Tax, Tax, Tax: Legislature’s bid to remove inventory tax credits would be devastating locally

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The Louisiana Senate will soon vote on a constitutional amendment to exempt offshore vessels from paying property taxes, freeing the state from having to reimburse vessel owners a full tax credit for that parish tax.

The tax, which goes to parishes but then is refunded to vessel owners by the state, was the target of legislators seeking to close a $1.6 billion budget gap.


Should the bill move through both chambers of the Legislature, Gov. Bobby Jindal signs the bill and voters ratify the law during upcoming elections in October, Lafourche Parish could lose over $50 million in property tax revenue, which represents roughly 40 percent of all property taxes collected in the parish every year, officials said.

The bill requires a two-thirds vote in both the Senate and the House of Representatives to pass the Legislature.

“If I took a quarter of your household budget away, how would you be affected?” Councilman Lindel Toups said when asked about the potential effect of a repeal. “Definitely, our services would decrease for the fact that we wouldn’t have the money to furnish them.”


“It would significantly impact all of our essential districts, like school board, parish government, law enforcement, levees, library, drainage, water, court. Everybody,” said Wendy Thibodeaux, Lafourche Parish assessor. “It would affect our fire district, our hospital, ambulance. All of the different districts that receive some sort of ad valorem tax from water craft.”

The repeal of the watercraft tax, which is levied and collected by parish governments and municipalities once a year, would relieve the state from offering the tax credit to commercial boat operators, which reimburses them for 100 percent of the taxes paid.

Officially called the Ad Valorem Tax Credit for Offshore Vessels, the credit concerns taxes levied primarily on vessels operating offshore.


No parish in Louisiana collects more than Lafourche in watercraft property taxes. Cameron Parish, which collected $5,492,344 in watercraft taxes last year, is the second-most dependent, relying on watercraft taxes for 14.8 percent of their property tax base.

“I can’t see where we could recover from losing the watercraft [tax],” Thibodeaux said. “I mean $52 million. That’s hard to overcome in such a short period of time.”

What’s worse for the parish government is that the bill contains a provision that forbids the parish from raising millage rates or adding any other taxes in order to make up that loss for one full year. It does say that those millages can be raised by one-tenth of the total lost revenue each year after that.


Currently, 123.42 mills go to the major districts that receive watercraft tax revenue in Lafourche Parish. In order for those districts to receive the same level of funding, they would have to raise their taxes on property to 230.04 mills.

The bill also requires assessors to apply the changes retroactively to the beginning of 2015, meaning any property taxes charged to those appropriate vessels would have to be returned.

But when it comes to filling a budget gap as big as this state faces, no longer having to pay the watercraft tax credit wouldn’t save Louisiana much money, a review of Louisiana Department of Revenue data by The Times shows.


Louisiana paid out $26,541,874 in 2012, according to the state figures.

That amounted to less than two percent of all tax credits and exemptions the state paid corporations that year.

But what is a drop in the bucket for savings to the state would submerge Lafourche Parish in a sea of problems, local officials maintain.


The Lafourche Parish School Board, which also passed a resolution urging lawmakers to reconsider ridding the tax, will receive the brunt of the budget cuts. It stands to lose $19 million.

Superintendent JoAnn Matthews and a number of local officials have made many trips to Baton Rouge this legislative session to talk to lawmakers and plead their case, but returned to the school board with disheartening news.

“There seems to be not be another plan,” she said at a school board meeting on May 6. “This is the plan for them.”


Matthews said that numbers of employees would undoubtedly have to be reduced. She said legislators have assured her and other officials that other revenue be found for them, but that they have not offered any examples.

“If they can make us whole, then they can fill their hole with that money,” Matthews said.

Thibodeaux listed off a few more examples of reductions in property tax revenue to different governmental agencies. She said the South Lafourche Levee District that protects would lose about $3.7 million in revenue.


Lafourche Parish Fire District 3 would lose about $3 million.

Lafourche Parish government would lose almost $8.9 million. The government currently gets about $20 million from all property taxes each year.

“It is their way of plugging the hole in their budget, but our biggest concern is the fact it would create about a 40 percent hole in ours,” Lafourche Parish President Charlotte Randolph told the parish council at their April 28 meeting.


