Docket: 2018 CA 0030, 2018 CA 0031, 2018 CA 0032, 2018 CA 0033
Court: Louisiana Court of Appeal; November 2, 2018; Louisiana; State Appellate Court
The Louisiana Department of Revenue, represented by Secretary Kimberly L. Robinson, appeals a Board of Tax Appeals (BTA) judgment that denied its exceptions regarding subject matter jurisdiction and right of action, as well as its motion for summary judgment. The BTA granted summary judgment in favor of taxpayers Bannister Properties, Inc. and Southold Properties, Inc., ordering the Department to refund $500,713.00 and $164,287.00 respectively, plus interest, under the assertion that the taxpayers were not liable for Louisiana corporation franchise tax during specific tax periods.
The appeal involves undisputed facts that the taxpayers, both foreign corporations incorporated in Delaware, conducted no business in Louisiana during the relevant periods, which began on January 1 of 2008 through 2011. They initially filed tax returns and paid franchise taxes totaling $636,651.00 for Bannister and $189,924.00 for Southold, but later amended their returns claiming they were not subject to the tax based on a precedent case, UTELCOM, Inc. v. Bridges, which deemed a related regulation invalid due to a legal misinterpretation by the Department.
After the Department denied their refund claims, the taxpayers filed petitions with the BTA to recover the alleged overpayments. The BTA consolidated these matters, and the parties entered into settlement agreements acknowledging the overpayments. The BTA recommended legislative appropriation to cover the refunds. Subsequently, motions to stay the Overpayment Refund Claims were filed, with the taxpayers reserving the right to pursue these claims if the appropriations were not made.
The court affirmed the denial of the Department's exceptions but reversed the summary judgment in favor of the taxpayers and the ordered refunds. It also reversed the denial of the Department's motion for summary judgment, ultimately denying the taxpayers' claims for overpayment refunds.
As of the appeal, the Louisiana Legislature has not allocated funds to refund taxpayers for overpayments identified by the BTA in Claims Against the State cases, and taxpayers have not utilized the remedy under La. R.S. 47:1484(C)(1). The Department filed a motion for summary judgment and raised exceptions regarding lack of subject matter jurisdiction and no right of action concerning the taxpayers' Overpayment Refund Claims, arguing that La. R.S. 47:1621(F) prohibits refunds for tax overpayments resulting from a misunderstanding of law by the Department. This statute specifies that taxpayers believing the Department misinterpreted the law must pay under protest and either sue for recovery or appeal to the BTA. The Department contended that a prior determination in UTELCOM confirmed a misinterpretation of the corporate franchise tax law, thus applying La. R.S. 47:1621(F) to deny the refunds. The Department argued that, due to this prohibition, taxpayers lacked a right of action and the BTA lacked jurisdiction to grant refunds. In opposition, the taxpayers filed a cross-motion for summary judgment to compel the Department to issue refunds plus interest, based on the Overpayment Refund Procedure outlined in La. R.S. 47:1621-1627. After a hearing, the BTA denied the Department's exceptions and motion for summary judgment, granted the taxpayers' motion, and awarded refunds of $550,713.00 to Bannister Properties, Inc. and $164,287.00 to Southold Properties, Inc., along with interest. The Department subsequently appealed the BTA's judgment. In its appeal, the Department raises seven assignments of error, asserting that the BTA wrongly denied its motion for summary judgment and incorrectly granted the taxpayers' motion based on the clear prohibition in La. R.S. 47:1621(F) against refunds due to the Department's misinterpretation of the law. Additionally, the Department contends that if the statute is not clear, the BTA's judgment fails to apply statutory construction principles that favor the specific provision over general provisions.
