Telecable Associates, Inc. v. Louisiana Tax Commission

Citations: 694 So. 2d 279; 94 La.App. 1 Cir. 0499; 1995 La. App. LEXIS 3797; 1995 WL 794207Docket: No. 94 CA 0499

Court: Louisiana Court of Appeal; November 8, 1995; Louisiana; State Appellate Court

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Plaintiff Tele-cable Associates, Inc. initiated a lawsuit to recover ad valorem taxes paid for 1990 under protest, targeting defendants Jewette Farley (Lincoln Parish Assessor), Michael Wooden (Morehouse Parish Assessor), and the Louisiana Tax Commission (LTC). The district court reversed the LTC's earlier decision regarding Telecable's property valuation, which had been contested by Telecable based on the assessors' new valuation method adopted for the 1989 tax year and continued for 1990. Although Telecable did not appeal the 1989 assessments in a timely manner, it challenged the 1990 method, leading to a hearing where the LTC upheld the initial assessments. Telecable subsequently sought judicial review, with all defendants denying the LTC's ruling was incorrect.

Later, the LTC amended its answer to admit the assessors' valuation method was improper under statute and requested a proper assessment. Defendants objected to this amendment, claiming it was an ultra vires act that effectively reclaimed jurisdiction. The district court allowed the amendment and reversed the LTC's decision, ordering a tax refund with interest and assessing costs against the defendants. Farley and Wooden appealed, contesting the amendment's validity, the reversal of the LTC’s decision, and the cost allocation.

The analysis emphasized that the LTC's change of position was not an ultra vires act and did not reclaim jurisdiction, which remained with the court. The court's review of the agency decision was limited to the existing record, and the LTC’s revised stance did not undermine the court's authority.

Louisiana Code of Civil Procedure article 1151 permits amendments to an answer with court approval or written consent from the opposing party after ten days from service. The district court has discretion in deciding whether to allow such amendments, and its decisions are only overturned on appeal in cases of abuse of discretion that could lead to injustice, as noted in Hogan v. State Farm Automobile Insurance Company. 

In the case concerning the valuation of Telecable's personal property in Lincoln and Morehouse Parishes, appellants Mr. Farley and Mr. Wooden argued that the trial court improperly reversed the Commission's upheld assessments. The valuation method agreed upon by all parties excluded real property and vehicles, and involved three approaches: income, market, and cost. The income approach calculated value based on subscriber numbers and average revenue, adjusting for operating expenses and applying a capitalization rate. The market approach utilized data from the Kagan Report to derive average sales prices per subscriber, with Mr. Farley selecting $2,000 per subscriber as the value for Telecable's system, subtracting $1,000 to account for non-taxable items. The cost approach was also applied using LTC guidelines. 

Mr. Farley weighted the valuation approaches based on their perceived strengths, assigning 30% to the income approach, 50% to the market approach, and 20% to the cost approach. The final fair market value was determined by combining the weighted values from each approach. Telecable contended that this assessment methodology violated statutory and constitutional mandates for uniformity in property valuation under Louisiana law.

Article VII, Section 18 of the Louisiana Constitution of 1974 stipulates the framework for ad valorem taxation, highlighting key aspects related to property assessments and classifications. Properties subject to this tax must be assessed at a valuation based on a percentage of their fair market value, a percentage that must be uniform across the state for the same class of property. Specific classifications and their corresponding assessment percentages include: land (10%), residential improvements (10%), electric cooperative properties (15%), public service properties (25%), and other properties (15%). 

Assessors are responsible for determining the fair market value of all properties in their jurisdiction, except for public service properties, which are valued by the Louisiana Tax Commission (LTC). The valuation process must adhere to criteria established by law and applied uniformly statewide. Louisiana Revised Statute 47:2323 mandates that these criteria be uniformly adopted and that assessors follow the LTC's guidelines, which must be approved after public hearings.

The document indicates that assessors Farley and Wooden did not comply with these uniform guidelines, using a unique methodology not sanctioned by the LTC, which was only applied in their parishes and not to other local businesses, leading to a lack of statewide uniformity. The existing guidelines for determining fair market value emphasize the cost approach for assessing business personal property, allowing assessors some discretion while ensuring fairness and uniformity across the state. These guidelines also require determination of the economic and functional life of personal property as part of the assessment process.

The LTC provided a list detailing principal business activities and equipment, including C.A.T.V. equipment and cablevision systems, along with estimates of their average economic life. The LTC determined that the cost approach is the most effective method for assessing fair market value of personal business and industrial property. Assessors Farley and Wooden failed to adhere to these guidelines, resulting in improper assessments and ad valorem taxes due to a lack of statewide uniformity when an arbitrary formula was used in only two parishes. The district court correctly reversed the LTC's ruling on the assessments. 

Telecable's CPA, Jimmie F. Taylor, calculated the fair market and assessed values using the proper guidelines, which were verified by independent appraiser Donald R. Turlington. Telecable submitted a schedule of taxes paid under protest, detailing assessment numbers and amounts. Although Farley and Wooden disagreed with Telecable’s valuation approach, there was no evidence of their dispute over the tax figures. The district court ordered a refund of the protested taxes and awarded Telecable interest at a rate of two percent per annum, as permitted by La. R.S. 47:1998(F). 

Farley and Wooden challenged the district court's cost assessment against them, citing La. R.S. 47:1998(0), which protects assessors from liability for costs when enforcing tax payments. However, the assessment of costs was deemed proper. The district court's judgment, ordering a tax refund with interest and assessing costs against Farley and Wooden, was affirmed. Telecable also raised additional arguments regarding equal protection, First Amendment violations, and taxation of intangibles, but these were deemed unnecessary to address based on prior findings.