Proposed tax changes would be ‘logistical, administrative nightmare’ for CPAs, businesses
A series of proposed changes to Louisiana’s tax code—including tax increases and rollbacks of various exemptions and credits—will become effective July 1 if passed into law, regardless of the tax year to which a return relates.
Though the revenue measures have not passed, CPAs, accountants, tax attorneys and officials at the Louisiana Department of Revenue already are bracing for what could be “a logistical and administrative nightmare,” according to Bill Potter, tax director at Baton Rouge-based Postlethwaite & Netterville.
“If passed, it’s going to be a tremendous headache for taxpayers and tax preparers,” Potter says. “And it will be worse on businesses because they are major users of the tax credits, which would be affected by these changes.”
The Legislature often makes changes to the tax code. Sometimes those changes go into effect July 1, which is the start of the state’s fiscal year, and sometimes they become effective Jan. 1. This year, what makes the language in the various revenue measures before the Legislature so tricky is that, if enacted, they would go into effect July 1 but apply retroactively to returns filed for any previous tax period.
The tax bills were written that way to help generate enough revenue to help balance the state budget, according to Greg Albrecht, chief economist for the state Legislative Fiscal Office.
“There was no way (the administration) would be able to generate all the money they need for fiscal year 2016 to support the 2016 budget unless they made these tax changes effective for all tax returns filed after July 1,” he says. “They’re counting on more than $600 million in revenue coming from this. … If they had said the changes were only effective for this year forward, that would have only generated $377 million or so.”
The timing of the proposed changes makes the July 1 effective date particularly tricky. The session does not end until June 11, which means if the changes are approved, those in the tax preparation business will have less than three weeks to prepare returns for their clients. Postlethwaite & Netterville notified all its clients last week of the potential changes, though it does not want to alarm them “that the sky is falling,” Potter says. The Louisiana CPA Association also is reaching out to its members statewide through emails blasts, urging them to get ready in the event some or all of the tax measures pass.
“We don’t want to overreact because these laws are not a reality yet,” says Ronald Gitz II, executive director of the LCPA. “But we want our membership to be aware of the conversations we are having.”
The Louisiana Department of Revenue is involved in those conversations, too. Deputy Secretary Jarrod Coniglio says the department isn’t quite sure how it logistically will adjust its systems between June 12 and July 1 to account for the changes to the tax code, should they become law.
“Normally, when session ends we gather up what changes have been made to the tax code, which obviously relate to changes to our forms, and that process doesn’t usually wrap up until January—just days before we start processing returns for the next tax season,” he says. “Now we’ll have three weeks. It will definitely be a challenge.”
Besides the administrative difficulties of implementing the tax changes retroactively on returns from prior tax periods filed after July 1, Gitz said there may be legal issues about the language in the bills. But until the Legislature actually acts on them, it’s too soon to say what will happen.
“We haven’t sat down to iron out what we will do yet because we’re just kind of waiting to see if they will pass,” Coniglio says. “We’ve never had a situation like this before.”