Lafourche Parish Administrator Archie Chaisson said that there is yet no plan on how to adapt to 40 percent less revenue, but that staff reductions would be proportional to reductions in spending on projects and services.

This is why both the Lafourche and Terrebonne parish councils passed a resolution opposing the repeal or reduction of the watercraft tax.

Parish officials say they are counting on local legislators to help sink the bill.


“I don’t know how much good we can do without our delegation behind it,” said Councilman Aaron Caillouet. He remains hopeful, however.

Some local state legislators are not alarmed. They say the Legislature would never vote to repeal the tax.

Rep. Joe Harrison, R-Napoleonville, said that he has spoken with many fellow lawmakers who are opposed to repeal.


“This would undermine the revenue sources of a number of parishes without any replacement revenue,” Harrison said.

Councilman Jerry LaFont said he doesn’t think the bill will pass in the Louisiana House of Representatives. “I think anybody that does that, it would kind of be a shot in the foot for any political career.”

INVENTORY TAX


The bill not only exempts offshore vessels from property taxes. It also exempts all business owners from having to pay inventory taxes as well.

The inventory tax is levied on a business’ goods being held for sale, and collected annually, early in the year, with property taxes. The inventory tax is collected by local governments and used to pay for police, fire departments and recreation departments, as well as other services.

After businesses have paid the local tax, companies can then apply for a state tax credit that reimburses them for 100 percent of the tax.


Last year, Lafourche Parish collected $6 million in inventory taxes, representing 4.91 percent of all taxes the parish collects, according to records from both parish’s tax assessors.

There was a total of $456,623,499 collected in inventory taxes state-wide last fiscal year.

Adley said that Louisiana collects about $8 billion a year in total revenue from taxes on businesses specifically, but the total potential tax that could be collected is $15 billion. The reason, Adley says, is because Louisiana offers about $7 billion in tax exemptions and credits. Five billion dollars of those exemptions and credits, Adley said, go to pay for local governments.


“…But then it leaves a hole in local government and so how you fill that hole becomes a big part of the debate,” Adley said. “And I think there are ways to fill the hole, but everybody’s going to have to get some skin in this game because we cannot afford to keep giving $5 billion to local government and $7 billion over here to business and run our universities and our hospitals and build our roads.”

Assessor Wendy Thibodeaux has worked tirelessly to find a solution to the problem to no avail.

“I have spent nights, weekends at this office trying to come up with some sort of solution or some way we could make this up and I have exhausted everything that comes through my office to try to make this up and I can’t come up with anything,” she said. “This will devastate Lafourche Parish.”


If it passes both chambers of the Legislature and is signed into law in June, Louisiana voters would have to approve the amendment to the constitution on the Oct. 24 ballot.

Senate bill 177 is one of six bills concerning the watercraft tax. The other bills are as follows:

• HB 521 – Sponsored by Rep. Julie Stokes, R-Kenner. Exempts vessels that operate in the Outer Continental Shelf waters from property taxes. Pending House Ways and Means Committee hearing.


• HB 812 – Sponsored by Rep. Julie Stokes, R-Kenner. Changes the tax credit for taxes paid on vessels in Outer Continental Shelf Lands Act Waters from a refundable credit to one in which credit amounts which exceed taxpayer liability may be carried forward against subsequent income or corporation franchise tax liability for up to five years. Pending House Ways and Means Committee hearing.

• HB 429 – Sponsored by Chris Broadwater, R-Hammond. Changes the tax credit for property taxes paid on vessels in Outer Continental Shelf Lands Act Waters from a refundable credit to a credit in which amounts of the credit above the tax liability may be carried forward and applied against subsequent tax liability for up to five years. Pending House Ways and Means Committee hearing.

• HB 563 – Sponsored by Ledricka Thierry, D- Opelousas. Reduces the amount of certain income tax credits by 20 percent, including the credit for property taxes paid on vessels in Outer Continental Shelf Lands Act Waters Pending House Ways and Means Committee hearing.


• HB 819 – Timothy G. “Tim” Burns, R-Mandeville. Reduces the amount of certain income tax credits by 20 percent, including the credit for property taxes paid on vessels in Outer Continental Shelf Lands Act Waters. Pending House Ways and Means Committee hearing.

Inventory tax creditsCOURTESY