Report From Pierre, Frerichs Fights Against Big Business

March 3, 2010

State Representative Jason Frerichs, Wilmot

Major Project tax refund gridlock

Lobbyists, state bureaucrats, the Governors Office, legislators, and staff continue to debate how much contractors’ excise and sales/use tax should be paid by large project companies. The Governors Office organized a bi-partisan meeting with all of the interests dealing with the issue of repealing the tax breaks for major projects involved in energy processing or transportation. Compromise pieces of legislation have been proposed, but the issue still remains that any change in the amount refunded for these taxes will either affect the State Treasury, or a large company who still may be obtaining financing.

I disagree with the results achieved when a contractors’ excise tax is applied. All of us ordinary, private citizens always have to pay the tax when we complete a project on our property, unless of course we do the work with our own hands. For large companies who rely on obtaining financing through Wall Street, the tax being paid upfront can present some challenges and must be a playing factor. However, these large companies are not any different than you or I – we know that we are expected to pay this tax on our projects. For example if we have a remodel performed in our house and we hire a contractor to do the work; we will be required to pay the contractors excise tax on that project.

The difference between an oil pipeline project and a wind farm footprint must be discovered, because each of them contributes differently to our economy in South Dakota. First off, the example of an oil pipeline that is simply “traveling-through” our State is evidence that they only need to use the geographic location of South Dakota and that is reason why they are in our State. This is the reason why I brought HB 1246, which would have required oil pipelines to pay all of their taxes. When dealing with wind energy projects, we must keep in mind that we are limited with transmission capabilities in our state. The presence of contractors’ excise and sales/use taxes at the beginning of a project presents an issue for wind companies, because surrounding states do not all have this hurdle and actually make it very easy for wind energy to start wheeling electricity.

Since wind companies find it difficult to justify the “up-front” taxes on a project, let’s consider the possibility of taxing the wind company when they are making money and selling the electricity produced with South Dakota wind. South Dakota obtains much of the property taxes collected from a wind turbine based on the nameplate capacity (what is expected for output). The problem still exists that all large projects are not treated equal on collecting taxes for the State Treasury. This is the reason why I think someday we should discover the possibilities of expanding the bank franchise tax to include only major corporations who utilize the South Dakota workforce to make money in our state. Mainstreet South Dakota would finally be on a level playing field with the national and international companies who earn a profit in the Rushmore State.

I continue to monitor my two pieces of legislation that are alive and kicking. First off on Monday, I enjoyed a nice welcome back to Pierre when I received the press release that Governor Rounds signed my bill HB 1190! This is very important to our high school students who must make decisions as to whether they will shoot for the goal of achieving the Opportunity Scholarship. The elective category for the requirements of this scholarship previously only required foreign language, so I brought HB 1190 that inserted Career and Technical Education (CTE) courses as an alternative option. This bill also achieved other areas of flexibility for students and reinforced the rigor expected from our CTE courses, such as agriculture, family and consumer science, pre-engineering/drafting, and the health sciences area. The Governor’s staff has been great to work with on this bill and continues to monitor other legislation that might conflict with the intent of HB 1190, which is the law of the land in South Dakota.

Another piece of legislation that I continue to move forward is House Bill 1155, which sailed out of Senate Commerce amidst some concerns from a big wind energy company who thought requiring the area around the anchors for the wind metering towers would be over burdensome. Fortunately, the committee agreed with myself, refused the amendment and approved the bill. The entire Senate gave its solid approval, and now the bill is aimed toward the Governor’s desk.

Senate Bill 92 made its trek to the House side, but was defeated which is good for Northeast South Dakota. It would have placed a burden on our county if Native Americans would be incarcerated in another county. The Federal Bureau of Indian Affairs is responsible for covering the costs in these “other” counties, and I feel it would have not been fair to the residential counties to bear this burden. Treaties and federal policy would have been compromised with the passage of SB 92.

I voiced my opposition to a bill brought to the House Floor by the Department of Public Safety and the Department of Transportation, which will increase the penalties for traveling on the interstate when it is designated “closed”. Yes, nobody should be out on the interstate when the weather is so terrible that the state decides to stop all travel, but when dealing with this bill, I am more alarmed that if somebody doesn’t see a barrier or if a barrier does not exist to keep them off the interstate they immediately would have to prove why they didn’t know the interstate was closed. With the passage of this legislation, the burden of proof shifted from the law enforcement authorities to the individual who may be on the interstate when it is closed. Instead of $105 fine, the possibility exists that a judge could assess up to a $1000 fine.

Our House Agriculture and Natural Resources committee recently gave our stamp of approval for SB 75 which defines agritourism liability protections for landowners. Examples of possible agritourism could include vegetable and fruit “you pick it” operations, corn mazes, Christmas tree farms, and Dude Ranches.

Please keep me informed of any issues and concerns that are important to you. You can reach me at 949-2204 or leave a message in the House Chamber at 773-3851. My email is rep.frerichs@state.sd.us. Check out www.jasonfrerichs.com for updates.