STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT
NUMBER 19-315
CALCASIEU PARISH SCHOOL BOARD SALES & USE DEPARTMENT, ET AL.
VERSUS
NELSON INDUSTRIAL STEAM COMPANY
CONERY, J., concurs and assigns reasons.
With regard to the legislature’s taxing authority, La.Const. art. 7, § 2
mandates that “[t]he levy of a new tax” or “an increase in an existing tax,” be
enacted “by two-thirds of the elected members of each house of the legislature.”
Act 3 was not, as the House of Representatives passed the measure by simple
majority. It is clear that the amendment of La.R.S. 47:301(10)(c)(i)(aa)(III)(aaa)
constitutes a “new tax.”
In Bridges v. Nelson Indus. Steam Co., 15-1439 (La. 5/3/16), 190 So.3d 276
(NISCO I), the supreme court reviewed “the jurisprudential test created over the
last few decades” in discussing the “further processing exclusion” of La.R.S.
47:301(10)(c)(i)(aa) and before finding NISCO’s purchase of limestone subject to
that exclusion from taxation. The statute thus provided taxing authorities with no
basis for the collection of tax revenue from that product.
Before NISCO I became final, the legislature indicated its intent to “clarify
… the original intent and application of R.S. 47:301(10)(c)(i)(aa).” 2016 La. Acts
No. 3, § 2. The amendment, however, was not applicable to the facts and audit
periods involved in NISCO I, as the legislature made “the provisions of this Act …
retroactive and applicable to all refund claims submitted or assessments of additional taxes due which are filed on or after the effective date of this act.” Id.
(emphasis added). Continuing, the legislature indicated that Act 3 “shall not be
applicable to any existing claim for refund filed or assessment of additional taxes
due issued prior to the effective date of this Act for any tax period prior to July 1,
2016, which is not barred by prescription.” Id.
While the parties dispute whether Act 3 can be treated as a mere clarification
or interpretive measure, and thus given retroactive effect since NISCO I was not
final at the time of its enactment, that dispute is of no consequence in the analysis
of whether the measure levied a “new tax” or increased “an existing tax” for
purposes of validity under La.Const. art. 7, § 2. In operation, it imposed a tax on
materials previously determined to be excluded only after it’s effective date.
Further, Act 3, § 2 specifically indicates that it is inapplicable to the claim involved
in NISCO I. That ruling, along with the determination regarding the excluded
material, is now final.
With regard to the issue of whether Act 3 involved a new tax, the supreme
court addressed a similar scenario in Dow Hydrocarbons & Res. v. Kennedy, 96-
2471 (La. 5/20/97), 694 So.2d 215. In Dow, the supreme court addressed 1993 La.
Acts No. 690, which reclassified certain corporate income from “allocable income”
to “apportionable income” and considered whether the legislation enacted a “new
tax” or “increased an existing tax.” The query was critical given Dow’s challenge
to the 1993 legislation under La.Const. art. 3, § 2, which, at that time, prohibited
the legislature from levying a new tax or increasing an existing tax during a regular
session held in an odd-numbered year.
The supreme court explained that, prior to the enactment of Act 690, “a
corporation was not subject to tax on dividends received from a subsidiary
2 provided that the subsidiary earned all of its income outside of Louisiana,” but that
Act 690 “changed the classification of dividend income from allocable income to
apportionable income.” Id. at 217. “Consequently, the previously untaxed income
received from such sources is now subject to Louisiana corporate tax.” Id. Given
that change, the supreme court found no difficulty in the initial determination of
whether Act 690 constituted a tax as moneys collected by the State via the
Louisiana Corporate Income Tax statutes are taxes, and moneys paid pursuant to
the statutes modified by Act 690 are taxes. Id. 2016 La. Acts No. 3 operates in
the same way, providing for the payment of taxes.
Continuing, the supreme court further explained in Dow that the secondary
determination of “whether Act 690 is more appropriately characterized as a new
tax versus an increase to an existing tax is somewhat difficult,” but “that it is one
of the two is easily discernable.” Id. Notably, prior to Act 690, certain
corporations did not pay the subject money to Louisiana, whereas after the
reclassification, they did. The supreme court found, however, that although
arguably a new tax, “it matters not whether Act 690 is characterized as a new tax
or an increase to an existing tax as both are violative of [La.Const. art. 3, § 2]”
which then prohibited any measure levying a new tax or increasing an existing tax
during a regular session held in an odd-numbered year. Enacted in 1993, an odd-
numbered year, the supreme court therefore maintained the trial court’s
determination that Act 690 was unconstitutional under Article 3, § 2.
