USA – LOUISIANA Law and Practice Contributed by: Jeffrey P. Good, Susan M. Tyler and B. Trevor Wilson, Jones Walker LLP
Property Taxes Sales of real estate in Louisiana will typically include a proration of ad valorem property tax - es between the buyer and the seller. Ad valo - rem 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 calendar year. Unless special circumstances exist, prorations 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 allo - cate 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 Invest - ment 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 disposition 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 sub - ject to US income tax. Foreign investors should be particularly aware of restrictions introduced by Act 464 of the 2023 Louisiana Regular Legislative Session (codified as La. Stat. Ann. Section 9:2717.1). This legisla - tion prohibits “foreign adversaries” and “persons connected with foreign adversaries” from pur - chasing, leasing or otherwise acquiring immov - able property in Louisiana. Acquisitions of commercial real estate in Loui - siana 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 prominence, including private debt funds, fam - ily offices and specialised real estate investment trusts (REITs) that provide mezzanine financing and preferred equity investments. Life insurance companies have maintained a steady presence in the market, particularly for stabilised, high- quality assets. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Tax-exempt financing alternatives include tax- exempt municipal bonds, which are either gov - ernment bonds (to finance government functions and services) or private activity bonds (by a state
1197 CHAMBERS.COM
Powered by FlippingBook