Oklahoma's vote on intangible property tax exemption to have uncertain financial impact on homeowners

Homeowners and locally assessed businesses could see property taxes go up regardless of whether Oklahomans vote Nov. 6 to exempt all intangible personal property from state property taxes by approving State Question 766, officials say.
by Randy Ellis Published: October 29, 2012
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Homeowners and locally assessed businesses could see property taxes go up regardless of whether Oklahomans vote Nov. 6 to exempt all intangible personal property from state property taxes by approving State Question 766, officials say.

“We have no clue what the impact is going to be,” admits Garfield County Assessor Wade Patterson, who has an advantage over most folks because he served on a committee that studied the issue.

The Oklahoma Tax Commission's best estimate is that 251 centrally assessed companies like AT&T, Oklahoma Gas and Electric Co., American Airlines and Cox Communications will receive a collective $50 million tax break if voters approve State Question 766.

Patterson said he has seen other estimates ranging from $12 million to more than $60 million.

Regardless of the amount, less money will be distributed to school districts and counties, which will be required to absorb the bulk of the loss. When property taxes are reduced for one taxpayer, like a utility company, that means a higher percentage must be paid by other businesses and homeowners in the district to pay off outstanding indebtedness on school and county bonds, Patterson said.

But a vote against the state question won't necessarily save homeowners and small businesses from higher taxes either.

The State Chamber of Oklahoma has been running television ads warning homeowners and businesses that a vote against eliminating intangible property taxes could lead to the “single largest tax increase in state history.”

“That's the fear,” Patterson said. “Theoretically, I think they would be right.”

Court decision

The fear is based on a 2009 Oklahoma Supreme Court decision that affirmed the state Tax Commission's authority to tax some types of intangible property owned by centrally assessed businesses. In its ruling, the court also opened the door for local county assessors, who have not been taxing intangible property owned by businesses and homeowners, to perhaps begin doing so in the future.

“Even if a county assessor didn't want to collect the tax, I think they have a duty to collect the tax under their general duties,” said Fred Morgan, president of the State Chamber.

Patterson said it's a bit more complicated than that.

Residents of 71 of Oklahoma's 77 counties have voted previously to exempt household personal property from taxation. One more county, Harper County, has a vote scheduled on the issue in November.

Patterson said he believes intangible property falls within the category of household personal property for homeowners and would not be subject to taxation in 71 counties, even if State Question 766 is defeated.

“I disagree with that,” Morgan said.

Personal property

Morgan said he believes the household personal property tax exemption only refers to tangible property, and county assessors could begin taxing homeowners on a wide range of intangible items. He listed music copyrights, the right to use a smartphone app after paying a licensing fee, teaching certificates, nursing licenses and doctor licenses as being among items that might be taxed if the state question is defeated.

Courts might have to decide the issue, Patterson said.

As for the six counties that haven't approved household personal property tax exemptions — Cherokee, Adair, Choctaw, Texas, Beaver and Harper (depending how the local vote goes there) — Patterson agrees that assessors in those counties could be under an obligation to start collecting taxes on intangible property that is not specifically exempt by law.

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by Randy Ellis
Capitol Bureau Reporter
For the past 30 years, staff writer Randy Ellis has exposed public corruption and government mismanagement in news articles. Ellis has investigated problems in Oklahoma's higher education institutions and wrote stories that ultimately led to two...
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