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STATE OF OKLAHOMA
1st Session of the 58th Legislature (2021)
SENATE BILL 594 By: Hall
AS INTRODUCED
An Act relating to income tax credit; amending 68
O.S. 2011, Section 2357.4, as last ame nded by Section
1, Chapter 329, O.S.L. 2016 (68 O.S . Supp. 2020,
Section 2357.4), which relates to tax credit for
investments; deleting credit for increa se of certain
employees; increasing investment requirement in
certain property; indexing investment req uirement to
certain measure of inflation; requiring the Oklahoma
Department of Commerce to d etermine adjustment;
modifying term for carryover of u nused credit;
modifying term of annual limit for credits used;
providing annual limit for credit earned before
certain year; clarifying statutory language; and
providing an effective date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2011, Section 235 7.4, as
last amended by Section 1, Cha pter 329, O.S.L. 2016 (6 8 O.S. Supp.
2020, Section 2357.4), is amended to read as follows:
Section 2357.4. A. Except as otherwise provided in subsection
F of Section 3658 of this title and in subsections J and K of t his
section, for taxable years beginni ng after December 31, 19 87, there
shall be allowed a credit against the tax imposed by Section 2355 of
this title for:
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1. Investment investment in qualified depreciable property
placed in service during those years fo r use in a manufacturing
operation, as defined in Section 1352 of this title, which has
received a manufacturer exemption permit pursuant to the provisions
of Section 1359.2 of this title or a qualified aircraft maintenance
or manufacturing facility as def ined in Section 1357 of this title
in this state or a qualifie d web search portal as defined in Section
1357 of this title; or
2. A net increase in the number of full -time-equivalent
employees in a manufacturing operation, as defined in Section 1352
of this title, which has received a manufac turer exemption permit
pursuant to the provisions of Section 1359.2 of this title or a
qualified aircraft maintenance or manufacturing facility defined in
Section 1357 of this title in this state or in a qualified web
search portal as defined in Section 13 57 of this title includi ng
employees engaged in support services.
B. Except as otherwise provided in subsection F of Section 3658
of this title and in subsections J and K of this section, for
taxable years beginning a fter December 31, 1998, there shall be
allowed a credit agains t the tax imposed by Section 2355 of this
title for:
1. Investment investment in qualified depreciable property with
a total cost equal to or greater than Forty Million Dollars
($40,000,000.00) within three (3) years from the date of initial
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qualifying expenditure and placed in se rvice in this state during
those years for use in the manufacture of products described by any
Industry Number contained in Division D of Part I of the Standard
Industrial Classification (SIC) Manual, lates t revision; or
2. A net increase in the number of full-time-equivalent
employees in this state engaged in the manufacture of any goods
identified by any Industry Number contained in Division D of Part I
of the Standard Industrial Classification (SIC) Manu al, latest
revision, if the total cost of qualifie d depreciable property placed
in service by the business entity within the state equals or exceeds
Forty Million Dollars ($40,000,000.00) within three (3) years from
the date of initial qualifying expenditu re.
C. The business ent ity may claim the credit a uthorized by
subsection B of this section for expenditures incurred or for a net
increase in the number of full -time-equivalent employees after the
business entity prov ides proof satisfactory to the Oklahom a Tax
Commission that the conditions imposed pursu ant to paragraph 1 or
paragraph 2 of subsection B of this section have been satisfied.
D. If a business entity fails to expend the amount required by
paragraph 1 or paragraph 2 of subsection B of this sect ion within
the time required, the business entity may not claim the credit
authorized by subsection B of this section but shall be allowed to
claim a credit pursuant to subsection A of this section if the
requirements of subsection A of this section are me t with respect to
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the investment in qualified depr eciable property or net increase in
the number of full-time-equivalent employees .
E. The credit provided for in subsection A of this section , if
based upon investment in qualified depreciable property, shall not
be allowed unless the investment in qualifi ed depreciable property
is at least Fifty Thousand Dollars ($50,000.00) Five Hundred
Thousand Dollars ($500,000.00) and, beginning January 1, 2023, the
investment required shall be increased annually by a p ercentage
equal to the previous year’s increase in the national Consumer Price
Index (CPI). The Oklahoma Department of Commerce shall determin e
the amount of the increase, if any, on January 1 of each year. The
credit provided for in subsection A or B of this section shall not
be allowed if the applicabl e investment is the direct cause of a
decrease in the number of full -time-equivalent employees. Qualified
property shall be limited to machinery, fixtures, equipment,
buildings or substantial improvements thereto, placed in serv ice in
this state during th e taxable year. The taxable years for which the
credit may be allowed if based upon investment in qualified
depreciable property shall be measured from the year in wh ich the
qualified property is placed i n service. If the credi t provided for
in subsection A or B of this section is calculated on the basis of
the cost of the qualified pro perty, the credit shall be allowed in
each of the four (4) subsequent years. If th e qualified property on
which a credit has previously been all owed is acquired from a
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related party, the date such property is placed in service by the
transferor shall be c onsidered to be the date such property is
placed in service by the transferee, for purposes of determining the
aggregate number of years for whic h credit may be allowed.
F. The credit provided for in subsection A or B of this
section, if based upon an inc rease in the number of full -time-
equivalent employees, shall be allowed in each of the four (4)
subsequent years only if the level of new employe es is maintained in
the subsequent year. In calculating the credit by the number of new
employees, only those employees whose paid wages or salary were at
least Seven Thousand Dollars ($7,000.0 0) during each year the credit
is claimed shall be included in the calculation. Provided , that the
first year a credit is claimed for a new employee, such employee may
be included in the calculation notwithstanding paid wages of less
than Seven Thousand D ollars ($7,000.00) if the employee was hired in
the last three quarters of the tax year, has wages or salary which
will result in annual paid wages in excess of Seven Thousa nd Dollars
($7,000.00) and the taxpayer submits an affidavit stating that the
employee’s position will be retained in the following tax year and
will result in the payment of wages in excess of Seven Thousand
Dollars ($7,000.00). The number of new employe es shall be
determined by comparing the monthly average number of full -time
employees subject to Oklahoma income tax with holding for the final
quarter of the taxable year w ith the corresponding period of the
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prior taxable year, as substantiated by such rep orts as may be
required by the Tax Commission.
