BOYD LOUISIANA RACING, INC.
CYNTHIA BRIDGES, SECRETARY, DEPARTMENT OF REVENUE & TAXATION, STATE OF LOUISIANA BOYD GAMING CORPORATION
CYNTHIA BRIDGES, SECRETARY, DEPARTMENT OF REVENUE & TAXATION, STATE OF LOUISIANA BOYD KENNER, INC.
CYNTHIA BRIDGES, SECRETARY, DEPARTMENT OF REVENUE & TAXATION, STATE OF LOUISIANA
Appeal from the Nineteenth Judicial District Court In and for
the Parish of East Baton Rouge State of Louisiana Docket Nos.
C539824, C548765, C548766
Russell J. Stutes, Jr. Shelley Bouillion J. Michael Veron
Lake Charles, Louisiana Counsel for Defendant/Appellant
Cynthia Bridges, Secretary of the Department of Revenue and
Taxation, State of Louisiana
S. Akchin Jaye A. Calhoun William J. Kolarik, II Baton Rouge,
Louisiana Counsel for Plaintiffs/ Appellees Boyd Louisiana
Racing Inc., Boyd Gaming Corporation, and Boyd Kenner, Inc.
BEFORE: WHIPPLE, C.J., MCCLENDON, AND HIGGINBOTHAM, JJ.
these consolidated tax cases, the defendant appeals a
district court's judgment that granted a partial summary
judgment in favor of the plaintiffs. For the following
reasons, we affirm in part, reverse in part, and remand.
AND PROCEDURAL HISTORY
Gaming Corporation (Boyd Gaming) is engaged in the gaming
industry, owning and operating through its numerous
subsidiaries and affiliate casinos and horse-racing
facilities throughout the nation. Boyd Gaming is domiciled in
Nevada. Boyd Gaming directly owns two Louisiana subsidiaries,
Boyd Kenner, Inc. (Boyd Kenner) and Boyd Louisiana Racing,
Inc. (Boyd Louisiana Racing). Boyd Kenner is a partner in
Treasure Chest, LLC, a casino in Kenner, Louisiana. Boyd
Louisiana Racing owns Boyd's Racing, LLC, which owns and
operates Delta Downs, a pari-mutuel racetrack and casino in
tax years 2002, 2003, and 2004 (the audit period), each of
the Boyd entities reported and paid income and franchise
taxes as reflected on their returns. Boyd Kenner and Boyd
Louisiana Racing filed their state tax returns as Louisiana
entities, and Boyd Gaming filed its Louisiana tax returns as
and 2006, the State of Louisiana, Department of Revenue and
Taxation (the Department) issued a Notice of Proposed Tax Due
to each of the plaintiffs, Boyd Gaming, Boyd Louisiana
Racing, and Boyd Kenner, following an income and franchise
tax audit for the audit period. The audits resulted in an
upward adjustment of the taxable capital base for each of the
three entities and the assessment of additional corporate
franchise taxes, with interest, to their businesses.
Originally, Boyd Gaming paid a total of $373, 515.00 in
franchise taxes, Boyd Louisiana Racing paid a total of $331,
371.00 in franchise taxes, and Boyd Kenner paid a total of
$116, 076.00 in franchise taxes. Following the audits, the
plaintiffs were assessed additional taxes and interest, for
the tax years 2002, 2003, and 2004, in the following amounts:
Boyd Gaming was assessed a total of $1, 082, 930.63, Boyd
Louisiana Racing was assessed a total of $277, 033.72, and
Boyd Kenner was assessed a total of $244, 548.66. The
plaintiffs paid to the Department the additional franchise
taxes and interest, under protest, and notified the
Department that they would be seeking a refund of the amounts
each of the plaintiffs filed a petition for appeal in the
district court seeking a refund for the payment of the taxes
paid under protest and asserting that the Department
erroneously determined that the additional franchise tax and
interest were due. After the matters were consolidated, the
plaintiffs filed a motion for partial summary judgment on the
issue of liability. According to the plaintiffs, the
Department's audit determination that they had underpaid
Louisiana franchise taxes was erroneous, in part, because the
auditors' applications and interpretations of the
pertinent law and regulations were incorrect. Particularly,
they asserted that the auditors misapplied costs and values
to taxable income, based on a misunderstanding of the cash
management system employed by the Boyd entities. The
plaintiffs also generally asserted that in assessing the
taxes, the auditors ignored established accounting
principles, precedents, and the franchise tax law itself. In
response, the Department asserted, and continues to maintain
on appeal, that genuine issues of material fact remain that
negate the grant of summary judgment and, further, that it
correctly applied the law in computing the additional
corporate franchise taxes owed by the plaintiffs.
