Coalfield Employment Enhancement Tax Credit

The Coalfield Employment Enhancement Tax Credit is an income tax credit available to any person who has an economic interest in coal mined in the Commonwealth of Virginia. The credit is sixty cents per ton in 1996 and 1997, fifty cents per ton in 1998 and 1999, and one dollar per ton in 2000 and 2001 for each coal mined from a seam smaller than thirty-three inches.

The bill also changes the allocation of credits among coal mined from seams of different thicknesses, eliminates the provision that renders availability of the credit contingent on general fund revenue exceeding a certain amount, and eliminates the requirement that a person must convey any right, title or interest in coal to claim the credit. In addition, the tax credit is expanded to include any coal conveyed to a person with an economic interest for the purpose of generating electricity.

The legislation also creates the VCEDA Renewable Energy Fund, which is a $1 million program funded by a portion of the Coalfield Revolving Loan and Workforce Development and Training funds to assist renewable energy projects and promote economic diversification in Southwest Virginia’s e-Region. The fund may provide:

• Low-interest loans and grants for purchasing.
• Constructing or improving facilities and equipment to produce or convert renewable energy, such as solar.
• Workforce development and training initiatives that prepare a region’s workforce for jobs in renewable energy.

VCEDA Renewable Energy Funds

The state’s coal tax credits “generate negligible economic benefits” and no longer appear relevant in a world where natural gas is rapidly displacing coal, according to a new report by the Joint Legislative Audit and Review Commission (JLARC). JLARC has recommended that the General Assembly eliminate two of Virginia’s biggest coal incentives — the Coalfield Employment Enhancement Credit and the Virginia Coal Employment and Production Incentive Tax Credit.

These credits are reported on Schedule CR and are nonrefundable for individuals but refundable for corporations. They are limited to a maximum of $17,500 or the total amount of state income tax liability. Credits not used within a taxable year may be carried over for up to five taxable years.

In addition to the Coalfield Employment Enhancement Credit, VCEDA offers a number of other types of financing. These include a revolving loan fund that provides low-interest loans for fixed assets such as land purchase, construction, and equipment purchases. The funds are financed with a portion of local mineral severance taxes paid by the coal and natural gas industries.