Louisiana Gov. John Bel Edward’s proposal to pull back tax refund dollars from the offshore industry could not get traction with state lawmakers this year.
But with the state’s deepening budget crisis, OSV owners and operators could be targeted for that hit again in the next budget cycle, according the Offshore Marine Services Association.
During the state Legislature’s “extraordinary sessions” dealing with the budget shortfall, staffers for Edwards admitted they could not round up votes, OMSA president and CEO Aaron Smith said in a Thursday conference call with members. The governor said he would not try to change current Louisiana law that allows a refundable credit for 100% of the ad valorem taxes paid on vessels operating on the Outer Continental Shelf.
“Now, I don’t think that calculus works next year,” Smith cautioned, after noting the deficit is predicted to balloon to nearly $2 billion. “I hope we can find a legislative solution, but I’m not completely confident of that.”
In the meantime there have been a couple of small wins for the industry, such as a ruling from state revenue officials that new equipment purchased expressly for use on the Outer Continental Shelf can be sales tax exempt, Smith said.
In January, the then newly inaugurated Edwards appeared at a meeting of OMSA in New Orleans to make his pitch for changing the tax credit to help the state budget.
“This is the worst fiscal crisis in the history of the state,” Edwards said then. “The budget is not going to be pretty. We can’t pretend that there is revenue there when there isn’t.”
Edwards proposed to suspend the refundable ad valorem tax credits for OSVs for a year and then adjust the refundable rate to 80% beginning in 2017.
“There has to be some level of shared sacrifice,” Edwards said then.
The credit issue may be off the table for now, but Smith said there will be continued pressure “as Louisiana digs itself out of its budget hole, hopefully not using our pocketbooks to do it.”