Acadiana Business

Businesses use tax credits as amnesty payment

by Walter Pierce

In Louisiana's latest tax amnesty period, Gov. Bobby Jindal's administration added a new twist, letting companies settle their back-owed taxes with unused tax credits, instead of paying cash.

BATON ROUGE, La. (AP) - In Louisiana's latest tax amnesty period, Gov. Bobby Jindal's administration added a new twist, letting companies settle their back-owed taxes with unused tax credits, instead of paying cash.

The accounting trick brought in $67 million of the $435 million collected in the tax amnesty program, and it's raising questions about whether the book-balancing maneuver from businesses will give lawmakers and the governor real money to spend in the budget.

Tax credits weren't used to pay off delinquent tax bills the last time Louisiana had an amnesty program in 2009. This time, the idea came from businesses seeking to settle millions of dollars in unpaid taxes.

Revenue Secretary Tim Barfield said when the first business submitted a tax amnesty application that used tax credits as payment, he couldn't deny the request under Louisiana law.

"There's a statutory requirement that basically says a credit is property and can be used to pay for any outstanding tax liability," Barfield said this week. "There wasn't any legally-defensible reason to deny it, so we took it."

Other businesses then followed with the same types of amnesty applications.

The Legislature's chief economist, Greg Albrecht, said it's not certain the state will have a dollar-for-dollar collection from the tax credits. He said companies may have applied credits in amnesty payments that they otherwise wouldn't have been able to fully use.

"Would they have used these credits ever? I don't know that," Albrecht said. "I don't think it's cut and dry that, hey, we can monetize these into an expectation of extra cash."

Barfield disagreed, saying tax credits are just like cash.

He said the companies would have used the tax credits over time, lessening tax collections in other areas, so Barfield said the net effect is the same. Tax collections will be higher somewhere else where the credits otherwise would have applied, he said.

"Very few businesses would have a tax credit and not use it," he said. "They were either going to use it to pay a tax liability or sell it to someone else."

From September to November, delinquent taxpayers were able to get caught up on their tax bills without any penalties and with only half the interest charges they would have otherwise owed.

Lawmakers who created the amnesty program wanted upfront cash for the budget, and it's not clear how the accounting will work out for the tax credits.

Decisions over how to account for the money won't throw the state's budget out of balance, however. Lawmakers used $200 million to pay for health services in the current $25.4 billion state budget. Another slice of money goes to revenue department expenses.

How the $67 million in tax credits is accounted for in the state's books will determine whether the governor and Legislature have $157 million left to spend, $90 million or somewhere in between.

Rep. Joel Robideaux, R-Lafayette, sponsor of the amnesty bill, said he doesn't recall any discussions about tax credits being used to pay off a delinquent account, but he said the bill didn't prohibit that. He doesn't necessarily think tax credits as payment will generate dollars for the state, however.

"My gut response is no, I don't think that's real money to be spent," Robideaux said.