1 2017 Legislative Update and Policy Statements Prepared

1 2017 Legislative Update and Policy Statements Prepared and presented by: Policy Services Division Emily Toler, Attorney Supervisor, Sales Tax Section Bradley Blanchard, Attorney Supervisor, Income Tax Section Shanda Mc. Clain, Attorney Supervisor, Excise & Misc. Tax Section David Hansen, Attorney III, Income Tax Section

2 Informal Advice This communication constitutes “informal advice” from the Policy Services Division of the Louisiana Department of Revenue as contemplated by LAC 61: III. 101 and is not binding on the Department of Revenue or the person seeking the advice.

3 2017 First Extraordinary Session • • Convened on Monday, February 13 Adjourned on Wednesday, February 22 9 House bills No Senate bills 2 Acts 1 vetoed bill (line item) No proposed constitutional amendments

4 2017 Regular Session • • Convened on Monday, April 10 Adjourned on Thursday, June 8 692 House bills 257 Senate bills 429 Acts 8 vetoed bills, including line item vetoes 50 proposed constitutional amendments

5 2017 Second Extraordinary Session • • Convened on Thursday, June 8 Adjourned on Friday, June 16 13 House bills No Senate bills 5 Acts 3 vetoed bills, including line item vetoes No proposed constitutional amendments

6 Sales Tax Updates Presented by Emily Toler, Attorney Supervisor, Sales Tax Section

7 Act 209 of the 2017 Regular Session HB 264(Bishop) • Amends R. S. 47: 305. 11 to add “fixed fee and guaranteed maximum price construction contracts” to the existing sales tax exclusion for sales of materials or services involved in lump sum or unit price construction contracts. • R. S. 47: 305. 11 provides that no new or additional sales or use tax shall be applicable to the sales of materials or services involved in lump sum or unit price construction contracts entered into and reduced to writing prior to the effective date of a statute or ordinance. The contracts undertaken prior to the effective date must be computed and bid upon the basis of the sales tax rates effective and existing prior to such effective date. • This applies to sales and use taxes levied by the State of Louisiana or by any parish, municipality, or other political subdivision. This applies to additional sales and use taxes enacted after July 1, 2017. • Effective June 14, 2017.

8 Act 340 of the 2017 Regular Session HB 396 (Dwight) • Act 340 amends the definition of tangible personal property in R. S. 47: 301(16)(b)(ii) to exclude: ▫ platinum, gold, and silver bullion that is valued solely upon its precious metal content, whether in coin or ingot form, ▫ numismatic coins having a sales price of less than $1000, and ▫ numismatic coins sold at national, statewide, or multi-parish numismatic coin trade shows. • The sales tax exclusion prior to the enactment of Act 340 applies only to gold, silver, or numismatic Coins, or platinum, gold or silver bullion. • This sale tax exclusion is effective for purposes of R. S. 47: 302 and 321. 1 beginning October 1, 2017. • Effective June 22, 2017.

9 Act 424 of the 2017 Regular Session HB 629 (Anders) • Act 424 is a potpourri of amendments to different sales tax exemptions and exclusions. • Act 424 amends La. R. S. 47: 301(10)(x) to exclude from the definition of “sale at retail” or “retail sale” the sale or purchase of any fuel or gas including butane or propane to a consumer for residential use by the consumer. The sales tax exclusion for sales or purchases of butane and propane for non-residential or commercial use has been repealed Beginning July 1, 2017, these purchases for commercial use will be subject to five percent (5%) state sales tax. • Act 424 amends R. S. 47: 305. 25(A) to add polyroll tubing for commercial farm irrigation to the list of commercial farm equipment. R. S. 47: 305. 25 provides an exemption from state sales tax on the first $50, 000 of the sales price for each item of commercial farm equipment. Beginning October 1, 2017, purchases of polyroll tubing for farm irrigation pursuant to R. S. 47: 305. 25 will be subject to zero percent (0%) state sales tax.

10 Act 424 of the 2017 Regular Session HB 629 (Anders) • Act 424 amends R. S. 47: 305. 64(A)(2)(b) to add the Willis-Knighton Health System in Shreveport, Louisiana to the definition of qualifying radiation therapy center. R. S. 47: 305. 64(A)(1) provides state sales and use taxes shall not apply to the amount paid by a qualifying radiation center for the purchase, lease, or repair of capital equipment and for computer software. Beginning July 1, 2017, the state sales tax exemption in R. S. 47: 305. 64 is operative and in effect relative to R. S. 47: 302 and 321. 1. • Effective date June 26, 2017.