The BTA erred in denying the Department's Motion for Summary Judgment and granting Southold's and Bannister's Motion for Summary Judgment regarding an administrative claim for refund. La. R.S. 47:1621(F) must be interpreted clearly; otherwise, it renders part of the statute meaningless, contradicting established rules of statutory construction that require all parts of a statute to be given effect. The BTA's decision also disregards Louisiana Supreme Court jurisprudence that opposes refunds based on misinterpretations of law by the Department. Additionally, the BTA improperly denied the Department's Exception of No Right of Action, as Southold's and Bannister's claims are barred by the prohibition in La. R.S. 47:1621(F). The BTA further erred in rejecting the Department's Exception of Lack of Subject Matter Jurisdiction concerning its authority to award such refunds, given the absolute prohibition in the statute.
Jurisdiction for reviewing BTA decisions rests with appellate courts, as outlined by La. R.S. 47:1435, La. R.S. 47:1436, and La. C.C.P. art. 2083. Appellate review is confined to the record established before the BTA, focusing on factual and legal questions. The BTA's judgment should be upheld if it correctly applies the law; otherwise, it may be reversed or modified. Subject matter jurisdiction can be challenged through a declinatory exception, where the burden of proof lies with the defendant when jurisdiction is not apparent from the petition. Without evidence presented, a court must accept the petition's allegations as true. The issue of subject matter jurisdiction is reviewed de novo. The BTA was created to resolve disputes between taxpayers and the Department regarding tax laws, as specified in La. R.S. 47:1401 and related statutes.
Jurisdiction over tax-related appeals is granted to the Board of Tax Appeals (BTA) under Louisiana Revised Statutes 47:1407(1) and 47:1625, which allow the BTA to determine overpayment claims and issue refunds or credits for overpaid taxes. Taxpayers appealed to the BTA after the Department denied their refund requests, and the BTA found it had subject matter jurisdiction over these claims, correctly overruling the Department's challenge.
The right of action, as defined by Louisiana Civil Code Procedure Article 681, requires a plaintiff to have a genuine interest in the matter at hand. The exception of no right of action assesses whether the plaintiff belongs to the class entitled to the asserted cause of action. It does not address the merits of the case, nor does it consider the defendant's potential defenses. Evidence can be presented to challenge the right of action during trial, with the burden of proof resting on the party raising the exception.
In this case, the Department argues that the taxpayers lack a right of action for refunds under La. R.S. 47:1621(F), claiming conditions must be met for refunds, specifically the existence of an overpayment, the circumstances of the overpayment, and that it is not categorized as non-refundable. However, the Overpayment Refund Procedure does not stipulate any conditions that must be satisfied for a taxpayer to receive a refund of overpaid taxes.
Taxpayers are confirmed to have made overpayments of franchise taxes, qualifying them for refunds under the Overpayment Refund Procedure (La. R.S. 47:1621-1627). The legal issue revolves around whether these claims are barred by La. R.S. 47:1621(F). The no right of action exception pertains solely to the taxpayers' standing to pursue their claims, not their likelihood of success. A de novo review indicates the taxpayers possess the right to seek refunds, rendering the Department's no right of action exception improper.
Summary judgment is described as a means to resolve cases without a full trial when no substantial factual dispute exists, requiring the moving party to demonstrate entitlement to judgment as a matter of law (La. C.C.P. art. 966(A)(3)). The burden lies with the moving party to identify the lack of factual support for the opposing party's claims, while the opposing party must provide sufficient evidence to show a genuine issue of material fact (La. C.C.P. art. 966(D)(1)). Legal interpretations can be settled by summary judgment, with appellate courts reviewing such issues without deference to trial court findings.
The Louisiana Constitution mandates the Legislature to provide remedies for taxpayers to recover illegal taxes, which include three specific procedures: the Claims Against the State Procedure, the Payment Under Protest Procedure, and the Overpayment Refund Procedure. The latter specifically addresses refunds for voluntary tax overpayments.
