The state of Louisiana has enacted significant tax reforms with two new bills, H.B. 2 and H.B. 3, signed into law on December 4, 2024, by the governor. These changes, which introduce a flat corporate income tax rate and phase out the corporate franchise tax, will have a substantial impact on businesses operating in the state. Here’s what you need to know:

Key Provisions Effective January 1, 2025

1. Flat Corporate Income Tax Rate:
   • Louisiana is replacing its current graduated corporate income tax (CIT) structure, which included a top rate of 7.5%, with a single flat CIT rate of 5.5%.
   • This simplifies tax compliance and lowers the overall tax burden for many corporations.
2. Repeal of Certain Credits and Exemptions:
   • Alongside the new flat rate, the legislation eliminates various existing tax credits and exemptions to streamline the corporate tax framework.
3. 100% Bonus Depreciation Election:
   • For taxable years starting on or after January 1, 2025, businesses can elect to take 100% bonus depreciation for certain qualified property, qualified improvement property (QIP), and research and experimental expenditures.
   • This allows taxpayers to fully expense the costs of these investments in the year they are placed in service or incurred, providing an immediate tax benefit and incentivizing business investment.

Key Provisions Effective January 1, 2026

1. Corporate Franchise Tax Repeal:
   • Effective for franchise tax periods beginning on or after January 1, 2026, Louisiana will fully repeal the corporate franchise tax.
   • This marks a significant shift aimed at reducing the tax burden for businesses and enhancing Louisiana’s competitiveness as a business-friendly state.

Implications for Businesses

• Tax Simplification and Savings: The transition to a flat corporate income tax rate and the eventual elimination of the corporate franchise tax are expected to simplify tax compliance and reduce costs for businesses operating in Louisiana.
• Incentives for Investment: The option to elect 100% bonus depreciation offers immediate tax relief for capital investments, encouraging businesses to invest in property and innovation within the state.
• Review and Planning: Businesses should review their tax strategies to account for these changes, particularly the elimination of credits and exemptions that may have previously applied.

Next Steps

• Stay Updated: Additional details on these reforms will be available in an upcoming Multistate Tax Alert. For the latest updates, visit the Louisiana Department of Revenue or consult a trusted tax advisor.
• Consult Professionals: With these changes, businesses may need to adjust their tax planning strategies to maximize benefits under the new law. Reach out to your CPA or tax professional to ensure compliance and optimization.

Louisiana’s recent corporate tax reforms mark a bold step toward simplifying the tax landscape and fostering economic growth. Whether you’re a corporation currently operating in the state or considering expansion, these changes offer opportunities for tax savings and streamlined compliance. Stay informed and prepared to take full advantage of the benefits starting in 2025.