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CCH Axcess Tax

Introduction to the Louisiana Income and Franchise Tax Return

The Louisiana corporate income tax return is prepared for calendar and fiscal year S corporations. Since Louisiana does not recognize S corporation status, except for the calculation of the S corporation exclusion, it is taxed at the corporate level as a C corporation. Using entries from the federal tax return and Louisiana interview forms, the following forms for the Louisiana return are prepared:

• Form CIFT-620, Louisiana Corporation Income and Franchise Tax Return
• Form CIFT-620A, Louisiana Corporation Apportionment and Allocation Schedules
• Form CIFT-620ES, Louisiana Declaration of Estimated Income Tax
• Form LA 8453C, Declaration for Electronic Filing
• Form R-6004-SD, Electronic Filing Payment Voucher
• Form CIFT-620EXT-V, Extension Payment Voucher Louisiana Application for Automatic Extension of Time to File Corporation Income Tax Returns
• Form CIFT-624, Louisiana Request for a Tentative Refund Resulting from the Election to Carry Back a Net Operating Loss.

Copies of the following federal forms are attached to file with the Louisiana return if requested on Louisiana General worksheet > Options section:

• Schedule D - Capital Gains and Losses
• Form 4562 - Depreciation and Amortization
• Form 4797 - Sales of Business Property

S Corporation Status

Louisiana S corporations may exclude a percentage of their net income based upon a ratio, the numerator of which is the sum of the amount of shares owned by Louisiana residents plus the amount of shares owned by non-residents who have filed Louisiana income tax returns. The denominator is the total number of S corporation shares outstanding at the end of the tax year. This exclusion will be calculated based upon entries on the federal Shareholders Information category > General worksheet. The amount of shares attributable to a shareholder whose state of residency is identified as "LA" or blank on federal Shareholders Information category > General worksheet will be included in the numerator. To identify a non-resident shareholder who has filed a Louisiana income tax return, enter a check in the "Checkbox 1" on federal Shareholders Information > State Information worksheet. The total number of shares outstanding will be calculated based upon the federal return.

The calculation of the S corporation exclusion may be overridden by making an entry in the "S Corporation Exclusion - Override" box on Income/Deductions worksheet > Subtractions section.

Other than the allowance for the S corporation exclusion, Louisiana S corporations are taxed as C corporations.

Federal Notes and Features

Depreciation

Louisiana allows federal depreciation. State depreciation is calculated from depreciation entries on the federal Depreciation worksheet. Entries on the Depreciation worksheet > State if Different fields are NOT used to calculate Louisiana depreciation.

FS Codes: The Louisiana return recomputes Louisiana income from federal information. The use of FS codes is not required to prepare the Louisiana return. All income and expenses included on the federal worksheets carry to the Louisiana return. Generally, additions and subtractions to federal income are handled through entries on Louisiana interview forms.

Transfers: The following items from the federal return are carried to the Louisiana return and do not require additional entries on state worksheets:

• Interest on U.S. Obligations
• Municipal Bond Interest from States Other than Louisiana
• Work Opportunity Credit (IRC Section 280(c)(a))
• Louisiana Income Tax Deduction
• Refunds of Louisiana Income Tax

Dividends and Interest

Beginning with the 2006 tax year all dividends are exempt from Louisiana corporate tax. All interest income is also exempt from tax. However, the corporation can elect to be taxed on interest income received from controlled corporations. The dividends and interest will show as an other subtraction to federal taxable income on Louisiana Form CIFT-620, page 6, Schedule D when there is no apportionment. The dividends and interest will show as subtractions on Schedule G of the Louisiana Form CIFT-620 when apportionment applies to the Louisiana return.

Work Opportunity Credit

Wages or salaries eligible for the federal Work Opportunity Credit, which were not deducted on the federal return, carry to Louisiana Form CIFT-620 as a subtraction from federal income.

Tax Accrual

State taxes only carry to the federal return when a "State and City Tax Accrual Option" is selected. Taxes computed on the Louisiana return carry to page 1 of the federal return if a "1" is entered in the "State and City Tax Accrual Option" box in the "Processing Options" section of General category, Return Options section > Calculations Options section. The tax also accrues to the appropriate sections of the federal balance sheet.

State Tax Accrual Option 2 carries the income tax computed on the Louisiana return to page 1 of the federal return but does not accrue to the federal balance sheet. If required, a Schedule M-1 book/tax adjustment is made.

State Tax Accrual Option 3 accrues taxes to the balance sheet in the same manner as code "1", but tax expense carries to the rental schedule instead of page 1 of the federal return. The Louisiana franchise tax calculated on the Louisiana return is never carried to the federal return as a tax deduction.

State Tax Accrual Option 4 does NOT accrue taxes to the balance sheet, but tax expense carries to the rental schedule instead of page 1 of the federal return.

State Tax Accrual Option 5 accrues taxes to Schedule K as other deductions not taken against ordinary income. The taxes are also accrued to the balance sheet.

State Tax Accrual Option 6 accrues taxes to Schedule K as other deductions not taken against ordinary income. The taxes are not accrued to the balance sheet.

If a State Tax Accrual Option is not selected, state taxes computed on the Louisiana return neither carry to the federal return nor accrue to the balance sheet.

State Income and Franchise Taxes

State income taxes entered on Income/Deductions category > Business worksheet carry to Form CIFT-620, Schedule D or G. Louisiana franchise tax does not add back to federal income on the Louisiana return.

General Questions

Q. Where are the special allocation codes?

A. Louisiana law does not recognize S corporation status, and an S corporation is required to file in the same manner as a C corporation. Special allocations do not apply to a C corporation.

Q. Why isn't the franchise tax calculated?

A. Franchise tax is based on the fact that the corporation will be conducting business in the coming year. If this is a final return, the franchise tax will not be calculated. If the corporation is exempt from franchise tax, (an entry has been made in the Louisiana General worksheet > Options section) the tax will not be calculated.

Q. Why does the estimate voucher say to use the official government form?

A. Computer generated vouchers must have a scanline. The scanline is based on the Louisiana Revenue Account Number entered on the Federal Common State - State/City Common Data worksheet > General Information section > Account/file number. The number must be 10 digits and ALL numeric. If this field is blank, or less than 10 digits, the scanline is not produced and the information on the vouchers should be transferred to the government forms.

Q. Where do I make the depreciation adjustment related to the federal bonus depreciation?

A. Louisiana conforms to federal. No adjustments are made for depreciation differences due to bonus depreciation.

Q. Is there a way to have an X display for non-residents on the S Corporation exclusion statement?

A. Yes, make the following entries on the Shareholder Information worksheet > State Information section: select "LA" in the "State code" box and check "Checkbox 1".

Refunds

LDR has implemented enhanced security measures to protect Louisiana taxpayers from identity theft and other types of tax fraud. If returns do not trigger any fraud indicators, taxpayers can expect their tax refunds within 60 days of the filing date if they file electronically, and within 14 weeks if they file paper returns.