Did an out-of-state-chartered bank paying Louisiana bank shares tax qualify for the same corporation income- and franchise-tax exemptions as Louisiana banks?

Plain-English summary

An out-of-state-chartered bank paying Louisiana bank shares tax qualified for Louisiana's corporation income- and franchise-tax exemptions.

The Department also ruled that the bank was entitled to refunds of income and franchise tax for periods that had not prescribed.

Why the statutory wording was read broadly

The exemption statutes named national banks and banks organized under Louisiana law that paid the bank shares tax. When those provisions were enacted, banks generally could not operate across state lines, so that wording effectively covered all banks doing Louisiana banking business and paying the shares tax.

After federal and state interstate-branching law changed, a literal reading would discriminate against otherwise comparable banks chartered by other states.

The Department interpreted the original wording in light of the conditions when enacted and the Commerce Clause, concluding that all banks paying the bank shares tax were exempt.

Common questions

Q: Did the out-of-state bank qualify for the income-tax exemption?

A: Yes.

Q: Did it qualify for the franchise-tax exemption?

A: Yes.

Q: Could it recover taxes already paid?

A: Yes, for periods still open under the refund-prescription rules.

Q: What fact was central?

A: The bank was required to pay Louisiana bank shares tax.

Citations and references

• La. R.S. 6:533(3) and 6:537.1 — interstate banking
• La. R.S. 47:1967(A) — bank shares tax
• La. R.S. 47:287.501(B)(1) and 47:608(2) — banking exemptions
• U.S. Const. art. I, § 8, cl. 3 — Commerce Clause
• Union Sulphur Co. v. Parish of Calcasieu, 96 So. 787 (La. 1923)
• LAC 61:III.101.C — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 03-013

Original ruling text

Louisiana Department of Revenue

Private Letter Ruling 03-013
Redacted Version
December 12, 2003
A Private Letter Ruling concerning the application of Louisiana corporation income tax and Louisiana
corporation franchise tax has been requested. Specifically, the Department of Revenue was asked
whether a banking corporation that is paying the Louisiana bank shares tax, but is organized under
the laws of another state, qualifies for the Louisiana corporation income tax exemption and the
Louisiana corporation franchise tax exemption provided for Louisiana banking corporations. In
addition, the Department of Revenue was asked whether a banking corporation in such a situation
was due a refund for the years during which both Louisiana corporation income/franchise tax and the
bank shares tax were remitted.
Facts:
The following is a summary of the facts as supplied by the taxpayer requesting the Private Letter
Ruling (Banking Corporation A):
•

Banking Corporation A is incorporated under the banking laws of another state and is subject
to the applicable provisions of that state’s banking laws and the laws of the various states
in which it operates, as well as federal law.
• Banking Corporation A is headquartered in another state and has commercial banking
operations in several states.
• Banking Corporation A provides commercial banking, leasing, mortgage origination and
servicing, life insurance, brokerage, and trust services to corporate customers, local
governments, individuals, and other financial institutions through an extensive network of
branches and offices.
• Banking Corporation A has branches located in several Louisiana parishes.
• Banking Corporation A is a calendar year taxpayer.
• Beginning with the year ending 12/31/00 through 2003, Banking Corporation A has paid
Louisiana corporation income tax and Louisiana corporation franchise tax.
• For tax years 2000-2002, Banking Corporation A has paid the Louisiana bank shares tax.
Discussion:
Prior to 1994, banks were not allowed to operate across state lines. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994, Pub. L. No. 103-328, 108 Stat. 2338, allowed banks
to branch across state lines. A provision within the Riegle-Neal Interstate Banking and Branching
Efficiency Act allowed states to prohibit interstate branch banking by state and national banks as
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Redacted Private Letter Ruling 03-013
Page 2 of 4

