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West Feliciana Parish Government v. State

Supreme Court of Louisiana

December 11, 2019

WEST FELICIANA PARISH GOVERNMENT, PLAQUEMINES PARISH COUNCIL AND ST. JAMES PARISH SCHOOL BOARD
v.
STATE OF LOUISIANA, OFFICE OF MOTOR VEHICLES AND LOUISIANA UNIFORM LOCAL SALES TAX BOARD

          ON APPEAL FROM THE NINETEENTH JUDICIAL DISTRICT COURT FOR THE PARISH OF EAST BATON ROUGE

          GENOVESE, JUSTICE [*]

         The case comes to this Court on direct appeal from the Nineteenth Judicial District Court of East Baton Rouge Parish pursuant to La.Const. art. V, § 5(D)[1] upon a declaration by that court that La.R.S. 47:337.102(I), enacted by 2017 La. Acts No. 274 ("Act 274"), is unconstitutional.[2]

         Plaintiffs are the Plaquemines Parish Council and the St. James Parish School Board, each being designated as the single collector for sales and use taxes levied by all taxing authorities within their respective parishes.[3] Plaintiffs filed a Petition for Declaratory Judgment and Request for Preliminary and Permanent Injunction, and supplementing and amending petitions thereto, alleging that La.R.S. 47:337.102(I) is in violation of La.Const. art. VI, § 29 and La.Const. art. VII, § 3.[4] Defendants herein are the State of Louisiana, Department of Public Safety and Corrections, Office of Motor Vehicles, an agency of the State of Louisiana, and the Louisiana Uniform Local Sales Tax Board, a political subdivision of the State of Louisiana.[5]

         After conducting our legally mandated de novo review, [6] we find that La.R.S. 47:337.102(I) is unconstitutional. Consequently, the judgment of the district court declaring La.R.S. 47:337.102(I) unconstitutional and permanently enjoining the State of Louisiana, Department of Public Safety and Corrections, Office of Motor Vehicles from withholding locally levied sales and use taxes under the authority of La.R.S. 47:337.102(I) and from disbursing any funds withheld to the Louisiana Uniform Local Sales Tax Board is hereby affirmed.

         FACTS AND PROCEDURAL HISTORY

         Plaintiffs, Plaquemines Parish Council ("Plaquemines Parish") and St. James Parish School Board ("St. James Parish"), are the local taxing jurisdictions, and are also the designated single collector for sales and use taxes levied by all taxing authorities within their respective parishes.[7] In 2010, Plaquemines Parish entered into an Agreement to Collect Local Taxes Due on the Sale or Use of Motor Vehicles and Factory Built Homes ("the agreement") with the Louisiana Department of Public Safety and Corrections ("the Department") on behalf of the Department and the Vehicle Commissioner ("OMV") for the collection of sales and use taxes levied in the parish. The agreement contains a provision allowing OMV to collect the identified sales and use taxes and to retain 1% of the taxes levied.[8] St. James Parish also entered into an agreement with OMV for the collection of sales and use taxes levied in the parish. Their agreement contains the identical provision allowing OMV to collect the sales and use taxes and to retain 1% of the taxes levied as payment for its collection duties.

         Pursuant to their respective agreements, OMV collects certain identified sales and use taxes and retains 1% of the taxes levied. With respect to Plaquemines Parish, a 1977 sales tax proposition levied a 1% sales and use tax to be used for parish government operations and public services and facilities. [9] Additionally, in November 2009, the voters of Plaquemines Parish adopted an ordinance, effective in 2010, which levied a 1% sales and use tax and provided that the use of the proceeds be limited to the payment of costs associated with establishing a fire department and fire protection in Plaquemines Parish. [10] In St. James Parish, pursuant to the agreement, OMV began collecting sales and use taxes approved by the voters in 1965, [11] 1981, [12] and 2003, [13] which levied a 1% sales and use tax and designated the proceeds for appropriation and expenditure by St. James Parish to include: the payment of school employee salaries; the operation of the public school system; capital improvements in the public school system; and, health benefits for school employees.

