Louisiana enacts credits and incentives changes


Mike Eickhoff
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Tam Vo
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John Castro
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Zach Scott
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Louisiana Gov. John Bel Edwards signed legislation during the 2020 First Extraordinary Session of the legislature that amends the New Markets Jobs Tax Credit (“NMJTC”),1 Angel Investor Tax Credit (“AITC”),2 Enterprise Zone (“EZ”) Program,3 and the Quality Jobs (“QJ”) Program.4 The legislation also provides a sales and use tax rebate for specified fiber-optic cable equipment.5

NMJTC changes On July 13, 2020, Gov. Edwards signed legislation, S.B. 13, which makes multiple changes to the NMJTC.6 The analogous federal New Markets Tax Credit Program (“NMTC Program”) helps economically distressed and low-income communities attract private investment capital by providing investors with a federal tax credit opportunity.7 Existing Louisiana law allows investors to claim the Louisiana NMJTC against the insurance premium tax.8 Credit eligibility is based on the investment of private capital in low-income community businesses in Louisiana.

S.B. 13 makes multiple amendments to the program related to qualified equity investments issued on or after Aug. 1, 2020. The tax credit amount for each year is determined by multiplying the investment purchase price by specified percentages. Under existing law, this percentage is 14% for the first and second credit allowance dates, and 8.5% for the third and fourth credit allowance dates.9 As amended, these existing percentages apply for all qualified investments issued on or after Aug. 1, 2013, and before Aug. 1, 2020. S.B. 13 increases the number of credit allowance dates to seven and provides that the applicable percentage is 15% for the fourth through sixth credit allowance dates and 10% for the seventh credit allowance for investments issued on or after Aug. 1, 2020.10

New definitions are included in S.B. 13 to define “impact business” and “rural parish.”11 The legislation further specifies the types of qualified active low-income community businesses as well. The statute is amended to adopt the definition of a qualified low-income community business from IRC Sec. 45D and Treas. Reg. Sec. 1.45D-1.12 As amended, for all investments made on or after Aug. 1, 2020, qualified businesses must also be engaged in a specified North American Industry Classification System (“NAICS”) code and have a total employee count not to exceed the greater of 250 or the number of employees specified for each NAICS industry definition in 13 Code Fed. Regs. Sec. 121.201.13

The definition of a “qualified community development entity” is amended to exclude any entity that has invested less than $100 million in Louisiana qualified active low-income community businesses or other Louisiana investments for any investments issued on or after August 1, 2020.14 The definition of “qualified equity investment” has been updated so that 100% of the cash purchase price must be used in qualified active low-income community businesses within nine months of the initial credit allowance date for any investments issued on or after Aug. 1, 2020.15 Investments issued after Aug. 1, 2013, through July 31, 2020, continue to have a 12-month deadline.16 The new law also limits the amount of qualified low-income community investment in a business to $5 million for investments on or after Aug. 1, 2020.17 Prior to August 1, 2020, the limit was $10 million.18

S.B. 13 amends the definition of “state premium tax liability” to exclude liability incurred under La. Rev. Stat. Sec. 22:842(C).19 The amended law also limits the time period that an entity may use any excess tax credit amount, prospectively, to five (previously, 10) years.20

The law amends the application to the program to include a section for the entity to provide evidence that it has invested at least $100 million in Louisiana qualified active low-income community businesses or other Louisiana investments.21 Also, the new law allocates an additional $75 million of investment certification for the purpose of earning tax credits.22

S.B. 13 amends the recapture provisions for qualified equity investments issued on or after August 1, 2020.23 The issuer has nine months from the date of issuance in which to invest an amount equal to 100% of the purchase price of the qualified equity investment in Louisiana. Additionally, at least 50% of the purchase price of the investment must be within impact businesses.24 If investments issued on or after Aug. 1, 2020, fail to meet the requirements, the investment has a three-month cure period before the investment is recaptured.25 Lastly, the new legislation authorizes qualified community development entities, that issue qualified equity investments on or after Aug. 1, 2020, to submit a report within five business days of the nine-month anniversary of the initial credit allowance date.26

