Req. No. 5464 Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 STATE OF OKLAHOMA 1st Session of the 59th Legislature (2023) HOUSE BILL 2866 By: Wallace AS INTRODUCED An Act relating to revenue and taxation; amending 68 O.S. 2021, Sections 2396 and 2397, which relates to the Oklahoma Tourism Developmen t Act; modification on length of allowable term; increasing cumulative inducement cap amount; providing an effective date and declaring an emergency . BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA: SECTION 1. AMENDATORY 68 O.S. 2021, Section 2396, i s 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 touris m 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 appr oved company; 2. A date certain by which the approved company shall have completed the tourism attraction project or an individual component Req. No. 5464 Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 or phase of the project if the tourism attraction project is an Entertainment District. Within three (3) months o f 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 agreem ent, 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 Executive Director, with the advice and consent of the Oklahoma Ta x Commission, if the Execut ive Director determines that the failure to complete the tourism attraction project within three (3) years resulted from: Req. No. 5464 Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (a) unanticipated and unavoidable delay in the construction of the tourism attra ction 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 resulting 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 Tenant Pa rty, 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 supply 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 Req. No. 5464 Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 with the provisions of the Oklaho ma 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 attraction project that is not an Entert ainment District in any calendar year following the fo urth 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 first ye ar of the project or the to urism 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 operatin g 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 of the Executive Director but, with respect to a tourism at traction project that is Req. No. 5464 Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 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 accordance with Section 2397 of this title. C. If the approved company utilizes or rec eives 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 pa yments previously received by the approved company, pl us 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 multip le components or phases, the Executive Director may enter into more than one agreement with different approved companies for the different components or phases Req. No. 5464 Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of the Entertainment District and such agr eements may be entered into at different times as thou gh 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 i n subsection C of Section 2 394 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 project agreement and is entitled to the induceme nts provided by the Oklahoma 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 whose agreement pro vides 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 certifies to the Ta x 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 Tax Req. No. 5464 Page 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Commission shall then issue a tax credit me morandum 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 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 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 as determined by the Oklahoma Depa rtment of Commerce. Sales tax credits all owed pursuant to the provisions of the Oklahoma Tourism Development Act shall not be transferable or assignable; provided that, with respect to a tourism attraction project that 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 file a copy of the written credit pass -through agreement with the Oklahoma Tax Com mission within thirty (30) days of the effective date of the agreement. Such filing of the agreement with the Oklahoma Tax Commission shall perfect such agreement. The written agreement shall contain the name, ad dress Req. No. 5464 Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 and taxpayer identification number o f 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 c laimed, and a representation by the approv ed 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 shall develop a standard form for use by a n 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 shall 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 subsection but shall not promulgate any rul es 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 approved company is in Req. No. 5464 Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 compliance with the Ok lahoma 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, but limited to the percent of the approved costs that will result in the project being revenue- neutral to the State of Oklahoma as determined by the Oklahoma Department of Commerce. The credit on all subsequent additional certified approved costs shall be in the amount of up to twenty -five percent (25%) of the costs, but limited to th e percent of the approved costs that will result in the project being revenue -neutral to the State of Oklahoma as determined by the Oklahoma Department of Commerce. For a tourism attraction project that is an Ente rtainment District, an approved company ma y 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 approved costs but limit ed to the percent of the approved costs that will result in the project being revenue -neutral to the State of Oklahoma as determined by the Oklahoma Department of Commerce; provided that, (A) in no event shall the incentive payments exceed the increased state sales tax liability of the approved company and the Entertainment