Louisiana enacts major tax changes in special session

Update: On March 29, 2025, Louisiana voters rejected Amendment No. 2, a proposed constitutional overhaul of Article VII that included provisions impacting fiscal governance and property taxation. This rejection does not alter the statutory tax changes passed during the 2024 Third Extraordinary Session — such as the reduction of individual and corporate income tax rates and the repeal of the corporate franchise tax — which remain in effect. However, proposed constitutional reforms aimed at limiting government spending growth, increasing legislative vote thresholds for tax exemptions and credits, and creating flexibility around dedicated funds were not adopted. Additionally, provisions that would have allowed local governments to exempt business inventory from ad valorem tax and adjust its assessed value were rejected.

What happened?

A package of bills approved by the Louisiana State Legislature in special session and signed by Governor Jeff Landry (R) on December 5 includes significant tax changes, including for income, franchise, and sales and use taxes.

Among the changes are the repeal of the corporate franchise tax, imposition of a flat corporate income tax, significant credit changes including inventory tax credit repeal, imposition of sales and use tax on digital products, software-as-a-service, and information services, and the repeal of 84 sales and use tax exemptions and exclusions. (See H.B. 2, H.B. 3, H.B. 8, and H.B. 10.)

Why is it relevant? 

The legislation, taken together, furthers Governor Landry’s state goal of raising the stature of Louisiana’s tax structure and policy nationally by removing barriers to investment in Louisiana while limiting tax expenditures and expanding the consumption tax base to help maintain fiscal balance. The franchise tax repeal, corporate income tax rate simplification, and optional bonus depreciation and amortization will be a benefit for many Louisiana business taxpayers. However, the credit limitations and repeals, especially for the inventory tax credit, as well as the expansion of the sales and use tax base to many business-to-business transactions may have a significant business tax impact.

Actions to consider

Taxpayers should consider modeling the cumulative impact of the corporate income tax and credit changes and franchise tax repeal on their business tax liability. Taxpayers also should consider the potential impact of sales and use tax base expansion on their obligations as sellers and purchasers of newly taxable goods and services, as these changes generally take effect January 1, 2025.

Also, another bill, H.B. 7, creates a constitutional referendum pending voter approval at a statewide election to be held March 29, 2025. The bill affects, among other things, individual income tax, property tax, and severance tax. The outcome of this referendum could impact legislation during the 2025 regular legislative session.