Ivan I. Smith, Jr. and Gloria G. Smith v. Kimberly L. Robinson, Secretary of the Department of Revenue, State of Louisiana

Summary

The Supreme Court of Louisiana held that 2015 La. Acts No. 109, which amended Louisiana Revised Statutes § 47:33 to condition credits for income taxes paid to other states on reciprocal treatment, violated the dormant Commerce Clause. The court also held that the Texas franchise tax qualified as a net income tax for purposes of the statute and affirmed the district court's judgment awarding the taxpayers a refund.

Holdings

1. The Texas franchise tax imposed under the 2006 revisions is a net income tax paid to another state for purposes of Louisiana Revised Statutes 47:33 as amended by Act 109.
2. The fact that a pass-through entity paid the Texas franchise tax does not prevent the individual shareholders or members from claiming the credit under Louisiana Revised Statutes 47:33.
3. Act 109 fails the external-consistency component of the fair-apportionment requirement because it allows Louisiana to tax beyond the portion of interstate income fairly attributable to economic activity within Louisiana and creates a potential for multiple taxation.
4. Act 109 impermissibly discriminates against interstate commerce because it subjects interstate income to double taxation while taxing comparable intrastate income only once.

Questions Presented

1. Whether the Texas franchise tax imposed under Texas's 2006 statutory revisions constitutes a net income tax paid to another state for purposes of Louisiana Revised Statutes 47:33 as amended by Act 109.
2. Whether the taxpayers may claim a Louisiana income-tax credit for taxes paid by their pass-through entities even though the taxes were not imposed directly on or paid personally by the individual taxpayers.
3. Whether Act 109 violates the dormant Commerce Clause by denying or limiting credits for income taxes paid to other states and thereby subjecting interstate income to greater taxation than intrastate income.
4. Whether the district court properly granted summary judgment to the taxpayers.

Disposition

affirmed