long as they acted prior to June 1, 1997.
In 1995, La. Rev. Stat. Ann. § 6:533(3) was enacted, which provides that “Effective June 1, 1997,
an out of state bank holding company may convert its Louisiana bank or banks into branches of the
out of state bank.” Also in 1995, La. Rev. Stat. Ann. § 6:537.1 was enacted, which provides:
In accordance with the provisions of the Riegle-Neil Interstate Banking and Branching
Efficiency Act, a Louisiana bank or bank holding company may acquire an out of
state bank or bank holding company or may branch into any other state to the same
extent as any state chartered bank, national bank, foreign bank, or other similar
institution in the host state in question may do so and shall have the right and power
to exercise and enjoy all rights, powers, privileges, and immunities accorded to any
state chartered bank, national bank, foreign bank, or other similar institution in the
host state.
The imposition of the tax commonly called the bank shares tax is based on La. Rev. Stat. Ann. §
47:1967(A), which provides:
The shares of stock of all banks, banking companies, firms, associations or
corporations, doing a banking business in this state, chartered by the laws of this
state or of the United States are hereby declared subject to taxation for all purposes
in this state. (emphasis added)
The Louisiana corporation income tax exemption pertaining to banking corporations was enacted in
1986 and is located at La. Rev. Stat. Ann. § 47:287.501(B)(1). It provides:
Mutual savings banks, national banking corporations and banking corporations
organized under the laws of the state of Louisiana who pay a tax for their
shareholders or whose shareholders pay a tax on their shares of stock under other
laws of this state and building and loan associations shall be exempt from taxation
under this Part. (emphasis added)
La. Rev. Stat. Ann. § 47:608(2), enacted in 1935, provides an exemption from the Louisiana
corporation franchise tax for:
Mutual savings banks, national banking corporations and banking corporations
organized under the laws of the state of Louisiana who pay a tax for their
shareholders or whose shareholders pay a tax on their shares of stock under other
laws of this state, and building and loan associations. (emphasis added)

Redacted Private Letter Ruling 03-013
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The bank shares tax applies to all banks doing a banking business in Louisiana. However, both the
corporation income and franchise tax exemptions apply to banks organized under the laws of the
state of Louisiana. On their face, these exemptions appear to violate the Commerce Clause of the
United States Constitution, U.S. Const. art. 1, § 8, cl. 3.
The Supreme Court of Louisiana, in Union Sulphur Co. v. Parish of Calcasieu et al., 96 So. 787 (La.
1923), held that “… laws, like contracts, are to be construed in the light of conditions as they exist
at the time of their passage.”
Based on Union Sulphur Co., both La. Rev. Stat. Ann. § 47:287.501(B)(1) and La. Rev. Stat. Ann.
§ 47:608(2) are to be construed in light of the conditions that existed at the time of their passage. At
the time of their passage, banks could only operate in Louisiana if they were organized under
Louisiana law or were national banks. Therefore, the exemptions had the effect of exempting all
banks paying the bank shares tax. The phrase “organized under the laws of the state of Louisiana”
must be interpreted as reflecting this condition at the time of passage rather than reflecting an intent
by the legislature to unconstitutionally discriminate against banks organized under the laws of other
states. The exemptions are therefore interpreted to exempt all banks paying the bank shares tax from
the Louisiana corporation income and franchise tax.
Ruling:
Since Banking Corporation A is required to pay the Louisiana bank shares tax, it qualifies for the
exemptions provided in La. Rev. Stat. Ann. § 47:287.501(B)(1) and La. Rev. Stat. Ann. § 47:608(2).
Banking Corporation A would be due a refund of income and franchise tax for all periods not
prescribed.
Sincerely,

Cynthia Bridges
Secretary
By:

William (Mac) E. Little
Attorney
Policy Services Division

Redacted Private Letter Ruling 03-013
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A Private Letter Ruling (PLR) is issued under the authority of LAC 61:III.101( C ). A PLR provides
guidance to a specific taxpayer at the taxpayer’s request. It is a written statement issued to apply
principles of law to a specific set of facts or a particular tax situation and is limited to the matters
specifically addressed. A PLR does not have the force and effect of law and may not be used or cited
as precedent. A PLR is binding on the Department only as to the taxpayer making the request and
only if the facts provided with the request were truthful and complete and the transaction was carried
out as proposed. The Department’s position concerning the particular tax situation addressed
remains in effect for the requesting taxpayer until a subsequent declaratory ruling, rule, court case,
or statute supersedes it.