Although La.Const. art. 7, § 2 is at issue in this case, rather than Article 3, §
2 as in Dow, both Articles address the legislative framework for passage of matters
involving a new tax or an increase to an existing tax. Like Act 690 in Dow, Act 3
resulted in the assessment of taxes not formerly paid. Whether that former lack of
3 taxation was due to judicial interpretation or legislative will is of no consequence
as the legislature addressed the situation by ultimately assessing the contested tax
via the amended language contained in Act 3. As the supreme court explained,
“[w]here the collected moneys at issue are clearly taxes, there is no need to digress
into an analysis of legislative intent.” Dow, 694 So.2d at 217, n.6 (citing
La.Civ.Code art. 9). Further consideration of the legislature’s intent to clarify its
earlier language is inconsequential given the taxation realm in which Act 3 was
enacted.
CPSB advances Palmer v. Louisiana Forestry Comm’n, 97-0244 (La.
10/21/97), 701 So.2d 1300 for the proposition that Act 3 did not impose a new tax
but that it fit within the overall scheme of taxing the ultimate consumer of a
product rather than altering the overall scheme of a taxing authority. Palmer is
distinguishable however, as it questioned the actions of the Louisiana Tax
Commission’s reclassification of “chip and saw” forestry product from a pulp
wood subgroup to a “trees and timber” subgroup for purposes of assessment of
severance taxes. The reclassification resulted in lesser tax collections for the
plaintiff police juries.
Although the Palmer plaintiffs asserted that the reclassification constituted a
“new tax” and therefore permitted the Commission to encroach on the legislature’s
power to levy a tax, the supreme court rejected that argument. The “chip and saw”
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STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT
NUMBER 19-315
CALCASIEU PARISH SCHOOL BOARD SALES & USE DEPARTMENT, ET AL.
VERSUS
NELSON INDUSTRIAL STEAM COMPANY
CONERY, J., concurs and assigns reasons.
With regard to the legislature’s taxing authority, La.Const. art. 7, § 2
mandates that “[t]he levy of a new tax” or “an increase in an existing tax,” be
enacted “by two-thirds of the elected members of each house of the legislature.”
Act 3 was not, as the House of Representatives passed the measure by simple
majority. It is clear that the amendment of La.R.S. 47:301(10)(c)(i)(aa)(III)(aaa)
constitutes a “new tax.”
In Bridges v. Nelson Indus. Steam Co., 15-1439 (La. 5/3/16), 190 So.3d 276
(NISCO I), the supreme court reviewed “the jurisprudential test created over the
last few decades” in discussing the “further processing exclusion” of La.R.S.
47:301(10)(c)(i)(aa) and before finding NISCO’s purchase of limestone subject to
that exclusion from taxation. The statute thus provided taxing authorities with no
basis for the collection of tax revenue from that product.
Before NISCO I became final, the legislature indicated its intent to “clarify
… the original intent and application of R.S. 47:301(10)(c)(i)(aa).” 2016 La. Acts
No. 3, § 2. The amendment, however, was not applicable to the facts and audit
periods involved in NISCO I, as the legislature made “the provisions of this Act …
retroactive and applicable to all refund claims submitted or assessments of additional taxes due which are filed on or after the effective date of this act.” Id.
(emphasis added). Continuing, the legislature indicated that Act 3 “shall not be
applicable to any existing claim for refund filed or assessment of additional taxes
due issued prior to the effective date of this Act for any tax period prior to July 1,
2016, which is not barred by prescription.” Id.
While the parties dispute whether Act 3 can be treated as a mere clarification
or interpretive measure, and thus given retroactive effect since NISCO I was not
final at the time of its enactment, that dispute is of no consequence in the analysis
of whether the measure levied a “new tax” or increased “an existing tax” for
purposes of validity under La.Const. art. 7, § 2. In operation, it imposed a tax on
materials previously determined to be excluded only after it’s effective date.
Further, Act 3, § 2 specifically indicates that it is inapplicable to the claim involved
in NISCO I. That ruling, along with the determination regarding the excluded
material, is now final.
With regard to the issue of whether Act 3 involved a new tax, the supreme
court addressed a similar scenario in Dow Hydrocarbons & Res. v. Kennedy, 96-
2471 (La. 5/20/97), 694 So.2d 215. In Dow, the supreme court addressed 1993 La.
Acts No. 690, which reclassified certain corporate income from “allocable income”
to “apportionable income” and considered whether the legislation enacted a “new
tax” or “increased an existing tax.” The query was critical given Dow’s challenge
to the 1993 legislation under La.Const. art. 3, § 2, which, at that time, prohibited
the legislature from levying a new tax or increasing an existing tax during a regular
session held in an odd-numbered year.
The supreme court explained that, prior to the enactment of Act 690, “a
corporation was not subject to tax on dividends received from a subsidiary
2 provided that the subsidiary earned all of its income outside of Louisiana,” but that
Act 690 “changed the classification of dividend income from allocable income to
apportionable income.” Id. at 217. “Consequently, the previously untaxed income
received from such sources is now subject to Louisiana corporate tax.” Id. Given
that change, the supreme court found no difficulty in the initial determination of
whether Act 690 constituted a tax as moneys collected by the State via the
Louisiana Corporate Income Tax statutes are taxes, and moneys paid pursuant to
the statutes modified by Act 690 are taxes. Id. 2016 La. Acts No. 3 operates in
the same way, providing for the payment of taxes.
