Oklahoma lawmakers say elimination of tax credits appears unlikely

The leader of an Oklahoma panel examining tax credits last summer, said there isn't the political will to do away with the lucrative incentives for businesses and individuals.
BY MEGAN ROLLAND mrolland@opubco.com Published: May 3, 2012
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She said the new jobs tax credit has brought huge investment to Oklahoma, while the historic tax credit has redeveloped ailing downtowns across the state, and the investment by wind farms in western Oklahoma could not have occurred without the ability to compete with incentives offered by Texas and Kansas.

“A healthy majority (of tax credits) are benefiting Oklahoma, but I would say also it's always good to revisit them and make sure,” Caldwell said.

Dank is not so sure those tax credits are good for Oklahoma.

“If you just take it as one, then maybe it doesn't seem, on the surface, as not such a bad deal,” Dank said.

But taken in conjunction with one another, the financial windfall for recipients is huge.

“You have to look at what are the people putting into the project that are absolutely going to benefit from it,” Dank said. “It's a giveaway culture that's been developed.”

To be eliminated

Three tax credits that expired at the end of 2011 look like they are headed off the tax books permanently, Dank said.

The credits for Oklahoma venture capitol investments, small business investments and rural small business investments expired without a fight, he said, but there is still time for lawmakers to slip an amendment onto a bill extending the life of the tax credits.

“That's a step in the right direction,” Dank said, of eliminating those three programs.

He said there was no cap in how much a company could claim, no oversight for how the money was invested and no evidence that it was creating significant jobs in Oklahoma.

In fiscal year 2010, corporations and individuals claimed $15.3 million in tax credits from venture capitol investments, according to data from the Tax Commission available on the Open Books website. However, just because a tax credit was claimed doesn't mean the individual had enough tax liability to use all of that credit.

According to the data, Bank of Oklahoma and Bank of Oklahoma's board Chairman George Kaiser, claimed $12.1 million of those venture capitol tax credits in 2010. The bank did not respond to questions about how much of those tax credits were utilized in that fiscal year.

For the Rural Small Business Venture Capital Credit, $71.7 million was claimed in 2010. Terra International Inc., a subsidiary of CF Industries that produces fertilizer in Woodward, claimed $19.3 million in the rural small business tax credits in fiscal year 2010. A spokeswoman for CF Industries declined to comment about the company's tax credits. The Small Business Venture Capital Credit, according to the data, had $15.8 million claimed in 2010.

Caldwell said she didn't think anyone was surprised that those tax credits may go away.

“I think those will expire, they'll be sunset, but I can't tell you that next year that somebody won't introduce legislation to try to bring them back in some sort of modified form,” Sears said.

Guidelines

Dank said he was disheartened when his bill proposing to end transferability of tax credits was killed this year. Transferable tax credits allow companies who are unable to use all of their tax credits — because they don't owe enough taxes to the state — to sell them to others at a discounted rate.

For example, if a company owed $25,000 in taxes but had $50,000 in tax credits, it could sell the remaining $25,000 to another company at 50 cents on the dollar. The buyer then could use those tax credits.

Another one of Dank's bills would have maintained a moratorium on 29 tax credits until lawmakers could analyze the costs and benefits of the programs. That bill failed in committee, as well.

So Dank and Sears are resting their hopes on a bill that sets forth criteria to evaluate tax credits.

House Bill 2978, has passed the House and Senate, and is now headed to joint committee, Dank said.

It sets up a review that all credits must go through, Sears said.

“Is it creating jobs, is it benefiting the state, has it had an audit, have they developed a plan to submit to the legislature so we can see exactly what it's going to do?” Sears asked. “Any tax credit that we have on the books if it is creating wealth, if it is creating jobs ... we would be fools not to continue those programs.”