In the recent 2-1 decision of Knight v. Kirby Offshore Marine Pac., L.L.C, No. 19-30756, 2020 WL 7393534, at *1 (5th Cir. Dec. 17, 2020), the Fifth Circuit held that a Jones Act Seaman was contributorily negligent for his injuries when following the general orders of his superior.  The Court analyzed the differences between general and specific orders for purposes of a seaman’s contributory negligence in emphasizing that a seaman must act with ordinary prudence when carrying out those orders, though the dissent disagreed with the majority. This is a case to watch.

Plaintiff was a seaman aboard a tugboat owned by Defendant. The tugboat housed a stern line to secure barges when entering and exiting ports. At one point, the line chafed, and the captain ordered Plaintiff and another crewmember to replace it. When the order was given, the weather conditions were adverse consisting of four-foot seas and winds of at least twenty miles per hour. After Plaintiff and the other crewmember removed the chafed line, they place it on the deck next to them. As they were installing the new one, Plaintiff stepped on the chafed line and injured his ankle.

Following a bench trial, the district court concluded that Defendant was negligent because the captain ordered the change of line during bad weather. However, the district court also concluded that Plaintiff himself was contributorily negligent as he failed to watch his footing while replacing the chafed line and failed to move the chafed line to a location where he would not have stepped on it. As a result, the district court assigned equal percentages of fault to each party.

Plaintiff appealed the district court’s decision contending that, as a matter of law, a Jones Act seaman may not be held contributorily negligent when carrying out an order. Plaintiff based his argument on the decision Williams v. Brasea, Inc., 497 F.2d 67 (5th Cir. 1974) in which the Fifth Circuit previously stated that “a seaman may not be contributorily negligent for carrying out orders that result in his own injury.”

Although that language appears clear, the majority determined that it was dicta, which does not have binding authority. Further, the majority surveyed the case law and made a distinction between specific and general orders for purposes of the contributory negligence of the seaman. A specific order is one that must be accomplished using a specific manner and method, leaving the seaman with no reasonable alternative to complete the assigned task. The Fifth Circuit applied a narrow interpretation of the dicta in Williams when stating that a “seaman may not be found contributorily negligent for carrying out a specific order from his superior.” In this case, the captain’s order to change the chafed line was one of a general nature. Thus, as a matter of law, the district court was not precluded from reducing Plaintiff’s award by his proportion of fault.

However, the dissent applied a broader interpretation in concluding that the district court ignored binding and longstanding precedent in Williams that seamen who are injured while following orders cannot be held contributorily negligent.

The narrower interpretation of the majority opinion appears to emphasize the duty of a seaman to act with ordinary prudence when carrying out his orders, particularly when receiving orders of general nature. This is a case to continue watching.

One of the most confounding situations faced by corporate taxpayers engaged in a Louisiana income tax audit is the receipt of preliminary workpapers that disallow interest expense deductions with no opportunity to prove that the interest expense is properly deductible because it is directly attributable to the production of apportionable income. The Louisiana Department of Revenue (the “Department”) takes the position, based on what appears to be an incorrect interpretation of the applicable law, that it is not possible for a company to ever directly trace expenses to apportionable income because money is fungible. Therefore, interest expenses must always be indirectly traced to all classes of Louisiana income, i.e., apportionable, allocable and non-taxable, and taxpayers will be required to add back legitimate deductions that nonetheless, clearly relate to apportionable income.

This narrow reading of the state’s expense allocation provisions, and the federal tax laws on which they are based, often produces incongruous results and assessments which, even auditors may agree, are not logical and don’t make good business sense.  That being said, the Department’s regulations provide formulas (discussed below) which auditors feel bound to follow even when the result is problematic and likely wrong, for example, where a corporate taxpayer is deemed to have incurred a very large amount of interest expense over a number of years in order to generate a very small amount of allocable income.  Such a result ignores the realities of how businesses operate under the premise of defeating “tax arbitrage,” even where no such attempt has been made.

Applicable Louisiana Law

The Louisiana corporation income tax is based on a corporation’s “Louisiana taxable income”[1], which is defined as “Louisiana net income, after adjustments, less the federal income tax deduction allowed by R.S. 47:287.85.”[2]  The “net income” of a corporation is defined as “ the taxable income of the corporation computed in accordance with federal law for the same accounting period and under the same method of accounting, including statutorily required accounting adjustments, subject to the modifications specified” in Louisiana law.[3]  A taxpayer is allowed the same deductions allowed under Internal Revenue Code (the “Code”) Section 163 unless a specific statutory modification exist under Louisiana law.

A multistate business operating in Louisiana is taxed on the combination of its Louisiana net apportionable income and its Louisiana net allocable income.  In addition, Louisiana specifically exempts interest and dividend income from tax.[4]

Louisiana net apportionable income is calculated by subtracting the following amounts from the taxpayer’s gross apportionable income:

  • Expenses, losses and other allowable deductions which are directly attributable to gross apportionable income; and
  • A ratable portion of allowable deductions which are not directly attributable to any item or class of gross income.[5]

Louisiana’s interest expense attribution provisions are intended to prevent taxpayers from receiving a double tax benefit through engaging in a type of “tax arbitrage,” e.g., using borrowed capital to fund activities that produce non-taxable income while using equity capital to fund taxable operations.  Thus, the taxpayer would receive a deduction in determining state taxable income for interest expense incurred to generate income that is not subject to tax in the state.  If the expenses related to generating tax-exempt income are deductible, the taxpayer may be able to generate a tax loss even when there has been an economic gain in the state.  While the policy of requiring an addback of expenses related to income not taxable in the state makes sense, and is adopted by many states, the Department has taken such a narrow view of the statutory provisions addressing interest expense allocation, both in its regulations and on audit, that the end result is that taxpayers are paying tax on income that is simply not taxable under Louisiana law.

Interest Expense Attribution

The Department determines  the “ratable portion” of allowable deductions not directly attributable to any item or class of gross income under La. R.S. 47:287.93(B)(2), based on its regulation, La. Admin. Code 61.I.1130(B) (“the Allocation Regulation”), which provides a formula for allocating interest expense within and without Louisiana.  The Allocation Regulation is based on the theory, taken from federal income tax law, that money is fungible and the debt of a multi-state business will always be used, to some extent, to generate both allocable and apportionable income.  Even though the Allocation Regulation is specifically limited by its title[6] to the computation of allocable income, the regulation states that the same formula for allocating interest expense also applies to deductions disallowed under La. Rev. Stat. § 47:287.81 as being related to non-taxable income.[7]

Under the asset-based formula for indirectly attributing expenses, interest expense is allocated through a ratio “the numerator of which is the average value of assets that produce or that are held for the production of Louisiana allocable income and the denominator of which is the average value of assets that produce or that are held for the production of allocable income within and without Louisiana.”[8]

The Louisiana expense attribution provisions outlined above are based on federal tax  provisions aimed at preventing United States taxpayers from claiming deductions for amounts incurred to generate income not included in federal taxable income by the United States.[9]  There are two Internal Revenue Code  (“Code”) provisions on which the Louisiana law is based: Section 265, which addresses the treatment of interest expense incurred to generate income that is not taxed by the U.S., e.g., government bond income, as well as Code Section 861, which addresses interest expenses related to income that would be taxable in the U.S. but is allocated outside of the U.S. based on the source of the income.

