Req. No. 8846 Page 1 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
STATE OF OKLAHOMA
2nd Session of the 58th Legislature (2022)
HOUSE BILL 3082 By: Hilbert
AS INTRODUCED
An Act relating to revenue and taxation; amending 68
O.S. 2021, Section 2902, which relates to five -year
manufacturing exemptions for qualifying manufacturing
concerns; modifying provisions related to payroll
requirements for certain tax years; and declaring an
emergency.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S . 2021, Section 2902, is
amended to read as follows:
Section 2902. A. Except as otherwise provided by subsection H
of Section 3658 of this title pursuant to which the exemption
authorized by this section may not be claimed, a qualify ing
manufacturing concern, as defined by Section 6B of Article X of the
Oklahoma Constitution, and as further defined herein, shall be
exempt from the levy of any ad valorem taxes upon new, expanded or
acquired manufacturing facilities including facilities engaged in
research and development, for a period of five (5) years. The
provisions of Section 6B of Article X of the Oklahoma Constitution
requiring an existing facility to have been unoccupied for a period
Req. No. 8846 Page 2 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
of twelve (12) months prior to acquisition sh all be construed as a
qualification for a facility to initially receive an exemption, and
shall not be deemed to be a qualification for that facility to
continue to receive an exemption in each of the four (4) y ears
following the initial year for which the exemption was granted.
Such facilities are hereby classified for the purposes of taxati on
as provided in Section 22 of Article X of the Oklahoma Constitution.
B. For purposes of this section, the following de finitions
shall apply:
1. "Manufacturing facilities" means facilities engaged in the
mechanical or chemical transformation of materia ls or substances
into new products and except as provided by paragraph 6 of
subsection C of this section shall include:
a. establishments which have received a manuf acturer
exemption permit pursuant to the provisions of Section
1359.2 of this title,
b. facilities including repair and replacement parts,
primarily engaged in aircraft repair, buildin g and
rebuilding whether o r not on a factory basis,
c. establishments primarily engaged in computer services
and data processing as defined under Industrial Group
Numbers 5112 and 5415, and U.S. Industry Number 334611
and 519130 of the NAICS Manual, lates t revision, and
which derive at least fifty percent (50%) of their
Req. No. 8846 Page 3 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
annual gross revenues from the sale of a product or
service to an out-of-state buyer or consumer, and as
defined under Industrial Group Number 5182 of the
NAICS Manual, latest revision, whi ch derive at least
eighty percent (80%) of their annual gross reven ues
from the sale of a product or service to an out-of-
state buyer or consumer. Eligibility as a
manufacturing facility pursuant to this subparagraph
shall be established, subject to revie w by the
Oklahoma Tax Commission, by annually filing an
affidavit with the Tax Commission stating that the
facility so qualifies and such other information as
required by the Tax Commission. For purposes of
determining whether annual gross revenues are de rived
from sales to out-of-state buyers, all sales to the
federal government shall be considered to be an out-
of-state buyer,
d. facilities that the investment cost of the
construction, acquisition or expansion is Five Hundred
Thousand Dollars ($500,000.00) or more with respect to
assets placed into service during calendar year 2022.
For subsequent calendar years, the investment required
shall be increased annually by a percentage equal to
the previous year's increase in the Consumer Price
Req. No. 8846 Page 4 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Index-All Urban Consumers ("CPI-U") and such adjusted
amount shall be the required investment cost in order
to qualify for the exemption authorized by this
section. The Oklahoma D epartment of Commerce sha ll
determine the amount of the increase, if a ny, on
January 1 of each year. The Oklahoma Tax Commission
shall publish on its website at least annually the
adjusted dollar amount in order to qualify for the
exemption authorized by this section and shall in clude
the adjusted dollar amount in any of it s relevant
forms or publications with respect to the exemption .
