The state Senate passed a package of legislation Tuesday that could cost Louisiana close to $1 billion in corporate franchise tax revenue over the next five years, though the tax package includes a measure to offset at least some of that loss.

Two proposals from Sen. Bret Allain, R-Franklin — Senate Bill 1, which passed in a 37-1 vote, and Senate Bill 6, which passed in a 38-0 vote — are tied together as a tax-swap package of legislation. 

Senate Bill 1 repeals the corporate franchise tax by reducing it in equal increments over a four-year period beginning in 2025. The franchise tax is essentially a privilege tax that corporations pay in order to do business in the state. It is levied at a rate based on the value of a company’s capital stock. 

According to the Senate Bill 1 fiscal note, the measure would decrease Louisiana’s revenues by approximately $1.033 billion, though Allain has linked it to Senate Bill 6 to offset some of the revenue loss by slashing the state’s Quality Jobs tax credit program.

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The Quality Jobs program, administered through Louisiana Economic Development (LED), offers payroll tax rebates to certain businesses for creating or retaining jobs. The incentive program costs the state millions every year, so the initial version of the bill could have offset as much as 40% of the revenue lost from repealing the franchise tax, according to the fiscal note.

However, the Senate adopted an amendment for Senate Bill 6 on Tuesday to only shrink — rather than fully repeal — the Quality Jobs program. The latest version of the bill reduces Quality Jobs tax credits by 50% of their current value, thereby weakening the proposal’s potential to offset the loss of corporate franchise tax revenue. 

The fiscal note further pointed out that Louisiana likely won’t see an offset for several years.

Allain has long disliked the franchise tax and called it an impediment to attracting businesses to Louisiana. 

Repealing it could make Louisiana an outlier in the South. More than a dozen states have a franchise tax, including regional neighbors Texas, Mississippi, Arkansas, Alabama, Georgia and Tennessee, among others.

Both bills will head to the House for consideration.