Louisiana Revised Statutes 47:1621 outlines the conditions under which taxpayers can receive refunds for overpayments of taxes, penalties, or interest. Overpayment is defined as any payment made when none was due, an excess payment, or a penalty later waived. The statute recognizes specific instances where the Department must refund overpayments, including mathematical errors, incorrect legal interpretations by taxpayers, mistakes of fact, changes in assessments, eligibility for reduced tax rates, and excess payments. Additionally, refunds are mandated if clear and convincing evidence of overpayment is established, subject to legal conditions.
However, La. R.S. 47:1621(F) prohibits refunds for overpayments caused by the Department's mistakes of law, emphasizing that taxpayers cannot claim refunds for misinterpretations by the Secretary. Instead, taxpayers believing in such misinterpretations must either pay under protest or appeal to the Board of Tax Appeals (BTA). The current legal dispute involves the interpretation of Section 1621(F), where the Department asserts that the first sentence prohibits refunds for mistakes of law, while taxpayers contend that the second sentence provides a remedy for such scenarios by allowing payment under protest or appeals. The taxpayers argue that adopting the Department’s interpretation undermines the second sentence, effectively disregarding the remedies it offers.
Taxpayers claim that the phrase "appeal to the Board of Tax Appeals in instances where such appeals lie" in Section 1621(F) refers to appealing a refund denial under La. R.S. 47:1625. The Department counters that taxpayers cannot use the Overpayment Refund Procedure (La. R.S. 47:1621-1627) for overpaid taxes as their claims arise from a mistake of law due to the Department's misinterpretation of a tax regulation according to UTELCOM. The Department asserts that La. R.S. 47:1621(F) prohibits tax refunds in such scenarios and argues that the appeal provision pertains to Claims Against the State under La. R.S. 47:1481-1486, which the taxpayers have already pursued.
The Board of Tax Appeals (BTA) found that the last sentence of Section 1621(F) presents two exceptions to the refund prohibition: (1) payment under protest, and (2) appeal to the Board of Tax Appeals. It determined that the second exception includes appeals from the Department's denial of refund claims, not Claims Against the State. The BTA concluded that the Legislature would not need to explicitly state an exception for Claims Against the State as they are not restricted by Section 1621(F).
Statutory interpretation principles emphasize applying clear laws as written unless they lead to absurd results, particularly in tax statutes. Legislative language is presumed to reflect a deliberate understanding of existing laws and the intent behind its enactment. Generally, tax statutes favor the taxpayer, but laws pertaining to tax exemptions or refunds are strictly construed against them. In this case, the taxpayers' claims for overpayment refunds stem solely from a legal misinterpretation by the secretary as established in the UTELCOM decision.
La. R.S. 47:1621(F) states that no tax overpayment refund is authorized under this section. Taxpayers who believe the Department misapplied the law may remedy this through payment under protest or appeals to the Board of Tax Appeals (BTA) where applicable. The Payment Under Protest Procedure, as established in previous cases, is available if a tax collector denies a refund request. In this case, the taxpayers did not pay their franchise taxes under protest, limiting their remedy to appealing to the BTA for a refund of voluntarily paid taxes. The BTA's reasoning relied on the Louisiana Supreme Court's decision in TIN, which clarified that the phrase "instances where such appeals lie" pertains to appeals from refund denials. TIN involved a taxpayer who paid local use taxes based on their calculation, later concluding they were not owed, without paying under protest. The Supreme Court ruled that taxpayers are not obligated to pay under protest if the collector does not respond to a refund claim. Additionally, subsequent refund requests cannot be contingent on prior denied claims if they involve different materials or time periods. Time limitations for appeals only apply once a collector denies a refund request, not when they fail to act within a year. TIN is not directly applicable to the current case, as it concerns local use taxes rather than state taxes.
