Louisiana Property Tax Update Archive

Updated june 2020

Louisiana's Catastrophe Statutes

Like most states, Louisiana has gone through phases of lockdown and reopening due to COVID-19. Our governor also extended filing deadlines for property tax renditions numerous times, but eventually the question will have to be asked: how has all of this affected property tax values? The general rule in Louisiana is that assessments are based on the condition of property on January 1 each year (August 1 in Orleans Parish). However, La. R.S. 47:1978.1, which was enacted after the late summer/fall devastation of Hurricane Katrina in 2005, provides that:

[i]f lands or property, including buildings, structures, or personal property, are damaged, destroyed, non-operational, or uninhabitable due to an emergency declared by the governor or to a disaster or fire, the assessor or assessors within such parish shall assess such lands or property for the year in which damage has occurred at the percentage of fair market value provided in the Constitution of Louisiana by taking into consideration all the damages to the lands or other property, including obsolescence, and the depreciation of the value of such land or other property caused by the disaster, fire, or emergency.

Thus, when the governor declares a public emergency, any property that is (1) damaged, (2) destroyed, (3) nonoperational, or (4) uninhabitable as a result of the emergency is entitled to reassessment regardless of when the public emergency occurred.

The Louisiana Tax Commission has confirmed that La. R.S. 47:1978.1 applies to property affected by COVID-19. However, it has not specified the type of information that must be provided to assessors to substantiate any COVID-19 reduction in value. Some suggestions: financial statements, profit and loss statements, revenue and expense information, and sales information, preferably presented in year-over-year/month-over-month format for easy (and irrefutable) comparison.

Additionally, taxpayers may request a hardship deferral that allows for a short-term delay in making property tax payments under La. R.S. 47:3702.  

Angela W. Adolph
Kean Miller LLP
American Property Tax Counsel (APTC)

PILOT Gets A Second Chance

Louisiana has long relied on its Industrial Tax Exemption Program ("ITEP") as an economic development engine for manufacturing.  Several years ago, a coalition of industry associations promoted Payments In Lieu of Taxes ("PILOT") as an alternative to ITEP to create greater flexibility in assessments of manufacturing facilities.   After getting no traction for years, the legislation finally passed this year (Act 370).  Essentially, the legislation creates a new classification of exempt property and allows taxing jurisdictions and taxpayers to negotiate PILOT on that exempt property.  The legislation requires an amendment to the Louisiana Constitution, which proposal will be on the November 3 ballot.  

Angela W. Adolph
Kean Miller LLP
American Property Tax Counsel (APTC)

Updated september 2019

But It's A Nice Round Number...

For the 2017 Tax Year, the Taxpayer protested a gross over-valuation of its casino/hotel property by the Assessor for Bossier Parish (the “Assessor”). The dispute concerns both the casino/hotel property and the land valuations (land underlying the casino/hotel, the RV parking lot and the employee parking lot). After a full trial on the merits, the five-member state commission charged with overseeing the correctness of property tax assessments – the Louisiana Tax Commission (“LTC”) – rendered a decision that in large part corrected the injustice and numerous errors contained in the Assessor’s overvaluation and consequent unfair assessment regarding both the casino/hotel property and the land valuation.

The Commission determined that both the Taxpayer’s appraisal and its Staff appraisal were flawed for different reasons, but also determined that sufficient information was submitted enabling the Commission to reconcile the issues in each of the appraisals and calculate a new, correct income approach to value.  In its decision, the Commission actually offered values of the casino/hotel property using both the cost approach and the income approach, ultimately concluding that the income approach was the more reliable method for valuing the casino/hotel income-producing property.  

The Commission’s Decision also determined that both the Assessor’s and Staff appraiser’s land valuations were unreliable, and further determined that “The Taxpayer’s land appraisal is the most reliable information and evidence provided regarding the land value.” Accordingly, the Commission determined the total land value to be the same as the Taxpayer’s local land appraisal expert.

The Assessor appealed the LTC decision to the District Court which affirmed the LTC’s finding of 65% obsolescence (using the cost approach method) based upon the record evidence of obsolescence – none of which was refuted by the Assessor.  The District Court was however silent on the land valuation issue. The Assessor appealed the District Court decision to the Second Circuit Court of Appeal.

The Second Circuit Court of Appeal ordered that the LTC adopt the appraisal report of the LTC staff appraiser in which the cost approach was used to value the subject property. Interestingly, both parties (Taxpayer and Assessor) and the LTC refuted the staff appraisal report during the LTC hearing on the matter, and neither the parties, nor the LTC requested that the appraisal report be adopted on appeal to the District Court or the Second Circuit Court.

The Second Circuit found that the Assessor “arbitrarily refused to consider additional obsolescence in his 2017 assessment, which was an abuse of the Assessor's discretion,” and as a result, his 2017 assessment was incorrect.  However, the Court also determined that the LTC “arbitrarily and capriciously assigned an obsolescence factor [65%], which was in error.” The Court then fashioned a remedy that requires the LTC to adopt the appraisal of a staff employee that uses a 30% obsolescence factor that is not supported by anything other than that employee’s belief that it would yield a “nice round number.”  Additionally, the staff appraisal report referenced by the Second Circuit included the casino/hotel property, but included only part of the land – the land on which the casino/hotel sits –and did not include the other two parcels of land.  Thus, the Second Circuit was silent on the valuation of two of the land parcels.

