Corporation Income and Franchise Taxes

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How does Louisiana tax a corporation that is classified by the IRS as an "S" (small business) corporation?

Louisiana taxes Subchapter S corporations, known as S corporations or Sub S corporations, in the same manner as regular corporations, with one exception. For federal tax purposes, an S corporation will determine its items of income and expense in the same manner as if it were a regular "C" corporation. Since the classification of a Subchapter S corporation is a determination made under federal law, any question regarding that classification must be referred to the IRS.

A corporation classified by the IRS as an "S" corporation may exclude all or part of its income derived from the activities of the corporation, depending upon the domicile of the shareholders. Shareholders who are Louisiana residents are required to file a Louisiana individual income tax return to report their portion of the income derived from the activities of the corporation. In general terms, the portion of income that can be excluded is determined by the ratio of the number of issued and outstanding shares of the S corporation’s capital stock owned by Louisiana resident individuals to total number of issues and outstanding shares of capital stock.

Shareholders who are nonresidents of Louisiana may elect to file the individual nonresident and part-year resident return to report their portion of the income derived from the activities of the S corporation or to allow the corporation to pay the tax at the corporate income tax rate on their portion of the income. When electing the second method, the Subchapter S exclusion must not offset the net income to be reported on the corporation income and franchise taxes return.

An S corporation is not exempt from franchise tax. The franchise tax is imposed on an S corporation in the same manner as it is for a C corporation.

How are Limited Liability Companies (LLCs) taxed for Louisiana income and franchise tax purposes?

An LLC is treated and taxed in the same manner for Louisiana income tax purposes as it is treated and taxed for federal income tax purposes. If the LLC is taxed as a corporation for federal income tax purposes, the LLC will be taxed as a corporation for Louisiana income tax purposes. If the LLC is considered a partnership for federal income tax purposes, which is the most common situation, the LLC is treated as a partnership for Louisiana income tax purposes.

An LLC is never considered to be a corporation for franchise tax purposes, and therefore is not subject to Louisiana franchise tax.

Who should I contact if I need a letter of good standing?

A corporation that requires a Letter of Good Standing should contact our Special Collection Unit in the Collection Division.

Who should I contact if I do not know the account number for my corporation?

Contact our Customer Service Division for instructions to obtain your account number.

If my corporation is inactive, do I need to file a corporate income/franchise return?

Yes. Returns need to be filed until the corporation’s charter is dissolved, liquidated, or withdrawn through the Louisiana Secretary of State. The franchise tax for the return must be calculated at a rate of $1.50 for each $1,000 or major fraction thereof, on the first $300,000 and at a rate of $3 for each $1,000, or major fraction thereof that exceeds $300,000. The franchise tax calculated as a result of that two-part calculation is the amount of franchise tax that should be remitted.

I did not put my corporation state account number on my tax return, and was assessed a negligence penalty--why was that?

Corporations are required to include their Louisiana corporation income and franchise tax account number on all tax returns. Returns filed without this information must be manually researched and processed, which is administratively costly for LDR.

In 2003, corporations were mailed copies of their state tax account numbers and notified of the requirement to include the state number on the corporation tax returns. The federal employer identification number (FEIN) is not acceptable. Included in the notice was a warning that failure to include the state identification number would result in a negligence penalty, as authorized by Revised Statute 47:1604.1, which provides that a negligence penalty can be imposed "when a taxpayer makes an incorrect return and the circumstances indicate willful negligence or intentional disregard of rules and regulations, but no intent to defraud...". See the December 22, 2003, Press Release entitled Corporate Account Numbers to be Mailed to Businesses. The negligence penalty is five percent of the tax or deficiency, or $10, whichever is greater.

If you believe that the negligence penalty was wrongfully imposed, you may request that the penalty be abated from the Collections Division, at Post Office Box 201, Baton Rouge, LA 70821, or from your local Regional Office. Your abatement request must include the reason why you believe the negligence penalty should not have been imposed.

How does a corporation close its Louisiana Revenue account number?

To close a corporation’s Louisiana Revenue account number, the corporation must either dissolve or withdraw its corporate charter with the Louisiana Secretary of State. If the corporation was chartered as a domestic corporation, one that was formed in the state of Louisiana, the corporation must file dissolution papers with the Louisiana Secretary of State’s office to dissolve the corporation’s charter. If the corporation was chartered as a foreign corporation, one that was formed in another state or out of the country, the corporation must file an application with the Louisiana Secretary of State’s office to withdraw the corporation’s charter. The Louisiana Secretary of State’s office will notify the Louisiana Department of Revenue that the appropriate paperwork has been filed with their office. That notification will allow the Department of Revenue to close the Louisiana Revenue account number.

