Zelia, LLC Versus Kimberly Robinson, Secretary, Department of Revenue and Taxation, State of Louisiana, Don Pierson, Secretary Louisiana Economic Development, State of Louiisiana; And Steven L. Windham, Chairman, Board of Commerce and Industry, State of Louisiana ( 2019 )

ZELIA, LLC NO. 19-CA-372
VERSUS FIFTH CIRCUIT
KIMBERLY ROBINSON, SECRETARY, COURT OF APPEAL
LOUISIANA DEPARTMENT OF REVENUE,
ET AL STATE OF LOUISIANA
ON APPEAL FROM THE
BOARD OF TAX APPEALS
STATE OF LOUISIANA
NO. 10430D
December 30, 2019
STEPHEN J. WINDHORST
JUDGE
Panel composed of Judges Jude G. Gravois,
Marc E. Johnson, and Stephen J. Windhorst
AFFIRMED
SJW
JGG
MEJ
COUNSEL FOR PLAINTIFF/APPELLANT,
ZELIA, LLC
Cloyd F. Van Hook
COUNSEL FOR DEFENDANT/APPELLEE,
KIMBERLY ROBINSON, SECRETARY, STATE OF LOUISIANA,
DEPARTMENT OF REVENUE
Miranda Y. Scroggins
Antonio C. Ferachi
Debra D. Morris
Brian C. DeJean
WINDHORST, J.
Appellant, Zelia, LLC, seeks review of the Louisiana Board of Tax Appeals
April 10, 2019 judgment granting the motion for summary judgment filed by
appellee, Kimberly Robinson, Secretary, Department of Revenue & Taxation, State
of Louisiana, and denying the cross-motion for summary judgment filed by
appellant.1 For the reasons that follow, we affirm.
PROCEDURAL HISTORY AND FACTS
Appellant entered into Enterprise Zone Contract No. 20111066-EZ (“the
contract”) with the Louisiana Board of Commerce and Industry (“BCI”) with an
effective date of October 18, 2011. The Enterprise Zone Program is administered
by the Louisiana Department of Economic Development (“LED”). Because of the
contract, appellant received a refundable investment tax credit in the amount of
$233,159.78. The terms of the contract required appellant to hire one new employee
or to create one net new job within the first twelve months of the contract period.
On April 25, 2015, LED notified appellant that it was in violation of its net
new job obligation under the contract. The contract was presented to BCI for
cancellation at its June 23, 2015 and October 27, 2015 meetings, but no action was
taken. LED again brought the contract to BCI for cancellation at its December 8,
2015 meeting, at which time BCI voted to cancel the contract. By letter dated
December 15, 2015, LED advised appellant that BCI cancelled the contract and for
appellant to contact the Audit Division of LDR to make arrangements for repayment
of the investment tax credit. LED also notified LDR via email on December 16,
2015 that the contract was cancelled and that all benefits previously received by
appellant should be recovered.
1 Pursuant to this Court’s order and prior to submission of the case to this Court, an amended valid final
judgment was submitted containing appropriate decretal language, dismissing the appellant’s claims
against the LDR with prejudice.
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On February 25, 2016, appellant filed an administrative appeal of the
cancellation of the contract. The administrative review was based on a contractual
dispute between appellant and LED wherein the parties disagreed on the correct
formula for calculating the number of net new jobs appellant was required to create
within the first twelve months of the contract. On September 12, 2016, BCI denied
the administrative appeal, upholding the cancellation of the contract. LED notified
LDR that the administrative appeal was denied and that LDR needed to recover the
investment tax credit. In response, LDR notified appellant that it needed to repay
the investment tax credit with interest and that it was due immediately. Appellant
did not repay the investment tax credit.
On December 1, 2016, LDR issued appellant a “Notice of Proposed Tax Due”
and “Notice of Assessment and Notice of Right to Appeal to the Louisiana Board of
Tax Appeals” assessing Louisiana corporation income and franchise tax in the
amount of $223,159.78 and interest in the amount of $40,276.73 for the 2013 tax
year (“the assessment”). In issuing the assessment, LDR sought to recover the
investment tax credit that appellant received from the contract. On January 20, 2017,
appellant appealed the assessment by filing a petition for redetermination of the
assessment with the Louisiana Board of Tax Appeals (“BTA”). In the petition,
appellant contended that LED’s method for determining the number of net new jobs
created did not comply with the language of the statute, that BCI breached
appellant’s contract when it cancelled it despite appellant complying with the
contract, and LDR’s assessment should be rescinded as it was improperly issued
based on erroneous information from LED.