Application of Code Section 265

While the Louisiana law and regulations only specifically incorporate Code Section 861 by reference, it is clear that Code Section 265 is the basis for attributing interest expense to non-taxable interest and dividend income in Louisiana.  While the application of Code Section 265 has not been addressed by the Louisiana courts, the application of Code Section 265 to a very similar California interest expense attribution provision was addressed in Ampacet Corporation vs. Cynthia Bridges, Secretary, Department of Revenue and Taxation.[10]  In Zenith the California State Board of Equalization held that the fact that “section 265(a)(2) and its supporting regulatory scheme concern the allocation of interest expense between taxable and nontaxable activities” indicates that it applies to California’s expense attribution provisions even though Section 265 “by its terms, applies to tax exempt obligations and does not necessarily apply to [tax exempt income].”  On the other hand, Code Section 861 cannot be the basis for Louisiana’s attribution of expenses to exempt dividend and interest income because it does not apply to tax exempt income. Therefore, it makes sense that the federal basis of Louisiana’s attribution of interest expense to non-taxable income must be Code Section 265. Because the its Louisiana statutory counterpart appears to be based on this federal provision, the principles developed under Code Section 265 can be very helpful in interpreting the Louisiana statute so as to accomplish its objectives without taxing income that is simply not taxable by the state.

In fact, in applying Code Section 265 principles to California’s comparable statute attributing expenses to non-taxable income, in Zenith, the Board of Equalization stated that it is necessary to “determine whether the totality of the facts and circumstances establish a sufficiently direct relationship between the borrowing and the investment to allow for a direct allocation between those two items.”  Further, it was only required that the taxpayer establish that the “dominant purpose” for the borrowing was to generate taxable income in order to overcome the California Franchise Tax Board’s assertion that the use of an indirect allocation method was required to attribute the expense to taxable and non-taxable income.  There is no reason that the principles espoused in the well-reasoned Zenith decision should not be helpful to a Louisiana court interpreting the almost identical expense attribution provisions in Louisiana. But fundamentally, Louisiana can only tax income that has a connection with the state and, in fairness, a taxpayer must be given the opportunity on audit to demonstrate that the dominant purpose of a particular borrowing was to produce apportionable income.  The Department’s goal is to get it right under the law and, accordingly, the Department serves taxpayers and the system best by never refusing to acknowledge the reality of any particular situation in which there is no tax avoidance motive and in which imposition of tax ignores both the letter and spirit of the federal law on which Louisiana law is based.

Application of Code Section 861

With respect to the attribution of interest expense to allocable income, the federal predicate for the Louisiana provisions,  Code Section 861(b) addresses whether the expenses of a U.S. company with international operations are related to the production of  U.S. income or foreign source income, i.e., it prevents a U.S. taxpayer from receiving a deduction for expenses paid that are related to non-U.S. activities that are not subject to U.S. income tax.  Code Section 861 provides that, from items of gross income specified as income from sources within the United States, there shall be deducted the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of any expenses, losses or other deductions which cannot definitely be allocated to some item or class of gross income.  The Service’s regulations enumerate specific classes of gross income, e.g., rents, royalties, interest, compensation for services, to which a company’s deductions must be allocated.    The deductions can be directly allocated to a specific class of gross income or, in the alternative, the related federal regulations provide a mechanism for the allocation and apportionment of expenses among classes of income.

The Department has narrowly interpreted Code Section 861 to require that indirect attribution always be used in regard to interest expense deductions based on the concept that money is fungible and a particular expense can never be attributed to a specific item of income.  But this overly broad application of fungibility was struck down by the Board of Tax Appeals (“Board”) in Ampacet Corporation vs. Cynthia Bridges, Secretary, Department of Revenue and Taxation.   In Ampacet, the taxpayer borrowed the funds at issue to purchase Industrial Revenue Bonds (“IRBs”) that were used to build a manufacturing facility in Deridder, Louisiana and deducted the related interest expense in computing its net apportionable income in Louisiana.  On audit, the Department required the taxpayer to instead indirectly allocate the expense to all classes of income using the asset method set out in the regulations.

The Board, however, found that an indirect attribution of the interest expense was not applicable to the IRBs at issue because the taxpayer successfully demonstrated that the money was borrowed for a specific purpose and there were rules requiring that the money to be used for that purpose. The Board stated that if the taxpayer can demonstrate that the “specified purpose” for the borrowing was to generate a particular class of income, the expense can be directly traced to that income.  While the Department has since interpreted the Ampacet decision to apply only to expenses related to IRBs, there is no justification for the Department’s narrow view. Such an interpretation is not supported by state law and directly conflicts the federal application of Code Section 861, which requires that a taxpayer be provided the opportunity to show that the “specified purpose” of the borrowing was to produce apportionable income. Only if the taxpayer cannot meet its burden of proof can the Department require the use of an indirect attribution method.


While determining what amount of a company’s interest expenses were incurred to produce a particular class of income may be complicated, the Department needs to make every effort to get to the right result.  It cannot fall back on administrative convenience and apply a one size fits all approach if this approach truly does not fit all. Based on state and federal precedent, a taxpayer must be given the opportunity to prove that its interest expense can be directly traced to a particular class of income.  The premise that money is fungible cannot support an assessment in which the result is an attempt to tax income that is not taxable by the state under applicable law.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441 or Michael McLoughlin at (504) 620-3351.


[1] La. R.S. 47:287.11(A).

[2] La. R.S. 47:287.69.

[3] La. R.S., 47:287.65.

[4] La. R.S. 47:287.93(A)(2) and La. R.S. 47:287.738(F). For the period July 1, 2015, through June 30, 2018, Louisiana only allowed a deduction for dividends equal to the amount of 72% of those dividends.

[5] La. R.S. 47:287.94(A) (emphasis added).

[6] LAC 61:I.1130 is titled” Computation of Net Allocable Income from Louisiana Sources.”

[7] LAC 61.I.1130(B)(1(d)(iv).

[8] LAC 61:I.1130(B).

