S-Corporation Election Package (Form 2553 + State S-Election) — Louisiana

S-CORPORATION ELECTION PACKAGE (FORM 2553 + STATE S-ELECTION) — LOUISIANA

OVERVIEW

This package walks a corporation (or an LLC electing corporate then S treatment) through:

1. Confirming federal S-corporation eligibility under IRC § 1361;
2. Completing and filing IRS Form 2553 on time (or under late-relief procedures);
3. Collecting the required shareholder consents;
4. Understanding the entity-classification interplay for LLCs; and
5. Handling the Louisiana state overlay — which is materially different from most states.

LOUISIANA FLAG — READ FIRST. Louisiana income-tax law does not recognize federal Subchapter S status. An S corporation is taxed in the same manner as a C corporation and files Form CIFT-620. Two mechanisms reduce or eliminate the resulting double tax: (1) the historic S-corporation exclusion of net income passed through to resident shareholders (La. R.S. 47:287.732); or (2) the elective pass-through entity (PTE) tax (La. R.S. 47:287.732.2), under which the entity pays Louisiana income tax at the entity level on Form R-6980-accepted terms and shareholders exclude that income. An entity that makes the PTE election is NOT eligible for the S-corporation exclusion. VERIFY current treatment with a Louisiana CPA before filing.

PART 1 — FEDERAL ELIGIBILITY CHECKLIST (IRC § 1361)

Entity Eligibility (26 U.S.C. § 1361(b))

☐ Entity is a domestic corporation, or a domestic LLC that will elect corporate tax treatment
☐ Entity has no more than 100 shareholders (family members may be counted as one under § 1361(c)(1))
☐ Entity has only one class of stock (differences in voting rights alone are permitted — § 1361(c)(4))
☐ Entity is not an ineligible corporation (a bank/thrift using the reserve method, an insurance company taxed under subchapter L, a possessions-tax-credit corporation, or a current/former DISC)

Shareholder Eligibility (26 U.S.C. § 1361(b)(1)(B)–(C))

☐ All shareholders are U.S. citizens or resident aliens — no nonresident-alien shareholders
☐ No shareholder is a partnership or a corporation
☐ Any trust shareholder is a permitted trust: grantor trust, testamentary trust (2-year limit), QSST, ESBT, or voting trust
☐ Estates and certain § 401(a) / § 501(c)(3) tax-exempt organizations are permitted shareholders
☐ Each shareholder will provide a valid SSN or ITIN for the consent statement

Pre-Filing Housekeeping

☐ Entity is properly formed and in good standing with the Louisiana Secretary of State
☐ EIN obtained from the IRS
☐ Bylaws / operating agreement in place; stock or membership interests issued
☐ Only one class of stock / equity is outstanding as of the intended effective date

PART 2 — IRS FORM 2553, LINE BY LINE

Timing of the Election (26 U.S.C. § 1362(b))

Part I — Election Information

Part II — Fiscal Year (Complete only if a non-calendar tax year is requested)

☐ Natural business year under Rev. Proc. 2006-46 (§ 444 election or business-purpose request)
☐ Ownership tax year
☐ Section 444 election (file Form 8716)

Part III — QSST Election (Complete only if a QSST holds stock)

☐ QSST beneficiary income-deemed-owner election attached

Part IV — Late Corporate Classification Election Representations

☐ Complete only if a late entity-classification election is requested together with the S election (see Part 4)

PART 3 — SHAREHOLDER CONSENT STATEMENT

ALL shareholders (and, for community-property states, generally both spouses) who own stock on the election effective date — or at any time during the portion of the tax year before the election is filed — must consent (26 U.S.C. § 1362(a)(2); Treas. Reg. § 1.1362-6). Louisiana is a community-property state, so a spouse with a community-property interest in the stock must also sign.

The undersigned shareholders consent to the entity's election to be treated as an S corporation under 26 U.S.C. § 1362(a), effective [__/__/____].

PART 4 — ENTITY INTERPLAY (LLC ELECTING S STATUS)

A Louisiana LLC that wants to be taxed as an S corporation does not have to file Form 8832 first. Under Treas. Reg. § 301.7701-3(c)(1)(v)(C), an eligible entity that timely files Form 2553 alone is deemed to have elected to be classified as an association (corporation) under Form 8832 as of the same effective date. Key points:

☐ LLC files Form 2553 with the effective date desired for S status
☐ No separate Form 8832 is required when Form 2553 is timely (deemed corporate election)
☐ If the corporate-classification election is itself late, complete Part IV of Form 2553 with the late-classification representations
☐ Confirm the LLC's operating agreement does not create a second class of equity (disproportionate distribution/liquidation rights can violate the one-class-of-stock rule)

Louisiana franchise tax note. An LLC that is eligible to elect Subchapter S treatment on the first day of the franchise-tax period is not subject to Louisiana corporation franchise tax (La. R.S. 47:601 et seq., as amended by Act 12 of the 2016 First Extraordinary Session). Entities taxed as C corporations generally remain subject to franchise tax. VERIFY current franchise-tax exposure.

PART 5 — LOUISIANA STATE S-CORP OVERLAY (KEY SECTION)

CRITICAL — LOUISIANA IS UNUSUAL. [verify current treatment with a Louisiana CPA before filing.]

