LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 6 SLS 201ES 1
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 25, 2020 3:39 PM Author: ALLAIN
Dept./Agy.: Revenue
Subject: Suspend Corporate Franchise Tax Analyst: Greg Albrecht
TAX/FRANCHISE/CORPORATE EN -$7,500,000 GF RV See Note Page 1 of 1
Provides for the suspension of the corporation franchise tax and initial corporation franchise tax for small business
corporations. (Item #16) (gov sig)
Present law levies a franchise tax at the rate of $1.50 per $1,000 on the first $300,000 of taxable capital, and $3.00 per
$1,000 on taxable capital in excess of $300,000. The tax is due on the first day of a taxpayers normal accounting period
(calendar or fiscal), and payable in the fifth month after the tax is due.
Proposed law suspends the first tier of the tax ($1.50 per $1,000 on the first $300,000 of taxable capital) for firms subject to
the tax that have up to $1,000,000 of taxable capital. The first-time initial tax ($110) is also suspended. The suspension
applies to franchise tax periods beginning between July 1, 2020 and June 30, 2021. This Act supercedes and controls to the
extent of conflict with HCR 66 of the 2020 Regular Session (which provided this suspension through resolution).
Effective upon governor's signature.
EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0 $0 $0 $0 $0
REVENUES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. ($7,100,000) ($400,000) $0 $0 $0 ($7,500,000)
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total ($7,100,000) ($400,000) $0 $0 $0 ($7,500,000)
EXPENDITURE EXPLANATION
The Department will incur relatively minor costs in FY21 and FY22 ($51,000/year) of IT staff time to modify the tax
processing system to incorporate the suspension and then reinstatement of the tax.
REVENUE EXPLANATION
The estimated effect of this bill is considered here in its entirety, without regard to HCR 66 Enrolled of the 2020 Regular
Session, which suspended the first tier of tax as well, but on a smaller set of firms. That resolution results in $5.8 million of
revenue loss. Thus, the incremental effect of this bill (SB 6) is a $1.7 million revenue loss.
The Department of Revenue looked to the 2017/2018 tax year returns (2017 corporate income tax year, 2018 corporate
franchise tax year: filed on a combined return) as the most recent year of complete filings to estimate the effect of
suspending the first tier of the franchise tax for firms with up to $1,000,000 of taxable capital. The franchise tax associated
with this first tier of tax, after all nonrefundable credits, was $7.5 million. Refundable credits require no tax liability, and
would still be refunded to taxpayers.
The tax is suspended based on the beginning of the franchise tax period for affected firms, while the estimated state fiscal
year revenue losses occur based on the payable date. Most taxpayers are on a calendar year normal accounting period,
while some taxpayers are on their own fiscal year normal accounting periods, making most due dates fall with FY21, but with
some due dates fall within FY22. Thus, most of the state revenue loss will occur in FY21 ($7.1 million), but some will occur in
FY22 ($400,000), as depicted in the table above, and based on the payment pattern of the 2017/2018 tax returns evaluated
by the department.
An initial tax of $110 is levied on every new entity subject to franchise tax. This initial tax would also be suspended for new
entities during the suspension period, and would add to the estimated losses above. Typically, the initial tax generates
approximately $110,000 per year, assuming the typical number of new entities in 2021 as in past years (about 1,100).
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Evan Brasseaux
x 13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Staff Director
or a Net Fee Decrease {S}