In response, LDR, LED, and BCI filed joint exceptions of lack of subject
matter jurisdiction, no right of action, and no cause of action. LDR, LED, and BCI
argued that the BTA did not have jurisdiction over LED or BCI and therefore, it had
no jurisdiction to determine the merits of the contract between appellant and BCI.
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They also asserted that appellant did not have a right of action because the law did
not afford it a remedy from LDR’s assessment. They further claimed that because
of the BTA’s lack of jurisdiction over the underlying contract between appellant and
BCI, appellant did not have a cause of action. On November 7, 2017, the BTA
sustained in part the exceptions as to the prayer requesting the BTA to order LED
and BCI to reinstate the contract. In all other respects, the BTA overruled the
exceptions. LED and BCI filed for supervisory review of the BTA’s November 7,
2017 judgment overruling their exceptions with the Louisiana First Circuit Court of
Appeal (“the First Circuit”). LDR also filed for supervisory review of the BTA’s
November 7, 2017 judgment overruling its exceptions with the First Circuit.
On May 14, 2018, the First Circuit denied LDR’s writ application. On the
same day, the First Circuit granted LED and BCI’s writ application, sustaining LED
and BCI’s exception of lack of subject matter jurisdiction, and dismissing the claims
asserted by appellant against LED and BCI. In granting LED and BCI’s exception,
the First Circuit found that:
The BTA’s jurisdiction, as provided in La. R.S. 47:1407,
does not extend to permit the BTA to determine the merits
of the contract dispute between Zelia, LLC and Relators,
particularly considering the tax assessment issued by the
Louisiana Department of Revenue is a secondary issue
contingent upon resolution of the contract dispute.
After the First Circuit’s rulings, appellant filed an amended petition removing LED
and BCI as defendants and all claims against them.
Subsequently, LDR and appellant filed cross-motions for summary judgment
with the BTA. In its motion for summary judgment, LDR argued that it received
notice that the contract was cancelled and that once notice was received, it was
statutorily obligated to recover the investment tax credit under La. R.S. 51:1787 I.
LDR contended that absent jurisdiction to determine the underlying contract dispute
between appellant and BCI, the only issue remaining before the BTA was the
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correctness of the assessment. LDR asserted that because there was no error in the
calculation of the assessment, it was entitled to summary judgment. In support of
its motion, LDR attached appellant’s petition with exhibits and appellant’s discovery
responses to LDR’s interrogatories and requests for admissions and production of
documents.
In its motion for summary judgment, appellant argued that the BTA
maintained jurisdiction over the contract dispute as it related to LDR. Appellant
contended that it was entitled to summary judgment because the termination of the
contract was invalid as a matter of law. Appellant claimed that under the law, LDR
was required to make its own determination as to whether the contract should have
been cancelled. In support of its motion, appellant submitted the affidavit of
Maureen Clary. In the affidavit, Ms. Clary stated that appellant had one employee
prior the October 18, 2011 effective date of the contract and hired a second employee
on August 26, 2012. Ms. Clary stated that both employees are still employed by
appellant. Appellant asserts that it complied with its obligation by hiring the second
employee. LDR objected to Ms. Clary’s affidavit in a motion to strike and motion
in limine. LDR argued that Ms. Clary’s statements are irrelevant because they
concern the underlying contract dispute, of which the BTA has no jurisdiction. The
matter was taken under advisement. On April 10, 2019, the BTA rendered judgment
granting LDR’s motion for summary judgment and denying appellant’s motion for
summary judgment. The BTA found no genuine issue of material fact existed as to
the correctness of the assessment. The BTA found that the assessment “was proper
under the law, and factually correct with respect to the computation of liability” and
therefore granted LDR’s motion for summary judgment. Finding that the underlying
contract was not properly before the BTA, the BTA denied appellant’s cross-motion
for summary judgment. This appeal followed.
