HB1415 Replaces existing taxes on electricity and natural gas with a tax based on consumption
Sponsor: Mays, Carol Jean (50) Effective Date:00/00/0000
CoSponsor: Burton, Gary L. (128) LR Number: 3697L.05C
Last Action: COMMITTEE: UTILITIES REGULATION
02/29/2000 - HCS Reported Do Pass (H)
HCS HB 1415
Next Hearing:Hearing not scheduled
Calendar:Bill currently not on calendar
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Available Bill Summaries for HB1415 Copyright(c)
* Committee * Introduced

Available Bill Text for HB1415
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BILL SUMMARIES

COMMITTEE

HCS HB 1415 -- TAXATION AND FEES FOR ENERGY SERVICES

SPONSOR:  Mays (50)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Utilities
Regulation by a vote of 12 to 5 with 1 present.

This substitute makes changes to utility property taxation,
local utility gross receipts and business license taxes,
franchise fees, and sales and use taxes on energy services.

UTILITY PROPERTY TAXATION

The following provisions will become effective January 1
following the date the Public Service Commission (PSC) notifies
the Revisor of Statutes that retail electric choice has been
enacted or January 1, 2001, whichever is later, if by that date
an amendment to Article X of the Missouri Constitution
abolishing local taxes on utilities and authorizing the
implementation of replacement taxes has not been adopted.

The substitute authorizes the State Tax Commission to assess
distributable property with electricity generating capacity of
at least 2 megawatts.  Distributable property of electric power
and light companies will be assessed by the same method used in
the January 1, 2001, taxable year.  Electric generating
equipment of rural electric cooperatives in service during the
January 1, 2001, taxable year will continue to be assessed and
taxed by the same method used in that year.

All electric generating equipment placed into service after
December 31, 2001, will be assessed by the State Tax Commission
and the value distributed in the same manner as local property.

LOCAL UTILITY GROSS RECEIPTS TAXES, BUSINESS LICENSE TAXES,
FRANCHISE FEES, AND SALES AND USE TAXES ON ENERGY SALES

The following provisions will become effective January 1
following the date the PSC notifies the Revisor of Statutes that
retail electric choice has been enacted or January 1, 2001,
whichever is later, if by that date an amendment to Article X of
the Missouri Constitution abolishing local taxes on utilities
and authorizing the implementation of replacement taxes has not
been adopted.

The substitute makes changes to the provisions enacted in Senate
Bill 627 (1998) which required sellers of electricity and gas to
be certified by the PSC and to file agreements which the sellers
entered into for the payment of all business license taxes or
franchise fees owed.  The substitute clarifies that a retail
user will not be considered a seller.  It also excludes as a
seller any supplier who delivers natural gas to an end user's
structure as of January 1, 2000, as long as that supplier's
gross receipts were not subject to a local gas gross receipts
tax, except if ownership of the structure or end user changes
after that date or if the end user constructs a new structure
after that date and the construction costs do not exceed or
equal $50 million.  Distributors must file tariffs or implement
procedures by October 1, 2000, to comply with the substitute's
requirements.

The substitute also extends the same framework to sales and use
tax.  No person will provide energy services to a Missouri
seller or retail user unless that person is a distributor or has
been certified by the PSC.  Sellers are required to waive all
rights to challenge the validity of the agreement and of any
right to a refund of amounts paid.  A declaratory judgment
action is authorized.  Legal action challenging the validity of
any agreement suspends that agreement until a final court
judgment is made; if a court judgment invalidates the agreement
structure, energy services may only be provided upon a finding
of public convenience and necessity by the PSC.

These provisions are nonseverable and if any provision is held
to be invalid, the remaining provisions will be invalidated.
The PSC is authorized to establish procedures for certification
and enforcement.

UTILITY REPLACEMENT TAXES

The following provisions will become effective January 1
following the date the PSC notifies the Revisor of Statutes that
retail electric choice has been enacted or January 1, 2001,
whichever is later, if by that date an amendment to Article X of
the Missouri Constitution abolishing local taxes on utilities
and authorizing the implementation of replacement taxes has been
adopted.

