Louisiana Pass-Through Entity Tax Election

Louisiana allows business owners of S corporations and partnerships to elect to be taxed at the entity level instead of reporting the business's net income on their individual tax returns. The Department recently issued guidelines on ending this election.

Louisiana is among the states that allow pass-through entities to elect to be taxed at the entity level, like a corporation. Generally, owners of a PTE that makes this election exclude their share of the entity’s income from their individual tax returns. However, a number of issues can arise with this approach.

For example, if the entity has a mix of resident and nonresident owners, the PTE election may benefit some owners at the expense of others. In addition, a PTE’s revocation of this election is subject to specific guidelines and requires the consent of at least 50 percent of the owners.

How to Make the Louisiana Pass-Through Entity Tax Election?

This election is for S corporations and other entities taxed as partnerships for federal income tax purposes. By making the election, the entity itself pays Louisiana income tax, rather than the income being passed through to the owners and taxed on their individual income tax returns. In order to make the election:

  • Use Form R-6980, Tax Election for Pass-Through Entities.
  • The Louisiana Department of Revenue (LDR) needs to accept your election.
  • You can submit the form during the preceding taxable year, the taxable year you want the election to take effect, or within a specific window after the close of that taxable year. Find details on deadlines on the LDR website.
How Do LLC taxes work in Louisiana

How Do LLC Taxes Work in Louisiana?

A limited liability company (LLC) in Louisiana has numerous state tax obligations that must be met. These include ongoing compliance reports and Louisiana tax form requirements. It is important to understand all of these tax obligations so that you can avoid errors, which can be costly.

If your LLC makes sales of physical products or services, it will be taxable on these amounts. The state collects these taxes and remitted to the Department of Revenue. Moreover, the state has a localized sales tax system, with different rates for each city and county.

Louisiana law allows entities that are taxed as S corporations or partnerships for federal income tax purposes to elect to be taxed at the entity level like a C corporation. The election is effective for the year it is made and all subsequent years until it is revoked. However, it is important to note that the election will not eliminate the $10,000 limit on federal itemized deductions. It will, however, provide a credit against the franchise tax for income that flows through to a Louisiana resident.

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