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STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
SENATE BILL 394 By: Coleman
AS INTRODUCED
An Act relating to sales tax credit; amendin g 68 O.S.
2021, Sections 2396 and 2397, which relate to the
Oklahoma Tourism Development Act; modifying term of
agreement; modifying certain annual limit; updating
statutory language; updating statutory references;
and providing an effective date.
BE IT ENACTED BY THE PEOPLE OF THE ST ATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 2396, is
amended to read as follows:
Section 2396. A. Upon granting final approval, the Executive
Director of the Oklahoma Department of Commerce may enter into an
agreement with an approved company with respect to its tourism
attraction project. The terms and provisions of each agreement
shall include, but shall not be limited to:
1. The amount of approved costs, which shall be determined by
negotiations between the Executive Director and the approved
company;
2. A date certain by which the approved company shall have
completed the tourism attraction project or an individual component
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or phase of the project if the tourism attraction project is an
Entertainment District. Within three (3) months of the completion
date of the whole or an individual component or phase of the
project, the approved company shall document its actual costs of the
project through a certification of the costs by an independent
certified public accountant acceptable to the Executive Director;
and
3. The following provisions:
a. the term of the agreement shall may be up to ten (10)
years from the later of:
(1) the date of the final approval of the tourism
attraction project, or
(2) the completion date specified in the agreement,
if the completion date is within three (3) years
of the date of the final approval of the tourism
attraction project. However, the term of the
agreement may be extended for up to two (2)
additional years by the Executiv e Director, with
the advice and consent of the Okla homa Tax
Commission, if the Executive Director determines
that the failure to complete the tourism
attraction project within three (3) years
resulted from:
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(a) unanticipated and unavoidable delay in the
construction of the tourism attraction
project,
(b) an original completion date for the tourism
attraction project, as originally planned,
which will be more than three (3) years from
the date construction began, or
(c) a change in business structure resulti ng
from a merger or acquisition,
b. in any tax year during which an agreement is in
effect, if the amount of sales tax to be remitted by
the approved company or an Entertainment District
Tenant Party, if applicable, exceeds the sales tax
credit available to the approved company or
Entertainment District Te nant Party, if applicable,
then the approved company or Entertainment District
Tenant Party, if applicable, shall pay the excess to
this state as sales tax,
c. within forty-five (45) days after the end of each
calendar year the approved company shall suppl y the
Executive Director with such reports and
certifications as the Executive Director may request
demonstrating to the satisfaction of the Executive
Director that the approved company is in compliance
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with the provisions of the Oklahoma Tourism
Development Act, and
d. the approved company or an Entertainment District
Tenant Party, if applicable, shall not receive an
inducement with respect to any calendar year if:
(1) with respect to any tourism attractio n project
that is not an Entertainment District in any
calendar year following the fourth year of the
agreement, the tourism attraction project fails
to attract at least fifteen percent (15%) of its
visitors from among persons who are not residents
of this state, or
(2) in any calendar year following the f irst year of
the project or the tourism attraction project is
not operating and open to the public on a regular
and consistent basis, which for a tourism
attraction project that is an Entertainment
District shall mean that a substantial portion of
the Entertainment District is not operating and
open to the public on a regular and consistent
basis.
B. The agreement shall not be transferable or assignable by the
approved company without the written consent o f the Executive
Director but, with respect to a tou rism attraction project that is
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an Entertainment District, the approved company can elect to pass -
through all or a portion of the sales tax credit to one or more
Entertainment District Tenant Parties in ac cordance with Section
2397 of this title.
C. If the approved company utilizes or receives inducements
which are subsequently disallowed then the approved company will be
liable for the payment to the Tax Commission of an amount equal to
(i) all taxes resulting from the disallowance of the inducements
plus applicable penalties and interest, whether owed by the approved
company or an Entertainment District Tenant Party to which the
credits have been passed -through in accordance with Section 2397 of
this title, and/or (ii) all incentive payments previously re ceived
by the approved company, plus applicable penalties and interest.
Only the approved company originally allowed a sales tax credit
shall be held liable to make such payments and not any Entertainment
District Tenant Party to whom the credit has been passed-through in
accordance with Section 2397 of this title.
D. The Executive Director shall provide a copy of each
agreement entered into with an approved company to the Tax
Commission.
E. For a tourism attraction project that is an Entertainment
District and anticipated to have multiple components or phases, the
Executive Director may enter into more than one agreement with
different approved companies for the different components or phases
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of the Entertainment District and such agreements may be enter ed
into at different times as though the different components or phases
of the Entertainment District are their own separate project. In
such case, the Executive Director shall not be required to obtain a
separate report (referred to in subsection C of Se ction 2394 of this
title) for each individual component or phase of the Entertainment
District, but only one report for the entire Entertainment District.
SECTION 2. AMENDATORY 68 O.S. 2021, Section 2397, is
amended to read as follows:
Section 2397. A. Upon receiving notification from the
Executive Director of the Oklahoma Department of Commerce that an
approved company has entered into a tourism proj ect agreement and is
entitled to the inducements provided by the Okla homa Tourism
Development Act, the Oklahoma Tax Commission shall provide the
approved company with forms and instructions as necessary to claim
or receive or pass-through those inducements .