         In 2017, Act 274, among other things, created the Louisiana Uniform Local Sales Tax Board ("the Board") via the enactment of La.R.S. 47:337.102, [14] a new provision within the Uniform Local Sales Tax Code ("ULSTC"). La.R.S. 47:337.1, et seq.[15] Specifically, La.R.S. 47:337.102(I) provided authority for and the means of funding the Board by authorizing OMV to retain an additional 0.2% of the total statewide collections of local sales and use taxes levied on motor vehicles and to remit these withholdings to the Board. This amount to be remitted to the Board is in addition to and separate from the 1% currently collected by OMV for its services in collecting local sales and use taxes for all local taxing authorities on motor vehicle transactions in the state.

         Louisiana Revised Statutes 47:337.102(I) provides:

I. Funding. (1) The board shall be funded through a dedication of a percentage of the total statewide collections of local sales and use tax on motor vehicles, in accordance with the limitations provided in this Paragraph and the budgetary policy as provided in Paragraph (2) of this Subsection. Monies shall be payable monthly from the current collections of the tax. The dedication shall be considered a cost of collection and shall be deducted by the state and disbursed to the board prior to distribution of tax collections to local taxing authorities. The dedication shall be in addition to any fee imposed by the office of motor vehicles for the collection of the local sales and use tax on motor vehicles. The amount to be disbursed to the board in any fiscal year shall not, under any circumstances and notwithstanding any budget adopted by the board, exceed the following:
(a) In Fiscal Year 2017-2018, one-fifth of one percent of the collections.
(b) In Fiscal Year 2018-2019, one-quarter of one percent of the collections.
(c) In Fiscal Year 2019-2020 and each fiscal year thereafter, three-tenths of one percent of the collections.

         Pursuant to La.R.S. 47:337.102(I), OMV began withholding the additional 0.2% of the local sales and use taxes collected by it on the sale of motor vehicles from all local sales and use taxes due on the sale of motor vehicles.[16]

         Following the enactment of La.R.S. 47:337.102, Plaquemines Parish and St. James Parish filed an original Petition for Declaratory Judgment and Request for Preliminary and Permanent Injunction, and supplements thereto, alleging that the Board's funding mechanism found in La.R.S. 47:337.102(I)[17] is in violation of La.Const. art. VI, § 29 and La.Const. art. VII, § 3. Named as Defendants were OMV and the Board.

         Plaquemines Parish and St. James Parish aver that their respective agreements with OMV do not contain any provision allowing its retention and distribution to the Board of any proceeds from the additional 0.2% of the taxes levied by La.R.S. 47:337.102(I). Further, Plaintiffs assert that since July 2017, OMV has retained the additional 0.2% of the taxes levied, despite there being no agreement authorizing OMV's actions and despite the use of the proceeds of the sales and use taxes levied by the respective ordinances, which were approved by the voters of Plaquemines Parish and St. James Parish. Therefore, Plaintiffs assert La.R.S. 47:337.102(I) is an impermissible use of dedicated local sales and use taxes pursuant to La.Const. art. VI, § 29. Additionally, to the extent that the statute mandates that the Board serve as the agent for the collection and administration of local sales and use taxes, La.R.S. 47:337.102(I) violates La.Const. art. VII, § 3. In terms of relief, Plaintiffs sought a declaration of the unconstitutionality of La.R.S. 47:337.102(I) and a permanent injunction enjoining OMV from withholding locally levied sales and use taxes under the authority of La.R.S. 47:337.102(I) and from disbursing any funds withheld to the Board.

