Coal value added facilities-tax exemptions.

06LSO-0186.C1

                                                         

CORRECTED COPY

FISCAL NOTE

The fiscal impact is indeterminable.

 

This bill establishes a sales and use tax exemption on the sale or purchase of equipment used to construct a new coal gasification or coal liquefaction facility.

 

In the event a coal gasification or coal liquifaction facility is constructed, this bill would result in an estimated sales and use tax exemption of $5.2 million to $34.9 million to the General Fund and $4.1 million to $27.5 million to the Local Sources Fund.

 

Because there is currently no operation of this kind in Wyoming, estimates are based on a range of construction costs of $300 million on the low end and $2 billion on the high end. These estimates were obtained from Rob Hurless, Energy and Telecommunications Advisor in the Governor's Office. It is assumed that 60% of the construction costs would relate to materials and equipment while 40% would be non-taxable labor. This analysis is based on the building of one plant with all tax revenue paid in one year.

 

Total tax due is based on the statewide average sales tax rate of 5.2%.

 

$300,000,000 x 60% x 5.2% =     $9,360,000 in sales and use tax

$2,000,000,000 x 60% x 5.2% = $62,400,000 in sales and use tax

 

Please note that this type of construction project would also qualify the county where the project is located to impact assistance funding which will affect General Fund revenue.  The amount of the impact will be dependent on the scope of the project.

 

Please also note that this type of construction project could also have a fiscal impact in the form of increased sales and use tax revenues to the General Fund and the Local Sources Fund from increased economic development. However, the amount and timing of this impact would also be dependent upon the scope and timing of the project.

 

In addition there would be a positive financial impact to the local government and the school foundation fund for any ad valorem taxes owed on the project.  A rough estimate of the potential revenue raised from ad valorem taxes would be as follows, assuming construction costs of $2 billion:

 

$2,000,000,000 * 11.5% =  $230,000,000 * 62 mils = $14,260,000 property tax.

 

Additionally, local governments could receive additional ad valorem tax revenue from increased extraction of coal to supply the plant, and the state could receive additional severance taxes and a potential increase in royalty income. These amounts are also dependent upon the scope and timing of the project and are therefore also indeterminable.

 

Prepared by:   Dan Noble, Dept. of Revenue Phone:   777-5220