Effects of Virginia Coalfield Employment Enhancement Tax Credit Legislation

Coal mining is the major industry in Virginia's far southwestern counties. Coal transportation supports employment in other parts of the state. In 1995, the Virginia General Assembly passed, and the Governor signed, legislation establishing the Virginia Coalfield Employment Enhancement Tax Credit. This tax credit applies to coal produced from mines located within the state's borders. The tax credit is intended as a means of maintaining coal-related employment in the coalfield counties and other parts of the state. The Virginia Coal and Energy Commission is considering proposals that would modify the current tax credit. The current legislation establishes a production tax credit of $0.25 per ton for surface-mined coal, $0.60 for coal produced in deep mines with seam thicknesses under 33 inches, and $0.50 per ton for other deep-mined coal. The current tax credit will be available to coal producers with a three-year delay, and only if the state runs a revenue surplus which exceeds projections during the intervening fiscal year. The Coal and Energy Commission has voted to recommend removal of the revenue surplus contingency and three year-delay provisions from the current legislation. This report contains results of a study of the Coalfield Employment Enhancement Tax Credit's effect on export coal businesses at the Port of Hampton Roads. The study addresses this topic within the context of the tax credit's effect on the state as a whole. The study also addresses the effects of alternative tax credits under consideration by the Coal and Energy Commission.