Louisiana’s Department of Revenue has released final regulations for entities claiming net capital gains deductions. These regulations include guidance for situations where the claimed capital gain exceeds USD 250,000.
The final regulations were published in the Louisiana Register on 19 November 2024. Previously, the notice of intent for these proposed regulations was published on 20 February 2024.
The final regulations come from S.B. 89, which was signed into law in June 2023, requiring the Department of Revenue to set rules on documentation and eligibility for net capital gains deductions.
Eligibility restrictions
- Net capital gains from the disposal of real property or immovable assets may qualify for a deduction if over 50% of the assets are in Louisiana and the related business was taxed by Louisiana before the sale.
- Net capital gains from tangible movable assets may qualify if the assets were in Louisiana for at least 50% of the time of the past three years, with the same tax requirement.
- Capital gains from selling equity interests or all assets do not qualify if the transaction involves a related party.
Under the finalised regulations extensive documentation is required for deduction claims. These are as follows:
- Completed Louisiana Form R-6180 (Net Capital Gains Deduction Worksheet);
- Proof of equity interest acquisition (Articles of incorporation or acts of sale)
- Federal Schedule K-1
- Complete copy of Federal Form 1040, including Schedule D and supporting forms.
For gains over USD 250,000, additional submissions are required.
- Copies of the last two tax returns where the income was reported;
- Completed Form IT-565 for partnerships;
- Detailed information on pass-through structures, including an organizational chart.
- Depreciation schedules.
