Louisiana Franchise Tax: Everything You Need To Know
Louisiana franchise tax must be paid by all corporations who earn income from state-based sources. 3 min read
2. Louisiana Franchise Tax Deadlines
3. Changes to Louisiana Tax Law
4. Louisiana Franchise Tax for Holding Companies
5. Louisiana Franchise Tax for LLCs
6. Estimated Income Tax
7. Louisiana Tax Extension
Updated November 3, 2020:
Louisiana franchise tax must be paid by all corporations who earn income from state-based sources. This also includes other business entities who have opted for federal corporate tax treatment. Corporations that have obtained a franchise tax exemption from the IRS must provide a copy of this exemption to the state tax authority.
Louisiana Franchise Tax Rates
State franchise tax rates for corporations are as follows:
- First $25,000 in net income: 4 percent
- Second $25,000 in net income: 5 percent
- Next $50,000 in net income: 6 percent
- Next $100,000 in net income: 7 percent
- Net income exceeding $200,000: 8 percent
Louisiana Franchise Tax Deadlines
Franchise tax must be paid by the 15th day of the fifth month after a fiscal year closes. For example, the due date would be May 15 for companies that go by the calendar year.
Changes to Louisiana Tax Law
Governor John Bel Edwards signed several tax bills in March 2016, resulting in major changes to state tax law that include:
- Franchise tax for corporations that use a joint venture, partnership, or other entity to own Louisiana real estate
- Franchise tax for LLCs that elect corporate federal income tax treatment
- Cap of 72 percent of state net income for reported net operating losses
- Deduction for a portion of holding company investments and advances to child corporations
- Last-in, first-out reporting requirement for net operating losses
- Flat rate of 6.5 percent for corporate income tax
- Add-back adjustment for intangible expenses and management fees
- Deduction for dividends received from specific banks
- Initial franchise tax increase to $110 from the previous rate of $10
Louisiana Franchise Tax for Holding Companies
Under the new laws, corporations that own property, plants, or capital in Louisiana through a holding company such as a joint venture or partnership are now categorized as domestic corporations.
This change resulted from a state Court of Appeals decision indicating that domestic corporations that act as flow-through entities would not be required to pay corporate franchise tax.
Louisiana Franchise Tax for LLCs
Beginning in 2017, Louisiana limited liability companies (LLCs) are taxed in the same way they are taxed by the federal government. This rule was established by the 2016 First Extraordinary Session, Act 12.
Under Act 12, all entities that have elected corporate federal income tax treatment must also pay Louisiana franchise tax. Two exceptions exist:
- LLCs that have opted for pass-through taxation under Subchapter S (S corporations)
- Entities purchased by an S corporation in 2012 or 2013
LLCs taxed as corporations are not subject to franchise tax for fiscal years prior to 2017.
Estimated Income Tax
Corporations expected to owe more than $1,000 in Louisiana income tax must make estimated tax payments. Installments can be increased or decreased any time the estimate changes.
New installment payment amounts are figured by finding the difference between the new and old estimated tax amounts and dividing that amount by the number of remaining installment payments.
Overpayments of estimated tax can be credited to unpaid installments. Excess tax payments will be refunded.
Corporations can apply for an overpayment adjustment for a specific tax year after a tax year closes but before the tax return is filed, which should be before the middle of the fourth month after the close.
Adjustments are allowed only when the overpayment is more than $500 and represents more than 10 percent of the total estimated tax amount for the corporation in question. The adjustment does not constitute a credit or refund claim.
No application form exists for this request. Instead, submit the following information:
- Estimated amount of income tax paid by the company for the year in question
- Estimated total income tax liability for the year
- Requested adjustment amount
A decision about the adjustment will be made within 45 days after submission of the request. Adjustments that are later deemed excessive will be subject to an annual 12 percent penalty.
Louisiana Tax Extension
If your company needs a franchise tax extension, you can file a request to pay within seven months of the return's original due date. You must request an extension online on or before the due date at the Louisiana Department of Revenue website.
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