District Tenant Parties that is actually received by the Tax Commission, and (B) the approved company shall be entitled to receive only ten perc ent (10%) of the incentive payment Req. No. 5464 Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 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%) of the approved cos ts but limited to the percent of the approved costs that will result in the project being revenue -neutral to the State of Oklahoma as determined by the Oklahoma Department of Commerce. As soon as practicable after the end of each calendar 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 Commission shall be responsible for ensuring that the amount 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 Tenant Parties as perm itted 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 shall require proof of expenditures prior to issuing a tax credit memorandum or incentive payment memorandum to the approved company which may be satisfied by a report from an independent certified public accountant. Additional credit Req. No. 5464 Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 memoranda or incentive memoranda may be issued as the approved company certifies additional expenditures of approved costs. No tax credit memorandum or incentive payment memorandum shall be issued for any approved costs expended after the expiration of three (3) years from the date the agreemen t 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 approved costs expended up to five (5) years from the date the agreement was signed if the Executive Director determines that the failure to complete the tourism attraction project within three (3) years resulted 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 structure resulting from a merger or acquisition. C. A sales tax credit al lowed pursuant to the provisions of this section may be used to offset a portion of the reported state sales tax liability of the approved company or an Entertainment District Tenant Party, if applicable, for all sales tax reporting periods following the i ssuance of the credit memorandum subject to the following limitations: Req. No. 5464 Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 1. Only increased state sales tax liability may be offset by the issued credit; 2. An approved company whose agreement provides that it shall expend approved costs in excess of One Mi llion Dollars ($1,000,000.00) or an Entertainment District Party, if applicable, shall be entitled to use only ten percent (10%) of the amount of each issued credit to offset increased state sales tax liability during each calendar year, plus the amount of any unused credit carried forward from a prior calendar year, and an approved company whose agreement provides that it shall expend approved costs of more than the minimum amount for each project as listed in this subsection but less than One Million Doll ars ($1,000,000.00) shall be entitled to use only twenty percent (20%) of the amount of each issued credit to offset increased state sales tax liability during each calendar year, plus the amount of any unused credit carried forward from a prior calendar y ear; and 3. All issued credit memoranda or incentive payment memorandum shall expire at the end of the month following the expiration of the agreement as provided in Section 2396 of this title. The approved company or an Entertainment District Tenant Part y, if applicable, shall have no obligation to refund or otherwise return any amount of this inducement to the person from whom the sales tax was collected. Req. No. 5464 Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 D. The Tax Commission shall promulgate rules as are necessary for the proper administration of the Oklahoma Tourism Development Act. The Tax Commission may also develop forms and instructions as necessary for an approved company or Entertainment District Tenant Party, if applicable, to claim or receive or pass -through the inducements provided by the Ok lahoma 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 a pproved companies or an Entertainment District Tenant Party, if applicable, have received the proper amounts of inducements as authorized by the Oklahoma Tourism Development Act. The Oklahoma Tax Commission shall demand the repayment of any inducements ta ken or received in excess of the inducements allowed by this act. F. No sales tax credit or incentive payment right authorized by this section shall be granted on or after January 1, 2026. Notwithstanding the foregoing, an approved company that has enter ed into a tourism attraction project agreement with the Oklahoma 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 section as contemp lated by the tourism project agreement. Req. No. 5464 Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 G. All currently approved tourism project agreements executed by the Oklahoma Tourism and Recreation Department are hereby transferred to the Oklahoma Department of Commerce upon the effective date of this act. H. On the effective date of this act, all administrative rules promulgated by the Oklahoma Tourism and Recreation Department regarding the Oklahoma Tourism Development Act shall be transferred to and become a part of the administrative rules of the Oklahoma Department 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 transferred rules under the Administrative Code section o f the Oklahoma Department of Commerce. On the effective date of this act, any amendment, repeal or addition to the transferred rules shall be under the jurisdiction of the Oklahoma Department of Commerce, who shall have the authority to enact rules in ord er to carry out the provisions of the Oklahoma Tourism Development Act. SECTION 3. This act shall become effective July 1, 2023. SECTION 4. It being immediately necessary for the preservation of the public peace, health or safety, an emergency is hereby declared to exist, by reason whereof thi s act shall take effect and be in full force from and after its passage and approval. 59-1-5464 JM 01/05/23