Louisiana Court Holds That a Locality Cannot Run Out the Clock on a Refund Claim

The BR State + Local Tax Spotlight

On November 5, 2021, a Louisiana appeals court held that a company’s appeal of a locality’s refund claim denial was timely inasmuch as it was filed within 90 days of the date of the locality’s notice of disallowance. Nucor Steel La., LLC v. St. James Parish Sch. Bd., No. 20-CA-247, 2021 WL 5149770 (La. Ct. App. Nov. 5, 2021). This is another recent example of a taxing authority appearing to work in good faith with a company in reviewing the company’s refund claim, but then attempting to pull the rug out from under the company with a statute of limitations argument when the matter goes to court. See Zimmer US, Inc. v. Gerregano, No. M2020-00171-COA-R3-CV, 2021 WL 3029566 (Tenn. Ct. App. July 19, 2021), and Eugene J. Gibilaro, Statute of Limitations Extension Agreements: Taxpayers Beware!, The BR State + Local Tax Spotlight (August 2021). Fortunately, the Louisiana appeals court here did not permit the taxing authority to run out the clock.

Facts: Louisiana law provides that if a locality fails to act on a refund claim, an appeal cannot be filed “after the expiration of one hundred eighty days from the end of the expiration of the one year” from the date of the filing of the refund claim. La. Rev. Stat. tit. 47, § 337.81(A)(2) (2021) (effective June 16, 2017). Here, the locality acknowledged receipt of the company’s timely-filed refund claim and requested additional information from the company, which it received and reviewed. During the refund claim review period, the parties entered into several “Agreement to Suspend Prescription of Taxes” as well as a confidentiality agreement with respect to certain confidential documents that the locality requested to review and did eventually review. Moreover, the locality represented to the company that it could appeal the locality’s decision to the Board of Tax Appeals within 90 days of the issuance of the notice of disallowance.

Despite the fact that the locality actively reviewed the refund claim, was in communication with the company throughout the period from when the refund claim was filed until the locality issued the notice of disallowance, and expressly stated that the company had 90 days to appeal, the locality argued in court that the locality failed to act on the refund claim within the statutory timeframe and the company’s appeal after that timeframe had expired was time barred.

The Decision: The court rejected the locality’s argument that the failure to issue a final decision on the company’s refund claim during the year-plus-180-day timeframe constituted a failure to act under the statute. Instead it concluded that the locality did indeed act on the refund claim during that timeframe by conducting a “thorough and extensive investigation” of the company’s refund claim. The court reasoned that if the statute was interpreted to mean that only a final decision could constitute action, then the statute would absurdly require that “a taxpayer must file an appeal during the course of an ongoing evaluation but before a ruling on the claim.”

The court further held that the locality was estopped from asserting that the company’s appeal was time barred inasmuch as the locality represented to the company that it had 90 days to appeal a notice of disallowance and the company relied on that representation to its detriment. To hold otherwise, the court explained, “would be contrary to the principles of the taxpayer bill of rights and allow a governmental entity to mislead a law-abiding taxpayer.”

This article is one in a series of articles written for the December 2021 edition of The BR State + Local Tax Spotlight.