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HOUSE OF REPRESENTATIVES - FLOOR VERSION
STATE OF OKLAHOMA
1st Session of the 58th Legislature (2021)
ENGROSSED SENATE
BILL NO. 498 By: Thompson and McCortney of
the Senate
and
Fetgatter of the House
[ ad valorem tax exemption - providing waiver of
certain payroll requirement –
emergency ]
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2011, Section 2902, as
last amended by Section 1, Chapter 258, O.S.L. 2019 (68 O.S. Supp.
2020, 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 qualifying
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
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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
of twelve (12) months prior to acquisition shall 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) years
following the initial year for which the exemption was granted .
Such facilities are hereby classified for the purposes of taxation
as provided in Section 22 of Article X of the Oklahoma Constitution.
B. For purposes of this section, the following definitions
shall apply:
1. “Manufacturing facilities ” means facilities engaged in the
mechanical or chemical transformation of materials or substances
into new products and except as provided by paragraph 8 of
subsection C of this section shall include:
a. establishments which have received a manufacturer
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, building and
rebuilding whether or not on a factory basis,
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c. establishments primarily engaged in comp uter 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, latest revision, and
which derive at least fifty percent (50%) of their
annual gross revenues from th e sale of a product or
service to an out-of-state buyer or consumer, and as
defined under Industrial Group Number 5142 of the
NAICS Manual, latest revision, which derive at least
eighty percent (80%) of their annual gross revenues
from the sale of a produc t or service to an out -of-
state buyer or consumer. Eligibility as a
manufacturing facility pursuant to this subparagraph
shall be established, subject to review by the
Oklahoma Tax Commission, by annually filing an
affidavit with the Tax Commission statin g that the
facility so qualifies and such other information as
required by the Tax Commission. For purposes of
determining whether annual gross revenues are derived
from sales to out-of-state buyers, all sales to the
federal government shall be considered to be an out-
of-state buyer,
d. for which the investment cost of the construction,
acquisition or expansion of the manufacturing facility
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is Two Hundred Fifty Thousand Dollars ($250,000.00) or
more. Provided, “investment cost” shall not include
the cost of direct replacement, refurbishment, repair
or maintenance of existing machinery or equipment,
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 the Internal Revenue Code of
1986, as amended, and such expenditures shall be
eligible as a part of an “expansion” that otherwise
qualifies under this section, and
e. establishments primarily engaged in distribution as
defined under Industry Numbers 49311, 49312, 49313 and
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 certified by the
Oklahoma Employment Security Commission,
(3) payment of wages or salaries to its employees at
a wage which equals or exceeds one hundred
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seventy-five percent (175%) of the federally
mandated minimum wage, as certified by the
Oklahoma Employment Security Commission, and
(4) commencement of construction on or after November
1, 2007, with construction to be completed within
three (3) years from the date of the commencement
of construction.
Eligibility as a manufacturing facility pursuant to this
subparagraph shall be established, subject to review by the Tax
Commission, by annually filing an affidavit with the Tax Comm ission
stating that the facility so qualifies and containing 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 facilities for
purposes of this section, nor shall centrally assessed properties.
Eligibility as a manufacturing facility pursuant to this
subparagraph shall be established, 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” means and includes the land,
buildings, structures, improvements, machinery, fixtures, equipment
and other personal pro perty used directly and exclusively in the
manufacturing process; and
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3. “Research and development ” means activities directly related
to and conducted for the purpose of discovering, enhancing,
increasing or improving future or existing products or proces ses or
productivity.
C. The following provisions shall apply:
1. A manufacturing concern shall be entitled to the exemption
herein provided for each new manufacturing facility constructed,
each existing manufacturing facility acquired and the expansion o f
existing manufacturing facilities on the same site, as such terms
are defined by Section 6B of Article X of the Oklahoma Constitution
and by this section;
2. Except as otherwise provided in paragraph 5 of this
subsection, no manufacturing concern shall receive more than one
five-year exemption for any one manufacturing facility unless the
expansion which qualifies the manufacturing facility for an
additional five-year exemption meets the requirements of paragraph 4
of this subsection and the employment l evel established for any
previous exemption is maintained;
3. Any exemption as to the expansion of an existing
manufacturing facility shall be limited to the increase in ad
valorem taxes directly attributable to the expansion;
4. Except as provided in pa ragraphs 5 and, 6 and 10 of this
subsection, all initial applications for any exemption for a new,
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acquired or expanded manufacturing facility shall be granted only
if:
a. there is a net increase in annualized base payroll
over the initial payroll of at le ast 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 most
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 of
seventy-five thousand (75,000) or more, according to
the most recent Federal Decennial Census, while
maintaining or increasing base payroll in subsequent
years; provided the payroll requirement of this
subparagraph shall be waived for claims for
exemptions, including claims previously denied or on
appeal on March 3, 2010, for all initial applications
for exemption filed on or afte r January 1, 2004, and
on or before March 31, 2009, and all subsequent annual
exemption applications filed related to the initial
application for exemption, for an applicant, if the
facility has been located in Oklahoma for at least
fifteen (15) years enga ged in marine engine
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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 applica nt that qualifies for the payroll
requirement waiver as outlined 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 engag ed in paperboard manufacturing
as defined under U.S. Industry Number 322130 of the
NAICS Manual, latest revision, union master payouts
paid by the buyer of the facility to specified
individuals employed by the facility at the time of
purchase, as specified under the purchase agreement,
shall be excluded from payroll for purposes of this
section.
