- How does Louisiana tax a corporation that is classified by the IRS as an "S" (small business) corporation?
Louisiana taxes "S" corporations in the same manner as regular corporations, with one exception. For income 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 for federal income tax purposes. However, a corporation classified by the IRS as an "S" corporation may be entitled to an exclusion of part or all of its income for Louisiana income tax purposes, depending on the percentage of shares owned by Louisiana resident individuals. In general terms, the portion of income that can be excluded is determined by the ratio of outstanding shares owned by Louisiana resident individuals to total shares outstanding.
For franchise tax purposes the "S" corporation is taxed in exactly the same manner as a regular "C" corporation.
Since the classification of a corporation as an "S" corporation is a determination under federal law, any question of classification must be referred to the IRS.
- How are Limited Liability Companies (LLCs) taxed for Louisiana income and franchise tax purposes?
An LLC is taxed and treated in the same manner for Louisiana income tax purposes as it is taxed and treated for federal income tax purposes. If the LLC is taxed as a corporation for federal income tax purposes, then the LLC will be taxed as a corporation for Louisiana income tax purposes. If it is considered a partnership for federal income tax purposes (the most common situation), then it is treated as a partnership for Louisiana income tax purposes.
An LLC is always treated as a partnership 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?
Letters of good standing on corporations are handled by the Taxpayer Services Division. Letters of good standing for individuals are handled by the Individual Income Tax Division.
- 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 else $10, whichever is greater.
If you believe that the negligence penalty was wrongly 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 information as to why you believe the negligence penalty should not have been imposed.
- Who should I contact if I do not know the account number for my corporation?
The Taxpayer Services Division should be contacted in order to get the proper instructions for obtaining these numbers.
- If my corporation is inactive, do I need to file a corporate income/franchise return?
Yes. Returns need to be filed until the corporation is dissolved through the Secretary of State. There is a minimum $10.00 yearly franchise tax for inactive corporations.
- 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 with the Louisiana Secretary of State’s office to dissolve the corporation’s charter. See Dissolutions.
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.
