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Security Plan Fire Insurance Co. v. Donelon

Court of Appeals of Louisiana, First Circuit

May 10, 2017

SECURITY PLAN FIRE INSURANCE COMPANY
v.
JAMES L. DONELON, COMMISSIONER OF INSURANCE, DEPARTMENT OF INSURANCE, STATE OF LOUISIANA

         On Appeal from the Louisiana Board of Tax Appeals In and for the State of Louisiana No. 9069 The Honorable Anthony J. Graphia (Retired), Chairman Presiding

          Gregory E. Bodin Andrew C. Kolb Baton Rouge, Louisiana Attorneys for Appellant Plaintiff - Security Plan Fire Insurance Co.

          John D. Ryland Alexandria, Louisiana Attorney for Appellee Defendants - James J. Donelon, in his capacity as Commissioner of Insurance, State of Louisiana.

          BEFORE: WELCH, CRAIN, AND HOLDRIDGE, JJ.

          WELCH, J.

         This appeal concerns the Board of Tax Appeals' ("BTA") sustaining of a declinatory exception raising the objection of lack of subject matter jurisdiction that resulted in the dismissal of a taxpayer's petition seeking a refund of taxes paid under protest. For the following reasons, we reverse the BTA's dismissal of the taxpayer's petition and find that the BTA has subject matter jurisdiction over the dispute herein.

         FACTUAL AND PROCEDURAL HISTORY

         Assessments by the Commissioner of Insurance

         Louisiana Revised Statutes 22:1476(A)(1) requires the Commissioner of Insurance for the Louisiana Department of Insurance ("Commissioner") to levy Louisiana Insurance Rating ("LIR") assessments against insurers doing business in the state in proportion to their gross direct premiums received in the state in the preceding year, less returned premiums. The LIR assessments are in the nature of a tax. See Audubon Ins. Co., v. Bernard, 434 So.2d 1072, 1075 (La. 1983).

         A certain percentage of revenue generated by LIR assessments is deposited by the Commissioner with the state treasurer to be credited to a special fund created in the state treasury entitled the Municipal Fire and Police Civil Service Operating Fund. La. R.S. 22:1476(A)(2) The legislature has established the manner in which the funds are distributed amongst the retirement systems to meet actuarial requirements and other obligations. La. R.S. 22:1476(A)(3); see also Louisiana Municipal Association v. State, 2004-0227 (La. 1/19/05), 893 So.2d 809, 830. Under La. R.S. 22:1476(A)(2), monies in the fund shall be invested by the state treasurer in the same manner as monies in the state general fund and interest earned on investment of these monies shall be credited to the state general fund. All unexpended and unencumbered monies in the fund at the end of the fiscal year shall revert to the state general fund. La. R.S. 22:1476(A)(2) and (4).[1]

         Pursuant to La. R.S. 22:1476, the Commissioner assessed Security Plan Fire Insurance Company ("Security") with $134, 483.57 in taxes, representing LIR assessments for 2014 and corrected assessments for 2012 and 2013 (collectively referred to herein as "assessments"). In a letter dated August 6, 2014, the Commissioner classified an LIR assessment as a tax and informed Security that it had the right to appeal the assessment by filing a petition with the BTA. Also, attached were LIR payment coupons, which also set forth the taxpayer's right to appeal to the BTA and referred Security to the provisions of La. R.S. 47:1431 et seq.

         On August 21, 2014, Security remitted payment for the three assessments to the Department of Insurance under protest and requested a refund. Security asserted that as an industrial fire company, it was not statutorily required to pay LIR assessments. Security's letter accompanying the payments noted that should the Department fail to refund said payments by August 29, 2014, Security would prosecute its appeal with the BTA.

         Determination of the Board of Tax Appeals

         The Department did not refund Security's payments, and on August 29, 2014, Security filed a "Petition to Review Denial of Tax Assessment Refund" with the BTA. The petition alleged that the BTA had jurisdiction "over this matter involving the determination of an overpayment or refund of a tax assessment pursuant to La. R.S. 47:1407(1)." Security named the Commissioner as the defendant. Attached to the petition was a letter dated August 6, 2014, wherein the Commissioner informed Security that it had the right to appeal the assessment by filing a petition with the BTA, as well as the LIR payment coupons that referred to the taxpayers appeal rights under La. R.S. 47:1431 et seq.

         Despite having directed Security to file any appeal associated with the payment of the assessments with the BTA, on May 19, 2015, the Commissioner filed a declinatory exception with the BTA raising the objection of lack of subject matter jurisdiction, and a peremptory exception raising the objection of the failure to join parties needed for a just adjudication. In his peremptory exception, the Commissioner alleged that the retirement systems that were recipients of the LIR assessments were necessary parties. In his exception of lack of subject matter jurisdiction, the Commissioner maintained that the BTA did not have jurisdiction in the instant matter because the Commissioner was not a "state collector" under La. R.S. 47:1418 as amended by the legislature in 2014. Further, the Commissioner noted that under the version of La. R.S. 47:1431 in effect at that time, a petition could only be filed against a "state collector, " which excluded the Commissioner. Finally, the Commissioner argued that Security's petition sought recovery under the payment under protest procedure, which is governed by La. R.S. 47:1576. Louisiana Revised Statutes 47:1576 requires the Secretary of the Department of Revenue to be the "sole necessary and proper party defendant in any such suit;" therefore, according to the Commissioner no such action can be brought against him.

         A hearing on the Commissioner's exceptions was held by the BTA on August 13, 2015. At that time, the parties stipulated that they did not dispute that LIR assessments are a tax. Further, counsel for the Commissioner acknowledged the documents instructed Security to appeal to the BTA; however, that position was subsequently ...


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