On November 13, 2021, Louisiana voters approved Constitutional Amendment Number 2 (“CA2”)1, which amended Article VII, Section 4(A) of the Louisiana Constitution. With the adoption of this constitutional amendment, additional income tax statutory changes became effective. The purpose of this guidance is to explain changes to Louisiana’s individual income tax and to encourage taxpayers to review their withholdings and estimated tax payments beginning with the 2022 tax year. There is no impact to the 2021 tax returns due May 16, 2022.
Constitutional Changes to Individual Income Tax
CA2 contained two major changes – one specific to individual income tax and one applicable to all Louisiana income taxes:
For tax years before the 2022 tax year, Louisiana taxpayers receive a constitutionally mandated deduction for federal income tax liability. CA2 changes the nature of this deduction from constitutionally mandated to one that is permissible and authorizes the Legislature to provide for this deduction by statute.
Statutory Changes to Individual Income Tax Act 395 of the 2021 Regular Session of the Louisiana Legislature contains several statutory changes to individual income tax, all of which became effective for the 2022 tax year upon the adoption of CA2:
Through the 2021 tax year, taxpayers are entitled to Louisiana’s Excess Federal Itemized Personal Deductions (“EID”). If a taxpayer itemized her deductions at the federal level via IRS Schedule A, she/he received a deduction for state tax purposes equal to the amount that the federal itemized deductions exceed the federal standard deduction. Such deductions include (1) medical expenses; (2) state and local taxes paid on income or sales tax, real estate taxes, and personal property taxes; (3) interest paid on home mortgages and mortgage insurance premiums; (4) charitable contributions; (5) casualty and theft losses; and (6) certain other deductions, such as gaming losses. Beginning with the 2022 tax year, the EID is limited to medical expenses. 7 The calculation remains the same, except that medical expenses must be deductible at the federal level and exceed the federal standard deduction for the taxpayer’s filing status.
On March 14, 2022, Governor Edwards announced that he will not renew the state’s COVID Public Health Emergency Order since cases and hospitalizations are declining and vaccines are widely available.
On Monday, March 21, 2022, the City of New Orleans’ public health guidelines requiring proof of vaccination or proof of recent negative COVID test to enter certain establishments has been lifted.
The Labor Department’s Wage and Hour Division recently announced that it is reviewing the regulations that implement the exemption of bona fide executive, administrative, and professional employees from the Fair Labor Standards Act’s minimum wage and overtime requirements. The review aims to update the salary level threshold for the so-called “white-collar exemptions” (currently set at $35,568 annually). Recognizing smaller employers may have concerns about proposed changes, the Small Business Administration Office of Advocacy is holding a virtual roundtable to hear directly from small businesses and nonprofits. This Small Business Virtual Roundtable on Upcoming Overtime Regulations will take place on Friday, March 25, 2022, 2:00 pm – 3:30 pm Eastern. Nonprofits are invited to register for the roundtable by sending an email to Janis.Reyes@sba.gov.
One of the most significant policy priorities of the nonprofit community is restoration of the Employee Retention Tax Credit (ERTC), the refundable payroll tax credit that Congress created at the outset of the pandemic, but retroactively repealed in November. A coalition of businesses and nonprofits sent a letter to congressional leaders encouraging them to reinstate the ERTC by inserting the Employee Retention Tax Credit Reinstatement Act (H.R.6161/S.3625) in upcoming legislation. A few days later, 30 Members of Congress, half Democrats and half Republicans, sent their own letter to their leaders calling for reinstating the credit “to help struggling small businesses and nonprofits who were counting on the ERTC to pay their employees through the end of the year.” The ERTC Reinstatement Act would restore the incentive for the fourth quarter of 2021. Nonprofits are also seeking extension and expansion of the ERTC as described in the nonprofit priorities letter.
