A recent Louisiana Supreme Court ruling on a tax assessment for oil and gas wells could affect many other tax cases in the state, said an attorney for the energy company that brought the suit.
D90 Energy purchased two gas wells and one salt-water disposal well for $100,000 but the wells were assessed by the Jefferson Davis Parish assessor at more than $3 million, the Louisiana Oil and Gas Association said in a news release.
D90 appealed the assessment to the Louisiana Tax Commission which lowered it to $235,000 based on the recent sales price. The Jefferson Davis Parish district court upheld the lower assessment but the state’s Third Circuit Court of Appeal reversed it.
The Louisiana Supreme Court on Oct. 20 sided with D90.
“We reverse the judgment of the court of appeal and reinstate the district court’s judgment affirming the decisions of the Commission,” it ruled.
The court clarifies an issue that has surfaced in many cases, Kyle Polozola of Kean Miller LLP, one of the lawyers representing D90, told the Louisiana Record.
“This was a question that was hotly contested in a lot of cases in Louisiana: What kind of meaningful review can a taxpayer get when they disagree with an assessor’s determination of value?” said Polozola. “There was an argument on the assessor’s side that 'we’re constitutional officers, we set value and the tax commission can’t change that, cannot set the value.' What this case does is lays out very clearly the proper scope and standard of review.
The Supreme Court held that “taxpayers do have a place they can go to get a meaningful review if the assessor’s determination is wrong,” Poloza said. “In addition to that, it recognized for the first time that in oil and gas cases, a recent sale can be a very important measure of fair market value. It’s not just the tax tables that they should look at. They need to seriously consider a recent sale especially if it’s valid and properly supported."