B. An approved company who se agreement provides that it shall
expend approved costs of more than Five Hundred Thousand Dollars
($500,000.00) for a tourism attraction project but less than One
Million Dollars ($1,000,000.00) shall be entitled to a sales tax
credit if the company cer tifies to the Tax Commission that it has
expended at least the minimum amount in approved costs, and the
Executive Director certifies that the approved company is in
compliance with the Oklahoma Tourism Development Act. The Ta x
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Commission shall then issue a tax credit memorandum to the approved
company granting a sales tax credit in the amount of up to ten
percent (10%) of the approved costs, but limited to the percent of
the approved costs that will result in the project being revenue-
neutral to the State of Oklahoma this state as determined by the
Oklahoma Department of Commerce. Subsequent requests for credit for
additional certified approved costs in excess of the minimum amount
for each project as listed in this subsection but less than One
Million Dollars ($1,000,000.00) shall result in a sales tax c redit
in the amount of up to ten percent (10%) of the approved costs, but
limited to the percent of the approved costs that will result in the
project being revenue -neutral to the State of Oklahoma this state as
determined by the Oklahoma Department of Commerce. Sales tax
credits allowed pursuant to the provisions of the Oklahoma Tourism
Development Act shall not be transferable or assignable; provided
that, with respect to a t ourism attraction project tha t is an
Entertainment District, the approved company can elect to pass-
through all or a portion of the sales tax credit to one or more
Entertainment District Tenant Parties. The approved company and the
Entertainment District Tenant Party shall jointly fi le a copy of the
written credit pass-through agreement with the Oklahoma Tax
Commission within thirty (30) days of the effective date of the
agreement. Such filing of the agreement with the Oklahoma Tax
Commission shall perfec t such agreement. The writte n agreement
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shall contain the name, address and taxpayer identification number
of the parties to the agreement, the amount of credit being passed -
through, the month and year the credit was originally allowed to the
approved company, the month and tax year or years for which the
credit may be claimed, and a representation by the approved company
that the approved company has neither claimed for its own behalf nor
conveyed such credits to any other Entertainment District Tenant
Party. The Tax Commission shal l develop a standard fo rm for use by
an approved company and an Entertainment District Tenant Party
demonstrating eligibility for the Entertainment District Tenant
Party to utilize the sales tax credit. The Tax Commission shal l
develop a system to record and track the pass-through of the sales
tax credit and certify the ownership of the sales tax credit and may
promulgate rules to permit verification of the validity and
timeliness of a sales tax credit claimed upon a sales tax return
pursuant to this subse ction but shall not pro mulgate any rules which
unduly restrict or hinder the pass-through of such sales tax credit
to an Entertainment District Tenant Party.
An approved company whose agreement provides that it shall
expend approved costs in excess of One Million Dollars
($1,000,000.00) shall be entitled to a sales tax credit if the
company certifies to the Tax Commission that it has expended at
least One Million Dollars ($1,000,000.00) in approved costs and the
Executive Director certifies that the approve d company is in
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compliance with the Oklahoma Tourism Development Act. The Tax
Commission shall then issue a tax credit memorandum to the approved
company granting a sales tax credit in the amount of up to twenty -
five percent (25%) of the approved costs, b ut limited to the perce nt
of the approved costs that will result in the project being revenue -
neutral to the State of Oklahoma this state as determined by the
Oklahoma Department of Commerce. The credit on all subsequent
additional certified approved cost s shall be in the amount of up to
twenty-five percent (25%) of the costs, but limited to the percent
of the approved costs that will result in the project being revenue -
neutral to the State of Oklahoma this state as determined by the
Oklahoma Department of Commerce. For a tourism attraction project
that is an Entertainment District, an a pproved company may elect to
receive an incentive payment based on sales tax collections of
Entertainment District Tenant Parties rather than a sales tax
credit. The incentive payment shall be in the amount of up to
twenty-five percent (25%) of the approv ed costs but limited to the
percent of the approved costs that will result in the project being
revenue-neutral to the State of Oklahoma this state as determined by
the Oklahoma Department of Commerce; provided that, (A) in no event
shall the incentive payments excee d the increased state sales tax
liability of the approved company and the Entertainment District
Tenant Parties that is actually rec eived by the Tax Commission, and
(B) the approved company shall be entitled to r eceive only ten
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percent (10%) of the incenti ve payment amount during each calendar
year. The Tax Commission shall issue an incentive payment
memorandum to the approved company granting a right to receive an
incentive payment from the Tax Commission in the amount of up to
twenty-five percent (25%) o f the approved costs but limited to the
percent of the approved costs that will result in the project being
revenue-neutral to the State of Oklahoma this state as determined by
the Oklahoma Department of Commerce . As soon as practicable after
the end of each calenda r year during the term of the agreement, the
approved company shall file a claim for the incentive payment with
the Tax Commission, and the Tax Commis sion shall be responsible for
ensuring that the amo unt of the incentive payment claimed does not
exceed the increased state sales tax liability of the approved
company and the Entertainment District Tenant Parties that has been
actually received by the Tax Commission, which may include accessing
the Oklahoma sales tax returns of the Entertainment District Tena nt
Parties as permitted by this section.
