Opinion ID: 1856543
Heading Depth: 1
Heading Rank: 4

Heading: was the reclassification a new tax?

Text: The power to levy a new tax is vested in the legislature. La. Const. art. 7, § 2. Thus, an action taken by an agency that results in the levy of a new tax would be void and unenforceable. Our task is to determine whether, by removing chip and saw from the pulpwood category and designating that forest product as a subcategory of trees and timber for severance tax purposes, the Commissions levied a new tax, as urged by the plaintiffs. As this is a case of first impression, guidance must be gleaned from relevant law. This Court recently addressed the question of whether reclassification of a corporate dividend income amounted to an impermissible levy of a new tax in Dow Hydrocarbons & Resources v. Kennedy, 96-2471 (La.5/20/97), 694 So.2d 215. The Dow court held that changing the classification of the corporate dividends from allocable income to apportionate income was constitutionally impermissible as a revenue-raising measure. The court declined to say whether the measure constituted a new tax or an increase in an existing tax, finding that the constitution prohibited the levy of either in an odd numbered year. The Dow court noted, however, that by reclassifying, certain types of corporate dividend income earned outside the state that had not been subject to the tax were now taxed. In U.S. v. Darusmont, 449 U.S. 292, 101 S.Ct. 549, 66 L.Ed.2d 513 (1981), the Court held that amendments to the minimum wage provision did not constitute a new tax because the items had been subject to taxation under the overall scheme before the change. In Audubon Ins. Co. v. Bernard, 434 So.2d 1072 (La.1983), a statute proposing a .2% increase in an agency's collection was deemed a new tax because its primary purpose was to raise revenues. In Cox Cable New Orleans, Inc. v. City of New Orleans, 92-2311 (La.9/3/93), 624 So.2d 890. reh'g denied, 10/7/93, this Court held the City's ordinance to be an impermissible levy of a new tax because the ordinance definition was not a fair reflection of the tax scheme as a whole. In Cox, the City enacted an ordinance along the lines of the enabling statute La.R.S. 4:41, but defined production to include audiovisual production so that the City could collect an amusement tax on that service. This Court noted that the critical inquiry was whether the definition fell within the contemplation of the term ... used in the original ordinance and the enabling state statute. Id. at 894. Because the import of the statute was to charge amusement tax on live entertainment, the ordinance constituted the levy of a new tax. In Furlong v. Commissioner Internal Revenue, 93-3668 (7 Cir. 9/19/94), 36 F.3d 25, tax on a loan was not a wholly new tax in the overall tax scheme because the tax was reasonably foreseeable. Viewed in light of the surrounding circumstances, we conclude that the Commissions' action in reclassifying chip and saw did not result in the imposition of a new tax. Chip and saw had always been a taxable item under La.R.S. 47:633. The purpose of the reclassification was not for raising revenue, but to conform the product to the mandate of section 633 to tax all trees and timber at the 2¼% severance tax rate, excepting only pulpwood. Both the market value and the factual composition of chip and saw indicated that those resources classified as chip and saw were no longer pulpwood. As a non-pulpwood product, the statute would not require chip and saw's exclusion from the universal 2¼% trees and timber tax category. La.R.S. 47:633 (1) & (2). Thus, placement of chip and saw in the trees and timber tax category was a fair reflection of the statutory scheme as a whole. Finally, given the recent developments in chip and saw technology, it was reasonably foreseeable that the product would be taxed at the trees and timber tax rate.