Req. No. 5315 Page 1
STATE OF OKLAHOMA
1st Session of the 59th Legi slature (2023)
HOUSE BILL 1600 By: Martinez
AS INTRODUCED
An Act relating to digital asset mining; creating the
Commercial Digital Asset Mining Act of 202 3; stating
intent; defining terms; pr oviding sales tax exemption
for the sale of certain equipment and machinery;
amending 68 O.S. 2021, Section 2357.4 , which relates
to income tax credit for certain investments;
providing credit for investment in certain facility;
updating statutory language ; providing for
codification; and providing an effectiv e date.
BE IT ENACTED BY THE PEOPLE OF TH E STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law to be codif ied
in the Oklahoma Statute s as Section 1359.3 of Title 68, unless there
is created a duplication in numb ering, reads as follows:
This act shall be known and may b e cited as the "Commercial
Digital Asset Mining Act of 2023".
SECTION 2. NEW LAW A new section o f law to be codified
in the Oklahoma Statutes as Section 1359.4 of Title 68, unless there
is created a duplication in numb ering, reads as follows:
It is the intent of the Legislature that: Req. No. 5315 Page 2
1. The State of Oklahoma provide approp riate incentives to
attract investments and jobs in innovative technological industries
and sectors to this state;
2. Blockchain technology is innovative technolo gy that may be
utilized in multiple industries to secure dat a and reduce fraud;
3. Access to cost-effective energy is c ritical in the use of
blockchain technology, particularly in the commercial mining of
digital assets which requires large amounts of ene rgy; and
4. The original intent of the Legislature that the Oklahoma Tax
Code recognize the continuing development of n ew and advanced
manufacturing and industrial processing technologies has led to new
industrial processes. Blockchain technology used in the commercial
mining of digital assets is an industrial pr ocess that should be
taxed in a manner similar to historical forms of manufacturing o r
industrial processing in order to encourage the location a nd
expansion of such operations in this state rathe r than in competing
states.
SECTION 3. NEW LAW A new section of law t o be codified
in the Oklahoma Statutes as Section 1359.5 of Title 68, unless there
is created a duplication in n umbering, reads as follows:
A. 1. "Blockchain technology" means shared or distributed data
structures or digital ledgers governed by consensus pro tocols and
maintained by peer-to-peer networks that:
a. store digital transactions, and Req. No. 5315 Page 3
b. verify and secure transactions cryptographically ;
2. "Colocation facility" means a facility or facilities,
totaling not less than fifty thousand (50,000) square feet, located
in this state and utilized in the commercial mining of digital
assets or in hosting persons engag ed in the commercial mining of
digital assets throu gh utilization of the facility's infrastructure,
including servers and network hardware powered b y Internet
bandwidth, electricity, and other services generally required for
mining operations;
3. "Commercial mining of digital asse ts" means the process
through which blockchain technology is used to mine digital ass ets
at a colocation facility;
4. "Digital assets" means a type of virtual currency that
utilizes blockchain technology and that:
a. can be digitally traded between users , or
b. can be converted or exchanged for legal tender; and
5. "Mine" means the process through which blockchain
transactions are verified and accepted by adding the transactions to
a blockchain ledger, which in volves solving complex and mathematical
cryptographic problems associated with a block containing
transaction data.
B. Beginning on the effective date of this act and endi ng on
December 31, 2037, the sale of machinery and equipment including but
not limited to servers and computers , racks, power distribution Req. No. 5315 Page 4
units, cabling, switchgear, transformers, substations, software,
network equipment, and electricity used for commercial mining of
digital assets in a coloca tion facility shall be exempt from the tax
imposed by Section 1350 et seq. of Title 68 of the Oklahoma
Statutes.
SECTION 4. AMENDATORY 68 O.S. 2021, 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 subsec tions J and K of this
section, for taxable years beginning after D ecember 31, 1987, there
shall be allowed a credit against the tax imposed by Section 2355 of
this title for:
1. Investment in qualified depreciable property placed in
service during those y ears for use in a manufacturing operation, as
defined in Section 1 352 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 facilit y in this state as defined in Section 1357 of
this title in this state or, a qualified web search po rtal as
defined in Section 1357 of this title, or, for tax year 2023 and
subsequent tax years, for use in a colocation facility as defined in
Section 3 of this act; or
2. A net increase in the number of full -time-equivalent
employees in a manufacturing ope ration, as defined in Section 1352 Req. No. 5315 Page 5
of this title, which has received a manufactu rer exemption permit
pursuant to the provisions of Section 1359.2 of this t itle or, a
qualified aircraft maintenance or manufacturing facilit y defined in
Section 1357 of this t itle in this state or, in a qualified web
search portal as defined in Section 13 57 of this title, or, for tax
year 2023 and subsequent tax years, in a colo cation facility as
defined in Section 3 of this act including 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 afte r December 31, 1998, there shall be
allowed a credit against the t ax imposed by Section 2355 of this
title for:
1. 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 qualifying
expenditure and plac ed in service 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, latest revision; or
2. A net increase in the n umber of full-time-equivalent
employees in this state engaged in the manufacture of any goods
identified by any Ind ustry Number contained in Division D of Part I
of the Standard Industrial C lassification (SIC) Manual, latest Req. No. 5315 Page 6
revision, if the total cost of qualified depreciable property plac ed
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 expenditure.