How do I request an extension to file a Louisiana Corporation Income and Franchise taxes return?

Corporate taxpayers who need additional time to file their Louisiana corporation income and franchise taxes returns must request an extension electronically by:

  1. Requesting the extensions electronically through the bulk extension filing application or the Online Extension Filing application on LDR website;
  2. Requesting the extensions electronically through tax preparation software that supports the electronic filing of the Louisiana Application for Extension to File Corporation Income and Franchise Tax; or
  3. Requesting an extension request via LDR’s IVR phone system by calling 225-922-3270 or 888-829-3071. For an extension request, select option #3, then select option #2. Taxpayers will need the Corporation’s LA tax account number to request the extension.
Is there a deadline to request an extension to file a Louisiana Corporation Income and Franchise taxes return?

Yes, all extension requests must be electronically made on or before the return’s due date. The return’s due date is April 15th for calendar year filers, and the 15th day of the fourth month following the close of the taxable year for fiscal year filers. Extension requests received after the return’s due date or on paper will not be honored.

If an extension to file a corporate income and franchises taxes return is received timely, do I still owe late payment penalty and interest on taxes that are paid when the return is filed?

Yes, the extension only allows for an extension of time to file the tax return. The extension does not allow an extension of time to pay the tax due. To avoid interest and penalty assessments, estimated taxes should be paid on or before the original due date.

Is there an electronic filing mandate for requesting an extension to file a Louisiana Corporation Income and Franchise taxes return, and if so, what are my options?

Yes. The Department has adopted Rule LAC 61:III.2503 to require the electronic filing of a request for an extension to file a corporation income and franchise tax return.

Currently the only electronic method available on LDR’s website to request an extension is through the bulk extension filing application or the Online Extension Filing application. Both applications can be used to request extensions for corporations and can be used by any taxpayer who has a current Louisiana Account Number listed with LDR. The bulk extension filing application can also be used by any firm who has an Electronic Filing Identification Number (EFIN) registered with LDR.

You may also request an extension through tax preparation software that supports the electronic filing of the Louisiana Application for Extension to File Corporation Income and Franchise Tax or by calling LDR’s IVR phone system at 225-922-3270 or 888-829-3071. For an extension request, select option #3, then select option #2. Taxpayers will need the Corporation’s LA tax account number to request the extension.

When I make an estimated payment by the due date of my Louisiana Corporation Income and Franchise taxes return, am I automatically granted an extension to file?

No, a payment does not qualify as a request for an extension to file. Corporate taxpayers who need additional time to file their Louisiana corporation income and franchise tax returns may request an extension electronically by:

  1. Requesting the extensions electronically through the bulk extension filing application or the Online Extension Filing application on LDR web site;
  2. Requesting the extensions electronically through tax preparation software that supports the electronic filing of the Louisiana Application for Extension to File Corporation Income and Franchise Tax; or
  3. Requesting an extension request via LDR’s IVR phone system by calling 225-922-3270 or 888-829-3071. For an extension request, select option #3, then select option #2. Taxpayers will need the Corporation’s LA tax account number to request the extension.
When I make my last estimated payment, does that payment qualify as a request for an extension to file a Louisiana Corporation Income and Franchise taxes return?

No, a payment does not qualify as a request for an extension to file a Louisiana Corporation Income and Franchise tax return. See question above for how to request an extension.

Can I request an extension to file a Louisiana Corporation Income and Franchise taxes return when I make an EFT payment?

No, a payment does not qualify as a request for an extension to file a Louisiana Corporation Income and Franchise tax return. See above for how to request an extension.

How does a corporation dissolve its charter?

Domestic corporations, those that were formed in the state of Louisiana, wishing to dissolve their charter must file dissolution papers with the Louisiana Secretary of State’s office. A corporation can choose to dissolve by two different methods: by filing a notarized affidavit of dissolution with the Louisiana Secretary of State, or by filing an application to dissolve, referred to as a long form dissolution. In the case of dissolution by a notarized affidavit, the affidavit must state that the shareholders have agreed to dissolve the corporation, that no outstanding debt is owed by the corporation, and that the corporation does not own any immovable property. A clearance is not issued by the Secretary of State for these types of dissolutions.

