On July 11, 2024, the Secretary of Revenue for the State of Louisiana, Richard Nelson, briefed a joint meeting of the Louisiana House Ways and Means Committee and the Senate Revenue and Fiscal Affairs Committee on the administration’s tax proposals for a potential limited constitutional convention later this summer and the upcoming 2025 Louisiana Legislative Fiscal Session.

Though the Secretary did not detail every item in the legislative package, this briefing offered the clearest view to date of the administration’s plans. The Secretary focused on reducing tax rates across the board while addressing the expiration of the temporary .45% general state sales tax and 2% state sales tax on business utilities on June 30, 2025 (otherwise known as the Fiscal Cliff). In explaining his plans, the Secretary reiterated the need to hold and conclude a constitutional convention to rewrite the state Constitution’s tax provisions before August 23, 2024 so that the public can vote on any constitutional amendments in November and those changes can be implemented by the state’s fiscal year starting July 1, 2025.

Highlights of the tax reform plan include:

Individual Income Tax

• Implementing a single, flat rate less than 3.5%
• Increasing the standard deduction to $12,500 for individuals and $25,000 for married couples
• Increasing the deduction for certain retirement income from $6,000 to $12,000

State Sales Tax

• Eliminating or consolidating roughly 100 exemptions and exclusions
• Expanding the tax base to include digital goods and certain personal services
• Using increased sales tax collections to reduce the state sales tax rate and offset the individual income tax changes

Corporation Income & Franchise Tax

• Eliminating the Corporation Franchise Tax
• Eliminating some or all of the following credits and incentives to “buy-down” the Corporation Income Tax rate to less than 3.5%:
  • Inventory Tax Credit
  • Louisiana Quality Jobs Program
  • Motion Picture Investor Tax Credit
  • Historic Structures Tax Credit
  • Enterprise Zone
  • Digital Interactive Media & Software Tax Credit
  • Research & Development Tax Credit

Inventory Tax

• Implementing wholesale ad valorem inventory tax reform by:
  • Eliminating or phasing out the tax through direct payments to local governments;
  • Allowing local governments to voluntarily exempt inventory from tax, possibly through a state incentive;
  • Eliminating the Inventory Tax Credit, while keeping the tax; or
  • Adopting some combination of the above

Severance Tax

• Reducing the 12.5% oil severance tax rate
• Shifting the oil severance tax base from price to volume
• Phasing out exemptions, including the horizontal well exemption
• Increasing the local share of severance tax revenue

Taxpayers should keep a close eye on any formal legislative proposals coming from the Secretary’s office. Of particular importance are which Corporation Income Tax credits/incentives and sales tax exclusions/exemptions are in the Secretary’s crosshairs as well as which currently nontaxable services could become subject to Sales Tax.

A copy of the Secretary’s presentation can be found HERE.