TAX NEWS - JUNE 2010

Ohio Tax: Ohio House passes wind energy bill which will allow a tax break

A bill to give wind energy companies a tax break in Ohio has now passed the Statehouse.

In a late-night session on Thursday, the Ohio House passed a version of Senate Bill 232 that can be sent to Gov. Ted Strickland. The house passed the bill on a 91-7 vote. Once the house vote was final, state senators passed the measure 27-5.

The bill will change the way green energy firms like wind and solar companies pay taxes. Instead of property taxes, the company will pay fees of between $6,000-$8,000 per year for each megawatt (MW) of energy generated.

"The elimination of this tax improves Ohio's competitiveness and will spur job creation in the growing energy production industries. I appreciate the legislature's commitment to growing the advanced energy industry in Ohio. I look forward to signing this bill as soon as it reaches my desk," Strickland said.

Hoaglin Township Trustee Milo Schaffner admitted that he is disappointed by the passage of the amended Senate Bill 232. Schaffner, along with the Ohio Township Association and the Ohio School Board Association have stood opposed to the plan to take the power to make tax abatements out of the hands of school boards and township trustees.

Under the bill, the only local approval for abating taxes for these companies comes through the County Commissioners. However, the commissioners could use the opportunity to increase income to the county's general fund.

"From what I've been told, the commissioners need to pass a resolution accepting the pilot payment in lieu of taxes. If they do that, they can go up to $9,000 per MW," Schaffner explained. "Now, if a project is approved by the state at $7,000 per MW, the commissioners could tell them they have to pay $9,000 per MW. The first $7,000 would be divided among all the entities. The extra $2,000, the county gets to keep and put in their general fund and do with what they want. They don't have to share it with anyone else."

Van Wert County, like most counties, has serious financial difficulties right now. The money problems have been the cause of numerous cuts in county departmental budgets and the implementation of a county worker furlough program which has forced most county offices to close at noon every Friday through the end of the year. An infusion of cash from wind energy companies could be a boon to a general fund swimming in red ink.

However, Schaffner is hoping that the commissioners hold out to keep control of tax abatements at the township and school district level. He stated, "I'd like to put enough pressure on the commissioners that they do not adopt a resolution approving this. Because if they do nothing after the governor signs it within 30 days or adopt a resolution to reject the pilot program, then the wind turbines would have to pay their full taxes. That would throw the wind turbines into asking for a tax abatement from the township trustees and the schools, and we'd be in the ball game again."

Supporters of the bill are lauding the passage, citing the bipartisan support in both legislative bodies. "With this vote, Ohio public officials have positioned the State to create and protect thousands of local Ohio manufacturing, construction, operations and maintenance jobs in the wind industry," said Brad Lystra, manager, economic development partnerships for the American Wind Energy Association.

Wind energy companies have complained that Ohio's effective tax rate is eight times higher than neighboring states. "By eliminating this tax disadvantage, Ohio lawmakers have strengthened the renewable market and secured millions in new tax revenue for local communities," Lystra said. "Additionally, Ohio's struggling manufacturing industry will get a significant boost from wind turbine component part orders and position itself to see even greater investments from wind and solar manufacturers looking to expand into new markets and supply chains."

Supporters are also touting the new jobs which could be created by green energy companies. State Sen. Chris Widener, who sponsored SB 232, says the measure could generate up to 1,000 new jobs. The effect on counties with high unemployment could be great.

However, opponents continue to state that even with the payments per MW generated, townships and school districts will still be forced to make do with less than they are getting now.

"I'm unhappy about that," said Schaffner.