Blog Posts > Tax Cuts for Coal and Natural Gas Industries Are on the Move
February 21, 2020

Tax Cuts for Coal and Natural Gas Industries Are on the Move

On top of Senate Bill 655 that would reduce local property tax revenues from natural gas extraction, there are also several bills moving in the House that would give sizable tax reductions to natural gas and coal corporations.

House BIll 4439 would expand a 35% tax credit on the coal severance tax that was passed last year for new coal mines based on total state coal production, investment and employment to more coal mines based on their increase in metallurgical coal production as opposed to all coal production. The bill would allow coal companies “to decrease their total coal production and total coal employment in the State and still claim rebate tax credits for increased coal production at the same time” for those subject to the coal severance tax rate of 4.65%, which is on metallurgical coal (steam coal is now taxed at a lower rate). According to the fiscal note, “[t]he State would potentially lose a significant amount of tax revenue” from these changes, estimating it would reduce coal severance tax collection by $3 million.

Two other bills on first reading in the House that deal with natural gas development would also reduce state tax collections. House Bill 4019 (Downstream Natural Gas Manufacturing Investment Tax Credit Act of 2020) would provide a sizable tax credit over 210 years on the personal income and corporate income tax for potential downstream manufacturers of natural gas (e.g. cracker plant) that make a qualified investment and create at least five jobs. While the fiscal note for the bill says it will not impact general revenue collections today, it could in the future if one of these facilities are built in the future.

House Bill 4421 is very similar to HB 4019 but it provides a tax credit on the personal and corporate income tax for “natural gas liquid storer or transporter” equal to the property taxes they would pay in the state on their inventory and equipment. The fiscal note on the committee substitute of the bill finds that passage of the bill would lower general revenue collection by $500,000 in FY 2022 but “[as] these sectors grow in response to increased future activity, local property taxes on associated machinery and inventory will likely increase significantly with revenue gains to local governments along with the potential loss in State General revenue associated with the tax credits for local taxes paid.”

Lastly, the House Finance Committee originated a bill on Tuesday (HB 4957) that will reduce business and occupation taxes on coal-fired utilities by $16 million. The Senate has also done the same (SB 793). These bills come on the heels of a bill passed last year to rescue the Pleasant Power Station with a $12.5 million reduction in their B&O taxes.

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