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Beebe vetoes tax exemption for drilling sand

Published on NewsOK Modified: March 17, 2014 at 2:34 pm •  Published: March 17, 2014

LITTLE ROCK, Ark. (AP) — Arkansas Gov. Mike Beebe vetoed a $5 million tax exemption for the sand used in natural gas drilling on Monday, saying it was unconstitutional for the Legislature to include the tax break in a state agency's budget bill.

Beebe used his line-item veto authority to strike the exemption, which was included in the appropriation bill for the Department of Finance and Administration's revenue services division. In a letter to lawmakers, Beebe said the tax break should have been considered on its own rather than slipped into an appropriation bill.

Beebe said the exemption violated an amendment voters approved in 2008 requiring the Legislature to meet annually, with sessions in even-numbered years focused on the state's budget. During the fiscal session, non-budget bills must win the support of two-thirds of the House and Senate to even be introduced.

"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 said in the 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."

A Pulaski County circuit judge ruled earlier this month that sand qualifies as equipment, meaning taxes can't be collected on it. Lawmakers who backed the exemption said they're clarifying the law to follow the judge's decision.

Beebe's decision sets up a potential override vote when the Legislature convenes Wednesday to formally adjourn this year's session. It takes only a simple majority to override the Democratic governor's veto, and Republicans control both the House and Senate.

Sen. Jonathan Dismang, R-Beebe, who proposed the amendment to the budget bill, said he'll likely seek an override. Dismang defended including the exemption in the budget bill rather than proposing it as a separate measure.

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