Five companies or individuals are responsible for nearly half of the $264 million in state income tax credits claimed for tax year 2008, according to an analysis of the latest data available compiled by the Oklahoma Tax Commission.
The Tax Commission first began releasing details about who was claiming which income tax credits in 2006 after a law specifically made the information public record. Other tax incentives such as exemptions from sales tax or gross production tax still are not public record.
In the 2008 tax year, five income tax returns claimed nearly $104.6 million in tax credits, an analysis of data published by the Office of State Finance shows.
Weyerhaeuser Co., a national lumber company, claimed $54.6 million; Terra International Inc., a fertilizer producer, claimed $19.3 million; Howard Hawks with Tenaska, a power company, claimed $10.3 million; Koch Industries Inc., a corporation based in Wichita, Kan., claimed $9.2 million; and George Kaiser, with BOK Financial, claimed $11.1 million.
Tax credits have come under scrutiny by lawmakers recently, as more and more money that normally would have come into the state as revenue is lost because of a variety of tax breaks, incentives and credits.
More than 44 different tax credits were targeted for elimination by Gov. Mary Fallin in her initial plan to reduce the statewide income tax. This week members of the House and Senate will meet behind closed doors to hammer out the details of an income tax reduction plan, but key lawmakers have said elimination of any tax credits is unlikely.
Three of the five companies claiming the most tax credits in 2008 say the incentives resulted in a vast economic impact in Oklahoma. The incentives played a significant role in the decision to invest in Oklahoma rather than other states.
The other two companies utilized tax credits for venture capital investments and declined to comment for the article.
“In a project like this, it comes down to economic analysis and calculation of rates of return and tax credits play a big part in that,” said Ron Quinn, executive vice president of Tenaska. “The fact is that adjacent states — Kansas, Texas, Missouri — are all competing for these kinds of projects.”
The roughly $450 million Tenaska Kiamichi Generating Station opened in 2003 in Pittsburg County after employing 1,051 construction and trade workers, half of whom were from Oklahoma, and spending almost $1.5 million in mortgage recording taxes and $21 million on Oklahoma goods and materials, Quinn said.
Today the plant has 35 full-time employees and will pay substantial property taxes for years to come, he said.
Tax data show the Nebraska company's chairman, Howard Hawks, claimed $10.3 million in tax credits in 2008 using the Oklahoma investments and new jobs tax credit. Quinn said Tenaska generated those tax credits through building the power plant and has carried over remaining credits since 2003. Eventually, he said, the tax credits will run out, and the company will pay full taxes to the state for a power plant that otherwise would have never existed.
Just because a tax return claims a tax credit doesn't mean the individual or company will receive that entire incentive that year or even ever. Entities and individuals only receive as much money back as what they have paid into or owe to the state — the amount of their tax liability.
For example, Weyerhaeuser filed $54.6 million in tax credits on the lumber corporation's 2008 income tax return, but company spokesman Richard Chapman said the company was unable to use a vast majority of those credits.
Chapman said the credits were accumulated using Oklahoma incentives for investments in qualified manufacturing facilities over the course of several years. That tax incentive is the same used by Tenaska.
They invested in heavy machinery at two facilities; however, the company sold one facility and closed the other, and today has only a small sawmill operating in Idabel.
“It's so minimal that we will never, ever use $54 million in state tax credits because we don't have the tax liability,” Chapman said.
He said the company received about $2 million in tax credits in tax year 2009.
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Chapman said the incentives played a role in Weyerhaeuser deciding to invest in Oklahoma.
“It was a little combination of both. No. 1, those machines had to be rebuilt. They were worn out,” Chapman said.
“However, Oklahoma had a program that had a capital investment incentive, and if you spent the money in Oklahoma, it would turn over five times.”
Ultimately, the housing crisis in 2008 resulted in the closure of one plant and sale of another, Chapman said.
The second-greatest amount of tax credits claimed in 2008 came from Terra International Inc., a subsidiary of CF Industries, a global manufacturer and distributor of fertilizer.
Terra International owns plants in Verdigris and Woodward that produce ammonia and other chemicals used in fertilizer.
The company, based in Deerfield, Ill., claimed $19.3 million in tax credits on its 2008 income tax return, according to the data.
A spokeswoman for the company would not comment on the tax credits, or how much the company's tax liability was in 2008.
The tax credits were for rural small business venture capital investments. The incentive allows a tax credit to be claimed for 30 percent of an investment made in a qualified rural small business.
That tax credit expired in 2011, and lawmakers have not indicated they will extend the credit for this year.
George Kaiser, chairman of the board of BOK Financial, claimed $11.1 million in tax credits on his 2008 tax return, according to state data, for venture capital investments. That tax credit has expired, and no new credits may be made.
Finally Koch Industries Inc. received $9.2 million in tax credits in 2008. The tax credits were accumulated over a 15-year period, Koch spokeswoman Melissa Cohlmia said in an email.
Cohlmia said the company completed a $20 million modernization project at a fertilizer plant in Enid, increasing the workforce by more than 20 percent to 130 people.
The company claimed the same investment and new jobs tax credit that Tenaska and Weyerhauser used, receiving $4.5 million in 2008.
The Wichita-based corporation also claimed $4.6 million in 2008 for operating a qualified recycling facility. Cohlmia said Koch operates a mill in Muskogee that uses 1,300 tons of wastepaper a day to manufacture tissue. She said the plant employs about 1,000 people.
“Oklahoma, like many states, offers specific business tax incentives meant to generate and retain good jobs,” Cohlmia wrote. “Koch directly employs more than 1,700 Oklahomans, and our operations support an estimated 5,800 jobs in Oklahoma.”