AITC changes In addition to the NMTJC legislation, Edwards signed legislation that amended the AITC program. The AITC was originally created to encourage third parties to invest in early stage wealth-creating businesses within the state, which would expand the economy of the state by enlarging its base of wealth-creating businesses, and enlarge the number of quality jobs available to retain the presence of young people educated in Louisiana.27

The incentive is available to Louisiana entrepreneurial businesses that are not involved in retail sales, real estate, professional services, gaming or gambling, natural resource extraction or exploration, or financial services, including venture capital funds.28 Qualified use of investment includes capital improvements, plant equipment, research and development, and working capital.29 The business must have a Louisiana taxpayer identification number and must possess a fully developed business plan that includes all appropriate long-term and short-term forecasts and contingencies of business operations, including research and development, profit, loss and cash flow projections, and details of expenditure of angel investor funding.30 The business is required to have either gross annual sales of less than $10 million or a business net worth of less than $2 million. The business is required to employ 50 or fewer full-time employees and must demonstrate that it will create quality jobs in the state as well. Lastly, the business is required to have a plan of progression through which more than 50% of its sales will be derived from outside Louisiana.31

Edwards signed S.B. 1732 and S.B. 2433 on July 13, 2020, to amend the AITC provisions. Specifically, S.B. 17 extends the program to allow credits to be granted or reserved for reservation applications until July 1, 2023 (previously, July 1, 2021).34 S.B. 24 allows credits approved by the Department of Economic Development to be 25% of the amount of the investment in a Louisiana entrepreneurial business, with the credit divided in equal portions for two years.35 Previously, the AITC could be generated over a three-year period.36

S.B. 24 also provides an additional opportunity for businesses located in federal opportunity zones by authorizing an enhanced tax credit up to 35% of the amount of eligible investment made in a Louisiana entrepreneurial business to be divided into equal portions over two years.37 The new law also provides a cap of $3.6 million per calendar year in addition to the previously allowed $3.6 million per year cap, establishing the total program cap of $7.2 million per calendar year.38 Eligible businesses in opportunity zones are also exempt from the program’s requirement that 50% or more of sales be derived from outside Louisiana.39 Lastly, S.B. 24 extends the sunset of the program from July 1, 2021, to July 1, 2025,40 which notably is inconsistent with the July 1, 2023, sunset date provided in S.B. 17.

Sales and use tax rebate for fiber-optic cable equipment Edwards signed H.B. 69 on July 13, 2020, to provide a sales and use tax rebate for fiber-optic cable equipment.41 This legislation is tied to recent procedures passed by the Federal Communications Commission (FCC) for the Rural Digital Fund Auction.42 H.B. 69 authorizes a potential rebate to a winning bidder that is awarded a census block by the FCC in the Rural Digital Fund Auction.43 The rebate is tied to fiber-optic cable equipment used to distribute fixed and mobile broadband networks to eligible rural and unserved areas in Louisiana. The rebate is equal to 50% of the sales and use tax paid by the winning bidder on fiber-optic cable equipment.44 The law defines “fiber-optic cable equipment” and “unserved-areas” that are eligible for the program, and clarifies that the state or federal funds that are not taxable income or structures such as repayable loans, are ineligible and that the equipment is eligible for only a single rebate.45 Lastly, the legislation provides that in order to receive the rebate, a request must be sent to both the Department of Revenue and the appropriate local taxing authority. Each entity must provide a form and process procedure for the applicant. The Secretary of the Department of Revenue and the Louisiana Uniform Local Sales Tax Board may promulgate rules and regulations to carry out this new law.46

Expansion of EZ and QJ programs On July 13, 2020, Edwards signed legislation, H.B. 13 and H.B. 19,47 which allows certain retail businesses to apply for the EZ or QJ programs if certain criteria are met.48 The EZ program is a jobs incentive program that provides Louisiana income and franchise tax credits to new or existing businesses located in Louisiana that create permanent net new full-time jobs, and hire at least 50% of those net new jobs from one of four targeted groups.49 The QJ program provides a cash rebate to companies that create well-paid jobs and promote economic development. The program provides up to a 6% cash rebate of annual gross payroll for new direct jobs for up to 10 years and provides a state sales/use tax rebate on capital expenditures or a 1.5% project facility expense rebate on the total capital investment, excluding tax-exempted items.50