Provided, "investment cost" shall not include the cost
of direct replacement, refurbishment, repair or
maintenance of existing machinery or equipm ent, except
that "investment cost" shall include capital
expenditures for direct replacement, refurbishment,
repair or maintenance of existing machinery or
equipment that qualifies for depreciation and/or
amortization pursuant to t he Internal Revenue Code of
1986, as amended, and such expenditures sh all be
eligible as a part of an "expansion" that otherwise
qualifies under this section,
e. establishments primaril y engaged in distribution as
defined under Industry Numbers 49311, 4931 2, 49313 and
Req. No. 8846 Page 5 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
49319 and Industry Sector Number 42 of the NAICS
Manual, latest revision, and which meet the following
qualifications:
(1) construction with an initial capital investment
of at least Five Million Dollars ($5,000,000.00),
(2) employment of at least one hundred (100 ) full-
time-equivalent employees, as certifie d by the
Oklahoma Employment Security Commission,
(3) payment of wages or salaries to its employees at
a wage which equals or exceeds the average wage
requirements in the Oklahoma Quality Jo bs Program
Act for the year in which the real property was
placed into service, and
(4) commencement of construction on or after November
1, 2007, with construction to be completed w ithin
three (3) years from the date of the commencement
of construction,
f. facilities engaged in the manufacturing, compounding,
processing or fabrication of materials into articles
of tangible personal propert y according to the special
order of a customer (custom order manufacturing) by
manufacturers classified as operating in North
American Industry Classification System (NAICS)
Sectors 32 and 33, but does no t include such custom
Req. No. 8846 Page 6 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
order manufacturing by manufac turers classified in
other NAICS code sectors , and
g. with respect to any entity making an application for
the exemption authorized by this sec tion on or after
January 1, 2023, the establishment making a pplication
for exempt treatment of real or personal p roperty
acquired or improved beginning Januar y 1, 2022, and
for any calendar year thereafter, the entity shall be
required to pay new direct jobs, as defined by Section
3603 of this title for purposes of the Oklahoma
Quality Jobs Program Act, an average an nualized wage
which equals or exceeds the ave rage wage requirement
in the Oklahoma Quality Jobs Program Act for the yea r
in which the real or personal property was placed into
service. The Oklahoma Tax Commission may request
verification from the Oklahoma Department of Commerce
that an establishment seeking an exemption for real or
personal property pays an average annual ized wage that
equals or exceeds the average wage requirement in
effect for the year in which the real or personal
property was placed in to service. For purposes of
this subparagraph, it shall not be necessary for the
establishment to qualify for incentiv e payments
pursuant to the Oklahoma Quality Jobs Program Act, but
Req. No. 8846 Page 7 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
the establishment shall be subject to the wage
requirements of the Okla homa Quality Jobs Program Act
with respect to new direct jobs in order to qualify
for the exempt treatment authorized b y this section.
Eligibility as a manufacturing facility pursuant to this
subparagraph shall be established, subject to review by the Tax
Commission, by annually filing an affidavit w ith the Tax Commission
stating that the facility so qualifies and containi ng such other
information as required by the Tax Commission.
Provided, eating and drinking places, as well as other retail
establishments, shall not qualify as manufacturing faciliti es for
purposes of this section, nor shall centrally assessed properties.
Eligibility as a manufacturing facility pursuant to this
subparagraph shall be es tablished, subject to review by the Tax
Commission, by annually filing an application with the Tax
Commission stating that the facility so qualifies and containing
such other information as required by the Tax Commission;
2. "Facility" and "facilities", except as otherwise provided by
this section, means and includes the land, buildings, structures and
improvements used directly and exclusively in the manufacturing
process. Effective January 1, 2022, and for each calendar year
thereafter, for establishme nts which have received a manufacturer
exemption permit pursuant to the provisions of Section 1359.2 of
this title, or facilities engaged in manufacturing activities
Req. No. 8846 Page 8 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
defined or classified in the NAICS Manual under Industry Nos. 311111
through 339999, inclu sive, but for no other establishments, facility
and facilities means and includes the land, buildings , structures,
improvements, machinery, fixtures, equipment and other person al
property used directly and exclusively in the manufacturing process;
and
3. "Research and development " means activities directly rel ated
to and conducted for the purpose of disc overing, enhancing,
increasing or improving future or existing products or processes or
productivity.
