December 12, 2001 | By Keith Martin in Washington, DC

LOUISIANA will have to defend in court its view that owners of new merchant power plants built in the state qualify for a 10-year tax holiday from parish and local property taxes.

A state legislator — Rep. Kip Holden (D.) — filed suit challenging an announcement by the state Board of Commerce and Industry last August that merchant power plants qualify potentially for the tax holiday. The tax holiday applies to all improvements that are part of a “manufacturing” process. Holden won a similar suit against waste incinerators in 1998.

He has temporarily withdrawn the suit, at least as it applies to merchant plants,until after the state formally approves the first application from a merchant plant developer for the tax holiday. Until then,the suit is premature. He is pursuing the suit in the meantime against the state on the issue whether salt and other chemical processing plants “manufacture” a product.

Eleven companies have asked the court to intervene on the side of the state tax authorities.