USA – LOUISIANA Law and Practice Contributed by: Jeffrey P. Good, Susan M. Tyler, B. Trevor Wilson and Parker Hufft, Jones Walker LLP
Property Taxes Sales of real estate in Louisiana will typically include a proration of ad valorem property taxes between the buyer and the seller. Ad valorem property taxes are assessed by the local parish assessor on an annual basis, and are based on the assessed value of the property. The assessed value is a percentage of the fair market value (10% for land and 15% for most other property). In every parish except for Orleans Parish, ad valorem taxes are assessed in arrears. At the closing of the sale, the prior year’s tax bill is apportioned between the buyer and the seller, based on the number of days each will occupy the property during the current cal - endar year. Unless special circumstances exist, prora - tions of ad valorem taxes are considered final at the closing and are not re-allocated when the tax bill is issued, which is usually in the fall of each year. In Orleans Parish, tax bills are generally issued in December or January, and the parties can allocate based on the current year’s tax bill. Taxes are due by 31 January of the current year and carry interest and penalties if not paid promptly. Pro-rated ad valorem taxes in Orleans Parish, assuming they have been paid, will be added to the seller’s proceeds at closing. In equity deals where ownership of a property-holding entity changes hands, transfer taxes are generally not triggered. 2.11 Legal Restrictions on Foreign Investors For US income tax purposes, the Foreign Investment in Real Property Tax Act (FIRPTA) rules, under Internal Revenue Code (IRC) Sections 897 and 1445, generally require a buyer to deduct and withhold 15% of the amount realised by the foreign seller from the dispo - sition of US real property interests, and to treat gain realised by a foreign person from the sale of US real property interests as effectively connected income subject to US income tax. Foreign investors should be particularly aware of the restrictions in Louisiana Revised Statutes Section 9:2717.1. This statute prohibits “foreign adversar - ies” and “persons connected with foreign adversar -
ies” from purchasing, leasing or otherwise acquiring immovable property in Louisiana.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Acquisitions of commercial real estate in Louisiana are generally financed by both domestic and out-of-state financial institutions and other commercial lenders. Traditional financing from regional and national banks remains the primary source for commercial real estate transactions, though terms have tightened amid the higher-interest-rate environment. Alternative financing sources have gained promi - nence, including private debt funds, family offices and specialised real estate investment trusts (REITs) that provide mezzanine financing and preferred equity investments. Life insurance companies have main - tained a steady presence in the market, particularly for stabilised, high-quality assets. Tax-exempt financing alternatives include tax-exempt municipal bonds, which are either government bonds (to finance government functions and services) or pri - vate activity bonds (by a state or local government issuer for private business financings). To finance a project with the proceeds of tax-exempt qualified pri - vate activity bonds, a borrower must identify a conduit issuer. Local port, terminal and harbour districts are used for projects within the boundaries of a Louisiana port. The IRC provides that small-issue manufacturing bonds, subject to a limit of USD10 million, may be used for expansion and investment in existing manufacturing facilities or in the development of new manufactur - ing facilities. Exempt facility bonds may be used to finance other infrastructure projects, including docks and wharves, water, sewerage, qualified residential projects, green building and sustainable design pro - jects and other similar projects, provided the projects comply with the restrictions imposed by the IRC.
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