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Governor Introduces Proposed Commercial Activity Tax: HB 628

DALLAS, April 18, 2017 /PRNewswire/ -- On April 17, 2017, seven days into the 2017 Louisiana Regular Legislative Session and two days prior to the deadline for filing bills, Governor John Bel Edwards filed his key piece of legislation, the Commercial Activity Tax (CAT), as House Bill 628 ("HB 628") by Representative Sam Jones. A copy of the bill can be found here. As of today, indications are that the Chairman of the House Ways and Means Committee will schedule the bill for a hearing as early as next Monday, April 24. The hearing may span multiple days, and the committee will likely vote on the bill at the conclusion of testimony.

The main components of HB 628 are as follows:

A.

The CAT only applies to entities with gross receipts greater than $150,000. Flow-through organizations, with some exceptions, will be subject to the tax based on tiered levels of gross receipts, and the total amount of tax owed by such entities will range from $250–$12,500.



B.

For entities taxed as a corporation at the federal level, the tax will be calculated based on the greater of the following:


a.

Louisiana corporate income tax after all available credit carry-forwards, non-refundable credits, and refundable credits are applied


b.

A payment between  $250–$750, based on gross receipts less than $1.5 million


c.

If gross receipts from all sources are greater than $1.5 million, an amount equal to $0.35 per $100 of the entity's Louisiana gross receipts




C.

For entities taxed as a corporation at the federal level, but engaged in the business of "manufacturing," "merchandising," or the "business of gaming," the tax shall be computed as the greater of the following:



a.

Louisiana corporate income tax after all available credit carry-forwards, non-refundable credits, and refundable credits are applied.



b.

A payment between  $250–$750, based on gross receipts less than $1.5 million



c.

If gross receipts from all sources are greater than $1.5 million, the lesser of the following:




i.

$0.35 per $100 of the entity's Louisiana gross receipts




ii.

$2.76 per $100 of the entity's Louisiana gross profits

"Louisiana gross profits" is defined as Louisiana gross receipts reduced by cost of goods sold attributable to Louisiana gross receipts.

Entities exempt under HB 628 include:

  • Financial institutions
  • Insurance corporations
  • Non-profit organizations
  • Agencies, instrumentalities, or political subdivisions of the state
  • Farmers cooperatives, homeowners associations, political organizations and rural electric and rural telephone cooperatives
  • Cooperative, nonprofit membership corporations organized for the purpose of supplying electrical energy and promoting and extended the use thereof

There are many other details with regard to the 14-page bill. Ryan's Advocacy team will be analyzing the details, watching for potential amendments and following the bill through each step at the Capitol.   

About Ryan

Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.

TECHNICAL INFORMATION CONTACTS:

Jason DeCuir
Principal
Ryan
225.334.0040
jason.decuir@ryan.com

Matt Grabner
Manager
Ryan
225.334.0040
matt.grabner@ryan.com

 

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