         As reflected in the Pre-Trial Order of the district court and prior to trial on the merits, the parties entered into several factual stipulations, including, in part, that Plaintiffs do not contest the reasonableness of the cost of the services of the Board. Additionally, the parties jointly agreed to the introduction of several exhibits, including the respective agreements between Plaintiffs and OMV, the documents pertaining to the 1977 and 2009 sales and use taxes passed in Plaquemines Parish, and the documents pertaining to the 1965, 1981, and 2003 sales tax elections in St. James Parish.

         Following a trial on the merits, [18] the district court issued an oral ruling on February 4, 2019, granting Plaintiffs' declaratory judgment declaring La.R.S. 47:337.102(I) unconstitutional and issuing a permanent injunction enjoining OMV from withholding locally levied sales and use taxes under the authority of La.R.S. 47:337.102(I) or from disbursing any funds withheld pursuant to La.R.S. 47:337.102(I) to the Board. The district court signed an April 1, 2019 judgment, which provides, in pertinent part:[19]

Considering the stipulations, exhibits, testimony, law, jurisprudence and argument of counsel, the Court finds in favor of PLAINTIFFS, and declares that LRS 47:337.102(I) is UNCONSTITUTIONAL. This provision being severable, the remainder of LRS 47:337.102 remains in full force and effect.
THERE IS HEREBY ISSUED a Permanent Injunction enjoining the State of Louisiana, Department of Motor Vehicles, Office of Motor Vehicles from withholding locally levied sales and use taxes under the authority of LRS 47:337.102(I) and from disbursing any funds withheld to the Louisiana Uniform Sales Tax Board as provided in LRS 47:337.102(I).

OMV and the Board, pursuant to La.Const. art. V, § 5(D), directly and suspensively appealed the district court judgment to this Court.[20]

         LAW AND ANALYSIS

         Because the issue before this Court involves the constitutionality of a revised statute enacted by the Louisiana Legislature, we restate the governing principals of judicial review regarding same. As a general rule, statutes are presumed to be constitutional; therefore, the party challenging the validity of the statute bears the burden of proving that statute to be unconstitutional.[21] Because the provisions of the Louisiana Constitution are not grants of power, but instead are limitations on the otherwise plenary power of the people, exercised through the legislature, the legislature may enact any legislation that the constitution does not prohibit.[22] The "party challenging the constitutionality of a statute must point to a particular provision of the constitution that would prohibit the enactment of the statute, and must demonstrate clearly and convincingly that it was the constitutional aim of that provision to deny the legislature the power to enact the statute in question."[23]Additionally, because it is presumed that the legislature acts within its constitutional authority in enacting legislation, this Court must construe a statute so as to preserve its constitutionality when it is reasonable to do so.[24] Nevertheless, the constitution is the supreme law of this state to which all legislative instruments must yield.[25]When a legislative instrument conflicts with a constitutional provision, the legislative instrument must fall.[26] Finally, the presumption of constitutionality is especially forceful in cases involving statutes related to taxation and public finance.[27] With these principles in mind, we now turn to the merits of Plaintiffs' constitutional challenges.

         In this case, Plaintiffs assert that La.R.S. 47:337.102(I)'s funding mechanism violates both La.Const. art. VI, § 29 and La.Const. art. VII, § 3. As framed by Plaintiffs, the constitutional questions presented are: (1) whether the legislature may, constitutionally, redirect local sales and use taxes, the use of which were established in the ballot propositions that authorized the levy of those taxes; and, (2) whether the legislative rededication of local sales and use taxes as a mandatory funding mechanism for the Board infringes on the authority of the single local collector in each parish.