The Court’s decision fails to address the record presented by the taxpayer – most importantly the opinion of the taxpayer’s expert, and the factual back-up he provides for those opinions.  The expert opinions of the only qualified expert appraiser to testify were not even mentioned in the decision, indicating that evaluation of the record in its entirety did not occur. The decision mentions the expert appraiser once, but does not discuss his analysis or the substance of his opinions at all. The decision also does not recite his qualifications, credentials, or professional associations and experience. The decision is also devoid of any discussion or any of the evidence presented by the taxpayer’s other witnesses – including the General Manager of the casino/hotel - on which the LTC’s decision was clearly based.

Both the Assessor and the Taxpayer have filed applications for re-hearing to the Second Circuit.  Bobby Edmiston, Assessor v. Louisiana Riverboat Gaming Partnership d/b/a Diamond Jacks Casino and Resort, No. 52, 948 (La. App. 2 Cir. 9/9/2019

Angela W. Adolph
Kean Miller LLP
American Property Tax Counsel (APTC)

 

Property Tax Exemption

The operator of lease-to-own stores claimed an exemption from Orleans Parish ad valorem taxes on the grounds that the leased personal property was being used in the homes of its customers. However, the Fourth Circuit found that the applicable ad valorem tax exemption applies to owners using their property in their own homes as opposed to a commercial owner leasing out personal property to customers for use in their homes. Aaron's, Inc. v. Foster, No. 2019-CA-0443 (La. App. 4 Cir. 09/25/2019).

Angela. W. Adolph
Kean Miller LLP
American Property Tax Counsel (APTC)

Updated september 2018

Proving Economic Obsolescence is All In the Timing

TBM-WC Sabine, LLC (“TBM”) owns natural gas pipeline and surface equipment in Sabine Parish, Louisiana. In support of its claim of economic obsolescence, TBM provided information with its annual property tax rendition demonstrating the condition of the pipeline and establishing that the surface facilities were idle during the tax year in question. TBM also provided an unaudited, consolidated financial statement that did not specifically attribute income and expenses to TBM.  Finally, TBM provided a short statement regarding the utilization percentage of its pipeline.   Based on this information, the assessor recognized considerable obsolescence in the surface equipment, but only about 12% in the pipeline.  TBM appealed the pipeline valuation to the Louisiana Tax Commission (“LTC”).

At the hearing before the LTC, TBM introduced additional evidence of obsolescence that had not been provided to the assessor, which apparently had been available to TBM. The LTC ruled in TBM’s favor, but did not issue factual findings or any conclusion that the assessor had abused her discretion in denying additional obsolescence.  The assessor appealed to district court in Sabine Parish, which promptly reinstated the assessor’s determination.  TBM appealed to Louisiana’s Third Circuit Court of Appeal.

The Court of Appeal affirmed on all counts. First, the Court reiterated that the LTC was only to review property tax assessments, not make them.  It then held that it was incumbent on TBM to provide all data and information regarding obsolescence to the assessor.  Providing information, even compelling information, to the LTC on appeal was insufficient.  Importantly, the Court never questioned whether the information was too little, just that it was too late.

Next, the Court stated that, in reviewing the LTC’s decision, it must determine whether the LTC manifestly erred when it held that the assessor abused her discretion in rejecting TBM’s evidence of economic obsolescence. It concluded that the LTC had indeed erred.  The Court noted that the assessor's determinations were based on data provided by TBM, and that TBM had no complaint with assessor's exercise of discretion in accepting the depreciated value of surface equipment, but only complained about her exercise of discretion when she denied the requested obsolescence on the pipeline.  Essentially, the Court found that, because TBM agreed that the assessor’s valuation was correct as to surface equipment, it could not challenge her valuation of other property. 

Notably, the LTC revised its regulations this summer, at least partly in response to this case. The regulations now require any information to be introduced before the LTC must first have been provided to the assessor.  The LTC recognized that it may be impractical for taxpayers to provide full-blown appraisals, but any documentation that would be used by an appraiser in conducting an appraisal, such as audited financial statements, purchase/sale agreements, substantiated utilization reports, etc., should be provided to the assessor. 

TBM-WC Sabine, LLC v. Sabine Parish Board of Review, 2017-1189 (La. App. 3rd Cir. 7/18/18), ___ So.3d ___. 

Angela W. Adolph, Partner
Kean Miller LLP
American Property Tax Counsel (APTC)

Updated june 2018

Taxpayer's Novel Refund Argument Rejected

The City of New Orleans issued a property tax bill for the 2012 tax year to the New Orleans Riverwalk Marketplace, LLC (“Riverwalk.”) Riverwalk initially challenged the Assessor’s valuation of the property with the Orleans Parish Board of Review, but subsequently withdrew the appeal and accepted the valuation.  Riverwalk and the Assessor eventually determined that the property was actually owned by the Port of New Orleans, a political subdivision not liable for property taxes.  Approximately two (2)  years later, Riverwalk filed a claim for refund of taxes paid in error with the Louisiana Tax Commission (“Tax Commission”) pursuant to La. R.S. 47:2132, which allows any person who has a claim for ad valorem taxes erroneously paid three (3) years from the date of the payment to present the claim. The Tax Commission agreed that the request for refund was filed timely, but found that Riverwalk’s earlier withdrawal of its appeal to the Board of Review (and acceptance of value) was binding. Thus, the Tax Commission denied the refund claim. 

