What Louisiana income-tax deadline and penalty relief did RR 20-002 provide during the 2020 COVID-19 emergency?

Plain-English summary

Louisiana Revenue Ruling 20-002 created three temporary forms of income-tax relief during the first months of the COVID-19 emergency:

1. an automatic underpayment-penalty safe harbor for the first two 2020 individual estimated-tax payments;
2. timely treatment for certain late 2019 pass-through entity tax elections; and
3. a 30-day extension for certain 2019 transferable-credit purchases or binding transfer agreements.

The ruling did not generally move the statutory first- and second-quarter estimated-tax due dates. Instead, taxpayers had to pay those installments on time and meet the 90%-of-prior-year tests to receive the automatic penalty waiver.

Every date in this ruling has passed. It is useful for historical returns, audits, penalty disputes, and credit-transfer records—not current relief.

Estimated-tax penalty safe harbor

Individuals generally had to make estimated-tax declarations when expected Louisiana income-tax liability exceeded $1,000 after credits; the ruling noted a $2,000 threshold for married joint filers.

Louisiana law did not let the Secretary extend the statutory declaration-payment due dates. For the April 15 and June 15, 2020 installments, the Department instead automatically waived the underpayment-of-estimated-tax penalty when all three conditions were met:

• the taxpayer paid the April 15 and June 15, 2020 declarations on time;
• the April 15, 2020 payment was at least 90% of the April 15, 2019 declaration payment; and
• the June 15, 2020 payment was at least 90% of the June 17, 2019 declaration payment.

The Department based the relief on taxpayers' inability to complete 2019 returns and use them to calculate 2020 installments during the emergency.

Fiscal-year filers received the same relief by substituting their corresponding first and second declaration-payment dates.

Late pass-through entity elections

Act 442 of 2019 allowed an S corporation or an entity taxed federally as a partnership to elect Louisiana entity-level tax treatment.

For a calendar-year 2019 election otherwise due April 15, 2020, the Department treated an election filed on or after April 16 but before July 16, 2020 as timely.

For a fiscal-year filer whose election was due between March 1 and May 30, 2020, a filing after the fourth-month deadline but before the fifteenth day of the seventh month after year-end was also treated as timely.

The relief applied to the 2019 tax year and relied on the COVID-19 emergency and the filing extensions described in Revenue Information Bulletin 20-008.

Transferable-credit deadline extension

Louisiana law required a purchased credit's transfer effective date—or execution of a binding transfer agreement—to occur by the original return due date, without regard to an ordinary filing extension.

The Department used the emergency proclamation's nonessential-deadline authority to add 30 days for income and franchise returns whose original due dates fell between March 1 and May 30, 2020.

For 2019 calendar-year individual, corporation, composite partnership, and fiduciary income-tax returns, the extended deadline was June 15, 2020.

For fiscal-year returns in the covered window, the deadline became 30 days after the original due date.

Any statutorily required credit-transfer fee still had to accompany the transfer documents when submitted.

What this means for you

Historical individual returns

When reviewing a 2020 underpayment penalty, compare the first two declaration payments to the corresponding 2019 installments and confirm both 2020 payments were timely.

Pass-through entities

The late-election relief covered only the stated 2019 election window. Preserve filing proof showing the election arrived before July 16, 2020 or within the fiscal-year rule.

Credit buyers and sellers

For a 2019 credit used on a covered return, verify the transfer date or binding agreement against the special June 15 or 30-day deadline and retain proof of any required transfer fee.

Common questions

Q: Did the ruling postpone the April 15 and June 15 estimated-tax payments?

A: No. The automatic safe harbor required timely payment and waived the penalty when the 90% tests were met.

Q: Did every 2020 estimated-tax underpayment qualify?

A: No. The ruling covered the first two declaration payments and imposed specific timing and amount conditions.

Q: What was the calendar-year deadline for the 2019 pass-through election?

A: The late filing had to be made before July 16, 2020.

Q: How long was the transferable-credit extension?

A: Thirty days for covered returns, producing a June 15, 2020 deadline for the listed 2019 calendar-year filers.

Q: Is this relief still available?

A: No. The ruling addressed deadlines in 2020 and related 2019 tax-year actions.