11 Act 318 of the 2017 Regular Session SB 30 (Morrell) • Act 318 extends the sunset of the Tax Free Shopping Program through July 1, 2023. • Effective date June 22, 2017.

12 Act 279 of the 2017 Regular Session SB 93 (Mills) • Act 279 amends the taxable service of repair pursuant to R. S. 47: 301(14)(g) to add repairs to tangible personal property and fabrication shall not include the surface preparation, coating, and painting of a fixed or rotary wing military aircraft or certified transport category aircraft as long the aircraft’s Federal Aviation Administration registration address is outside of Louisiana. These repairs are excluded from sales taxes imposed under R. S. 47: 302 and 321. 1 beginning July 1, 2017. • Effective date July 1, 2017.

13 Act 378 of the 2017 Regular Session SB 97 (Fannin) • Act 378 provides for definition of “commercial farmer” and creates a registration process for farmers seeking an exemption certificate to avail themselves of the sales tax exemption for seeds used in the planting of crops, pesticides used for agricultural purposes, diesel fuel, butane, propane, or other liquefied petroleum gases used for farm purposes, and commercial farm irrigation equipment. • Act 378 defines "commercial farmers" as persons occupationally engaged in producing food or agricultural commodities for sale. These terms are limited to those persons, partnerships, or corporations regularly engaged in the commercial production for sale of vegetables, fruits, crops, livestock, poultry, and other food or agricultural products that report farm income and expenses on a federal Schedule F or similar federal tax form, including but not limited to 1065, 1120, and 1120 S filed by a person assigned a North American Industry Classification System (NAICS) Code beginning with 11.

14 Act 378 of the 2017 Regular Session SB 97 (Fannin) • Beginning January 1, 2018, “Commercial Farmers” will be exempt from the sales tax upon the sale at retail of following items: ▫ Raw agricultural commodities including feed, seed and fertilizer to be used in the preparing, finishing, manufacturing, or producing crops or animals for market pursuant to La. R. S. 47: 301(10)(e). ▫ Seeds for use in planting crops pursuant to La. R. S. 305. 3. ▫ Pesticides used for agricultural purposes pursuant to La. R. S. 47: 305. 8. ▫ Diesel fuel, butane, propane, or other liquefied petroleum gases used or consumed for farm purposes pursuant to La. R. S. 47: 305. 37(A). ▫ Polyroll tubing sold for commercial farm irrigation pursuant to La. R. S. 47: 305. 63. • Effective date January 1, 2018.

15 Act 395 of the 2017 Regular Session SB 241 (Johns) • Act 395 restores the exemption for sales and purchases of orthotic devices, prostheses, restorative materials, and other dental devices as provided in R. S. 47: 305(D)(1)(t) for state sales tax purposes relative to R. S. 47: 302 and 321. 1. • Effective July 1, 2018.

16 Income Tax Updates Presented by Bradley Blanchard, Attorney Supervisor, Income Tax Section

17 Act 413 of the 2017 Regular Session HB 187 (Cromer) • Effective June 19, 2015, Act 131 of the 2015 Regular Session placed limits or “credit caps” on the amount of credits that the Department could grant in a given fiscal year for both purchased and leased systems through the end of the program on 12/31/2017. ▫ Fiscal Year 2015/2016 - $10 M ▫ Fiscal Year 2016/2017 - $10 M ▫ Fiscal Year 2017/2018 - $5 M • Purchased System Cap’s Exhausted: ▫ Fiscal Year 2015/2016 – cap exhausted 1/31/16 ▫ Fiscal Year 2016/2017 – cap exhausted 2/25/16 ▫ Fiscal Year 2017/2018 – cap exhausted 3/16/16

18 Act 413 of the 2017 Regular Session • Act 413 allows taxpayers who purchased and installed a solar energy system on or before 12/31/2015 and were denied or would have been denied due to the credit caps to be granted a credit. • To qualify, taxpayers must meet the following requirements: 1) The claim for credit was denied or would have been denied for any portion of the original claim because of the Act 131 credit cap; 2) The claim for credit relates to a solar energy system that was purchased and installed on or before December 31, 2015; 3) The claim for credit meets all the requirements of an eligible system.

