May 16, 2022

Volume XII, Number 136

Advertisement
Advertisement

May 16, 2022

Subscribe to Latest Legal News and Analysis

May 13, 2022

Subscribe to Latest Legal News and Analysis
Advertisement

Louisiana Franchise Tax—No Tax on Corporate Limited Partners with No Louisiana Nexus

The Louisiana Court of Appeal blocked the Louisiana Department of Revenue from imposing franchise tax on a corporation that had no Louisiana contacts other than owning a limited partner interest in a partnership that engaged in business in Louisiana. Utelcom, Inc. and Ucom, Inc. v. Bridges, 2010 CA 0654 (La. Ct. App. Sept. 12, 2011).

The case involved two corporations, one formed in Kansas and the other in Missouri. Neither was registered in or qualified to do business in Louisiana and neither had any business activities in Louisiana. Both corporations owned limited partner interests in Delaware limited partnerships that owned property and engaged in business in Louisiana.

Louisiana audited the companies and determined that they owed Louisiana franchise tax based on their indirect ownership and use of property in Louisiana through the Delaware partnerships. Louisiana relied on a regulation, which imposes tax on a partner of a partnership that employs capital in the state. Reversing the District Court, the Louisiana Court of Appeal explained that the regulation was an impermissible expansion of the statutory language, and that franchise tax applies only if the corporation is using Louisiana property in a corporate capacity. The court found that using capital through a partnership is not the same as using capital in a "Corporate" capacity. The court stressed that the partners' only use of property in Louisiana was the capital they contributed to the partnerships. Once the capital contribution was made, the capital was used by the partnership, not the partners. The companies therefore did not employ capital in Louisiana and were not subject to franchise tax.

Corporate limited partners of a partnership or members of an LLC doing business in Louisiana, having no other contacts with the State of Louisiana, should consider whether they may be entitled to a refund of Louisiana franchise tax. 

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume I, Number 265
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Andrew Feiner, Andrews Kurth Law Firm, Tax Attorney
Partner

Andy has a general corporate tax practice, focusing on acquisitions, restructurings, inbound and outbound transactions, tax controversies and state tax matters.

Representative Experience

  • Tax counsel to Six Flags in its bankruptcy reorganization
  • Tax counsel in restructuring of several Canadian income trusts
  • Tax counsel to Creditors’ Committee in numerous cases
  • Tax counsel to Transocean/Global Santa Fe in IRS tax controversy
  • Tax counsel in numerous telecom M&A, financing and restructuring transactions...
212-850-2883
Advertisement
Advertisement
Advertisement