MCI TELECOMMUNICATIONS CORPORATION VS JOHN N. KENNEDY, SECRETARY DEPARTMENT OF REVENUE, STATE OF LOUISIANA

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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2004 CA 0458 MCI TELECOMMUNICATIONS CORPORATION VERSUS JOHN N KENNEDY SECRETARY DEPARTMENT OF REVENUE STATE OF LOUISIANA f Judgment Rendered March 24 2005 cp On 19th Judicial District Court and For the Parish of East Baton Rouge Appeal In from the State of Louisiana Trial Court No 444 366 Division Honorable Curtis A Otha Curtis Nelson Jr Barry L Kelly J Section 25 Calloway Judge Presiding Counsel for Louisiana Appellant Department of Revenue David Hansen Leslie Strahan Baton Rouge LA Cassidy David R Kelly Baton Rouge LA Counsel for Tracy Mitchell Baton Rouge LA Intervenor David R J BEFORE Appellee MCI Telecommunications Corp Pro Se WHIPPLE DOWNING AND HUGHES JJ HUGHES J This is an appeal from corporate taxpayer follow a refund of affirm in part we summary a taxes reverse in judgment awarding paid in this state reasons For the state of that out an part and amend in part FACTS AND PROCEDURAL HISTORY In response to an Department of Revenue was amounts protesting paid issued by the Louisiana assessment for payment of additional corporate franchise LDR 31 1995 1994 March 31 and March Corporation MCI notified the MCI Telecommunications 1996 that it 1997 periods ending March taxes for the 31 25 August the assessment and would file suit for refund of any Submitted with the MCI letter check in the was a amount the total of the amounts assessed for the three years 210 925 25 LDR of marked PAID UNDER PROTEST Mcr filed suit 210 925 25 it claimed were overpayments overpayments of the made were of overpaid taxes for the 56 079 00 and 1996 because summary a judgment summary regulatory basis 1 a J of tax years a a refund of the refund of amounts the three years at issue 1 taxes legally MCI claimed the incorrect allocation improper allocation formula it follows 1994 the trial court in favor of MCr 22 735 00 granted On October 3 in favor of MCI determining Tracy Mitchell intervened sought a 1995 91 356 00 judgment for as seeking paid for additional During the ensuing litigation signed taxes MCI asserted that because of the formula had 1997 under protest and in addition the assessment to prior paid November 7 on decreeing MCIs franchise tax in the proceeding as a claim for his attorney s fee 2 two motions for 2001 the trial court that the statutory and liability for the years former outside counsel for the LDR asserting 1994 1995 61 I 306 A LDR than 61 I306 A was 1 i e The that 1 e entitled to denied reserved a MCI was in provided refund The LDR and all other issues of refund owed summary awarding a and MCI motion for summary judgment disposed not LAC and e abated was of by the judgment 75 649 00 court appointed a With the the LDR it Special of refund owed was judgment motion for summary a were signed by the trial MCI On court to January awarding MCI a 7 2004 refund of paid under protest with interest from date of payment and together with interest The trial findings 00 and 1996 457 31 on January 2004 15 asserting the of error court that erred when it 61 I 306 A set aside the LDR s audit based upon the agency s application of LAC 47 606 A 1 k and were LSA R S The trial issue in provided by law suspensive appeal a following assignments as tax years at 1995 14 380 00 1994 amounts The LDR filed 1 court k i erred in of find the LDR s method Louisiana interstate sales revenue failing to computing MCI s a reasonable methodology 3 the for the purpose of Master to as of counsel for consent refund of overpayments made for the three following 2 cross by to amount judgment 210 925 25 1 s 1 any formula to the pmiies calculating the the 47 606 A the assessment portion of and LAC e employed or upon LSA R S that i the parties the trial the predicated 1 that to the extent the judgment fmiher decreed Subsequently MCI filed amount in LSA R S 47 606 A provided was assessment to s other was and 1996 LSA R S erred when it found that the provisions of LAC and 47 606 A 1 e 61 I306 A e The trial court 1 computation of i a b MCIs from its should govern Louisiana interstate telecommunication revenue earned provided in the State of Louisiana without 3 a the sales services finding that the LDR application ofLSA s LAC 61 I 306 A The trial 4 R S 47 606 A 1 k and k i was unreasonable or arbitrary 1 court erred in MCIs granting