 2009, in an effort to stimulate Louisiana business activities, the Louisiana Legislature passed Act 106, effective January 1, 2010, which granted an exemption from individual income tax for the net capital gain on sale of an equity interest or substantially all of the assets of a pass through entity. The exemption is limited to those business entities having a Louisiana commercial domicile. There are several factors considered in determining the commercial domicile, but it can be generally described as the location from which the business is directed or managed. For Louisiana income tax year 2012, $55,004,383 was claimed in tax savings under this exemption.

A similar exemption has been recently struck down in another state because it was found to violate the US Constitution and the court granted the exemption to those taxpayers previously excluded based on the location of commercial domicile.
The Louisiana exemption could also be unconstitutional such that anyone who was precluded from claiming the exemption because the business had a non-Louisiana commercial domicile would be entitled to a refund. Of course to get this refund the statute would have to be challenged in court, which has not yet been done to our knowledge. If you questions about this potential refund, please contact Nicole Gould, one of our attorneys in the Breazeale Sachse & Wilson LLP state and local tax controversy team.

Louisiana Tax Reform Proposal

Cassidy photoDavid Cassidy, Partner

David.Cassidy@bswllp.com

 

 

 

2010 Low Res BW NFG PhotoCropped

Nicole Gould, Of Counsel

Nicole.Gould@bswllp.com

Louisiana Tax Alert

Tim Barfield , Executive Counsel to the Louisiana Department of Revenue, , provided a draft of Governor Jindal’s tax reform bill to the Louisiana House Ways and Means Committee on March 19, 2019.  The bill is scheduled to be introduced in the Legislative Session which opens April 8.The bill is already receiving opposition from parties ranging from various advocacy groups, local governments, business leagues, and religious leaders so it is unlikely that the bill will make it through in its present form, if it makes it all. (Indeed the opposition to the bill is so strong at this point that there is already talk about the Governor convening a special session to take up tax reform.)  We will update you as changes occur. The purpose of this bulletin is to alert you of the proposed tax changes so that you may anticipate how the bill may affect you and your business.    The proposed changes are to:

  1. Repeal individual income tax which represents a significant portion of the state’s revenue.
  2. Repeal the  corporate income and franchise tax.  This change is presently in HB 178, but the Administration’s version is coming.
  3. Increase the state sales and use tax rate from 4% to 5.88%.
  4. Broaden the state (but not the local) sales and use tax to include services which are not currently taxed., “Service” is defined as “all activities engaged in for other person, natural or juridical, for a fee, retainer, commission, or other monetary charge or consideration, which involve predominantly the performance of a service as distinguished from the selling of property.”
  5. Repeal certain sales and use tax exemptions.

To determine the impact of the Governor’s proposal you should consider every transaction you or your business enter into. If any transaction is not among the exempt transactions set out below then, you will be required to pay or collect and remit tax on those services and transactions.  Under the draft bill, a service is taxable even if that service was not the principal reason for you entering into a transaction.

Proposed Taxable Services:

All Services, unless specifically exempted, are taxable; however the administration has a “target” list of services to be taxed.

 

Mining

213113+ Support services for other   mining

Transportation

Transit and ground passenger   transportation services
487 + 488 Scenic and sightseeing   transportation services and support activities for transportation
492 Couriers and messengers   services

Professional   Services

5412 Accounting, tax preparation,   bookkeeping, and payroll services
5413 Architectural, engineering, and   related services
5414 Specialized design services
541511 Custom computer programming   services
541512 Computer systems design   services
541513 Other computer related   services, including facilities management
54161 Management, scientific, and   technical consulting services
54162+9 Environmental and other   technical consulting services
5417 Scientific research and   development services
Advertising related services
54192 Photographic Services
54194 Veterinary services
54199 All other miscellaneous   professional, scientific, and technical services

Business   Services

5613 Employment services
5615 Travel arrangement and   reservation services
5611 Office administrative services
5612 Facilities support services
5614 Business support services
5616 Investigation and security   services
5617 Services to buildings and   dwellings
5619 Other support services
562 Waste management and   remediation services

Information

5152 Cable and other subscription   services
518 Data processing-hosting ISP-web   search portals
519 Other information services

Financial   Services

52429 Insurance related support   services

Entertainment

7111 Performing arts
7113 Promotional services for   performing arts and sports and public figures
7115 Independent artists, writers,   and performers
712 Museum, heritage, zoo, and   recreational services

Personal   Services

8121 Personal care services
8129 Other personal services

Proposed Nontaxable Services:

 

(1)               Services already taxed will not be subject to the state’s 5.88% rate , but will instead to continue to be taxed at the old state rate, 4%, and local sales tax rate.  Therefore, the following are exempt from the additional tax under the proposal:

  1. Furnishing of hotel rooms,
  2. Sale of admissions to certain events,
  3. Furnishing parking facilities,
  4. Certain printing services,
  5. The furnishing of cleaning or storage services for clothes, furs, rugs, and the like,
  6. Furnishing of cold storage, and,
  7. Repairing tangible personal property:

(2)               Services performed by an employee for his employer are not taxable.

