Louisiana - Gain on sale of LLC interest included in sales factor

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January 2019


The Louisiana Board of Tax Appeals has held that the Department of Revenue could not exclude the gain on the sale of an interest in an LLC from the denominator of the Louisiana sales factor ratio.

The takeaway

This is not the first time the Secretary has been found to have exceeded its authority in promulgating a regulation.  In UTELCOM, Inc. v. Bridges, 77 So. 3d 39 (La. App. 1st Cir. 9/12/11), writ denied, 84 So. 3d 1046 (La. 3/2/12), the First Circuit Court of Appeals found the Secretary had improperly used a regulation to exceed the taxing authority granted by the statute. This case may serve as a reminder to taxpayers that the scope of a regulation may not exceed the authority provided by statute.   Here, as in UTELCOM, a court determined the regulation exceeded the taxing authority granted under the statute and vacated the assessment.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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