How to Claim the Louisiana Inventory Tax Credit

The Louisiana Inventory Tax Credit is designed to offset the financial burden of local property taxes paid on business inventory. It provides a dollar-for-dollar reduction against certain state taxes, reimbursing companies for ad valorem taxes levied by local governments on items they hold for sale. The purpose of the credit is to encourage businesses to maintain and expand their inventory within the state, making Louisiana a more attractive location for manufacturers, distributors, and retailers.

Eligibility for the Credit

The credit is available to a wide range of business structures, including corporations, individuals, partnerships, and limited liability companies that pay Louisiana ad valorem taxes on their business inventory. Manufacturers, distributors, and retailers are the primary beneficiaries of this tax incentive. The fundamental requirement for eligibility is that the taxpayer must have paid the ad valorem property taxes on their business inventory to a local taxing authority within the state.

For the purposes of this credit, “inventory” is defined as all goods, wares, and merchandise held for sale in the regular course of business. This includes raw materials, work-in-progress, and finished goods. A key distinction is that the credit applies specifically to taxes on movable property and not on real property such as land and buildings.

Recent legislative changes have altered eligibility for certain entities. For taxable periods beginning on or after July 1, 2026, entities taxed as C-corporations will no longer be eligible to earn new inventory tax credits. However, these corporations can continue to use any unused credits they have already accrued. The credit will remain available for individual income taxpayers and for pass-through entities, such as S-corporations and partnerships, where the credit flows through to the owners’ individual income tax returns.

Information and Documentation Required

To claim the Louisiana Inventory Tax Credit, meticulous record-keeping is necessary. The most important document is the official, paid ad valorem tax bill received from the local parish tax assessor or sheriff, and you should have these from every local jurisdiction. This document serves as the primary evidence of the tax paid and must be retained, as it contains the critical information needed for the claim.

The state provides a specific form that must be used to calculate the credit, available on the Louisiana Department of Revenue’s website. The information from the local ad valorem tax bills must be accurately transferred to this state calculation form. Failure to provide this documentation upon request during an audit can result in the disallowance of the credit.

Calculating the Credit Amount

The credit amount is equal to 100% of the ad valorem taxes paid on qualifying business inventory. This means for every dollar a business pays in local inventory property tax, it can receive a dollar back as a credit against its state tax liability. If the amount of the credit is greater than the taxpayer’s state tax liability for a given year, the excess credit can either be refunded or carried forward, depending on the circumstances. Unused credits can be carried forward for up to ten years.

The refundability of the credit is subject to several limitations. For manufacturers, any excess credit is not refundable and can only be carried forward. For taxable periods beginning in 2025, credits earned by C-corporations are non-refundable and must be carried forward.

For other eligible taxpayers, the refundability depends on the total credit amount. If the credit is $500,000 or less, any excess is fully refundable. For credits between $500,000 and $1 million, 75% of the excess is refundable, with the remaining 25% carried forward. For credits exceeding $1 million, 75% of the first $1 million of excess is refundable, and the rest is carried forward.

How to Claim the Credit

The completed inventory tax credit calculation form must be attached directly to the taxpayer’s annual Louisiana state tax return. This attachment is a mandatory part of the submission process, and without the attached form, the Louisiana Department of Revenue will not process the credit claim.

The specific state tax return to which the form is attached depends on the business’s legal structure. For corporations, the credit is claimed on the Corporation Income and Franchise Tax Return. Individuals, including sole proprietors and owners of pass-through entities like LLCs and S-corporations, will claim the credit on their Individual Income Tax Return.

The credit amount calculated on the dedicated form is entered on the appropriate line of the main tax return. It is important to file the tax return by the prescribed due dates to ensure the timely processing of the credit and any associated refund.