Riverwalk appealed the Tax Commission’s decision. The district court reversed the ruling of the Tax Commission, finding that it erred by not considering the underlying legality of the tax payment.  On further review, the court of appeal reversed the district court.  The court of appeal found that Riverwalk’s claim was not actually a claim for erroneous payment, but rather a challenge as to the legality of the tax assessment. While a claim for taxes erroneously paid is subject to a three (3) year prescriptive period, a challenge to the legality of an ad valorem tax is subject to La. R.S. 47:2134(C), which provides that a person must pay the tax under protest and then file suit for refund within thirty (30) days of the date of the payment.  Since Riverwalk did not file the refund suit within thirty (30) days of payment, its claim was not timely.  New Orleans Riverwalk Marketplace, LLC v. Louisiana Tax Commission, Dkt. No. 2017-CA-0968 (La. App. 4th Cir. 04/30/2018).

Angela W. Adolph, Partner
Kean Miller LLP
American Property Tax Counsel (APTC)

Updated March 2018

Louisiana Voters Formalize Exemption for CWIP

During its regular 2017 legislative session, the Louisiana Legislature recognized the need to formalize an exemption for construction work in progress (“CWIP”). Act 428 was approved by the voters in October, and adds an additional subsection to Article VII, Section 21 of the Louisiana Constitution, which lists property that is exempt from ad valorem tax assessment. The new provision exempts from ad valorem tax all property delivered to a construction project site for the purpose of incorporating the property into any tract of land, building, or other construction as a component part, including the type of property that may be deemed to be a component part once placed on an immovable for its service and improvement. This exemption applies until the construction project is completed, i.e., occupied and used for its intended purpose. The exemption does not apply to: (1) any portion of a construction project that is complete, available for its intended use, or operational on the date that property is assessed; (2) for projects constructed in two or more distinct phases, any phase of the construction project that is complete, available for its intended use, or operational on the date the property is assessed; and (3) certain public service property.

It is clear in Louisiana that CWIP is exempt from property taxes until construction is “completed.” The exemption thus remains effective until the construction project or given construction phase of the project is ready to be used or occupied.Paste or type article here.

Angela W. Adolph
Kean Miller LLP
American Property Tax Counsel (APTC)

 

So How Much is Nothing Worth?

Axiall, LLC owns a number of salt caverns in Assumption Parish, Louisiana. Several years ago, a salt cavern failed in Assumption Parish.  The Louisiana Department of Natural Resources subsequently promulgated regulations that severely curtailed Axiall’s ability to use its salt caverns.  However, the local Assessor rejected Axiall’s assertion that, under the new regulations, the property was essentially worthless.  Upon review, the Louisiana Tax Commission agreed with Axiall.  The Commission found that the salt caverns were to be valued under the guidelines for oil and gas properties and that they were not being, nor could they be, used for a commercial purpose due to the new restrictive regulations. The Commission determined a nominal fair market value for the properties.

On appeal, the district court in Assumption Parish reversed. See Wayne Blanchard v. Axiall, LLC, Docket No. 035890, Div. B, 23rd Judicial District Court. The district court found first that the properties should have been valued as ordinary business assets, not oil and gas properties, despite the fact they were intended to be used for oil and gas storage.  The district court next found that Axiall used the caverns for commercial production of brine for its manufacturing establishment and for disposal.  Accordingly, the district court reinstated the Assessor’s valuations.  The matter is currently on appeal to the Louisiana First Circuit Court of Appeal. 

In the meantime, the Louisiana Tax Commission considered a very similar case by another taxpayer. See Blue Cube Operations, LLC v. Assumption Parish Board of Review, Docket No. 16-22007-001. In its decision, the Commission doubled down, and emphasized that brine wells are no different from oil and gas wells and that the local Assessor’s refusal to value brine wells under the guidelines for oil and gas properties was invalid, incorrect, and an abuse of the Assessor’s discretion. The Commission further noted that the local Assessor had submitted no evidence explaining or justifying his valuation of the salt caverns. The Commission noted that it could only speculate that the Assessor must have determined the salt caverns to have some commercial use. However, the taxpayer presented specific and compelling evidence clearly establishing that the salt caverns had no separate commercial value and were not (and could not) be used to store hydrocarbons as intended. Finally, the Commission concluded that, until the process to convert the caverns for the storage of hydrocarbons is completed, they are simply holes in the ground without any inherent additional commercial value. The Commission then determined a nominal fair market value for the properties. The local Assessor has appealed this decision to the district court in Assumption Parish.
 
Angela W. Adolph
Kean Miller LLP
American Property Tax Counsel (APTC)

Updated June 2016

30 Days From What? Days from What? Louisiana Property Tax Appeal Deadline Clarified

The statutory and regulatory deadline for appealing an adverse decision of the Louisiana Tax Commission is clearly thirty (30) days, but identifying the event that triggers commencement of the deadline has not always been easy. The applicable statute provides that the appeal deadline runs from the date the decision is “entered,” while the applicable administrative rule provides that the deadline runs from the date the decision is “mailed.” A decision from the Fourth Circuit Court of Appeal had previously held that a decision was “entered” on the day that the members of Commission signed the decision. In that case, the decision was signed and mailed on the same day.

