The House Judiciary Committee on Wednesday approved by voice vote a bill that would prohibit states from assessing taxes on interstate natural gas pipelines at a higher rate than those levied on in-state industrial and commercial facilities.
The legislation (HR 1369) would bar states from discriminating in their taxation of interstate gas pipelines and potentially could in the long term lower natural gas prices for consumers. The measure, sponsored by Rep. Chris Cannon (R-UT), also would provide concurrent state and district court jurisdiction over tax issues involving interstate pipelines, allowing interstates to challenge for the first time a state’s taxation policy in federal court.
The interstate pipelines “aren’t the real victims” of the higher state taxes, said Rep. Chris Cannon (R-UT), who sponsored the bill. Rather, the victims are gas customers who pay the higher taxes in their rates, he noted. This issue “has been a burr under the saddle” since 1998, when a bill seeking to ban higher state taxes on interstate pipes was first passed out of committee, Cannon said.
In the 1970s, Congress enacted legislation to prevent states from levying higher taxes on railroads, interstate trucking and interstate aviation, but they excluded interstate gas pipelines from the bill. This is “about the only area of interstate transportation” where Congress hasn’t provided an even playing field, Cannon said.
It’s estimated that 12 to 15 states currently assess higher taxes on interstate pipes than on in-state industrial and commercial facilities, according to Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America. Ohio is “kind of the 800-pound gorilla taxing interstate pipelines at four times the level of in-state industrial and commercial property,” he said. This is an “area where we have significant abuse by the states,” Cannon agreed.
HR 1369 would not preclude states from ever raising taxes on interstate gas pipelines. However, when increasing taxes, the bill would require states to deal with interstate pipelines and in-state industrial and commercial facilities in a consistent fashion.
Rep. Melvin Watt (D-NC) opposed the bill, saying that interstate pipelines “[had] not demonstrated a need for this legislation.” He offered an amendment that would have eliminated the interstate pipelines’ right to challenge state taxation policies in federal court. It was defeated by voice vote.
A similar bill, sponsored by Sen. John Cornyn (R-TX), is pending in the Senate.
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