Citations and references

• La. R.S. 47:116 et seq. — individual estimated-tax declarations
• La. R.S. 47:118 — underpayment penalty, exceptions, and waiver authority
• La. R.S. 47:287.732.2 — pass-through entity tax election
• La. R.S. 47:1675(H)(1)(e) — transferable-credit timing
• La. R.S. 29:724(A) — emergency proclamation authority
• Proclamation JBE 2020-27 — emergency deadline authority discussed 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 20-002

Original ruling text

Revenue Ruling 20‐002
March 30, 2020
Income Tax
Income Tax Relief Provisions for COVID‐19 Public Health Emergency On March 11, 2020, Governor John Bel Edwards declared a statewide public health emergency as a result of the imminent threat posed to Louisiana citizens by the outbreak of a respiratory disease caused by a novel coronavirus known commonly as COVID-19. On March 22, 2020, additional measures, including a general stay-at-home order to the public, were enacted. The purpose of this ruling is to provide guidance and relief provisions relative to income tax, as follows:

1. Safe harbor provision for declaration payments for the 2020 tax year;
2. Allowance for late filed elections for pass-through entity tax; and
3. Extension of time to acquire tax credit or execute a binding agreement to transfer a tax
   credit.
   First and Second Quarter 2020 Declaration Payments
   Overview of Declaration Payments, Penalty, and Exceptions
   Individuals are required by statute1 to file and pay declarations of estimated income tax with the Louisiana Department of Revenue (“Department”). Declarations are required if the Louisiana individual income tax liability can reasonably be expected to exceed $1,000 after deducting all allowable credits.2 The purpose of requiring declaration filings and payments is to ensure income tax is paid timely throughout the tax year as the individual earns the income. Individual income taxpayers are generally exempt from this requirement because their income tax is withheld by employers as withholding tax and remitted directly to the Department. Individuals then claim a credit for taxes withheld by employers when preparing and filing their individual income tax returns.

1 LA R.S. 47:116 et seq.
2 LA R.S. 47:116(A); For taxpayers with married filing jointly status, the amount is doubled to $2,000.

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.

Revenue Ruling 20‐002
March 30, 2020
Page 2 of 5

For the 2020 tax year, generally, the first declaration payment is due on or before April 15, 2020, and the second declaration payment is due on or before June 15, 2020.3 If an individual is required to pay declarations of estimated tax, but fails to do so, the Underpayment of Estimated Tax (“UET”) penalty is added to the tax due.4 However, LA R.S. 47:118(D) provides five exceptions; if any one exception is satisfied, the penalty is not assessed by the Department.5 Some of the more common exceptions include:

1. The taxpayer does not owe more than $1,000 after consideration of credits and tax
   withholdings.
2. The taxpayer’s current year payments equal or exceed the previous year’s tax liability for
   each installment period.
3. The taxpayer’s current year payments equal or exceed 90% of the tax computed on
   annualized income for the period ending based on calendar quarters. Title 47 of the Louisiana Revised Statutes of 1950 provide no mechanism or authority for the Secretary to extend the statutory due date of declaration payments for individuals.6 However, for the 2020 tax year, the Secretary may waive the UET penalty if the taxpayer requests a waiver by May 17, 2022 (one year after the statutory due date of the return) and the taxpayer has acted in good faith in failing to make estimated payments.7 The Secretary may presume the taxpayer acted in good faith if the failure to make estimated payments was attributable to extraordinary circumstances beyond the individual’s control.8 Ruling Due to the public health emergency resulting from the COVID-19 pandemic, taxpayers are physically unable to visit their tax preparers to prepare 2019 individual tax returns. By extension, without the completed 2019 individual income tax return, taxpayers cannot base 3 LA R.S. 47:117(A)(1); LDR Form IT-540ESi; Farmers and fisherman are exempt from this requirement as

provided by LA R.S. 47:117(B)
4 LA R.S. 47:118(A)
5 LDR Form R-210Ri (2019 Tax Year) provides an overview of each of the five exceptions and the underlying calculations. Approximately 1.63% and 2.20% of individual income taxpayers were assessed UET penalty in 2017 and 2018, respectively. 6 As authorized by LA R.S. 47:1514, the Secretary has administratively extended the filing of various tax returns and their associated payments (See Revenue Information Bulletins 20-008 and 009). However, declaration payments required by LA R.S. 47:116 et seq. are neither “returns” nor the “payment of tax due” as reflected on “returns”. Thus the general authority to extend a return and payment of tax due is inapplicable to declaration payments. 7 LA R.S. 47:118(I) 8 LA R.S. 47:118(I)(1)

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.

Revenue Ruling 20‐002
March 30, 2020
Page 3 of 5

their 2020 declaration payments on the prior year’s income or liability. Therefore, in consideration of these extraordinary circumstances, the Department shall automatically waive any UET penalty otherwise due for the April 15 and June 15, 2020 declaration payments provided the following criteria are met:

1. The taxpayer pays the April 15 and June 15, 2020, declaration payments timely.
2. The amount paid on the April 15, 2020, declaration payment is at least 90% of the amount
   paid on the April 15, 2019, declaration payment.
3. The amount paid on the June 15, 2020, declaration payment is at least 90% of the amount
   paid on the June 17, 2019, declaration payment.
   For fiscal year filers, the same UET penalty wavier is granted; fiscal year filers must follow the same criteria provided above but substitute the first and second declaration payment due dates as appropriate based on the filers’ taxable year. Late Filed Elections for Pass‐Through Entity Tax Overview of Act 442 Election Act 442 of the 2019 Regular Session authorizes a voluntary election by any S corporation, or entity taxed as a partnership for federal income tax purposes, to pay tax on its income.9 For the 2019 tax year, the election must be filed by April 15, 2020. However, a late filed election may be treated as timely if reasonable cause exists for the failure to make the election timely.10 Ruling Any late filed election for the 2019 tax year filed on or after April 16, 2020, but before July 16, 2020, shall be considered filed timely in light of the COVID-19 public health emergency and in consideration of existing filing and payments extensions provided by LDR RIB 20-008. For fiscal year filers with an election due between March 1 and May 30, 2020, any late filed election for the 2019 tax year filed on or after the fifteenth day of the fourth month after the close of the taxable year but before the fifteenth day of the seventh month after the close of the taxable year shall be considered filed timely in light of the COVID-19 public health emergency and in consideration of existing filing and payments extensions provided by RIB 20-008. 9 LA R.S. 47:287.732.2(A)(1)

10 LA R.S. 47:287.732.2(A)(2)

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.

Revenue Ruling 20‐002
March 30, 2020
Page 4 of 5

Extension of Time to Transfer Credits (2019 Tax Period Only)
Overview of Time Limitations to Transfer Credits and Proclamation No. JBE 2020-27 Louisiana utilizes a variety of tax credits that offset income and corporation franchise taxes to incentivize taxpayers to engage in certain behaviors such as create jobs, invest in certain business sectors, and donate to particular organizations or causes. These tax credits have different characteristics: refundable, nonrefundable, transferable, and nontransferable. Transferable credits are sold or exchanged between the person who earns the credit and a taxpayer who purchases and utilizes the credit on a Louisiana income or franchise tax return. In order for a taxpayer who purchases a credit to use the credit on a return, Louisiana law11 requires that either (1) the effective date of the transfer of the tax credit or (2) the execution of a binding agreement to transfer the tax credit must occur on or before the due date of the return, without regard to any extension granted. Title 2912 also grants the governor the authority in times of emergency or disasters to issue executive orders, proclamations, and regulations and to amend and rescind them related to the emergency or disaster. The statute also provides that any executive order, proclamation, or regulation issued during an emergency shall have the force and effect of law. Based upon general credits provisions of the applicable statute13, there exists no ability to extend the time for either the effective date of the transfer of a tax credit or the execution of a binding agreement to transfer the tax credit beyond the due date of the return for a taxable year. However, on March 13, 2020, Governor John Bel Edwards issued Proclamation JBE 2020-27 (the “Proclamation”) which provided additional measures for the COVID-19 public health emergency. Provisions14 of the Proclamation state that any state department, agency, or political subdivision is allowed to extend any non-essential deadline for a period of no longer than 30 days if the extension is deemed necessary to respond to the COVID-19 threat. The Proclamation also provides that the state of emergency due to COVID-19 extends until April 9, 2020, unless terminated or extended. Ruling Based on the existing public health emergency, the Department finds that the deadline to transfer a credit is a non-essential deadline and an extension is necessary to respond to the COVID-19 threat. Therefore, in consideration thereof, the Department extends the deadline 11 LA R.S. 47:1675(H)(1)(e) 12 LA R.S. 29:724(A)

13 LA R.S. 47:1675(H)(1)(e)

14 Section 4 of Proclamation JBE 2020-27

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.

Revenue Ruling 20‐002
March 30, 2020
Page 5 of 5

for a credit transfer or for the execution of a binding agreement to transfer such credit by 30 days for income and franchise tax returns with an original due date between March 1 and May 30, 2020.15 For 2019 calendar year filers of returns for individual income tax, corporation income, composite partnership income tax and fiduciary income tax, the extended deadline is June 15, 2020. For fiscal year filers with an income or franchise tax return filing and payment due date between March 1 and May 30, 2020, the extended deadline is thirty days from the original due date of the return. Summary In consideration of the public health emergency and general stay-at-home order, the Department rules as follows:

1. The Department shall automatically waive any UET penalty otherwise due for the
   April 15 and June 15, 2020 declaration payments provided the following criteria are met: a. The taxpayer pays the April 15 and June 15, 2020, declaration payments timely. b. The amount paid on the April 15, 2020, declaration payment is at least 90% of the amount paid on the April 15, 2019, declaration payment. c. The amount paid on the June 15, 2020, declaration payment is at least 90% of the amount paid on the June 17, 2019, declaration payment. Corresponding relief is granted for fiscal year filers.
2. The Department shall consider any late filed Act 442 election for the 2019 tax year
   filed on or after April 16, 2020, but before July 16, 2020, as filed timely. Corresponding relief is granted for fiscal year filers.
3. The Department extends the deadline for a credit transfer or for the execution of a
   binding agreement to transfer such credit for 2019 income and franchise returns by 30 days. Corresponding relief is granted for fiscal year filers.

15 The credit transfer must include any applicable statutorily mandated transfer fee. This fee remains due at the time of submission of the credit transfer documentation.

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.