For each law, the applying business is only eligible to each program if advance notice is given between July 1, 2020 and Dec. 31, 2021.51 Each law also prohibits benefits to be received after June 30, 2023. Specifically, for H.B. 13 related to the EZ incentives, the amended law allows eligible accommodation businesses, retail trade, as well as food services and drinking places that have less than 50 employees nationwide to receive benefits.52 This amended statute also extends the EZ incentives to July 1, 2026 (previously, July 1, 2021).53 H.B. 19 makes similar changes to the QJ program. It extends eligibility to the same businesses listed for the EZ program, but these businesses must be a “COVID-19-impacted retail business.”54

Commentary States continue to focus on providing credits and incentives for businesses, even during COVID-19, as many governing bodies are still looking for avenues to offset budget shortfalls that may have been experienced in recent months. Many states have considered various strategies to assist small businesses through existing programs, which Louisiana has done by opening the EZ and QJ programs to retail businesses that would normally not qualify. Additionally, the changes to the AITC shorten the timeline that incentives are divided and thereby provide a larger incentive for capital investments into businesses during a time period where business owners and operators have become more risk-averse.

The changes to the NMJTC apply a higher level of accountability for investment in the program and therefore, may accelerate the rate of investment into qualified areas. Language added to the sales and use tax rebate program for certain fiber-optic cable equipment and the AITC should enhance the overall existing Opportunity Zone (OZ) program, thus amplifying the FCC’s Rural Digital Opportunity Fund and the AITC program which could increase the credit amount for investing in qualified OZ businesses. However, these program enhancements may have limited initial impact as OZs and the Rural Digital Opportunity Fund are relatively new initiatives.

Overall, the changes made to these programs show Louisiana’s attempt to continue to assist small businesses and update certain programs to be more effective in the near future.