19 Act 413 of the 2017 Regular Session • For qualifying taxpayers previously denied, no additional or new claim for a solar energy system is required. • Taxpayers were required to electronically file an original or amended return claiming the credit no later than August 31, 2017 • All taxpayers were required to submit all supporting documentation no later than November 1, 2017. • The term “supporting documentation” means: 1) A completed Form R-1086 for the corresponding tax period; 2) Proof of purchase in the form of an itemized receipt or a copy of the contract signed by the taxpayer demonstrating either full payment or payment through financing; and 3) All other documentation requested by the Department pursuant to the requirements of LAC 61: I. 1907.

20 Act 413 of the 2017 Regular Session • For qualifying taxpayers, Act 413 allows for payment of the credit in three equal installments over three fiscal years beginning with Fiscal Year 2017 -2018. • Act 413 provides for a $5 million credit cap on the amount of credit that may be granted in a given fiscal year. • Accordingly, in the event the Department receives more than $15 million worth of valid claims, taxpayers will receive their pro-rata share of credit for the first three years and the balance of any outstanding claims in the fourth year or Fiscal Year 2020 -2021. • See R. I. B. 17 -012 for additional information.

21 Act 309 of the 2017 Regular Session SB 254 (Morrell) • Creates a new category of motion picture production tax credit referred to as “legacy credits”. • Pursuant to R. S. 47: 6007(B)(30), a legacy credit means a certified credit that: 1) is evidenced by a final certification letter before July 1, 2017; 2) has not expired; 3) has not been claimed as a credit against the state income tax on a tax return filed before July 1, 2017; 4) has not been transferred to the Department of Revenue (buyback) before July 1, 2017.

22 Act 309 of the 2017 Regular Session • Beginning July 1, 2017, legacy credits which are recorded in the Louisiana Tax Credit Registry before January 1, 2018 are eligible to participate in the buy-back program. • Legacy credits may be transferred back to the Department of Revenue for eighty-five cents of the face value of the credit. • The right to transfer legacy credits to the Department of Revenue extends to the motion picture production company that earned the credit or the company’s irrevocable designee as well as any other taxpayer who currently holds a credit that meets the definition of a legacy credit. • Qualifying transfers are eligible to be issued up to $10 million per fiscal year, per taxpayer with any remaining balance to receive priority in the credit cap for the subsequent fiscal year over any later filed claims.

23 Act 309 of the 2017 Regular Session • For projects that apply for initial certification to the Department of Economic Development (LED) on or after July 1, 2017, Act 309 eliminates transferability meaning the motion picture production company that earns the credit or the company’s irrevocable designee may no longer sell the credit to a third party. However, for such projects, Act 309 provides for an increased buy-back rate that allows qualifying taxpayers to transfer the credit back to the department for ninety percent of the face value of the credit. • For such credits, the fee to transfer credits back to the state is 2% of the face value of the credits being transferred (Act 223). For all projects that apply to LED before July 1, 2017, the credits remain transferable and may continue to be transferred back to the department by the motion picture production company that earns the credit or the company’s irrevocable designee for eighty-five cents of the face value of the credit.

24 Act 309 of the 2017 Regular Session • Act 309 makes permanent the $180 million per fiscal year credit cap originally established by Act 134 of the 2015 Regular Session of the Louisiana Legislature. As previously provided in Act 134, Act 309 establishes an aggregate tax credit cap applicable to claims against state income tax allowed on returns or used as a payment and for credits transferred back to the state (“buy-backs”). • The credit cap limits the aggregate total of credits which may be utilized in the above-mentioned manner to $180 million per fiscal year. The credits are required to be allowed based on a first-come, first-served basis as determined by the taxpayer’s Louisiana income tax return or Form R-6140/Form R-6170 received date. All credits utilized pursuant to La. R. S. 47: 6007 will not be considered received for purposes of the first-come, first-served requirement until all supporting documentation and applicable fees are received.

25 Act 400 of the 2017 Regular Session SB 79 (Luneau) • Act 125 of the 2015 Regular Session provided for across the board reductions, typically 28%, to numerous income and corporation franchise tax credits. • Act 125 was applicable to credits claimed on returns filed on or after July 1, 2015, but before June 30, 2018, regardless of the taxable year to which the return relates, unless the taxpayer qualifies for an exception as provided for in Act 125. • With the passage of Act 400, the reductions provided for in Act 125 are now permanent reductions.