Motion for Summary Judgment 5 The trial 6 The trial erred in LDR denying the Motion for Summary Judgment court erred in court issuing an order Cross s striking certain portions of affidavits submitted by the LDR in opposition to MCI s Motion for Summmy Judgment to Establish Amount of Refund Owed and in sustaining MCI s Motion Strike to Defendant Exhibits s and Affidavits 7 The trial Special adopting III the findings of the granting MCI s Master The trial 8 erred court erred in court Summary Judgment Motion for of Refund Establish Amount to Owed 9 The trial court erred in ordering the LDR refund to to remitted under protest in accordance with LSA R S 47 1576 MC overpayment The trial 10 court amounts not erred in taxing the costs of the sustaining MCIs Special Master to the LD R The trial court erred in 11 the LDR Motion for Leave s to objection submit Affidavit in Barbara Motion for Summary Judgment Reeves s affidavit dated October 31 2003 to Opposition 12 The trial comi proceedings erred to the in taxing to all of these costs LDR Record references omitted LAW AND ANALYSIS Motions for Summary Judgment The summary speedy inexpensive determination of and disallowed construed by to judgment procedure is designed LSA C C P art 969 accomplish these ends judgment shall be rendered in the every secure action the just except those procedure is favored and shall be LSA C C P favor of the 4 to art 966 A mover 2 if the Summary pleadings depositions answers to intelTogatories and admissions the affidavits if any show that there is and that is entitled mover to judgment genuine issue no as a together with file on matter of law material fact to as LSA C C P art 966 B Appellate courts review summary judgments de criteria that govern the district Orleans Exhibition Hall 377 So 2d 373 State v v Board of summary judgment the judge s role is evidence or whether there is resolved in the non litigant s ultimate genuine issue is success one as potentially insures or to reasonable persons could reach on movant material fact materiality in National of Louisiana State ruling on motion for a weight of the but instead determine to All doubts should be Garrett 2004 0806 p only one bears the burden Because it is the whether a pp 4 5 Property particular Cir 6 25 04 precludes 1 appropriate legal dispute to fact in show there is 451 no the is material case 874 So 2d 131 genuine issue of 137 be can seen See Richard Dyess p writ denied 2004 1858 5 need for trial no substantive law that determines dispute to disagree if Id at 765 66 Casualty Company 2003 1971 886 So 2d 448 recovery affects conclusion there is applicable La 4 23 04 and or which reasonable persons could light of the substantive law applicable 2003 1488 v 842 determines the outcome of the that issue and summary judgment is The 4 9 03 La evaluate the matter Hines moving party s favor A fact is material if it A not to New 876 So 2d 764 765 La 6 25 04 a In genuine issue of triable fact a 5 p Supervisors determine the truth of the Morial reI Ernest N 1991 La University 591 So 2d 342 345 to ex Authority 2002 1072 Schroeder same consideration of whether summary comi s Allen judgment is appropriate under the novo v 4 La v only Han American La App 10 29 04 1 Cressionnie 885 So 2d 592 2003 1714 p 3 Inc Intrepid v La 1 App 879 So 2d 736 738 39 Cir 14 5 04 2001 Summary Judgment In the October 3 2001 summary judgment the trial court ruled that the law that should MCI that suggested 5 method for issue that was 47 606 A 1 LSA R S of these laws e suggested by 3 1 Paragraph e rather than kt provides a and LAC calculation in the from services other than those described r evenues The text of LSA R S tax at and LAC 61 I 306 A e LDR by the 1 k i 2 1 LSA R S 47 606 A 61 I306 A 2 determine the to apply 47 606 A 1 e 2002 amendment to its appeared prior it as was as follows Revenues from services other than those described above shall be attributed within and without Louisiana on the basis of the location at which the services are rendered added Emphasis This provision is the telecommunications services rendered another in determination of MCl s franchise tax results in 3 The text ofLAC 61 I 306 A 1 reads e as a lower property have been are material perfon11ed located In the producing factors rendered case engaged in be of services in which to presumed rendering the services are material revenue and without this state on the shall be attributed within of services in which such In the shall