You risk putting voters to sleep if you start discussing the importance of State Question 766, the intangible property tax issue on the general election ballot. Recruit an intellectual property attorney to further expound on the intricacies of the issue, and you will send voters running for the hills.
Bearing that in mind, I'd like to accept those risks because the consequences will be grave should SQ 766 fail to pass.
A quick background on the issue: In 2009, the state Supreme Court ruled intangible property generally was subject to property taxes. This represents an about-face in the application of intangible property taxation since 1968 when State Question 460 was passed. SQ 460 amended the state constitution to exempt intangible property.
As such, the 2009 ruling sent a chill through Oklahoma's business community and the Legislature, which subsequently proposed SQ 766 as a permanent solution to prevent possibly the largest property tax increase in Oklahoma's history.
Intangible property includes (but is not limited to) items such as customer lists, customer relationships, patented technology, logos, personal property, lease agreements, trademarks and even “extensive advertising efforts.”
How state and local governments would go about determining a value to intangibles could quickly become a convoluted, subjective and expensive nightmare for Oklahoma businesses. For example, a business holds an unexpired patent for an old picture-tube style computer monitor. No market demand exists for a product that nonetheless has patented protection. Because there is no real hope for revenue that can be assessed to the patent, the patent has no value of consequence. In this instance, what formula would an assessor use to tax the intangible property?
Additionally, when a property has no value, who will fund the defense of lawsuits brought against the taxing authority for keeping a tax on properties that have no value?
Conversely, let's say a business has a wildly successful marketing campaign that has increased sales. That campaign is now subject to property taxation. Keep in mind the business already pays corporate income, sales, excise and property taxes on all revenue, tangible personal property and real property associated with the profit from increased sales. If an assessor begins taxing this marketing campaign as well, does the business owner have a legitimate question of double taxation?
Many complications were wrought by the Oklahoma Supreme Court's decision. Worst of all, failure to simplify this legislation will likely drive companies out of Oklahoma and take with them thousands of high-paying jobs. To avoid this disaster, I urge all Oklahomans to vote yes for State Question 766.
Dooley is a registered patent attorney in Oklahoma City.