LDR Clarifies Pass-Through Treatment for S Corporations Under Act 382

The Louisiana Department of Revenue (“LDR”) has issued Revenue Information Bulletin 25-032 to provide guidance on changes to the state’s taxation of S corporations enacted by Act 382 of the 2025 Regular Legislative Session. Effective for income tax periods beginning on or after January 1, 2026, Act 382 amends La. R.S. 47:287.732 to align Louisiana’s treatment of S corporations with federal law by recognizing them as pass-through entities for Louisiana income tax purposes.

Prior to Act 382, Louisiana did not automatically follow federal flow-through treatment for S corporations. Instead, S corporations were generally taxed as C corporations unless they affirmatively elected an S corporation exclusion under prior law. Income excluded under that election was taxed at the shareholder level, while any remaining income was subject to Louisiana corporation income tax. Act 382 eliminates this dual system. Beginning in 2026, all income, losses, deductions, and credits of an S corporation automatically pass through to shareholders, and no special election is required to achieve pass-through treatment (unless a pass-thru entity election is filed).

The bulletin distinguishes filing requirements based on the applicable taxable period. For taxable periods beginning in 2025 and earlier, S corporations remain subject to the pre-Act 382 rules and must file LDR Form CIT-620, Louisiana Corporation Income Tax Return, reporting corporate-level tax unless the S corporation exclusion election is made. For taxable periods beginning on or after January 1, 2026, S corporations are no longer subject to Louisiana corporation income tax. Instead, they must file an informational return. Although Form CIT-620 is still required to compute allocation and apportionment, it is informational only, and the shareholders, rather than the corporation, are responsible for reporting and paying Louisiana tax on their distributive shares on their individual or fiduciary returns. Both the informational return and any composite return must be filed electronically.

Act 382 also changes Louisiana’s treatment of Qualified Subchapter S Subsidiaries (“QSubs”). For taxable periods beginning on or after January 1, 2026, Louisiana follows the federal approach and treats QSubs as disregarded entities automatically. As a result, all income, losses, deductions, and credits of a QSub are reported on the parent S corporation’s return, without the need for a separate election.

Although S corporations are now treated as flow-through entities, Louisiana law continues to permit the filing of composite returns on behalf of nonresident shareholders. Beginning in 2026, an S corporation may file a composite return by indicating “S corporation composite filing” on the face of Form CIT-620 and completing the required schedules. When a composite return is filed and tax is paid on behalf of nonresident shareholders whose only Louisiana income is from the S corporation, those shareholders are not required to file separate Louisiana income tax returns. However, if the S corporation has a net loss, a composite return is not permitted, and each shareholder must report their share of the loss on an individual Louisiana return.

The bulletin also addresses the interaction between composite filings and Louisiana’s pass-through entity tax election. An S corporation may still elect to be taxed as a C corporation under La. R.S. 47:287.732.2, but it may not combine that election with a composite return for the same taxable period. Similarly, an S corporation that files a composite return and makes composite payments for nonresident shareholders may not also make the pass-through entity tax election for that period.

Finally, Revenue Information Bulletin 25-032 clarifies estimated tax obligations. Because S corporations are no longer subject to Louisiana corporation income tax, they are not required to make estimated payments. However, an S corporation expecting to file a composite return may voluntarily make estimated payments following the procedures applicable to C corporations. If no composite payments are made, each nonresident shareholder remains responsible for making estimated Louisiana income tax payments on their share of S corporation income.

RIB 25-032 provides important practical guidance on compliance with Act 382. S corporations and their shareholders should review these changes carefully to ensure proper reporting, payment planning, and coordination with composite and pass-through entity elections beginning in the 2026 tax year. If you have any questions about this update or any of the other recent Louisiana tax changes, please contact Liskow attorneys Bob Angelico, Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit the firm’s Tax Practice page.