An Oklahoma City attorney who has successfully sued the state in the past is threatening another lawsuit if Gov. Mary Fallin signs into law a bill setting a revised tax rate for oil and natural gas wells.
Jerry Fent delivered a letter to the governor’s office Tuesday saying the bill fails to meet requirements in the Oklahoma Constitution for revenue measures. Specifically, he said House Bill 2562 violated requirements that revenue bills be approved by three-fourths of the membership of the House and Senate and that such bills should not be passed in the last five days of a session.
“Based upon your signing an oath to support, obey and defend the Oklahoma Constitution, I respectfully request you not approve HB 2562,” Fent said in the letter. “If you approve HB 2562, I will consider filing an action in the Oklahoma Supreme Court to stop this bill.”
The bill was passed Thursday, one day before the Legislature ended its session. It was approved 61-34 in the House and 30-14 in the Senate.
The bill sets the state’s gross production tax rate for oil and natural gas wells at 2 percent for the first 36 months of production, and 7 percent thereafter.
The state historically has assessed a 7 percent tax. In 1994, the Legislature created an incentive for horizontal drilling. The incentive initially lowered the tax rate to 1 percent for the first two years or until costs were recovered. In 2002, the incentive was extended up to four years. The incentive program is set to expire next year, which would return the tax rate to 7 percent.
Fallin spokesman Alex Weintz said Fent’s opinion of the bill won’t determine whether it is signed into law.
Senate President Pro Tem Brian Bingman said the bill actually decreases gross production taxes from the 7 percent rate before the incentive, to a new rate of 2 percent, so the constitutional procedures Fent cites don’t apply. Bingman said those procedures apply only to bills that increase taxes.
“I think we can agree to disagree,” Bingman said. “We’re actually decreasing taxes after July 1, 2015.”
Meanwhile, Fent already is suing Fallin over another bill she signed into law. Senate Bill 1246 calls for a gradual reduction in the state’s top personal income tax rate from 5.25 to 4.85 percent. The cut is to begin to take effect for the 2016 tax year if general revenue meets benchmarks set forth in the legislation.
In that suit filed with the Oklahoma Supreme Court, Fent said bills affecting state revenue need to originate in the House, and this bill started in the Senate. He also says such bills require a three-fourths vote in the Oklahoma House and Senate, and the approval of this bill did not reach that threshold.
A hearing is scheduled for June 24 before a referee who will recommend whether the state’s highest court should take up the case.
A previous attempt at an incremental cut of state income taxes was tossed out by the state Supreme Court late last year. Acting on a lawsuit filed by Fent, the court found that law, which also included provisions creating a fund for Capitol repairs, violated a constitutional prohibition against including more than one subject in a single bill.