In order to provide certainty with respect to
investments in manufacturing facilities pertaining to
all initial applications for exemption filed on or
after January 1, 2016, the following definitions shall
apply:
(1) “base payroll” shall mean total payroll adjusted
for any nonrecurring bonuses, exercise of stock
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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 O klahoma Employment Security
Commission for the calendar year immediately preceding
the year for which initial application is made for
base-line payroll, which must be maintained or
increased for each subsequent year; provided, a
manufacturing facility shal l have the option of
excluding from its payroll, for purposes 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
limited liability comp any or
stockholder-employees of a corporation
who own at least ten percent (10%) of
the stock in the corporation, and
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ii. any nonrecurring bonuses, exercise of
stock option or stock rights or other
nonrecurring, extraordinary items
included in total payrol l 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
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
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specified in subparagraph b of paragraph 1 of
subsection A of Section 3603 of this title or elements
substantially equivalent thereto.
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 initial
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 b y an officer, stating that the construction,
acquisition or expansion of the facility will result in a net
increase in the annualized base payroll as required by this
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,
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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. If a facility fails to meet the base payroll requirement of
subparagraph a of paragraph 4 of this subsection, the payroll
requirement shall be waived for claims for exemptions , including
claims previously denied or on appeal on June 1, 2009, for all
initial applications for exemption filed on or after January 1,
2004, and on or before March 31, 2009, and all subsequent annual
exemption applications filed related to such initial application for
exemption, for an applicant, if the facility:
a. has been located for at least five (5) years as of
March 31, 2009, in a county in Oklahoma with a
population of six hundred thousand (600,000) or more,
b. is owned by an applicant that has been engaged in
manufacturing as defined under U.S. Industry Numbers
323110, 323111, 323121 and 323122 of the NAICS Manual,
latest revision,
c. is owned by an applicant that maintains a workforce of
at least three hundred (300) employees on June 1,
2009,
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d. is owned by an applicant that has filed multiple
applications for exemption pursuant to this section,
and
e. is owned by an applicant that operates at least one
facility in this state of at least seven hundred
thirty thousand (730,000) square feet on June 1, 2009.
In the event that any applicant obtaining a waiver of the payroll
requirement pursuant to this paragraph ceases to operate all of its
facilities in this state on or before a date that is four (4) years
after any initial application for an exemption is filed by such
applicant, all sums of property taxes exempted under this paragraph
through a waiver of the payroll requirement that relate to such
application shall become due and payable as if such sums we re
assessed in the year in which the applicant ceases to operate all of
its facilities in the state;
6. Any new, acquired or expanded automotive final assembly
manufacturing facility which does not meet the requirements of
paragraph 4 of this subsection s hall be granted an exemption only if
all other requirements of this section are met and only if the
investment cost of the construction, acquisition or expansion of the
manufacturing facility is Three Hundred Million Dollars
($300,000,000.00) or more and t he manufacturing facility retains an
average employment of one thousand seven hundred fifty (1,750) or
more full-time-equivalent employees in the year in which the
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exemption is initially granted and in each of the four (4)
subsequent years only if an avera ge employment of one thousand seven
hundred fifty (1,750) or more full -time-equivalent employees is
maintained in the subsequent year. Any property installed to
replace property damaged by the tornado or natural disaster that
occurred May 8, 2003, may con tinue to receive the exemption provided
in this paragraph for the full five -year period based on the value
of the previously qualifying assets as of January 1, 2003. The
exemption shall continue in effect as long as all other
qualifications in this paragr aph are met. If the average employment
of one thousand seven hundred fifty (1,750) or more full -time-
equivalent employees is reduced as a result of temporary layoffs
because of a tornado or natural disaster on May 8, 2003, then the
average employment requ irement shall be waived for year 2003 of the
exemption period. Calculation of the number of employees shall be
made in the same manner as required under Section 2357.4 of this
title for an investment tax credit. As used in this paragraph,
“expand” and “expansion” shall mean and include any increase to the
size or scope of a facility as well as any renovation, restoration,
replacement or remodeling of a facility which permits the
manufacturing of a new or redesigned product;
7. Any new, acquired, or expan ded computer data processing,
data preparation, or information processing services provider
classified in Industrial Group Number 7374 of the SIC Manual, latest
