LABI, BRAC weigh in on efforts to phase out corporate franchise tax

Business Report

Business groups are taking notice of pre-filed legislation that, if approved, would phase out the corporate franchise tax over a five-year period, a small slice of a broader effort to overhaul Louisiana’s tax system and attract outside business to the state.

The current tax is $1.50 per $1,000 of taxable capital, up to $300,000, and $3 per $1,000 above 300,000. Furthermore, three years ago, the Legislature passed a bill expanding the assessment of the tax to non-corporate entities, including LLCs and partnerships.

But under a bill filed by state Rep. Phillip DeVillier, R-Eunice, those amounts would be reduced by 20% each year beginning Jan. 1, 2020, eliminating the tax completely by Jan. 1, 2024.

“We need to figure out how we can be more competitive as far as tax laws go for the state,” Devillier tells Daily Report, adding Louisiana is one of only 15 states that impose the tax. Some of those states, including Mississippi and New York, are working on similar legislation to repeal it.

In addition to the corporate franchise tax, Louisiana also levies a corporate income tax. Critics say the franchise tax adds to the complexity of the overall tax system and penalizes capital-intensive, low-margin and unprofitable new firms. It’s a stance echoed by the Louisiana Association of Business and Industry, which calls the tax “onerous and archaic.”

“Any effort to eliminate the franchise tax is good policy and would make Louisiana more competitive for business investment and job creation,” says Jim Patterson, LABI’s vice president for government relations.

The Baton Rouge Area Chamber, meanwhile, says it supports taking a big-picture look at tax reform, pointing to recommendations from The Task Force on Structural Changes in Budget and Tax Policy. Their 2017 report not only recommended phasing out the corporate franchise tax but also giving away fewer tax exemptions in favor of a “broad-based, low rates” approach.

“While we favor getting rid of the tax, we think it’s more important to support a comprehensive fiscal reform package, like that outlined by the HCR 11 Task Force, that makes our state’s taxing both fairer and simpler while also protecting higher education and healthcare,” says BRAC President and CEO Adam Knapp in a prepared statement.

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