LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 19 SLS 23RS 157
Bill Text Version: ENGROSSED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: April 25, 2023 8:46 PM Author: ALLAIN
Dept./Agy.: Revenue
Subject: Corporate Income Tax & Inventory Tax Credit Applicability Analyst: Benjamin Vincent
TAX/INCOME/CORPORATE EG +$10,000,000 GF RV See Note Page 1 of 1
Eliminates the inventory tax credit for corporations and reduces the corporate income tax rates. (1/1/24)
Proposed law reduces the number of Corporate Income Tax (CIT) brackets from three to two, and reduces rates as follows:
| Existing Rate | Proposed Rate
$0-50K | 3.5% | 2.0%
$50-150K | 5.5% | 4.75%
$150K+ | 7.5% | 4.75%
Proposed law additionally repeals the ability to claim the ad valorem tax credit for inventory or natural gas to corporate
income or franchise taxes. Effective January 1, 2024, and applies to all taxable years beginning on or after that date.
EXPENDITURES 2023-24 2024-25 2025-26 2026-27 2027-28 5 -YEAR TOTAL
State Gen. Fd. $0 INCREASE $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
REVENUES 2023-24 2024-25 2025-26 2026-27 2027-28 5 -YEAR TOTAL
State Gen. Fd. $2,000,000 $10,000,000 $10,000,000 $10,000,000 $10,000,000 $42,000,000
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 $2,000,000 $10,000,000 $10,000,000 $10,000,000 $10,000,000 $42,000,000
EXPENDITURE EXPLANATION
LDR reports that implementation of proposed law will require additional expenditures for system modification, development
and testing, tax form modification, and certain processing equipment modifications and development. The change is
estimated at $81,000 of staff time.
REVENUE EXPLANATION
Proposed law reduces state general fund revenues by reducing CIT rates, and offsets the reduction by limiting the
applicability of the ad valorem tax credits for inventory and natural gas storage to individual income tax liabilities only.
Impact of Tax Rate Changes
An estimate of the impact of the rate reductions in a typical year is estimated based on CIT collections reported in FY22, and
is then adjusted in proportion to REC projections for FY24, the bill’s initial effective year. Proposed law is anticipated to
reduce CIT collections by approximately $152 million due to changes in tax liabilities.
LDR has previously reported a typical corporate filing pattern in which 18% of liability changes occur in the immediate fiscal
year, followed by 72% in the second fiscal year, and 10% in the third fiscal year. This results in a ramp-up of revenue
impact in the bill’s first three years: -$27 million in FY24, -$136 million in FY25, and -$152 million in FY26 and beyond.
Impact of Ad Valorem Tax Credit Changes
A material portion of ad valorem credits would be made unusable by proposed law due to inability to claim against corporate
income or franchise tax. To the extent that credits become fully unusable, revenue collections will increase, offsetting the
impact of tax rate reductions. The most recent and complete data based on tax returns (2020 returns) indicated that $266
million in total ad valorem credits applied toward either CIT or CFT liabilities. Depending on the size of the credit the
taxpayer is eligible for, and depending on taxpayer participation in certain other incentive programs, a material portion of
such credits are unused nonrefundable credits that are carried forward, and would not be made unusable by proposed law.
LDR estimates that approximately 61% of ad valorem credits will be made unusable, resulting in a revenue gain of
approximately $162 million annually and offsetting the revenue reduction resulting from the rate changes. The typical three-
year CIT ramp-up effects (18%/72%/10%) will result in a +$29 million in FY24, +$146 million in FY25, and +$162 million in
FY26.
Net effects of the tax rate and ad valorem credit applicability changes for each year are reflected in the table above. Actual
revenue loss from proposed law may differ materially from these estimates due to the volatility inherent in CIT collections.
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}
Deborah Vivien
x 13.5.2 >= $500,000 Annual Tax or Fee x 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Chief Economist
or a Net Fee Decrease {S}


Statutes affected:
SB19 Original: 47:6006(A), 47:6006(B)(1), 47:6006(B)(2)
SB19 Engrossed: 47:6006(A), 47:6006(B)(1), 47:6006(B)(2)