C. The following provisions shall apply:
1. A manufacturing concern shall be entitled to the exemption
herein provided for each new manufacturing facili ty constructed,
each existing manufacturing facility acquired and the expan sion of
existing manufacturing facilities on the same site, as such terms
are defined by Section 6B of Article X of the Oklahoma Constit ution
and by this section;
2. No manufacturing concern shall receive more than one five -
year exemption for any one manu facturing facility unless the
expansion which qualifies the manufactu ring facility for an
additional five-year exemption meets the requirements of paragraph 4
of this subsection and the employment level established for any
previous exemption is maintained;
Req. No. 8846 Page 9 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
3. Any exemption as to the expansion of an existing
manufacturing facility shall be limited to the increase in a d
valorem taxes directly attributable to the expansion;
4. All initial applications for any exemption for a new,
acquired or expanded manufac turing facility shall be granted only
if:
a. there is a net increase in annualized base payroll
over the initial payroll of at least Two Hundred Fifty
Thousand Dollars ($250,000.00) if the facility is
located in a county with a population of fewer than
seventy-five thousand (75,000), according to the mos t
recent Federal Decennial Census, while maintaining or
increasing base payroll in subsequent years, or at
least One Million Dollars ($1 ,000,000.00) if the
facility is located in a county with a population o f
seventy-five thousand (75,000) or more, accordi ng to
the most recent Federal Decennial Census, while
maintaining or increasing base payroll in subsequent
years; provided the payroll r equirement of this
subparagraph shall be waived for claims for exemptio ns
including claims previously denied or on appe al on
March 3, 2010, for all initial applications for
exemption filed on or after January 1, 2004, and on or
before March 31, 2009, and a ll subsequent annual
Req. No. 8846 Page 10 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
exemption applications filed related to the initia l
application for exemption, for an applicant, i f the
facility has been located in Oklahoma for at least
fifteen (15) years engaged in marine engine
manufacturing as defined under U.S. Industry Number
333618 of the NAICS Manual, latest revision, and has
maintained an average employment of five hundred ( 500)
or more full-time-equivalent employees over a ten -year
period. Any applicant that qualifies for the payroll
requirement waiver as o utlined in the previous
sentence and subsequently closes its Oklahoma
manufacturing plant prior to January 1, 2012, may be
disqualified for exemption and subject to recapture.
For an applicant engaged in paperboard manufacturing
as defined under U.S. Indu stry Number 322130 of the
NAICS Manual, latest revision, union master p ayouts
paid by the buyer of the facility to spec ified
individuals employed by the facility at the time of
purchase, as specified under the purchase agreement,
shall be excluded from pay roll for purposes of this
section.
In order to provide certainty with r espect to
investments in manufacturing facilitie s pertaining to
all initial applications for exemption filed on or
Req. No. 8846 Page 11 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
after January 1, 2016, the following definitions shall
apply:
(1) "base payroll" shall mean total payroll adjusted
for any nonrecurring bonus es, exercise of stock
option or stock rights and other nonrecurring,
extraordinary items included in total payroll,
and
(2) "initial payroll" shall mean base payroll for the
year immediately preceding the initial
construction, acquisition or expansion.
The Tax Commission shall verify payroll information
through the Oklahoma Employment Security Commission by
using reports from the Oklahoma Employment Security
Commission for the calendar y ear immediately preceding
the year for which initial application is mad e for
base-line payroll, which must be maintaine d or
increased for each subsequent year; provided, a
manufacturing facility shall have the option of
excluding from its payroll, for purp oses of this
section:
i. payments to sole proprietors, members
of a partnership, members of a limited
liability company who own at least ten
percent (10%) of the capital of the
Req. No. 8846 Page 12 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
limited liability company or
stockholder-employees of a corporation
who own at least ten percent (10%) of
the stock in the corporation, and
ii. any nonrecurring bonuses, exercise of
stock option or stock rights or other
nonrecurring, extraordinary items
included in total payroll numbers as
reported by the Oklahoma Employment
Security Commission. A manufacturing
facility electing either option shall
indicate such election upon its
application for an exemption under this
section. Any manufacturing facility
electing either option shall submit
such information as the Tax Commission
may require in order to verify payroll
information. Payroll information
submitted pursuant to the provisions of
this paragraph shall be submitted to
the Tax Commission and shall be subject
to the provisions of Section 205 of
this title, and
Req. No. 8846 Page 13 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
b. the facility offers, or will offer within one hundred
eighty (180) days of the date of employment, a basic
health benefits plan to the full-time-equivalent
employees of the facility, which is determined by the
Department of Commerce to consist of the elements
specified in subparagraph b of paragraph 1 of
subsection A of Section 3603 of this title or elements
substantially equivalent ther eto.
