$264M tax break for Ohio drillers awaits governor’s action


COLUMBUS, Ohio (AP) — Ohio’s oil-and-gas industry would get a retroactive tax benefit that will cost state and local governments a combined $264 million under legislation passed during the Legislature’s lame duck session.

The expanded sales-tax exemption on drillers’ tangible personal property was contained in a multi-faceted bill awaiting action by Republican Gov. John Kasich, The Columbus Dispatch reported. Since it’s a spending measure, the governor can line-item veto individual provisions he opposes.

An industry lobbyist defended the exemption and said it doesn’t constitute a tax break.

“Our amendment is simply a clarification of existing law and practices,” said Shawn Bennett of the Ohio Oil and Gas Association.

Kasich has repeatedly proposed tax increases on Ohio’s high-volume oil-and-gas drillers. Those efforts have failed to gain traction among fellow Republicans who control the Legislature.

The administration hasn’t publicly divulged Kasich’s plans for the bill, but they’ve foreshadowed a tight budget due to revenue falling below projections.

Organizations representing Ohio counties and townships and county auditors asked Kasich on Thursday to veto the tax benefit.

The groups want a better understanding of the proposal before it becomes law because “we are concerned there could be repayments local governments may have to make,” they said in a letter.

The tax language was among 20 amendments added to the bill during a lame duck session Dec. 8. It makes the property tax exemption retroactive to June 30, 2010.

The Ohio Department of Taxation estimates the provision would cost the state $215 million and local governments $49 million.

House Finance Chairman Ryan Smith, a Bidwell Republican, said the wording aims to make clear which areas of the industry — well pads or extraction expenses, for example — are not subject to taxation.

“Taxation has interpreted that law differently than what we intended,” Smith said. “If the state has to issue refunds, it’s because they collected taxes they should have never collected.”

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