State Auditor Gary Jones announced Thursday he plans to audit several state tax credit programs, including one that financed an Altus aerospace project that failed to get off the ground and took a bank down with it.
Jones said the goal of the audits will be to determine whether there has been compliance with legislative and Oklahoma Tax Commission program requirements and whether the economic benefits to the state justify the loss of potential tax revenue.
“The Tax Credit Task Force identified numerous areas of concerns as a result of its lengthy review of all of Oklahoma's various tax credit programs,” Jones said. “Among the recommendations submitted to the Legislature was the need for these tax credits to be audited by the state auditor to ensure compliance with statutory requirements granting the credits.”
Tax credit programs
Jones told The Oklahoman he would like to start by auditing three tax credit programs that have generated controversy in recent years.
He identified those programs as the Rural Venture Capital Formation Incentive Act, Small Business Capital Formation Act and Venture Capital programs.
The Rural Venture and Small Business Capital tax credit programs were at the center of a major controversy six years ago when it was disclosed that attorneys and bankers had discovered a loophole that enabled them to promise investors $2 or more in tax credits for every dollar invested in projects.
That led to the funding of several controversial projects, including the Quartz Mountain Aerospace project in Altus that failed and was partially blamed for the failure of the First State Bank of Altus.
Then-state Treasurer Scott Meacham said at the time that the programs represented a “serious financial threat to the state” if they were not reformed.
The state Legislature responded by making changes in the law, but secrecy laws that govern Oklahoma Tax Commission filings have made it difficult for the public to determine whether the programs are now producing the intended economic benefits.
A group of Republican state lawmakers proposed abolishing several state tax credit programs this past session as a way of funding a proposed cut in state income tax rates without cutting services or raising taxes in some other area.