A 2015 law that scaled back an income tax break Louisiana allows for taxes paid to other states was unconstitutional, the state Supreme Court ruled, striking down a change that raised more than $30 million a year for the state budget.
Two part-owners of multiple companies doing business in Texas, Arkansas and Louisiana challenged the law, and the Louisiana Supreme Court on Friday upheld a lower court decision that the law violates a U.S. Constitution provision governing interstate commerce.
But while the state collected millions from the law change, Revenue Secretary Kimberly Robinson said Monday that Louisiana only will have to return $23,000 to the taxpayers who filed the lawsuit paid into an escrow account under protest.
“We’re not looking at a run on refunds,” Robinson told House Speaker Taylor Barras, who asked about the court ruling during a meeting of the state’s income forecasting panel.
Ahead of the high court’s decision, Louisiana lawmakers tweaked the tax credit provision earlier this year to attempt to address the lawsuit’s claims that some business owners were subject to illegal double taxation. The changes, which reduced anticipated yearly tax collections, already were built into state income forecasts.
“We’ve got a few fixes that we made in 2018,” Robinson said.
The Louisiana Association of Business and Industry, which opposed the efforts to limit the tax break, said the changes made earlier this year didn’t correct all the legal problems identified by the court. Stephen Waguespack, the organization’s president, is urging lawmakers to restore the full credit for taxes paid in other states to the way it looked before 2015.
If any other changes are needed to respond to the Supreme Court decision, Robinson said, the revenue department will work with lawmakers in next year’s legislative session to make them. But she said that shouldn’t make a huge dent in projected tax collections.
Barras questioned if taxpayers who paid more money to the state because of the limitations added to the tax break program three years ago could seek to amend their tax returns to claim they overpaid – costing the state significant sums.
Robinson replied that she would deny any such refund claims. She said taxpayers would have had to pay under protest to challenge the amount of taxes owed. If they want to appeal, Robinson said, they could take up the issue with a tax board under Louisiana law. But she said if the appeals were successful, the dollars only would be repaid if lawmakers agreed to appropriate the money at a later date.