Louisiana Overhauls Tax Code with Sweeping Changes

Louisiana recently enacted a comprehensive tax reform package, significantly altering the state’s tax landscape. Signed into law by Governor Jeff Landry on December 5th, the legislation includes:
Corporate Tax Changes
- Repeal of the corporate franchise tax. (HB3)
- Implementation of a flat 5.5% corporate income tax rate for tax years beginning on/after Jan. 1, 2025; previously, the state’s progressive rate topped out at 7.5%. (HB2)
- Allowing taxpayers to apply for immediate deductions for qualified property, qualified improvement property, and research and experimental expenditures beginning on/after Jan. 1, 2025. (HB2)
- Repeal and/or limitations on various tax credits, including the inventory tax credit. (HB2)
Individual Tax Changes
- The tax rate decreased to be a flat 3% (HB10)
- The standard deduction was increased (HB10)
- The capital gains exclusion was repealed (HB10)
- Allowing taxpayers to apply for immediate deductions for qualified property, qualified improvement property, and research and experimental expenditures beginning on/after Jan. 1, 2025. (HB10)
- Repeal and/or limitations on various tax credits (HB10)
Sales and Use Tax Expansion
- Extension of sales tax to digital products, software-as-a-service (SaaS), and information services. (HB8)
- Increase in the sales tax rate from 4.45% to 5% until December 31, 2029. (HB10)
- Repeal of 84 sales and use tax exemptions and exclusions. (HB10)
This tax reform package aims to enhance Louisiana’s business climate by simplifying the corporate tax structure and broadening the sales tax base. While these changes may benefit some businesses, others may experience increased tax burdens.
Businesses should carefully analyze the cumulative effect of these changes on their tax liabilities, paying particular attention to the corporate income tax modifications and the repeal of the inventory tax credit.
Furthermore, businesses must carefully evaluate the impact on their obligations as both sellers and purchasers of newly taxable goods and services.
Please note that this is only an overview. For specific guidance, connect with our state and local tax team here.