Could a Louisiana part-year resident claim a credit for income tax paid to another state, and which return did the ruling require?

Plain-English summary

A Louisiana part-year resident could claim a credit for income tax paid to another state only by electing to file the full-year resident return described in the ruling.

The resident return, Form IT-540, reported all income for the year from every source and allowed the La. R.S. 47:33 credit.

The nonresident and part-year resident return, Form IT-540B, reported all-source income for the Louisiana-resident portion of the year and Louisiana-source income for the nonresident portion, but the ruling said that form did not provide the other-state credit.

When the election could help

If a person paid another state's income tax on income earned there while also a Louisiana resident, filing as a full-year Louisiana resident could be advantageous because it opened the credit.

The tradeoff was reporting the entire year's income from all sources on the resident return.

Residency discussion in the ruling

The document stated that a natural person spending more than six months of the tax year in Louisiana was deemed a resident. It described individuals resident for part of the year but less than six months as eligible to use the part-year form, while also permitting them to elect the resident form.

Common questions

Q: Could a part-year resident claim the other-state credit?

A: Yes, under the ruling by filing the full-year resident return.

Q: Could the credit be claimed on Form IT-540B?

A: No, according to the 2005 ruling.

Q: What income had to be reported on the resident return?

A: All income for the year, regardless of source.

Q: Is this necessarily the current form procedure?

A: No. It describes the forms and law addressed in 2005.

Citations and references

• La. R.S. 47:31(1) — resident status discussed in the ruling
• La. R.S. 47:33 — credit for income tax paid to another state
• Form IT-540 — resident return identified in the ruling
• Form IT-540B — nonresident and part-year resident return identified in the ruling
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 05-008

Original ruling text

RPage 1 of 1Revenue Revenue RevenueRRRRevenue Information Bulletin No 01-xxxx
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Revenue Ruling
No. 05- 008
December 23, 2005
Individual Income Tax
Credit for Income Tax Liabilities Paid to Other States by Part-Year Resident
Purpose: This revenue ruling explains that a part-year resident has the option of filing a return as
a resident using form (IT-540) or part-year resident using form (IT 540B).
Analysis/Discussion: There is imposed an income tax for each taxable year upon the Louisiana
income of every individual, whether resident or nonresident.
Resident individuals are taxed upon net income from whatever source and must file a resident
form (IT-540). R.S.47:31(1) provides that every natural person who spends in the aggregate
more than six months of the taxable year within the state is deemed to be a resident for purposes
of determining income tax liability. R.S. 47:33 provides a credit to resident individuals against
taxes for net income taxes imposed by and paid to another state on income which is taxable
under the laws of the other state irrespective of the residence or domicile of the recipient. R.S.
47:33, however, provides no relief for taxes paid to other states by taxpayers filing the part-year
resident form.
Individuals who are residents for part of the year, but less than six months, and nonresidents for
the remainder of the year must report income from all sources for the portion of the year they are
residents, and all income from Louisiana sources for the portion of the year during which they
are nonresidents. These individuals may file the nonresident and part-year resident form (IT540B). Because a part-year resident is not prohibited from reporting as a resident for the entire
year, these individuals also have the option to file the resident form (IT-540).
In certain situations a taxpayer who is a part-year resident may find it advantageous to file a
resident return (IT-540) reporting all income for the year from whatever source derived and
claiming credit for taxes paid to another state. There is nothing prohibiting a part-year resident
reporting as a resident.
Conclusion: Because a part-year resident must report income from all sources for the portion of
the year he is a resident, it is possible to have income that is taxable under the laws of another
state irrespective of residency or domicile during the period of residency in Louisiana. If an
income tax liability was paid to another state on income earned in that state during the period of
residency in Louisiana, the part-year resident has the option of filing either a resident form (IT540) reporting all income earned regardless of the source or nonresident form (IT-540B). To
receive credit for taxes paid to another state the part-year resident must file resident form (IT540).
Cynthia Bridges
Secretary

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.