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SENATE FLOOR VERSION
April 10, 2023
ENGROSSED HOUSE
BILL NO. 2866 By: Wallace and Sims of the
House
and
Coleman of the Senate
An Act relating to revenue and taxation; amendi ng 68
O.S. 2021, Sections 2396 and 2397, which relate to
the Oklahoma Tourism Development Act; modifying
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, 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 determin ed by
negotiations between the Executive Director and the appr oved
company;
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2. A date certain by which the approved company shall have
completed the tourism attraction project or an individual component
or phase of the project if the tourism attraction pr oject 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 Tax
Commission, if the Executive Director determines
that the failure to complete the tourism
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attraction project within three (3) years
resulted from:
(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 t he sales tax
credit available to the approved company or
Entertainment District Tenant 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 supply the
Executive Director with such reports and
certifications as the Executive Director may request
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demonstrating to the satisfaction of the Executive
Director that the appro ved company is in compliance
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 fourth year of the
agreement, the tourism attraction project fails
to attract at least fifteen percent (15%) of its
visitors from among person s who are not residents
of this state, or
(2) in any calendar year following the first 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 t hat 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.
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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 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 in accordance 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 amo unt 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, plus applicable penalties and interest.
Only the approved company originally allowed a sales tax credit
shall be held liable to make such pay ments 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 T ax
Commission.
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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 c omponents or phases
of the Entertainment District and such agr eements may be entered
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 sh all not be required to obtain a
separate report (referred to i n subsection C of Section 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 pr oject 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 inducemen ts.
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 sale s tax
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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
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 bei ng 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 allowed
pursuant to the provisions of the Oklahoma Tourism Development Act
shall not be transferable or assignable; provided that, with respect
to a tourism attraction pr oject 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
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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 perfect such
agreement. The written agreement shall contain the name, ad dress
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 c laimed, 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 Commis sion 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 t o 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 t his 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 exces s of One Million Dollars
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($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 th e approved company is in
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 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. For a tourism attraction project that is an Ente rtainment
District, an approved 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 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 Comm erce;
provided that, (A) in no event shall the incentive payments exceed
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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 com pany shall be
entitled to receive only ten perc ent (10%) of the incentive 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 fro m the Tax Commission 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 Depart ment 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 ensur ing 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 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.
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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
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 app roved costs expended after the expiration of
three (3) years from the date 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 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 unav oidable 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 allowed pursuant to the provisions of
this section may be used to offset a portion of the reported state
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sales tax liability of the approved 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:
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 Million 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 o ffset increased state sales tax liability
during each calendar ye ar, 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 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 sales 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
shall expire at the end of the month following the expiration of the
agreement as provided in Se ction 2396 of this title.
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The approved company or an Entertainmen t District Tenant Party,
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.
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 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 Act. The Oklahoma Tax Commission shall demand
the repayment of any inducements taken 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 af ter January 1, 2026.
Notwithstanding the foregoing, an approved company that has entered
into a tourism attraction project agreement with the Oklahoma
Department of Commerce pursuant to Section 2396 of this title prior
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to January 1, 2026, shall continue t o be entitled to claim or
receive any inducements authorized by t his section as contemplated
by the tourism project agreement.
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 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 bec ome 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 transfer red
rules and shall place the t ransferred rules under the Administrative
Code section of the Oklahoma Department 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 Department of Commerce, who shall have the auth ority
to enact rules in order 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
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declared to exist, by reason whereof thi s act shall take effect and
be in full force from and after its passage and approval.
COMMITTEE REPORT BY: COMM ITTEE ON FINANCE
April 10, 2023 - DO PASS