SALT To Taste: Louisiana - "Can't Touch This"

SALT To Taste: Louisiana - "Can't Touch This"

The Louisiana Court of Appeal, First Circuit, recently issued its decision in UTELCOM, Inc. and UCOM, Inc. v. Bridges,[1] overturning the trial court's granting of partial summary judgment on behalf of the State.  The primary issue addressed by the Appeal Court was "whether this regulation [La. Admin. Code tit. 61, § I.301(C)] was a reasonable interpretation of the relevant statutory authority setting forth the bases for the imposition of Louisiana's corporate franchise tax, or was a prohibited expansion of the scope of the statute."  This newsletter will focus on the limitations that exist in assessing Louisiana franchise tax on activities associated with a limited partnership interest.  In addition, taxpayers with Louisiana franchise tax liabilities should take note of opportunities that now exist to significantly lower their tax burden. 


UTELCOM, Inc. and UCOM, Inc. (collectively, the companies) were foreign corporations organized outside the state of Louisiana.  Neither of the companies was registered or qualified to do business in Louisiana.  Both companies maintained their commercial domicile outside Louisiana.  The companies owned limited partnership interests in Sprint Communications LP (Sprint) which was registered in, and conducted business in, Louisiana.


The focus of the Court was La. Rev. Stat. Ann. § 47:601 which provides, in pertinent part:

A.  Every domestic corporation and every foreign corporation, exercising its charter, or qualified to do business or actually doing business in this state, or owning or using any part or all of its capital, plant, or any other property in this state . . . shall pay an annual tax. . . .  The tax levied herein is due and payable on any one or all of the following alternative incidents . . .

. . .

3.  The owning or using any part or all of its capital, plant, or other property in this state in a corporate capacity.


Louisiana made several arguments in support of its position, including the argument that the companies were subject to the franchise tax based on the activities of other entities.  Specifically, Louisiana sought to attribute the activities of Taxpayer's parent corporation and the partnership's general partner as acting in "unison and with a common purpose."[2]  The Court rejected this argument, noting that a "unity of purpose" provision "does not appear anywhere as an incident of taxation" in La. Rev. Stat. Ann. § 47:601(A).  Additionally, each company, including the partnership, was a separate legal entity - a point for which Louisiana provided no judicial or statutory authority that would allow the attribution of activities from one entity to another...


View Geoffrey J. Christian and James S. Helms' insights in their entirety on

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