Kevin Spradlin
The following information was provided by Brandon Butler, chief of staff to the District 1 legislative delegation to Annapolis, on Monday after deadline.
Originally, the act provided that a public service company may claim a credit against their public service company fanchise tax in the amount of $3 for each ton of Maryland-mined coal that company purchased in a calendar year. Then, the tax credit was forced to be phased out incrementally with a final sunset being Jan. 1, 2021. So, then the following caps were placed on the credit:
$9 million cap until Jan 1, 2013;
$6 million cap until Jan 1, 2015;
$3 million cap until Jan 1, 2021.
Last session, the Governor wanted to totally eliminate the credit through the (budget bill). The argument was that it would save the state $9 million. (Edwards and Beitzel) can tell you why this is a faulty argument. The truth is that producers didn't reach that cap. So, really if the producers only claimed a credit to equal, say $6 million in Maryland coal purchased, then the state really didn't save a total of $9 million.
The structure, now codified is the direct result of the fight waged by Senator Edwards and Delegate Beitzel:
$4.5 million cap until Jan 1, 2013;
$6 million cap until Jan 1, 2015;
$3 million cap until Jan 1, 2021.
The premise for this change was that the coal producers will take a hit because everyone else was expected to. Yet, it also reflects the fact that this was a compromise on top of a compromise. Delegate Beitzel's and Senator Edwards' amendments to the BRFA were agreed upon by Senate Budget & Tax and the House Appropriations Committees, and was later agreed upon by the conference committee.
If the cap was reached, then the companies would split the credit based on a formula. So, basically after the generators who submit proper documentation on Jan 15 of each year to Tax and Assessments, the Department figures out how much coal is being applied and how much tax credit is being claimed by the generator. If the credit being claimed is greater than the credit available then, here's how it works out.
% CREDIT RECEIVED = $4.5 million / "x" amount applied for the credit.
For example, if Allegany Power applies for $5.5 million for 2009, and SMECo applies for $1.5 million for 2009, the total number of applicants would equal $7 million.
% CREDIT RECEIVED = $4.5 million / $7 million
% CREDIT RECEIVED = 64.29%
Therefore, Allegany Power would receive 64.29% of the $5.5 million it applied for or roughly $3.54 million and SMECo would receive 64.29% of the $1.5 million they applied for or roughly $964,000.
$3.54 million + 964,000 = $4.5 million.
After the public service providers receive the credit, they rebate back based on contractual agreements. So, in other words, a company like Allegany Energy takes the credit, but rebates it back to a lot of the coal companies along George's Creek, who use it to pay their employees. This tax credit has meant good paying jobs for the people of Garrett & Allegany Counties... and it's on the chopping block again.
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CUMBERLAND — Delegate Wendell Beitzel will have to work hard this year to retain his status as a “Friend of Coal” bestowed by the Maryland Coal Association at its annual banquet.
The Western Maryland Republican and Sen. George Edwards spearheaded efforts last year in the Maryland General Assembly to reach a compromise regarding Gov. Martin O’Malley’s goal to repeal the Maryland-mined coal tax credit. The compromise resulted in a 50 percent tax credit reduction. Edwards figured the dealing was done.
Well, it’s not. A line item in House Bill 151, Budget Reconciliation and Financing Act of 2010, includes a second straight attempt to abolish the tax credit. There is but a single mention of the repeal initiative in the 42-page document, taking up one entire line and parts of two others.
The word “coal” doesn’t garner any other mention in the bill, introduced last week and cross-filed in the Senate as Senate Bill 141.
Edwards was justifiably upset when interviewed Monday.
“It’s just frustrating,” Edwards said. “We’ve worked long and hard on this issue (to reach) a compromise. It’s irritating that we worked long and hard” to have it taken away this year.
There is a little irony. Shortly after the coal tax credit repeal effort — which could save the state about $4.5 million — there is mention of a $3,000 tax credit to businesses that hire an unemployed Maryland resident. The price tag on that line item is in excess of $20 million and is expected to help about 6,700 Marylanders come off the unemployment rolls.
Edwards said a tax credit to help people get work is preceded by one that could put more than 1,000 Marylanders out of work.
O’Malley, Edwards said, has “got millions of dollars in the budget for bio-this, bio-that and bio-everything, to create jobs. Then, where they do have a job market, they want to take it away and maybe kill some jobs.”
The tax credit was to be phased out gradually between 2011 and 2020 under the terms of the agreement reached only a year ago.
Edwards said the tax credit has a positive impact on more than just the 1,200 direct coal-related jobs in the state. Those support services, including trucking companies and others, pay their bills from jobs derived from the carbon-based fuel source.
“I can tell you any measures such as (this) that would raise our costs makes it much more difficult for us to compete with coal producers in neighboring states,” said Mike Moore, newly elected president of the Maryland Coal Association and president and general manager of Swanton-based Vindex Energy Corp.
Vindex Energy operates three surface mines in Western Maryland, Moore said. The company employs more than 120 people with “high-paying jobs with outstanding benefits,” Moore said, and works with more than 120 contractors.
Edwards said companies like Vindex show the industry is key to Mountain Maryland.
“It’s important to our part of the state,” Edwards said of the tax credit and of the coal industry. “We have some of the toughest rules in the country for mining. We have companies that win national awards for mining. If you look at the whole energy picture, we need to use” clean, renewable energy sources and carbon-based sources.
“That means coal is a part of the mix,” he said.
Just like last year, Edwards said it will take a strong lobbying effort from chambers of commerce in Allegany and Garrett counties, individual businesses and the Maryland Coal Association.
Current mining operations allow companies to go into previously abandoned coal mines and repair acid mine drainage.
“New mining cleans up old mining at no expense to the taxpayer,” Edwards said. “They don’t want a half-billion- dollar bond bill to clean up all the old mining.”
If such a bill were introduced in the legislature, Edwards said, “They’d think you were nuts.”
Contact Kevin Spradlin at kspradlin@times-news.com.
