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Louisiana Property Tax Updates

Updated june 2021

Louisiana Supreme Court issues opinion resulting in big property tax win for industry

On October 20, 2020, the Louisiana Supreme Court issued a major decision in an ad valorem (property) tax case.  D90 Energy, LLC v. Jefferson Davis Parish Board of Review, 2020-C-200 (La. 10/20/2020).  This ruling is a key Louisiana tax decision on the scope of authority possessed by Assessors in ad valorem (property) tax matters and for the Louisiana Tax Commission (“LTC” or “Commission”) as a reviewing body. 

In 2012, D90 Energy, a multi-state, independent oil and gas operator, purchased two gas wells and one salt-water disposal well for $100,000.  Facing a fair market valuation by the Assessor of over $3 million, the operator paid $110,000 in taxes under protest for the first two tax years (2013 and 2014) – more than it paid for the property – and appealed the Assessor’s decision. D90 Energy did not pay under protest for the last two tax years – 2015 and 2016 - because it prevailed at the Tax Commission for the first two tax years.

D90 relied upon the purchase price of $100,000.00 for the three wells, until 2016, in which it sought the 90% reduction provided for shut-in wells under LTC Rules and Regulations. The Assessor determined fair market value using tables in the LTC Rules and Regulations providing estimated “cost new” values for well properties, but the assessor refused to consider any adjustments for allowance of economic obsolescence based upon the $100,000 purchase price and the subsequent shut-in of the wells.

The Tax Commission ruled in favor of D90 Energy in three separate hearings covering the four tax years.  The LTC conducted three (3) full evidentiary hearings, heard live testimony and received documentary evidence, made written findings of fact, and issued Reasons for Decision for the four (4) tax years.  In these rulings, the LTC assigned a value of $235,000.00 for each of the 2013-2015 tax years, considering (1) the purchase price of $100,000; and (2) estimated plug and abandon liability costs of $135,000.00 for the three wells. For the 2016 tax year, the LTC arrived at a value of $145,000.00, based upon a 90% shut-in reduction in the purchase price to $10,000.00, and an additional $135,000.00 for the plug and abandon liability costs. For all tax years, the Louisiana Tax Commission reduced the fair market value, heavily weighing a Tax Commission regulation that requires valid, properly documented sales to be considered by an Assessor as a measure of fair market value.[1] 

The Assessor’s suits for judicial review were consolidated by the District Court in Jefferson Davis Parish. The District Court affirmed the LTC decisions, finding no basis to overturn the LTC’s decisions. The Assessor appealed to the Third Circuit Court of Appeal, which reversed the decisions of the District Court and the LTC and reinstated the Board of Review decisions to set fair market value according to the original denominations made by the Assessor.  The Third Circuit Court of Appeal reasoned that the Tax Commission should have afforded “much discretion” to the Assessor’s determination of value.  As a consequence, the Court of Appeal overturned the LTC’s finding that the arms-length sale price of $100,000, together with future plug and abandonment costs, should be the measure of fair market value.  In addition, for the 2015 and 2016 tax years, the Court of Appeal found that D90 Energy had no right to appeal the fair market valuation because no payment under protest was made for those specific years.  The Assessor filed an exception of no right of action asserting that because D90 failed to pay the disputed tax amounts under protest for the 2015 and 2016 tax years, that it was barred from disputing the valuations and assessments for those years. The Louisiana Supreme Court granted D90 Energy’s writ application to review the Third Circuit’s decision.

