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SD House OKs tax change for rural electric co-ops

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SD House OKs tax change for rural electric co-ops
Mitchell South Dakota 120 South Lawler 57301

PIERRE -- The state House of Representatives voted Friday in strong support of changing the tax system for rural electric cooperatives in South Dakota by taking price out of calculation.

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House members passed the legislation 64-2. The legislation, Senate Bill 123, would repeal the 2 percent tax that co-ops pay on gross receipts. School districts receive the revenue.

In its place would be a new set of tax rates charged on the kilowatt-hours of electricity delivered. The measure now must return to the Senate for a decision whether to agree with amendments made by a House committee. Senators previously voted 25-9 in favor of the concept.

Rep. Thomas Brunner, R-Nisland, said school districts will be able to collect twice in the first year of the new system because the dates will be changed for calculating the taxes owed.

That adjustment, made by a House committee, was at the request of the co-ops.

"It won't be a windfall, but it will help. I think the school districts will really appreciate this," Brunner said.

The 2 percent gross-receipts tax has been in place since 1941, according to Rep. Roger Solum, R-Watertown.

Solum said the changes will slow "the exponential growth" of taxes paid by rural-electric customers in the past 10 years. He said there will be "a moderate, more sustainable growth rate."

Electricity generation costs have been rising at many coal-fired power plants that have needed special equipment in response to stricter air-quality regulations imposed by the federal EPA.

Those environmental costs are passed along to customers and, under the gross-receipts system, become subject to taxes. "Here's another piece of electrically-charged legislation. Not static. This is the real deal," Solum said.

Rep. Frank Kloucek, D-Scotland, said the change is acceptable to all but one of the school officials with whom he checked in his legislative district.

The average annual increase in taxes paid during the past decade was 9.7 percent, according to the South Dakota Rural Electric Association. The projected rate under the new system is 3.7 percent annually.

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