Legislature Overrides Governor’s Veto Of Tax Break For Natural Gas Industry

The Arkansas House and Senate overrode a line-item veto of a bill that would give a tax break to the natural gas drilling industry.

The House of Representatives voted 55-41 to override the Governor’s veto. The Senate vote was 26-7.

Last week, the governor had invoked the line-item veto for Section 16 of House Bill 1048, an appropriation bill for the Revenue Services Division of the Department of Finance and Administration.

The section of the bill in question allowed for an exemption from the gross receipts tax for certain machinery and equipment used in manufacturing as well as sand and other proppants used in oil or gas drilling.

Beebe said the provision was unconstitutional and should not have been dealt with in the fiscal session.

“Substantive changes to Arkansas law that have no relation to appropriations, such as Section 16 of HB 1048, should rarely be considered during fiscal sessions,” Beebe wrote in his veto letter. “If they are to be considered at all, it should be done through the process the people established in our Constitution, and not through ‘special language’ amendments to unrelated appropriation bills.”

With the veto override, the tax exemption becomes law. Some legislators and Gov. Beebe have said the revenue hit caused by the tax exemption – roughly $4 million – may jeopardize cost-of-living-adjustments for state employees that were approved for next year’s budget.

The House and Senate also adjourned officially for the fiscal session.