[9] See Code Section 861 and the regulations thereunder.

[10]  Appeal of Zenith National Insurance Corp., 98-SBE-001, 1998 WL 15204 (Cal. St. Bd. Of Equalization 1998).  See also Apple, Inc. v. Franchise Tax Bd. 199 Cal.App.4th 1 (Cal. Ct. of App., First District 2011); Appeal of B.B.C.A.F. Inc., OTA Case No. 18011333, 2019 WL 5902553 (Cal.Off.Tax App. 2019).




In a case examining the extent to which the 14th Amendment Due Process Clause limits a state assertion’s of jurisdiction over an out-of-state taxpayer, the Louisiana Court of Appeal for the First Circuit held that the Court lacked personal jurisdiction over an out-of-state corporation for income and franchise tax purposes because the corporation’s contacts with the state were not sufficient to satisfy the minimum contacts requirement of the Due Process Clause.[1] For a number of years, Louisiana and other states have aggressively pursued economic nexus[2] arguments against nonresident entities, and these efforts increased after the U.S. Supreme Court overturned the physical presence requirement for satisfying the substantial nexus standard of the dormant Commerce Clause in Wayfair.[3]

When the U.S. Supreme Court overturned its decision in Quill, which bifurcated the Due Process Clause and Commerce Clause nexus requirements, the extent to which the Due Process Clause would continue to limit aggressive attempts to tax an out-of-state business because less clear. The Court’s decision in Jeopardy Productions demonstrates that the Due Process Clause can effectively be used by nonresident entities to fight excessively aggressive assertions of taxing jurisdiction.

In Jeopardy Productions, the Court dismissed the Louisiana Department of Revenue’s (the “Department”) petition to collect corporation income and franchise taxes from a California company, Jeopardy Productions, whose only contact with the state was that it indirectly derived revenue from intangible property used in Louisiana. Jeopardy Productions owned the intangible property related to the Jeopardy! television game show — for example, the Jeopardy! logo. Jeopardy Productions licensed the distribution rights to the television show to CBS Television Distribution Group (“CBS”), licensed trademarks to International Gaming Tech (“IGT”) for use on gaming machines around the country, and licensed similar marks to other manufacturers and distributors for use on merchandise marketed in a number of states. In turn, CBS sold the distribution rights to television stations, including seven in Louisiana, and IGT manufactured gaming machines that used the logo — placing several of them in truck stops and other locations in Louisiana.

In determining whether Jeopardy Productions satisfied the minimum contacts requirement of the Due Process Clause, the court noted that Jeopardy had no intentional or direct contact with Louisiana. Its only contact with Louisiana was indirectly through the activities of unrelated third parties that contracted with CBS and IGT. Jeopardy’s licensing agreements gave CBS and IGT the sole authority to determine where and with whom they contracted to license or distribute the game show and related merchandise. Also, the licensing agreements specifically stated that Jeopardy Productions was not in a partnership, joint venture, or agency with CBS or IGT. The Court held that this indirect contact with Louisiana was too attenuated to provide the Court jurisdiction over Jeopardy Productions and dismissed the Department’s petition.

The issue of when a Louisiana court has personal jurisdiction over an out-of-state taxpayer has been percolating for many years.[4] While the Department has long attempted to assert taxing jurisdiction over out-of-state businesses with tenuous connections to Louisiana, in recent years it has become more aggressive in issuing assessments and filing lawsuits seeking to collect tax from out-of-state businesses with no direct contacts with the state. Since Wayfair, out-of-state businesses have increasingly refused to appear voluntarily in these cases and a number of nonresident entities have filed exceptions objecting to the lack of personal jurisdiction. These cases are pending.

In Jeopardy Productions, the nonresident entity’s contacts with Louisiana were indirect because the relevant activity was conducted by unrelated third parties. It is important to note, however, that the Court’s holding in Jeopardy Productions should not be interpreted to imply that the Court would have personal jurisdiction over the company in the event the parties were related. Louisiana law recognizes the separate nature of related business entities and there is no indication that a direct or indirect ownership interest in a lower-tier affiliate is sufficient to satisfy the Due Process Clause minimum contacts standard.

Louisiana’s status as a separate-entity jurisdiction continues to frustrate the Department, which seems to be trying to change the law or narrow the limitations the Due Process Clause places on state taxation by taking aggressive audit positions— such as ignoring the existence of separate legal entities — in an attempt to shift the state’s tax burden to out-of-state businesses. At present, the Department is regularly issuing assessments premised on the assertion of jurisdiction over a number of out-of-state businesses that simply own an interest in an affiliate doing business in Louisiana. If the Jeopardy Productions decision stands, it should give the Department pause regarding whether to continue issuing such assessments. The Department is likely to file a writ with the Louisiana Supreme Court. How the Louisiana Supreme Court reacts may give nonresident businesses some indication of the extent to which the judiciary is willing to place limitations on the department’s increasingly aggressive attempts to assert taxing jurisdiction over nonresidents.

In memoriam:  Alex Trebek – 1940-2020

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441 or Michael McLoughlin at (504) 620-3351.


[1] Robinson v. Jeopardy Productions Inc., 2019-1095 (La. App. 1st Cir. Oct. 21, 2020) ___ So. 3d ___ (slip op.).

[2] Economic nexus is the position taken by some states that a nonresident entity can be subjected to tax because it earns revenue in the state, regardless of whether the nonresident has any physical presence in the taxing state]

[3] South Dakota v. Wayfair Inc., 585 U.S. ___, 138 S. Ct. 2080 (2018), overruling the physical presence for commerce clause nexus upheld in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). For a detailed discussion of Wayfair and its implications, see Jaye Calhoun and William J. Kolarik II, “Implications of the Supreme Court’s Historic Decision in Wayfair,” State Tax Notes, July 9, 2018, p. 125.

[4] See, e.g., Bridges v. AutoZone Properties, 900 So. 2d 781 (2005) (nonresident real estate investment trust required to pay corporate income tax on rental payments made by retail stores in Louisiana); Secretary v. GAP (Apparel) Inc., 886 So. 2d 459 (La. App. 1st Cir 2004) (nonresident corporation required to pay Louisiana corporate income tax on royalties received from affiliate for the use of intangibles in Louisiana).

After several years of negotiation and political posturing, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP) trade agreement on November 15, 2020. The RCEP includes several countries from the Southeast Asia and the Pacific region, including Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam. RCEP has the distinction, along with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of serving as one of two major-multilateral free trade agreements signed during President Trump’s administration. The United States and India were originally slated to be member of both RCEP and CPTPP but withdrew under Trump and Modi. Perhaps the U.S. might see a renewed interest in becoming a member under its next foreign-trade regime.

