Dear Mr. Broyles:
You have requested an opinion of the Attorney General regarding a contract between Vernon Parish (Parish) and the Revenue Recovery Group (RRG), under which RRG will conduct sales and use tax audits on various business entities to recover unpaid taxes. You specifically ask whether the fee arrangement under the contract is legally permissible.
The contact provides that RRG shall be compensated as follows:
The per diem rate of compensation for the personnel of RRG is $75 to $200 per hour, depending upon expertise, plus reimbursement for any and all reasonable expenses, the total of which shall not exceed 50% of the aggregate delinquent sales/use/rental tax, penalties, and/or interest collected. This compensation shall not exceed the amounts permitted by law. The compensation due to RRG is referred to herein as "fees". RRG shall receive no fees unless RRG is successful in facilitating collection of delinquent sales/use/rental taxes, penalties and/or interest. In no event shall the fee exceed 50% of the taxes, penalties and/or interest collected.
Initially, it should be noted that the language contained in the contract refers to both a "per diem" and "per hour" rate of compensation. These two methods of payment appear to be conflicting. We recommend that the compensation verbiage be modified to conform to the language in R.S. 33:2719, quoted infra.
The law authorizing the audit and/or investigation of any public taxpayer for the purposes of the enforcement and collection of taxes is found at R.S. 33:2719. This office recognized the authority to conduct such audits in Attorney General Opinion No. 97-26. At that time, Section 2719(B) provided the following with regard to the rate of compensation for the collection entity:
The rate of compensation shall be on an hourly basis, plus reasonable expenses. The payment shall not exceed thirty percent of taxes collected pursuant to an audit if payment is contingent on the actual collection of taxes.
Section 2719 was amended by Act No. 1140 of the 1997 Regular Session of the Louisiana Legislature. It now provides, with respect to compensation, as follows:
The rate of compensation shall be on an hourly basis, plus reasonable expenses.
As can be gleaned from the above, the thirty percent ceiling previously imposed was repealed.
In the contract at issue, the compensation is fixed at the per diem rate of $75 to $200 per hour, plus reasonable expenses. In the event collection is effected, the hourly fees assessed can not exceed 50% percent of the taxes, penalties, and/or interest collected. In the event the audit does not result in the collection of said taxes, the tax recipient will not be charged for the audit.
We find the above fee arrangement to be legally permissible. In accord are Attorney General Opinion Nos. 93-375, 95-407 and 97-26.
Trusting this adequately responds to your inquiry, I am
Very truly yours,
RICHARD P. IEYOUB ATTORNEY GENERAL
By: ROBERT E. HARROUN, III Assistant Attorney General
RPI/Rob3/sfj