The cumulative inducements provided pursuant to the Oklahoma
Tourism Development Act shall not exceed Fifteen Million Dollars
($15,000,000.00) Thirty Million Dollars ($30,000,000.00) per year.
The Tax Commission sha ll require proof of expenditures prior to
issuing a tax credit memorandum or incentive payment memorandum to
the approved company which may be satisfi ed by a report from an
independent certified public accountant. Additional credit
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memoranda or incentive memoranda may be issued as the approved
company certifies additional expenditures of approved costs.
No tax credit memora ndum or incentive payment mem orandum shall
be issued for any approved costs expe nded after the expiration of
three (3) years from the d ate the agreement was signed by the
Executive Director and the approved company. However, the Executive
Director, with the advice and consent of the Tax Commission, may
authorize inducements for appro ved costs expended up to five (5)
years from the date t he agreement was signed if the Executive
Director determines that the failure to complete the tourism
attraction project within three (3) years result ed from:
1. Unanticipated and unavoidable delay in the construction of
the tourism attraction;
2. An original completion date for the tourism attraction, as
originally planned, which will be more than three (3) years from the
date construction began; or
3. A change in business ownership or business stru cture
resulting from a merger or acquisition.
C. A sales tax credit allowed pursuant to the provisions of
this section may be used to offset a portion of the reported state
sales tax liability of the appr oved company or an Entertainment
District Tenant Party, if applicable, for all sales tax reporting
periods following the issuance of the credit memorandum subject to
the following limitations:
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1. Only increased state sales tax liability may be offset by
the issued credit;
2. An approved company whose agr eement provides that it shall
expend approved costs in excess of One Million Dollars
($1,000,000.00) or an Entertainment District Party, if applicable,
shall be entitled to use only ten percent (10%) of th e amount of
each issued credit to offset increased state sales tax liability
during each calendar year, pl us the amount of any unused credit
carried forward from a prior calendar year, and an approved company
whose agreement provides that it shall expend a pproved costs of more
than the minimum amount for e ach project as listed in this
subsection but less than One Million Dollars ($1,000,000.00) shall
be entitled to use only twenty percent (20%) of the amount of each
issued credit to offset increased state s ales tax liability during
each calendar year, plus the amount of any unused credit carried
forward from a prior calendar year; and
3. All issued credit memoranda or incentive payment memorandum
memoranda shall expire at the en d of the month following the
expiration of the agreement as provided in Section 2396 of this
title.
The approved company or an Entertainment Dist rict Tenant Party,
if applicable, shall have no obligation to refund or otherwise
return any amount of this ind ucement to the person from wh om the
sales tax was collected.
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D. The Tax Commission shall promulgate rules as are necessary
for the proper admini stration of the Oklahoma Tourism Development
Act. The Tax Commission may also develop forms and instructions a s
necessary for an approved c ompany or Entertainment District Tenant
Party, if applicable, to claim or receive or pass-through the
inducements provided by the Oklahoma Tourism Development Act.
E. The Tax Commission shall have the authority to obtain any
information necessary from or regarding the approved company or an
Entertainment District Tenant Party, if applicable, and the
Executive Director to verify that approved companies or an
Entertainment District Tenant Party, if applicable, have received
the proper amounts of inducements as authorized by the Oklahoma
Tourism Development A ct. The Oklahoma Tax Commission shall demand
the repayment of any inducements taken or received in excess of the
inducements allowed by this act the Oklahoma Tourism Development
Act.
F. No sales tax cred it or incentive payment right authorized by
this section shall be granted on or after January 1, 2026.
Notwithstanding the foregoing, an approved compan y that has entered
into a tourism attraction project agreement with the Ok lahoma
Department of Commerce pursuant to Section 2396 of this title prior
to January 1, 2026, shall continue to be entitled to claim or
receive any inducements authorized by this se ction as contemplated
by the tourism project agreement.
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G. All currently approved tourism project agre ements executed
by the Oklahoma Tourism and Recreat ion Department are hereby
transferred to the Oklahoma Department of Commerce upon the
effective date of this act November 1, 2021.
H. On the effective date of this act November 1, 2021, all
administrative rules promulgated by the Oklahoma Tourism and
Recreation Department regarding the Oklahoma Tourism Development Act
shall be transferred to and becom e a part of the administrative
rules of the Oklahoma D epartment of Commerce. The Office of
Administrative Rules in the Office of the Secretary of State shall
provide adequate notice in the Oklahoma Register of the transferred
rules and shall place the tra nsferred rules under the Administrative
Code section of the Oklahoma Departmen t of Commerce. On the
effective date of this act November 1, 2021, any amendment, repeal,
or addition to the transferred rules shall be under the jurisdiction
of the Oklahoma Depart ment of Commerce, who shall have the authority
to enact rules in ord er to carry out the provisions of t he Oklahoma
Tourism Development Act.
SECTION 3. This act shall become effective November 1, 2023.
59-1-743 QD 1/15/2023 9:26:40 PM