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STATE OF OKLAHOMA
2nd Session of the 58th Legislature (2022 )
HOUSE BILL 3081 By: Hilbert
AS INTRODUCED
An Act relating to revenue and taxation ; defining
terms; creating a strategic industrial development
enhancement tax credit; limiting cr edits to certain
amount for certain projects; preventing certain
application of credit; allowing assignment of credit;
requiring certain documents for assignment;
authorizing carryover of credit; setting total annual
credit cap; authorizing Oklahoma Tax Commission and
Oklahoma Department of Commerce to promulgate cert ain
rules; providing for codification; and providing an
effective date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 2357.105 of Title 68, unless
there is created a duplication in numbering, reads as follows:
A. As used in this section:
1. "Eligible entity" means a business entity incorporated and
located in the state with a qualifying project in a qualifying
project location that receives an allocation of tax credits for
qualified economic development and qualified initial infrastructure
expenditures;
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2. "Qualifying project" means the new construction or expan sion
of an eligible entity or the development of qualified init ial
infrastructure to serve an eligible entity in a qualifying project
location;
3. "Qualifying project location" means a project located in an
industrial park, economic development zone, or p ort located within a
county in this state with a population of less than one hundred
thousand (100,000) persons ("Qualified Area"), or a project located
adjacent to a terminal, switchin g, or Class II or III railroad as
defined by the federal Surface T ransportation Board;
4. "Project sponsor" means a local economic dev elopment
organization or authority, organized under Section 501(c)(3) of the
Internal Revenue Code, 26 U.S.C., Section 501(c)(3) , port authority,
qualified industrial park, or a terminal, swit ching, or Class II or
III railroad;
5. "Project application" means an application submitted by a
project sponsor on behalf of a qualifying project for an allocation
of qualifying strategic industrial development enhancement ( SIDE)
tax credits. Project applications must include a description of the
qualifying project, project location, detailed project costs, and a
summary of expected economic benefits and job creation;
6. "Qualified economic development expenditures " means
expenditures for land improveme nts, building construction, building
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improvements and expansio n, port terminal improvements, and the
purchase of certain machinery and equipment;
7. "Qualified initial infrastructure expenditures" means
expenditures for new rail infrastructure and improve ments, which
includes the acquisition of right of way, enginee ring, construction
of new track such as industrial leads, switches, spurs, and sidings,
loading dock improvements, and transloading structures involved with
providing rail service to a qualifyin g project; and
8. "Project tax credit amount" means the amount of tax credits
allocated by Oklahoma Department of Commerce to a qualifying project
for qualified economic development and initial infrastructure
expenditures.
B. For tax years beginning afte r December 31, 2022, and ending
not later than December 31, 2027, there shall be allowed a credit
against the tax imposed pursuant to Section 2355 of Title 68 of the
Oklahoma Statutes in the amount not to exceed ten percent (10%) of
an eligible entity's qualified economic development expenditures,
subject to limitations, determination, and allocation by the
Oklahoma Department of Commerce.
C. The total project tax credit amount may not exceed ten
percent (10%) of the qualified economic development expendit ures,
except for qualified initial infrastructure expenditur es the project
tax credit amount is earned at rate of fifty percent (50%) of
qualified initial infrastructure expenditures .
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D. 1. The project tax credit amount for qualified economic
development expenditures may not exceed Six Million Dollars
($6,000,00.00) per qualifying project; and
2. The project tax credit amount for qualified initial
infrastructure expenditures may not exceed Three Million Dollars
($3,000,000.00) per qualifying project.
Projects are eligible to combine qualified economic developmen t
and qualified initial infrastructure expenditures, but the total
project tax credit amount may not exceed Six Million Dollars
($6,000,000.00) per qualifying project in aggregate.
E. The project tax credit amount that may be claimed or
assigned to a qualifying project affiliate in any year may not
exceed one-third (1/3) of the project tax credit amount awarded
beginning in the year that construction is initiated.
F. The issuance of the project tax credit amount shall be
subject to review of eligible ex penditures and qualifying project
status by the Oklahoma Department of Commerce.
G. The credits authorized pursuant to this section may not be
used to reduce the tax liability of the taxpayer to les s than zero
(0).
H. The credits allowed pursuant to thi s section that are not
used may be assigned to a qualifying project affiliate by written
agreement at any time during the five (5) years following the tax
year the qualified expenditures are incurred . For purposes of this
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subsection, a "qualifying project affiliate" shall include a
customer, vendor, project investor, or strategic finance partner of
the eligible entity subject to the Oklahoma corporate or individual
income tax. The eligible taxpayer a nd the qualifying project
affiliate must jointly file a copy o f the written assignment
agreement with the Oklahoma Tax Commission within thirty (30) days
of the assignment. The written agreement must contain the name,
address, and taxpayer identification number of the parties to the
assignment, the tax year the eli gible taxpayer incurred the
qualified expenditures, the amount of credit being assigned, and the
tax year or years for which the credit may be claimed.
I. To the extent not used, the tax credit authorized by this
section may be carried over, in order, to each of the five (5)
subsequent taxable years .
J. The total credits authorized pursuant to this section for
all taxpayers shall not exceed Twelve Million Dollars
($12,000,000.00) annually beginning in tax year 2023. In the event
the total tax credits aut horized by this section exceed Twelve
Million Dollars ($12,000,000.00) annually in any calendar year, the
Tax Commission shall permit any excess over Twelve Million Dollars
($12,000,000.00) annually but shall factor such excess into the
percentage adjustment formula for subsequent years. The Tax
Commission shall annually calculate and publish by the first day of
the affected year a percentage by which the credits authorized by
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this section shall be reduced so the total amount of credits used to
offset tax does not exceed Twelve Million Dollars ($12,000,000.00)
annually per year. The formula to be used for the percentage
adjustment shall be Twelve Million Dollars ($12,000,000.00) annually
divided by the credits claimed in the second preceding year .
K. 1. The Oklahoma Tax Commission may promulgate rules, forms ,
and regulations as are necessary to implement and administer the
provisions of this section and certify the tax credit amount
generated by each qualifying project annually.
2. The Oklahoma Departmen t of Commerce shall promulgate rules
to permit verification of the eligibility of a qualifying project
for the purpose of claiming the credit. The rules shall provide for
the approval of qualifi ed economic development expenditures prior to
commencement of a project and provide a certificate of verification
upon completion of a project that uses qualified economic
development expenditures. The certificate of verification shall
satisfy all requirements of the Oklahoma Tax Commission pertaining
to the eligibility of the eligible taxpayer claiming the credit.
SECTION 2. This act shall become effective January 1, 2023.
58-2-8844 AQH 01/06/22