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STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
SENATE BILL 305 By: Bergstrom
AS INTRODUCED
An Act relating to income tax credit; amending 68
O.S. 2021, Section 2357.4, which relates to tax
credit for investments in qualified depreciable
property and a net increase in full -time-equivalent
employees; limiting certain credit to certain tax
years; limiting certain tax credit to property placed
in service before certain date; limiting requirement
to provide satisfactory proof to certain years;
limiting carry forward of certain credits to certain
years; providing for carry forward of certain
credits; requiring submission of claim to carry
forward credit; requiring submission and approval of
application to claim certain credit; requiring the
Oklahoma Department of Commerce to pr escribe certain
form; requiring the Department to notify Oklahoma Tax
Commission of application approval; and providing an
effective date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. 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 i n subsections J and K of this
section, for taxable years beginning after December 31, 1987, there
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shall be allowed a credit against the tax imposed by Section 2355 of
this title for:
1. Investment in qualified depreciable prop erty placed in
service during those years for 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 defined in Section 1357 of this title i n
this state or a qualified web search po rtal as defined in Section
1357 of this title; or
2. A For tax years 1988 through 202 3, a net increase in the
number of full-time-equivalent employees in a manufac turing
operation, as defined in Section 1352 of thi s 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 fac ility defined in Section 1357 of this title in
this state or in a qualified web s earch portal as defined in Section
1357 of this title including employees en gaged in support services.
B. Except as otherwise provided in subsection F of Section 3658
of this title and in subsections J an d K of this section, for
taxable years beginning af ter December 31, 1998, there shall be
allowed a credit against the tax impos ed by Section 2355 of this
title for:
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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 placed in se rvice in this state during those years
for use in the manufacture of products described by any Indu stry
Number contained in Divis ion D of Part I of the Standard Industrial
Classification (SIC) Manual, latest revision; or
2. A For property placed in service before January 1, 2024, 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) Manual, latest revision, if the
total cost of qualifie d depreciable property placed in service b y
the business entity within t he state equals or exceeds Forty Million
Dollars ($40,000,000.00) within three (3) years from the date of
initial qualifying expenditure.
C. The For property placed in service before January 1, 2024,
the business entity may c laim the credit authorized by subsection B
of this section for expenditures incur red or for a net increase in
the number of full-time-equivalent employees after the business
entity provides proof satisfactory to the Oklahoma Tax Commission
that the conditions imposed pursuant to paragraph 1 or paragraph 2
of subsection B of this sectio n have been satisfied.
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D. If a business entity fails to expend the amount required by
paragraph 1 or paragraph 2 of subsection B of this section within
the time required, the business entity may not claim the credit
authorized by subsection B of this sect ion 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 qualified depreciable 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 inve stment in qualified depreciable property
is at least Fifty Thousand Dollars ($50, 000.00). The credit
provided for in subsection A or B of this section shall not be
allowed if the applicable investment is the direct cause of a
decrease in the number of ful l-time-equivalent employees. Qualified
property shall be limited to machinery, f ixtures, 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 based 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 qualified property, the credit shall be allowed in
each of the four (4) subs equent years. If the qualified property on
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which a credit has previously been allowed is acquired from a
related party, the date such property is placed in service by the
transferor shall be considered to be the date such 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 employee 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 year, has wages or salary which
will result in annual paid wages in exce ss of Seven Thousand Dollars
($7,000.00) and the taxpayer submits an affidavit st ating 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 num ber of new employees shall be
determined by comparing the monthly average number of full-time
employees subject to Oklahoma income tax withholding for the final
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quarter of the taxable year with the corresponding period of the
prior taxable year, as substan tiated by such reports 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 increase is a
result of an investment in qualified depreciable property for which
an income tax credit has been allowed as authorized by this se ction.
H. The credit allowed 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 placed 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 investment i n qualified depreciable
property for which an income tax credit has been allowed as
authorized by this section.
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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 For property placed in service before January 1, 2024, or
a net increase in the numb er of full-time-equivalent employees in a
manufacturing operation , 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 otherwise 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 fed eral 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;
4. To the extent not used in paragraphs 1 and 2 of this
subsection, such credit s from qualified depreciable property placed
in service on or after January 1, 2000 and before January 1, 2024,
may be utilized in any subsequent tax years after the initial
twenty-year period; and
5. To the extent not used in paragraph 1 of this subsecti on,
credits from qualified depreciable property place d in service on or
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after January 1, 2024, may be carried forward in order to each of
the seven (7) years, following the initial five-year period, upon
the filing of a claim on a form prescribed by the Tax Commission for
each year the credit is carried forward . The form prescribed shall
require the claimant to attest whether the property is still in use ;
and
6. Provided, for tax years beginning on or aft er January 1,
2016, and ending on or before Decembe r 31, 2018, the amount of
credits available as an offset 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 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 otherwise be al lowable until the provisions
of this subsection shall cease to be operative on Ju ly 1, 2012.
Beginning July 1, 2012, the credit authorized by this section may be
claimed for any event, transaction, investment, expenditure , or
other act occurring on or aft er July 1, 2010, according to the
provisions of this section; provided, credits a ccrued during the
period from July 1, 2010, through June 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 tot al amount of the
accrued credit. Any tax credits w hich accrue during the period of
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July 1, 2010, through June 30, 2012, may not b e claimed for any
period prior to the taxable year beginning January 1, 2012. No
credits which accrue during the period of Ju ly 1, 2010, through June
30, 2012, may be used to f ile 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 au thorized 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, 201 6, and
ending on or before December 31, 2018, the total amount of credits
authorized by this section used to offset tax shall be adjusted
annually to limit the annual amount o f credits to Twenty-five
Million Dollars ($25,000,000.00). The Tax Commission sh all 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 exc eed Twenty-five Million Dollars
($25,000,000.00) per year. The formula to be use d 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.
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M. Pursuant to subsection L of this section, i n the event the
total tax credits authorized by thi s section exceed 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 subsequ ent years.
N. The credit provided for in subsections A and B of this
section, for qualified deprecia ble property placed in service on or
after January 1, 2024, shall not be claimed unless an application
for the credit is approved by the Oklahoma Departmen t of Commerce.
The application shall be submitted to the Department on a form
prescribed by the Department within sixty (60) days of the property
placement in service. The Department shall notify the Tax
Commission upon approval of the application that the taxpayer is
eligible to claim the cre dit.
SECTION 2. This act shall become effective November 1, 2023.
59-1-168 QD 1/12/2023 5:54:42 PM