On Tuesday, the Louisiana Supreme Court rejected an attempt to block a constitutional amendment needed to complete the restructuring of the state’s tax laws sought by Gov. Jeff Landry and the Louisiana Legislature. The Court allowed to move forward a statewide vote on a package of changes to the state’s tax laws by dismissing a case challenging how the reforms were presented to voters.
Amendment 2, one of four amendments voters across the state are considering on the March 29th ballot, would make changes to provisions of the state constitution that govern taxes and government spending. The other amendments involve debt payments, specialized courts, juvenile crime and vacancies in judgeships.
The four amendments were passed by lawmakers in a special legislative session in November. The House and Senate created a special statewide election to consider these amendments. Each proposal had to receive a two-third favorable vote in the House and Senate to reach the ballot. Now, each amendment needs a majority vote at the polls to get enacted.
While folks at the Capitol are focused on the March 29th ballot, Louisiana taxpayers should expect the Legislature to revisit some of the measures that were enacted during last year’s special session in the upcoming fiscal session which starts in April.
One item expected to be addressed in a cleanup bill will be reinstating vendor compensation, which is the cut of sales taxes that businesses get to keep, for local sales tax collections. In addition, lawmakers plan to clarify that K-12 schools and nonprofits don’t have to collect sales taxes for sports tickets and events, an issue Revenue Secretary Richard Nelson addressed in Revenue Information Bulletin No. 25-009 earlier this year.
It is also expected that the Legislature will reconsider the incentives the state is offering to entice local governments to forgo charging the inventory tax, an option the locals will have if the amendment passes. Lawmakers approved upfront payments for parishes, based on how much inventory tax they collect, but failed to include totals collected at the municipal level. If Amendment 2 passes, some dollars that have been flowing into two state trust funds will be available for general spending. It has been suggested by legislators that some of that money could be used to enhance payments to local governments that choose to give up inventory taxes.
Secretary Nelson has noted that there might be some appetite for a “limited services sales tax bill” although the move to expand the sales tax base to include more services was controversial.
Lawmakers are also expected to make an attempt to lower severance taxes on oil. Currently, the state’s horizontal well exemption spares much of the natural gas production from taxation; limiting that exemption could allow the Legislature to pay for a lower rate on oil.
If Amendment 2 passes on March 29th, enacting a new exemption, exclusion, deduction, credit or rebate will take a two-thirds vote, rather than a simple majority in the Legislature.
For further questions regarding this update, contact Liskow attorneys Bob Angelico, Caroline Lafourcade, and Kevin Naccari, Jr., and visit our Tax practice page.