         Louisiana Constitution Article VI, § 29 - Local Governmental Subdivisions and School Boards; Sales Tax

         Plaintiffs challenge the funding mechanism of the Board pursuant to La.R.S. 47:337.102(I) as an impermissible rededication of dedicated local sales and use taxes in violation of the La.Const. art. VI, § 29, which provides, in relevant part:

(A) Sales Tax Authorized. Except as otherwise authorized in a home rule charter as provided for in Section 4 of this Article, the governing authority of any local governmental subdivision or school board may levy and collect a tax upon the sale at retail, the use, the lease or rental, the consumption, and the storage for use or consumption, of tangible personal property and on sales of services as defined by law, if approved by a majority of the electors voting thereon in an election held for that purpose. The rate thereof, when combined with the rate of all other sales and use taxes, exclusive of state sales and use taxes, levied and collected within any local governmental subdivision, shall not exceed three percent.
(B) Additional Sales Tax Authorized. However, the legislature, by general or by local or special law, may authorize the imposition of additional sales and use taxes by local governmental subdivisions or school boards, if approved by a majority of the electors voting thereon in an election held for that purpose.

         Plaintiffs argue that a tax in accordance with La.Const. art. VI, § 29, which is subject to a use dedication approved by the voters, may not be used for any other purpose without approval of the voters.[28] In this case, Plaintiffs assert that the sales and use taxes levied by Plaquemines Parish and St. James Parish at issue are such dedicated taxes for the uses identified in the respective ballot propositions. See infra, pp. 3-4 notes 9-13.

         The Board counters that its funding is not in violation of sales and use tax dedications. It concedes that once an election is held where citizens approve a tax dedicated to a specific purpose, the tax proceeds cannot be used for any other purpose.[29] However, the Board maintains that the manner in which it is funded through La.R.S. 47:337.102(I) does not divert sales and use tax revenues outside of the approved purposes for two reasons. First, the Board argues that not all local sales and use taxes are dedicated to a specific purpose. Second, it argues that all of the duties and activities of the Board fall within the dedicated purposes of the sales and use tax propositions the voters approved.

         As to its first argument, relying on Denham Springs Economic Development District, 894 So.2d 325, the Board argues that not all sales and use taxes are dedicated to a specific purpose. Further, it contends that non-dedicated taxes can be used for other purposes. Id.; Louisiana Assessors' Retirement & Relief Fund, 986 So.2d 1. In this case, the Board takes the position that Plaquemines Parish's 1977 sales and use tax proposition levying a 1% sales and use tax is a non-dedicated tax. See infra, p. 3 note 9. The Board asserts that Plaquemines Parish could pay its entire annual obligation to the Board solely out of this non-dedicated sales and use tax revenue; thus, for this reason alone, Plaquemines Parish's claims fail. Relying on Louisiana Assessors' Retirement & Relief Fund, the Board maintains that where the financial obligation can be met by using non-dedicated tax revenue funds, there is no violation of the dedication language of other tax propositions.

         Plaintiffs do not dispute that such language dedicating a sales and use tax for the benefit of the taxing body or its operations is open to a wide range of uses; however, those uses are expressly limited by the dedication to be used for the benefit of the taxing body. Consequently, they are dedicated taxes subject to La.Const. art. VI, § 29. Additionally, Plaintiffs counter that while the Board asserts that the taxes can be used for other purposes, the differentiating legal element between the instant matter and Louisiana Assessors' Retirement & Relief Fund is the constitutional mandate implicated in that case, La.Const. art. X, § 29(E). In the instant matter, there is no commensurate constitutional mandate.

         In Louisiana Assessors' Retirement & Relief Fund, 986 So.2d 1, the issue before this Court was whether La.R.S. 11:1481, the statutory funding provision of the Assessors' Retirement Fund ("the Fund"), violated La.Const. art. VI, §§ 26(B)[30] and 32, [31] because it allowed the Fund to divert dedicated taxes to a purpose other than that for which they were designated. Therein, this Court opined:

