Business of Politics

Taxes being held in escrow as litigation lingers

by Jeremy Alford, LaPolitics

In the wake of the Louisiana Legislature suspending part of a sales tax exemption favored by industry, $3.5 million has been paid in protest by 25 to 30 companies and the money is now being held in escrow.

With protested payments averaging about $1.4 million per month, as much as $16.8 million the state was counting on may not be available for use in the current fiscal year budget until pending litigation can be put to rest.

“The good news is it’s still less than 15 percent of what we are expecting to bring in from the change this year,” said Revenue Secretary Tim Barfield, referencing the $100 million fiscal note on HCR 8 by Rep. Jack Montoucet.

The resolution created a temporary suspension of 1 cent on the 4-cent sales tax exemption on utilities.

Those paying in protest are also filing suit in court, joining the Louisiana Chemical Association, which sued on constitutional grounds that the required two-thirds vote was not obtained by lawmakers.

If 19th Judicial District Court Judge R. Michael Caldwell decides in favor of the chemical association or any of the other plaintiffs, it could remove roughly $100 million from the current fiscal year budget.

State officials hope they can start moving the proceedings toward a consolidation of cases. A Dec. 7 hearing has been scheduled for the initial arguments on the LCA case.

There have been predictions that it could take nine months to a year to settle the matter, which means lawmakers may convene their 2016 regular session with the issue still in court.

That would certainly make it more difficult for the Legislature to renew or extend the temporary suspension, which is slated to expire shortly after the regular session adjourns next year.

“It could be completely off of the table,” said Greg Bowser, LCA’s executive vice president.

Barfield said his office will be auditing soon to see how payments are looking overall.

“I’m sure there are some people who aren’t paying it at all,” he said.