The Fourth Circuit revisited the issue in Erroll Williams v. Hotel Ambassador NOLA, LLC, No. 2016-CA-0015 (La. App. 4 Cir. 6/15/16), ___ WL _____ , a case in which the Commission mailed its decision some eight (8) days after the decision was signed by the members of the Commission. There, the aggrieved litigant appealed within thirty (30) days of the mailing date, but the district court found the appeal to be untimely. On appeal, the Fourth Circuit noted that the applicable statute did not provide a specific definition of “entry” of judgment. Surveying the cases, the Court noted that entry of judgment may be the date of signing, but it may also include the date of distribution or the date of mailing. The Court gave great weight to the fact that the decision itself stated that it would become effective upon date of issuance (yet another term that is not defined in the applicable statute or administrative rule), and that the decision bore a “true copy” stamp that suggested that the Commission had entered the decision into its own records on that date.

Accordingly, the court concluded that entry of judgment occurs on the date that the decision is mailed such that the appeal at issue had been timely filed. In a concurrence, one judge noted that the panel was compelled by principles of due process to hold that entry of judgment cannot occur earlier than the date on which the decision is mailed: “To hold otherwise would allow the time period for an appeal to lapse before the affected party is sent notice of the decision against it.” The Court reversed and remanded the case to the district court for further proceedings.

Christopher J. Dicharry
Angela W. Adolph
Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P. 
American Property Tax Counsel (APTC)

Updated March 2016

The Saga Continues at the Port of New Orleans

As is customary in navigation and shipping business, the Port of New Orleans leased property to two private entities to provide warehousing, freight forwarding and intermodal transportation services at the Port.  Until very recently, such property had been routinely regarded as exempt from ad valorem taxation because it was owned by a public entity and served a public purpose.  However, starting in 2012, the assessor of Orleans Parish contended that the property was not exempt from ad valorem taxation because the activities of the private companies did not constitute a governmental function, a benefit to the general public, or a dedication for use by the general public. The assessor assessed ad valorem property taxes on the private companies that leased the properties, not on the public entity that owned them. When the companies failed to pay the taxes, the assessor attempted to sell the leased properties at a public tax sale.

In response to the assessor’s arguments regarding public purpose, the port authority demonstrated that the companies’ activities were necessary for the operation of a port facility and that they furthered its broad public mission to maintain, develop, and promote commerce and traffic at the port.  The trial court granted the Port’s motion for summary judgment and the assessor appealed.  The Fourth Circuit Court of Appeal punted on the question in 2014, and ordered a hearing on whether the specific activities conducted by the companies served a public purpose.   On remand, the trial court held a hearing on that very question and again ruled in favor of the Port and the companies. 

The assessor appealed to the Fourth Circuit again.  The court reiterated that, in order to be exempt from ad valorem taxation, public property must be vested in or owned by the public and used for a public purpose, and that the Legislature determines whether a particular use constitutes a “public use.”  The court considered the specific activities of the private companies and the legislative purpose of the Port.  The court found that the Port offers services to industries that are mainstays of the Louisiana economy and that it connects producers with buyers and helps bring Louisiana commodities to the global market, which it cannot do without the facilities and services provided by the private companies.  Accordingly, the court held that such activities are “in harmony with the Port’s legislative mission and provide a public benefit,” and affirmed the summary judgment in favor of the Port.   See Board of Commissioner of Port of New Orleans v. City of New Orleans, 2013-0881 (La. App. 4 Cir. 2/26/14), 135 So. 3d 821, reh\'g denied (Mar. 20, 2014), writ denied, 2014-0809 (La. 6/13/14), 140 So. 3d 1190, after remand, 2015-0768 (La. App. 4 Cir. 3/16/16), ___ So.3d ___ , 2016 WL 1061490.

Christopher J. Dicharry
Angela W. Adolph
Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P. 
American Property Tax Counsel (APTC)

 

Updated September 2015

Louisiana Imposes New Limits on Inventory Tax Credit

In its most recent session, the Louisiana Legislature made numerous changes to business exclusions, exemptions, deductions, and credits. One significant change involves the inventory tax credit, which is used in Louisiana to reimburse taxpayers for the cost of the annual local property taxes paid on the value of inventories. Rather than receiving an exemption from property taxes on inventories, taxpayers paid the property tax on the value of inventories and were reimbursed by means of a 100% refundable credit on their income and corporation franchise tax returns. If the inventory tax exceeded the income and corporation franchise tax due to the state that year, the Louisiana Department of Revenue issued a check for the balance of the credit to the taxpayer.

However, effective July 1, 2015, the refund of inventory taxes for eligible taxpayers whose cumulative annual tax is $10,000 or more will be limited to 75% of any excess credit instead of 100% of the excess credit. The remaining 25% of the excess credit may be carried forward against income and corporation franchise tax for up to five (5) years. Taxpayers paying less than $10,000 in cumulative annual property tax will continue to receive the 100% refundable credit. La. Acts 2015 No. 133 (amending La. R.S. 47:6006).

Under Act 133, the inventory tax credit is curtailed based upon when a taxpayer’s return is filed. All claims for credit on any return filed on or after July 1, 2015 will be subject to the refund limit regardless of the taxable year to which the return relates. However, the filing of an amended return on or after July 1, 2015 amending a return that was filed before July 1, 2015 will receive the full inventory tax credit if the inventory tax credit was properly claimed on the original return. Thus, a late-filed original 2013 return filed on or after July 1, 2015 will be subject to the reduced refund even though other taxpayers received full refunds on their timely filed 2013 returns. Additionally, 2014 returns under extension will not receive the full refund on returns filed after July 1, 2015.

