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Several bills aimed at making changes to Louisiana severance tax laws were filed on Friday, the deadline for pre-filing bills to be considered during the Louisiana Legislature’s upcoming regular session, which is a fiscal one.

State Rep. Brett Geymann, chair of the House Natural Resources Committee, pre-filed H.B. No. 495, H.B. No. 518 and H.B. No. 600 which would provide as follows:

For taxable periods beginning on or after July 1, 2025, H.B. No. 495 would retain the horizontal well exemption for oil as provided in present law but limits the duration for which the exemption applies to gas. The proposed legislation provides that the horizontal well exemption for gas shall last for a period of six months or until payout of the well cost is achieved, whichever comes first. Present law provides that the horizontal well exemption for oil and gas shall last for a period of 24 months or until payout of the well cost is achieved, whichever comes first.

H.B. No. 518 proposes significant amendments to Louisiana’s severance tax laws, particularly focusing on the rates, computation, and administration of severance taxes on oil, gas, and other natural resources. The bill updates the title of R.S. 47:633 from “Rates of tax” to “Severance tax; rates; administration” and introduces new provisions for calculating severance tax based on the quantity or value of resources severed. It specifies a tax rate of 12.5% for oil, determined by either gross receipts or posted field prices, and outlines exemptions and reduced tax rates for oil produced from incapable or stripper wells, as well as provisions for inactive or orphan wells.

Additionally, H.B. No. 518 establishes a structured exemption system for severance taxes based on market prices for oil and natural gas, with exemptions decreasing as prices rise. It introduces new definitions and clarifications regarding the qualifications of accountants verifying well costs and specifies conditions under which the gas severance tax will not accrue. The bill also updates tax rates for various natural resources and empowers the Louisiana Forestry Commission to determine the market value of trees and timber. The legislative digest states that the proposed changes aim to streamline the severance tax process while ensuring clarity and accuracy in its administration.

H.B. N0. 600 contains a provision to reduce the severance tax for newly produced oil by establishing a rate of 6.5% on oil produced from wells completed on or after July 1, 2025.  In addition, H.B. No. 600 proposes to change the special rate on oil produced from incapable wells from 1/2 of the regular rate provided for in present law and proposed law to 6.25%. In addition, the proposed law would change the special rate on oil produced from stripper wells from ¼ of the regular rate provided for in present law and proposed law to 3.125%. Proposed law would also change the special rate on oil produced from inactive wells from ½ or ¼ of the regular rate provided for in present law and proposed law, depending on when the oil was produced, to 6.25% or 3.125%, depending on when the oil was produced. Lastly this proposed law would change the special rate on oil produced from orphan wells from ¼ or 1/8 of the regular rate provided for in present law and proposed law, depending on when the oil was produced, to 3.125% or 1.565%, depending on when the oil was produced. These changes would apply to taxable periods beginning on or after July 1, 2025.

State Rep. Larry Bagley pre-filed H.B. No. 294 proposing to amend Article VII, Section 4(D)(3) of the Louisiana Constitution to repeal the dollar-amount limit on severance tax revenues to be remitted to parishes. The proposed constitutional amendment would require that 20% of all severance tax revenues on the natural resources specified in the present constitution, regardless of the dollar amount, be remitted to the governing authority of the parish in which severance or production occurs. In addition, the proposed constitutional amendment would repeal Article VII, Section 4(D)(4) of the present Constitution, rendered without effect by the repeal of the dollar-amount limit on severance tax revenues to be remitted to parishes. The proposed legislation provides for submission of the proposed constitutional amendment to the voters at the statewide election to be held Nov. 3, 2026.

Changes to these pieces of proposed legislation could be made during the legislative process. Liskow will be monitoring for updates during this legislative session.

For further updates regarding this topic, contact Liskow attorneys Bob Angelico, Caroline Lafourcade, and Kevin Naccari, Jr. and visit our Tax practice page.

On April 3, 2025, the Louisiana Department of Revenue published Revenue Information Bulletin No. 25-013 clarifying the proper sales and use tax treatment for rentals of cranes and other equipment with operators. Under Act 11 of the Third Extraordinary Session of 2024, the Louisiana Legislature repealed the statutory sales and use tax exclusion for the lease or rental of cranes and related equipment with operators. However, R.I.B. No. 25-013 makes clear that this repeal does not mean that all leases of cranes and other related equipment are taxable. The lease or rental of a crane and related equipment with an operator will  be treated the same as other rentals of tangible personal property with operators for sales and use tax purposes.

Whether a lease or rental of tangible personal property, including cranes and related equipment, with an operator is subject to sales and use tax is determined based on whether the “essence of the transaction” is the performance of a service (not taxable) or the lease of tangible personal property (taxable).  The taxability of such transactions is determined by following the analysis provided in LAC 61:I.4301 “Lease or Rental (c)(i) and (ii). That regulation provides that:

i.  A lease or rental does not include providing tangible personal property with an operator who provides some additional service for a fixed or indeterminate period of time when the essence of the transaction is the performance of a service. The essence of the transaction is to provide a service when obtaining the tangible personal property is not an end in and of itself but rather furnishes the mechanism through which a service is provided.

ii. In order to determine the essence of a transaction involving both the performance of a service and the providing of tangible personal property, the facts and circumstances of each transaction must be examined. The following factors suggest, but are not necessarily conclusive, that the essence of the transaction is for the performance of a service:

(a) in order for the tangible personal property to perform as designed, the owner’s operator maintains control over the property. This level of control by the owner’s operator involves more than maintaining, inspecting, or setting-up the property;

(b) the contract between the owner of the property and the person receiving the services and property provides for the performance of a specific job that requires services for a certain number of hours or until completion of a specific job; 

(c) the performance of the job using the tangible personal property is conducted in a manner determined by the owner of the property;

(d) the owner of the tangible personal property is responsible for choosing the particular piece of property to be used in the transaction; or

(e) the owner of the tangible personal property has a standard business practice of not allowing customers to rent the property separately from the services provided.

The R.I.B. makes clear that the regulation for the lease or rental of tangible personal property with an operator will also apply to the lease or rental of cranes and other related equipment. “If the facts and circumstances indicate the essence of the transaction is the performance of a service, the lease or rental of a crane with an operator will be treated as a non-taxable service.”

For further questions regarding this update, please contact Liskow attorneys Bob Angelico, Caroline Lafourcade, or Kevin Naccari and visit our Tax practice page and The Louisiana Industrial Insights Hub for further updates.