With Louisiana leaders in the middle of a wide-ranging debate over state tax policy, state Revenue Secretary Tim Barfield started a project in his office to determine how much the state’s largest businesses pay in taxes.
He was surprised at what his auditors found.
“You start realizing that, wow, of the biggest companies doing business in Louisiana, very few are paying income taxes,” Barfield tells The Associated Press.
Lawmakers have questioned why Louisiana’s corporate tax collections have remained largely stagnant despite the national economic recovery and a long list of job announcements and economic development projects from Gov. Bobby Jindal’s administration.
Barfield, a Jindal appointee, says he wanted to know why “we don’t see the growth in those revenues like you would expect with the economy coming back.”
What he found were companies aggressively using tax avoidance options and tax breaks to avoid owing anything to Louisiana. His office has opened more than 100 audits based on its findings, and he’s talking to lawmakers about possibly closing some of the loopholes in the upcoming legislative session that begins next week.
In a review of the state’s largest companies, Barfield says his agency found only about one-fourth of them were paying corporate taxes to Louisiana.
“You’re talking about literally dozens and dozens of potential areas of discretion. It all starts to add up pretty quickly to minimize your exposure. You combine that with our generous tax exemptions and other things, companies are paying very low taxes in Louisiana,” he says.
The Department of Revenue chose the largest businesses based on gross revenue and combed through two years of complex corporate income and franchise tax data to account for tax deductions, operating losses and the application of state tax breaks.
Barfield shared the findings with The Associated Press, but he says he couldn’t identify the individual companies because of tax privacy laws.
Of the 87 largest companies that filed corporate tax returns in 2012, one-quarter of them—22 businesses—paid corporate income taxes in Louisiana, according to the revenue department data. About half of the businesses, 42, paid corporate franchise taxes.
The department had similar findings from the 2011 returns.
To avoid corporate taxes, companies doing business in multiple states can move money around subsidiaries to shift profits to states with lower tax rates and expenses to states with higher tax rates. They can create new companies that can sell goods and services back to their other companies.
Barfield has given his data to Sen. Robert Adley, R-Benton, and Rep. Julie Stokes, R-Kenner. Both lawmakers have proposed legislation to end certain tax loopholes and change the income reporting method to better account for all subsidiary companies regardless of their location. Lawmakers will consider the ideas in the two-month legislative session that opens Monday.