The substitute establishes replacement electric or gas local
gross receipts taxes, local franchise fees, local sales taxes,
and payments-in-lieu-of-taxes (PILOTs).  Each tax and fee will
be replaced by a local electricity or gas usage tax based on the
amount of electricity or natural gas delivered.  The tax will be
imposed upon the local electricity or gas distributor at a rate
per kilowatt hour of electricity delivered or therms of natural
gas delivered and will be paid to the appropriate political
subdivision.  The tax rates will be designed to produce, to the
greatest extent practicable, revenues in the base year not
greater than the amount of revenues produced by the local
electric and gas gross receipts taxes, franchise fees, or PILOTs
for the base year of that customer class.  Each political
subdivision will present to the State Auditor, by October 1
following the effective date, data supporting the amount of
usage tax by customer class imposed.  The State Auditor will
certify by the next December 1 that the replacement tax is not
generating greater revenues than was the previous tax, and the
tax will go into effect 30 days after certification.

Any franchise fee agreement in force prior to the effective date
of the adopted constitutional amendment will not be terminated
as a result of its adoption unless the political subdivision and
utility mutually agree to terminate the agreement.  After
January 1 following the effective date, no new local electricity
or gas franchise fee will be imposed by a political subdivision.

The local electricity usage taxes and local gas usage taxes are
imposed on a local distributor and will be included in the cost
of local electricity distribution service.  These taxes will not
be subject to review or adjustment by the PSC.

No local gas usage tax will apply to natural gas delivered to an
end user's structure if as of January 1, 2000, the supplier was
not subject to certain local taxes or fees as of that date,
unless the ownership of the structure or end user changes after
that date.  Also, no local gas usage tax will apply to natural
gas delivered to any new structure of that end user constructed
after January 1, 2000, if construction costs are at least $50
million.

A political subdivision is authorized by majority vote of its
governing body to eliminate or reduce an existing local
electricity or gas usage tax or to grant, extend, or expand an
exemption from an existing local electricity or gas usage tax.
No political subdivision is authorized to levy a local
electricity or gas usage tax, without a majority vote of the
electorate, impose a new local electricity or gas usage tax,
increase an existing local electricity or gas usage rate, or
eliminate or reduce exemptions from the local electricity or gas
usage tax.

The tax on distributable property is replaced with a local
electricity usage tax based on the amount of electricity
delivered and paid to the Department of Revenue.  This tax will
be imposed on the local electricity distributor at a rate per
kilowatt hour of electricity delivered and will be due no later
than December 31 following the effective date and December 31 of
each subsequent year.  The State Tax Commission will calculate a
separate tax rate per kilowatt hour of electricity delivered for
each local electricity distributor.  The tax rate will not
generate revenues greater than the amount of revenues produced
by the tax levied on distributable property for the base year.
The tax rate will be reviewed and certified by the State Auditor
to the Department of Revenue.

The Department of Revenue will collect the replacement property
tax and distribute the revenues in the following order:

(1)  An amount equal to the funds received in the base year to
the Blind Pension Fund;

(2)  Any remaining funds to political subdivisions in an amount
equal to funds received in the base year; and

(3)  Any remaining funds will be distributed to the public
schools.

Additional revenues resulting from increased consumption
produced by the replacement property tax will be distributed to
public schools on a per student basis.  These additional
revenues will not be used as substitute funds but will
supplement the total amount of money allocated for public
schools in Missouri.  Any taxpayer may bring an action to
enforce compliance with the replacement property tax
requirements.

FISCAL NOTE:  Estimated Net Cost to General Revenue Fund of
$327,687 in FY 2001, $229,067 in FY 2002, and $57,117 in FY
2003.  Does not include possible costs to Office of the State
Auditor in FY 2001 and FY 2003.  Estimated Net Effect on All
State Funds of Unknown in FY 2001, FY 2002, and FY 2003.
Expected to be minimal since the purpose of the replacement
taxes is to be revenue neutral.

