Drillers escape taxes, group says

http://standardspeaker.com/news/drillers-escape-taxes-group-says-1.1137967

By robert swift (Harrisburg Bureau Chief)
Published: April 27, 2011

HARRISBURG – The vast majority of natural gas drillers in Pennsylvania don’t pay the state corporate income tax and benefit from federal tax incentives and state tax breaks, according to a report issued Tuesday by a Harrisburg think tank.

The report by the Pennsylvania Budget and Policy Center is more fodder for the statehouse debate over whether the companies that produce natural gas in the Marcellus Shale boom should be subject to a special state tax or local impact fee levied by municipalities. Gov. Tom Corbett has steadfastly opposed a severance tax saying it will drive investment to other states. Republican senators plan to outline an alternate local impact fee proposal later this week.

The budget and policy center is a Harrisburg-based think tank that advocates tapping new state revenue sources, including a severance tax, to address Pennsylvania’s fiscal problems.

Most gas drillers structure their business as partnerships so they can instead pay the much lower state personal income tax, the report said. The state corporate income tax rate is 9.99 percent, while the state personal income tax rate is 3.07 percent.

A number also take advantage of the so-called Delaware loophole that allows businesses headquartered in other states to avoid paying the corporate income tax on their operations here, according to the report.

The federal incentives, such as allowing write-offs for a large portion of drilling and well-completion costs, make substantial dents in a driller’s taxable income, the report said.

rswift@timesshamrock.com