BISMARCK — North Dakota Gov. Kelly Armstrong issued his first veto since assuming office Friday, citing concerns over the constitutionality of Senate Bill 2261.
The legislation sought to establish a prison industries workforce development tax credit -- a non-refundable tax credit equal to 10% of the cost of purchased components of final manufactured products or labor from prison industries.
In his statement on the veto, Armstrong said the credit would have potentially created an incentive to purchase components from Rough Rider Industries – a self-sustaining state agency at the State Penitentiary which qualifies as a prison industry providing final manufactured products.
He said the bill creates an “uneven playing field” by giving Rough Rider Industries an unfair competitive advantage over out-of-state manufacturers. That would potentially violate the Dormant Commerce Clause of the U.S. Constitution, which prohibits states from enacting laws that discriminate against or unduly burden interstate commerce.
“Tax credits, when given to micro-segments of the economy, decrease state revenue and further saddle those still paying taxes with a higher percentage of the tax burden,” Armstrong said in his statement. “Any tax policy that creates this type of carve-out must be tied to a significant outcome that benefits the state’s economic interests. This bill does not do that. Combined with the aforementioned legal concerns, the juice in this case is quite simply not worth the squeeze.”
The bill passed the Senate in a 43-3 vote and passed the House of Representatives on a 56-33 vote.
To override the veto, both chambers of the Legislature vote and both need to reach a two-thirds majority in favor of the override. A two-thirds majority is 63 votes for the House and 32 votes for the Senate.
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