19-CA-372 4
On appeal, appellant argues that the BTA erred in granting LDR’s motion for
summary judgment and denying appellant’s cross-motion for summary judgment.
Specifically, appellant contends that: (1) “The BTA erred when it interpreted the
language of Louisiana First Circuit Court of Appeal's (the "First Circuit") Judgment
on the writ application filed by LED and BCI to mean that it lacked subject matter
jurisdiction to determine if Zelia had met the statutory Enterprise Zone Program
hiring requirements”; (2) “The BTA erred when it failed to consider the affidavit of
Ms. Clary”; (3) “The BTA erred when it stated, ‘Thus, even though the Taxpayer
might have met the statutory criteria for the ITC, it was no longer entitled to a credit
or rebate once the EZ Contract was cancelled’”; (4) “The BTA erred when it granted
Summary Judgment in favor of the Secretary [of the Department of Revenue]”; and
(5) “The BTA erred when it did not grant Summary Judgment in favor of the
Taxpayer (Zelia).”
STANDARD OF REVIEW
La. R.S. 47:1435 provides that the courts of appeal have exclusive jurisdiction
to review the decisions or judgments of the BTA. Judicial review of a decision of
the BTA is rendered on the record as made up before the BTA and is limited to facts
on the record and questions of law. International Paper, Inc. v. Bridges, 07-1151
(La. 01/16/08), 972 So.2d 1121, 1127; R & B Falcon Drilling USA, Inc. v. Secretary,
Department of Revenue, 09-256 (La. App. 1 Cir. 01/11/10), 31 So.3d 1083, 1085;
See La. R.S. 47:1434. The BTA’s findings of fact should be accepted where there
is substantial evidence in the record to support them and should not be set aside
unless they are manifestly erroneous in view of the evidence on the entire record.
International Paper, Inc., 972 So.2d at 1127-1128; R & B Falcon Drilling USA, Inc.,
31 So.3d at 1085. For questions of law, if the BTA has correctly applied the law and
adhered to correct procedural standards, its judgment should be affirmed.
International Paper, Inc., 972 So.2d at 1228 (citing Collector of Revenue v. Murphy
19-CA-372 5
Oil Co., 351 So.2d 1234, 1236 (La. App. 4 Cir. 1977)); Bridges v. Offshore Drilling
Co., 10-2214 (La. App. 1 Cir. 07/18/11), 69 So.3d 738; Ferrara v. Secretary, Dept.
of Revenue and Taxation, State of Louisiana, 96-806 (La. App. 5 Cir. 01/28/97), 688
So.2d 147, 148, writ denied, 97-0411 (La. 04/04/97), 692 So.2d 418.
After an opportunity for adequate discovery, a motion for summary judgment
shall be granted if the motion, memorandum, and supporting documents show that
there is no genuine issue as to material fact and that the mover is entitled to judgment
as a matter of law. La. C.C.P. art. 966 A(3). A genuine issue of material fact is one
as to which reasonable persons could disagree; if reasonable persons could reach
only one conclusion, there is no need for trial on that issue and summary judgment
is appropriate. Hines v. Garrett, 04-806 (La. 06/25/04), 876 So.2d 764, 765 (per
curiam).
The party moving for summary judgment bears the burden of proof. La.
C.C.P. art. 966 D(1). However, if the movant will not bear the burden of proof at
trial, the movant’s burden on the motion for summary judgment does not require him
to negate all essential elements of the adverse party's claim, action, or defense. Id.Movant only needs to point out the absence of factual support for one or more
elements essential to the adverse party's claim, action, or defense. Id. If the adverse
party fails to produce factual support sufficient to establish the existence of a genuine
issue of material fact or that the mover is not entitled to judgment as a matter of law,
summary judgment should be granted. Id.Appellate courts review summary judgments de novo using the same criteria
applied by trial courts to determine whether summary judgment is appropriate.
American Multi-Cinema, Inc. v. Normand, 18-488 (La. App. 5 Cir. 04/03/19), 268
So.3d 1167, 1172; Kennedy v. United Airlines, Inc., 01-426 (La. App. 5 Cir.
10/17/01), 797 So.2d 186, 187.