(3)               Services performed directly for the state, a political subdivision of the state, the United States government, or the agencies of the United States government are not taxable.

(4)               Purchases and resales of advertising time or space from media outlets.

(5)               The following services enumerated in the North American Industrial Classification System, 2007, as prepared by the Statistical Policy Division of the Office of Management and Budget, Office of the President shall be exempt from the tax levied and imposed by this Chapter:

(a)    Industry 23112 Support Activities for Oil and Gas Operations.

(b)   Sector 22 Utilities.

(c)    Sector 23 Construction.

(d)   Subsector 481 Air Transportation.

(e)    Subsector 482 Rail Transportation.

(f)    Subsector 483 Water Transportation.

(g)   Subsector 484 Truck Transportation.

(h)   Subsector 486 Pipeline Transportation.

(i)     Subsector 491 Postal Service.

(j)     Industry 51913 Internet Publishing and Broadcasting and Web Search Portals.

(k)   Sector 52 Finance and Insurance, except Industry Group 5242 Agencies, Brokerages and Other Insurance Related Activities.

(l)     Subsector 531 Real Estate, except Industry 53113 Lessors of Miniwarehouses and Self-Storage Units and Industry 531130 Lessors of Miniwarehouses and Self-Storage Units.

(m) Industry Group 5411 Legal Services.

(n)   Sector 55 Management of Companies and Enterprises.

(o)   Sector 61 Educational Services.

(p)   Sector 62 Health Care and Social Assistance.

(q)   Industry Group 8122 Death Care Services.

(r)     Industry Group 8131 Religious Organizations.

(s)    Industry Group 8132 Grantmaking and Giving Services.

(t)     Industry Group 8133 Social Advocacy Organizations.

(u)   Industry Group 8134 Civic and Social Organizations.

(v)   Industry Group 8139 Business, Professional, Labor, Political, and Similar Organizations.

IRS Makes A Quaint Review: Taxable and Nontaxable Income

Taxable and Nontaxable Income.

IRS Tax Tip 2013-12, February 12, 2013

Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:

  • Child support payments;
  • Gifts, bequests and inheritances;
  • Welfare benefits;
  • Damage awards for physical injury or sickness;
  • Cash rebates from a dealer or manufacturer for an item you buy; and
  • Reimbursements for qualified adoption expenses.

Some income is not taxable except under certain conditions. Examples include:

  • Life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income you get from a qualified scholarship is normally not taxable. Amounts you use for certain costs, such as tuition and required course books, are not taxable. However, amounts used for room and board are taxable.

All income, such as wages and tips, is taxable unless the law specifically excludes it. This includes non-cash income from bartering – the exchange of property or services. Both parties must include the fair market value of goods or services received as income on their tax return.

If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount. If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you. That agency may have made the form available only in an electronic format. You will need to get instructions from the agency to retrieve this document. Report any taxable refund you received even if you did not receive Form 1099-G.

For more information and examples, see Publication 525, Taxable and Nontaxable Income. The booklet is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Withholding Tax Payment Schedule Restates Existing Law For Simplicity

RULE
Department of Revenue
Policy Services Division

IncomeWithholding TaxPayment (LAC 61:I.1516)

Under the authority of R.S.47:1511, R.S.47:1519, and R.S.47:114 and in accordance with the provisions of the Administrative Procedure Act, R.S.49:950 et seq., the Department of Revenue, Policy Services Division, adopts LAC 61.I.1516.

Pursuant to Act 107 of the 2012 Regular Legislative Session relative to Returns and Payment of tax, this Rule provides for payment and due dates for payment of tax by every employer or person who deducts and withholds any amount from any wage as required by Louisiana law.

Title 61  REVENUE AND TAXATION
Part I. Taxes Collected and Administered by the Secretary of Revenue, Chapter 15. Income

Withholding Tax

§1516. Payment

A. All employers or persons who deduct and withhold any amount from any wage pursuant to R.S. 47:114 shall remit payment on a quarterly basis.

