Tax credit claims likely to be denied

“The reality is that the law ... was not followed. We went back to determine the proper scope of the law.”” Jane Smith, State Revenue secretary

State Revenue Secretary Jane Smith disputed Wednesday that an alternative fuel tax credit possibly could expose state government to $400 million in claims by taxpayers.

Smith said claims for the credit will be reviewed based on the intent of law rather than on guidelines issued earlier this year by her agency.

“The reality is that the law ... was not followed,” she said in written answers to questions on the issue. “We went back to determine the proper scope of the law.”

In the process of drawing up new guidelines for the 2009 law that she authored as a legislator, Smith and state economist Greg Albrecht wrote an impact statement estimating the state’s exposure to be $400 million through mid-August. The estimate was based on the number of eligible vehicles dating back to Jan. 1, 2009, that have yet to receive the credit.

Smith said she disputes that estimate despite the inclusion of her name on the impact statement.

She said the $400 million is based on earlier guidelines that the governor rescinded because they did not reflect the intent of the law.

At issue are financial concerns that imploded over the tax credit three years after Gov. Bobby Jindal signed it into law.

Complicated laws such as the alternative fuel tax credit often require state agencies to write rules or guidelines governing how they are to be applied.

Amid confusion by financial experts on which vehicles to apply the tax credit to, Smith’s predecessor, Cynthia Bridges, authorized a rule allowing taxpayers to claim the lesser of 10 percent of the cost or $3,000 on flexible-fuel vehicle purchases.

Smith and Albrecht reported that flex-fuel vehicles, which are designed to run on more than one type of fuel, accounted for 96 percent of alternative-fuel vehicle registrations in Louisiana over the last four years.

They estimated that state government could be forced to pay $250 million a year to car buyers without a rule change. With a change eliminating flex-fuel vehicles from the credit, the state’s exposure shrinks to $10 million a year.

The governor rescinded Bridges’ guidelines in June. Bridges resigned a day later.

The Jindal administration then got to work on new guidelines.

The biggest change in the rule recently published by the revenue department is the exclusion of flexible-fuel vehicles. Beginning Dec. 20, vehicles must be capable of running independently of petroleum fuel to qualify for the credit.

The state Department of Revenue will hold a public hearing at 10 a.m. Oct. 25 on the new rule. The agency did not give a location for the hearing.

The lingering question is what will happen with vehicle purchases made before the rule change and tax credit requests filed in the interim. The revenue department stopped processing requests once the governor rescinded the original guidelines.

Smith and Albrecht reported a backlog of $4 million in possible claims since the rule’s recension. They said roughly $30 million has been paid or claimed.

Albrecht, chief economist for the Legislative Fiscal Office, said Wednesday that he believes most alternative-fuel vehicle owners will be excluded under the new guidelines, even if they bought their cars or trucks before the rule changed.

“I think that the Revenue Department would say that the new rule negates all that exposure, that the door is closed. I’m pretty sure that’s what they would argue. I can’t opine one way or the other there,” he said.

Only eight to 10 percent of eligible vehicle owners typically have filed for the credit.

Smith said the new rule will be prospective once it is promulgated.

“The claims filed after the emergency rule was rescinded will be reviewed based on the actual intent of the statue, not the (original) rule,” she said in a written response.