Arkansas AG asks to help defend drilling tax break after agency says it's unconstitutional

Attorney General Dustin McDaniel wants to help defend in court a $5 million tax break legislators gave natural gas drillers earlier this year, asking to step in and assist in the case after the state's chief finance officer said he believed the exemption was unconstitutional.

McDaniel on Friday asked a Pulaski County judge to allow him to intervene in the lawsuit over a measure that exempts sand used in natural gas drilling from state sales taxes, which was approved earlier this year as part of a state agency's budget despite objections from the governor. The lawsuit argues the tax break should have been considered on its own and required a two-thirds majority to even be introduced during the legislative session, which was intended to focus on budget issues.

McDaniel asked to intervene in the case the same day Department of Finance and Administration Director Richard Weiss, named as the defendant in the lawsuit, agreed in court papers that the tax exemption was unconstitutional.

The Legislature approved the tax break in March as part of the budget for the department's revenue services division, overriding a line-item veto by Gov. Mike Beebe. Beebe and Weiss had cited concerns about the tax break being included in the division's budget and not considered as a stand-alone item.

Lawmakers said they were clarifying state law to follow a Pulaski County circuit judge's ruling that sand qualifies as equipment, meaning taxes can't be collected on it. That decision has been appealed.


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