The RCEP intends to establish a modern, comprehensive, high-quality, and mutually-beneficial-economic partnership to facilitate the expansion of regional trade and investment while contributing to global-economic growth and development. The agreement also espouses the goal of creating a liberal, facilitative, and competitive-investment environment in the region, that will enhance investment opportunities and promote, protect, and facilitate investment among the parties.

The trade agreement contains 20 chapters, which include several arenas ranging from e-commerce to the movement of goods, services, and persons, as well as enhanced economic and technical cooperation among the members. The formative chapters provide a framework to foster international trade relations by virtue of uniformity and decreased tariffs.

The RCEP will directly impact approximately 2.2 billion people in the Southeast Asia and Pacific region, which is home to nearly 30% of the world’s population. The combined gross domestic product (GDP) of the members countries represents upward of US$26 trillion. At a time of economic uncertainty caused by the COVID-19 pandemic, the RCEP offers a new alliance to increase the level of economic activity for the foreseeable future. Although it is mere speculation to predict its precise impact on the global economy, RCEP may bring about positive change to at least regional-international trade through an increase of approximately $210 billion to member trade revenues and a $500 billion trade increase over the next 10 years.

Global economy pundits suggest that the RCEP and CPTPP will offset global trade deficits stemming from the U.S.-China trade and tariff conflict, but not likely for the U.S. and China. The agreements show promise to bolster the international trade and domestic economies of the member countries by increasing trade efficiencies and combining and expanding resources relative to manufacturing, mining, agriculture, and technology. The agreement further hopes to maximize supply-chain integration across member countries. But it falls short of expectation in key areas concerning intellectual property, labor regulation, state-owned enterprise, and the environment.

For assistance understanding international trade agreements and navigating the nuances and complexities of international trade, please contact Stephen Hanemann.

As predicted in Kean Miller’s earlier blog post on an interesting developing movement toward centralized sales and use tax collection in Louisiana, the Louisiana Department of Revenue (the “Department”) has expressed its reservations regarding certain aspects of the proposal submitted by the Louisiana Association of Tax Administrators (the “LATA”).  The LATA had worked collaboratively with other local tax organizations to develop the proposal.  See Centralized Sales and Use Tax Proposal Submitted by Local Associations (Oct. 23, 2020).  As expected, the Department is wary of ceding its authority to a newly created Sales Tax Board comprised primarily of local representatives.  In a letter submitted to the chairman of the Centralized Sales and Use Tax Collection Study Group (the “Study Group”), the Department expressed its disinclination to “support any proposal that does not provide equal representation of board membership between state and local government.”

The Department expressed its concerns that, because state sales and use tax revenues account for one third of the revenue collected by the Department annually, and because the Department collects 70% of the revenue that funds state operations, the state tax collector should have equal representation when it comes to setting sales and use tax policies.  As discussed in more detail in our earlier blog post, the LATA proposal recommends that the Sales Tax Board be weighted more heavily in favor of representatives of local government.

Instead of forming a separate Sales Tax Board to oversee state and local sales and use tax collection, the Department suggests that an appropriate alternative would be to merge the new Sales Tax Board into the currently operating Louisiana Sales and Use Tax Commission for Remote Sellers (the “Remote Sellers Commission”).  The Remote Sellers Commission is constituted so as to provide for equal representation between the state and localities. The LATA proposal would place the Remote Sellers Commission underneath the control of the newly created Sales Tax Board.

The Department is also not in favor of having the proposed Sales Tax Board determine sales and use tax policy for both state and local sales and use taxes.  In the alternative, the Department suggests that the Sales Tax Board only be given responsibility for overseeing centralized registration, filing, and remittance of sales and use tax, with the Department and the local collectors each retaining their policy making and auditing functions.

In the end, the Department proposed an alternative to the LATA proposal, which would entirely remove the Department from the proposed Sales Tax Board.  Specifically, the Department proposes that a Local Sales Tax Collection Board be established that deals only with the centralized collection and remittance of local sales and use tax.  The proposed Local Sales Tax Collection Board would be subject to the guidance of the Uniform Local Sales Tax Board.  Under this proposal, the Remote Sellers Commission would remain apart from the proposed Local Sales Tax Collection Board and would continue to collect tax from remote sellers.

Centralized local sales and use tax collection has long been a contentious issue in Louisiana.  While taxpayers have sought centralized and more uniform administration and collection for many years, neither the Department nor the local collectors have been willing to cede the level of autonomy necessary to create a better and more uniform system for taxpayers. As the proposals put forth by the two sides so far contain positions that are not easily resolvable, the Study Group will face an uphill battle in making recommendations that both sides will support.  Certainly the Department’s recommendations, which are likely to weigh heavily with state legislators, do not advance the effort toward the level of uniformity that would make the Louisiana state tax system fairer and would provide welcome improvements designed to facilitate compliance for taxpayers and vendors.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441, or Michael McLoughlin at (504) 620-3351.


The case is Scalia [Secretary of Labor] v. Wynnewood Refining Co., LLC, et al, No. 19-9533 (U.S. Tenth Circuit, October 27, 2020). Wynnewood LLC’s refinery in Oklahoma processes crude oil and on a daily basis produces 70,000 barrels of gasoline, propane, propylene, butane, fuel oils, and solvents. In 2012, one of Wynnewood Refining Co’s boilers—the Wickes boiler—exploded, resulting in two employee fatalities.[1] The Occupational Safety and Health Administration (“OSHA”) cited the refinery’s owner for violating the regulation that creates a standard for process safety management (“PSM”) of highly hazardous chemicals, 29 C.F.R. §1910.119. The PSM standard sets out “requirements [employers must follow] for preventing or minimizing the consequences of catastrophic releases of toxic, reactive, flammable, or explosive chemicals.” §1910.119. The Occupational Safety and Health Review Commission (the “Commission”) upheld the violations.[2]

Wynnewood appealed from the Commission’s decision to the U.S. 10th Circuit, arguing that §1910.119, and therefore the PSM standards, do not apply to the boiler.

On appeal, the Tenth Circuit held that:

  • the boiler could be part of a process as defined in § 1910.119(b) even if it does not contain highly hazardous chemicals;
  • the Secretary of Labor was not required to demonstrate that the boiler posed a risk of releasing a highly hazardous chemical for the boiler to be considered part of a process through interconnection; and
  • Wynnewood waived its argument that the boiler was not interconnected with a PSM-covered process, upholding the Commission’s finding that the boiler is part of a process covered by the regulation because it is interconnected with the FCCU and the alkylation unit.[3]

“Process” Definition

The PSM regulation applies only to “process[es] which involve[]” a threshold amount of highly hazardous chemicals. §1910.119(a)(1). The regulation provides a specific definition of “process” that is broken out into two sentences.