B. The due dates for quarterly payments are:

1. first quarterApril 30;

2. second quarterJuly 31;

3. third quarterOctober 31;

4. fourth quarterJanuary 31.

C. Exceptions

1. When the amount deducted or withheld within any calendar month from the combined wages of all employees is an amount equal to or greater than $500.00 but less than $5,000, the taxes withheld shall be paid monthly. Payment is due on the last day of the month following the close of the monthly period.

2. When the amount deducted or withheld within any calendar month from the combined wages of all employees is an amount equal to or greater than $5,000, the taxes withheld shall be paid semimonthly. For wages paid during the first 15 days of a calendar month, the due date is the last calendar day of that month. For wages paid between the sixteenth day and the last day of a calendar month, the due date is the fifteenth day of the following month.

AUTHORITY NOTE: Promulgated in accordance with R.S. 47:114, R.S. 47:1511, R.S. 47:1519, and R.S. 47:1520.

HISTORICAL NOTE: Promulgated by the Louisiana Department of Revenue, Policy Services Division, LR 39:000 (January 2013).

Tim Barfield
Executive Counsel

§1520. Withholding by Professional Athletic Teams

A. – C. …

D. Due Date of Withholding Return and Payment. A withholding payment must be submitted for each game played in Louisiana. The payment must be submitted on or before the last day of the month following the month in which the game was played. A withholding return must be submitted for each quarter in which a game was played in Louisiana to reconcile all payments made within that quarter. The withholding return must be submitted quarterly on or before the last day of the month following the quarter in which the game was played.

E. – F. …

AUTHORITY NOTE: Adopted in accordance with R.S. 39:100.1, R.S. 47:164(D), R.S. 47:295, R.S. 47:1511, R.S. 47: 114 and R.S. 47:1602.1.

HISTORICAL NOTE: Promulgated by the Department of Revenue, Policy Services Division, LR 30:91 (January 2004), amended LR 39:000 (January 2013).

Tim Barfield
Executive Counsel

 

Louisiana to Repeal Income Tax? LDR Tax Facts January 2013 Building A Case For It.

http://taxtopics.revenue.louisiana.gov/2013/01/17/know-the-facts-sales-taxes-income-taxes/

Know the Facts: Sales Taxes & Income Taxes

January 17, 2013 at 10:59 am · Filed under LDR News Release · Tagged , , , , ,

BATON ROUGE – With news outlets continuing to report on the Governor’s goal of eliminating personal and corporate income taxes, some comparisons have been made between the sales tax and the income tax, and what it means for individuals and the state. Here are some facts and figures to keep in mind: 

1. Sales tax is a MORE STABLE form of revenue compared to the personal income tax. According to the Louisiana Revenue Estimating Conference (REC) and the Louisiana Department of Revenue (LDR), sales tax collections have historically been MORE STABLE than personal income tax collections.  (REC Historical Data; LDR Annual Reports). Additionally, according to R. Alison Felix, who authored “The Growth and Volatility of State Tax Revenue Sources in the Tenth District,” state sales taxes have proven to be a more stable source of revenue for year-to-year budgetary expenditures.”

2. Over a 30-year period, the nonpartisan Tax Foundation used 26 different economic studies to determine sales taxes were MORE BENEFICIAL for economic growth than both personal and corporate income tax. (Tax Foundation Special Report No. 207 December 18, 2012)

3. Eliminating personal income tax will create a business climate that encourages MORE BUSINESS INVESTMENT and MORE JOBS. According to the nonpartisan Tax Policy Center, America’s economy would steadily grow by “0.6 percent larger than otherwise after two years; 1.8 percent larger after ten years; and 3.6 percent larger in the very long run” if the nation switched to a tax system that relied on sales tax, not income tax. (Tax Policy Center)

4. Sales tax grows with the economy. When compared to other sources of revenue, sales tax is relatively stable during economic downturns resulting in more revenue as the need arises.

5. Governor Jindal’s proposal will KEEP the Constitutional protections for the exemptions of food for home consumption, prescription medicine, and residential utilities. These exemptions result in the average individual or family with income under $30,000 per year having almost half of their annual purchases exempt from state sales tax. These progressive provisions lessen the impact of the sales tax on lower income individuals and families.

6. In order to offset unfair impacts to low income groups, Governor Jindal’s proposal will set aside funding to operate an Earned Income Tax Credit or a similar mechanism.

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year.

WASHINGTON — The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

Home OfficeThe new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after Jan. 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

  • E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.
  • Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  • Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.