Corporation Income & Franchise Taxes

Corporation Income Tax

Who Must File?

All corporations and entities taxed as corporations for federal income tax purposes deriving income from Louisiana sources, whether or not they have any net income, must file an income tax return. Corporations that obtain a ruling of exemption from the Internal Revenue Service must submit a copy of the ruling to the Department to obtain an exemption.

Rate of Tax

For periods beginning prior to January 1, 2022 corporations will pay tax on net income computed at the following rates:

• Four percent on the first $25,000 of net income
• Five percent on the next $25,000
• Six percent on the next $50,000
• Seven percent on the next $100,000
• Eight percent on the excess over $200,000

For periods beginning on or after January 1, 2022 corporations will pay tax on net income computed at the following rates:

• Three and one half percent on the first $50,000
• Five and one half percent on the next $100,000
• Seven and one half percent on the excess over $150,000

Effective for tax periods beginning on and after January 1, 2019, Subchapter S Corporations and other pass-through entities who receives an acceptance of the Pass-through Entity Tax Election under LA R.S. 287.732.2 will:

• Compute net income as if they filed a C-corporation return at the federal level, and

• Pay tax on net income computed at the following rates for periods beginning prior to January 1, 2022:

  o Two percent on the first $25,000 of net income
  o Four percent on the next $75,000
  o Six percent on the excess over $100,000
  

• For periods beginning on or after January 1, 2022 pay tax on net income computed at the following rates:

  o One and eighty-five one hundredths percent on the first $25,000 of net income
  o Three and one-half percent on the next $75,000
  o Four and twenty-five one hundredths percent on the excess over $100,000
  

Date Tax Due

Returns and payments are due on or before the 15th day of the fifth month following the close of an accounting period (May 15 for a calendar year).

Corporation Franchise Tax

Who Must File?

Any corporation or entity taxed as a corporation for federal income tax purposes meeting any of the following provisions, unless specifically exempted under the provisions of R.S. 47:608, must file a Louisiana corporation franchise tax return:

1. Organized under the laws of Louisiana.

2. Qualified to do business in this state or doing business in this state.

3. Exercising or continuing the corporate charter within this state.

4. Owning or using any of the corporate capital, plant, or other property in this state whether owned directly or indirectly by or through a partnership, joint venture, or any other business organization of which the domestic or foreign corporation is a related party as defined in R.S. 47:605.1.

Starting with the 2017 Franchise tax period, a limited liability company (L.L.C.) for Louisiana franchise tax purposes is treated and taxed in the same manner that it is treated and taxed for federal income tax purposes. Act 12 of the 2016 First Extraordinary Session extended the imposition of the franchise tax to additional types of entities. An entity taxed as a corporation pursuant to 26 U.S.C. Subtitle A, Chapter 1, Subchapter C for federal income tax purposes, is now subject to franchise tax if it meets any of the criteria listed above, with 2 exceptions:

1. Any L.L.C. qualified and eligible to make an election to be taxed in accordance with the provisions of 26 U.S.C. Subtitle A, Chapter 1, Subchapter S on the first day of the franchise tax period is not subject to franchise tax.

2. Any other entity that was acquired during the period January 1, 2012 to December 31, 2013, by an entity that was taxed pursuant to 26 U.S.C. Subtitle A, Chapter 1, Subchapter S, is not subject to franchise tax.

Rate of Tax

For periods beginning prior to January 1, 2023, $1.50 for each $1,000 or major fraction thereof up to $300,000 of capital employed in Louisiana, and $3 for each $1,000 or major fraction thereof in excess of $300,000 of capital employed in Louisiana.

For periods beginning on or after January 1, 2023, $2.75 for each $1,000 or major fraction thereof in excess of $300,000 of capital employed in Louisiana.

The initial corporation franchise tax is $110. For information concerning capital employed in Louisiana and computation of the tax, see the instructions for Form CIFT-620.

Date Returns Due

Initial return: An initial return covering the period beginning with the date the corporation first becomes liable for filing a return and ending with the next close of an accounting period must be filed on or before the 15th day of the third month after the corporation first becomes liable.