  • The first sentence states that “process” is “any activity involving a highly hazardous chemical including any use, storage, manufacturing, handling, or the on-site movement of such chemicals, or combination of these activities.” 29 C.F.R. § 1910.119(b).
  • The second sentence explains what constitutes a single process: “For purposes of this definition, any group of vessels which are interconnected and separate vessels which are located such that a highly hazardous chemical could be involved in a potential release shall be considered a single process.”

The Commission’s Determination

In analyzing the two-part definition, the Commission determined the Wickes boiler was part of a process covered by the regulation—in other words, that it was part of a “PSM-covered process” or was “PSM-covered.”

First, the Commission determined that the Wickes boiler was interconnected with the FCCU and the alkylation unit, both of which are covered by the PSM standard.

Second, and alternatively, the Commission determined that the Wickes boiler was located such that a highly hazardous chemical could be involved in a potential release.

The Tenth Circuit Opinion

On appeal, Wynnewood argued that the PSM regulation does not apply to the Wickes boiler because the Wickes boiler did not contain any highly hazardous chemicals and was not interconnected.

The Tenth Circuit rejected both of Wynnewood’s arguments holding that the first sentence of the regulation does not require a vessel to contain a highly hazardous chemical in order to be part of a process—“any activity involving a highly hazardous chemical including any use, storage, manufacturing, handling, or the on-site movement of such chemicals, or combination of these activities.” According to the Court, “the comprehensive phrase ‘any activity involving’ captures a wide swath of vessels in that they need only be part of an any activity that involves a highly hazardous chemical.”

Next, the Court rejected Wynnewood’s argument, focusing on the second sentence of the process definition, that an interconnected vessel is not part of a process unless it poses a risk of catastrophic release of highly hazardous chemicals—“For purposes of this definition, any group of vessels which are interconnected and separate vessels which are located such that a highly hazardous chemical could be involved in a potential release shall be considered a single process.” §1910.119(b)(emphasis added). Wynnewood argued that the requirement that vessels be “located such that a highly hazardous chemical could be involved in the potential release” applies to both “separate vessels” and to “vessels which are interconnected.” Applying a purely textual analysis, the Court disagreed, finding instead that:

the text of the regulation is unambiguous: the phrase “such that a highly hazardous chemical could be involved in the potential release” applies only to “vessels which are located.” And therefore, the Commission did not err in concluding that the Secretary need not demonstrate that the Wickes boiler posed a risk of catastrophic release of highly hazardous chemicals in order to be part of a process. Rather, he need only prove that the boiler was interconnected with a PSM-covered process.[4]

Thus, the Court agreed with the Commission that the Wickes boiler was interconnected physically by pipeline to the FCCU and Alkylation Unit, both of which were indisputably PSM-covered processes by virtue of the flammables contained in each. This connection, according to the Court, was sufficient for PSM coverage.

Wynnewood had attempted to challenge this conclusion. But the Tenth Circuit disregarded the argument because Wynnewood had not made it in its opening brief, only in its reply brief. That is, Wynnewood’s opening brief focused on whether interconnected vessels must pose a risk of the release of highly hazardous chemical, not on whether the Wickes boiler was interconnected with the FCCU or Alkylation Unit.[5] So, the Court ruled that Wynnewood had waived the argument and upheld the Commission’s decision on interconnectedness.[6]

The Dissent

The dissent found convincing that the boiler itself contained no highly hazardous chemicals (abbreviated as “HHC” in the dissenting opinion). The dissent focused on the two-part structure of the “process” definition and reasoned that:

The two sentences reflect two ways that a vessel can constitute part of a single PSM “process”:

  1. if the vessel is used in an “activity” involving an HHC or
  2. if a group of vessels is “interconnected” or “located such that [an HHC] could be involved in a potential release.”

Thus, according to the dissent, under the first sentence, the boiler could be subject to PSM as a PSM “activity” if the boiler had been used in a process with the FCCU or Alkylation Unit. However, the Commission and majority opinions did not turn on the first sentence. Rather, the Commission and Tenth Circuit applied the PSM standard based on the boiler’s interconnection with the FCCU and Alkylation Unit. The reliance on the second sentence rather than the first was dispositive to the dissent. It noted that the underlying decision from the initial administrative law judge relied heavily on the Fifth Circuit case of Delek Refining, Ltd., which focused on whether a piece of equipment was part of a covered activity. Delek Refining, Ltd., 25 BNA OSHC 1365 (No. 08- 1386, 2015), 2015 WL 1957889 at *7, aff’d in relevant part, 845 F.3d 170 (5th Cir. 2016). Delek concluded that the at-issue-equipment (a positive pressurization unit located in the control room of the FCC) was “part of a ‘process’ covered by the PSM standard because [the equipment was] an integral part of the ‘manufacturing, handling [and] on-site movement of [highly hazardous chemicals].” Id. (quoting the first sentence of the “process” definition in 29 C.F.R. § 1910.119(b)).

Delek thus rested on the first sentence of the regulatory definition of “process.” Because Delek focused on the first sentence and not whether vessels were interconnected pursuant to the definition in the second sentence, the Commission had rejected the administrative law judge’s reliance on Delek.

Therefore, according to the dissent, the only question before the Court was whether the second sentence meant that the boiler was PSM covered. And, in reviewing the preamble and history of the process definition, the dissent found that the second sentence covered vessels only if they contain an HHC:

Given this explanation [from the preamble to the rule defining “process”], the second sentence unambiguously applies only when HHCs exist in the interconnected or nearby vessels.

Note that the Tenth Circuit had declined to consider the history and preamble of the rule because it found the language of the definition to be unambiguous.

Reprocussions of the Tenth Circuit Decision

So where does this leave us? The holding in this case seems to stand for the proposition that every boiler (or other equipment) that is physically connected to a PSM covered unit is also PSM covered, regardless of whether it contains highly hazardous chemicals and regardless of whether it poses a risk of releasing a highly hazardous chemical.

