TAX NEWS - JUNE 2010

Ohio Tax: Green strategies

Back in session for the month of May, the legislature kept busy trying to finish up a number of items before the House and Senate broke for the summer – a hiatus that is expected to last until after the November 2 election. In addition, at the federal level, Senators John Kerry (D-MA) and Joseph Lieberman (I-CN) introduced the framework of a comprehensive climate change bill in the midst of debate and discussion over the oil leak in the Gulf of Mexico. Below is a summary of newly introduced legislation and an update on pending items at the state and federal level.   


New Legislation


Ohio House Bill 439

Allows consumers to exempt certain energy conservation or improvement measures from Ohio's property tax.

Although introduced in February of this year by Representatives Debbie Phillips (D-Athens) and Dan Stewart (D-Columbus), House Bill 439 received its first committee hearing May 11, 2010. The bill creates a 35 percent exemption from property taxes for improvements made in energy efficiency or renewable energy. The bill does not allow an exemption for any energy that is produced and then sold by the entity claiming the exemption.

In addition, the bill allows for an income tax deduction for capital gains realized on the sale of a building to which energy efficiency or renewable energy improvements have been made. The income tax deduction is designed to phase out over the life of the improvement:

(1) 100 percent for a qualifying improvement placed into service not more than five years before the end of the taxable year;

(2) 75 percent for a qualifying improvement placed into service more than five years but not more than 10 years before the end of the taxable year;

(3) 50 percent for a qualifying improvement placed into service more than 10 years before the end of the taxable year.

The bill received its first "sponsor" hearing this month and awaits another hearing in the House Alternative Energy Committee


Ohio House Bill 471

Transfer of development rights leading to farmland preservation and denser developments

Representative Kathleen Chandler (D-Kent) gave sponsor testimony on House Bill 471 (HB 471) in the House Local Government and Public Administration Committee. While not addressing advanced or renewable energy issues, HB 471 does speak to sustainability through innovative zoning practices.

Transfer of development rights allows property owners to designate a tract of land as a "sending area." When that designation is made, that tract of land receives a permanent agricultural and conservation easement and cannot be developed. Another piece of land is then designated as the "receiving area" and receives the right to develop from the transferring plot. This transfer allows for potentially denser development on the receiving property. A popular trend in "green zoning" across the country, "density bonuses" allow developers to create denser, more walkable neighborhoods without impacting the overall impact of those developments.

The legislation allows counties and townships to adopt transfer development rights either individually or as part of a joint agreement.


Updates on Pending Legislation

Ohio House Bill 7

Requires State Building Projects Meet Certain LEED Standards

The bill requires all new buildings constructed using state capital budget money to meet certain "green" building standards.

This bill received a second hearing in the Senate Finance Committee with proponent testimony from the Sierra Club, Ohio Chemistry Technology Council and the Cincinnati Chapter of the U.S. Green Building Chapter.


Ohio House Bill 113

"Solar Schools" pilot project

Representative Mike Foley (D-Cleveland) introduced House Bill 113 which promotes advanced energy projects at Ohio's primary and secondary schools.

The bill passed the House of Representatives last month. On February 2, the Senate had a first hearing on the bill and it awaits further hearings in the Senate Energy and Public Utilities Committee.


Ohio House Bill 474

Exempts from property taxation certain renewable energy facilities that are not financed through the Ohio Air Quality Development Authority (AQDA).

Introduced by Representative Cliff Hite (R-Findlay), House Bill 474 (HB 474) requires payment in lieu of taxes per megawatt hour for projects not financed through the AQDA. The payment owed varies between $5,000 and $6,000 per megawatt, depending on the business structure of the facility. Entities receiving the tax exemption also are required to pay for other programs impacting the community, including training for first responders.

HB 474 has been referred to the House Alternative Energy committee and awaits a first hearing.


Ohio House Bill 443

Proposes Creation of Energy Efficiency Advisory Group

Ohio House Bill 443 would create a so-called Energy Efficiency Stakeholder Advisory Group to review proposed energy efficiency and peak-demand reduction programs of utility companies.

This bill has been referred to the House Public Utilities Committee and is awaiting a first hearing.


Ohio House Bill 447

Recycling of Electronic Waste

Representative Dennis Murray (D-Sandusky) introduced House Bill 447 in February. It creates a "covered electronic device" recycling program and a temporary "Electronic Waste Advisory Council."

The bill received a third hearing in the House Environment and Brownfield Development Committee where the Ohio Environmental Council gave proponent testimony on the importance of keeping arsenic, cadmium, chromium, lead and mercury out of the waste stream.


