Louisiana: Inventory Tax Credit Changes Effective January 1, 2021

During a recent extraordinary session, the Louisiana legislature enacted measures making certain taxpayer-favorable changes to the state’s inventory tax credit. Under Louisiana law, an income and franchise tax credit is allowed certain businesses for ad valorem taxes paid to political subdivisions on inventory located in the jurisdiction.   If the amount of the credit exceeds the taxpayer’s liability for the tax year, the credit is either fully or partially refundable depending on the taxpayer’s total amount of ad valorem taxes paid to political subdivisions for the tax year. The remainder can be carried forward. Manufacturers whose credit exceeds liability must carry forward any excess; no portion is refundable.  Under Act 50, effective January 1, 2021, the carryforward period for purposes of the inventory tax credit is extended from five to ten years.  Under Act 56, taxpayers that pay ad valorem taxes after December 31, 2020 can treat those taxes as being paid on December 31, 2020 provided that the payments are made to the local tax collector on or before April 15, 2021. This will enable a taxpayer whose payments entitle it to one of three ad valorem tax credits (tax credit for local inventory taxes paid, tax credits paid on vessels in the Outer Continental Shelf, and the credit for property taxes paid by certain telephone companies) to qualify for those credits in 2020, despite possible late payment of the taxes.  Finally, Act 59, provides a full refund of the excess credit amounts for ad valorem taxes paid on inventory for the 2020 tax year if the total ad valorem taxes paid by the taxpayer were $1 million or less and the taxpayer employed a minimum of 100 full-time employees at each location in the state for at least one month within each of the first three quarters of calendar year 2020.  Manufacturers are not included in the scope of these provisions.  Please contact Amy Hatten at 713-319-2649 or Christie Rao at 504-569-8807 with questions on these changes.