Renewable-energy tax plan not feasible, state officials say 

State tax officials are sounding alarms about the feasibility of House Speaker Jon Husted’s plan to boost renewable-energy research and development in Ohio.

Husted suggested the Ohio Department of Taxation might need some new talent.

The Kettering Republican wants to create an 11-member Ohio Renewable Energy Authority, which would take state income taxes from any new jobs created in Ohio by renewable- and advanced-energy companies and invest the money back into the industry.

The plan would generate at least $10 million a year, which Husted hopes will create jobs in areas such as solar power and fuel-cell development.

But in addition to concerns about lost tax revenue for state coffers, the Taxation Department questions whether the plan is even doable. To divert new income taxes from the alternative-energy industry, the department must first determine how much is collected from that industry today.

“It would be nearly impossible for ODT to estimate the ‘base amount’ of income tax revenues that are generated from the renewable energy industry or the incremental amounts of income tax that could be attributed to this sector,” the department said in an analysis requested by Gov. Ted Strickland.

The tax department says it doesn’t collect data that enable it to determine what portion of income for thousands of taxpayers should be considered part of the renewable-energy industry. Larger energy companies in particular might have only a small portion of their business dedicated to alternative energy.

Any estimates, the department said, would be “quite subjective and thus either subject to manipulation or cause lengthy disputes.”

And if estimates are not acceptable, the department said, “the proposal would require a dramatic change in the reporting procedures for taxpayers.” But because the new information would not relate to a person’s tax liability, “the accuracy and veracity of this information would likely be quite dubious.”

Husted, who said he had not heard of the analysis before a Dispatch reporter’s call, said other states have done similar types of tax financing.

“If the Ohio Department of Taxation can’t do that, we need some new talent over there,” he said.

“It’s about time the Department of Taxation in Ohio get itself up to speed with what it takes to grow an economy and create jobs. If that means they need to do some work over at the department to get that done, I’ll help them get that done.”

Husted expects to add his tax plan to Strickland’s proposal to rewrite regulations for the electricity industry, which passed the Senate and is now in the House. At least initially, money from the state’s kilowatt-hour tax would be used to meet the $10 million-a-year funding guarantee for the Renewable Energy Authority.

“It’s time Ohio stop making excuses about why it can’t get things done, and start working to create new jobs and an economic future in our state,” Husted said.

State tax officials say they know of no other state that applies this type of tax arrangement to a particular industry.

Strickland spokesman Keith Dailey stressed that this was the department’s initial analysis, and said the governor wants to hear more details.

“The governor wants the opportunity to talk to Speaker Husted personally before he draws any conclusions about the plan,” he said.

It would be tough to estimate tax revenue from renewable-energy sources, the state says.

By Jim Siegel

The Columbus Dispatch

7 January 2008