SD Legislature approves tax breaks for wind farms

PIERRE, S.D. - A measure that would refund about half the construction taxes for large wind energy projects and an environmental upgrade at Big Stone Power Plant now awaits the signature of South Dakota Gov. Dennis Daugaard.

The House voted 52-16 to accept the Senate's version of the bill, which would provide tax refunds beginning in January 2013 for wind energy projects or environmental upgrades at power plants costing more than $50 million. Supporters said it would usher along a couple of wind energy projects and would help Big Stone Power Plant make environmental upgrades required by the federal Environmental Protection Agency.

The bill would not interfere with a public vote in November on a more general economic incentive plan that the Democratic Party referred to the ballot. That law would use a different method of refunding construction taxes to a wider range of projects.

Rep. Roger Solum, R-Watertown, said South Dakota's sales taxes and contractor's excise taxes during construction are far higher than those in surrounding states. Until the state's tax bill is lowered, he said, companies may build large wind energy projects elsewhere.

"These things are taken into consideration when they start making a decision to build a wind farm," Solum said.

Rep. Steve Street, D-Revillo, said the state needs to assist the Big Stone Power Plant with the $500 million of environmental upgrades to its coal-fired plant on the South Dakota-Minnesota border. Construction taxes would be passed on to the plant's electricity customers, so a tax break will help many families in the state, he said.

But House Democratic Leader Bernie Hunhoff of Yankton said the tax refunds for the Big Stone project could amount to $10 million or more, which means the state will have less money to spend on schools and other priorities. Hunhoff said he has no problem with the part of the bill giving tax breaks to wind farm projects, but the Legislature should wait until next year to deal with the issue.

The bill approved by the House on Thursday would take effect next year regardless of the outcome of November's vote on the referred law.

Daugaard and others have said the ballot measure for the new business grant program has created uncertainty about state incentives that could hurt South Dakota's efforts to attract new companies and help existing ones expand.

Current South Dakota law gives partial refunds of sales taxes and contractor's excise taxes to large construction projects, but that law expires Dec. 31, 2012. Last year, the Legislature approved Daugaard's plan to replace the refund law with a new program that would take 22 percent of the receipts from the contractor's excise tax - about $16 million a year - and put the money into a fund that a state board could use to give grants to large construction projects.

The state Democratic Party collected enough petition signatures to put the new grant law to a public vote in the November election. Democrats argue that taking 22 percent of the contractor's excise tax each year forfeits money that should go to other priorities.

A House committee last week passed a bill that would have repealed last year's law and replaced it with a similar one. That move would have cancelled the November vote, but earlier this week, the House killed that proposal.