Louisiana Governor John Bel Edwards signed legislation on June 28, 2016, to adopt changes to the Louisiana corporate income tax apportionment formulas for certain businesses and to provide rules for the sourcing of income relating to certain sales. These corporate income tax amendments apply to all taxable periods beginning on or after January 1, 2016. Prior rules continue to be in effect for taxable periods beginning before January 1, 2016.
History & Background
Under Louisiana corporate income tax law, income is apportioned to Louisiana using one of several statutory formulas depending upon the type of business from which the taxpayer primarily derives its income. The default apportionment formula for taxpayers not specifically required to use a special apportionment formula is a three-factor formula based on the average of the taxpayer’s property value, payroll and sales. The new rules provide a single-sales factor apportionment formula for most taxpayers and a four-factor apportionment formula for oil and gas companies. Additionally, sales other than sales of tangible personal property and sales of services are now sourced to Louisiana if the taxpayer’s market for sale is in the state.
H.B. 20: Single-Sales Factor Formula, Gross Apportionable Income
Louisiana requires one of two methods for calculating single sales factor apportionment for tax years beginning on or after January 1, 2016, depending on the taxpayer’s industry classification.
Most taxpayers now calculate their sales factor using a combination of net sales and other gross apportionable income. It is equal to the ratio of (1) Louisiana-sourced net sales made in the regular course of business plus other Louisiana-sourced gross apportionable income to (2) total net sales made in the regular course of business plus total other gross apportionable income (sourced both within and outside of Louisiana).
Transportation Companies & Service Organizations
The sales factor for transportation companies (excluding pipeline transportation companies) and service organizations is equal to the ratio of (1) gross apportionable income sourced to Louisiana to (2) total gross apportionable income sourced within and outside of Louisiana.
H.B. 20: 4 Factor Apportionment for Oil and Gas Companies
Taxpayers defined as integrated oil companies now calculate their Louisiana apportionment factor using the standard three-factor (property, payroll, and sales) rule with double weighted sales. This includes taxpayers that derive income primarily from exploration, production, refining or marketing of oil and gas and integrated oil companies.
Section 199A provides a 20% deduction on the amount of Qualified Business Income (referred to as QBI and defined later) from a domestic business operated as a partnership, S-Corporation, sole proprietorship, trust or estate. This deduction is in response to...
Part I in our Tax Planning Opportunities for the Construction Industry series One of the most comprehensive changes included in the TCJA is the changes in tax accounting methods available for contractors. Methods previously only available to smaller contractors are...
One of the significant changes required by the new accounting guidance under ASU 2014 09, Revenue from Contracts with Customers (Topic 606) relates to accounting for uninstalled materials. Under the previous accounting practice, the cost of materials specifically...