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Oklahoma voters to decide intangible-property tax issue

Along with being bombarded with presidential ads before November's election, Oklahoma voters are going to hear a lot about intangible property and whether this ethereal asset should be taxed in businesses locally and across the state.
BY MEGAN ROLLAND Published: August 20, 2012
/articleid/3702304/1/pictures/1804981">Photo - Oklahoma state Rep. David Dank, R-Oklahoma City, on Friday, July 15, 2011. AP Photo/Sue Ogrocki
Oklahoma state Rep. David Dank, R-Oklahoma City, on Friday, July 15, 2011. AP Photo/Sue Ogrocki

“Before I got involved in the task force, I really wasn't paying that much attention,” said Charles Mills, owner of Mills Machine Co. in Shawnee.

“I thought, oh Southwestern Bell, that's just the big guys.”

But Mills said once he learned that local assessors could start taxing his patents, copyrights and trademarks, he became concerned.

“The more I found out about it, the more disturbed I got about what it really is,” Mills said.

“To me, it seemed like they were trying to tax an idea. The whole term intangible tells you that no one can quite get their mind around what the value is of that. You think hard and you work hard, and you develop a product or a service. That's a free enterprise system. That's innovation.”

Mills said a tax on that brain power could be stifling to entrepreneurs.

Mills' drilling company has been around since 1908 and focuses on shallow drills for things like wells and utilities.

He said they have one domestic patent and four international patents on their drilling equipment that could be taxed under the Supreme Court's interpretation.

Dan Ramsey, president of Independent Insurance Agents of Oklahoma, the state's largest trade association, also served on the task force.

“The insurance industry could be impacted by this up to $100 million,” Ramsey said.

“That would be a tremendous hit, especially on businesses that are struggling right now.”

Ramsey said almost all of what insurance agents possess is “intangible.”

What is the value of the paper that insurance contracts are written on?

“It would just be crippling to anybody in the service-related industry,” Ramsey said.

Assigning value

Wade Patterson, the Garfield County assessor, said it would be nearly impossible for county assessors to start assigning value to intangible property.

He used McDonald's as an example.

“I value the building, the land, the kitchen equipment, but I don't value the intellectual property of the golden arches because it's so hard to determine a cost of that,” he said.

“If the state question does not pass, there would be a requirement for county assessors to pick up intangibles.”

But Patterson said the complications come when lawmakers include exempting all intangibles, such as public service companies that are centrally assessed by the Board of Equalization — like AT&T and Oklahoma Gas and Electric Co.

“We don't agree with that simply because no one knows what the impact is going to be,” Patterson said.

Currently those companies pay taxes based on a unit valuation of their company. With the change in the Oklahoma Constitution, they may start filing exemptions for their client lists and other intangible property to be subtracted off their current tax bills.

“We're not against the state question passing, but there was no measure there to make up the shortfall if this thing passes,” Patterson said.

“It becomes an unfunded mandate instantly.”

The money from those centrally assessed companies' property taxes is distributed to counties based on where the companies have their assets. Among the hardest hit would be Oklahoma, Tulsa, Rogers, Noble and Muskogee counties, according to officials with the Oklahoma Tax Commission.

About 65 percent of the centrally assessed ad valorem taxes go to common education.

“That's just kind of where you are walking on egg shells hoping it doesn't hurt too bad,” Patterson said.

“We know it's going to be a loss, but hopefully not too staggering a loss.”

The Tax Commission issued a report estimating a worst-case scenario cost to the state of $50 million in 2013 if voters approve the constitutional amendment.

But the impact to businesses in Oklahoma who aren't centrally assessed could be much greater, Patterson said.


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