A Louisiana Chemical Association lawsuit that threatened to blow a $103 million hole in the state’s $25 billion operating budget was thrown out Monday by a Baton Rouge state judge.
The suit challenged the constitutionality of House Concurrent Resolution 8, a recently approved measure that temporarily suspended 1 penny of the 4-cent sales tax exemption on the purchase of power by businesses such as chemical plants.
The tax exemption rollback is projected to generate $103 million in revenue for the cash-starved state.
The LCA claimed in its suit that the measure was improperly passed because it did not win backing from two-thirds of state lawmakers, but House Speaker Chuck Kleckley, R-Lake Charles, has said the rollback did not require such a vote.
District Judge Mike Caldwell ruled following a hearing Monday that HCR 8 was properly adopted and thus constitutional. He dismissed the suit. The judge said the tax exemption rollback was subject to the same voting requirement as the tax exemption itself.
“My bosses are going to be extremely pleased,” House Clerk Alfred “Butch” Speer, who represented the Legislature at the hearing, said of the judge’s reaffirmation of the legislative authority used to suspend part of the tax exemption.
LCA attorney Linda Akchin declined comment outside the courtroom on the association’s next move.
Other companies also have filed challenges to the measure, including the Entergy utilities. Those are pending with other judges.
Akchin argued during the hearing before Caldwell that HCR 8 should have been submitted to state lawmakers as a bill because its purpose is to raise revenue, which she said is tantamount to imposing a tax. New taxes require a two-thirds vote of lawmakers.
Akchin also argued that the concurrent resolution is a repeal of a tax exemption, something that requires a two-thirds vote.
“A suspension of a tax is a temporary repeal of a tax,” she told Caldwell.
Speer disagreed with both of her arguments.
“This is not the raising of revenue. Yes, it is increasing the state fisc, but this is not the raising of revenue,” he said to the judge.
“This is a suspension of a tax exemption,” Speer added.
Caldwell agreed with Speer, saying there is a “complete difference” between suspension and repeal.
“It is not a taxing law. It is an exemption,” the judge said from the bench.
The Louisiana Department of Revenue also asked Caldwell to dismiss the LCA suit.
The LCA has said it filed the suit to keep the cost of doing business in the state as low as possible for its members. Some of those members paid the tax under protest and were seeking a refund.