Extras on Excise: Alabama is Extracting More Taxes from Declining Coal Industry


The steady drop in coal consumption in recent years may be causing a feeling of depletion among the industry. Natural gas has surpassed coal as the main energy source used by states in the Northeast, and with the lack of necessity comes a decline in production, leading to mass bankruptcies among coal companies. The decreased tax revenue from coal production has state legislators looking for additional ways to raise revenue to support the regulatory authorities that oversee this industry.    

On May 24, 2017, Alabama enacted H.B. 468, imposing an additional excise and privilege tax on coal and lignite mining in-state. Alabama is allocating these additional funds to the Surface Mining Commission, the state’s regulatory authority for surface and underground coal mining operations.

The new tax will be collected in addition to Alabama’s current taxes on coal and lignite, which are imposed at a total rate of $0.335 per ton. Mining companies must pay the additional tax based on the tonnage severed, up to 2 million tons per year, as follows:

  • $0.025 per ton for underground mining
  • $0.05 per ton for surface mining

This additional tax is estimated to generate $209,000 per year in revenue for the commission. Also, failure to comply with the new tax law means a penalty of up to $1,000 per offense, which could produce more revenue for the State General Fund. 

H.B. 468’s passage is a blow to an industry whose annual prospects are continuing to look bleak in 2017, according to the Institute for Energy Economics and Financial Analysis. The organization’s annual outlook report for the U.S. coal industry is anything but promising, with an expected drop in demand and low prices that will have coal producers struggling to keep up with their counterparts in natural gas and renewables. 

Coal businesses should stay alert as their states may impose more taxes and higher fees to fund regulatory programs.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Is the coal industry ready for a resurgence or is it going to keep declining?

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