Traigle v. Gulf Coast Aluminum Corp.
| Decision Date | 12 October 1982 |
| Docket Number | No. 15036,15036 |
| Citation | 422 So.2d 1190 |
| Parties | Joseph N. TRAIGLE, Collector of Revenue, State of Louisiana v. GULF COAST ALUMINUM CORPORATION, et al. |
| Court | Court of Appeal of Louisiana — District of US |
Riley F. Boudreaux, Jr., Baton Rouge, for plaintiff-appellant Joseph N. Traigle, Collector of Revenue, State of La.
R. Gordon Kean, Jr., Baton Rouge, for defendants-appellees Gulf Coast Aluminum Corp., et al.
Before ELLIS, PONDER and SAVOIE, JJ.
By this suit, the Collector of Revenue of the State of Louisiana is attempting to collect $272,817.00 in corporation franchise taxes allegedly owed by Gulf Coast Aluminum Corporation, now known as Conalco, Inc. From a judgment rejecting its demands, plaintiff has appealed.
The trial judge has rendered written reasons for judgment, which adequately dispose of the various issues presented by this case, with which we agree, which we adopt as our own, and attach hereto as an appendix.
For the reasons therein set forth, the judgment of the trial court is affirmed at plaintiff's cost.
AFFIRMED.
APPENDIX
This matter was tried on October 30, 1979. Counsel for the plaintiff, Collector of Revenue, State of Louisiana (hereafter "Collector") and counsel for defendants, Gulf Coast Aluminum Corporation, Consolidated Aluminum Corporation and Conalco, Inc. (hereafter collectively referred to as "GCA") filed either or both pretrial and post trial memoranda, and this Court heard oral argument of counsel on November 20, 1979.
Pursuant to the provisions of La.R.S. 39:991 et seq. (Louisiana's Industrial Inducement Statute), the Parish of Calcasieu (Parish) and GCA entered into agreements whereby the Parish would issue Industrial Development Bonds, the proceeds of which would be and were used to construct a manufacturing facility to be leased to GCA. The lease payments would be used to pay the principal of and interest on the bonds as they came due. The Collector has filed this suit to collect franchise tax which it maintains GCA owes. The Collector's position, basically, is that the bond proceeds used by the Parish to construct the manufacturing facility should have been included on the books of GCA to establish its franchise tax basis. The Collector adopted various arguments: that the lease transaction was actually a sale; that the bond proceeds constitute "borrowed capital" by GCA; and, that GCA acquired a "material equity," as that term is used in the accounting profession, in the property and lease agreement. GCA contends that it located its facility in Calcasieu in reliance upon Louisiana's industrial inducement package, of which R.S. 39:991 et seq. was an integral part, that the Parish properly followed the requirements of La.R.S. 39:991 et seq. in structuring the transaction and that R.S. 39:991 et seq. provides a special financing arrangement which, if correctly followed, does not result in franchise tax liability to the lessee-industry which leases from the municipality or other authorized local government issuing the bonds.
After considering the testimony and evidence at the trial, the argument of counsel, the briefs and law, this Court finds that GCA has incurred no franchise tax liability to the State of Louisiana for reasons hereafter set forth.
The Internal Revenue Service was requested to and did review and rule by private letter ruling on the proposed transaction between GCA and the Parish of Calcasieu. The IRS ruled that since bonds issued under the provisions of R.S. 39:991 et seq. were bonds of Calcasieu Parish ("municipal bonds") they were exempt from federal taxation.
Bond counsel testified that if the ruling request would have stated that the proposed transaction would result in the inclusion of the bond proceeds in the franchise tax base of GCA, the IRS would have denied exempt status.
The Parish thereafter called a special election for the purpose of submitting to the qualified property tax paying voters the question of issuing $62,700,000 in industrial revenue bonds of the Parish and the issue was approved by the voters. The State Bond and Tax Board and the Board of Commerce and Industry approved the bonds. Bond counsel, by letter opinions, stated that all requirements of La.R.S. 39:991 et seq. had been complied with. The Parish then acquired certain rights in tracts of property: a right to occupy a tract owned by Lake Charles Harbor and Terminal District and full ownership of another tract which when joined with the first, make up the tract upon which the manufacturing facility was ultimately constructed.
The comprehensive Lease Agreement entered into between the parties reflects that the Parish, as Lessor, is the owner of the rights in the tracts acquired and that GCA is the lessee. The Parish, in a Mortgage and Indenture of Trust, obligates itself as owner of the property and obligor on the bonds to Morgan Guaranty Trust Company of New York, Trustee for the bondholders. The Indenture is the security instrument by which the obligation of the Parish is secured. GCA is not a party to that instrument.
The foregoing is not an ordinary financing transaction; it is one specially authorized by La.R.S. 39:991 et seq., one of the "right to profit" laws enacted as part of a comprehensive industry inducement program enacted in 1964. This industrial inducement program, (including La.R.S. 39:991, and others) was enacted to make industrial location in Louisiana more economically desirable. One of the reasons an industry such as GCA would be attracted to Louisiana through the industrial inducement program is the fact that such industry could lease an industrial site without the costs (including franchise taxation) inherent in ownership.
Taking this statutory background into consideration and applying recognized rules of statutory construction, it is obvious that the industrial bonds issued by the Parish to purchase land and construct the plant leased to GCA, strictly in accordance with La.R.S. 39:991 et seq., cannot justifiably be included in GCA's corporation franchise tax base. To find otherwise would be inconsistent with the legislative intent in enacting the provisions of R.S. 39:991 et seq.
In seeking to determine legislative intent, it is a well settled maxim that laws should be construed so as to give them effect and not render them meaningless. State v. Mestayer, 144 La. 601, 80 So. 891 (1919); Jordan v. LeBlanc and Broussard Ford, Inc., 332 So.2d 534 (La.App., 3d Cir., 1976); Hills v. Bonin, 329 So.2d 773 (La.App., 1st Cir., 1976); Peyrefitte v. Harvey, 312 So.2d 159 (La.App., 1st Cir., 1975). The effectiveness of the industrial inducement statutes would be greatly diminished,...
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...determined that the contested agreements were "in fact leases" and based on the case of Traigle v. Gulf Coast Aluminum Corp., 422 So.2d 1190 (La.App. 1 Cir. 1982), writ denied, 429 So.2d 143 (La. 1983), it concluded that System Fuels' obligations pursuant to the leases were not borrowed cap......
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