26 Act 400 of the 2017 Regular Session • Act 400 rounds certain credits to whole numbers and restores the insurance company premium tax credit contained in R. S. 47: 227 to 100% of its pre-Act 125 value. These changes are effective for taxable periods beginning on or after January 1, 2017, unless otherwise provided by the statute granting the credit. The changes affect the following statues: ▫ R. S. 47: 227 Insurance company premium tax credit –the credit is restored to its full pre-Act 125 value. ▫ R. S. 47: 287. 759 -Employee and dependent health insurance coverage credit ▫ R. S. 47: 297(B)-Credit for certain federal tax credits ▫ R. S. 47: 297(G)-Environmental equipment ▫ R. S. 47: 297. 6. (A)(1)(b)-(5)-Rehabilitation of an owner occupied residential or mixed -use property ▫ R. S. 47: 6005 -Purchase of qualified new recycling manufacturing or process equipment and/or service contracts ▫ R. S. 47: 6013 -Donations made to public schools ▫ R. S. 47: 6020 - Angel investor tax credit program ▫ R. S. 47: 6022 - Digital interactive media and software tax credit ▫ R. S. 47: 6034 - Musical and theatrical production income tax credit ▫ R. S. 47: 6037 - Tax credit for “green job industries” ▫ R. S. 51: 2354 -Technology commercialization credit; amount; duration; forfeit▫ R. S. 51: 2399. 3 -Modernization tax credit

27 Act 400 of the 2017 Regular Session • The following credits were reduced by Act 125 but have been amended relative to the amount of credit that may be authorized by separate and controlling legislation in the 2017 Louisiana Legislative Regular Session. As such, taxpayers seeking to utilize any of the below-listed credits should reference the pertinent legislation as provided below: ▫ R. S. 47: 297 (D) Education-See Act 375. ▫ R. S. 47: 297(H) Small town doctor/dentist-See Act 342. ▫ R. S. 47: 297(P)Accessible and barrier-free constructed home credit-See Act 270. ▫ R. S. 47: 6023 Sound recording investor tax credit-See Act 275. ▫ R. S. 47: 6035 Conversion of vehicles to alternative fuel usage-See Act 403 & Act 325.

28 Revenue Information Bulletin 17 -008 • Act 661 of the 2016 Regular Session amended R. S. 47: 1675 as it relates to claiming a transferable tax credit on a tax return. • R. S. 47: 1675(H)(1)(e) now provides that a taxpayer may only claim a tax credit on a tax return by performing one of two actions on or before the due date of the return, without regard to the granting of any extension: 1) Purchase tax credits with an effective date of transfer on or before the due date of the return without regard to the granting of any extension; or 2) Execute Form R-6111, which evidences a binding agreement to transfer a tax credit, on or before the due date of the return, without regard to the granting of any extension.

29 Revenue Information Bulletin 17 -008 • Taxpayers must still own the credit prior to claiming on a tax return or utilizing as a payment, meaning the credit will not be allowed prior to the effective date of transfer as reflected in the Tax Credit Registry pursuant to R. S. 47: 1524. • Changes effective for income tax periods beginning on or after January 1, 2016, and franchise tax periods beginning on or after January 1, 2017.

30 LAC 61: I. 301, 302 and 311, Imposition of Tax; Determination of Taxable Capital; Newly Taxable Corporations • Relates to expansion of corporation franchise tax as required by Act 12 of the 2016 First Extraordinary Session. • NOI published in the October 2016 Edition of the Louisiana Register. • Public hearing held November 30, 2016. • Revised NOI to be issued as a result of comments received. • Public hearing to be held on revised NOI.

31 Income Tax Updates Continued Presented by David Hansen, Attorney III, Income Tax Section

32 Act 206 of the 2017 Regular Session HB 237 (Barras) • Amends La. R. S. 51: 1787(K) to extend the sunset of the Enterprise Zone Program from July 1, 2017 to July 1, 2021. • Effective June 14, 2017.

33 Act 336 of the 2017 Regular Session HB 300 (Davis) • Amends La. R. S. 47: 6015 to reduce the value of the Research and Development Tax Credit: ▫ From 8 to 5% of difference between expenses minus base amount available to companies with more than 100 employees. ▫ From 20 to 10% of difference between expenses minus base amount available to companies with 50 -99 employees. ▫ From 40 to 30% of difference between expenses minus base amount available to companies with less than 50 employees. ▫ Allows a credit equal to 30% of the federal grant received by a taxpayer who receives a Phase I or II grant from the federal Small Business Technology Transfer Program or a federal Small Business Innovation Research Grant. �credits may be sold or transferred, subject to conditions.

