Attorney General Dustin McDaniel’s office is seeking to intervene in a lawsuit challenging a tax exemption that lawmakers provided to the oil and gas industry earlier this year.
The attorney general’s office filed a motion Friday to intervene in a lawsuit by Pulaski County resident Robert Nunn alleging that a sales tax exemption for sand and other proponents used in oil and gas drilling is unconstitutional.
The state Legislature inserted the tax exemption into a budget bill and approved it during this year’s fiscal session. Gov. Mike Beebe vetoed the part of the bill containing the tax exemption, saying the Legislature had not followed the proper procedure for approving a non-appropriation measure in a fiscal session, but the Legislature overrode the veto.
Nunn’s lawsuit, filed last month in Pulaski County Circuit Court, alleges that because the Legislature bypassed the two-thirds vote in both chambers required to consider a non-appropriation measure during a fiscal session, the tax break is unconstitutional. Nunn also is seeking an order that the state collect any taxes it failed to collect because of tax break and is asking for attorney’s fees and costs.
Legislators who support the tax break say a two-thirds vote was not required because the measure simply clarified that proponents fall under the state’s sales tax exemption for manufacturers’ equipment, in accordance with a Pulaski County circuit judge’s ruling in a separate lawsuit earlier this year. The state Department of Finance and Administration is appealing that ruling.
In its motion Monday, the attorney general’s office said it should be allowed to intervene in the lawsuit because under Arkansas law the attorney general is entitled to be heard when a state statute is alleged to be unconstitutional.
The defendant in Nunn’s lawsuit is DF&A Director Richard Weiss. On Monday Weiss filed an answer to the lawsuit in which he admitted the tax exemption is unconstitutional but denied that Nunn is entitled to an order that the state collect any taxes that it failed to collect or that he is entitled to attorney’s fees or costs.
"The Arkansas Supreme Court has not found that the mere failure to collect funds … constitutes an illegal exaction," Weiss said in his filing.