In a unanimous decision, a three-judge panel of the Louisiana Third Circuit Court of Appeal affirmed the authority of the Louisiana Tax Commission to correct property tax assessments of pipelines when a local assessor uses values that are too high or do not reflect fair market value.
In Enerfin Field Services v. Vernon Parish Board of Review, No. 22-740 (La. App. 3d Cir. 6/28/23), the Vernon Parish Tax Assessor valued a repurposed pipeline system at approximately nine times its actual fair market value. The taxpayer submitted appraisals and spreadsheet data to the Assessor, but the Assessor instead used the Louisiana Tax Commission’s pipeline tables (reflecting replacement costs new) without any reduction for economic obsolescence. The taxpayer appealed to the Louisiana Tax Commission, and after a full evidentiary hearing, the Tax Commission significantly reduced the value of the pipeline system. The Assessor appealed to the courts, arguing that the Assessor’s valuations should be given virtually unquestioned approval, that the Louisiana Tax Commission lacked the authority to change the assessment value, and that the courts should review and evaluate the Assessor’s original valuations rather than the Tax Commission’s determination of value. In addition, the Assessor argued that the Louisiana Supreme Court decision in D90 Energy, LLC v. Jefferson Davis Parish Bd. of Review, 2020-0200 (La. 10/20/2020), 341 So. 3d 492, which addressed similar issues in the context of oil and gas assets, did not apply. The district court essentially accepted the Assessor’s arguments and negated the Tax Commission’s holdings on valuation, reinstating the Assessor’s valuation.
The Third Circuit rejected all the Assessor’s arguments. It held that the Courts must review the decision of the Tax Commission based on the record developed at the Tax Commission, and that deference is due to the Tax Commission’s determination, not the Assessor’s determination. It also expressly recognized that the standards set out in the D90 matter applied in the valuation of pipelines and pipeline systems. Finally, it reversed the district court and reinstated the determination of the Tax Commission pursuant to the standards stated in the Administrative Procedures Act.[1] In doing so, the Third Circuit affirmed the constitutional and statutory authority of the Tax Commission to correct assessment that, as in this case, did not properly reflect the fair market value of the pipeline system.
Cheryl Kornick of Liskow represented the taxpayer in this matter; she also filed an amicus curiae brief in the Louisiana Supreme Court on behalf of the Louisiana Oil and Gas Association in the D90 case. Contact Cheryl Kornick or Robert Angelico for more information.
The decision is here: https://la3circuit.org/Opinions/2023/06/062823/22-0740opi.pdf
[1] The Assessor also argued that the Tax Commission could not be a party to the appeal of its agency determination. The Third Circuit rejected that argument as well.
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