34 Act 336 of the 2017 Regular Session • Defines “Base amount” as follows: ▫ 80% of average annual qualified research expenses within LA during previous 3 taxable years, when the taxpayer employs 50 or more persons. ▫ 50% of average annual qualified research expenses within LA during previous 3 taxable years, when the taxpayer employs less than 50 persons. • Extends sunset from December 31, 2019 to December 31, 2021. • Provides that the provisions of the act are applicable to tax years beginning on and after January 1, 2017. • Effective June 22, 2017.

35 Act 338 of the 2017 Regular Session HB 313 (Stokes) • Amends La. R. S. 47: 6006 relative to the inventory tax credit: ▫ Includes persons engaged in short-term rentals of tangible personal property within the definition of “dealer”. ▫ Includes any item of tangible personal property owned by a retailer that is available for short-term rental within the definition of “inventory”. • Retroactive application: applies to taxable periods beginning on and after January 1, 2016. • Defines “short-term” as less than 365 days. • Effective June 22, 2017.

36 Act 270 of the 2017 Regular Session HB 337 (Stokes) • Amends La. R. S. 47: 297(P) to modify the credit allowed to taxpayers who construct a new one- or two-family dwelling to include accessible and barrier-free design elements. • New law makes the credit available for renovations of an existing dwelling if the taxpayer, or his spouse or dependent(s) who reside with the taxpayer, have a physical disability that requires the inclusion of accessible and barrier-free design elements. • Increases the credit from the lesser of $750 or 72% of the total tax liability of the TP to the lesser of $5, 000 or the cost of the construction or renovation. • Provides for a 5 year carryforward. • Caps the credit at an aggregate $500, 000 per calendar year. • Provides for the credit to be awarded on a first-come, first-served basis.

37 Act 270 of the 2017 Regular Session • Provides that when a dwelling is co-owned in indivision by 2 or more taxpayers who qualify for and claim the homestead exemption on the dwelling, the credit allowed to each taxpayer shall be limited to the pro-rata ownership interest of the taxpayers. • Allows the credit to be claimed by taxpayers who lease a dwelling to an individual with a physical disability, who requires the inclusion of accessible and barrier-free design elements in the dwelling. • Applicable to tax years beginning on and after January 1, 2018. • Effective January 1, 2018.

38 Act 418 of the 2017 Regular Session HB 425 (Magee) • Amends La. R. S. 47: 6006. 1 to remove the limitation of prior law on awards of the tax credit for ad valorem tax paid on offshore vessels when the ad valorem tax is paid under protest. • Requires a taxpayer who pays the ad valorem tax under protest to notify LDR within five business days of the date that the lawsuit is filed. • Provides recapture authority to LDR for credits where the taxpayer prevails in the lawsuit against the political subdivision • Effective July 1, 2017. ▫ Applicable to corporation income tax periods beginning on and after January 1, 2017. ▫ Applicable to corporation franchise tax periods beginning on and after January 1, 2018.

39 Act 342 of the 2017 Regular Session HB 427 (D. Miller) • Amends La. R. S. 47: 297(H) to change the criteria relative to the “small town doctor tax credit” as follows: ▫ Prior law required a medical doctor to establish and maintain an office within 20 miles of a community hospital. ▫ New law requires a certified medical doctor to be in a primary care geographic health professional shortage area (HPSA), as defined by the federal government and as certified by the Louisiana Department of Health. • Expands the eligibility of the credit to include nurse practitioners. • Caps the credit at $1. 5 million per year. • Sunsets the credit on January 1, 2021. • Effective January 1, 2018.

40 Act 345 of the 2017 Regular Session HB 454 (Abramson) • Amends La. R. S. 47: 6020 to extend the sunset of the Angel Investor Tax Credit Program through July 1, 2021. • Changes the qualification requirement as follows: ▫ Prior law required that the department approve the business “as one which may receive investments which qualify for a tax credit, ” prior to investment. ▫ New law requires the department to certify the business as a Louisiana Entrepreneurial Business, prior to the award of the credit. • Grants a credit equal to 25% of the amount of investment made by the investor into a Louisiana Entrepreneurial Business. The investment may not exceed $720, 000 per year per business or $1. 44 million total, per business. • Effective date: ▫ sunset extension effective July 1, 2017; ▫ modifications to credit qualifications and limitations effective July 1, 2018.