This is not necessarily in contrast to prior OSHA decisions. For instance, the Delek case referenced by the dissent cited a 2008 OSHA interpretive letter stating that: equipment or connections which contain utility services, process cooling water, steam, electricity, or other non-regulated substances may be considered part of a process if such equipment could cause a regulated substance release or interfere with mitigating the consequences of an accidental release. OSHA Std. Interp. 1910.119 (D.O.L.), 2008 WL 2565070 (Jan. 31, 2008). Moreover, OSHA has previously advised that machinery not containing highly hazardous chemicals can nonetheless be a part of a process, insofar such machinery is used to control, prevent, or mitigate catastrophic releases. OSHA Std. Interp. 1910.119 (D.O.L.), 1997 WL 33798325 (Feb. 28, 1997). Thus, the boiler need not necessarily contain highly hazardous chemicals; rather, the question under the prior OSHA interpretive guidance is whether the boiler could cause a regulated substance release or interfere with mitigation efforts so as to qualify it as “any activity involving a regulated substance” under the first sentence of the definition—“any activity involving a highly hazardous chemical including any use, storage, manufacturing, handling, or the on-site movement of such chemicals, or combination of these activities.” 29 C.F.R. § 1910.119(b).

Accordingly, the analysis and Court’s reasoning under the first sentence is not necessarily in contrast to current understanding of the definition of a process. But, the Tenth Circuit did not render its holding under that analysis. Rather, it held that the interconnectedness was dispositive, upholding the Commissions’ finding that:

[T]he PSM standard’s use of the term “interconnected” makes it irrelevant whether the Wickes boiler is directly connected to, or involved with, the processes of the FCCU and Alkylation Unit. The main point is that [the refinery fuel gas] generated by the FCCU and the Alkylation Unit is piped to the Wickes boiler, and steam from the boiler is piped to the FCCU and Alkylation Unit; the Wickes boiler is therefore one of a “group of vessels which are interconnected,” 29 C.F.R. § 1910.119(b), and therefore covered as part of a “process” by the PSM standard. 29 C.F.R. § 1910.119(a)(1)(ii).[7]

Thus, the Tenth Circuit’s holding affirms the Commission’s finding that the second part of the second sentence of the process definition—“which are located such that a highly hazardous chemical could be involved in a potential release”—is only applicable to “separate vessels” and not to “any group of vessels which are interconnected.”

So there now seems to be three tests for determining whether a piece of equipment is PSM covered as a process: (1) the traditional understanding of a “process” under the threshold highly hazardous substance analysis; (2) the Delek analysis of whether the equipment could cause a regulated substance release or interfere with mitigation; and (3) the Wynnewood test of whether the equipment is physically interconnected with a PSM covered unit or is located such that it could be involved in a release. The aggregation of these tests seems to implicate nearly every piece of equipment at a facility. Thus, facilities may need to reevaluate the units and equipment covered under the facility’s PSM plan.


[1] The Wickes boiler, located about 100 feet from the reactor column in the refinery’s Fluid Catalytic Cracking Unit (FCCU), is one of four boilers in the refinery providing steam to the 225-pound “steam header,” which then routes steam for use in various processes throughout the facility. See

[2] The decision was originally before a single administrative law judge. Both parties petitioned for review of the judge’s decision to a panel of the commission. See Panel Opinion available at: The panel’s decision was then appealed to the Tenth Circuit.

[3] Because the Tenth Circuit affirmed the violations based on its conclusion that the Wickes boiler was interconnected to a PSM-covered process, it did not reach Wynnewood’s argument that the Commission erred in finding that the Wickes boiler was part of a process because it was located “such that a highly hazardous chemical could be involved in the potential release.” See §910.119(b). And, according to the Tenth Circuit, because the holding was based on the text of the regulation rather than deference to the Secretary’s interpretation, it did not reach Wynnewood’s arguments about why the Court should not defer to the Secretary’s interpretation.

[4] This is the same conclusion that OSHA proffered in an interpretation opinion dated June 7, 2007 (72 FR 31457):

The presence of the word “or” between interconnected and co-located vessels in the final rule demonstrates that two potential avenues exist to find a covered process when several aspects may be involved in the overall process. The plain language of the definition establishes two distinct burdens of proof when considering the applicability of PSM to an interconnected or a co- located process. With respect to a co-located process, OSHA would be required to demonstrate as part of its prima facie case that unconnected but co-located processes are situated in a manner that a release from one process could contribute to the release of the other. In contrast, the definition of “process” contains no such requirement for an interconnected process. In other words, OSHA’s intent is that the phrase ‘‘which are located such that a highly hazardous chemical could be involved in a potential release’’ modifies only the immediately-preceding “separate vessels,” making the entire phrase parallel to the free-standing phrase “any group of vessels which are interconnected.” Thus, there is no additional requirement on OSHA to show the potentiality of a release with respect to interconnected (as opposed to separate) vessels. Rather, the PSM standard presumes that all aspects of a physically connected process can be expected to participate in a catastrophic release.

(emphasis added).

[5] Whereas Wynnewood waived its right to argue against interconnectivity, a real question of fact and law exists in this question.  Boiler construction involves a fire box where gas is burned and which also contains a vessel.  The vessel is a pressure vessel that contains water and steam.  Gas is burned in the fire box and the hot flue gas contacts the outside of the pressure vessel.  Thus the gas from the fuel gas system is not interconnected with the interior of the vessel and only hot combusted gases are in contact with the exterior of the vessel.  The concept interconnectivity is intended to cause aggregation of materials found inside connected vessels.  A fire box is not a vessel.

[6] Secretary of Labor Eugene Scalia (the “Secretary”) also appealed from the order, arguing that the Commission erred in failing to characterize the violations as repeat violations. The Court also determined that the violations are not considered “repeat” violations under 29 U.S.C. § 666(a), which permits increased penalties for “employer[s] who willfully or repeatedly violate.” Substantial evidence supported the Commission’s finding that there was no substantial continuity between Wynnewood Inc. (prior owner) and Wynnewood LLC (current owner).

[7] Commission Opinion, pg. 10 (available at:

On October 16, 2020, Governor John Bel Edwards signed into law Senate Bill 33 amending the Louisiana Business Corporation Act (LBCA) in several areas.

Remote Shareholder Meetings (La. R.S. 12:1-709)

The new law, which became Act No. 3 of the 2020 Second Extraordinary Session, allows for meetings of shareholders to be held solely by means of remote communication, unless the corporation’s bylaws expressly require otherwise. Although the prior law allowed shareholders to participate in any shareholder meeting by remote communication, it was unclear if an in-person meeting was required to be held simultaneously with any remote participation. The LBCA is now clear that virtual-only shareholder meetings are acceptable, a practice which is expected to increase as a repercussion of the COVID-19 pandemic.

Corporate Name Changes (La. R.S. 12:1-1005)

Act No. 3 also empowers the board of directors to change the name of a corporation without shareholder approval, unless the articles of incorporation provide otherwise. Under the prior law, the board was only allowed to change the name of a corporation without shareholder approval in very limited scenarios, such as changing the word “corporation” or “company” to an abbreviation or similar word or adding or deleting a geographical attribution to the name.