1 Act 17 (S.B. 13), Laws 2020, 1st Extra. Session.
2 Act 19 (S.B. 17) and Act 22 (S.B. 24), Laws 2020, 1st Extra. Session.
3 Act 28 (H.B. 13), Laws 2020, 1st Extra. Session.
4 Act 29 (H.B. 19), Laws 2020, 1st Extra. Session.
5 Act 35 (H.B. 69), Laws 2020, 1st Extra. Session.
6 Act 17 (S.B. 13), Laws 2020, 1st Extra. Session, effective Aug. 29. 2020.
7 See IRC § 45D; New Markets Tax Credit Program Maps, New Orleans Regional Planning Commission, Aug. 2, 2020,
8 LA. REV. STAT. ANN. § 47:6016.1.
9 LA. REV. STAT. ANN. § 47:6016.1.B(1)(a).
10 LA. REV. STAT. ANN. § 47:6016.1.B(1)(b).
11 LA. REV. STAT. ANN. § 47:6016.1.B(4), (6). “Impact business” is a qualified active low-income community business located in Louisiana that is either located in a rural parish or more than 50% owned by women, minorities, or military veterans. A “rural parish” is a parish with a population less than 100,000 as of July 1, 2019, as estimated by the United States Census Bureau.
12 LA. REV. STAT. ANN. § 47:6016.1.B(7).
13 Id. Under IRC § 45D, as amended, and Treas. Reg. Sec. 1.45D-1, a low-income community includes a business located in either a census tract with a poverty rate of at least 20% or a census tract with a median income that does not exceed 80% of the benchmark median income. The list of eligible NAICS codes includes sectors 11, 21, 23, 31, 32, 33, 42, 48, 49, 54, 56, 62, 72, or 81. 13 Code Fed. Regs. Sec. 121.201 contains size standards that apply to all Small Business Administration (SBA) programs for each NAICS code. The size standards themselves are expressed either in number of employees or annual receipts in millions of dollars, unless otherwise specified. The number of employees or annual receipts indicates the maximum allowed for a concern and its affiliates to be considered small.
14 LA. REV. STAT. ANN. § 47:6016.1.B(8).
15 LA. REV. STAT. ANN. § 47:6016.1.B(9).
16 Id.
17 LA. REV. STAT. ANN. § 47:6016.1.B(10).
18 Id.
19 LA. REV. STAT. ANN. § 47:6016.1.B(11). LA. REV. STAT. ANN. § 22:842(C) refers to organizations dealing with life, accident, health, or service insurance, health maintenance organizations, and Medicaid-enrolled managed care organizations. This statutory section specifically discusses taxes collected from healthcare premium assessments paid by Medicaid-enrolled managed care organizations.
20 LA. REV. STAT. ANN. § 47:6016.1.C(2).
21 LA. REV. STAT. ANN. § 47:6016.1.E(1)(f).
22 LA. REV. STAT. ANN. § 47:6016.1.E(5)(b).
23 LA. REV. STAT. ANN. § 47:6016.1.F(3).
24 Id.
25 LA. REV. STAT. ANN. § 47:6016.1.G.
26 LA. REV. STAT. ANN. § 47:6016.1.J(1)(b).
27 LA. REV. STAT. ANN. § 47:6020.A.
28 LA. REV. STAT. ANN. § 47:6020.C(2)(d).
29 LA. REV. STAT. ANN. § 47:6020.C(1)(c).
30 LA. ADMIN. CODE tit. 13, part I, § 3305.A.1, B.
31 Id.
32 Act 19 (S.B. 17), Laws 2020, 1st Extra. Session, effective Aug. 29, 2020.
33 Act 22 (S.B. 24), Laws 2020, 1st Extra. Session, effective July 13, 2020.
34 LA. REV. STAT. ANN. § 47:6020.G.
35 LA. REV. STAT. ANN. § 47:6020.D(2)(a).
36 Id.
37 LA. REV. STAT. ANN. § 47:6020.G(1).
38 LA. REV. STAT. ANN. § 47:6020.G(2).
39 LA. REV. STAT. ANN. § 47:6020.G(3).
40 LA. REV. STAT. ANN. § 47:6020.H.
41 Act 35 (H.B. 69), Laws 2020, 1st Extra. Session, effective July 1, 2020.
42 Rural Digital Opportunity Fund Phase I Auction Scheduled for October 29, 2020; Notice and Filing Requirements and Other Procedures for Auction 904, Public Notice, 20-77 FCC Rcd 6079 (2020). In the public notice released on June 11, 2020, the FCC adopted bidding procedures for a $16 Billion Rural Broadband Auction to be held in October 2020. Applications were accepted from July 1 – 15, 2020. Bidding is scheduled to begin on October 29, 2020.
43 LA. REV. STAT. ANN. § 47:305.73.
44 LA. REV. STAT. ANN. § 47:305.73.A(1).
45 LA. REV. STAT. ANN. § 47:305.73.A(2)-(4).
46 LA. REV. STAT. ANN. § 47:305.73.B, C.
47 Act 28 (H.B. 13) and Act 29 (H.B. 19), Laws 2020, 1st Extra. Session, effective July 1, 2020.
48 LA. REV. STAT. ANN. §§ 51:1787; 51:2453.
49 LA. ADMIN. CODE tit. 13, part 1, § 701.
50 LA. ADMIN. CODE tit. 13, part 1, §§ 1101 – 1104.
51 LA. REV. STAT. ANN. §§ 51:1787.B(3)(c)(ii); 51:2453(2)(c)(i)(bb).
52 LA. REV. STAT. ANN. § 51:1787(B)(3)(c), (e). These list NAICS codes 721, 44, 45, and 722 as eligible. NAICS code 721 specifically lists Accommodation Industries. According to the NAICS definition, industries in the accommodation subsector provide lodging or short-term accommodations for travelers, vacationers, and others. NAICS codes 44-45 include Retail Trade, which range from general merchandise stores to motor vehicle and parts dealers. NAICS code 722, food services and drinking places, includes restaurants and bars.
53 LA. REV. STAT. ANN. § 51:1787.K.
54 LA. REV. STAT. ANN. § 51:2453(2)(b)(ix), (c)(i)(bb). A “COVID-19-impacted retail business” is a for-profit corporation, a limited liability company, a partnership, or a sole proprietorship that had a physical and active operation in Louisiana on March 13, 2020, and ceased operations due to either one of the governor’s public health emergency proclamations or a mayor’s proclamation or executive order related to the public health emergency, or a decrease in customer activity or the inability to retain sufficient staff due to the COVID-19 public health emergency.

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