19-CA-372 6
DISCUSSION
The Enterprise Zone Program allows a state sales and use tax rebate on the
purchase of materials used in the construction, expansion, or upgrading of a facility
housing the business of an Enterprise Zone contract holder and purchasers of
machinery and equipment. La. R.S. 51:1787 A(a). In lieu of a state sales and use
tax rebate, the State of Louisiana will grant a refundable investment tax credit equal
to one and one-half percent of the qualified expenditures for federal income tax
purposes and items placed in service during the project period. La. R.S. 51:1787
A(b). If LDR receives notice that the rebate or credit ceases by reason of violation
of the terms of the contract under which the rebate or credit is granted, then the
amount of the credit shall be considered a tax due and the tax due shall be collected
by LDR in the same manner and subject to the same provisions for the collection of
other tax debts. La. R.S. 51:1787 I.
In this case, LDR received notice from LED that the contract was cancelled
and that LDR was to recover the investment tax credit. As a result of the notice of
cancellation, LDR sent the assessment containing the amount alleged to be owed to
appellant. LDR’s duty to recover the investment tax credit is mandatory. See La.
R.S. 51:1787 I; La. R.S. 1:3. The statute does not require LDR to make its own
determination as to whether the underlying contract was validly cancelled. The
statute only requires LDR, upon notice of cancellation, to recover the investment tax
credit in the “same manner and subject to the same provisions for the collection of
other tax debts.” In response to the assessment, appellant filed an appeal with the
BTA contesting the cancellation of the contract. In the petition, appellant argued
that it complied with the hiring requirements of the contract and therefore the
assessment by LDR was improper.
La. R.S. 47:1407 provides that the BTA has jurisdiction over all matters
related to assessments; however, that jurisdiction does not encompass the underlying
19-CA-372 7
contractual dispute. The First Circuit correctly determined that the BTA did not
have jurisdiction to determine the merits of the underlying contractual dispute and
dismissed appellant’s claims against LED and BCI. The underlying contract claim
is the primary issue in this dispute, and jurisdiction in this case as to the underlying
contract is proper in the Nineteenth Judicial District Court. See La. Const. Art. 5,
§16; La. R.S. 13:5104. The assessment by LDR is a secondary issue that is
contingent upon a ruling on the underlying contractual dispute. Appellant did not
contest this ruling; rather, appellant filed an amended petition removing defendants
LED and BCI and all claims against them.2
It is undisputed that the underlying contract was cancelled based on a finding
that appellant violated the hiring requirement terms of the contract. Appellant filed
an administrative appeal as to the cancellation of the contract, which was
unsuccessful. Neither this Court, nor the BTA, can resolve the underlying contract
dispute without determining whether appellant complied with the hiring
requirements of the contract. Because the BTA does not have jurisdiction over the
underlying contract, it cannot examine whether the hiring requirements of the
contract were violated in determining if the assessment in this case was erroneous.
We find the BTA correctly applied the law in concluding that the BTA does not have
jurisdiction to determine (1) the merits of the underlying contract; or (2) whether the
hiring requirements of the underlying contract were violated in determining if the
assessment in this case was erroneous.
We further find that the BTA correctly concluded that its jurisdiction does
allow it to review LDR’s action in issuing the assessment. La. R.S. 51:1787 I
provides:
If the collecting agencies receive notice that the rebate or
credit, or any part thereof, has ceased by reason of a
violation of the terms of the contract under which it was
2 We also note that appellant has not filed a lawsuit in the 19th JDC contesting the cancellation of the
underlying contract by BCI.
19-CA-372 8
granted, then the amount of the credit for the year in which
the violation occurred and for each year thereafter in
which the violation is not remedied shall be considered a
tax due as of December thirty-first of the year in which the
violation occurred, and for each year thereafter in which a
credit is used and the violation is not remedied, and it shall
be collected by the collecting agencies in the same
manner and subject to the same provisions for the
collection of other tax debts. (Emphasis added.)
Thus, in order to prove it was entitled to summary judgment under the facts of this
case, LDR was only required to show that (1) it received notice that the “rebate or
credit. . . has ceased by reason of a violation of the terms of the contract under which
it was granted”; (2) the amount it seeks to recover is the same amount of the credit
or rebate provided to the taxpayer; and that (3) the credit or rebate, which is now a
tax due, is collected “in the same manner and subject to the same provisions for the
collection of other tax debts.”
