Present law provides an income tax credit for local ad valorem taxes on inventory paid by manufacturers and retailers.

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Proposed law retains present law.

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Present law prohibits the credit from being claimed to offset corporation income and franchise taxes for taxpayers taxed as C-corporations for taxable periods beginning on or after July 1, 2026; however, taxpayers using the credit to offset corporation income tax may carry forward any remaining credits for an additional five years from the date that the credits would have expired.

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Proposed law changes the prohibition requirement for C-corporations from taxable periods beginning on or after July 1, 2026 to payments of ad valorem taxes made on or after July 1, 2026, and otherwise retains present law.

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Proposed law clarifies that the prohibition is applicable to a C-corporation or an estate or trust subject to the tax levied pursuant to present law.

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Proposed law authorizes a taxpayer taxed as an S corporation for federal income tax purposes to earn the credit but only for amounts for which an election to flow-through the credit to shareholders is made and in proportion to amounts calculated pursuant to present law.

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Proposed law authorizes cooperatives to continue to claim the credit if the cooperative is allowed a federal income tax deduction for any patronage dividend paid or allocated to its members.

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Present law authorizes the credit for taxes paid by unincorporated persons and pass-through entities to be applied to state individual income taxes.

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Proposed law authorizes credits for taxes paid by corporations to be applied to state corporation income taxes, unless an election to flow-through the credit pursuant to present law has been made for the taxable period. Further provides that when the election to flow-through credits has been made, the credits shall be claimed by the shareholders of the S corporation to the extent allowable under present law.

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Present law requires the credit to be claimed against state individual income tax.

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Proposed law changes the reference to state personal income tax.

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Applicable to taxable periods beginning on or after January 1, 2025.

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Effective upon signature of the governor or lapse of time for gubernatorial action.