The Supreme Court last week rejected pipeline owner El Paso Corp.’s petition for a review of a Louisiana court ruling that denied the company a refund of overpayments on property taxes that allegedly were caused by the state’s discriminatory assessment of pipelines.
The high court gave no explanation for its decision not to hear arguments in the case in which El Paso challenged the constitutionality of state property tax assessments on its natural gas pipelines over a nearly 10-year period ending in 2003 (ANR Pipeline et al vs. Louisiana Tax Commission). The El Paso pipelines argued that Louisiana violated their due process rights to “clear and certain remedy” for payment of an unconstitutional tax.
At the core of the case was a ruling by the Louisiana Tax Commission that had assessed interstate pipelines at 25% fair market value, while intrastate pipelines were taxed at a lower rate of 15%.
The U.S. Court of Appeals for the First Circuit in Louisiana upheld a district court’s ruling, which found the tax against the El Paso pipelines to be discriminatory and ordered the state tax commission to require local assessors to conduct new evaluations and calculate the tax on the new assessments based on the 15% rate. El Paso’s request for immediate refunds based on the existing tax valuations was rejected.
El Paso countered that the reassessments, which would be carried out by local assessors in 52 different parishes in the state for each year of intentional tax discrimination, could ultimately increase the economic burden on the company rather than lighten it. The Louisiana Supreme Court denied review of the appellate court ruling.
Legislation is pending in Congress that would prohibit states from discriminating in their taxation of interstate gas pipelines. It also would allow interstate gas lines to challenge a state’s taxation policy in federal court.
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