It is undisputed, and the exhibits in support of LDR’s motion for summary
judgment showed, that (1) LDR received notice of the cancellation of appellant’s
contract with BCI; (2) LDR properly issued appellant an assessment pursuant to the
requirements of La. R.S. 51:1787 I, La. R.S. 47:1561.2, and La. R.S. 47:1561; and
(3) the tax amount in the assessment is equal to the investment tax credit received
by appellant. Appellant did not assert or submit any evidence to show that LDR did
not comply with the requirements of issuing the assessment or in correctly
calculating the amount of tax due on the assessment. Additionally, because the BTA
does not have jurisdiction to determine the merits of the underlying contractual
dispute, we further find no error in the BTA’s ruling excluding Ms. Clary’s affidavit
to the extent that her statements are relevant to the merits of the underlying
contractual dispute.
Upon de novo review of the record, we find that no genuine issues of material
fact remain, and that LDR is entitled to judgment as a matter of law. Accordingly,
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we find appellant’s arguments on appeal are without merit and affirm the judgment
under review.
DECREE
For the reasons stated herein, we affirm the judgment of the Board of Tax
Appeals granting the LDR’s motion for summary judgment and denying appellant’s
motion for summary judgment.
AFFIRMED
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SUSAN M. CHEHARDY CURTIS B. PURSELL
CHIEF JUDGE CLERK OF COURT
MARY E. LEGNON
FREDERICKA H. WICKER
CHIEF DEPUTY CLERK
JUDE G. GRAVOIS
MARC E. JOHNSON
ROBERT A. CHAISSON SUSAN BUCHHOLZ
STEPHEN J. WINDHORST
FIRST DEPUTY CLERK
HANS J. LILJEBERG
JOHN J. MOLAISON, JR. FIFTH CIRCUIT
MELISSA C. LEDET
JUDGES 101 DERBIGNY STREET (70053)
DIRECTOR OF CENTRAL STAFF
POST OFFICE BOX 489
GRETNA, LOUISIANA 70054 (504) 376-1400
(504) 376-1498 FAX
www.fifthcircuit.org
NOTICE OF JUDGMENT AND CERTIFICATE OF DELIVERY
I CERTIFY THAT A COPY OF THE OPINION IN THE BELOW-NUMBERED MATTER HAS BEEN DELIVERED
IN ACCORDANCE WITH UNIFORM RULES - COURT OF APPEAL, RULE 2-16.4 AND 2-16.5 THIS DAY
DECEMBER 30, 2019 TO THE TRIAL JUDGE, CLERK OF COURT, COUNSEL OF RECORD AND ALL PARTIES
NOT REPRESENTED BY COUNSEL, AS LISTED BELOW:
19-CA-372
E-NOTIFIED
BOARD OF TAX APPEALS (CLERK)
CLOYD F. VAN HOOK (APPELLANT) STEPHANIE LE GRANGE (APPELLEE)
MAILED
LOUISIANA BOARD OF TAX APPEALS BRETT S. LALA (APPELLANT) DREW M. TALBOT (APPELLEE)
POST OFFICE BOX 3217 ATTORNEY AT LAW DANIELLE B. CLAPINSKI (APPELLEE)
BATON ROUGE, LA 70821 601 POYDRAS STREET ATTORNEYS AT LAW
SUITE 2355 LOUISIANA DEPARTMENT OF ECONOMIC
DEBRA D. MORRIS (APPELLEE) NEW ORLEANS, LA 70130 DEVELOPMENT
BRIAN C. DEJEAN (APPELLEE) POST OFFICE BOX 94185
ATTORNEYS AT LAW MIRANDA Y. SCROGGINS (APPELLEE) BATON ROUGE, LA 70804-9185
LOUISIANA DEPARTMENT OF REVENUE ANTONIO C. FERACHI (APPELLEE)
POST OFFICE BOX 4064 ATTORNEYS AT LAW
BATON ROUGE, LA 70821 STATE OF LOUISIANA
DEPARTMENT OF REVENUE
POST OFFICE BOX 4064
BATON ROUGE, LA 70821