The popularity of state tax credits skyrocketed five years ago, but exact figures on the growth of these programs and who is participating in them is hard to come by.
Tony Mastin, administrator of the Oklahoma Tax Commission, told an Oklahoma House panel Monday that the credits became popular among investors trying to offset income tax. He didn’t provide figures documenting the increased use of the credits.
Lawmakers are considering limiting some tax credits as they look for ways to close a $1.2 billion revenue shortfall.
Asked whether some investors could be inappropriately gaining financially, Mastin told members of the House Administrative Rules and Agency Oversight Committee, "There’s always a way to scam the system.”
Legislators in 2006 adjusted the small business and rural small business capital credit programs — which offer 20 percent or 30 percent tax credits on money invested in qualified projects — after it was determined individuals were participating in the programs with borrowed money to obtain tax credits 200 percent or more of their investments.
In some cases, the borrowed money apparently never was intended to go into new or expanded businesses and was used solely to boost the amounts of the tax credits.
Cost state $102.7M
Tax Commission records show income tax credits took about $161.5 million from state revenue in the 2008 tax year, tax credits claimed in the rural small business capital credit program were $65.6 million, and credits claimed in the small business capital credit program were $13.8 million.
For the current 2010 tax year, it’s projected the state tax credits will take away about $102.7 million from state revenue. Credits for the rural small business program are estimated at $37.4 million, and credits for the small business program are estimated at $11.1 million.
Three members of the Oklahoma Tax Commission oversee the programs, which were established through the years by the Legislature.
Rep. John Wright, the committee chairman, said more information should be made public about who is investing and benefiting from the tax credit programs.
"If someone believes they’re bringing positive value to the state by their economic incentives, they shouldn’t hesitate to be identified with it and defend it in the town square, if you will,” said Wright, R-Broken Arrow. "It has been the lack of transparency that causes me to question whether or not someone could defend the economic contribution that their specific incentive is bringing to the state.”
Wright said the secrecy of the tax credit programs is concerning.