NEW ORLEANS - The Louisiana Senate has decided not to extend the inventory tax credit. Known as House Bill 383, it will now expire in 2026 as originally planned.
The business groups backing the extension of the tax credit were the Louisiana Association of Business and Industry, the Louisiana Chemical Association and the Louisiana Mid-Continent Oil and Gas Association.
Earlier the House passed HB 383 with a vote of 98-4 but with the Senate now rejecting it, government leaders, including Gov. Landry, will need to consider next steps. While Landry opposed the credit due to its budgetary impact—reportedly costing the state over $500 million annually—he must now plan for how its phase-out will affect local governments that rely on reimbursements tied to the credit.
Both Senate President Cameron Henry, R-Metairie, and Gov. Jeff Landry’s administration have stated that the inventory tax credit negatively impacts the budget and costs the state too much.
The inventory tax system is complex, with businesses paying a local property tax on inventory but receiving a state tax credit to offset the cost. The tax credit was repealed last year as part of a broader tax reform, but that repeal was meant to coincide with a constitutional amendment allowing parishes to opt out of the tax in exchange for state compensation. Voters rejected that amendment in March.
Some Louisiana parishes support keeping the inventory tax credit because it helps businesses offset the cost of the inventory tax, making them more competitive and financially stable. Since parishes collect a local property tax on business inventory, eliminating the credit without a replacement could leave businesses struggling with higher costs.
Additionally, the rejected constitutional amendment was supposed to allow parishes to opt out of the inventory tax while receiving state funds to make up for lost revenue. With that amendment failing, some local governments worry about losing tax dollars if businesses push for elimination without a clear financial backup plan.
Louisiana's inventory tax puts the state at a competitive disadvantage compared to others that don't impose such a tax, contributing to its 40th-place ranking in overall tax competitiveness. Neighboring states like Texas and Mississippi have lower business tax burdens.
The inventory tax has long been a point of debate, with efforts to repeal or modify it to improve Louisiana’s business climate. Voters will have another chance to decide on this issue in 2026.
If approved, about 40 out of 64 parishes are expected to repeal the inventory tax to appease businesses.