Continuing, the supreme court further explained in Dow that the secondary
determination of “whether Act 690 is more appropriately characterized as a new
tax versus an increase to an existing tax is somewhat difficult,” but “that it is one
of the two is easily discernable.” Id. Notably, prior to Act 690, certain
corporations did not pay the subject money to Louisiana, whereas after the
reclassification, they did. The supreme court found, however, that although
arguably a new tax, “it matters not whether Act 690 is characterized as a new tax
or an increase to an existing tax as both are violative of [La.Const. art. 3, § 2]”
which then prohibited any measure levying a new tax or increasing an existing tax
during a regular session held in an odd-numbered year. Enacted in 1993, an odd-
numbered year, the supreme court therefore maintained the trial court’s
determination that Act 690 was unconstitutional under Article 3, § 2.
Although La.Const. art. 7, § 2 is at issue in this case, rather than Article 3, §
2 as in Dow, both Articles address the legislative framework for passage of matters
involving a new tax or an increase to an existing tax. Like Act 690 in Dow, Act 3
resulted in the assessment of taxes not formerly paid. Whether that former lack of
3 taxation was due to judicial interpretation or legislative will is of no consequence
as the legislature addressed the situation by ultimately assessing the contested tax
via the amended language contained in Act 3. As the supreme court explained,
“[w]here the collected moneys at issue are clearly taxes, there is no need to digress
into an analysis of legislative intent.” Dow, 694 So.2d at 217, n.6 (citing
La.Civ.Code art. 9). Further consideration of the legislature’s intent to clarify its
earlier language is inconsequential given the taxation realm in which Act 3 was
enacted.
CPSB advances Palmer v. Louisiana Forestry Comm’n, 97-0244 (La.
10/21/97), 701 So.2d 1300 for the proposition that Act 3 did not impose a new tax
but that it fit within the overall scheme of taxing the ultimate consumer of a
product rather than altering the overall scheme of a taxing authority. Palmer is
distinguishable however, as it questioned the actions of the Louisiana Tax
Commission’s reclassification of “chip and saw” forestry product from a pulp
wood subgroup to a “trees and timber” subgroup for purposes of assessment of
severance taxes. The reclassification resulted in lesser tax collections for the
plaintiff police juries.
Although the Palmer plaintiffs asserted that the reclassification constituted a
“new tax” and therefore permitted the Commission to encroach on the legislature’s
power to levy a tax, the supreme court rejected that argument. The “chip and saw”
product had instead always been taxable under the statute and, as the supreme
court remarked, the reclassification from the higher taxed group to the lower taxed
group was obviously not for the purpose of raising revenue. Id. In fact, the
supreme court distinguished the matter in Palmer from Dow on that basis noting
that the reclassification in Dow related to income that “had not been subject to the
4 tax” before the amendment. Id. at 1307 (emphasis in the original). In contrast to
Dow, the reclassification in Palmer, the supreme court concluded, was merely a
fair reflection of the statutory scheme. Additionally, developments in “chip and
saw technology” indicated that it was reasonably foreseeable that the product
would be taxed at the lesser “trees and timber” tax rate. Id. at 1307.
The same cannot be said in this case. Act 3 clearly raised revenue by
bringing into the taxable ambit items previously excluded from taxation under
La.R.S. 47:301. That new inclusion is reflected in the supreme court’s
interpretation of Act 3 in its per curiam, wherein the supreme court explained that
“[a]sh is an incidental byproduct under the statutory definition set forth by
Louisiana Revised Statutes 47:301(c)(i)(aa)(III)(aaa), as recently amended by the
legislature.” Calcasieu Par. Sch. Bd. Sales & Use Dep’t, 20-724 (La. 10/20/20),
303 So.3d 292 (emphasis added).
The purpose of Act 3, the amendment addressed by the supreme court, was
patently to raise revenue, with portions of the legislation identifying time periods
to which its designated assessments were applicable. Those identified time periods
were not applicable to NISCO I by the specific temporal parameters of the
legislation itself and thus its finality at the time of the new legislative
pronouncement is not determinative in this case.
The tax burden identified in Act 3 was thus a new one, assessing taxes on
items previously excluded and requiring enactment by two-thirds of both
legislative houses. The June 19, 2016 Roll Call of the House of Representatives
reflects Final Passage in the House of Representatives with 54 “Yeas” and 47
“Nays.” Four members were absent. That simple majority fell short of the
5 constitutional mandate, requiring that 2016 La. Acts No. 3, § 2 be found violative
of Article 7, § 2.
With the additional reasons, I concur with the lead opinion to reverse the
trial court’s grant of summary judgment and find that CPSB’s case must be
dismissed upon granting of NISCO’s cross motion for summary judgment.