transportation factor the services shall be in the state in which the personnel case are the tax for MCr are producing revenue to provision Transportation attributed to the state in which the services a of this derived from services other than from Revenue is not application Because Louisiana customers follows Revenue from Services Other Than from i state paragraph f ofthe statute Mcr to its typically provided by located by employees contained in currently revenue personnel and property basis ofthe arithmetical average ofthe following two ratios the ratio that salaries and wages paid to persoilllel a such services within Louisiana bear to total salaries and wages for such services perfon11ing persoilllel performing both within and without Louisiana and b the ratio that the value of property used in Louisiana in performing the whether owned by the taxpayer or not bears to the total value of all property services used in performing ii In any the services both within and without Louisiana in which it be shown that charges for services constitute a pure of the cost of perfonning the services and do not include a reasonable rate of recovery profit amounts received in reimbursement of such costs shall not be construed to be revenues case can received and shall be omitted from both the numerator and denominator of the attribution ratio 4 The text of LSA R S follows All other such ratio or revenues 47 606 A revenues as it appeared prior shall be attributed within ratios prescribed bv the collector as mav and business involved Emphasis of the statute Because the LDR paragraph 1 reasonable formula under this formula k I applied by paragraph Georgia the State of added to its 2002 amendment was as and without this state on the basis of be reasonablv applicable to the type of provision is currently contained in TIns Secretary has the discretion to develop the LDR elected to make this calculation based to MCl s taxes in that state which produced on a a the much higher Louisiana tax for Mcr and resulted in the supplemental assessments at issue herein 5 The text of LAC 61 I A 306 1 k i provides All Other Revenues i All revenues which are not reasonably applicable to the a described in S306 Al j shall be the basis of such ratio or ratios as may be and business involved specifically attributed within and without Louisiana on type of revenue 6 prescribe to Secretary while of the law preceding paragraphs reasonable calculation method for a providing MCI contends that because its business entails its the former customers because the service MCI Louisiana as paragraphs 6 revenue the d a l is provides MCI s is former The provisions e to revenue the trial applied and the LDR Paragraphs a means business is court was conect are not services l other and other to as l governed by e listed in the LAC revenue preceding the encompassed by services ruling that those provisions should in was Therefore tax properly granted motion for summary judgment d of LSA R S 47 606 A 47 606 A classified relating in the calculation of MCI s franchise s cross service a presence in physical 47 606 A of these laws generated by a appropriately LSA R S of to in LSA R S listed more the October 2001 summary judgment 6 related not services revenue Since MCI s paragraphs be ll other while the LDR asserts that apply s Clearly telecommunications services obviously apply provisions provision the type are provISIOns 61 I 306 A to a Emphasis added revenues to allows the LDR k Paragraph was l address the following carrier we find in favor of MCI properly denied a b goods merchandise air transportation or c transportation other than by aircraft or pipeline transportation of oil and gas products and d transportation e addressing revenue pipeline The 2002 amendment of the statute inserted a new paragraph The transmissions covered in new paragraph e from broadcasting film or radio programming property delivered in this state via include public airwaves communication either affiliated unaffiliated by a common of any other means network including owned and affiliated stations or through an The LDR s television or radio broadcasting station cable direct or indirect satellite transmission or through a or independent respecting Me is telecommunications companies that argument because it provide services by Paragraphs a to unlike the businesses addressed leases the use that it sells to its d that of facilities customers presumably use their from other its