Louisiana Supreme Court Addresses the Role of Louisiana Tax Commission

Liskow & Lewis

The Louisiana Supreme Court addressed the role of the Louisiana Tax Commission in its decision in the case of D90 Energy, LLC v. Jefferson Davis Parish Board of Review, No. 2020-C000200.   While the case addressed the property tax assessments of a specific taxpayer, its larger importance is the holding regarding the role of the Louisiana Tax Commission in its review of local property tax assessments, including the assessments of oil and gas property.  Louisiana property is assessed by the assessor for the parish where the property is located.  The Louisiana Constitution provides a process for the taxpayer to seek review of an assessment that the taxpayer believes is incorrect.  La. Const. art. VII, section 18(E) provides that “[t]he correctness of assessments by the assessor shall be subject to review first by the parish governing authority, then by the Louisiana Tax Commission or its successor, and finally by the courts, all in accordance with procedures established by law.”

For several years, some assessors had argued that the role of the Louisiana Tax Commission in determining the “correctness” of assessors by the assessor was limited to reviewing only the information presented to the assessor by the taxpayer and determining whether, in effect, the assessor had abused his or her discretion in determining the fair market value of the property for ad valorem tax purposes.  The assessors argued that for the Tax Commission to decide that a particular assessment was not correct would constitute the Tax Commission “assessing” property and usurping the role of the local assessor.  The assessors also had challenged the constitutionality and validity of statutes, or the interpretation of statutes, that purported to give the Tax Commission the right to “correct” assessments because the Tax Commission disagreed with the fair market value as determined by the local assessor.  The appellate courts had reached inconsistent conclusions on the relative roles of the assessors and the Tax Commission.

When the Louisiana Supreme Court accepted the writ application in the D90 matter, the case attracted significant attention because it provided the Supreme Court with an opportunity to clarify, in the Court’s words, “the proper scope and standard of review” of ad valorem tax assessments.  First, relying on the constitutional provision, the Court held that “an assessor must comply with the criteria enacted by the legislature, and his assessments are subject to review as prescribed by the legislature,” affirming the authority of the legislature to set the rules “to both develop the criteria to determine fair market value and to define the review process.”  Further, the Court concluded that “[t]he laws enacted pursuant to this constitutional grant of authority allow a broader scope of review by the Commission than suggested by the Assessor,” essentially rejecting the more limited scope of review advanced by the assessor.  The Court held that the Tax Commission was authorized to conduct a full evidentiary hearing even if not all of the evidence had been presented to the assessor:  “If the Commission can only review and consider the evidence submitted to an assessor, a hearing is meaningless.”  Further, the Court rejected the assessor’s argument that an assessor’s valuations  are entitled to “deferential review.”  Instead, the Court looked to the Administrative Procedures Act to determine that (1) it is the decision of the Tax Commission, not the assessor, that is subject to review in the courts; and (2) the courts are to review the decisions of the Tax Commission pursuant to the standards outlined in the Administrative Procedures Act, La. R.S. 49:964(G).

Liskow & Lewis filed the amicus curiae brief on behalf of  the Louisiana Oil and Gas Association in the D90 matter.  The decision can be found here:  https://www.lasc.org/Opinions/2020/20-0200.C.OPN.pdf

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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