Christopher J. Dicharry
Angela W. Adolph
Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P.
American Property Tax Counsel (APTC)

 

Updated June 2014

Louisiana Salt Caverns Assessed at 15% of Fair Market Value

In PBGS, L.L.C. v. Duplechain, 2013-278 (La.App. 3 Cir. 12/18/13), 130 So.3d 45 the Louisiana Court of Appeal, Third Circuit, determined that a salt cavern was not a feature of the land surrounding the cavern and was assessable as "other property" at 15% of fair market value. The court declined to apply property law concepts and divorced ad valorem taxation concepts from property law.

The PBGS case is the only reported decision finding that salt caverns could be assessed independently from the surrounding land as "other property." Other than procedural issues, the only issue before the court was the classification of a salt cavern as land assessed at 10% of fair market value or "other property" assessable at 15% of fair market value. The court did not consider how the classification of salt caverns as "other property" departed from the definition of land in La. R.S. 47:2322, or the lack of uniform valuation rules adopted by the Louisiana Tax Commission ("LTC") for purposes of valuing salt caverns. The PBGS ruling has encouraged assessors to assess salt cavern property independently from the land and has resulted in a widespread lack of uniformity contrary to the uniformity mandate of La. Const. art. VII, Sect. 18.

Christopher J. Dicharry
Kean Miller LLP
American Property Tax Counsel (APTC)

 

Updated March 2012

New Appointees

Newly reelected Louisiana Governor, Bobby Jindal, has re-appointed three members of the Louisiana Tax Commission, and appointed two new members. The members of the Louisiana Tax Commission are:

• James D. "Pete" Peters, reappointed member and Chair

• Kenneth P. "Ken" Naquin, reappointed member

• Harold J. "Joey" Vercher, reappointed member

• Charles "Chord" Carrico, new member

• Kay K. Katz, new member

Charles Abels continues to be the Administrator of the Louisiana Tax Commission.

The Louisiana Tax Commission has scheduled its annual rule making submissions/meetings as follows:

• June 8, 2012 - Submission of Written Proposals

• June 26, 2012 - Presentation of Proposals

• July 13, 2012 - Submission of Written Rebuttal Evidence

• July 24, 2012 - Presentations of Rebuttal Evidence

• September 25, 2012 -Tentative Adoption Hearing

The Louisiana Tax Commission oversees the assessment of taxable property by the parish assessors and values public service properties for assessment purposes. The Louisiana Tax Commission also serves as the body for adjudicating valuation and uniformity disputes with Assessors and in connection with the assessment of public service properties.

Christopher J. Dicharry
Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P.
American Property Tax Counsel (APTC)

 

Updated June 2011

Alternate Property Tax Protest Procedures Create Complexity in Louisiana

Louisiana uses separate property tax challenge procedures depending on the nature of the challenge.

If you are challenging value or uniformity, Louisiana law requires the filing of an initial protest with the local Board of Review before going to the Louisiana Tax Commission and the courts. The local Board of Review in most parishes is the Parish Council or Police Jury. Frequently, the local Board of Review will defer to the Assessor in protests dealing with commercial and industrial properties. The determination of the local Board of Review is subject to review by the Louisiana Tax Commission and the determination of the Tax Commission is subject to review by the Louisiana courts. The hearing before the Tax Commission is critical. At the Tax Commission hearing you must properly submit all valuation evidence that you want the Tax Commission and the courts to review.

If you are challenging the taxability of property (i.e. property exempt under the Louisiana Constitution or property not taxable under the United States Constitution), you do not have to follow the administrative routine of filing a protest with the local Board of Review followed by a protest to the Tax Commission and appeal to the courts. Rather, you should pay the taxes under protest and file suit directly in district court within thirty days of the payment under protest. You must make the payment under protest before the taxes become delinquent or the right to contest taxability is waived. Under this procedure, the district court will conduct a trial on the taxability of the property.

If you are challenging taxability of property, but also feel that the property has been over-valued for assessment purposes, you may need to follow both procedures to preserve the right to challenge value in case the courts rule that the property is in fact taxable.

Both types of protests are subject to complex rules. Taxpayers should engage qualified counsel to represent them in protesting either the valuation or taxability of property in Louisiana.

 

Updated March 2011

Legislative Oversight Committees Reject Louisiana Tax Commission Oil & Gas Rules

On Monday, March 14, 2011, oversight committees of the Louisiana Legislature rejected portions of rules proposed by the Louisiana Tax Commission for 2011 property tax purposes. The Louisiana Oil & Gas Association requested the oversight hearing, contending that the proposed rules resulted in the taxation of non-taxable property and imposed taxes on property that has no value.
The Louisiana Constitution protects oil and gas operations from taxes other than the Louisiana severance tax. In this regard, the Louisiana Constitution provides:

(B)  Severance Tax.  Taxes may be levied on natural resources severed from the soil or water, to be paid proportionately by the owners thereof at the time of severance.  Natural resources may be classified for the purpose of taxation.  Such taxes may be predicated upon either the quantity or value of the products at the time and place of severance.  No further or additional tax or license shall be levied or imposed upon oil, gas, or sulphur leases or rights.  No additional value shall be added to the assessment of land by reason of the presence of oil, gas, or sulphur therein or their production therefrom....
La. Const. of 1974 art. 7, Sect. 4(B)(emphasis added).

