LANSING (AP) – A bill in Lansing would exempt from personal property taxes some equipment used to develop oil and gas wells, including piping, machinery and tanks, prompting concern about the potential effects on Michigan communities that rely on such revenue to fund services.
Some of Michigan’s poorest counties in the northern Lower Peninsula say the change would cost their communities millions of dollars while giving a tax break to oil and gas companies, the Detroit Free Press reported.
According to the Michigan Oil and Gas Association, however, the bill would be a fix from the Legislature to an administrative error made by state officials.
The bill was introduced by Republican state Sen. Jack Brandenburg, of Macomb County’s Harrison Township, who is chairman of the Senate Finance Committee. The bill also would exempt drilling costs and the change would be retroactive to 2012.
“That’s going to mean layoffs around here,” said Montmorency County equalization director Kevin Keller, who said the proposal would cut $310,000 from the county’s $2.6 million general fund budget this year and have more than a $3 million total impact on all taxing entities in the county, including schools, the road commission, libraries and the sheriff’s office.
Some other northern counties, having just learned of the bill’s existence, couldn’t immediately put a dollar figure on its impact this week, but said it would be significant. Otsego County administrator John Burt said there are thousands of wells in his county.
“It just means more cuts,” Burt said.
Republican Sen. Patrick Colbeck, of Wayne County’s Canton Township, is a cosponsor of the bill. He said the personal property tax is a job killer and he favors any measure that will dovetail with or accelerate the 10-year phase-out of the tax on manufacturers for industrial equipment.
Oil and gas exploration is “pretty critical” and the local concerns, which Colbeck said he learned about Thursday, are “something we’ve got to go off and pursue.”
Most personal property tax revenues go to local governments. Counties said the wells and equipment were always on the tax rolls, but until recently many companies didn’t report them for assessment purposes. In October 2012, the State Tax Commission issued a bulletin aimed at clarifying the issue.
The state’s Treasury Department had no estimate Thursday of how much taxable value is at issue, spokesman Terry Stanton said.
Deb Muchmore, a spokeswoman for the Michigan Oil and Gas Association, said the bulletin is wrong, because it would apply the personal property tax to machinery, equipment and drilling costs that the law never intended to be taxable. It would boost taxes on the industry, she said.
Following the bulletin’s guidelines would send “a clear signal that Michigan’s tax climate for energy exploration and production is unfriendly,” she said.
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