hearing, the district court issued written reasons on October
1, 2014, finding that there was no evidence of any disputed
issues of material fact and that the central dispute in the
case involved the interpretation and application of the law.
After consideration of the applicable law, the district court
granted the plaintiffs' motion for partial summary
judgment. Thereafter, the district court signed a judgment on
November 24, 2014, granting a partial summary judgment on the
issue of liability in favor of the plaintiffs. The Department
this court ex proprio motu examined the record and
noted a potential jurisdictional defect in the judgment.
Following the submission of memoranda and oral argument, we
determined that the judgment did not contain sufficient
decretal language to constitute a final appealable judgment,
declined to convert the invalid appeal to a supervisory writ,
dismissed the appeal, and remanded the matter for further
proceedings. See Boyd Louisiana Racing, Inc. v.
Bridges, 15-0393 (La.App. 1 Or 12/23/15) (unpublished),
2015 WL 9435285.
this court's decision, the plaintiffs filed a Motion for
Entry of Judgment and attached a proposed judgment. The
district court signed the proposed judgment on August 9,
2016, prior to the scheduled hearing on the motion, and
mailed notice of the judgment to the parties. The judgment
granted the motion for partial summary judgment on the issue
of liability, as follows:
1. Because all management services were performed in its
offices in Nevada rather than in Louisiana, the Department of
Revenue erred in its auditor's adjustments with respect
to the management fees collected by Boyd Gaming Corporation.
2. Because Boyd Gaming used generally accepted "equity
accounting" principles to value its investment in
subsidiaries, the adjustments to surplus and undivided
profits made by the Department of Revenue's auditor were
3. The participation of the Taxpayers in the common cash
management system used by Boyd Gaming Corporation and all its
affiliates, including Boyd Kenner and Boyd Louisiana Racing,
was not a borrowing of capital by Boyd Gaming, Boyd Kenner or
Boyd Louisiana Racing, so the auditor's adjustments to
borrowed capital were incorrect.
4. Partnership tax losses were properly included in Boyd
Gaming's volume of business ratio for the Periods at
Issue because the regulation prohibiting that inclusion was
not in effect during the years 2002-2004.
judgment also provided that the determination of the amount
of refund to which the plaintiffs were entitled would be the
subject of future proceedings.
meantime, the Department opposed the motion for the entry of
judgment. On September 26, 2016, the district court held the
hearing on the content of the proposed judgment and took the
matter under advisement. Thereafter, the Department filed a
suspensive appeal from the district court's August 9,
2016 judgment. The district court signed the order for
suspensive appeal on October 12, 2016, but the signature was
later scratched through with the following unsigned undated
handwritten note: "moot - this is an appeal of a
judgment erroneously signed."
November 2, 2016, the district court issued a Ruling on
Plaintiffs' Motion for Entry of Judgment, ordering that
the plaintiffs' proposed judgment be filed and tendered
to the court for signature. The judgment was signed on
November 18, 2016, and was identical to the August 9, 2016
judgment. Also, as in the August 9, 2016 judgment, the
November 18, 2016 judgment ordered that the judgment
consituted a final judgment pursuant to LSA-C.C.P. art. 1915B
for purposes of an immediate appeal because there was no just
reason for delay.
on April 4, 2017, “[i]n an abundance of caution and due
to the unique circumstances present," the Department
filed another motion for suspensive appeal, seeking to appeal
the August 9, 2016 and November 18, 2016 judgments. The
Department filed a memorandum in support of the motion for
suspensive appeal, and the plaintiffs filed a memorandum in
opposition to the motion.
