Corporate Tax Law Rewrite Emerges From Special Session

BATON ROUGE (AP) — With the focus on filling state budget gaps, an effort to rewrite Louisiana's corporate tax laws was largely overlooked as it won passage in the special legislative session.

         Voters will be asked to consider the business tax revamp on this fall's ballot, after receiving overwhelming support from lawmakers. It's one of the only substantive tax changes not just aimed at raising cash for the treasury to emerge from the special session.

         The package of bills by Rep. Walt Leger, D-New Orleans, would do away with a tax break that allows businesses to deduct the federal income taxes they pay from their state tax liability. In exchange, corporations would be taxed at a flat rate of 6.5 percent, rather than varying rates from 4 percent to 8 percent.

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         The changes, if approved by voters, would take effect in 2017.

         Leger said the changes would do away with an unpredictable tax break that can fluctuate based on federal tax laws and regulations over which the state has no control. Sen. J.P. Morrell, D-New Orleans, said the bills would simplify Louisiana's business tax structure.

         Rep. Julie Stokes, a Kenner Republican who worked on the measures, said the changes would make Louisiana's business tax structure more competitive with other states, doing away with an 8 percent tax rate that is one of the highest in the nation.

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         She said 27 states have a flat tax rate for businesses and only six states — Missouri, Utah, South Carolina, Florida, Arizona and Colorado — would have lower rates.

         "This would be a huge improvement to Louisiana corporate tax, and it would be a really good thing for this state," Stokes said during debate. "This is a good tax policy."

         Opponents worried the changes could raise business taxes.

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         The state's leading business lobbying group, the Louisiana Association of Business and Industry, didn't take a position on the tax rewrite. But the organization said its impact "has not been sufficiently analyzed and there is potential for smaller businesses to bear the brunt of the proposal."

         A financial analysis done by the Legislative Fiscal Office suggested the corporate tax revamp might boost state revenue slightly, though it warned the volatility of business taxes make the changes harder to forecast.

         Nonpartisan government watchdog group the Public Affairs Research Council of Louisiana called the restructuring "an ambitious corporate income tax streamlining package." But it said the impact on businesses "depends on who you are."

         "Some big companies have relatively large federal income tax liabilities and may end up paying more state income tax even at the lower 6.5 percent rate. Some companies that typically post smaller earnings might see a modest increase in their tax bills. And some companies will pay about the same or less," the council wrote in its analysis.

         The concept was endorsed by the Committee of 100, a group of Louisiana's top business leaders that worked with the Tax Foundation, a national research organization, on tax reform proposals.

         – by AP Reporter Melinda Deslatte

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