Gov. Edwards rejects phase-out of Louisiana’s corporate franchise tax

Gov. John Bel Edwards on Wednesday vetoed legislation that would have phased out the corporate franchise tax but also would’ve cost the state millions in revenue.

Senate Bill 1, sponsored by Sen. Bret Allain, R-Franklin, would have gradually eliminated Louisiana’s corporate franchise tax, which is essentially a privilege tax corporations pay to do business in the state. 

The phase-out would have left a $631 million hole in state revenues, so Allain tied the legislation to a second measure, Senate Bill 6, that would’ve offset some of the loss by slashing the Quality Jobs tax credit program for employers. 

Combined, both bills would have still resulted in a five-year net loss of roughly $140 million for the state, according to the legislation’s final fiscal note.   

In his veto letter, Edwards noted the franchise tax is “antiquated and should be structurally reformed or repealed,” but that Allain’s timing for such a big change is off. 

The Louisiana Legislature made sweeping changes to the state’s individual and corporate income tax structures just two years ago, and the state won’t see the effects of those changes until the end of this year or early next year.  

House passes legislation to cut corporate franchise tax

“With many moving and intertwined pieces, it is unwise to create a second franchise tax reduction trigger at this time,” Edwards wrote. He added that lawmakers still have yet to address the approaching sunset of a 0.45-cent sales tax in midyear 2025, the return of previously suspended sales tax exemptions, and tax dedications to the Transportation Trust Fund and Revenue Stabilization Fund. 

Although he commended Allain’s efforts in pushing what he called necessary tax reforms, Edwards is leaving the state’s finances in far better shape than his predecessor, former Gov. Bobby Jindal, and is cognizant of how that will color his reputation. 

“This legacy allows my successor to continue our progress with a new perspective and fresh start and affords a unique opportunity to propel Louisiana forward,” he wrote in his veto message.  

Allain said he was disappointed in the governor’s decision to veto the bill. The franchise tax is disincentivizing investment in the state, he said. 

“You can come up with a thousand reasons not to reform the tax code, but the right reason [to do so] is that it’s just a bad tax,” Allain said. “Until we start making changes to the tax code, we’re going to continue to trail the nation in attracting business and industry.”

Senate Bill 6 can still go into effect if Edwards approves it, resulting in a revenue increase for Louisiana and fewer benefits for corporations.