PROPONENTS:  Supporters say that tax issues appear to be the
first issue to address in the electric restructuring debate, and
replacement taxes will be designed to ensure that all entities
are equally taxed and the cities continue a reasonable revenue
stream.

Testifying for the bill were Representative Mays (50); Kansas
City Power & Light; Utilicorp United; State Tax Commission;
Missouri Gas Energy; Empire District Electric Company; Missouri
Energy Group; St. Joseph Light & Power; Laclede Gas; Missouri
Municipal League; and AARP.

OPPONENTS:  Those who oppose the bill say that a notion of
equality cannot be played out under this scheme and that they do
not want to pay more than their fair share of taxes.

Testifying against the bill was Anheuser Busch.

Donna Schlosser, Legislative Analyst


INTRODUCED

HB 1415 -- Taxation and Fees for Energy Services

Co-Sponsors:  Mays (50), Burton, Hegeman, Leake, Griesheimer

This bill makes substantial changes to utility property taxation
assessment by the State Tax Commission, local utility gross
receipts and business license taxes and franchise fees, and
sales and use taxes on energy services.

UTILITY PROPERTY TAXATION

The bill authorizes the State Tax Commission to assess
distributable property with electricity generating capacity of
at least 2 megawatts.  Distributable property of electric power
and light companies assessed by the State Tax Commission,
effective January 1, 2001, will be revised annually based upon
market value and the distribution of the assessed valuations to
political subdivisions will be adjusted to recognize new or
dissolved political subdivisions within which the electric power
company owns transmission and distribution assets as of January
1, 2001.

Any electric cooperative will, before January 1, 2001, and
annually thereafter, calculate and report to the State Tax
Commission the number of electric transmission and distribution
line miles it owns for each taxing jurisdiction included within
its service territory.

On or after January 1, 2001, for any new electric generating
property put into service, without any new distribution service,
the apportionment of the assessed valuation of that property
will be distributed as if the property were distributable
property owned by the electrical corporation or based on the
number of electric and transmission and distribution line miles
in that jurisdiction owned by the electric cooperative
authorized to provide electric distribution service within that
service territory.

After the Public Service Commission certifies to the State Tax
Commission that retail competition in electric power exists in
Missouri, the State Tax Commission will use the market valuation
method for all electricity generating property specified above.

These provisions will become effective on August 28, 2000, and
will terminate on January 1, 2002, if an amendment to Article X
of the Missouri Constitution has been adopted that authorizes
the General Assembly to abolish local taxes on electricity and
natural gas.

LOCAL UTILITY GROSS RECEIPTS TAXES, BUSINESS LICENSE TAXES,
FRANCHISE FEES, AND SALES AND USE TAXES ON ENERGY SALES

This bill makes changes to the provisions enacted in Senate Bill
627 (1998), which required sellers of electricity and gas to be
certified by the Public Service Commission and to file
agreements which the sellers entered into for the payment of all
business license taxes or franchise fees owed.  The bill
clarifies that a retail user will not be considered a seller.  A
provision is added requiring electrical and gas corporations to
file tariffs,  and electric cooperatives to implement service
conditions, by October 1, 2000, to enforce the agreement
structure.

The bill also extends the same framework to sales and use tax,
requiring sellers of electricity and gas to file agreements with
the Public Service Commission to collect and remit all local
sales and use taxes on energy services.  Distributors and
political subdivisions are prohibited from providing energy
services to any person unless the seller has been certified by
the Public Service Commission and has filed its agreements.
Sellers are required to waive all rights to challenge the
validity of the agreement and of any right to a refund of
amounts paid.  A declaratory judgment action is authorized.
Legal action challenging the validity of any agreement suspends
that agreement until a final court judgment is made; if a court
judgment invalidates the agreement structure, energy services
may only be provided upon a finding of public convenience and
necessity by the Public Service Commission.

