Legislation in 2013 will enhance security and transparency of transfers of state tax credits
BATON ROUGE —The Louisiana Department of Revenue (LDR) and Louisiana Economic Development (LED) announced plans Tuesday to create a transferable tax credit registry that will be managed by LDR. The purpose of the registry is to enhance the security and transparency of transfers of state tax credits.
“Louisiana’s tax credits have stimulated a tremendous amount of new business activity in our state and are responsible for helping to secure new investment and jobs in our economy,” LDR Executive Counsel Tim Barfield said. “Most transferable tax credits are transferred in a safe and lawful manner. However, we want to further ensure that the State of Louisiana receives all the revenue to which it’s entitled and to ensure that taxpayer money is protected at all times. This tax credit registry will help on all those counts.”
Only 13 of Louisiana’s more than 460 tax exemptions involve transferable tax credits, representing less than five percent of the $6.8 billion in tax exemptions in Fiscal Year 2011. These transferable tax credits incentivize entertainment, business investment, research and development, and other economic and community development activities.
The proposed tax credit registry would apply to any transferable tax exemption programs that continue to exist following consideration of tax reform legislation this year. The registry would be used also to address any final transfers of existing transferable tax credits associated with tax exemption programs that may be eliminated during the legislative session.
The state’s proposed tax credit registry would provide a central registration system managed by LDR. It would require also timely reporting for the transfer of tax credits, including sales by the original holder of the credit and subsequent sales. Transfers would not be effective until reported. Currently, state law requires only that a notice of transfer be filed with LED and LDR within 30 days of a transfer, allowing a time lapse. The registry would give investors assurance by enabling them to verify the status of a tax credit in a central place.
LDR’s Barfield added, “This transferable tax credit registry will give us more certainty about the validity of the tax credit in addition to giving taxpayers confidence that they are indeed acquiring a valid tax credit.”
Among other safeguards, the state registry would confirm when tax credits have been used and are no longer valid. Therefore, the public would have access to records documenting the amount of credits issued, transferred and claimed (that is, used), and the dates and identities of the parties involved in these transactions.
“This is a common-sense mechanism to provide taxpayers and the state with transparency and security when dealing with tax credit transfers,” LED Secretary Stephen Moret said.
Under this proposal, tax credit transfer fees currently collected by LED would be collected by LDR to pay for the administrative costs necessary to operate the transferable tax credit registry.