41 Act 352 of the 2017 Regular Session HB 555 (Jackson) • CIT deduction for dividends received by certain telecommunications service providers and electric utilities. • Act 352 added La. R. S. 287. 71(B)(6)(a) which provides a 100% deduction for dividends received by any member of a regulated group of entities providing telecommunications services or electric utility services. • Prior to Act 352 of the 2017 Regular Session, there was no special treatment for dividends received by certain telecommunications service providers and electric utilities. • "Regulated group of entities" is defined as a group comprised of a parent entity and any other legal entities in which the parent entity directly or indirectly owns at least fifty percent of either the vote or the value of the stock, membership interest, partnership interest, or other ownership interest and in which either one of the following applies:

42 Act 352 of the 2017 Regular Session • One or more of the members of the group is regulated by the Louisiana Public Service Commission as a telecommunications service provider and at least one of the members of the group has at any time been party to a contract entered into under the authority of Chapter 1 of Subtitle V of this Title. • One or more of the members of the group is regulated by the Louisiana Public Service Commission as an electric utility. • Effective on January 1, 2018 and applicable to all taxable periods beginning on and after January 1, 2018.

43 CIT Deduction for Dividends Received History • Prior to Act 123 of the 2015 Regular Session, La. R. S. 47: 287. 738(F)(1) provided a 100% deduction for dividend income. Act 123 (See RIB No. 15 -017) • Act 123 of the 2015 Regular Session of the Louisiana Legislature made several significant changes to the Louisiana Corporation Income Tax. Act 123 reduced exclusions and deductions from corporate gross income for a variety of situations by 28%. Among the major changes is that the previous 100% deduction for dividend income is reduced by 28%. Therefore, the 100% deduction is reduced to a 72% deduction. Consequently, 28% of dividend income is now subject to Louisiana Corporation Income Tax.

44 Act 358 of the 2017 Regular Session HB 639 (Schexnayder) • Amends La. R. S. 47: 242 and 293(10) and enacts La. R. S. 47: 53. 5, 111(A)(11), and 287. 71(B)(8) to provide an exclusion from gross income for a nonresident business that performs disaster or emergency-related work within the state during a disaster period. ▫ Provides an exclusion from gross income for an out-of-state employee for compensation for personal services rendered during a declared state disaster or emergency. ▫ Effective July 1, 2017.

45 Act 375 of the 2017 Regular Session SB 25 (Morrell) • Amends La. R. S. 47: 297(D) to sunset, on January 1, 2017, the individual income tax credit for educational expenses. • Effective June 23, 2017.

46 Act 377 of the 2017 Regular Session SB 95 (Morrish) • Amends La. R. S. 47: 6301 to convert the rebate authorized in prior law for donations to student tuition organizations to a nonrefundable tax credit. • Specifies that the donation must be made by a taxpayer who is required to file a Louisiana tax return, in order for that taxpayer to be eligible to receive a credit. • Allows the taxpayer to use a state tax credit in combination with any federal tax credit or deduction earned for the same donation, but limits the taxpayer from using the credit if he has received any other state tax credit, exemption, exclusion, deduction or tax benefit pursuant to the same statute. • Allows a 3 year carryforward of the credit.

47 Act 377 of the 2017 Regular Session • Present law requires student tuition organizations who receive donations in accordance with law to: ▫ award scholarships to students, ▫ perform criminal background checks on employees, and ▫ provide a public report to the Department of Education (DOE) which lists all scholarships awarded or granted in the previous state fiscal year. • New law: mandates that failure of a student tuition organization to meet the above-listed requirements by January 1 st, shall result in the organization being barred from participating in the credit for the upcoming year. • Requires student tuition organizations to annually pay out or reserve for scholarships at least 75% of all funds from donations (a reservation of funds must be designated for a specific student who is awarded a scholarship for the next school year or multiple school years); requires any donated funds that exceed 25% of all funds available from donations to be remitted to DOE for deposit in the SGF. • Effective June 23, 2017.

48 Act 245 of the 2017 Regular Session SB 150 (Chabert) • Amends La. R. S. 47: 6036 relative to the Port Investor Tax Credit. • Removes requirement that state bond commission certify to LED secretary that securing a project will result in “significant positive economic benefit to the state” (retains the JLCB’s role in certifying that the project will result in significant positive economic benefit). • Makes permanent the 2015 reduction to the Investor Tax Credit. • Extends sunset on Investor Tax Credit until July 1, 2021. • Effective June 14, 2017.

