All tax credits and economic incentive programs offered by Oklahoma should be audited to ensure no shenanigans take place at taxpayer expense, state Auditor and Inspector Gary Jones told a House committee Wednesday.
“You come up with these programs and people start looking at where's the loophole,” Jones said. “You should audit them for compliance every year. You should audit them every so often for efficiency.”
Jones said a preliminary audit by his office of the venture capital tax credit program focused on an Oklahoma bank and two of its subsidiaries. One subsidiary transferred $800 million to the other, potentially creating the opportunity for up to $160 million in tax credits.
Jones did not identify the bank or subsidiaries by name, but records show the bank was Bank of Oklahoma and the subsidiaries were CVV Partnership and Cottonwood Valley Ventures Inc.
“It is probably technically not illegal,” Jones said after meeting with the House of Representatives Tax Credit and Economic Incentive Oversight Committee.
But he said it may run afoul of the state's constitution, according to a 2010 attorney general's opinion that requires tax credits to serve a public purpose and benefit citizens. The Oklahoma Constitution prohibits the state from making a gift to a private business.
Sheila A. Curley, director of corporate communications for BOK Financial, said she believes Bank of Oklahoma has complied with the law.
“While we were not present to hear the full context of today's discussion, we can assure our legislative leadership that Bank of Oklahoma proactively supplies information and ensuing results as required by the Oklahoma Tax Commission,” Curley said. “We follow the full intent of this economic development program as outlined by our legislators.”
Committee Chairman Rep. David Dank said he's been assured by Attorney General Scott Pruitt's office that it is “fully behind the existing opinion that found so many of these tax credits constitutionally infirm.”
Dank, R-Oklahoma City, said he plans to again file legislation next year that would give the auditor's office the power and duty to conduct audits of financial records of a business that uses state tax credits to ensure they comply with requirements that allowed the credit to be used.
“Most of these tax credits are hardly being audited or monitored at all,” he said. “We have no idea what the recipients are doing with the money, who they are hiring, how much they are paying, or even if there are any economic benefits to the public at all. Ask for the cost-benefit analysis and you get blank stares.
“It's an absolute must that we audit these credits to see how they're spending the money,” Dank said.
Bank of Oklahoma and its subsidiaries used the program to make more than $1 billion in loans over the past 15 years. Loans went to entities ranging from the Roman Catholic Diocese of Tulsa to several Oklahoma Indian tribes, records show.
The Legislature terminated the program at the end of 2008.
Jones said the tax credits contain no audit clauses. The Oklahoma Tax Commission is only authorized to check if they comply with the requirements.
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We need more safeguards, audit provisions, a stick to measure incentives by, and caps set on how long and how much an individual company can receive.”
Rep. David Dank