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A vote for would
Create a property tax exemption for certain goods destined for the Outer Continental Shelf.
Businesses and homeowners pay property tax to local governments based on the assessed value of their property on an annual basis. Property might include land, homes, buildings, machinery or business inventory. The state Constitution allows certain exceptions, such as the homestead exemption for homeowners and the Industrial Tax Exemption Program for manufacturers. The only property tax exemptions are those listed by the state Constitution. However, the U.S. Constitution trumps state law. For example, our nation’s Constitution prohibits states from regulating interstate commerce. This “Commerce Clause” has been interpreted to mean that Louisiana cannot tax property merely in transit or destined for other states or countries.
Historically, businesses have interpreted the law to exclude from taxation property stored in Louisiana but destined for the Outer Continental Shelf (OCS), such as offshore drilling equipment. In the Gulf of Mexico, the OCS is roughly the area in U.S. waters 200 miles beyond the state jurisdiction, which for Louisiana is three miles. Recently, some local assessors have started to assess certain equipment and other property headed for the Outer Continental Shelf. This assessment is based on their interpretation of the state Constitution and rulings related to interstate commerce. No specific ruling has been made by either the Louisiana Supreme Court or the U.S. Supreme Court to clarify the issue of property destined for the OCS.
This amendment would prohibit property taxes on raw materials, goods, commodities and articles stored for maintenance if destined for the Outer Continental Shelf. While part of the United States, the OCS is not subject to the jurisdiction of individual states. If the amendment does not pass, the tax on such property would continue to be levied. Lawsuits could follow to determine if the tax passes muster with the U.S. Constitution. The number of parishes immediately affected by this amendment would be relatively small and mostly confined to areas near the Gulf of Mexico.
The U.S. Constitution’s interstate Commerce Clause allows for goods to travel unimpeded from or through Louisiana to other places. Although the Commerce Clause does not specify that materials going offshore are included in that category, goods destined for the Outer Continental Shelf had been understood to be exempted from property tax assessments. For years businesses thought this property was exempt and only recently have a few assessors called the exemption into question, leading to the current controversy. This amendment offers necessary clarification so as not to cause undue burden or confusion for tax assessors or oil and gas companies or cause a shift in storage or repair of materials to other states. Passage would also help avoid lengthy and expensive battles in state and federal court that would create uncertainty for business for many years.
Adding yet another tax exemption would only further clutter the Constitution and restrict the local tax base. Oil and gas companies should be required to pay tax on the property they own in Louisiana. If the U.S. Constitution’s Commerce Clause prohibits taxation of materials destined for offshore, then the courts should be the place to decide that question. A vote against this amendment would allow those few parishes that tax this class of property to continue to collect this much-needed revenue. Some equipment from inactive oil rigs is already exempt under another section of the Louisiana Constitution, and we do not need more tax breaks.
Legal Citation: Act 444 (House Bill 234 by Rep. Miguez) of the 2019 Regular Session amending Article VII, Section 21 (D)(2) and (3). Companion bill Act 432 (House Bill 301 by Rep Miguez) to amend R.S. 47:1951.2 and 1951.3.
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For more information, media interviews or public presentation requests regarding this constitutional amendment guide, please contact PAR President Robert Travis Scott at RobertScott@parlouisiana.org.