49 Act 403 of the 2017 Regular Session SB 172 (Morrell) • Sunsets the following tax credits beginning January 1, 2020: ▫ Corporation tax credit (La. R. S. 47: 34). ▫ Corporation tax credit; re-entrant jobs credit (La. R. S. 47: 287. 748). ▫ Jobs credit (La. R. S. 47: 287. 749). ▫ Tax credit for employment of first-time nonviolent offenders (La. R. S. 47: 287. 752). ▫ Tax credit for contributions to educational institutions (La. R. S. 47: 37; 287. 755). ▫ Reduction to tax due (La. R. S. 47: 297). ▫ Louisiana Citizens tax credit (La. R. S. 47: 6025). ▫ Tax credit for conversion of vehicles to alternative fuel usage (La. R. S. 47: 6035). • Changes the value of the tax credit for conversion to alternative fuel from the lesser of 7. 2% or $1, 500 to the lesser of 10% or $2, 500. • Sunsets the tax credit for rehabilitation of historic structures on January 1, 2022. • Effective June 26, 2017.

50 Act 384 of the 2017 Regular Session SB 177 (Morrell) • Amends La. R. S. 47: 164(D)(2)(b) relative to motion picture production and motion picture payroll services companies, requires the payor to withhold taxes from employee payments in an amount determined in accordance with an employee’s withholding allowance certificate. • Prior law required the withholding to be at the top rate of 6%. • Effective July 1, 2017.

51 Act 386 of the 2017 Regular Session SB 183 (Morrell) • Amends La. R. S. 17: 3389, R. S. 51: 1787(K), 2461, 3121, and R. S. 51: 2367(F) et al to sunset the university research and development parks tax exemption and the Louisiana Mega-Project Energy Assistance Rebate on July 1, 2017. • Sunsets the Enterprise Zone Program, the Quality Jobs Program, the Competitive Projects Payroll Incentive Program on either July 1, 2022 or July 1, 2021. • Modifies requirements for participation in the Quality Jobs Program. • Effective June 23, 2017.

52 Act 325 of the 2017 Regular Session SB 243 (Peacock) • Amends La. R. S. 47: 6035 to change to nonrefundable, the tax credit for conversion of a vehicle to alternative fuel. • Requires commercial vehicles to be registered and primarily used in the state for four years after conversion on order for retail costs paid to convert the vehicle to be qualify as “cost of qualified clean-burning motor vehicle fuel property”. • Adds “costs associated with fueling station infrastructure that is not directly related to the delivery of an alternative fuel in the fuel tank of motor vehicles” to items that qualify as “cost of qualified clean-burning motor vehicle fuel property”. **prior law already provided for the inclusion of property directly related to the delivery of alternative fuel into the fuel tank of motor vehicles)** • Reduces credit from 36% to 30% of the cost of qualified clean-burning motor vehicle fuel property. • Effective June 22, 2017.

53 Act 396 of the 2017 Regular Session SB 248 (Morrell) • Amends La. R. S. 47: 6034 to cap the musical and theatrical tax credit at $10 million per year. • Caps each project at $1 million per project. • Reserves 50% of the total tax credits each year for state-certified musical or theatrical productions by approved nonprofit organizations. • Sunsets the credit on July 1, 2025. • Effective July 1, 2017.

54 Update on Regulations: Add-Back • Acts of the 2016 Extraordinary Session Act 16 (HB 55) (Corporation Income Tax) ▫ Enacts La. R. S. 47: 287. 82. ▫ Requires that certain deductible interest expenses, intangible expenses, and management fees be added-back when computing corporation income tax liability. ▫ Requires corporations to add-back otherwise deductible interest expenses and costs, intangible expenses and costs, and management fees paid to a related member unless: �the corresponding item of income was in the same taxable year either subject to a tax based on or measured by the related member's net income in Louisiana or any other state, or was subject to a tax based on or measured by the related member's net income by a foreign nation which has an enforceable income tax treaty with the United States, if the recipient was a "resident" as defined in the income tax treaty with the foreign nation; or

55 Update on Regulations: Add-Back �the transaction giving rise to the interest expenses and costs, the intangible expenses and costs, or the management fees between the corporation and the related member did not have as a principal purpose the avoidance of any Louisiana tax. ▫ If the transaction giving rise to the interest expenses and costs, intangible expenses and costs, or the management fees has a substantial business purpose and economic substance and contains terms and conditions comparable to a similar arm's length transaction between unrelated parties, the transaction shall be presumed to not have as its principal purpose tax avoidance, subject to rebuttal by the Secretary of the Department of Revenue. • Act 16 is effective for all tax years beginning on or after January 1, 2016. • Add-Back Proposed Regulation published: LAC 61: I. 1115.

