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The Louisiana Department of Revenue has drafted an emergency regulation regarding the Louisiana net capital gains deduction, Louisiana Administrative Code 61:I.1312.  The emergency regulation will be published in the January 20, 2024 issue of the Louisiana Register, but the rule is effective for all transactions occurring on or after January 1, 2024.  The emergency regulation will be in effect for 180 days, unless renewed or revoked, or until the adoption of the final regulation, whichever comes first.

The regulation was prepared at the direction of the Louisiana legislature which in Act 242 of the 2023 regular session required the Department to promulgate regulations relative to the net capital gain deduction and to specifically address four particular areas:

  1. documentation requirements applicable to taxpayers claiming the deduction;
  2. a de minimis exception to documentation requirements for small transactions eligible for the deduction;
  3. restrictions on eligibility for transactions where the majority of the physical assets are located outside of Louisiana; and
  4. restrictions on eligibility for transactions between related parties.

The emergency regulation addresses each of these areas in turn.  The Louisiana net capital gain deduction, La. R.S. 47:293(9)(a)(xvii), provides a deduction for resident individuals and non-resident individuals for net capital gains resulting the sale or exchange of an equity interest in, or for the sale or exchange of substantially all the assets of a non-publicly traded corporation, partnership, limited liability company, or other business organization commercially domiciled in Louisiana.  The emergency regulation sets forth the documentation requirements necessary for taxpayers who are claiming the deduction and prescribes what documents must be submitted at the time of the filing of their Louisiana individual income tax return that claims the deduction.  If the capital gain for which a deduction is being claimed is greater than $250,000, there are additional documentation requirements set forth.  Consequently, the de minimis requirements exist for capital gains transactions where the gain is less than $250,000. 

The emergency regulation also indicates that net capital gains resulting from the sale or exchange of real property or tangible assets may qualify for the deduction if 75% or more of the real property or tangible assets are located within Louisiana, provided however, that the income from the related business was subject to Louisiana income tax prior to the sale or exchange.  The emergency regulation indicates that net capital gains from the sale or exchange of an equity interest or from the sale or exchange of substantially all assets shall not qualify for the deduction if the transaction transfers ownership of the interest or assets to a related party.  A “related party” is defined as the taxpayer and all entities which are controlled entities with respect to such taxpayer, and a taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless the beneficiary’s interest in the trust is 5% or less of the value of the trust property.  Additionally, a taxpayer who is an executor of an estate and a beneficiary of such estate shall also be a related party, except in the case of a sale or exchange in satisfaction of a pecuniary bequest. 

Contact Liskow attorneys Bob Angelico, Leon Rittenberg, and John Rouchell for further questions regarding this topic.

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Photo of Robert S. "Bob" Angelico Robert S. "Bob" Angelico

Bob Angelico is a nationally known business lawyer with years of experience helping top-tier companies with sophisticated state and local tax issues throughout Louisiana.  As the head of the firm’s tax practice group, Bob works to minimize the taxes of his clients, which…

Bob Angelico is a nationally known business lawyer with years of experience helping top-tier companies with sophisticated state and local tax issues throughout Louisiana.  As the head of the firm’s tax practice group, Bob works to minimize the taxes of his clients, which include manufacturers, retailers, wholesalers, non-profits, construction businesses and other entities of all types and sizes.

Photo of Leon H. Rittenberg III Leon H. Rittenberg III

Leon Rittenberg III is a New Orleans native. His practice focuses on serving the needs of small and mid-sized businesses and their owners; including philanthropy and non-profit law, taxation, finance, private equity, estate planning, probate, real estate, mergers and acquisitions and related matters.

Leon Rittenberg III is a New Orleans native. His practice focuses on serving the needs of small and mid-sized businesses and their owners; including philanthropy and non-profit law, taxation, finance, private equity, estate planning, probate, real estate, mergers and acquisitions and related matters. Leon represents the interests of a number of private investors, oil service businesses, marine transportation companies and physician groups. He is a Board Certified Tax Specialist and Board Certified Estate Planning & Administration Specialist, as certified by the Louisiana Board of Legal Specialization. He frequently lectures in areas such as taxation, estate planning and maritime transactions.

Leon is a Fellow of the American College of Tax Counsel. He has been recognized by Chambers USA (Louisiana Marine Finance – 2021; Louisiana Corporate/M&A: Tax section – 2017), Louisiana Super Lawyers (Tax, Estate Planning & Probate and Business/Corporate), and the Best Lawyers in America (Non-Profit/Charities Law and Trusts & Estates) since 2007, and by New Orleans Magazine as one of their “Top Lawyers of New Orleans” for his work in Equipment Finance Law, Mergers & Acquisitions Law and Tax Law. New Orleans City Business selected him for their Leadership in Law class of 2014, which “identifies and honors 50 outstanding legal professionals whose successes in law and contributions to the community have set the pace for the legal community.”

Photo of John Rouchell John Rouchell

John Rouchell’s practice covers all aspects of state and federal tax law, as well as corporate and business law, estate planning and administration. He also represents authors, artists, and musicians in the New Orleans area, including his only child, John Michael, a professional

John Rouchell’s practice covers all aspects of state and federal tax law, as well as corporate and business law, estate planning and administration. He also represents authors, artists, and musicians in the New Orleans area, including his only child, John Michael, a professional musician and songwriter since the age of thirteen. John is a Board Certified Estate Planning & Administration Specialist and a Board Certified Tax Specialist – as certified by the Louisiana Board of Legal Specialization.

John is a Fellow of the American College of Trust and Estate Counsel. He has been recognized by Louisiana Super Lawyers in Estate Planning & Probate and Tax since 2007 and by the Best Lawyers in America in Business Organizations, Closely Held Companies and Family Businesses Law, Corporate Law, Elder Law, Tax Law, Trusts & Estates since 1995. New Orleans Magazine has also recognized John as one of their “Top Lawyers of New Orleans” for his work in Elder Law, Tax Law and Trusts & Estates since 2013.

John is a New Orleans native and Jesuit High School graduate. He attended Tulane University receiving a bachelor’s degree in English. He received a J.D. at Tulane Law School in 1976 and attended New York University where he received a LL.M. in Taxation in 1977. Prior to joining Liskow, John was a partner at Baldwin Haspel Burke & Mayer.