Chemical industry trade association challenges tax exemption rollback _lowres

Advocate staff photo by PATRICK DENNIS -- Rep. Jack Montoucet, D-Crowley, concentrates on work during the last day of the 2015 Legislative Session on June 11. His House Concurrent Resolution 8 was passed in the last minutes of the session. The Louisiana Chemical Association filed a lawsuit July 1 challenging the constitutionality of the legislation that is designed to bring state government about $103 million in revenue.

In what is the first of several expected lawsuits attempting to upset the revenue-raising measures enacted to balance the state budget, chemical manufacturers filed a constitutional challenge in state district court on Wednesday.

The lawsuit, filed by the Louisiana Chemical Association, could blow a $103 million hole in the $25 billion state operating budget for the fiscal year that began Wednesday.

LCA President Dan Borné said in a prepared statement that the purpose of the association’s legal action is not “intended to attack state revenue generation, nor should it suggest any cooling of relationships with any of our valued constituencies around the state. Our action is about defending the Constitution of the state of Louisiana.”

Rather than significantly chop state support for colleges, universities and health care to close a $1.6 billion deficit, legislators chose to roll back some tax breaks, along with raising taxes on cigarettes and some fees. Businessmen, who benefited from the credits, exemptions and deductions that cut their tax bills, have argued that the reduction of benefits amounts to a tax increase.

Officials in the film industry say they are preparing lawsuits to challenge the legislation that limited the amount state government would pay in a given year on tax credits for movies and television productions, at least for the next three years. Others in the business community also have talked about suing because their tax breaks were altered.

“That’ll be interesting to see how many lawsuits we’ll end up with,” said state Rep. Jack Montoucet, a Crowley Democrat and sponsor of the resolution. His House Concurrent Resolution 8 temporarily suspended 1 cent of the 4-cent sales tax exemption on the purchase of power by businesses such as chemical plants.

Representing 64 companies that operate 108 plants in the state, the LCA is asking 19th Judicial District Judge R. Michael Caldwell, of Baton Rouge, to declare that HCR8 was improperly passed because it didn’t win support from two-thirds of the legislators.

The Louisiana Constitution requires both chambers of the Louisiana Legislature to approve tax measures by a two-thirds vote — 70 in the House and 26 in the Senate. HCR8 was approved finally by the House a minute and 15 seconds before the Legislature was required to adjourn by a vote of 60-43.

An earlier version passed through the chamber on May 7 with a 63-41 vote. The resolution passed the Senate by the required amounts.

Borné argued that if the outcome stands — taxes approved by a majority vote instead of a two-thirds vote — it will be virtually impossible to kill resolutions that impose taxes in the future.

House Speaker Chuck Kleckley, R-Lake Charles, said the tax credit suspension doesn’t require a two-thirds vote.

The state constitution is clear that the repeal of exemptions requires a supermajority, but under the House’s interpretation, to suspend tax breaks, the law only requires the same number of votes that it took to enact the particular credits and exemptions, which in this case would be a simple majority of 53.

Kleckley, who is named as a defendant in the lawsuit, said in a prepared statement: “The House of Representatives is confident that HCR8 was adopted by the House in the manner provided for by law. If the LCA believes otherwise, they have the right to pursue legal actions as does any other citizen or entity in this state.”

Nobody specifically asked for an official ruling as to whether 53 votes or 70 would be needed at the time of the votes.

Revenue Secretary Tim Barfield, who is the lead named defendant, refused comment through his press office.

The 1 percent business utilities tax is effective Wednesday, meaning businesses will be billed for the tax in August for their July usage.

The tax was originally enacted at 1 percent in 1986 but had risen to 4 percent by 2001. As the price of natural gas increased, lawmakers allowed business purchasers to claim an exemption on income tax returns.

The exemption essentially allowed the tax-free sale of electric power or energy and any materials or energy sources used to fuel the generation of electric power for resale or used by an industrial manufacturing plant for self-consumption or cogeneration. HCR8 rolled back 1 percent of the exemption. (The sale of electricity for residential use is constitutionally protected.)

Competing states don’t charge a sales tax on manufacturers for use of natural gas or utilities.

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