For many years the oil and gas industry has challenged the method used by the Louisiana Tax Commission to value subsurface taxable property. The Assessors contend that 100% of the cost to drill and equip a well should be used in the valuation of the well. LOGA contends that the Louisiana Constitution does not allow for the taxation of the well bore (which is a part of the land), but does allow for the taxation of the down hole equipment. For years, the Tax Commission has provided for the assessment of down hole equipment based on a percentage  (currently 40%) of the cost to drill and equip wells as reported to the American Petroleum Institute in its Joint Association Survey. While the Louisiana Tax Commission proposed using the same methodology for 2011 property tax purposes, they expanded the taxable base by adding the lateral distance of horizontal and directional wells to the computation. The proposed change would have dramatically increased property taxes on lateral and directional wells.

The oversight committees rejected the portion of the rules that would add the lateral to the determination of value of subsurface equipment. The Tax Commission 2011 rules will continue to rely on 40% of the cost to drill and equip wells for the starting point for valuing wells for 2011 property tax purposes; however, the lateral will not be included in the computation. In addition to rejecting the lateral provision, the oversight committees also rejected an 11 year economic life for lateral wells and put all wells on a 17 year life.

The oversight subcommittees accepted all other rules proposed by the Louisiana Tax Commission for the 2011 property tax year. Those changes generally updated depreciation and made other updates for the valuation of a variety of properties, including vessels, pipelines, oil & gas surface equipment and general business assets.

 

Updated December 2010

Louisiana Oil & Gas Association Challenges Tax Commission Emergency Rules

The Louisiana Oil & Gas Association ("LOGA") has filed suit challenging the use of the emergency rule making procedures by the Louisiana Tax Commission in connection with the development of assessment guidelines for the 2011 tax year. The Louisiana Administrative Procedure Act allows for the use of emergency rule making (i) if there is an imminent peril to the public health, safety or welfare; (ii) to avoid sanctions or penalties from the United States; (iii) to avoid a budget deficit in the case of medical assistance programs; or (iv) to secure new or enhanced federal funding for medical assistance programs. See La. R. S. 49:953(B)(1). LOGA contends that none of these circumstances existed in connection with emergency rules adopted by the Tax Commission related to 2011 valuation guidelines for use by the Assessors and taxpayers. The dispute concerning emergency rule making arises out of a broader dispute over the valuation of oil and gas subsurface taxable property. LOGA filed the suit after the Tax Commission adopted emergency rules which, among other things, will result in large tax increases on horizontal and directional wells.

 

Updated September 2010

The Search for Signs of Obsolescence in Louisiana

Taxpayers who want to have Louisiana assessors make adjustments for obsolescence should submit evidence of obsolescence early.

In Seal v. Florida Gas Transmission Co., 2009-0808 (La. App. 1 Cir. 8/14/09), 2009 WL 2486918 the Louisiana Court of Appeal, First Circuit, in an unpublished opinion ruled that the Louisiana Tax Commission was wrong to make adjustments for obsolescence under facts where the taxpayer did not provide the Assessor with an appraisal supporting obsolescence until after the tax rolls had closed. The court upheld a determination by the district court that the taxpayer did not timely provide the Assessor with "sufficient data to warrant a reduction for obsolescence."

In Bailey v. Enervest Operating Company, 45,553 (La. App. 2 Cir. 6/30/10), --- So. 3d --- , 2010 WL 2598286, the court upheld a determination by the Louisiana Tax Commission that the taxpayer had provided enough information to the assessor prior to the rolls closing to shift the burden to the assessor to show that the assessment was correct without the requested obsolescence adjustments.

Both the Florida Gas and the Enervest cases are pipeline cases; however, the cases do provide guidance concerning adjustments for obsolescence for all types of properties. In Louisiana, it is important to provide high quality information concerning obsolescence to the assessor before the rolls close. Based on the Enervest decision, the burden should then shift to the Assessor to show why obsolescence is not warranted.

 

Updated March 2010

Major Developments in Louisiana

At the time of publication, the Louisiana Supreme Court had not yet rendered its decision in the interstate natural gas pipeline commerce clause case captioned Transcontinental Gas Pipeline Corporation, et al vs. Louisiana Tax Commission, et al, 2009-0628 (La. App. 1st Cir. 8/10/09), --- So.3d ----, 2009 WL 2461597 .

Based upon the holding of the Louisiana Court of Appeal, First Circuit in the Transcontinental Gas Pipeline Corporation case, Louisiana Assessors have requested local filing information from pipelines that have historically been centrally assessed by the Louisiana Tax Commission. Taxpayers have filed pleadings with the Louisiana Tax Commission requesting that the Tax Commission take action to protect both the Taxpayers and the Assessors from deadlines and other legal requirements should the Louisiana Supreme Court render a decision requiring pipelines to be locally assessed. The Tax Commission is expected to conduct a public hearing on the issue on March 23, 2010.

The Louisiana Tax Commission is taking the position that taxpayers who contest real estate values during the middle of the reappraisal cycle must rely on evidence of value as of the last reappraisal date. Under the current economic conditions this position will cause real estate to be overassessed. Louisiana Assessors are required to revalue real estate at least every four years. La. R.S. 47:1952 states that value shall be based upon the status and condition of property as of January 1 of each year. We believe that the four year mandatory cycle is designed to keep Assessors from letting assessed values get stale, but that taxpayers have the right to contest value each year based upon the January 1 value of the property.

