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<title>October 2001: Louisiana State Representative Files Suit Against the
Louisiana Board of Commerce and Industry</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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</center><p align="left"><b><u><br>
October 2001</u>
<br>
<span style="font-family: Palatino; color: black"><font size="6">Louisiana State
Representative Files
Suit
Against the Louisiana
Board of Commerce and Industry</font></span></b><span style="font-family: Palatino; color: black; font-weight: 700"><font size="6">
<br>
</font>
</span><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>2/01/19)</font></p><center>
</p>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">Last
month’s Stateline reported that Louisiana’s Board of Commerce and Industry
(the “board”) granted property tax exemption status to merchant power
plants.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">On
October 3, State Representative Melvin L. “Kip” Holden filed suit against
the Board and Attorney General Richard P.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">Leyoub
in the 19th Judicial District Court to contest this decision. The suit
requests the court to mandate that the Board cease practices that violate
Louisiana statutes and the state Constitution, according to Rep. Holden, or
show cause as to why they are not in violation. If the court agrees, Rep.
Holden’s request means that the Board would be required to find that
merchant plants are not eligible for property tax exemptions.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">The
Board’s decision to permit merchant power plants to receive property tax
exemptions was based on the Board’s determination that merchant power plants
fell under the definition of “manufacturing establishments,” which are
allowed to receive tax exemptions under existing state law. The issue
surrounds the definition of “manufacturing establishment” contained in the
Louisiana Constitution.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">The
definition states: The terms “manufacturing establishment” and “addition” as
used herein mean a new plant or establishment or an addition or additions to
any existing plant or establishment which engages in the business of working
raw materials into wares for use which gives new shapes, qualities or
combinations to matter which already has gone through some artificial
process.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">La.
Const. Art. VII, ’21 (F); Holden Writ at &5. The Board has authority to
grant tax exemptions based on the criteria set forth in Section 21 quoted
above. As reported in last month’s Stateline, in August the Board amended a
rule to include merchant power plants in the definition of “manufacturing
establishments.” Thus defined, merchant power plants were then allowed to
receive credit for property taxes equal to 10% of their capital investment
over the first 10 years of operation and to apply for such exemption prior
to plant construction.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">Rep.
Holden claimed in his suit that the definition under the Louisiana
Constitution had already been interpreted by a case previously brought by
him in 1997, which made the same tax exemption challenge regarding the
granting of an exemption to a hazardous waste plant. In that case, the
facility combusted hazardous material and resulted in the production of
hazardous ash which was landfilled. In that case Holden argued that because
the incinerator ash was still a hazardous substance, it was not “suitable
for use” as set forth in the Section 21 Constitutional definition. Thus, the
specific issues in that case were whether the “suitable for use” requirement
applied to raw materials made into consumer goods and whether establishments
that change the shape or quality of material or the combination of material
must also make the changed material “suitable for use” to meet the
constitutional definition of “manufacturing establishment.” On December 28,
1998, the court issued an order in the first case brought by Rep. Holden and
ruled that the facility did not meet the constitutional definition. In
making its decision, the court looked to the source of the constitutional
definition. The source of the definition was a case, decided in 1882 that
defined manufacturer in relation to producing something for a consumer or
dealer. The court reasoned that, although the facility did sell and profit
from the incineration process, the facility did not create a product from
the incinerated ash that could be sold for consumer use.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">The
court concluded that the facility did not fall within the constitutional
definition of a manufacturing establishment.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">In his
current case, Rep. Holden claims that the prior court’s interpretation of
“manufacturing establishment” applies to the determination of whether
merchant power plants are manufacturing establishments. With regard to two
recent recipients of tax exemptions, Entergy Thermal, LLC and Carey Salt
Co., Rep. Holden claims that the Board has ignored the prior court’s “clear
interpretation” of the state constitution when granting these tax
exemptions. Further, Rep. Holden claims that the Board’s actions have,
created an uneven playing field between companies that meet the
constitutional definition and those who do not, and deprived local
governments of millions of dollars for “police and fire departments, public
works, schools, libraries, recreation, lighting districts and even courts.”
Writ at & 14.</span></p>
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<p class="MsoNormal" align="left"><span style="font-family: Palatino">Rep.
Holden’s suit does not address the Board’s actions in light of a resolution
passed in both the Louisiana House and Senate “to urge and request” the
Department of Economic Development, of which the Board is a part, to develop
strategies and incentives to encourage merchant power development. The
hearing for this case is scheduled for October 19, 2001.</span></p><center>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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