Louisiana House Bill HB666

Louisiana 2017 Regular Session

• Introduced: 4/19/17
• Refer: 4/20/17

Caption

Imposes the La. Margins Tax and repeals the corporation income tax

Impact

The bill has the potential to simplify the tax structure for many businesses while providing exemptions for various nonprofit organizations, including health care providers and agricultural cooperatives. It outlines specific calculations for determining taxable margins, including allowable deductions for costs, such as cost of goods sold and compensation. The focus on gross margins rather than total income could create a more equitable tax environment, although entities with higher margins relative to their income may face a heavier burden under this new structure.

Summary

House Bill 666 introduces the Louisiana Margins Tax, replacing the existing corporation franchise tax by imposing a tax based on the gross margins of business entities. This transition marks a significant change in how businesses operating within Louisiana are taxed, moving away from a franchise model where income is taxed to a margin-based assessment. The new tax rates are set at 0.375% for retail and wholesale businesses and 0.75% for other business types, effective from January 1, 2018, for taxable years starting thereafter.

Sentiment

The general sentiment around HB666 has varied, with supporters praising its potential to streamline business taxation and invigorate the state’s economy by reducing complexity in tax calculations. Critics, however, have expressed concerns regarding the implications for smaller businesses that may struggle with compliance under a new tax model or perceivably higher rates. The discussions highlight a dichotomy between supporting business growth and ensuring fair taxation principles across the board.

Contention

Notable points of contention include debates over the fairness of the proposed tax rates and the adequacy of exemptions for nonprofits. Opponents argue that the shift could disproportionately affect smaller businesses with lower gross margins but significant operational costs. The clarity of the definitions related to taxable entities and gross revenues is also under scrutiny, as stakeholders urge for clearer guidelines to prevent confusion in implementation.