A Louisiana Law That Excluded Texas Franchise Taxes Paid From A Tax Credit Is Deemed Unconstitutional
01 / 30 / 19

A Louisiana Law That Excluded Texas Franchise Taxes Paid From A Tax Credit Is Deemed Unconstitutional

A recent Louisiana Supreme Court ruling in Smith v. Robinson has deemed a 2015 Louisiana tax unconstitutional.

Act 109 of the 2015 legislative session limited an existing statute, La. R.S. 47:33, that provides an income tax credit to resident individuals for “income taxes” paid in another state. The Act limited the credit to taxes paid to another state only if that state offered a reciprocal credit to the state’s own residents transacting business in Louisiana and it also capped the credit so that it could not exceed Louisiana income taxes paid. As a result, the Act denied Louisiana Taxpayers a credit on Texas franchise taxes paid. This affected Louisiana companies who performed work in Texas. Without the credit, these companies paid taxes twice on the same income since the law was changed in 2015.

In Smith v. Robinson, the Louisiana Supreme Court considered whether the Texas franchise tax was an “income tax” for purposes of Louisiana’s credit for tax paid to another state and whether it violated the dormant Commerce Clause of the United States Constitution by discriminating against interstate commerce. They ultimately agreed with the trial court on the matter and found that Act 109 is unconstitutional.

As a result of the Court’s decision that this law is unconstitutional, legislative fiscal analysis has totaled the amount of unconstitutionally collected tax to be approximately $70,000,000. However, the Louisiana Department of Revenue has announced that they only plan to reimburse approximately $23,000 to those who paid this tax “under protest.”

Were you denied credit for Texas franchise taxes paid in 2015-present? If so, we encourage you to contact Bryson Law Firm, LLC to discuss your options for requesting a refund of these taxes paid from the Louisiana Department of Revenue. Louisiana’s constitution provides for “a complete and adequate remedy for the prompt recovery of an illegal tax paid by a taxpayer.”