We need your help! We need your stories on why restoring the employee retention tax credit (ERTC) for the last three months of 2021 is important to your organization. The ERTC was created by the CARES Act in 2020 to help companies and nonprofit organizations keep employees on payroll during the COVID-19 pandemic. Though it was set to run through 2021, Congress ended the ERTC early to help defray some of the costs of last year’s bipartisan infrastructure legislation. Please email your stories by February 28 to firstname.lastname@example.org
Senators recently introduced the bipartisan Employee Retention Tax Credit Reinstatement Act (S. 3625), a bill that seeks to retroactively restore the refundable tax credit for the fourth quarter of 2021. The bill’s principal sponsors are Senators Hassan (D-NH) and Scott (R-SC). The business and nonprofit coalition issued a joint news release in support of the legislation. Tim Delaney, President & CEO of the National Council of Nonprofits, said, “The Employee Retention Tax Credit is, and has always been, a disaster relief provision designed to help employers keep workers on the payroll during trying times.” He warned that without swift passage of the bill and the restoration of the ERTC for the fourth quarter of 2021, “layoffs at community-based nonprofits will be necessary, harming the economic recovery and causing a reduction in the vital services our fellow residents need.” The Senate bill is a companion to the bipartisan legislation (H.R. 6161) introduced in December by Representatives Miller (R-WV) and Murphy (D-FL).
See Employee Retention Tax Credit For Nonprofits Has A Chance, The NonProfit Times, Feb. 22, 2022.
The set of Senate sponsors of the Employee Retention Tax Credit Reinstatement Act is now official. The bipartisan bill will be introduced on Thursday, Feb. 10 with these sponsors/cosponsors: Senators Hassan (D-NH), Tim Scott (R-SC), Warner (D-VA), Capito (R-WV), and Cardin (D-MD). The first three Senators are members of the Senate Finance Committee, which has jurisdiction over the ERTC; Senator Cardin is also on Finance, but importantly is Chair of the Small Business Committee and is putting together a pandemic relief package to help employers. This article in Roll Call yesterday lays out the background and some insights into the thinking of key Senators: Democrats mulling revival of employee retention tax credit, Laura Weiss, Roll Call, Feb. 7, 2022.
Advancing H.R. 6161: Efforts continue to promote Employee Retention Tax Credit Reinstatement Act, H.R. 6161, the bill that would restore eligibility for the ERTC for the fourth quarter of 2021. The list of House Cosponsors has grown to 53 from 23 states so far, which includes 29 Republicans and 24 Democrats. Also, the list of organizations endorsing the legislation is growing. The updated ERTC coalition Letter in support of H.R. 6161 now has 68 national organizational signers, 40 of which represent charitable nonprofits. Organizations large and small are urging Congress to restore the ERTC through the end of the year, as laid out in the recently introduced Employee Retention Tax Credit Reinstatement Act (H.R. 6161).
The coalition letter has been sent but will be updated regularly as more organizations sign on. Go here to sign your organization onto the letter.
In December, a bipartisan group of Representatives introduced the Employee Retention Tax Credit Reinstatement Act (H.R. 6161) to restore the important incentive. See the news release and current list of nonprofits and other employers endorsing the legislation.
The Build Back Better bill currently does not include reinstatement of the Employee Retention Tax Credit, a high priority of the charitable nonprofit community and a benefit that was eliminated for the fourth quarter of 2021 by way of the bipartisan infrastructure bill signed into law on November 11. Nonprofits have been counting on the refundable payroll tax credit of up to $7,000 per employee this quarter to afford to retain staff and avoid additional layoffs. Representatives introduced the Employee Retention Tax Credit Reinstatement Act (H.R. 6161) to restore the important incentive.
See the news release and current list of nonprofits and other employers endorsing the legislation.
Contact your Representatives (Twitter handles; email; telephone and urge them to cosponsor H.R. 6161 to restore this important refundable payroll tax credit. Learn more about the issue and go to this Take Action page for more ideas.