January 9, 2018, the district court issued its Ruling on
Motion for Suspensive Appeal and denied the Department's
appeal, stating that "all counsel of record were
informed that the earlier judgment was signed prematurely in
error and that the motion for suspensive appeal filed in
response to the premature judgment would not be signed by the
Court and processed." The district court found that the
Department's failure to either file a timely new motion
for appeal or to request that the original motion for appeal
be processed with a new corrected order "resulted in
defendant's failure to timely file an appeal as to the
Judgment that it was seeking to have overturned." The
order denying the motion for suspensive appeal was signed on
January 29, 2018. The Department then applied for supervisory
writs with this court. On June 4, 2018, this court granted
the writ and reversed the district court's denial of the
Department's suspensive appeal, with instructions to
enter an order of appeal from the August 9, 2016 judgment and
the November 18, 2016 judgment. See Boyd Louisiana
Racing, Inc. v. Bridges, 18-0159 (La.App. 1 Cir. 6/4/18)
(unpublished writ action). Thereafter, the district court
signed the order of appeal.
appeal, the Department asserts that the district court erred
in finding that there were no genuine issues of material fact
and that the plaintiffs were not liable for the additional
franchise taxes at issue. Particularly, the Department
contends that the district court erred in holding that:
1. Management services were performed solely in Nevada,
thereby resulting in an improper audit adjustment regarding
management fees collected by Boyd Gaming;
2. Audit adjustments to surplus and undivided profits were
not proper because the plaintiffs utilized equity accounting
principles to value investments in subsidiaries;
3. Treatment of funds maintained by Boyd Gaming in the common
cash management system was improperly characterized as
borrowed capital on audit; and
4. Partnership tax losses were properly included in Boyd
Gaming's volume of business ratio.
JUDGMENT LAW AND STATUTORY INTERPRETATION
motion for summary judgment is a procedural device used to
avoid a full scale trial when there is no genuine issue of
material fact. GameStop, Inc. v. St. Mary Parish Sales
and Use Tax Dept., 14-0878 (La.App. 1 Cir. 3/19/15), 166
So.3d 1090, 1094, writ denied, 15-0783 (La. 6/1/15),
171 So.3d 929. A motion for summary judgment is properly
granted if the pleadings, depositions, answers to
interrogatories, and admissions, together with affidavits, if
any, admitted for purposes of the motion for summary
judgment, show that there is no genuine issue of material
fact, and that mover is entitled to judgment as a matter of
law. LSA-C.C.P. art. 966B(2).
determining whether summary judgment is appropriate, this
court will review the evidence de novo using the
same criteria governing the district court's
determination of whether summary judgment is appropriate.
Thompson v. Center for Pediatric and Adolescent Medicine,
LLC, 17-1088 (La.App. 1 Cir. 3/15/18), 244 So.3d 441,
444, writ denied, 18-0583 (La. 6/1/18), 243 So.3d
1062. When the issue before the court on the motion for
summary judgment is one on which the party bringing the
motion will bear the burden of proof at trial, the burden of
showing there is no genuine issue of material fact remains
with the party bringing the motion. Green v.
Johnson, 16-1525 (La.App. 1 Cir. 1/10/18), 241 So.3d
is material if it potentially insures or precludes recovery,
affects a litigant's ultimate success, or determines the
legal outcome of the dispute. A genuine issue 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.
Thompson, 244 So.3d at 445.
interpretation of a statute is a question of law that may be
decided by summary judgment. When addressing legal issues,
the appellate court gives no special weight to the findings
of the district court, but exercises its constitutional duty
to review questions of law de novo, after which it
renders judgment on the record. Bannister Properties,
Inc. v. State, 18-0030 (La.App. 1 Cir. 11/2/18), 265
So.3d 778, 788, writ denied, 19-0025 (La. 3/6/19),
266 So.3d 902.
taxing statutes are to be interpreted liberally in favor of
the taxpayer and against the taxing authority. If the statute
can reasonably be interpreted more than one way, the
interpretation less onerous to the taxpayer is to be adopted.
Entergy Louisiana, Inc. v. Kennedy, 03-0166 (La.App.
1 Cir. 7/2/03), 859 So.2d 74, 77-78, writ denied,
03-2201 (La. 11/14/03), 858 So.2d 430. Furthermore, words
defining a thing to be taxed should not be extended beyond
their clear import. Cleco Evangeline, LLC v.
