La. Enacts Corp. Tax Breaks Aimed At Pandemic Recovery

By Paul Williams
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Law360 (July 15, 2020, 7:21 PM EDT) -- Louisiana's governor signed a package of bills expanding certain corporate tax incentive programs and providing casinos with a deduction for revenue derived from promotional play wagers to offer businesses tax relief amid the novel coronavirus pandemic.

Gov. John Bel Edwards, a Democrat, signed a host of legislation on Monday pushed by the Legislature's Republican leadership, who said the bills would aid businesses that have been the most adversely affected by the pandemic. Two bills that Edwards signed, H.B. 13 and H.B. 19, allow the state's retail, food service and hospitality sectors to participate in existing job-creation tax incentive programs available to other industries.

Another bill that the governor signed, S.B. 24, extends program applications for the state's Angel Investor Tax Credit Program through fiscal year 2025 and will offer an enhanced 35% credit for investments in businesses within federal opportunity zones established by the 2017 Tax Cuts and Jobs Act . Currently, the program offers a credit for 25% of eligible investments for applications received before July 1, 2021.

The program's enhanced and non-enhanced credits can now be spread out over two years rather than three years, and the annual program credit award cap has increased to $7.2 million from $3.6 million, according to the bill's fiscal note.

Additionally, Edwards signed S.B. 5, allowing riverboat casinos, land-based casinos and racetrack slot machine operators to annually deduct up to $5 million from their gross revenue that is directly attributable to promotional play vouchers and credits used to attract customers.

The bills, along with another measure that Edwards also signed that suspended a portion of the state's corporation franchise tax, passed in a special session in June that lawmakers called to pass the state's budget and consider a host of tax breaks designed to help businesses during the pandemic.

Most of the tax break bills were suggested by a business-heavy task force that the state's legislative leaders impaneled to explore how to boost Louisiana's economic recovery from the spread of COVID-19, the respiratory illness caused by the virus. Some Democrats had joined the Republican majority's support for the bills, as the measures passed with enough support to override any potential vetoes.

Stephen Waguespack, the president and chief executive officer of the Louisiana Association of Business and Industry, told Law360 in a statement Wednesday that the tax breaks will provide critical assistance to businesses that are suffering financially because of the pandemic and the oil price crash.

"These bills are a great first step to help get Louisiana businesses back on the road to recovery and rebuild our shattered economy," Waguespack said.

A representative of Edwards did not respond to questions about the bills on Wednesday. However, the state's revenue secretary, Kimberly Lewis Robinson, had previously told Law360 that the governor's administration had concerns about the return on investment potential for Louisiana under H.B. 13 and H.B. 19.

H.B. 13 allows retailers, restaurants and hotels to participate in Louisiana's Enterprise Zone incentive, which offers one-time tax credits of $1,000 or $3,500 per qualifying job created in designated areas. Additionally, the program offers a choice of a sales tax rebate on qualifying expenditures or a 1.5% refundable credit on qualifying capital expenditures.

H.B. 19 also makes those industries eligible for the state's Quality Jobs Program. That program allows payroll subsidies for qualifying businesses that create new jobs that pay at least $18 an hour, as well as a sales tax rebate or 1.5% refundable credit similar to that of the Enterprise Zone program.

Both bills would allow restaurants, retailers and hotels with no more than 50 employees nationwide to enter into the programs between July 1 and Dec. 31, 2021, with their eligibility to earn benefits terminating after June 30, 2023, according to fiscal notes on the bills.

Robinson had said that lawmakers had previously removed those industries from being eligible for the Enterprise Zone incentives because the number of jobs that some of them created were small in comparison with the large rebates they received for projects with high capital expenditures.

The bills' fiscal notes were unable to peg an exact estimate of how much revenue the bills would cost the state. The casino tax deduction carried the most hefty price tag, at an estimated $83 million loss of revenue over the next five fiscal years, according to the bill's fiscal note.

Some Democrats had objected to several of the measures, saying that they would result in a potential windfall for businesses that may not have been adversely affected by the pandemic and could hamper the state's budget.

Louisiana's Revenue Estimating Conference determined in May that the pandemic would slash state general fund revenue by about $868 million for fiscal year 2021. Edwards said in a statement on July 8 that he ordered cabinet agencies to brace for possible budget cuts by sequestering 10% of their budgets and hinted that cuts to Louisiana's judicial and legislative branches may also be on the table.

The offices of the House Speaker Clay Schexnayder, R-Gonzales, and Senate President Patrick Cortez, R-Lafayette, did not respond to requests for comment Wednesday. Rep. Ted James, D-Baton Rouge, one of the more vocal opponents to the Enterprise Zone and Quality Jobs bills, also did not respond to a request for comment.

--Additional reporting by Asha Glover. Editing by Joyce Laskowski. 

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