Ohio House Bill 464

Exempts Certain Certified Renewable Energy Projects from Tangible Personal Property Taxes

House Bill 464 is the companion legislation to Senate Bill 232 and exempts certain renewable energy projects from tangible personal property taxes.

The House Bill has received two hearings this month in the House and Senate Energy committees and awaits a fifth hearing. (See Ohio Senate Bill 232, below.)


Ohio House Bill 469

Tax credits for home energy audits

Representative Debbie Phillips (D-Athens) introduced the Home Energy Audit Tax Credit bill last month and proposes a tax credit on personal income tax for home energy audits.

The bill received its first "sponsor" hearing in the House Alternative Energy Committee and awaits a second hearing in that committee.


Ohio House Bill 485

Counting biomass and other natural resources used for advanced energy projects as "agriculture" for purposes of local zoning laws.

Representative Ray Pryor (D-Wilmington) has introduced House Bill 485 (HB 485) allowing farmers to qualify land used to grow certain renewable energy fuels as "agricultural" land for zoning and land valuation purposes. The bill specifies renewable fuels as biodiesel, biomass, electric or heat energy, and biologically derived methane gas. "Electric and heat energy" must be produced from a majority of manure, cornstalks, soybean waste or other feedstocks. The bill requires all renewable fuels consist of at least 50 percent raw materials derived from the same tracts, lots and/or parcels of land.

This bill is in the House Agriculture and Natural Resources committee and has received three hearings. HB 485 has enjoyed much support from Ohio's agricultural, commodity, and alternative fuels groups.


Ohio Senate Bill 223

Expands "Solar SIDs" to include renewable and energy efficiency projects.

As we reported in February, Ohio Senate Bill 223 expands the list of qualifying "Special Energy Improvement Projects," allowing residential and commercial energy users to expand their alternative energy options.

This bill is awaiting a third hearing in the Senate Energy and Public Utilities Committee. (See Senate Bill 232 below.)


Ohio Senate Bill 232

Renewable energy tangible personal and property tax exemption.

Ohio Senate Bill 232 (SB 232), introduced by Senator Jimmy Stewart (R-Athens), provides a property and tangible personal property tax exemption to renewable energy projects. It is a companion piece of legislation to House Bill 464 (HB 464) described above.

SB 232 was reported out of the Senate Energy and Public Utilities Committee and passed on the Senate Floor 28-4. It is widely suspected that SB 232 will be the vehicle for the personal and tangible personal property tax over HB 464. The version of SB 232 that passed out of the Senate included an amendment to include the language of Senate Bill 223, described immediately above. As of publication of this update, the bill awaits a second hearing in the House Ways and Means Committee.


Ohio Senate Bill 245

Requiring community water systems to report statistics of water loss through leakage in an annual report to consumers.

Senate Bill 245 (SB 245) was introduced by Senator Jimmy Stewart (R-Athens) to highlight the alleged inefficiencies in community water systems. The bill allows the director of the Ohio Environmental Protection Agency to promulgate rules that require water systems to forward an annual report to customers that includes "information concerning the amount of water that is lost by the system during the transmission of water between the source waters utilized by the system to the consumers serviced by the system."

SB 245 was referred to the House Energy and Public Utilities Committee and received a first "sponsor testimony" hearing.


Federal Legislative Action

Kerry and Lieberman announce framework for Cap-and-Trade bill

After much anticipation and a few missed deadlines, Senators John Kerry (D-MA) and Joe Lieberman (I-DE) released details of their proposed cap-and-trade bill on May 12, 2010. Noticeably missing from the conversation was Senator Lindsay Graham (R-SC), who played a large roll in crafting the legislation but has recently pulled back from its introduction over a fight with Senate Leadership on the handling of immigration issues on Capitol Hill.

The bill is substantially different from the "Waxman-Markey" bill introduced in the House of Representatives last year. The American Power Act, as Kerry and Lieberman have titled the bill, has a number of components that could affect the future of energy use and production in America if passed. Highlights include:

- Revenues from a cap-and-trade system will be dedicated to reducing the national debt and rebated to consumers.
- Manufacturers are exempted from carbon reductions until 2016 and after that period, carbon-heavy industries will receive allowances to offset compliance costs.
- A price collar will be implemented to set carbon prices at a fixed amount over inflation to help create predictability.
- More than $7 billion is dedicated to reducing dependence on foreign oil, including infrastructure investment and tax incentives for clean natural gas (CNG) vehicle conversion.

The bill also addresses nuclear power, CNG production, clean coal and off-shore drilling. Increased production and encouraging innovation of these fuel sources are matched with increased safeguards and requirements.

According to Kerry and Lieberman, the bill will only affect the largest polluters (7,500 factories and power plants) – those who produce 25,000 tons of carbon or more annually.