 

Updated September 2009

Louisiana Court Finds Commerce Clause Violation in Taxation of Interstate Natural Gas Pipelines

The Louisiana Court of Appeal, First Circuit has upheld a district court decision finding the Louisiana's system for assessing interstate natural gas pipelines violates the Commerce Clause. See Transcontinental Gas Pipeline Corporation, et al vs. Louisiana Tax Commission, et al, 2009-0628 (La. App. 1st Cir. 8/10/09), --- So.3d ----, 2009 WL 2461597 . Under Louisiana's pubic service property assessment routine, all interstate natural gas pipelines are assessed by the Louisiana Tax Commission at 25% of fair market value. Most intrastate natural gas pipelines are locally assessed at 15% of fair market value. The courts found that the interstate natural gas pipeline taxpayers did show competition with intrastate natural gas pipelines and that the disparate assessment rates violated the Commerce Clause. The Louisiana Court of Appeal, First Circuit declared the "pipeline company" definition in the public service properties portion of Louisiana ad valorem tax law unconstitutional. See La. R.S. 47:1851(K). The litigating pipelines had advocated for the more tailored remedy of 15% central assessment by the Louisiana Tax Commission and contended that there was no need to declare La. R.S. 47:1851(K) unconstitutional. The ruling invalidating La. R.S. 47:1851(K) could affect hundreds of pipelines that have no interest in the litigation, including oil and commodity lines. The decision is on appeal to the Louisiana Supreme Court.

 

Updated March 2009

Law Change Could Hurt Owners of Tax Exempt Properties

Owners of exempt property may be hurt by a recent Louisiana law change. Historically, the owners of tax exempt property did not have to confirm that the exemption was being respected by the Assessor by checking the tax rolls during the public inspection period. The owner of exempt property could challenge a tax bill by paying the bill under protest and filing a law suit in district court. This procedure used to be in La. R.S. 47:2110. As the result of a major rewrite of the Louisiana law on tax sales, La. R.S. 47:2110 was renumbered La. R.S. 47:2134. In addition to renumbering the provision, the Legislature added a change that says exemption challenges must be handled like valuation challenges. The change was effective January 1, 2009. Thus, for 2009 and later years, an owner of exempt property must check the tax rolls during August and September of each year to confirm that exempt property has not been put on the taxable property tax rolls. If the Assessor decides to challenge the exemption and puts the property on the tax rolls, the property owner must file a protest with the local Board of Review and can appeal to the Louisiana Tax Commission. If the property owner waits to get a tax bill, it will likely have lost substantial rights and may be unable to challenge the assessment.

 

Updated December 2008

Court Rules Assessors have Right to Challenge Tax Commission Public Service Property Valuations

The Louisiana Constitution provides that the local assessors shall value and assess all taxable property in the state of Louisiana except public service properties which are valued by the Louisiana Tax Commission. The Louisiana Court of Appeal, First Circuit, has ruled that local assessors may object to the public service property valuation determinations of the Louisiana Tax Commission. Entergy and the Louisiana Tax Commission had challenged the right of an assessor to object to the valuation of certain public service property assets of Entergy contending that the Louisiana Tax Commission is responsible for public service property valuations. See Gisclair v. La. Tax Commission, 2008 WL 4764336 (La.App. 1 Cir.), 2008-1616 (La.App. 1 Cir. 10/31/08)(unreported decision). In Gisclair, the court determined that the local assessor does have the right to challenge the fair market valuation determination of the Louisiana Tax Commission. This decision will adversely impact public service property taxpayers by allowing assessors, who are not well versed in the unit valuation methodology used by the Louisiana Tax Commission in valuing public service properties, to challenge the valuation determinations of the Louisiana Tax Commission.

 

Updated September 2008

Property Owners with Gustav Damage Entitled to Reduced Property Tax Assessments.

Property taxes in Louisiana are based on the fair market value of taxable property. The assessors make the fair market value determination based upon the status and condition of property as of January 1 of each tax year. Certain types of real estate are generally revalued every four years; however if market conditions suggest changes in fair market value, adjustments can be made during the four year cycle. Most equipment and personal property is valued annually. La. R.S. 47:1978 and La. R.S. 47:1978.1 provide relief provisions for property owners that sustain damage after January 1 due to flooding or a natural disaster. La. R.S. 47:1978.1, which was enacted after Hurricanes Katrina and Rita, provides that if buildings, structures or personal property are damaged, destroyed, non-operational or uninhabitable due to an emergency declared by the Governor then the assessment of such property should take into account all damage to the property even if the assessment rolls are complete. Different procedures apply depending upon the point in the assessment cycle that the natural disaster occurs. Business property and homes that were damaged in Gustav are due a reduction in assessment even though the January 1, 2008 assessment date has already passed. Gustav hit during a critical time in the assessment cycle; therefore, the implementation of La. R. S. 47:1978 and 47:1978.1 will vary by parish. Owners of Gustav damaged property should contact the parish assessor to determine how the revaluations provisions will be implemented. Kean Miller can help with disputes related to the assessment of damaged property.