Louisiana Tax Com'n, 01-2162 (La. 4/3/02), 813 So.2d
351, 355. Absent evidence to the contrary, the language of
the statute itself must clearly and unambiguously express the
intent to apply to the property in question. Id.
VII, § 1 of the Louisiana Constitution vests the power
of taxation in the legislature. Pursuant to LSA-R.S. 47:601A,
the Louisiana corporate franchise tax is imposed on
“[e]very domestic corporation and every foreign
corporation, exercising its charter, or qualified to do
business or actually doing business in this state, or owning
or using any part or all of its capital, plant, or any other
property in this state." LSA-R.S. 47:601. Taxable capital
is defined for purposes of corporate franchise tax in
LSA-R.S. 47:602A, which, during the audit period, provided:
Taxable capital. Every corporation taxed
under this Chapter shall determine the amount of its issued
and outstanding capital stock, surplus, undivided profits and
borrowed capital as the basis for computing the franchise tax
levied under this Chapter and determining the extent of the
use of its franchise in this state.
Article VII, § 3(A) of the Louisiana Constitution
mandates the legislature to "provide a complete and
adequate remedy for the prompt recovery of an illegal tax
paid by a taxpayer." To fulfill its obligation, the
legislature has provided three remedies to taxpayers: 1) the
Claims Against the State procedure, LSA-R.S. 47:1481-1486; 2)
the Payment Under Protest procedure, LSA-R.S. 47:1576; and,
3) the Overpayment Refund procedure, LSA-R.S. 47:1621-1627.
St. Martin v. State, 09-0935 (La. 12/1/09), 25 So.3d
736, 738; Bannister, 265 So.3d at 788. Relevant to
our analysis is the Payment Under Protest procedure.
the tax years at issue, the Payment Under Protest procedure
provided that if a taxpayer protested the payment of any tax
or enforcement of any tax law, the taxpayer had to pay the
amount due and at that time give notice of intention to file
suit for recovery of the tax. The amount paid was then placed
in escrow for thirty days. If suit was filed within that
period, the funds would be further held pending outcome of
the suit. Church Point Wholesale Beverage Co.,
Inc. v. Tarver, 614 So.2d 697, 703-04 (La. 1993).
Following the audits, and in accordance with LSA-R.S.
47:1576, the plaintiffs remitted the additional franchise
taxes at issue, advised the Department that the taxes were
paid under protest, and timely filed a petition for appeal
from the decision of the Department for the franchise taxes
paid under protest and for statutory interest thereon.
assignments of error on appeal, the Department has identified
four disputed audit adjustments. We will address each one
Department first asserts that Boyd Gaming mischaracterized
management fees received from Boyd Kenner and Boyd Louisiana
Racing. The Department acknowledged that it allowed the
plaintiffs to exclude support fees from the numerator of the
franchise tax computation, taking the position that such fees
constituted a reimbursement for expenses, or recovery costs,
paid on behalf of a subsidiary. However, with regard to
management fees, the Department maintains that such fees were
not "net sales made to customers," as asserted by
the plaintiffs, or reimbursements of expenses. The Department
contends that the fees were actually revenues transferred
between a parent company and its subsidiaries, which must be
included in the volume of business ratio of Boyd Gaming under
LSA-R.S. 47:606A(1)(k) and 606B.
we first consider LSA-R.S. 47:606, regarding the allocation
of taxable capital, which provided, in relevant part:
A. General allocation formula.
For the purpose of ascertaining the tax imposed in this
Chapter, every corporation subject to the tax is deemed to
have employed in this state the proportion of its entire
issued and outstanding capital stock, surplus, undivided
profits, and borrowed capital, computed on the basis of the
ratio obtained by taking the arithmetical average of the
(1)The ratio that the net sales made to customers in the
regular course of business and other revenue attributable to
Louisiana bears to the total net sales made to customers in
the regular course of business and other revenue. For the
purposes of this Subsection net sales and other revenues
attributable to Louisiana shall be determined as follows:
* * *
(f) Revenues from services other than those described above
shall be attributed within and without Louisiana on the basis
of the location ...