When filing the application for the long form dissolution, the application is sent to the Louisiana Secretary of State’s office. The Louisiana Secretary of State’s office sends notification to the Louisiana Department of Revenue, the Louisiana Workforce Commission’s Department of Employment Security, and in certain cases to the Louisiana Department of Environmental Quality, to inform the agencies that the corporation wishes to dissolve its charter. Each agency reviews the corporation’s file to determine if any unresolved issues exist on the account. If no unresolved issues exist, each agency sends to the Louisiana Secretary of State notification that the corporation’s account is clear. The Louisiana Secretary of State issues a formal clearance to the corporation and notifies it that its charter is dissolved.

A foreign corporation wishes to cease operating in Louisiana. How does it close its Louisiana Revenue account number and obtain a clearance?

A foreign corporation, one that was formed in another state or country, must withdraw its charter by filing an application with the Louisiana Secretary of State. When the withdrawal application is filed, the Louisiana Secretary of State’s office will send a notice to the Louisiana Department of Revenue, the Louisiana Workforce Commission’s Department of Employment Security, and in certain cases, the Louisiana Department of Environmental Quality to determine if any unresolved issues exist on the corporation’s account. The Louisiana Department of Revenue will close the Revenue Account number, and upon reviewing the corporation’s account, will notify the Louisiana Secretary of State of any outstanding liabilities. If no outstanding liabilities exist, the Louisiana Department of Revenue will send a clearance to the Louisiana Secretary of State. The Louisiana Secretary of State must receive clearances from each of the other appropriate agencies before an overall clearance is issued to the corporation.

Is there a $10 minimum amount imposed for corporation franchise tax on the Corporation Income and Franchise tax return?

No. Act 476 of the 2009 Regular Legislative Session was amended to repeal the imposition of the $10 minimum franchise tax for corporations. For tax periods after January 1, 2010, corporation franchise tax is calculated at a rate of $1.50 for each $1,000, or the major fraction thereof, on the first $300,000 and at a rate of $3 for each $1,000, or major fraction thereof that exceeds $300,000. The franchise tax calculated as a result of that two-part calculation is the amount of franchise tax that should be remitted.

How do I make a payment with my request for an extension to file a Louisiana Corporation Income and Franchise taxes return?

Electronic payment can be made through tax preparation software that supports the option, through LaTap; or by credit card at Officialpayments.com. If you need to mail in a check or money order, you must use the Electronically Filed Extension Payment Voucher, Form CIFT-620Ext-V. This voucher can be printed through the Online Extension Filing application or the Online Payment Voucher application and mailed to Post Office Box 751, Baton Rouge, LA 70821-0751.

Internal Revenue Code Section 280C requires a taxpayer who elects to claim certain credits that are based on an expense to reduce the federal deduction for the expense by the dollar amount of the credit claimed. How does Louisiana handle the adjustment made under IRC Section 280C?

Under R.S. 47:287.73(C)(4) Louisiana allows the deduction of any expenses disallowed under IRC Section 280C in calculating Louisiana taxable income for corporations. Therefore the amount of the expense disallowed under IRC Section 280C can be deducted in calculating taxable income for Louisiana.

A corporation would show this modification to income on Form CIFT-620, either on Schedule D, line 9 or Schedule G as a subtraction.

How can I file 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. File the amended return as if the original return was not filed and do not make any adjustments for refunds previously received or for payments previously made. This information is already on file and LDR will adjust your account accordingly. 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 60 days after the adjustments have been made and accepted. This statement should accompany the amended return.

A corrected return for the tax year being amended should be submitted along with an explanation of the change(s) and a copy of the federal amended return, Form 1120X, if one was filed. The return should be clearly marked with an "X" in the "Amended Return" box. Mail an amended return to the following address:

Louisiana Department of Revenue
P.O. Box 91011
Baton Rouge, La 70821-9011

You also have the option of filing the amended return electronically through the LDR Fed/State e-file program for corporation income and franchise tax returns.

Can I amend my Louisiana return electronically even if I filed my original return on paper?

Yes, you can file an amended return electronically through the LDR Fed/State e-file program. The LDR Corporation E-file program for corporation income and franchise tax returns is available starting with the 2008 tax year.