The Sentinel

Governor Signs Tax Credit Bill for Manufacturing Companies Using Natural Gas

July 27, 2020

Last week, Gov. Tom Wolf signed Act 66 of 2020, which will help to direct Pennsylvania’s natural gas resources toward growth within the manufacturing sector.

 

The new law establishes the Local Resource Manufacturing Tax Credit Program, which provides a tax credit (against 20 percent of annual tax liabilities to companies) to no more than four companies that meet certain eligibility requirements and that use methane from Pennsylvania natural gas in the manufacturing of petrochemicals or fertilizers. This credit could be awarded once the initial 30-month construction phase of a new facility has been completed (at a minimum cost of $400 million) and the plant is fully operational; and must also have created at least 800 construction and permanent full-time jobs. It also stipulates that the company pay all taxes during the construction phase and that the facility utilizes carbon capture and sequestration technology when economically able.

 

Supporters of the new law have estimated that the program will generate more than $600 million in annual labor income and leverage over $1.6 billion in economic output. Unfortunately, prior to the bill’s passage through the General Assembly, lawmakers were also compelled to add a prevailing wage section to the bill’s language in order to secure the governor’s support. Our organization opposed prevailing wage requirements on these facilities, which will inflate costs and add administrative complications during the construction phase and for alternations, repairs and other work at the facility, for potentially decades to come.

 

Our organization worked with lawmakers to make several changes and add clarifications to at least improve the bill’s prevailing wage provisions – including ensuring it does not apply to other tax credit programs; stipulating that prevailing wage only applies for these specific facilities, not all of a company’s facilities; and only for years in which the tax credit is awarded, as opposed to permanently subjecting facilities to this mandate even if the tax credit is not sought or awarded.

 

The PA Chamber applauds state Senators who voted against and defeated amendments that aimed to further expand Pennsylvania’s prevailing wage requirements, including to additional aspects of these facilities’ operations as well as recipients of other tax credits.  Imposing additional costs and red tape would discourage potential investors and make key economic development tools less attractive.

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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.