business is own physical argument unconvincing because such generate the plain words of the statute which are not ambiguous in a distinction is not expressed by other than those described in a d directing its application to revenues arising from services film or radio prograrnming paragraph expressly Further the text of the 2002 broadcasting stations are owned includes revenue generated by that medium whether the broadcasting assets within the state to affiliated revenue e unaffiliated generating or income is conclude that the physical presence of a detemlinative of inclusion within the scope of fonner Paragraph independent asset is not ofLSA R S 47 606 A However this Likewise l 7 we Refund of Overpayments The January 7 2004 summary overpayments it claims 1996 tax returns reached applied Mcr asserted that and that after these other receipt of this its on tax the filing of these the computation to on assessment position and then issued the MCr recalculated its 1995 tax other services 22 735 00 to assessment of taxes supplemental 56 079 00 and 91 356 00 or court refunding these were made by Mcr for these years legislature and to recovery of an 5 La App 4 23 04 Louisiana provide illegal a tax 870 So 2d 300 47 1481 years owe the either the remitted for 1994 judgment 00 457 31 14 380 00 judgment the trial was rendered 1 vests the power of taxation in the et seq 2 Constitution Article 7 3 mandates the complete and adequate remedy for the prompt paid by a taxpayer Clark v State 2002 1936 p 873 So 2d 32 35 writ denied 2004 0452 La 1 Cir 128 04 provided three remedies RS Upon amounts Louisiana Constitution Article 7 legislature not tax overpayments amounting agreed with MCr finding overpayments of 75 649 00 be MCr provisions provided On rendition of summary and 1996 and to supplemental liability for these previously 1995 respectively it had Georgia and 1996 appropriate calculation formula and determined that it did 210 925 25 method adopted the LDR reasoning the that the returns by the Secretary could be used liability refund of filed the LDR assumed the position 210 925 25 for the years of 1994 of assessment based this on calculating its method of prior were provisions revenue contends that based returns a conjunction with its 1994 1995 and agreement with the LDR an that the made in were Mcr judgment awarded To fulfill its latter 1 the Claims the obligation the legislature Against the State procedure Payment Under 8 Protest has LSA procedure LSA RS 47 1576 47 1621 taxes 3 LSA R S Overpayment Refund procedure the Id et seq In this of and et seq case MCI recovery of sought allegedly due an amount paid over the amount claim which falls within the definition of a overpayment found in LSA R S 47 1621 A For the purpose of this a payment of tax penalty or Chapter means overpayment interest when none was due the over the penalty or interest paid amount due or the payInent of a penalty that is later waived or remitted by the secretary provided that the power of the of the excess amount of tax refund overpayments shall be limited in this Section secretmy to The B secretary shall make as prescribed refund a of and each overpayment where it is determined that 1 The tax was overpaid because of an error on the part of the taxpayer in mathematical computation on the face of the return or on any of the supporting documents 2 The tax was overpaid because of a constluction of the part of the taxpayer contrary to the secretmy construction of the law at the time of payment the law on or a The overpayment was the result of an error omission mistake of fact of consequence to the determination of the liability whether on the part of the taxpayer or the s 3 tax secretary 4 The secretary in change made by the billing issued under the overpayment resulted from a notice or provisions of Chapter 18 of Subtitle II of this Title 5 With regard to a Louisiana income tax overpayInent the assessment an overpayInent resulted from a change in federal income tax data which formed the basis for calculation of the Louisiana income tax 6 With overpayment regard resulted to any from Louisiana an tax overpayment the of overpayment estimated Louisiana tax Louisiana income tax overpayInent the overpayment resulted from application of a Louisiana net operating loss carryback or carryover 8 The overpayment resulted from a subsequent determination that the taxpayer was entitled to pay a tax at a 7 reduced 9 With regard to a tax rate The overpayment