Opinion ID: 1630649
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Heading: The Louisiana Ad Valorem Tax Scheme

Text: Article VII, § 18(B) [2] of the Louisiana Constitution, provides the classifications for property subject to ad valorem taxes and the percentage at which their assessed values are taxed. The classifications at issue in this case include: property classified as public service properties, assessed at a rate of 25 percent (25%) of its fair market value; and property classified as other property, assessed at a rate of 15 percent (15%) of its fair market value. [3] Article VII, § 18(B) goes on to provide that the legislature may enact laws to define public service properties. In accordance with this pronunciation, the legislature enacted La. R.S. 47:1851(M), which defines public service properties as immovable, major movable, and other movable property owned or used but not otherwise assessed in this state in the operations of each ... pipeline company.... [4] The public service property classification then includes companies that qualify as pipeline companies. The Louisiana Legislature defined pipeline company in La R.S. 47:1851(K) as: [A]ny company that is engaged in the business of transporting oil, natural gas, petroleum products, or other products within, through, into, or from this state, and which is regulated by (1) the Louisiana Public Service Commission, (2) the Interstate Commerce Commission, or (3) the Federal Power Commission, as a natural gas company under the Federal Natural Gas Act, 15 U.S.C. §§ 717-717w, because that person is engaged in the transportation of natural gas in interstate commerce, as defined in the Natural Gas Act. According to federal law, all interstate natural gas pipelines are subject to rate-regulation by the Federal Energy Regulatory Commission (FERC), which is the successor to the Federal Power Commission, [5] which in effect qualifies all interstate companies as pipeline companies under La. R.S. 47:1851(K) and thus public service property under La. R.S. 47:1851(M). Concerning intrastate companies, according to La. R.S. 30:551(A): [T]he [Department of Natural Resources] shall be the authority to regulate natural gas and natural gas transporters... as provided in this Chapter; provided, however, that the Louisiana Public Service Commission shall remain the authority to regulate the sale of natural gas moving by pipeline to local distributing systems for resale. This statute provides that only intrastate companies that sell to local distributing systems are rate-regulated by the Louisiana Public Service Commission (LPSC). Thus, only those intrastate companies that sell to local distributing systems fall into the definitions of pipeline company and public service property under La. R.S. 47:1851(K) & (M). Therefore, both interstate companies and intrastate companies, who sell natural gas to local distributing systems, are assessed at 25 percent (25%) of their property's fair market value as determined by the LTC, because they are regulated by the FERC or the LPSC, respectively, under La. R.S. 47:1851(K). Intrastate pipeline companies that do not sell natural gas to local distributing systems for resale are not assessed at 25 percent (25%) of fair market value, because these companies do not fall within the definition of pipeline company in La. R.S. 47:1851(K), as they are not regulated by one of the designated agencies. Instead these companies are considered other property under La. Const. art. VII § 18(B). As such, these non rate-regulated intrastate companies are subject to a 15 percent (15%) assessment of fair market value to be performed by each local parish assessor in the parishes in which their property rests. As to the methodology used in determining the fair market value of property subject to ad valorem taxation, La. Const. art. VII, § 18(D) provides that [e]ach assessor shall determine the fair market value of all property subject to taxation within his respective parish or district except public service properties, which shall be valued at fair market value by the Louisiana Tax Commission or its successor. Therefore, all public service properties are subject to taxes on 25 percent (25%) of the fair market value of their property as determined centrally by the LTC. The LTC then apportions to each parish taxing unit its respective share of the fair market value of the property and it is taxed at the given rate. See La. R.S. 47:1855(A). All remaining unclassified property subject to ad valorem taxation located in Louisiana is considered other property and is subject to taxes on 15 percent (15%) of its fair market value as determined by the individual parish assessors in each parish in which the property is located.