With the enactment of the Infrastructure Investment and Jobs Act, nonprofit and other employers retroactively lost access to the Employee Retention Tax Credit (ERTC) for the fourth quarter of 2021. The repeal of the credit halfway through the quarter could subject employers to penalties and other liabilities that would not have applied had the ERTC remained in effect. What has been a lifeline for many nonprofits during the pandemic, the loss of the ERTC for Q4 may exacerbate nonprofit worker shortages, leaving many in communities without needed services. The National Council of Nonprofits sent a letter to the IRS urging the agency to announce that employers will not be penalized for using the ERTC in the first half of this quarter (that started on Oct. 1) and provide other relief. An IRS official is quoted as saying: “Rest assured, we are aware of this problem. We were aware of the problem when we saw the legislative language.” Clarifications could be issued this week.
By a tally of 65 to 27, the U.S. Senate approved a continuing resolution (H.R. 6617) that will fund the federal government through March 11. The U.S. House of Representatives passed the continuing resolution or CR for short, and President Joe Biden signed it into law. Without the passage of this continuing resolution, parts of the federal government would have shut down last Friday. Lawmakers are also working to lock in a broader full-year spending package, but have said they need more time to finish and, as a result, needed a short-term funding extension to avert a shutdown. Historically, federal government shutdowns have caused delays in payments from federal agencies to nonprofits and disruptions in the delivery of federal benefits.
The Nonprofit Finance Fund State of the Nonprofit Sector Survey opened on January 26, and will run through February 28, 2022. This is a vital national survey on the financial health of nonprofits, and state associations traditionally have the greatest success in promoting it. The Survey collects data on the experiences of nonprofit leaders and informs our sector's efforts to improve the lives of people in communities across the country. In the past, its findings have been widely used and cited by nonprofit leaders and boards, funders, advocates, policymakers, media, researchers, and many others.
ACTION ITEM: Please take the survey and spread to your other nonprofit colleagues in the state.
It’s still early, but here’s how some of the top spots are starting to look….
Top Spot – Governor
No one has officially announced yet for this race, but names being tossed around include Hunter Lundy, a Lake Charles personal injury attorney and one-time congressional candidate. Although he last ran as a right-leaning Democrat, Lundy says he is done with both parties and would run as an independent. “I’m in the radical middle.” – Hunter Lundy
Other possible candidates mentioned include the current Attorney General Jeff Landry, Treasurer John Schroder, Lt. Gov. Billy Nungesser, Sen. Gary Smith of Norco (the lone Democrat rumored so far), Sen. Sharon Hewitt of Slidell, Sen. Rick Ward of Maringouin, and Rep. Richard Nelson of Mandeville.
#2 Spot - Lieutenant Governor
House Speaker Clay Schexnayder was originally expected to make a bid for agriculture commissioner, but now it appears he is eyeing the #2 spot of lieutenant governor during the 2023 cycle.
Rep. Scott McKnight of Baton Rouge was originally eyeing the lieutenant governor’s race, but is now considering a run at treasurer. McKnight grew up working in the family business at Wright & Percy Insurance, now known as BXS Insurance, and has the voting record of a small government, free market, pro-business conservative.
Solicitor General Liz Murrill of Baton Rouge has already hit the ground running in her bid for attorney general. Others thinking about the race include House and Governmental Affairs Chair John Stefanski of Crowley and Speaker Pro Tempore Tanner Magee of Houma.
The American Rescue Plan Act (ARPA) of 2021 – a $1.9 trillion economic relief package – was signed by President Joe Biden March 11, 2021. The ARPA budget includes $350 billion in new funding for state, local, territorial and tribal governments through the Coronavirus State and Local Fiscal Recovery Fund (SLFRF). Within the SLFRF, $195 billion is distributed directly to state governments, with wide discretion on funding that can be used to address short- and long-term economic recovery. National Association of State Budget Officers (NASBO) have collected information on how states have allocated SLFRF funds to date. Note this page only includes state allocations of funds from the SLFRF, not from other sources of funding in the ARPA.
Other ARPA local investment trackers include:
National Conference of State Legislatures (NCSL)
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