Bait and Switch in the Big Easy

The BR State + Local Tax Spotlight

By Eugene J. Gibilaro

When a local taxing authority extends the deadline for paying taxes due, can taxpayers rely on that extension?  According to an intermediate appellate court in Louisiana, the answer is “no.”  In NOHC, Inc. v. Erroll G. Williams, Assessor, Parish of Orleans, et al., No. 2022-CA-0248 (La. Ct. App. Mar. 22, 2023), the City of New Orleans extended the deadline for taxpayers to pay their property taxes and when NOHC, Inc. paid property taxes under protest after the original deadline but before the extended deadline and filed a lawsuit in court seeking reimbursement of taxes paid, the City argued, and the Court of Appeal agreed, that the lawsuit was time-barred because NOHC, Inc. had failed to timely pay the taxes under protest by the original deadline. This case is a cautionary tale for taxpayers about relying on guidance from state and local taxing authorities when it comes to complying with statutory deadlines and the danger of waiting until close to a statutory deadline before taking the steps necessary to ensure that all compliance requirements have been satisfied.

The Facts: NOHC, Inc. is an Internal Revenue Code Section 501(c)(3) nonprofit corporation that received exemptions from both federal and state income taxes and owned property in New Orleans. After receiving its Section 501(c)(3) designation, NOHC, Inc. applied to the Orleans Parish Assessor’s Office for a property tax exemption in connection with the property that it owned in New Orleans. On December 16, 2019, the Assessor denied NOHC, Inc.’s application and issued a bill for property taxes due, which stated that the bill would become delinquent on February 1, 2020.

After the bill was issued but before February 1, 2020, the City announced an extension of time to February 14, 2020 for the timely payment of property taxes and NOHC, Inc. paid under protest on February 12, 2020, and filed its lawsuit shortly thereafter. In its initial decision on the City’s contention that NOHC, Inc.’s lawsuit was time barred for failure to timely pay the taxes due under protest, the Court of Appeal ruled for NOHC, Inc., finding that it had detrimentally relied on the City’s extension of the payment deadline. The City asked the Court of Appeal to reconsider its decision, and the Court of Appeal granted rehearing.

The Decision: The Court of Appeal held on reconsideration that the doctrine of detrimental reliance did not apply under these facts as detrimental reliance cannot apply to a representation of law and “the City’s purported extension of that deadline constituted a representation of law, which was in direct conflict with those statutes.”  The relevant statutes provided that in order to challenge an assessment, the taxpayer must “timely pay the disputed amount of tax under protest” and, with respect to timely payment, “taxes shall become delinquent on the first day of February . . . .”   La. R.S. 47:2134 and La. R.S. 47:1997. Finally, the Court explained that a heightened burden is necessary to apply the doctrine of detrimental reliance against a government entity, including proving that the government entity had provided “unequivocal advice.”  Here, the Court reasoned, “[w]hile the City extended the deadline to pay taxes in the year 2020, NOHC has not offered evidence to establish that the City announced that this extension also applied to taxes paid under protest.”

This update is one in a series of updates written for the April 2023 edition of The BR State + Local Tax Spotlight.

© 2023 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.