State lawmakers vow to keep heating oil tax exempt

ALBANY - Responding to the alarm raised by Gov. David A. Paterson, lawmakers Wednesday vowed to nix a potential state tax on use of low-sulfur home heating oil, starting in two years.

Homeowners complying with a new law requiring cleaner No. 2 heating oil could be subject to a 40-cents per gallon tax. While officials questioned whether the levy would be applied to residents, they promised to adopt an amendment keeping home heating oil exempt from state taxes.

One of the law's sponsors, Assemb. Robert Sweeney (D-Lindenhurst), said it was intended to reduce air pollution, not hike oil bills. He noted sulfur particles in the air have been blamed for asthma and cancer.

Sweeney and heating oil retailers said they hoped the law would spur sales of high-efficiency burners that lower homeowners' bills by using less fuel. "There was no intent that home heating oil be taxed," Sweeney said. "I don't feel there is a problem but if the governor feels a clarification is needed, we have no objection."

Aides to Assembly Speaker Sheldon Silver (D-Manhattan) and State Senate chief John Sampson (D-Brooklyn) indicated they were open to amending the law, also sponsored by Sen. Bill Perkins (D-Harlem).

Paterson raised the specter of a tax on home heating oil when he announced the law on Tuesday. He said the state Taxation and Finance Department would treat low-sulfur heating oil like low-sulfur diesel fuel found in highway trucks, which is taxed at about 40-cents per gallon.

"It is critical . . . that legislators work to pass a chapter amendment this year that would ensure that tax-exempt status of heating oil is maintained," he said. The amendment would not affect county taxes on oil.

Advocates of the law questioned whether a change was needed. They pointed to current tax law, which forbids some heating oil distributors from passing along to consumers certain state taxes. That law could apply to all distributors through a registration process and applying dye to the fuel, distinguishing it from other products.

"Homeowners will not pay an additional excise tax on home heating oil - it's ludicrous," said Kevin Rooney of the retailers' group Oil Heat Institute of Long Island. He added the tax debate was overshadowing the law's benefit of cutting fuel bills.

On the Island, where nearly 70 percent of residents heat with oil, the typical yearly bill is $2,700 for 900 gallons, based on a rate of $3 per gallon. That cost would be reduced by $135 using more efficient low-sulfur heating oil, while installation of a new burner saves between $540 and $675. The expense of such burners is offset by a $1,500 credit on federal income tax forms.

Still, Michael Doyle of the state Petroleum Council, representing oil producers, said price hikes were likely because refineries need more than two years to convert production. "There could be price increases and tightness of supplies."
CLEANER HEATING OIL

Gov. David A. Paterson signed into law a bill requiring the use of low-sulfur heating oil, effective July 1, 2012. He now wants lawmakers to pass an amendment ensuring homeowners don't pay a 40-cents per gallon tax that applies to similar kinds of fuel.

Supporters of the law predict less fuel use, lower bills

The average Long Island homeowner uses 900 gallons of heating oil per season. The typical yearly bill is $2,700, based on a charge of $3 per gallon.

Use of low-sulfur heating oil reduces consumption by

45 gallons, saving $135 per year.

Purchase of a high-efficiency burner reduces consumption

further, saving between $540 and $675 per year.

Cost of new burner can be offset by $1,500 federal tax credit.

Less frequent maintenance of burners.

Opponents of the law forecast possible

fuel shortages and higher bills

Refineries need more time to convert production.

Demand for low-sulfur heating oil will spike in 2012,

potentially increasing prices.

State tax, totaling 40-cents per gallon, could be passed

along by distributors.

SOURCES: Oil Heat Institute of Long Island, New York State Petroleum Council