When could individual shareholders exclude income flowing through from a bank organized as an S corporation and subject to Louisiana bank shares tax?

Plain-English summary

The shareholder exclusion began only for taxable periods starting on or after January 1, 2003.

Before that date, the corporate income-tax exemption for a bank paying bank shares tax protected the bank itself, not the individuals receiving its S-corporation flowthrough income.

Periods before January 1, 2003

La. R.S. 47:287.501(B)(1) exempted specified banks and associations from corporation income tax when the relevant shares tax was paid. The ruling found no corresponding exclusion for an individual S-bank shareholder.

Periods beginning on or after January 1, 2003

Under 2002 La. Acts 30, an individual owner of an S bank could exclude income flowing through from an S bank subject to the shares tax. The ruling also described the exclusion for an individual owner of a federal flow-through entity that owned 100% of the S bank.

Common questions

Q: Did the bank's own exemption automatically protect shareholders before 2003?

A: No.

Q: What date controlled the new shareholder exclusion?

A: The taxable period had to begin on or after January 1, 2003.

Q: Did the ruling require the S bank to be subject to bank shares tax?

A: Yes. The new exclusion was described for income from an S bank subject to La. R.S. 47:1967 shares tax.

Citations and references

• La. R.S. 47:287.501(B)(1) — bank-level corporate income-tax exemption
• La. R.S. 47:1967 — bank shares tax cited in the ruling
• 2002 La. Acts 30 — shareholder exclusion effective for periods beginning on or after January 1, 2003
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 02-014

Original ruling text

evenue RevenueRRRRevenue Information Bulletin No 01-xxxx

Revenue Ruling
No. 02- 014
September 5, 2002
Individual Income Tax
Applicability of Corporate Income Tax Exclusion to Individual Income Tax
Purpose: The purpose of this Revenue Ruling is to determine whether the exclusion from
corporate income tax for banks subject to the bank shares tax should properly be extended to
individual income tax for shareholders of banks organized as S corporations.
Analysis/Discussion: The question addressed is, if a bank is an S corporation, are the individual
shareholders of the S bank subject to tax on income received from the S bank.
The answer depends upon the tax period involved.
For taxable periods beginning before January 1, 2003, La. Rev. Stat. Ann. §
47:287.501(B)(1)(West 2001), provides that “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.”
This exemption only applies to the bank. There is no exclusion under this provision for
individual shareholders of banks organized as S corporations, even though the income “flowsthrough” to the shareholders.
For taxable periods beginning on or after January 1, 2003, 2002 La. Acts 30, provides that
individual owners of an S bank, or an entity that is a “flow-through” entity for federal income tax
purposes and owns 100 percent of an S bank, may exclude income that flows through to them
from an S bank that is subject to the shares tax imposed by La. Rev. Stat. Ann. § 47:1967(West
2001).
Conclusion: In compliance with 2002 La. Acts 30, there is an exclusion from individual income
tax for shareholders of banks organized as S corporations for taxable periods beginning on or
after January 1, 2003. No exclusion exists for individuals prior to January 1, 2003.
Cynthia Bridges
Secretary
By:

William (Mac) E. Little
Attorney
Policy Services Division

A Revenue Ruling is issued under the authority of LAC 61III.101 (C ). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued 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.