Louisiana could save millions in taxpayer dollars by tightening controls on the inventory tax credit, according to a new report from the legislative auditor’s office.
Each year the state of Louisiana reimburses businesses for the local property taxes that they pay on the business inventory they hold here. That includes property ranging from raw materials and supplies to goods awaiting sale.
But the audit found that the state does not clearly define which businesses are eligible, allows companies to self-report the information used to calculate how much money they’ll get back, and does not require that they provide supporting documentation.
Between 2007 and 2014, the tax credit’s cost to the state ballooned from $271 million to a projected $405 million.
“We identified several financial risks to the state related to how the inventory tax credit is structured and administered,” the auditor’s office wrote in the summary of its findings.
State lawmakers are preparing to head into a second special session to close an estimated $600 million budget shortfall.
The Legislature already raised $1.2 billion in a special session earlier this year -- largely through sales tax increases.
The inventory tax credit audit found that the reimbursements claimed by businesses have exceeded what would be expected based on economic factors such as changes in national inventories and wages -- to the tune of at least $157 million, or an average of $19.5 million a year, from 2007 through 2014.
“Amending state law to require that the companies have a primary business activity of manufacturing, retailing, or distributing to receive the credit would reduce the amount of credits issued each year, saving the state money but not affecting local governments’ ability to levy the tax,” the report suggests.