For purposes of this section, calculation of the amount of
increased base payroll shall be measured from the start of initial
construction or expansion to the completion of such construction or
expansion or for three (3) years from the start of initia l
construction or expansion, whichever occurs first. The amount of
increased base payroll shall include payroll for full -time-
equivalent employees in this state who are employed by an entity
other than the facility which has previously or is currently
qualified to receive an exemption pursuant to the provisions of this
section and who are leased or otherwise provided to the facility, if
such employment did not exist in this state prior to the start of
initial construction or expansion of the facility. The
manufacturing concern shall submit an affidavit to the Tax
Commission, signed by an officer, stating that the construction,
acquisition or expansion of the facility will result in a net
increase in the annua lized base payroll as required by this
Req. No. 8846 Page 14 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
paragraph and that full-time-equivalent employees of the facility
are or will be offered a basic health benefits plan as required by
this paragraph. If, after the completion of such construction or
expansion or after three (3) years from the start of initial
construction or expansion, whichever occurs first, the construction,
acquisition or expansion has not resulted in a net increase in the
amount of annualized base payroll, if required, or any other
qualification specified in this paragraph has not been met, the
manufacturing concern shall pay an amount equal to the amount of any
exemption granted including penalties and interest thereon, to the
Tax Commission for deposit to the Ad Valorem Reimbursement Fund;
5. Except as otherwise provided by this paragraph, any new,
acquired or expanded computer data processing, data preparation or
information processing servi ces provider classified in U.S. Industry
Number 518210 of the North American Industrial Classification Syst em
(NAICS) Manual, 2017 revision, may apply for exemptions under this
section for each year in which new , acquired, or expanded capital
improvements to the facility are made for assets placed in service
not later than December 31, 2021, if:
a. there is a net increase in annualized payroll of the
applicant at any facil ity or facilities of the
applicant in this state of at least Two Hundred Fifty
Thousand Dollars ($250,000.00), which is at tributable
to the capital improvements, or a net increase of
Req. No. 8846 Page 15 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Seven Million Dollars ($7,000,000.00) or more in
capital improvements, wh ile maintaining or increasing
payroll at the facility or facilities in this state
which are included in the application, a nd
b. the facility offers, or will offer within one hundred
eighty (180) days of the date of employment of new
employees attributable to the capital improvements, a
basic health benefits plan to the full-time-equivalent
employees of the facility, which is determined by the
Department of Commerce to consist of the elements
specified in subparagraph b of paragraph 1 of
subsection A of Section 3603 of this title or elements
substantially equivalent thereto.
An establishment described by this paragraph, the pri mary
business activity of which is described by Industry No. 518210 of
the North American Industry Classification System (NAICS) Man ual,
2017 revision, that has applied for and been granted an exemption
for personal property at any time within five (5) yea rs prior to the
effective date of this act, may apply for exemptions fo r items of
eligible personal property to be located within im provements to real
property and such rea l property and improvements having been exempt
from ad valorem taxation prior to the effective date of this act
pursuant to the provisions of this section if such personal property
is placed in service not later than December 31, 2036. No
Req. No. 8846 Page 16 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
additional personal property of such establishment placed in service
after such date shall qualify f or the exempt treatment otherwise
authorized pursuant to this paragraph ;
6. Effective January 1, 2017, an entity engaged in electr ic
power generation by means of wind, as described by the North
American Industry Classification System, No. 221119, shall no t be
defined as a qualifying manufacturing concern for purposes of the
exemption otherwise authorized pursuant to Section 6B of Art icle X
of the Oklahoma Constitution o r qualify as a "manufacturing
facility" as defined in this section. No initial applicat ion for
exemption shall be filed by or accepted from an entity engaged in
electric power generation by means of wind on or after Ja nuary 1,
2018;
7. An entity or applicant engaged in an industry as defined
under U.S. Industry Number 324110 of the NAICS Ma nual, latest
revision, which has applied for or been granted an exempti on for a
time period which began on or after calendar ye ar 2012 and before
calendar year 2016 but which did not meet the payroll requirements
of subparagraph a of paragraph 4 of this su bsection because of
nonrecurring bonuses, exercise of stock option or s tock rights or
other nonrecurring, extraordinary items i ncluded in total payroll in
the previous year, shall be allowed an exemption, beginning with
calendar year 2016, for the number o f years including the calendar
year for which the exemption was denied, remaining in the entity 's
Req. No. 8846 Page 17 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
five-year exemption period, provided such entity attains or
increases payroll at or above the initial or base payroll
established for the exemption ; and
8. A facility engaged in manufacturing defined under U.S.
Industry Number 327310 of the NAICS Manual shall have the payroll
requirements of paragraph 4 of this su bsection waived for tax year
2021, which is based in part on the 2020 calendar year payroll
reported to the Oklahoma Employment Security Commission, and may
continue to receive the exemption for the five -year period provided
in this section only if all oth er requirements of this section are
met.