C. The business entity may claim the credit authorized 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 provides proof sat isfactory to the Oklahoma Tax
Commission that the conditions impos ed pursuant to paragraph 1 or
paragraph 2 of subsection B of this section have been satisfied.
D. If a business en tity fails to expend the amount required by
paragraph 1 or paragraph 2 of s ubsection B of this section 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 met with respect to
the investment in qualif ied depreciable property or net inc rease in
the number of full-time-equivalent employees.
E. The credit provided f or in subsection A of this section, if
based upon investment in qualified d epreciable property, shall not
be allowed unless the investment in qualified depreciable property
is at least Fifty Thousand Dollars ($50,000.00). The credit
provided for in subsec tion A or B of this section shall not be
allowed if the applicable investme nt is the direct cause of a Req. No. 5315 Page 7
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 service in
this state during the taxable year. The taxable years for which the
credit may be allowed if b ased upon investment in qualified
depreciable property shall be measured from the year in which the
qualified property is placed in service. If the credit provided for
in subsection A or B of this section is calculated on the basis of
the cost of the qual ified property, the credit shall be allowed in
each of the four (4) subsequent years. If the qualified property on
which a credit has previously been allowed is acquired from a
related party, the date such the property is placed in service by
the transferor shall be considered to be the date such the property
is placed in service by the transferee, for purposes of determining
the aggregate number of years for which credit may be allowed.
F. The credit provided for in subsection A or B of this
section, if based upon an increase 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 employees 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 ($7,000.00) 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 the employee Req. No. 5315 Page 8
may be included in the calculation notwithstanding paid wages of
less than Seven Thousand Dollars ($7, 000.00) if the employee was
hired in the last three quarters of the tax yea r, has wages or
salary which will result in annual paid wages in e xcess of Seven
Thousand 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 payme nt 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 withholding for the
final quarter of the taxable yea r with the corresponding period of
the prior taxable year, as subs tantiated 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%) of the cost of the qualified property in
the year the property 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 the increase is
a result of an investment in qualified depre ciable property for
which an income tax credit has been allowed as authorized by this
section. Req. No. 5315 Page 9
H. The credit allow ed by subsection B of this section shall be
the greater amount of either:
1. Two percent (2%) of the cost of the qualified property in
the year the property is place d in service; or
2. One Thousand Dollars ($1,000.00) 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 inves tment in qualified deprec iable
property for which an income tax credit has been allowed as
authorized by this secti on.
I. 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 each of the four (4) years following the year of
qualification;
2. To the extent not used in those years in order to each of
the fifteen (15) years followi ng the initial five-year period;
3. If a C corporation that other wise qualified for the c redits
under subsection A of this section subsequently changes its
operating status to that of a pass-through entity which is being
treated as the same entity for fe deral tax purposes, the credits
will continue to be available as if the pass-through entity had
originally qualified for the credits subject to the limitations of
this section; Req. No. 5315 Page 10
4. To the extent not used in paragraphs 1 and 2 of this
subsection, such credi ts from qualified depreciable property placed
in service on or afte r January 1, 2000, may b e utilized in any
subsequent tax years after the initial twenty-year period; and
5. Provided, for tax years beginning on or after January 1,
2016, and ending on or before December 31, 2018, the amount of
credits available as an off set in a taxable year sh all be limited to
the percentage calculated by the Tax Commission pursuant to the
provisions of subsection L of this section.
J. No credit otherwise authorized by t he provisions of this
section may be claimed for any event, transac tion, 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 o perative on July 1, 2012.
Beginning July 1, 2012, the credit autho rized by this section may be
claimed for any event, transaction, investment, expenditure, or
other act occurring on or after July 1, 2010, according to the
provisions of this section; provi ded, credits accrued during the
period from July 1, 2010, through J une 30, 2012, shall be lim ited 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 during the period of
July 1, 2010, throug h June 30, 2012, may not b e claimed for any
period prior to the taxable year beginning January 1, 2012. No Req. No. 5315 Page 11
credits which accrue during the period of July 1, 2010, through June
30, 2012, may be used to file an amended tax return for any taxable
year prior to the taxable year beginn ing January 1, 2012.
K. 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 by 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. For tax years beginning on or after January 1, 2016, and
ending on or before December 31, 2018, the tot al amount of credits
authorized by this section used to offset tax shall be adjusted
annually to limit the annual a mount of credits to Twenty-five
Million Dollars ($25,000,000.00). The Tax Commission shall annually
calculate and publish a percentage by wh ich 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 for mula to be used for the
percentage adjustment shall be Twenty -five Million Dollars
($25,000,000.00) divided by the credits used to offset tax in the
second preceding year.
M. Pursuant to subsection L of this section, in the event the
total tax credits aut horized by this section exceed Twenty -five
Million Dollars ($25,000 ,000.00) in any calendar y ear, the Tax Req. No. 5315 Page 12
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 5. This act shall become effective November 1, 2023.
59-1-5315 MJ 11/21/22