Parent-Subsidiary Mergers (La. R.S. 12:1-1105)

Under the new law, a parent corporation may carry out a merger with a subsidiary of which it owns at least 90% of the outstanding voting shares without the approval of the board of directors or shareholders of the subsidiary and, when the parent corporation will be the surviving entity, without the approval of the parent corporation’s shareholders. These powers are restricted to the extent otherwise provided in the articles of incorporation of any corporation involved in the merger or, in the case of a foreign subsidiary, if prior approval by the subsidiary’s directors or shareholders is required by the laws under which it is organized.

Louisiana corporations which are considering taking advantage of the new rules on remote shareholder meetings, name changes, or parent-subsidiary mergers should first carefully review their bylaws and articles of incorporation to make sure there are no restrictions to doing so.

On October 16, 2020, the attorney representing the Louisiana Association of Tax Administrators presented a proposal for centralized local sales and use tax collection in Louisiana (the “Localities’ Proposal”) to the Centralized Sales and Use Tax Administration Study Group (the “Study Group”).  The Study Group was created by the Legislature earlier this year (HR 31, 2020 1st Ext. Sess.) to make recommendations to the 2021 Legislature on the best method for centralizing local sales and use tax collection.  The Study Group is required to submit a report to the speaker of the House of Representatives and the president of the Senate by November 1, 2020.  The Localities’ Proposal was the first step in formulating a general framework to consolidate the current sales and use tax collection systems into a single collector system.

The Localities’ Proposal would create a new, yet to be named, single sales tax board (the “Sales Tax Board”) that would serve as a single point of electronic filing, registration (including a single registration number), payment, and policy advice.  A de minimis exception to the electronic filing requirement would be included for certain small dealers that desire to continue to prepare and file paper returns or remit tax in person.  The Sales Tax Board would be created through a constitutional amendment as a statewide political subdivision outside of the Executive Branch to recognize its status as a joint state and local authority.  The proposed Sales Tax Board would consolidate currently existing sales and use tax authorities and mechanisms.  Specifically, Parish E-File System and the Louisiana Sales and Use Tax Commission for Remote Sellers (the “Remote Sellers Commission”) would be relocated under the Sales Tax Board, and the Board would be vested with all statutory duties and obligations of the Louisiana Uniform Local Sales Tax Board.

The proposed Sales Tax Board would be composed of three divisions: (1) the Remote Sellers Division; (2) the State Division; and (3) the Local Division.  The State and Local Divisions would have sole authority over state-only or local-only issues or guidance, such as state-only or local-only exemptions.  The entire Sales Tax Board would be responsible for addressing issues or issuing policy guidance on issues that affect both the state and the localities.  The Sales Tax Board would have the authority to promulgate rules and regulations under the Administrative Procedure Act, the power to issue binding policy advice to the Department and local collectors, to issue private letter rulings, to promulgate and develop rules and standards for a state-wide voluntary disclosure program, a single refund claim, and multi-jurisdictional audits.  If the Louisiana Department of Revenue (the “Department”) or a local collector objected to policy advice the Board proposed to promulgate, the aggrieved  party would have the right to appeal to the Louisiana Board of Tax Appeals.  The proposed Sales Tax Board would also be permitted to procure the development of software and enter into agreements with the Louisiana Department of Revenue (the “Department”) and local collectors.

In addition to having the power to promulgate binding policy guidance, the proposed Sales Tax Board would develop and implement an electronic filing and remittance system similar in function to the existing Parish E-File system.  The Sales Tax Board would not own taxes remitted to it by dealers.  Rather, all taxes remitted to the Board would remain the property of the relevant taxing authority and would be distributed to the appropriate taxing authority daily.  Local distributions would be disbursed on a parish-wide level.  Data the Department and local collectors receive through the current electronic filing software systems would continue to be collected and would also be distributed to the relevant taxing authority daily.

Under the Localities’ Proposal, the Department and the local collectors would retain all of their collection and enforcement powers, including all audit rights (e.g., the right to determine which dealers are audited and who conducts the audit).  Similarly, the Department and the local collectors would retain their existing powers to issue assessments or file summary or ordinary proceedings.  Local collectors would also retain the responsibility for disbursing funds to the various sub-parish local taxing authorities.

In recognition of the fact that creation of the Sales Tax Board would be an inherently political process, the Localities’ Proposal intentionally avoided specifics regarding the composition of the proposed Sales Tax Board and its funding.  However, for discussion purposes, the Localities’ Proposal outlined a seven member Board to be composed of the executive directors (or their proxies) of four local associations (the Louisiana Sheriff’s Association, the Louisiana Municipal Association, the Police Jury Association of Louisiana, the Louisiana School Board Association).  Similarly, the proposal did not suggest the state sources of revenue to be used to fund the Sales Tax Board but did propose to use existing local sources of funding to fund the Proposed Board’s local activities.

The Localities’ Proposal also included several “other considerations” that were not relevant to the creation or mission of the proposed Sales Tax Board.  Those considerations included abolishing the distinction between tax exemptions and tax exclusions in favor of only exemptions.  The localities also proposed the elimination of optional exemptions.  Finally, the proposal suggested that the Sales Tax Board be tasked with tracking the job creation and economic activity associated with tax exemptions to review an exemption’s effectiveness.

The Localities’ Proposal is endorsed by the Louisiana Sheriff’s Association, the Louisiana Municipal Association, the Police Jury Association of Louisiana, the Louisiana School Board Association, and the Louisiana Association of Tax Administrators.

During the Study Group meeting, the Localities’ Proposal was subject to vigorous questioning by Study Group members representing a variety of interests.  Members representing the business community were concerned that the proposal retained the existing tax enforcement mechanisms, which can result in a taxpayer being continually subject to audit by different local collectors.  Members representing localities were concerned about whether ceding the right to directly collect tax to the proposed Sales tax Board would impact a locality’s bond ratings.  Concerns were also raised about the composition of the proposed Sales Tax Board, e.g., the number of members, and how funding would be divided between the state and the localities.  Specific concerns related to the composition of the proposed Sales Tax Board revolved around whether the state would be willing to cede is regulatory authority to the Sales Tax Board, especially if local representatives made-up the majority of the Board’s members.  Concerns were also raised regarding whether the proposed Sales Tax Board would actually result in a cost savings to the state and local taxing authorities.


The Localities’ Proposal appears to represent a good-faith effort by the local associations to work towards centralized sales and use tax collection.  However, many obstacles remain in the path of a true centralized sales and use tax regime.  In the past those obstacles have proved to be insurmountable but the fact that the local associations were able to agree on a proposed framework is a significant development.