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revision, and U.S. Industry Number 514210 of the North American
Industrial Classification Syste m (NAICS) Manual, latest revision,
may apply for exemptions under this section for each year in which
new, acquired, or expanded capital improvements to the facility are
made if:
a. there is a net increase in annualized payroll of the
applicant at any faci lity or facilities of the
applicant in this state of at least Two Hundred Fifty
Thousand Dollars ($250,000.00), which is attributable
to the capital improvements, or a net increase of
Seven Million Dollars ($7,000,000.00) or more in
capital improvements, w hile maintaining or increasing
payroll at the facility or facilities in this state
which are included in the application, and
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;
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8. Effective January 1, 2017, an entity engaged in electric
power generation by means of wind, as described by the North
American Industry Classification System, No. 221119, shall not b e
defined as a qualifying manufacturing concern for purposes of the
exemption otherwise authorized pursuant to Section 6B of Article X
of the Oklahoma Constitution or qualify as a “manufacturing
facility” as defined in this section. No initial application for
exemption shall be filed by or accepted from an entity engaged in
electric power generation by means of wind on or after January 1,
2018; and
9. An entity or applicant engaged in an industry as defined
under U.S. Industry Number 324110 of the NAICS M anual, latest
revision, which has applied for or been granted an exemption for a
time period which began on or after calendar year 2012 and before
calendar year 2016 but which did not meet the payroll requirements
of subparagraph a of paragraph 4 of this s ubsection because of
nonrecurring bonuses, exercise of stock option or stock rights or
other nonrecurring, extraordinary items included in total payroll in
the previous year, shall be allowed an exemption, beginning with
calendar year 2016, for the number of years, including the calendar
year for which the exemption was denied, remaining in the entity ’s
five-year exemption period, provided such entity attains or
increases payroll at or above the initial or base payroll
established for the exemption ; and
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10. 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 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 subs ection,
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.
2. The five-year period of exemp tion from ad valorem taxes for
any qualifying manufacturing facility, as specified in subparagraphs
a and b of this paragraph, which is located within a tax incentive
district created pursuant to the Local Development Act by a county
having a population of at least five hundred thousand (500,000),
according to the most recent Federal Decennial 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 district. Facilities qualifying pursuant to this
subsection shall include:
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a. a manufacturing facility as defined in subparagraph 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 the
initial capital investment was at least 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 claiming the exemption
herein provided for shall file each year for which exemption is
claimed, an application therefor with the county assessor of the
county in which the new, expanded or acquired facility is located.
The application shall be on a form or forms 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 each year in which the
facility desires to take the exemption or within thirty (30) days
from and after receipt by such person, firm or corporation of notice
of valuation increase, whichever is later. In a case where
completion of the facility or faci lities will occur after January 1
of a given year, a facility may apply to claim the ad valorem tax
exemption for that year. If such facility is found to be qualified
for exemption, the ad valorem tax exemption provided for herein
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shall be granted for tha t entire year and shall apply to the ad
valorem valuation as of January 1 of that given year. For
applicants which qualify under the provisions of subparagraph b of
paragraph 1 of subsection B of this section, the application shall
include a copy of the a ffidavit 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 e xemptions. 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. Appr oved applications shall
be filed by the county assessor with the Tax Commission no later
than June 15, except as provided in Section 2902.1 of this title, of
the year in which the facility desires to take the exemption.
Incomplete applications and applica tions filed after June 15 will be
declared null and void by the Tax Commission. In the event that a
taxpayer qualified to receive an exemption pursuant to the
provisions of this section shall make payment of ad valorem taxes in
excess of the amount due, t he county treasurer shall have the
authority to credit the taxpayer ’s real or personal property tax
overpayment against current taxes due. The county treasurer may
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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 assessment 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 b y
law. The valuation and assessment of property for which an
exemption is granted hereunder shall be performed by the Tax
Commission.
H. The Tax Commission shall have the authority and duty to
prescribe forms and to promulgate rules as may be necessary t o carry
out and administer the terms and provisions of this section.
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 and approval.
COMMITTEE REPORT BY: COMMITTEE ON APPROPRIATIONS AND BUDGET, dated
04/15/2021 - DO PASS, As Amended.