The Department denied the taxpayers' Overpayment Refund Claims, distinguishing this case from TIN, where the collector's failure to respond to two refund claims was central. The interpretation of "instances where such appeals lie" in La. R.S. 47:1621(F) was not contested in TIN and refers to La. R.S. 47:1625, as discussed by the supreme court regarding the court of appeal's ruling. This statement is not legally binding on the BTA or this Court. La. R.S. 47:1621(F) prohibits refund authorization due to the Department's misinterpretation of tax law, which must be strictly construed against taxpayers. As such, taxpayers who voluntarily paid taxes are not entitled to refunds for overpayments resulting from the Department's misinterpretation, consistent with the UTELCOM ruling.
The UTELCOM decision led to numerous Overpayment Refund Claims for corporate franchise tax recovery, often resolved through settlement agreements with the Department, recognizing these claims as La. R.S. 47:1481 Claims Against the State, even when a duplicative La. R.S. 47:1621 claim was filed. In some instances, taxpayers' claims were confirmed to not qualify as La. R.S. 47:1621 Overpayment Refund Claims due to the prohibition in La. R.S. 47:1621(F). Although the BTA did not draft the settlement agreements, it was involved in reporting recommendations to the Legislature for appropriations based on these settlements. Nonetheless, in certain cases, the BTA has ruled that La. R.S. 47:1621(F) does not preclude refund claims based on UTELCOM from being recognized as La. R.S. 47:1621 Overpayment Refund Claims.
In cases involving UTELCOM claimants filing La. R.S. 47:1481 Claims Against the State and duplicative La. R.S. 47:1621 Overpayment Refund Claims, taxpayers have reserved the right to pursue refunds if their settled Claims Against the State are not timely paid. The Board of Tax Appeals (BTA) has stayed these proceedings pending receipt of the agreed Claim amounts. The BTA's decisions reveal inconsistent interpretations of La. R.S. 47:1621, particularly regarding the prohibition in Section 1621(F) against refunds for overpayments due to misinterpretation of law.
The BTA acknowledged that while the Legislature historically funded Claims Against the State, recent appropriations have not been made. La. R.S. 47:1484(C) was enacted to provide limited relief to UTELCOM claimants with settled Claims, allowing for offsetting against state corporate income or franchise tax liability if claims are not paid within a year of BTA approval. Despite the taxpayers’ attempts to recover overpaid franchise taxes through claims under La. R.S. 47:1621-1627, these claims do not qualify for refunds due to the explicit language of Section 1621(F) prohibiting refunds for overpayments arising from legal misinterpretation.
The BTA's decision to deny the Department's motion for summary judgment and grant the taxpayers' summary judgment was found to be erroneous. The judgment affirms the denial of the Department's exceptions regarding subject matter jurisdiction and right of action but reverses the grant of summary judgment in favor of Bannister Properties, Inc. and Southold Properties, Inc., which ordered the Department to refund the taxpayers $500,713.00 and $164,287.00, respectively, plus interest.
The judgment from September 12, 2017, is partially reversed, granting the Department's motion for summary judgment. The appeal costs of $625.00 are to be shared equally between the parties. Judge Pettigrew concurs with the decision but raises concerns regarding whether taxpayers have an adequate legal remedy under Article VII, Section 3(A) of the Louisiana Constitution. During the relevant tax periods, Bannister held a passive limited partnership interest in Forcap Investments, L.P., which operated in Louisiana. Forcap owned stakes in two LLCs, one of which, Angelina Leasing, L.L.C., was active in Louisiana, while Meriwether Investment, L.L.C. had no direct activity there but was connected to other entities with Louisiana operations. Bannister was registered in Louisiana solely to obtain a taxpayer ID for tax filings.
Similarly, Southold owned a passive membership interest in Gallatin Investment, L.L.C., which did not conduct business in Louisiana but was linked to other entities that did. Southold was also registered in Louisiana merely for taxpayer identification purposes. The corporate franchise law was amended to align with the Department's previous regulation, which had been overruled by the UTELCOM decision. The taxpayers' claims against the state are not part of this appeal. The parties agreed that they retain the right to pursue all claims and defenses, including potential refunds for franchise tax overpayments. Louisiana Revised Statutes 47:1484 offers a remedy for pending UTELCOM claimants, allowing for offsetting approved claims against state tax liabilities if payments are not made within a year.