As pointed out during the meeting, while the Localities’ Proposal does address the administrative issues related to filing returns and has the potential to result in more certainty through uniform guidance, it is only a partial solution and does not sufficiently address the most significant taxpayer concern: the lack of centralized enforcement and collections.  As a result, even if the proposed Sales Tax Board were to come to fruition, a multi-jurisdictional taxpayer would still be subject to seemingly unending local audits, which oftentimes require legal representation and litigation to resolve.  The cost incurred to defend multiple state and local audits can be significant and the threat of those audits is an impediment to doing business in the state.  At a minimum a mechanism for streamlining the audit process should be considered.  For example, as proposed during the meeting, when one taxing authority initiates an audit the Sales Tax Board could notify all other taxing authorities of the audit and give them a window for initiating an audit of the same taxpayer for the periods at issue.  Under this proposal, a taxing authority that chose not to initiate an audit during this window would be prohibited from later auditing the same taxpayer for the same tax periods.

There are also significant political hurdles to overcome related to the composition of the proposed Sales Tax Board and its funding.  As noted during the meeting, the state in particular may be unwilling to cede its regulatory authority to the Sales Tax Board if the Board’s membership is composed of a majority of local representatives.  It is possible this hurdle could be overcome by lowering the bar for appeals to the Board of Tax Appeals by an aggrieved taxing authority.  Under the current Uniform Local Sales Tax Board Rules, the Board of Tax Appeals may only overrule a proposed private letter ruling appealed by a local taxing authority if the “ruling is contrary to law or a controlling ordinance, conflicts with pre-existing jurisprudence, or otherwise is clearly arbitrary and capricious.”[1]  This standard is difficult for the aggrieved taxing authority to overcome and rarely results in a successful appeal.

The “other considerations” in the Localities Proposal, are not relevant to the Study Group’s mandate and appear to represent an attempt by the local taxing authorities to exert more control over exemptions and prejudice tax litigation in favor of the taxing authority.  The proposal to abolish the distinction between tax exemptions and tax exclusions is particularly egregious.  The taxing authorities are likely seeking to remove this distinction because the burden to prove taxability when an exclusion is at issue is on the taxing authority.  In contrast, the taxpayer has the burden of proving an exemption applies.  Because “exclusions” from tax are essentially those transactions which are not taxed in the first instance (for example, transactions involving sales of immovable property, sales of services or sales to governmental entities and the United States government), it is unclear how the distinction between exclusions and exemptions could be accomplished short of making all transactions taxable and subsequently exempting certain transactions from tax.  This would be a significant departure from the current system in Louisiana and create substantial additional complexity in Louisiana’s already overly complex sales tax laws.

It is not certain that the centralization effort will ultimately be successful, or whether it will provide much needed certainty and uniformity to taxpayers and the business community, but the effort is a significant step forward because, historically, the localities refused to consider centralized collection in any form.  While the proposal has been formulated with input from, and has been well received by, local government, it is clear that such a significant overhaul of the Louisiana sales and use tax system will require extensive coordination to facilitate the day-to-day operations and consolidation of the various taxing authorities collection operations.  This will not be accomplished quickly.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Willie Kolarik at (225) 382-3441, or Michael McLoughlin at (504) 620-3351.


[1] La. R.S. 47:337.102(D)(3).


On Wednesday, October 21, 2020, the CDC issued an expanded definition of who is considered a “close contact” for purposes of determining who should self-quarantine for 14-days following an exposure to a COVID-19 confirmed individual.  Previously, the CDC defined “close contact” as someone who was within six feet of a confirmed COVID-19 positive individual for a prolonged period, which the CDC indicated was generally 15 continuous minutes or more.

Now, the CDC provides that a person can become infected even if they were within 6 feet of a confirmed COVID case for only a short period if they were around them a cumulative total of 15 minutes or more over a 24-hour period.  In other words, short intervals of being around someone who is later confirmed to be a COVID positive case can still make that person a “close contact” if the individual exposures added together over the work day or shift equal or exceed 15 minutes total.

This broader definition significantly expands the universe of those who may have to self-quarantine when the employer learns of a laboratory confirmed COVID-19 case in the workplace.  Many employers are having to do contact tracing on their own without the assistance of public health agencies.  That task just got harder in light of this expanded definition.  Employers will now have to account for all short duration contacts over the work day or 24-hour period for your employees, sometimes having to go back more than a week depending on when the COVID positive individual first had symptoms or was tested.

On October 20, 2020, the Louisiana Supreme Court issued a major decision in an ad valorem (property) tax case involving oil and gas wells.  D90 Energy, LLC v. Jefferson Davis Parish Board of Review, 2020-C-200 (La. 10/20/2020).

D90 Energy, an independent oil and gas operator, purchased from Goldking two gas wells and one salt-water disposal well for $100,000.  Facing an assessment of over $3 million, the producer paid over $100,000 in taxes under protest for two of the tax years and appealed the Assessor’s decision.  The Louisiana Tax Commission reduced the assessed value to $235,000, considering a Tax Commission regulation that allows recent, valid sales that are properly documented to be a measure of fair market value.  The District Court for Jefferson Davis Parish affirmed the Tax Commission’s correction of the Assessor’s valuation, but the Third Circuit Court of Appeal reversed, reasoning that the Tax Commission should have afforded “much discretion” to the Assessor’s determination of value.  The Louisiana Supreme Court granted D90 Energy’s application to review the Third Circuit’s decision.

In a unanimous decision, the Supreme Court reversed the Court of Appeal’s decision and reinstated the Tax Commission’s decisions in favor of D90 Energy.  The Supreme Court found that the Tax Commission properly corrected the Assessor’s market value determination by considering the recent arms-length sale from Goldking to D90 Energy.  The Supreme Court found that the Tax Commission possessed the authority to correct the Assessor’s valuation, and the record evidence supported the correction.  The recent sale, as opposed to regulatory tax tables, was a proper measure of value for D90 Energy’s wells under the facts.  The Supreme Court also found that the Tax Commission was not limited to reviewing just the information provided to the Assessor, but could take evidence, hear testimony, and consider the administrative record established before it in an appeal of an Assessor’s determination.  Finally, the Supreme Court addressed the effect of a taxpayer’s failure to pay under protest when it is successful at a Tax Commission hearing, finding that such payment is not required when the taxpayer prevails before the Tax Commission.

This ruling is a key Louisiana tax decision on the scope of authority possessed by Assessors in ad valorem (property) tax matters and for the Louisiana Tax Commission as a reviewing body.

** Kyle Polozola and Phyllis Sims of Kean Miller LLP represented D90 Energy, LLC in this litigation.


Kean Miller’s oil and gas and tax attorneys stand ready to assist on matters of ad valorem (property) tax that affect energy companies and other businesses.