On January 19, the Wind Industry announced a proposal to the Oklahoma legislature for altering wind taxation policies. The proposal suggests eliminating ad valorem taxes on Wind Generation facilities in exchange for paying a gross production tax or an electrical generation facility tax.
While the proposal purports to offer a solution to the state’s budget shortfall, it is further evidence of the industry’s practice of misconstruing facts and communicating half-truths in an effort to reduce their contribution to Oklahoma.
Here are the facts.
1. The Ad Valorem Proposal is a Scam
Prior to 2017, all wind projects qualified for a 100 percent ad valorem tax exemption for 5 years from the date they first produced electricity. The Oklahoma constitution requires the taxes that should have been paid to counties, schools, fire districts, etc. be reimbursed by the state General Fund. In other words, Oklahoma taxpayers pay the Wind industry’s taxes for the first five years of operation. Through the efforts of many concerned citizens and legislators, this government handout ended December 31, 2016. However, wind farms operating prior to that date continue to receive the full five-year exemption. Seventy-two percent of the wind facilities operating in the State were still exempt from ad valorem taxes in 2017, costing the state more than $50 million. The last payout on this plan should occur in 2022. Now that Big Wind is finally beginning to pay its own property taxes, they want to eliminate that cost under the guise of helping the state budget. Don’t be fooled. Eliminating the tax now means many wind companies will never pay any ad valorem tax.
2. The Claim it Achieves Parity is Nonsense
The Proposal is made under a claim of “parity” with the oil and gas industry. However, oil and gas companies pay personal property taxes on the equipment used to produce the wells, as well as a gross production tax on all hydrocarbons produced from the well. This tax is paid in lieu of an ad valorem tax on the value of the wells and hydrocarbons in the ground. The Ad Valorem Tax on Wind Facilities is similar to the personal property tax paid by oil and gas producers because neither owns the land from which the energy is produced. Eliminating the ad valorem tax in exchange for instituting a production tax on wind-generated electricity in the name of “parity” is nonsense because oil and gas already pays taxes on both production and personal property.
3. The Cost of Wind Subsidies Greatly Exceeds any Savings from the Proposed Changes in Taxation
What can’t be overlooked is that Big Wind still receives three massive tax subsidies from the State of Oklahoma: Zero Emissions Tax Credit for facilities in operation before July 2017, expected to cost the state $930 million over the next 10 years, Ad Valorem Exemptions for facilities in operation before December 31, 2016, expected to cost the state more than $150 million over the next four years and an exemption from all sales taxes on the materials used to build the wind facilities. The proposed new taxes pale in comparison to the costs the state incurs for continuing to subsidize this industry.
Rep. Cleveland seeks to end zero emission tax credit
Sharing a recent announcement from the capital. We applaud Rep. Cleveland for recognizing Oklahoma taxpayers deserve better!
OKLAHOMA CITY – State Rep. Bobby Cleveland introduced legislation this week halting tax incentives for renewable resources, such as wind and solar power.
House Bill 2908 repeals Senate Bill 440, which was signed into law in 2001. At the time, SB 440 allowed zero-emission energy facilities to collect tax credits beginning in Tax Year 2002.
“It’s time we do away with this costly tax credit,” said Cleveland, R-Slaughterville. “The government is not your sugar daddy, no matter how hard the wind industry may wish. Wind companies are no longer in their infancy, and the industry is stable enough to stand on its own feet.”
As the cost of electricity has increased, so has the cost of the tax credit to the state. Credit for electricity generated by zero-emission facilities cost Oklahoma $66,876,581 for Tax Year 2015.
“There has been plenty of talk about raising taxes on everyday Oklahomans recently, including efforts by major Oklahoma businesses to advance the cause. Before we tax our citizens to death, lawmakers must seriously consider scaling back tax credits available to billion-dollar industries,” said Cleveland. “Does big wind need those tax dollars more than our friends and neighbors? I don’t think so.”
Cleveland represents House District 20, which includes parts of Garvin, McClain, Cleveland and Pottawatomie counties.
As the great Winston Churchill once said, “Sometimes doing your best is not good enough. Sometimes you must do what is required.”
Oklahoma still faces a budget deficit for fiscal year 2018, and next year’s budget hole is expected to be significant.
As we have reported , there is a relatively simple solution that can help solve the problem. It only requires a simple majority vote of the legislature and it could generate more than $120 million annually from an industry that makes multi-billion dollar profits.
A simple majority vote by lawmakers to change two wind subsidy programs could contribute to this year budget deficit.
- Repeal the sales tax exemption! Industrial wind companies should pay sales tax like everyone else. An estimated $20 million annually could be collected, according to Oklahoma Tax Commission figures.
- Implement a cap on Zero Emissions Tax subsidies. Another $100 million annually could be saved if the Legislature instituted an annual cap on the subsidies paid. Although new projects no longer qualify for the credit, taxpayers are still required to pay subsidies for 10 years from first commercial operation that began before July 1, 2017. Year-to-date electricity production from wind for 2017 suggests that we will pay more than $112 million in tax credits for the 2017 tax year. If we implemented a $12.5 million cap — the amount established for economically at-risk oil and gas wells — we could generate $100 million in savings. Without a cap, the total over the next 10 years will exceed $930 million.
To put it bluntly, we continue to subsidize a multi-billion dollar industry to the detriment of Oklahoma. Let’s end this corporate welfare and demand more for Oklahoma. Contact your lawmaker today and demand they do what’s required.