G. The credit allowed by subsection A of this section shall be
the greater amount of either:
1. One percent (1%) one percent (1%) of the cost of the
qualified property building property and the cost of substantial
improvements to building property , plus one-half of one percent
(0.5%) of the cost of qu alified machinery, equipme nt or fixtures in
the year the property qualified building, machinery, equipment or
fixture is placed in service ; or
2. Five Hundred Dollars ($500.00) for each new employee. No
credit shall be allowed in any taxable year for a net increase in
the number of full-time-equivalent employees if such increase is a
result of an investment in qualified depreciable property for which
an income tax credit has been allowed as authorized by this section .
H. G. The credit allowed by subsection B of this section shall
be the greater amount of either:
1. Two percent (2%) two percent (2%) of the cost of the
qualified building property and the cost of substantial improvements
to building property , plus one percent (1%) of the cost of qualified
machinery, equipment or fix tures property in the year the qualified
building, machinery, equipment or fixture property is placed in
service; or
2. One Thousand Dollars ($1,000.00) for each new employee .
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No credit shall be allowed in a ny taxable year for a net
increase in the number of full-time-equivalent employees if such
increase is a result of an in vestment in qualified deprec iable
property for which an income tax credit has been allowed as
authorized by this section .
I. H. Except as provided by subsection G of Section 3658 of
this title, any credits allowed but not used in any taxable year may
be carried over in order as follows :
1. To For credits awarded before tax year 2022, to each of the
four (4) years following the year of qu alification;
2. To For credits awarded before t ax year 2022, to the extent
not used in those years in order to each of the fifteen (15) years
following the initial five-year period;
3. For credits awarded for tax year 2022 and subsequent tax
years, to each of the following five (5) years;
4. If a C corporation that otherwise qualified for the c redits
under subsection A of this section subsequently changes it s
operating status to that of a pass -through entity which is being
treated as the same entity for federal tax purposes, the credits
will continue to be available as if the pass -through entity had
originally qualified for the credits subject to the limitati ons of
this section;
4. 5. To the extent not used in paragraphs 1 and 2 of this
subsection, such credits from qualified depreciable property plac ed
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in service on or after January 1, 2000, may b e utilized in any
subsequent tax years after the initial twent y-year period; and
5. 6. Provided, for tax years beginning on or after January 1,
2016, and ending on or before December 31, 2018 2016 through 2018
and tax year 2022 and subsequent tax years , the amount of credits
available as an offset in a taxable year shall be limited to the
percentage calculated by the Tax Commission pursuant to the
provisions of subsection L K of this section.
J. I. No credit otherwise authorized by the provisions of this
section may be claimed for any event, transaction, investment,
expenditure or other act occurring on or after July 1, 2010, for
which the credit would otherwis e be allowable until the provisions
of this subsection shall cease to be operative on July 1, 2012.
Beginning July 1, 2012, the credit authorized by this sect ion may be
claimed for any event, transaction, investment, expenditure or other
act occurring on or after July 1, 2010, according to the provision s
of this section; provided, credits accrued during the period from
July 1, 2010, through June 30, 2012, shall be limited to a period of
two (2) taxable years. The credit shall be limited in each taxable
year to fifty percent (50%) of the total amount of the accrued
credit. Any tax credits which accrue d uring the period of July 1,
2010, through June 30, 2012, ma y not be claimed for any period prior
to the taxable year beginning January 1, 2012. No credits which
accrue during the period of July 1, 2010, t hrough June 30, 2012, may
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be used to file an amende d tax return for any taxable year prior to
the taxable year beginning January 1, 2012.
K. J. Beginning January 1, 2017, except with respect to tax
credits allowed from investment or job creation occurring prior to
January 1, 2017, the credits authorized b y this section shall not be
allowed for investment or job creation in electric power generation
by means of wind as described by the North American Industry
Classification System, No. 221119.
L. K. For tax years beginning on or after January 1, 2016, and
ending on or before December 31, 2018 2016 through 2018 and tax year
2022 and subsequent tax years , the total amount of credits
authorized by this section u sed to offset tax shall be adjusted
annually to limit the annual amount of credits to Twenty -five
Million Dollars ($25,0 00,000.00). Credits originating from
qualified property placed into service ten (10) years before the
current tax year shall be limited to no more than One Million
Dollars ($1,000,000.00) of the Twenty-five Million Dollars
($25,000,000.00) annual limit. The Tax Commission shall annually
calculate and publish a percentage by which the credits authorized
by this section shall be reduced so the total amount of credits used
to offset tax does not exceed Twenty -five Million Dollars
($25,000,000.00) per year. The formula to be used for the
percentage adjustment shall be Twenty -five Million Dollars
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($25,000,000.00) divided by the c redits used to offset tax in the
second preceding year.
M. L. Pursuant to subsection L K of this section, in the event
the total tax credits authorized by this section exc eed Twenty-five
Million Dollars ($25,000,000.00) in any calendar y ear, the Tax
Commission shall permit any excess over Twenty -five Million Dollars
($25,000,000.00) but shall factor such excess into the percentage
adjustment formula for subsequent years.
SECTION 2. This act shall become effective November 1, 2021.
58-1-987 QD 1/20/2021 9:19:39 PM