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Smith International, Inc. v. Robinson

Court of Appeals of Louisiana, First Circuit

January 9, 2020


          On Appeal from the Louisiana Board of Tax Appeals State of Louisiana Docket No. 10498 Board of Tax Appeals Members Presiding: Judge Anthony J. "Tony" Graphia (ret.), Chairman; Cade R. Cole, Vice-Chairman; and Frances "Jay" Lobrano

          Miranda Y. Scroggins Antonio Ferachi Debra Morris Brian DeJean Baton Rouge, Louisiana Counsel for Defendant/ Appellant Kimberly Robinson, Secretary, Louisiana Department of Revenue

          Robert S. Angelico Cheryl M. Kornick Jeffrey P. Birdsong New Orleans, Louisiana Counsel for Plaintiff/Appellee Smith International, Inc.


          McCLENDON, J.

         The defendant, the Louisiana Department of Revenue, through its Secretary, Kimberly Robinson (the Department), appeals a judgment of the Louisiana Board of Tax Appeals (the Board) that denied its exception of lack of subject matter jurisdiction and determined that no penalties were due from the taxpayer plaintiff, Smith International, Inc. (Smith International). For the reasons that follow, we affirm.


         Smith International is engaged in the oil and gas equipment and services business in the State of Louisiana. Smith International timely filed its Louisiana corporate income and franchise tax returns for the 2008 through 2010 tax periods. Payment was submitted with the returns. Subsequently, the Department conducted an audit and determined that additional income and franchise taxes were due. Smith International received a Notice of Assessment, dated December 22, 2016, assessing additional corporate income and franchise tax for the tax period of January 1, 2008, through December 31, 2010. The Department also assessed interest and penalties.[2] Smith International submitted payment for the additional income and franchise tax, as well as the interest, as shown on the assessment. However, Smith International did not submit payment for the penalties.

         Thereafter, Smith International filed a timely appeal with the Board, disputing the penalty portion of the assessment. In response, the Department filed an exception raising the objection of lack of subject matter jurisdiction, which was referred to a hearing on the merits.

         Following the hearing, the Board signed a judgment on April 10, 2018, denying the Department's exception of lack of subject matter jurisdiction. The Board's judgment also found that Smith International was not liable for the penalties assessed by the Department. The Department appealed the Board's judgment to this court, [3] and assigns the following as error:

1. The Board erred by denying the lack of subject matter jurisdiction exception filed by the Department; and
2. The Board erred by failing to hold Smith International liable for the late payment penalty assessed under LSA-R.S. 47:1602.


         The legislature created the Board to act as an appeal board to hear and decide disputes between a taxpayer and the State. See LSA-R.S. 47:1401.[4] The Board acts as a trial court in finding facts and applying the law. St. Martin v. State, 09-0935 (La. 12/1/09), 25 So.3d 736, 740. Judicial review of a decision of the Board must be rendered upon the record before the Board and is limited to facts on the record and questions of law. See Barfield v. Bolotte, 15-0847 (La.App. 1 Cir. 12/23/15), 185 So.3d 781, 785, writ denied. 16-0307 (La. 5/13/16), 191 So.3d 1058.

         The Board'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 in the entire record. Additionally, when the assignments of error reflect that the main issue involves a purely legal question regarding the proper interpretation of a statute, our review is de novo in the sense that we give no deference to the factual findings or legal conclusions of the tribunals below. We are free to make our own determinations of the correct legal meaning of the appropriate statutes and render judgment on the record. Barfield, 185 So.3d at 785.

         If the Board has correctly applied the law and adhered to correct procedural standards, its judgment should be affirmed absent a clearly erroneous finding of fact. St. Martin, 25 So.3d at 740.


         In interpreting statutes, we begin with the well-settled premise that taxing statutes must be strictly construed against the taxing authority, and where a tax statute is susceptible of more than one reasonable interpretation, the construction favorable to the taxpayer is adopted. Cleco Evangeline, LLC v. Louisiana Tax Com'n, 01-0561 (La.App. 1 Or. 6/22/01), 808 So.2d 740, 744, aff'd, 01-2162 (La. 4/3/02), 813 So.2d 351.

         When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature. LSA-C.C. art. 9. This principle applies to tax statutes. Cleco Evangeline, 808 So.2d at 744. It is a recognized rule of statutory construction that the court must give the words of a law their generally prevailing meaning (except that words which are words of art or technical terms must be given their technical meaning). LSA-C.C. art. 11. Further, when the words of a law are ambiguous, their meaning must be sought by examining the context in which they occur and the text of the law as a whole. LSA-C.C. art. 12. When the language is susceptible of different meanings, it must be interpreted as having the meaning that best conforms to the purpose of the law. LSA-C.C. art. 10.

         It is presumed that every word, sentence, or provision in the law was intended to serve some useful purpose; that some effect is to be given to each such provision; and that no unnecessary words or provisions were used. The meaning of a statute is to be interpreted by looking to all the sections taken together so that no section, clause, sentence or word becomes superfluous or meaningless. Cleco Evangeline, 808 So.2d at 744.

         Finally, if a statute is not clear on its face, the meaning must be determined. Statutory interpretation is the province of the judiciary. The paramount consideration in interpreting a statute is ascertaining the legislature's intent and the reasons that prompted the legislature to enact the law. Cleco Evangeline, 808 So.2d at 744.


         In the instant matter, the Department first contends that the Board lacked jurisdiction over the penalty issue. It asserts that the Board's jurisdiction for penalties is limited to the waiver of penalties. The Department also argues that the Board lacked jurisdiction to "redetermine" the assessment of penalties where the taxpayer agreed with the tax and interest found to be due following an audit. Secondly, the Department argues that the penalties were lawfully imposed and are due, as Smith International did not follow the taxing laws when filing its returns and remitting payments. In opposition, Smith International maintains that the Board correctly found that the imposition of the penalties in the Notice of Assessment was contrary to law because the penalty provisions are not applicable.

         Subject Matter Jurisdiction

         Louisiana Revised Statutes 47:1407 ...

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