 

Updated June 2008

Appeal Procedure Begins in August

Political subdivisions in Louisiana are authorized to impose ad valorem property taxes on both tangible personal property and real estate, referred to as corporeal movable property and immovable property under Louisiana law. Property tax renditions are generally due by April 1st of each year. La. R.S. 47:2324. Taxpayers who fail to filde required renditions lose the right to contest the valuation placed upon the property by the Assessor. La. R.S. 47:2329. Generally, the assessment lists are open for public inspection in each parish for a fifteen day period between August 15 and September 15 of each year. La. R.S. 47:1992(F). Local parish governing authorities sitting as Boards of Review consider valuation and uniformity protests shortly after the end of the public inspection periods. La. R.S. 47:1992. Taxpayer appeals from the assessment determinations of the Assessors must be filed with the Boards of Review at least seven days prior to the Board of Review hearing. La. R.S. 47:1992(C). Taxpayer's dissatisfied with the determination of the Board of Review may appeal to the Louisiana Tax Commission within ten days of the Board of Review decision. Appeal forms and rules concerning the conduct of hearings can be found on the Louisiana Tax Commission web site: http://www.latax.state.la.us/home.asp. Taxpayers may appeal the decision of the Louisiana Tax Commission to an appropriate district court; however, any such appeal is based on the record created before the Louisiana Tax Commission. Generally, no additional evidence is allowed in the district court proceeding. La. R.S. 47:1998; La. R.S. 49:964.

 

Updated March 2008

New Louisiana Tax Commission Appointed / First Action Repeals Pro-taxpayer Rules

New Louisiana Governor Bobby Jindal has appointed the members of his new Tax Commission, the agency responsible for overseeing assessments by the local assessors. The members are: Mr. Pete Peters, the retired former head of the Tax Commission staff. Mr. Peters will serve as Chair of the Tax Commission. The other four Tax Commission members are Mr. Paul Hargrove, Mr. Joey Vercher, Mr. Ken Naquin, and Ms. Belinda Hazel. To the disappointment of the Louisiana business community, one of the first actions of the new Tax Commission was to reject rules proposed by the former Tax Commission that would have better defined the role of obsolescence in the valuation of taxable property. With this move Louisiana reverts back to a standard that appears to allow assessors to refuse to adjust for obsolescence notwithstanding the existence of evidence supporting an obsolescence adjustment.

 

Updated December 2007

Major Valuation Increases in the City of New Orleans Lead to Mass Appeals

The City of New Orleans has seven assessment districts. An elected assessor is responsible for property tax assessments in each district. In order to remedy historic complaints related to a lack of uniformity among and within assessment districts, many of the assessors acted to bring historically low assessments in to line. This move had a major impact on areas of the city not damaged by Hurricane Katrina. Over 5,000 appeals were filed with the Board of Review and the City Council, which is responsible for Board of Review appeals, contacted the appeal process out to a New Orleans law firm. The law firm hired appraisers and consultants to act as hearing officers for the Board of Review appeals. Many adjustments were recommended as a result of the Board of Review hearings, and the City Council adopted the recommended adjustments. In response to the large number of adjustments, affected assessors have filed over 1,500 appeals from the Board of Review to the Louisiana Tax Commission. Following the methodology of the of the New Orleans City Council, the Louisiana Tax Commission has contracted with a different New Orleans law firm to handle the appeals. These appeals will be true evidentiary hearings and appeals from the Louisiana Tax Commission are to the district court limited to the record created before the Louisiana Tax Commission. It is likely that additional challenges will arise in connection with these appeals. It is virtually certain that the use of law firms to handle these appeals will impact the conduct of Louisiana property tax appeals in the future.

 

Updated September 2007

Louisiana Oil and Gas Industry Proposes Major Changes to Method for Valuing Down Hole Taxable Property

The Louisiana oil and gas industry has proposed major changes in the way that property taxes on subsurface oil and gas equipment are determined. Louisiana is a fair market value state. La. Const. of 1974, art. VII,. § 18. However, special issues arise in the valuation and taxation of subsurface equipment because Louisiana law prohibits the taxation of minerals in place and of mineral rights and leases. Additionally, the value of land cannot be increased because of the presence of minerals. La. Const. of 1974, art. VII, § 4. Thus, the oil and gas industry contends that the taxation of subsurface equipment is limited to the fair market value of the actual in place equipment. For many years the LTC has begun the valuation of subsurface taxable equipment with the American Petroleum Institute Joint Association Survey on the Cost to Drill and Equip Wells ("JAS"). The survey is the result of voluntary reporting on the current cost to drill and equip wells. The survey includes such costs as drilling rig rates, the cost of board roads, and such other items. In order to extract the non-taxable costs from the JAS, the LTC has used a percentage of the average cost to drill and equip as reported in the JAS. At times the percentage has been as low as 15%, but in recent years the percentage has increased to the current 40% of the average JAS cost to drill and equip. For years the industry has insisted that the percentage of JAS has been too high resulting in the overvaluation of taxable property or the taxation of non-taxable property contrary to the Louisiana Constitution. During 2007 for use in 2008 and later years the industry has proposed the use of the United States Department of Energy's Energy Information Administration ("EIA") data to determine the cost of subsurface equipment. The industry believes that the EIA information is more specific to the actual down hole equipment and is a more reliable indicator of the current cost of the actual taxable down hole equipment. Once a reliable indicator of current cost is found, the LTC regulations will apply standard cost approach methodologies to annually arrive at the fair market value of subsurface taxable equipment. Contrary to the industry position, the Louisiana Assessors Association has recommended that the LTC adopt 100% of the average JAS cost to drill and equip as the starting point for valuing taxable down hole property. The LTC is scheduled to announce whether it will accept the industry proposal on October 3, 2007.