This court has consistently interpreted the constitution to prohibit the use of dedicated and special taxes for purposes other than those for which they were levied. For example, in Orleans Parish School Board v. City of New Orleans, 238 La. 738, 116 So.2d 505 (La.1959), the Orleans Parish School Board challenged the constitutionality of LSA-R.S. 47:1910, which required the Department of Finance for the City of New Orleans to deduct from taxes collected for the school board a proportionate share of the City's contribution to the expense fund of the Board of Assessors for the Parish of Orleans. The district court granted an injunction and ordered the City to pay to the school board, without any deductions, all of the money collected from a tax levied by the Board. This court affirmed, holding that the challenged statute was unconstitutional insofar as it authorized a deduction from the funds payable to the school board because the legislature has no power to divert to others proceeds the constitution requires "be paid daily to said board." See also, Orleans Parish School Board v. City of New Orleans, 198 La. 483, 3 So.2d 745 (1941) (City could not deduct from school board's tax revenues cost of collecting tax as the constitution requires that the entire amount derived from the tax be paid to the board.); Ziemer v. City of New Orleans, 195 La. 1054, 1067, 197 So. 754, 759 (1940) ("Where [tax] funds are dedicated to a certain purpose they cannot be intermingled with other funds and used indiscriminately, but must be applied as dedicated."). Indeed, this principle was recently confirmed by this court in Denham Springs Economic Development District v. All Taxpayers, Property Owners, 04-1674 (La.2/4/05), 894 So.2d 325, wherein, in interpreting a tax increment financing statute, we recognized that the statute prohibited dedicated taxes from being used for purposes other than their dedicated purpose.

Louisiana Assessors' Ret. & Relief Fund, 986 So.2d at 14-15.

         Thereafter, this Court addressed the Fund's argument that La.Const. art. X, § 29(E)(3) created an exception to the prohibition in La.Const. art. VI, §§ 26(B) and 32 against diverting dedicated taxes to a purpose other than that for which they were levied. This Court rejected the Fund's interpretation, reasoning that it would place the constitutional provisions in direct conflict and negate the protections provided in La.Const. art. VI, §§ 26(B) and 32. Finding no conflict between La.Const. art. VI, §§ 26(B) and 32 and La.Const. art. X, § 29(E), this Court reasoned:

To the contrary, the constitutional provisions can easily be construed to harmonize with each other in a manner that gives full effect to each of them. A plain reading of its language demonstrates that the clear intent of La. Const. art. X, § 29(E)(3) was to authorize the legislature to use contributions from three sources to attain and maintain actuarial soundness, including among those sources dedicated taxes which the legislature adopts and dedicates to funding retirement systems. In other words, the dedicated taxes authorized by section 29(E)(3) as one method for attaining actuarial soundness refers to taxes the legislature may levy and dedicate for the purpose of funding statewide retirement systems, not to taxes dedicated by the constitution or by voters to other purposes.
Viewed in this light, the constitutional provisions complement, rather than conflict with, each other. A "dedicated tax" is, quite simply, a tax that is dedicated for a specific purpose. Under the constitution, taxes dedicated to a specific purpose cannot be used for another purpose. Should the legislature elect to levy a "dedicated tax" to fund the Fund, as authorized by Article X, § 29(E)(3), then Article VI, §§ 26(B) and 32 would protect that dedicated tax and prevent the diversion of its proceeds to other purposes.

Louisiana Assessors' Ret. & Relief Fund, 986 So.2d at 15-16 (emphasis added).

         Louisiana Assessors' Retirement & Relief Fund reasoned that it is permissible for the legislature to levy a dedicated tax for the purpose of funding the Fund. However, it does not support the diversion of taxes dedicated for a specific purpose when passed to another purpose via legislation. To the contrary, this Court reiterated its holding in Denham Springs Economic Development District, 894 So.2d 325, stating:

As we recognized in Denham Springs Economic Development District, 04-1674 at 14, 894 So.2d at 335, when citizens are presented with a proposition that would impose a special tax for a specific purpose, and they approve the imposition of that tax, a covenant is created which must be respected and upheld. Once citizens vote for a tax dedicated to one purpose, the tax cannot be used for a purpose other than that approved by the citizens. Any alteration of a prior dedication must be by vote of ...

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