The chemical industry is pressing ahead with its lawsuit challenging a tax change aimed at raising tens of millions of dollars to balance the state budget, adding more uncertainty to Louisiana’s already fragile financial situation.
A Baton Rouge judge ruled against the Louisiana Chemical Association in December, saying lawmakers properly approved the temporary suspension of a 1-cent sales tax exemption on business utilities.
Chemical association spokesman Rob Landry said Wednesday the organization filed an appeal this week, ending questions about whether the organization would continue to dispute the short-term tax increase that falls most heavily on chemical plants.
The appeal prolongs questions over how much money Louisiana can expect to receive for its budget this fiscal year from the tax change.
Several chemical companies have paid the taxes under protest, so the money can’t be spent while the lawsuit is pending.
The chemical association argues the sales tax exemption was suspended unconstitutionally because the measure didn’t receive the required votes for passage in the state House of Representatives. Nineteenth Judicial District Judge Michael Caldwell, of Baton Rouge, disagreed.
Lawmakers reduced dozens of tax breaks last year to prevent deep cuts to public health care services and colleges. At the time of passage, the business utility tax change was expected to raise more than $100 million for the state treasury.
But the tax break suspension hasn’t generated as much money as expected, according to the Legislature’s economist. In addition, at least $13 million has been paid under protest and is being held in escrow unable to be spent, according to the revenue department.
Meanwhile, Louisiana’s budget woes have worsened, with a gap of about $900 million in the fiscal year that ends June 30.
Suspension of the business utility tax break expires in August, though Gov. John Bel Edwards is asking lawmakers, who are meeting in a special session, to consider an even larger scale-back of the tax break to help with the state’s continuing financial problems.
The chemical association, which represents companies that operate 108 plants across Louisiana, sought to have the suspension legislation declared unconstitutional because it didn’t receive support from two-thirds of House lawmakers.
The House and Senate took two votes each to pass the legislation.
Both times, the Senate had more than a two-thirds vote for the measure. The House never reached that mark.
Caldwell said the state constitution allows for the suspension of a law with the same votes as the law was passed. Since the tax break didn’t need a two-thirds vote to pass, the suspension of it doesn’t need a two-thirds vote, he said.