Louisiana Enacts Significant Tax Changes

On Dec. 4, 2024, Louisiana Gov. Jeff Landry signed multiple legislative bills enacting changes to several state taxes. In addition, the legislation sets the stage for a statewide ballot initiative to amend the Louisiana Constitution.

Crowe observation

Triggered by a looming fiscal cliff, the governor called for a special legislative session centered on tax reform. Though legislators gave the governor most of his requests, they raised the sales tax rate rather than adopting the governor’s proposal to broaden the sales tax base to cover services.

Louisiana tax changes signed into law

• Moving from graduated corporate income tax rates to a flat 5.5% rate
  • Applicable to tax years beginning on or after Jan. 1, 2025, H.B. 2 imposes a flat corporate income tax rate of 5.5% on Louisiana taxable income.
  • Through the 2024 tax year, the graduated corporate income tax rates are 3.5% on the first $50,000 of taxable income, 5.5% on $50,000 to $150,000, and 7.5% on taxable income greater than $150,000.
• Corporate election to claim bonus depreciation and amortization
  • Applicable to tax years beginning on or after Jan. 1, 2025, H.B. 10 allows taxpayers to elect bonus depreciation or amortization for costs of qualified property, qualified improvement property, and research and experimental expenditures as defined under IRC Section 174.

    “Bonus depreciation” and “bonus amortization” are defined under Louisiana law as the immediate deduction of such expenditures in the tax year in which the property is placed in service or when the expenditure is paid or incurred.

    With the phase-out of federal bonus depreciation, H.B. 10 effectively restores 100% full expensing for Louisiana state tax for qualified property starting in tax year 2025. Additionally, allowing “bonus amortization” for IRC Section 174 expenses effectively decouples Louisiana from the federal treatment enacted by the federal Tax Cuts and Jobs Act of 2017 and allows immediate expensing of such expenditures.

Crowe observation

As a result of H.B. 10, Louisiana taxpayers will have to separately determine federal and Louisiana bonus depreciation and research and experimental costs starting with the 2025 tax year.

• Moving from graduated individual income tax rates to a flat 3% rate
  • Applicable to tax years beginning on or after Jan. 1, 2025, H.B. 10 imposes a flat individual income tax rate of 3% on net income.

    Through the 2024 tax year, the graduated individual income tax rates are 1.85% on the first $12,500 of taxable income, 3.5% on the next $37,500 of taxable income, and 4.25% on taxable income greater than $150,000.

• Corporate franchise tax repealed
  • H.B. 3 repeals the Louisiana Corporate Franchise Tax applicable to corporate franchise tax periods beginning on or after Jan. 1, 2026. This change means calendar year filers will pay franchise tax only once more with their 2024 income and 2025 franchise tax returns. The final franchise tax will be based on a taxpayer’s Dec. 31, 2024, balance sheet or 2024 assessed property values.
• Sales tax rate increased and additions to base
  • Louisiana’s sales and use tax rate was scheduled to be 4.45% through June 30, 2025. The rate was due to revert to its prior rate of 4% starting July 1, 2025, as the result of the expiration of a temporary 0.45% rate increase. H.B. 10 increases the sales and use tax rate to 5% beginning on Jan. 1, 2025. The rate is set to decrease to 4.75% beginning on Jan. 1, 2030.
  • H.B. 8 makes several previously untaxed digital products (books, games, and periodicals) subject to sales and use tax beginning on Jan. 1, 2025.

Special election to adopt amendments to the state’s constitution

The special session also resulted in the passage of H.B. 6 which creates a March 29, 2025, statewide election to adopt amendments to the Louisiana Constitution as provided in H.B. 7. If passed, the constitutional amendment would rewrite portions of Article VII pertaining to the state’s budget and taxation. The changes provided in the amendment include, among other measures, a two-thirds majority vote requirement by lawmakers to make certain changes to state taxes, a state spending cap, a maximum individual income tax rate, required uniformity between state and local tax measures, and property tax exemptions.

Looking ahead

Louisiana enacted several tax bills that affect corporate income and franchise tax, individual income tax, and sales and use taxes, with most changes effective beginning in 2025. The upcoming special election also could affect Louisiana state taxes for years to come. Louisiana taxpayers should consult their tax advisers to evaluate the impact of these changes and to keep abreast of future developments.