November 3, 2003
FOR IMMEDIATE RELEASE
Louisiana Supreme Court Reverses Ruling on Local Interest Penalty Maximum Rate Issue.
The original case involving the limiting of the interest/penalty rate for
local jurisdiction was Elevating Boats, Inc. v. St. Bernard, et. al, Docket
00-E-3518, Supreme Court of Louisiana, 09-15-01.
The Parish had assessed 15% interest per annum on the tax deficiency. The
Parish's own ordinance, under Section 9.03, set the interest rate
for "underpaid tax" at 6% per annum. The taxpayer questioned the discrepancy,
asserting that the parish ordinance should take precedence over state statutes
allowance of 15% per annum interest on underpayments. The Parish would be prohibited from charging more than 15%, but the Parish
should charge less than 15% if an ordinance was passed to that effect. The
Louisiana Supreme Court looked to La. Rev. Stat. 33:2746 - Penalty
for Nonpayment of Tax as the controlling statute on "interest penalties".
The statute states: "Upon local taxes not paid and delinquent thirty days
after the date upon which the tax is due, there shall be an interest penalty
of one and one-quarter percent per month on the amount of the tax due, which
shall be collected by the tax recipient body, together with and in the same
manner as the tax."
The court used the literal reading of the statute to limit the total amount
of interest and penalty liability on taxes owed to 15% per annum in the
aggregate. The Court said: "We find that the Parish's combined interest,
penalty, and attorney fees cannot exceed the 15% interest penalties permitted
by La. Rev. Stat. 33:2476. Just as the Parish ordinance cannot be
less beneficial to the taxpayer than a state statute regarding refunds,
it similarly cannot be more burdensome regarding deficiencies…Therefore,
Elevating Boats is responsible for no more that 15% interest penalty permitted
by La. Rev. Stat. 33:2746."
The logic and interpretation of La. Rev. Stat. 33:2476 by the Louisiana
Supreme Court seemed sound. However, in the aftermath of the decision, many
local jurisdictions refused to follow the decision. It was only a matter
of time before this issue would again be presented to the courts for their
further consideration.
The time came in Anthony Crane Rental, L.P. v. Rufus Fruge, Jr., Director
of Calcasieu Parish Sales and Use Tax Department, Docket 03-c-011j, Supreme
Court of Louisiana, 10-21-03.
This time the Court looked at the legislative history surrounding La.
Rev. Stat. 33:2476. The statute was amended in 1982 by the legislature.
The only change was an increase in the interest penalty from 10% to 15%.
The Court noted that the 1982 legislative history indicated that "The increase
of this 'interest penalty' to its present amount of 15% was in response
to the high interest lending institutions were paying at that time."
The Court concluded that because of the legislative history, the legislature
believed that the "interest penalty" designation in La. Rev. Stat. 33:2746
applied to interest only.
For these reasons, the Louisiana Supreme Court reversed its ruling in Elevating
Boats and ruled that the local jurisdictions could charge 15% interest,
25% penalty and 10% attorney fees, where applicable, on delinquent taxes.
If you have any questions regarding this information, please call Mr. Timmy
Hulin, Senior Manager of the Ryan & Company Baton Rouge office, at 225.334.0040. Mr. Hulin can also be reached by e-mail.
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