Louisiana Extending Oil and Gas Property Tax Exemption?

On October 12, Louisiana voters will vote on a constitutional amendment to extend the current oil and gas property tax exemption for supplies stored in Louisiana but routed to the Gulf Coast’s Outer Continental Shelf. Until recently, oil and gas companies received a property tax exemption for raw materials, goods, commodities, and personal property other articles stored in Louisiana warehouses but routed for the Outer Continental Shelf.

A vote FOR would create the property tax exemption

A vote AGAINST would continue the taxation unless ruled unconstitutional

The purpose of the amendment to Article VII of the Louisiana Constitution is to clarify the wording in two sections of the current constitution. Goods destined for the Outer Continental Shelf currently fall into an undefined area. Section 21 of Article VII specifically exempts raw materials and other supplies en route to international locations and goods en route to other states from ad valorem taxation. The Outer Continental Shelf is part of the US, but not under the jurisdiction of any state. Thus, it does not clearly fit either qualification for the tax exemption.

Supplies stored in public or private warehouses are exempt if “being held” for transport “to a point outside the states of the United States”.  If voters approve the amendment, Section 21( D)(2) of Article VII will define “being held” to “include raw materials, goods, commodities and other articles stored in Louisiana for maintenance with a destination to the Outer Continental Shelf”.

Section 21(D)(3) exempts personal property, goods, and services in “storage for transit” to other states. If passed, the amendment will define “storage while in transit” to include property stored in Louisiana “with a destination to the Outer Continental Shelf”.

If the amendment fails to pass, then oil and gas property tax exemption for goods and materials in transit to other states and international destinations will continue, but goods en route to the Outer Continental Shelf will be subject to ad valorem tax in Louisiana.

Tyler Gray, president and general counsel to Louisiana Mid-Continent’s Oil and Gas Association, argues that the amendment is proactive and makes a necessary “clarification in the law”. Gray also states that the extension of the oil and gas property tax exemption will make Louisiana more competitive in the industry.

Dr. Steven Procopio of the Public Affairs Research Council of Louisiana argues that local governments will increase tax revenues if the amendment fails. However, he states that oil and gas companies can seek clarification of the language in the Louisiana Constitution through the legal system.