HB 430 Passes House – Ensures Predictability & Stability in Ohio’s Tax System

The Ohio House of Representatives passed HB 430 yesterday by a substantial, bipartisan margin (85-12). Why should you care? It’s important to your business because predictability and stability are crucial elements to a fair tax system, and HB 430 is a step towards protecting accepted practice and enforcement of Ohio’s tax laws and regulations. HB 430 deals specifically with the oil and gas industry, but similar concerns about shifting interpretation or definition changes are affecting other industries such as manufacturing processes and other commercial activities.

Over the years, changes brought about by advanced technology have created a need to adjust Ohio’s laws and accepted practices of tax enforcement. In this vein, HB 430 is an update to legislation that first defined “production equipment” for the oil and gas regulation law. Numerous changes were made in the wake of the broad emergence of horizontal hydraulic fracturing methods in Ohio. (S.B. 165 of the 128th General Assembly). Some further refinement has become necessary.

HB 430 modifies the sales and use tax exemption for property used in producing oil and natural gas and specifies that property that is approved by the Department of Natural Resources as part of a water pollution control facility qualifies for existing property and sales and use tax exemptions.

The bill modifies the existing sales and use tax exemption for property used directly in producing oil and natural gas. Existing law exempts the sale or use of tangible personal property used “directly” in the production of crude oil or natural gas. The bill redefines what constitutes the “production” of oil and gas by substituting “production operation” – for “production.”

The Ohio Chamber supports these changes that simply reaffirm what the state law has been for decades by clarifying the Ohio Revised Code, as originally intended by the Ohio General Assembly, and the Ohio Administrative Code that these direct sales are treated as nontaxable. The purpose is not to expand the scope of the current exemptions or exclusion; rather it is to aggregate and clarify them.

This action would bring a measure of clarity and certainty to the industry, which contributes to good business and continued business growth. We believe that it may also give a guideline for similar issues in other areas of law and regulation. The Ohio Chamber will continue working toward fair implementation of all taxes on behalf of our members and all Ohioans.