56 Update on Regulations: Sourcing Corporation Income Tax • Act 8 (HB 20) [R. S. 47: 287. 95] ▫ Amends La. R. S. 47: 287. 95 which provides for the apportionment formulas used to calculate the Louisiana apportionment percent for the corporation income tax. ▫ Amends the apportionment formula for most industries to implement the single sales factor formula. ▫ Provides for sourcing rules for the purpose of attributing sales other than sales of tangible personal property. • See RIB 16 -038. • See Proposed Regulation LAC 61: I. 1135. Sourcing of sales other than sales of tangible personal property.

57 Excise and Misc. Tax Updates Presented by Shanda Mc. Clain, Attorney Supervisor, Income Tax Section

58 Act 145 of the 2017 Regular Session HB 230 (Stokes) • Defines “aviation gasoline, ” for purposes of the exemption from the tax on gasoline and motor fuels. ▫ “Gasoline which is intended for or primarily used for propelling aircraft, which is invoiced as aviation gasoline or is received, sold, stored, or withdrawn from storage by any person for the purpose of propelling aircraft. ” • Specifies that motor fuel intended and primarily used for propelling motor vehicles is not aviation gasoline. • Effective July 1, 2017.

59 Act 212 of the 2017 Regular Session HB 315 (S. Bishop) • Modifies prior law, which allowed donations of alcoholic beverages of high alcoholic content to licensed Type A events or unlicensed civic, religious, or charitable organizations. • New law allows donations of alcoholic beverages of high or low alcoholic content to the same class of events or organizations. • Effective June 14, 2017.

60 Act 411 of the 2017 Regular Session HB 98 (S. Bishop) • Imposes an oilfield site restoration fee on crude petroleum from producing wells in Louisiana and on gas produced from producing wells in Louisiana. • Clarifies that the amount of the fee is in proportion to the amount of the severance tax collected on the producing well. • Specifies the full rate production fee is assessed on all production from oil and gas wells except for production from those that are identified as reduced rate production wells. • Effective date: July 1, 2017.

61 Act 421 of the 2017 Regular Session HB 461 (S. Bishop) • Adjusts the severance tax exemption for inactive and orphan wells into reduced rates, as follows: ▫ Production from an oil or gas well, subsequent to the well’s having been inactive for 2 or more years, is subject to severance tax rate equal to 50% of the full rate. ▫ Production from an oil or gas well, subsequent to the well’s having been designated an orphan well for longer than 60 months, is subject to a severance tax rate equal to 25% of the full rate. ▫ Reduced rates are allowed for a 10 year period. • It is for the period beginning July 1, 2018 and sunsets on June 30, 2023. • Requires the LDR secretary to notify the DNR commissioner of conservation if it appears that the severance tax paid under the reduced rates in any fiscal year will exceed $15 million. This notification will trigger the commissioner to discontinue issuing certifications for the remainder of that fiscal year. • Effective date: August 1, 2017.

62 Act 273 of the 2017 Regular Session HB 582 (P. Smith) • Reduces telecommunications tax for the deaf from 5 to 4. 5 cents per month per residential and business customer. • Extends the tax to wireline access lines and wireless handset devices. • Does not apply to prepaid wireless devices. • Increases the amount that local or wireless telephone companies may retain as a collection fee from 2 percent to 3 percent of the amount collected. • Effective October 1, 2017.

63 Act 273 of the 2017 Regular Session HB 582 (P. Smith) • Revenue Ruling No. 17 -001 provides that on an annual basis, the total amount collected and remitted will be fifty-four cents per line and provides the tax rate per calendar quarter.

64 Act 214 of the 2017 Regular Session HB 323 (Franklin) • Allows the governing authority of a municipality or parish to transfer regulatory authority over charitable gaming in that municipality or parish to the office of charitable gaming. The transfer must be done by ordinance. • Expands the functions of bingo card dabber devices to include networking of charitable gaming organizations, player tracking, and accounting functions related to bingo, progressive bingo, and progressive mega bingo games. • Provides that electronic bingo dabber devices shall not be construed to be electronic video bingo machines or electronic pull-tab devices. • Effective date August 1, 2017. • Notice of Intent will be published in the Register on November 20 th and a hearing held on December 27, 2017, at 10: 00 a. m. in the La. Belle Room.

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