These provisions are nonseverable and if any provision is held
to be invalid, the remaining provisions will be invalidated.
The commission is authorized to establish procedures for
certification and enforcement.

These provisions will become effective on August 28, 2000, and
will terminate on January 1, 2002, if an amendment to Article X
of the Missouri Constitution has been adopted that authorizes
the General Assembly to abolish local taxes on electricity and
natural gas.

UTILITY REPLACEMENT TAXES

This bill establishes replacement electric or gas local gross
receipts taxes, local franchise fees, local sales taxes, and
payments-in-lieu-of-taxes (PILOTs).  Each tax and fee will be
replaced by a local electricity or gas usage tax based on the
amount of electricity or natural gas delivered.  The tax will be
imposed upon the local electricity or gas distributor at a rate
per kilowatt hour of electricity delivered or therms of natural
gas delivered and will be paid to the appropriate political
subdivision.  The governing body of the political subdivision
will calculate and impose a separate tax rate per kilowatt hour
or therm for each customer class.  The tax rates will produce
revenues in the base year not greater than the amount of
revenues produced by the local electric and gas gross receipts
taxes, franchise fees, or PILOTs for the base year of that
customer class.  Each political subdivision is required to
present to the State Auditor by October 1, 2001, data supporting
the amount of usage tax by customer class imposed.  The State
Auditor will certify by December 1, 2001, that the replacement
tax is not generating greater revenues than was the previous
tax, and the tax will go into effect 30 days after certification.

Any franchise fee agreement in force prior to the effective date
of the adopted constitutional amendment will not be terminated
as a result of its adoption unless the political subdivision and
utility mutually agree to terminate the agreement.  The
agreement may not be renewed or extended beyond its expiration
date or January 1, 2002, if no term is provided.  After January
1, 2002, no new local electricity or gas franchise fee will be
imposed by a political subdivision.

The local electricity usage taxes and local gas usage taxes are
imposed on a local distributor and will be included in the cost
of local electricity distribution service.  These taxes will not
be subject to review or adjustment by the Public Service
Commission.

A political subdivision is authorized by majority vote of its
governing body to eliminate or reduce an existing local
electricity or gas usage tax or to grant, extend, or expand an
exemption from an existing local electricity or gas usage tax.
No political subdivision is authorized to levy a local
electricity or gas usage tax, without a majority vote of the
electorate, impose a new local electricity or gas usage tax,
increase an existing local electricity or gas usage rate, or
eliminate or reduce exemptions from the local electricity or gas
usage tax.

The tax on distributable property is replaced with a local
electricity usage tax based on the amount of electricity
delivered and paid to the Department of Revenue.  This tax will
be imposed on the local electricity distributor at a rate per
kilowatt hour of electricity delivered and will be due no later
than December 31, 2002, and December 31 of each subsequent
year.  The State Tax Commission will calculate a separate tax
rate per kilowatt hour of electricity delivered for each local
electricity distributor.  The tax rate will not generate
revenues greater than the amount of revenues produced by the tax
levied on distributable property for the base year.  The tax
rate will be reviewed and certified by the State Auditor to the
Department of Revenue.

The Department of Revenue will collect the replacement property
tax and distribute the revenues in the following order:

(1)  An amount equal to the funds received in the base year to
the Blind Pension Fund;

(2)  Any remaining funds to political subdivisions in an amount
equal to funds received in the base year; and

(3)  Any remaining funds will be distributed to the public
schools.

Additional revenues resulting from increased consumption
produced by the replacement property tax will be distributed to
public schools on a per student basis.  These additional
revenues will not be used as substitute funds but will
supplement the total amount of money allocated for public
schools in Missouri.

The bill allows any taxpayer to bring an action to enforce
compliance with the replacement property tax.

These provisions will become effective on January 1, 2002, if an
amendment to Article X of the Missouri Constitution has been
adopted that abolishes local taxes on electricity and natural
gas, only upon implementation of a replacement tax.


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