Louisiana Board of Tax Appeals Decision on Prescription Confirmed by 19th Judicial District Court

The 19th Judicial District Court confirmed the Louisiana Board of Tax Appeals' (“Board”) decision on prescription for a chemical plant in Louisiana in Formosa Plastics Corporation, Louisiana v. Secretary, Cynthia Bridges, Department of Revenue.

A chemical plant in Louisiana contracted with an independent contractor to design, install, test, and successfully startup a rectifier. All parties agreed that the transaction was for immovable property construction and not taxable to the chemical plant. The only question was when the transaction took place. Documents and testimony indicated that the contractor completed the construction in November 1997. Successful startup occurred in December 1997 with the chemical plant accruing tax in January 1998 on all of the progress payments to the contractor. The chemical plant had signed a Waiver of Prescription Agreement with the State of Louisiana, which extended the prescription date for 1998 until December 2002. The chemical plant filed the refund request on tax accrued in error on the rectifier in November 2002 before the waiver expired.

The Department of Revenue (“Department”) denied the refund on the basis that the refund was not timely filed. The Department argued that the rectifier was completely constructed by the end of November 1997 and, as such, tax was due in December 1997.

The chemical plant provided testimony from the engineer in charge of the project, which explained the terms of the contract. The pertinent fact was that the chemical plant did not accept or take possession of the equipment until successful startup. The successful startup occurred in December 1997.

The question before the Board was purely factual. The prescriptive period in Louisiana is three years from December 31st of the year in which taxes are due. All taxes due in 1998 would prescribe on December 31, 2001. If title to the equipment had transferred to the chemical plant in November 1997, the claim for refund would have prescribed. Having found that title to the equipment had not transferred to the chemical plant until December 1997 (with the tax due for a transaction in December 1997 being January 1998), the Board found that the refund claim was timely filed. The 19th Judicial District Court affirmed the Board’s finding.