A. No Recognition of Subchapter S Status

Louisiana income-tax law does not recognize federal Subchapter S status. An S corporation must file a Louisiana income tax return in the same manner as a C corporation — Form CIFT-620 (Corporation Income and Franchise Tax Return) — computing net income as if it were a C corporation. (La. R.S. 47:287.732; Louisiana Department of Revenue guidance.)

B. Path 1 — The S-Corporation Exclusion (default)

Under La. R.S. 47:287.732, all or part of the corporation's net income may be excluded from Louisiana corporation income tax to the extent that income is attributable to resident-individual shareholders who report and pay Louisiana individual income tax on their pro-rata share. The S corporation still files Form CIFT-620 and computes the exclusion; the excluded income is taxed at the shareholder level, mimicking pass-through treatment.

☐ S corporation files Form CIFT-620 and claims the S-corporation exclusion
☐ Resident shareholders report their share on individual Louisiana returns (Form IT-540)
☐ Income attributable to nonresident shareholders may remain taxable at the entity level (verify apportionment)

C. Path 2 — The Pass-Through Entity (PTE) Tax Election

Under La. R.S. 47:287.732.2 (originating with Act 442 / related 2019 legislation; effective for tax periods beginning on or after January 1, 2019), an S corporation (and other flow-through entities) may elect to pay Louisiana income tax at the entity level as if it had filed a C-corporation federal return. Shareholders then exclude the entity-level-taxed income from their Louisiana individual returns.

☐ Election is made on Form R-6980 (Tax Election for Pass-Through Entities) and must be accepted by LDR (see LAC 61:I.1001)
☐ Election may be made (i) during the preceding taxable year, (ii) during the effective taxable year, or (iii) on or before the 15th day of the 4th month after the close of the effective taxable year
☐ Once made, the election is binding for the entire year and all subsequent years until terminated (Form R-6983, Termination of the Pass-Through Entity Tax Election)
☐ An electing entity is NOT eligible for the S-corporation exclusion under La. R.S. 47:287.732.2(A)(1)

Entity-level PTE rate brackets (periods beginning on or after January 1, 2022 — VERIFY current rates):

D. Return, Tax, and Filing Snapshot

PART 6 — POST-ELECTION COMPLIANCE

IRS Confirmation

☐ Retain the IRS acceptance letter (CP261) permanently
☐ If no response within ~60 days, call the IRS Business & Specialty Tax Line: (800) 829-4933

Federal Ongoing Obligations

☐ File Form 1120-S annually; issue Schedule K-1 to each shareholder
☐ Reasonable compensation — pay shareholder-employees a reasonable W-2 salary before distributions (Rev. Rul. 74-44; recurring IRS audit issue)
☐ Built-in gains tax (§ 1374) — if the entity converted from C-corp status, monitor the 5-year recognition period for net built-in gains
☐ Passive investment income tax (§ 1375) — if the entity has C-corp earnings & profits and passive investment income exceeds 25% of gross receipts, an entity-level tax applies; 3 consecutive years of excess passive income terminates the S election (§ 1362(d)(3))
☐ Maintain a single class of stock and only eligible shareholders

Louisiana Ongoing Obligations

☐ File Form CIFT-620 by the 15th day of the 5th month after year-end
☐ If PTE election made, file consistently with Form R-6980 acceptance and remit entity-level tax
☐ If exclusion path, ensure resident shareholders report their shares on Form IT-540
☐ File Annual Report with the Louisiana Secretary of State to maintain good standing
☐ Monitor nonresident-shareholder withholding / composite obligations

PART 7 — REVOCATION AND TERMINATION

Voluntary Federal Revocation (26 U.S.C. § 1362(d)(1))

☐ Shareholders holding more than 50% of the shares (voting and nonvoting) consent
☐ File a revocation statement with the IRS (no official form — letter format citing § 1362(a)) signed by an authorized officer, with shareholder consents attached
☐ Effective date: if filed on or before the 15th day of the 3rd month, retroactive to the first day of that tax year; otherwise the first day of the following tax year; or a stated prospective date

Automatic Federal Termination (26 U.S.C. § 1362(d)(2)–(3))

☐ Entity ceases to qualify (exceeds 100 shareholders, ineligible shareholder acquires stock, or a second class of stock is created) — effective on the date of the disqualifying event
☐ Passive investment income exceeds 25% of gross receipts for 3 consecutive years while the entity has C-corp E&P

Louisiana Side

☐ Terminate any PTE election on Form R-6983 (consider the binding multi-year effect before electing)
☐ Coordinate the federal revocation with Louisiana filing posture for the year of change

FILLABLE SUMMARY FIELDS

Authorized Officer Signature: ____________________________________
Name: [____________________] Title: [____________________] Date: [__/__/____]

SOURCES AND REFERENCES

• 26 U.S.C. §§ 1361–1368, 1374, 1375 (Subchapter S)
• IRS Form 2553 and Instructions; Rev. Proc. 2013-30 (late election relief)
• Treas. Reg. § 1.1362-6 (election procedures); Treas. Reg. § 301.7701-3 (deemed Form 8832)
• La. R.S. 47:287.732 (S-corporation exclusion)
• La. R.S. 47:287.732.2 (pass-through entity tax election); LAC 61:I.1001
• Louisiana Department of Revenue — Corporation Income & Franchise Taxes; Form CIFT-620 and instructions
• Louisiana Forms R-6980 (election) and R-6983 (termination)
• Louisiana Department of Revenue FAQ — S corporations and the PTE election