was the result of a payment that exceeded either the amount shown on the face of the return or voucher or which would have been shown on the face of the return or voucher if a return or voucher were required 9 F This Section shall not be construed to authorize anv mistake of law arising from refund of tax overpaid through the misinterpretation bv the secretarv of the provisions of any a law the regulations promulgated of the rules and or event believes taxpaver a that the thereunder In has secretarv misinterpreted the law or promulgated rules and regulations contrary therewith his remedv is bv pavment under protest and by appeal to the board of tax appeals instances where such appeals lie Emphasis added suit to recover taxpayer aggrieved by A remedies available assessment 47 1565 lawsuit or to taxpayer may pay the disputed recover the the assessment appeal tax to protest the taxpayer has the trial court lacks assessment 4 La Corp v denied subject right of action matter 12 5 376 So 2d 156 La the trial these claims and that s v to cross court procedures See also portion La case of the Sperry Rand 1 Cir not writ reflect that to the with respect favor of MCr judgment should be reversed judgment should motion for summary s 99 0862 p App rendering judgment in erred in to Depmiment Inc Kennedy in this a assessment and review the Since the record does 1979 the make paYment under challenge the Collector of Revenue 376 So 2d 505 507 overpaYments LDR Texas or 762 So 2d 150 152 53 00 Mcr followed either of these on to appeal rfthe taxpayer fails Appeals jurisdiction Co L D Brinkman 1 Cir App no the LDR has two under protest and file tax under LSA R S 47 1576 the Board of Tax by accordance with LSA R S in Appeals made the taxpayer may assessment the Board of Tax to or a challenge the to assessment an in have been The granted dismissing this pOliion of MCls suit Amount Paid Under Protest The protest tax parties do was not dispute that the in response to the LDR due under LSA R S assessment based s 47 606 A rather than LSA R S 47 606 A 1 210 925 25 1 e k paid by MCr under on its calculation of and LAC 61 I 306 A and LAC 61 I306 A 10 1 e 1 k i Having determined hereinabove that the LDR ened in its inappropriate provision an supplemental affirm that we a assessment pOliion refund of this of of law conclude must we 210 925 25 to MCI of the trial court methodology by applying the LDR s Therefore was enoneous summary s that judgment awarding MCI amount Costs appeal the LDR contends the trial On costs of the Under LSA C C P costs Simpson 727 So 2d 555 fixing of court master special costs as Goodman absent taxing it with the of the proceeding 13 comi will 1 Cir 12 28 98 App La not awarding disturb the trial court s abuse of the sound discretion afforded the trial an Id In light of the disposition of this appeal reversing of the award to MCI we find that appropriate Accordingly the trial one costs 97 2675 p appellate An 563 all other as ened in 1920 the trial judge has great discretion in art v well court half of all costs an equitable court s including the special a substantial distribution of the judgment is amended to portion costs is apportion master s fee to each pmiy Remaining Assignments of Enol Pretermitted Having disposed of the issues presented in this appeal we on these bases remaining arguments of the parties find it unnecessmy to address the CONCLUSION For judgment the A special master s costs of court this case at as January 7 2004 it awarded MCI the compensation pursuant the October 3 assigned herein is affirmed the pmi insofar 7 reasons summary sums of is fixed by the trial court in to LSA R S 13 4165 7 500 00 and taxed the fees as judgment 14 380 00 a 2001 is reversed in 31 457 00 against 11 and reasonable amount and taxed The trial court fixed the fee ofthe costs summary the LDR special as master in 75 649 00 Summary judgment is hereby rendered in favor of the LDR Further that dismissing MCI s claim for refund of these overpayments portion court to of the proceeding including the special assess one the January 2004 judgment taxing half of all trial January 2004 of this appeal are summary assessed AFFIRMED IN to the LDR master court costs to all costs 7 500 00 fee of each party of the trial is amended In all other judgment in favor of MCI is affirmed respects All costs equally between the parties PART REVERSED AND RENDERED 12 IN PART AMENDED

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