Annual return : Louisiana corporation franchise tax accrues on the first day of each accounting year, and the return for that period must be filed on or before the 15th day of the fifth month of that accounting year.

Declaration of Estimated Tax

R.S. 47:287.654 requires that corporations pay estimated income tax if the corporation’s income tax less any credits for the taxable year can reasonably be expected to be $1,000 or more. If the corporation is required to pay estimated income tax, the percentage of the estimated tax must be paid on the 15th day of the following month based on the period in which the estimated tax payment requirement was met:

Recomputation of Estimated Tax

If, after paying any installment of estimated tax, the taxpayer determines that a new estimate is required, the payment amounts for the remaining installments may be increased or decreased, as the case may be. The amount required by the new estimate is computed by calculating the difference between the previous estimated tax amount and the new estimated tax amount and dividing that difference between the number of installments remaining to be paid.

Overpayment of Estimated Income Tax Installment

If a corporation pays a tax installment that is more than the correct amount of the installment, R.S. 47:287.660 allows the overpayment to be credited against the corporation’s unpaid installments, and any excess to be credited or refunded.

Adjustment of Overpayment of Estimated Income Tax

Revised Statute 47:287.656 allows corporations to file an application for an adjustment of an overpayment of its estimated income tax for a taxable year. The application must be filed after the close of the taxable year and on or before the 15th day of the fourth month thereafter, and before the tax return is filed. However, no application will be allowed unless the adjustment amount is at least ten percent of the corporation’s estimated tax amount and more than $500. This application for an adjustment of overpayment of estimated income tax does not represent a claim for credit or refund. There is no application form for this adjustment. However, the request should include the following information:

1. The estimated income tax paid by the corporation during the taxable year.

2. Amount that the corporation estimates its income tax liability is for the taxable year.

3. Amount of the adjustment.

4. Other pertinent information.

Within 45 days of the date that an application for an adjustment is filed, the adjustment will be allowed or disallowed if it is determined that the application contains material omissions or errors. If the adjustment is allowed, the secretary may credit the amount of the adjustment against any other tax liability owed by the corporation and refund the remainder.

If it is later determined that adjustment amount was excessive, a penalty of 12 percent annually of the excessive amount from the date on which the credit was allowed or the refund is paid to the due date for the taxable year. For the purposes of the penalty, the excessive amount is the lesser of the amount of the adjustment or the amount by which the corporation’s income tax liability exceeds the estimated income tax paid during the taxable year reduced by the amount of the adjustment.

Requesting an Extension of Time for Filing a Return

Revised Statute 47:287.614 allows the granting of an automatic extension of six months for filing the corporation income tax return IF you timely requested an extension for federal income tax purposes. No paper or electronic extension form needs to be filed to obtain the automatic extension. You will need to mark the box on Form CIFT-620 indicating that you timely requested an extension for federal income tax purposes in order to receive the extension. This is only an extension to file and NOT an extension of time to pay the tax due. Payments received after the return due date will be charged interest and late payment penalty. Electronic payment can be made through LaTAP or by credit card . If you need to mail in a check or money order, you must use the extension payment voucher, Form CIFT-620EXT-V. This voucher can be printed through the Online Payment Voucher application.

Filing an Amended Return

In order to amend the amounts reported for the computation of income or franchise taxes, you must file an amended (corrected) Form CIFT-620. Louisiana Revised Statute 47:287.614(C) requires every taxpayer whose federal return is adjusted to furnish a statement disclosing the nature and amounts of such adjustments within 180 days after the adjustments have been made and accepted. This statement should accompany the amended return.

Electronic Filing Mandate

1. Revised Statute 47:1520 authorizes the secretary the discretion to require electronic filing of tax returns or reports by administrative rule. Louisiana Administrative Code (LAC) 61:III.1503 and 1505 were promulgated to require the electronic filing of the corporation income and franchise tax return (Form CIFT-620). Taxpayers are required to file the return electronically for income (franchise) tax periods beginning:

   • 1/1/2018 (1/1/2019) - if their total assets have an absolute value equal to or greater than $500,000.

   • 1/1/2019 (1/1/2020)- if their total assets have an absolute value equal to or greater than $250,000.