Appellate courts have an obligation to assess subject matter jurisdiction on their own initiative, regardless of whether the parties raise the issue. Their jurisdiction is limited to final judgments as outlined in Louisiana Code of Civil Procedure (La. C.C.P.) Articles 1841 and 2083. A denial of a motion for summary judgment is considered an interlocutory judgment and can only be appealed if explicitly permitted by law. Interlocutory rulings, such as the overruling of a peremptory exception of no right of action or a declinatory exception of lack of subject matter jurisdiction, are also not appealable.
However, if a final judgment is appealed, the appellant can challenge all adverse interlocutory or partial judgments related to the case. The Department is appealing a summary judgment in favor of taxpayers, which is a final and appealable judgment. Thus, it is permissible to review the denial of the Department’s motion for summary judgment alongside the final judgment appeal. An amicus curiae brief was filed by a law firm not involved in the original case to support the Department, in accordance with Uniform Rules-Courts of Appeal, Rule 2-12.11, which governs the filing of such briefs.
The Department’s arguments reference the case Keen v. Louisiana Farm Bureau Ins. Co., emphasizing that when evaluating an exception of no right of action, courts must consider the relevant substantive law, particularly in tort cases involving emotional distress damages. The Department also highlights that, in addition to the Payment Under Protest Procedure, La. R.S. 47:1621(F) provides taxpayers with the remedy of a Claim Against the State, allowing for claims regarding erroneously paid taxes when justice and equity warrant it, despite the potential limitations on refunds by law.
The legal principle from Sperry Rand Corp. v. Collector of Revenue limits claims against the state to amounts not exceeding $1,000, as outlined in the Claims Against the State Procedure (La. R.S. 47:1483). The Supreme Court indicated that La. R.S. 47:1625, applicable to tax periods before the enactment of the Uniform Local Sales Tax Code (ULSTC) in 2003, relates to a taxpayer's second refund request after July 1, 2003. Before the ULSTC, La. R.S. 47:337.1 et seq. aimed to standardize local sales tax administration, with individual ordinances governing tax collection and refunds. La. R.S. 47:1625 was effective for tax periods from January 1, 2001, to July 1, 2003, after which La. R.S. 47:337.81 took effect, closely mirroring La. R.S. 47:1625 concerning overpayments and refunds.
The court of appeal noted that La. R.S. 47:1621(F) provides two remedies for taxpayers: payment under protest followed by a suit for recovery, or an appeal where applicable. However, La. R.S. 47:1625 was deemed inapplicable since the tax collector did not formally deny the refund request, and the taxpayer did not seek a hearing. Consequently, the taxpayer's only remedy was via "payment under protest and suit to recover" under La. R.S. 47:1576. The Board of Tax Appeals (BTA) acknowledged its agreement with the characterization of certain statements as dicta, referencing several relevant BTA docket decisions.
In Kayne Anderson MLP Investment Company v. Secretary, Department of Revenue and related cases, the Louisiana Board of Tax Appeals addressed various tax disputes involving multiple companies and the Department of Revenue. The cases cited include BTA Docket Nos. 7502 to 7507, 7726, 10723D, 7725, 8691, 105160, 7535 to 7538, 7582 to 7587, 10107D to 10108D, 7479, 7600, and 7666 to 8717, among others, with decisions rendered between 2014 and 2018. Significant rulings noted include discussions of jurisdiction and the Department's authority to disallow refund claims, specifically referencing La. R.S. 47:1625 and Section 1621(F) regarding the Board's jurisdiction over certain appeals. The document highlights a range of disputes related to tax assessments and refund denials, illustrating ongoing regulatory challenges faced by businesses in Louisiana.
