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Attorney general opinion questions constitutionality of several tax credits

The opinion by outgoing Attorney General Drew Edmondson was requested by Rep. David Dank, who wants to set up a panel to study the state's tax credits.
BY PAUL MONIES Published: December 23, 2010

Several types of state income tax credits to help rural and small businesses could be unconstitutional, Attorney General Drew Edmondson said Wednesday in a legal opinion.

The opinion was requested earlier this year by Rep. David Dank, R-Oklahoma City, the incoming chairman of the House Revenue and Taxation subcommittee.

Dank said he plans to hold a special meeting in January to brief panel members on the opinion and on tax credits. He said the attorney general's opinion would be a good framework to debate the effectiveness of the state's tax credits.

“If there's a tax credit that creates jobs and serves a real meaningful purpose for the taxpayers of Oklahoma, I'm their best friend,” Dank said Wednesday. “If there's a tax credit that's simply a giveaway to a certain entity or individual, I'm your worst enemy if it's not serving a purpose for the taxpayer. I don't mean to be sanctimonious or a Puritan, but I think the main reason I was sent out there was to look after the taxpayer money.”

Dank asked the attorney general's office if income tax credits constituted a “gift” under the Oklahoma Constitution. He also asked about the constitutionality of transferrable tax credits and the rural small business and small business venture capital tax credits.

Attorney general opinions on constitutional matters are nonbinding. That means a court would still have to rule that legislation setting up a tax credit is unconstitutional.

Edmondson's opinion separated tax credits into those that benefit economic development and those that don't. For example, the state's earned income tax credit for lower-income households goes to individuals. But the state Supreme Court has ruled it is not a “gift” and is constitutional.

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