Recent jurisprudential and legislative developments have significantly altered the Louisiana state tax penalty regime.  First, the Louisiana Supreme Court on November 4, 2020 denied the Louisiana Department of Revenue’s writ application in Smith International, Inc. v. Kimberly Robinson, Secretary, Louisiana Department of Revenue [1], rendering the earlier decision by the Louisiana First Circuit Court of Appeal final.  Now, the penalties imposed by Acts 2015, No. 128, eff. July 1, 2015 cannot be applied to tax periods prior to July 1, 2015.  In addition, the late payment penalty in La. R.S. 47:1602(A) is no longer applicable to amounts later assessed on taxpayers who timely filed their returns and remitted the amount of tax shown as due on their tax returns.  Taxpayers under audit should object to the Department of Revenue asserting these penalties in audit workpapers.

Second, the Louisiana legislature amended the Louisiana tax penalty regime in Acts 2020, No. 348.  Sensing that the Department of Revenue may lose the Smith International case, the legislature used this Act to prohibit refunds for taxpayers who previously paid late payment penalties but would not owe them under the holding of Smith International.  Starting with assessments and collection actions instituted after January 1, 2021, the legislation also made significant changes to the rates of penalties imposed as well as the Department of Revenue’s burden in proving that taxpayers owe penalties.  Taxpayers should review these developments and consider their effect on each taxpayer’s individual situation.

[1] 2018-1640 (La. App. 1 Cir. 1/9/20), cert. denied (11/4/20).

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