9. A facility engaged in manufacturing which otherwise
qualifies for the exemption or exemptions pursuant to the provisions
of this section shall have the payroll requir ements of paragraph 4
of this subsection waived for tax year 2021, which is based in part
on the 2020 calendar year payroll reported to the Oklahoma
Employment Security Commission, and may continue to receive the
exemption for the five -year period provided in this section only if
all other requirements of this section are met.
D. 1. Except as provided in paragraph 2 of this subsectio n,
the five-year period of exemption from ad valorem taxes for any
qualifying manufacturing facility property shall begin on January 1
following the initial qualifying use of the property in the
manufacturing process.
Req. No. 8846 Page 18 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
2. The five-year period of exemption from ad valorem taxes for
any qualifying manufacturing facility, as specified in s ubparagraphs
a and b of this paragraph, wh ich is located within a tax incentive
district created pursuant to the Local Development Act by a county
having a population of at l east five hundred thousand (500,000),
according to the most recent Federal Decenni al Census, shall begin
on January 1 following the expiration or termination of the ad
valorem exemption, abatement, or other incentive provided through
the tax incentive dist rict. Facilities qualifying pursuant to this
subsection shall include:
a. a manufacturing facility as defined in subparagra ph c
of paragraph 1 of subsection B of this section, and
b. an establishment primarily engaged in distribution as
defined under Industry Number 49311 of the North
American Industry Classification System for which t he
initial capital investment was at leas t One Hundred
Eighty Million Dollars ($180,000,000.00); provided,
that the qualifying job creation and depreciable
property investment occurred prior to calendar year
2017 but not earlier than calendar year 2013.
E. Any person, firm or corporation claimi ng the exemption
herein provided for shall file each year for which exemption is
claimed, an application therefor with the county asse ssor of the
county in which the new, expanded or acquired facility is located.
Req. No. 8846 Page 19 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
The application shall be on a form or form s prescribed by the Tax
Commission, and shall be filed on or before March 15, except as
provided in Section 2902.1 of this title, of e ach year in which the
facility desires to take the exemption or within thirty (30) days
from and after receipt by such per son, firm or corporation of notice
of valuation increase, whichever is later. In a case where
completion of the facility or facilitie s will occur after January 1
of a given year, a facility may apply to claim the ad valorem tax
exemption for that year. I f such facility is found to be qualified
for exemption, the ad valorem tax exemption provided for herein
shall be granted for that ent ire year and shall apply to the ad
valorem valuation as of January 1 of that given year. For
applicants which qualify und er the provisions of subparagraph b of
paragraph 1 of subsection B of this section, the application shall
include a copy of the affida vit and any other information required
to be filed with the Tax Commission.
F. The application shall be examined by the county assessor and
approved or rejected in the same manner as provided by law for
approval or rejection of claims for homestead exempt ions. The
taxpayer shall have the same right of review by and appeal from the
county board of equalization, in the same manner and subject to the
same requirements as provided by law for review and appeals
concerning homestead exemption claims. Approved applications shall
be filed by the county assessor with the Tax Commission no late r
Req. No. 8846 Page 20 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
than June 15, except as provided in S ection 2902.1 of this title, of
the year in which the facility desires to take the exemption.
Incomplete applications and applications filed after June 15 will be
declared null and void by the Tax Commission. In the event that a
taxpayer qualified to rec eive an exemption pursuant to the
provisions of this section shall make payment of ad valorem taxes in
excess of the amount due, the co unty treasurer shall have the
authority to credit the taxpayer 's real or personal property tax
overpayment against curren t taxes due. The county treasurer may
establish a schedule of up to five (5) years of credit to resolve
the overpayment.
G. Nothing herein shall in any manner affect, alter or impair
any law relating to the assessme nt of property, and all property,
real or personal, which may be entitled to exemption hereunder shall
be valued and assessed as is other like property and as provided by
law. The valuation and assessment of property for which an
exemption is granted here under shall be performed by the Tax
Commission using one or more of the cost, income and expense and
sales comparison approaches to estimate fair cash value in
accordance with the Uniform Standards of Professional Appraisal
Practice.
H. The Tax Commission shall have the authority and duty to
prescribe forms and to promulgate rules as may be necessary to carry
out and administer the terms and provisions of this section.
Req. No. 8846 Page 21 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
SECTION 2. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage an d approval.
58-2-8846 MAH 01/09/22