South Dakota

South Dakota

April 01, 2005
SOUTH DAKOTA enacted two tax incentives to encourage power companies to build new plants in the state.

New power plants will be assessed for property tax purposes under a formula that arbitrarily values the plants at $500 a kilowatt. Thus, a plant with the capacity to produce 600 megawatts would be valued at $300 million. Property tax relief is also provided while the plant is under construction.

The other incentive is refunds of some of the sales and use taxes paid on the equipment that goes into the power plant. For plants costing between $60 million and $600 million, 75% of the sales and use taxes paid would be refunded at the end of construction. For plants that cost more, 90% of such taxes would be refunded.

The governor signed both bills on March 18. South Dakota is hoping to set itself up as an exporter of electricity to other states.

Meanwhile, phone companies lost an effort to have a 4% gross receipts tax in South Dakota on cellular and other wireless telephone companies declared illegal. The state Supreme Court said in February that the ability of the state to levy such a tax was not “preempted” by federal law. The case is Dakota Systems, Inc. et al. v. South Dakota Department of Revenue.

Keith Martin