News Releases

News Release

April 02, 2001  -  Columbus, Ohio  -  New Utility Tax Structure Taking Shape

Ohio Tax Commissioner Thomas M. Zaino today released the findings of a project recalculating the value of tangible personal property owned by electric and natural gas companies in the state. The project was prompted by legislation deregulating the electric (Senate Bill 3) and natural gas (Senate Bill 287) industries.

Commissioner Zaino said the findings clearly show the upcoming drop in property taxes paid by the utilities, but said there will be no impact on funding for schools and local governments. "This legislation fundamentally restructures a big part of our business tax system, but, at the same time, provides critical protection for schools and local governments. They will see no drop in revenue because the state will reimburse them for the lower property values."

Zaino says Department of Taxation (ODT) figures show the new tax system cutting the taxable value of utility property by about $4.45 billion -- $3.25 billion for electric and $1.2 billion for natural gas. The exact tax loss hasn't been calculated yet but is estimated at $300 million.

To compensate schools and local government for the loss in property taxes, the state will use revenue from two new taxes on electric and gas distribution companies. The new kilowatt-hour (kWh) and Mcf (1,000 cubic feet) taxes are levied on the amount of electricity or gas delivered to customers. Revenue raised under the old and new tax systems is roughly equivalent.

Those taxes are part of a package that includes tax rate cuts on all natural gas property from 88- to 25-percent and electric generating property from 100- to 25-percent. Those cuts are designed to allow formerly regulated companies to operate in deregulated, competitive markets. The lower rate on most utility property is now the same rate (25%) as all other businesses pay.

The ODT figures will be sent (certified) to the Ohio Department of Education for use in the school funding formula. Actual reimbursements of schools and local governments begin in February 2002.

For more information contact:

Gary Gudmundson, Communications Director
Ohio Department of Taxation
(614) 644-6903