Did Louisiana corporation franchise tax apply to an unincorporated workers' compensation group self-insurance fund?

Plain-English summary

A qualifying unincorporated workers' compensation group self-insurance fund was not subject to Louisiana corporation franchise tax. The fund did not meet the statutory definition of either a domestic corporation or a foreign corporation.

Why the fund was outside the tax

Louisiana imposed corporation franchise tax on business organizations within the domestic- or foreign-corporation definitions in La. R.S. 47:601(C). The domestic definition included corporations, joint stock companies or associations, and other business organizations organized under Louisiana law that had privileges, powers, rights, or immunities not possessed by individuals or partnerships. The foreign definition covered the listed organizations when formed under another jurisdiction's law.

La. R.S. 23:1195 allowed qualifying employers to pool liabilities for employee injuries and occupational disease arising from employment. The resulting group self-insurance arrangement had to be domiciled, operated, and administered in Louisiana, and the statute specified that it was not a partnership.

Facts that limited the conclusion

The ruling addressed funds that were unincorporated, were not joint stock companies, were not registered with the Secretary of State, and did not conduct business independently of their members. On those characteristics, they were not an “other business organization” within the franchise-tax definition.

Common questions

Q: Did every workers' compensation arrangement escape franchise tax?

A: The ruling addressed an unincorporated group self-insurance fund organized under La. R.S. 23:1195 et seq. and having the stated characteristics.

Q: Did the statute treat the fund as a partnership?

A: No. The ruling stated that La. R.S. 23:1195 specifically provided that these funds were not partnerships under Louisiana law.

Q: Why was the fund not an “other business organization”?

A: The ruling said an unincorporated fund was not in that category if it conducted no business independently of its members.

Q: Was the fund registered with the Secretary of State?

A: The unincorporated funds described in the ruling were not.

Citations and references

• La. R.S. 23:1195 et seq. — workers' compensation group self-insurance funds
• La. R.S. 47:601(C) — domestic- and foreign-corporation definitions for franchise tax
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 01-003

Original ruling text

Revenue Ruling
No. 01-003
October 8, 2001
Corporation Franchise Tax
Status of Certain Unincorporated Group Self-Insurance Funds
for Worker’s Compensation
This revenue ruling addresses whether or not unincorporated group self-insurance funds for
worker’s compensation established pursuant to La. Rev. Stat. Ann. § 23:1195 (West 2001) are
subject to Louisiana’s corporation franchise tax.
Louisiana’s corporation franchise tax is imposed on both domestic corporations and foreign
corporations, which are defined in La. Rev. Stat. Ann. § 47:601(C) (West 2001). “Domestic
corporations” are defined as “all corporations, joint stock companies or associations, or other
business organizations organized under the laws of this state which have privileges, powers, rights,
or immunities not possessed by individuals or partnerships.” Foreign corporations are those
business organizations listed in the definition of “domestic corporation” that are organized under the
laws of any other state, territory or district, or foreign country. Business organizations that do not
meet the definition of domestic corporation or foreign corporation are not subject to the corporation
franchise tax.
Louisiana Revised Statute 23:1195 authorizes certain employers to enter into an agreement to pool
their liabilities to their employees on account of the personal injury and occupational disease arising
out of or incurred during the course of the employment relationship. These arrangements are
characterized as “group self-insurance funds” for worker’s compensation. The arrangement must be
domiciled, operated, and administered in Louisiana. The statute specifically provides that these
funds are not partnerships under Louisiana law. Unincorporated funds are not corporations or joint
stock companies, and are not registered with the Secretary of State. They are not an “other business
organization” if they do not conduct any business independent of their members.
An unincorporated group self-insurance fund that is organized according to La. Rev. Stat. Ann. §
23:1195 (West 2001), et seq., does not meet either the definition of “domestic corporation” or the
definition of “foreign corporation.” Therefore, an unincorporated group self-insurance fund for
worker’s compensation is not subject to Louisiana’s corporation franchise tax.
Cynthia Bridges
Secretary
By:

Leonore Heavey
Attorney
Policy Services Division

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is
issued under Section 61:III.101(C) of the Louisiana Administrative Code to apply principles of law to a specific
set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a
statement of the department's position and is binding on the department until superseded or modified by a
subsequent change in statute, regulation, declaratory ruling, or court decision.