In a unanimous decision, the Supreme Court reversed the Court of Appeal’s decision and reinstated the Tax Commission’s decisions in favor of D90 Energy. The Supreme Court found that the Tax Commission properly corrected the Assessor’s fair market value determination by considering the recent arms-length sale from Goldking to D90 Energy.  The Supreme Court found that the Tax Commission possessed the authority to correct the Assessor’s valuation, and the record evidence supported the correction.  The recent sale, as opposed to regulatory tax tables, was a proper measure of value for D90 Energy’s well properties under the facts.  The Supreme Court also found that the Tax Commission was not limited to reviewing only the information provided to the Assessor, but could take evidence, hear testimony, and consider the administrative record established before it in an appeal of an Assessor’s determination of value. The Assessor argued that he had the sole right to determine fair market value under the La. Constitution, and that the Tax Commission’s valuations deserved no deference. The Supreme Court found that the La. Constitution clearly provided the Tax Commission the right of review and that the evidentiary hearing required by law in an appeal to the Commission indicated that the Commission could hear new evidence as part of the scope of its responsibilities. The Court noted, “If the Commission can only review and consider the evidence submitted to an Assessor, a hearing is meaningless.”

Finally, the Supreme Court addressed the effect of a taxpayer’s failure to pay under protest when it is successful at a Tax Commission hearing, finding that such payment under protest is not required to preserve a taxpayer’s right to dispute a valuation and assessment when the taxpayer prevails before the Tax Commission.

This ruling is a key Louisiana tax decision on the scope of authority possessed by Assessors in ad valorem (property) tax matters and for the Louisiana Tax Commission as a reviewing body. 

[1] “Sales, properly documented, should be considered by the assessor as fair market value, provided the sale meets all tests relative to it being a valid sale.”  See LAC 61:V.907(A)(6)(e).

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

Louisiana Supreme Court Holds Taxpayers Could Not Appeal Assessment Directly to Louisiana Tax Commission

The Louisiana Supreme held in Comeaux v Louisiana Tax Comm’n, No. 2020-CA-01037 (La. May 20, 2021) that the Louisiana Tax Commission (the “Commission”) did not have jurisdiction to hear the appeal of the taxpayers’ 2017 property tax assessment even though the Commission accepted the appeal as a way to enforce its 2016 ruling for the same taxpayer.  The Court determined that Commission’s assertion of jurisdiction over the appeal violated the Louisiana Constitution because the taxpayers had not first appealed to the parish board of review.

The fair market value of the taxpayers’ property had been lowered by the Commission for 2016 but the Lafayette Parish assessor failed to use the lower value for 2017. The taxpayers went back to the Commission to try and force the assessor to use the lower valuation for 2017 and the Commission ruled that it had jurisdiction to hear the 2017 appeal under La. R.S. 47:1990[1] because it was enforcing its 2016 ruling instead of reviewing the 2017 assessment.  The Commission then determined that the assessor was required to follow the 2016 revised value for 2017.

The assessor appealed the Commission’s decision regarding the 2017 assessment, arguing that La. R.S. 47:1990, as applied by the Commission, was unconstitutional because it violated La. Const. art. VII, §18(D) and (E), which provide that an assessment must be reviewed first by the board of review and then by the Commission and that the parish assessors “shall determine the fair market value of property” for purposes of property taxation.. 

The Supreme Court agreed with the parish assessor, holding that La. R.S. 47:1990 did not give the Commission jurisdiction to review the 2017 assessment because the taxpayers had not first appealed to the board of review.  The court disagreed with the Commission’s argument that it was not “reviewing” the 2017 assessment but instead was simply enforcing its determination regarding the 2016 assessment.

Importantly, however, the Court also found that based on its prior holding in D90 Energy, LLC v. Jefferson Davis Par. Bd. of Review, 2020-00200 (La. 10/1/20), the Commission did not exceed its rulemaking authority in requiring that the assessor apply the 2016 valuation, as determined by the Commission, in assessing the taxpayer for 2017.  The Court reaffirmed that the Commission has the authority pursuant to La. Const. Art. VII, §18(D) and under La. R.S. 47:1837(D) and La. R.S. 47:2323 to establish uniform rules related to appraisal of property, the parish assessors must abide by these rules, and the rule at issue did not unconstitutionally infringe upon the powers of the assessors provided in La. Const. art. VII, §18(D) and did not unconstitutionally conflict with the requirements set forth in La. Const. art. VII, §18(F). 

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

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