American Oil and Gas Reporter - August 2016 - 30

State Legislative Reports

Record Louisiana Session Finally Over
By Dan Larson
Special Correspondent
BATON ROUGE, LA.-Louisiana Governor John Bel Edwards followed through
on his campaign promise to take as much
time as necessary to plug a $600 million
gap in the state's budget, even if it meant
he had to call two special sessions of the
state legislature, notes the Louisiana Oil
& Gas Association.
Although lawmakers cut a few programs, hiked a significant number of taxes on industry and removed important exemptions over the course of the first special legislative session, Republican leaders were finally able to prevent business
and industry from taking on an even larger and disproportionate share of the state's
tax burden at the end of the second special session, LOGA reports.
According to media sources, the governor and Republican legislators differ
about whether the new revenue will suffice to fill the budget gap or whether state
tax collections will exceed projections
from earlier in the year.
Record Duration
"There was some concern in the first
special session that the Senate might approve a tax increase aimed at industry, and
that is just what we saw in the first special
session," recounts Camille Ivy-O'Donnell,
LOGA's coordinator of media and government affairs. "However, once the second
session got under way, leadership made it
clear it was not going to be pushed again
into passing something without understanding the impacts."
House Speaker Taylor Barras, R-New
Iberia, "built a strong coalition that was
able to defeat some of the governor's tax
bills, despite calls for tax increases in the
press," Ivy-O'Donnell describes.
The governor's insistence that the
state's elected leaders remain in the Capitol until they reached a budget agreement
kept legislators in Baton Rouge for an unprecedented amount of time. According to
the Manship School News Service, the second special session set a record so that,
when it adjourned on June 23, the 2016
Louisiana Legislature had recorded 19 consecutive weeks at the statehouse, the
most in its 204-year history.
Even so, assessments of the second special legislative session varied widely in the
Louisiana media. Despite the governor's
warning that "the days of kicking the can
down the road are over," the second ses30 THE AMERICAN OIL & GAS REPORTER

sion saw the legislature shoot down Edwards' demand that it raise income taxes
and reform the process. The second session ended after legislators squeezed out
only $263 million of the new $600 million
Edwards sought.
"Some in the Capitol did not agree with
the governor that a second special session
was needed," Ivy-O'Donnell relates.
"They felt a second session would be unproductive without a better understanding
of the first session's effects."
However, she says, Edwards was
adamant about solving what he called the
state's "historic budget crisis."
"He said he did not want to be forced
to make midyear budget cuts or recall the
legislature for another special session
late in the year," Ivy-O'Donnell notes.
Sales Tax Increase
According to published reports, a tax
increase supported by Edwards did pass
in the first special session and raised the
state sales tax to 5.0 percent. It became effective April 1, but raised a number of
questions, including how it applied to
equipment and business personal property purchases, LOGA notes. Once legislators realized the sales tax bill included
blanket removal of dozens of sales tax exemptions, they went on to pass a "cleanup"
bill to reinstate exemptions for specific purchases.
However, an amendment placed on
that cleanup bill to solve LOGA's concerns
about the additional taxes was removed so
that the Louisiana Department of Revenue
could handle it further, outside the legislature, Ivy-O'Donnell explains. The revenue information bulletin included a recognition that business personal property
bought for use outside Louisiana or offshore
was not subject to sales tax. As described
in Bulletin No.16-034, issued by the DOR
in July, any business personal property purchased for use outside Louisiana or for offshore operations is not subject to the
state's sales, lease or use taxes.
Operators are permitted to store equipment or other business personal property
and not be liable for the sales or lease taxes provided the property "is clearly labeled
for transshipment to the federal offshore
area," the bulletin states.
The increase in the state's sales tax was
highlighted quickly by tax research groups.
One study, released in July by the Washington-based Tax Foundation, ranked
Louisiana as having the country's highest
state and local sales taxes. According to the

tax policy group, Louisiana's average
sales tax rate climbed from the country's
third-highest in 2015 to the country's
steepest in 2016, with an average sales tax
rate of 9.9 percent, ahead of Tennessee
(9.45 percent) and Arkansas (9.30 percent).
Ultimately, Louisiana avoided the "historic fiscal crisis" Edwards warned of in
his Feb. 11 state-of-the-state speech. The
budget passed in the second special session raised an additional $263 million, according to published reports, without
forcing the state's oil and gas industry to
shoulder a disparate share of the burden.
Tax Exemptions
After the session, a report issued by the
legislative auditor's office concluded that
the tax exemption budget report, which
was issued early in the session and often
cited during budget hearings and in fiscal
notes, overstated the amount the state lost
to tax exemptions by $150 million, or 10
percent. The exemption report is considered a key source for legislative analysts'
fiscal impact notes that estimate individual bills' financial impact.
According to published reports, the error was attributed to an inadvertent double counting of tax exemptions taken by
businesses that filed amended tax returns. Even so, Edwards did not relent in
his push for additional revenue. After the
session, press accounts note, the governor
took aim at a state tax program that offered
an exemption as great as 100 percent for
10 years from local taxes on investments
in buildings and equipment.
When Edwards signed Executive Order JBE16-26, he said it would provide local governments "a seat at the table"
when the applications for the Industrial Tax
Exemption Program were considered.
Companies applying for the local tax exemption must also "demonstrate job creation or job retention-or both-in order to
merit industrial tax exemptions," the EO
states.
Edwards cited a study that showed local governments lost $16.7 billion in
property tax revenue from the exemption.
Under the EO, local taxing district authorities still must approve a company's qualifications.
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