Maintaining a pro-business climate in Oklahoma during a period of stock market decline, investor caution, corporate cut-backs, and state revenue shortfalls was a challenge for the Oklahoma Legislature.
Oklahoma's economy was not immune from the national economic downturn and suffered its share of corporate retrenchment, job cuts, and financial instability. Nevertheless, Oklahoma faired better than the nation on some key economic indicators:
Declining state revenues limited the ability of the Legislature to act on all of the tax incentives and new programs proposed this session. In spite of this challenge, the Legislature successfully enacted several significant measures, which are summarized in this document, to address economic development and business concerns.
Summary of Actions
Small Business Measures:
SB 828 also clarifies the benefits available under the Oklahoma Quality Jobs Program Act for insurance companies and includes oil and gas company jobs not related to field drilling. Effective 7-1-02.
SB 948 (Maddox/Plunk): Enacts the Oklahoma Small Business Regulatory Flexibility Act. The measure creates a mechanism for ensuring that the impact of state agency rules on small business is assessed and considered prior to adoption of rules. It also provides for the review of adopted state agency rules that have an adverse affect on small business. The bill establishes a Small Business Regulatory Review Committee within the Oklahoma Department of Commerce. Agencies are required to submit to the Committee, for its review and input, proposed rules that could adversely affect small business. For rules that are in place, an adversely affected small business may petition the state agency for a review of the rule. The agency must consider the petition and submit a written response of its determination to the Small Business Regulatory Review Committee within 60 days. State agencies are also authorized under certain circumstances to waive or reduce an administrative penalty or fine imposed by a statute or rule. In addition, the bill amends the Administrative Procedures Act by increasing from 20 days to 30 days the comment period during which interested parties may submit data and views prior to the agency hearing on a proposed rule or rule change. Effective 7-1-02.
Health Care, Insurance, and Employee
HB 2350 (Liotta/Dunlap): Establishes the Employer Health Insurance Purchasing Group Act which allows small employers (employing 100 full-time employees or less) to band together to form a Health Insurance Purchasing Group (HIPG) to purchase a health benefits plan for their employees and for dependents of their employees. The HIPG must offer at least two types of plans to its members: one plan that must include all state-mandated benefits and one plan(plans) that does not include all or some of the state-mandated benefits. Policies that do not include all state-mandated benefits must include a notice to the insured to this effect. Authorizes the Insurance Commissioner to promulgate rules to implement the provisions of the act. Effective 11-1-02.
Rural Economy Measures:
Participating financial institutions will pledge $3 million to $10 million to a fund. If an applicant applies for a rural economic development loan from a participating financial institution and the amount of the loan is greater than the amount that institution has pledged, other pledging financial institutions will provide the remaining amount from their pledges. Financial institutions must apply the usual standards for making loans to rural economic development loans, and loan packages may be developed by SBA-certified development companies or political subdivisions or agencies. Administrative expenses of the State Treasurer and loan developers may be paid from the fund.
A Review Board consisting of the State Auditor and Inspector, Lieutenant Governor, State Treasurer, State Banking Commissioner, Director of the Department of Commerce, President of the State Board of Agriculture, and the Chair of the Oklahoma Tax Commission, or their designees, is created to review and prioritize applications and certify the amount of payroll attributable to new jobs created by rural economic development loans.
A participating financial institution will receive an income tax credit equal to the amount of taxable income attributable to the loan, limited each year to an amount equal to 5% of the amount of annual payroll from any job created by the economic activity financed with the loan. (The previous version of the bill allowed an income tax deduction in the amount of monies actually paid to the fund.) The Tax Commission has estimated that the fiscal impact would be minimal. SB 1442 also contains an amendment clarifying that business incubator income distributed to partners or shareholders or members of a limited liability company receive the state income tax exemption. Effective January 1, 2003.
Tax Incentives and Other Business
SB 1451 (Hobson/Miller): Allows an income tax credit to Oklahoma manufacturers of advanced small wind turbines, in the amount of $25 per square foot of rotor swept area in 2003, $12.50 in 2004 and $6.25 in 2005. Credits may be carried forward up to 10 years and are transferable. The tax years for which the credit allowed last session for electricity generated with zero-emission facilities is allowed are changed from those beginning on or after 1-1-02 to those beginning on or after 1-1-03. Effective 1-1-02.
HB 1222 (Leist/Shurden): Modifies establishments qualifying for incentive payments under the Oklahoma Quality Jobs Program Act to allow more than one establishment locating on a single "brownfield" site to qualify. Effective 3-11-02.
HB 2245 (Benson/Helton): Creates the "Oklahoma Quality Jobs Incentive Leverage Act", providing the following incentives:
Annual bond payments on a fifteen-year bond of the maximum benefit of $36 million will be approximately $3.4 million per year. The funds available to the special fund to cover principal and interest costs will exceed $7 million per year. HB 2245 also provides the following safeguards:
Airline and space industries
SB 1282 (Fisher/Rice): Modifies the qualifications for aircraft maintenance facilities to receive the sales tax exemption on sales of aircraft engine repairs, modification, and replacement parts; sales of aircraft frame repairs and modification, aircraft interior modification, and paint; and sales of services employed in the repair, modification and replacement of parts of aircraft engines, aircraft frame and interior repair and modification, and paint. Effective 7-1-02.
HB 2315 (Roach/Henry): Changes provisions relating to the income tax credit allowed to investors in certain airlines to extend the investment period from 12-31-00 to 12-31-02 and to increase the amount of investment qualifying for the tax credit by $9 million. Language is also included as to legislative intent that monies derived from tax credit transfers are intended to be nonshareholder contributions to capital for purposes of the Internal Revenue Code. Effective 2-19-02.
Oil and gas/Coal
SB 1302 (Crutchfield/Rice): Provides that the value of investment in property used exclusively by a small oil refinery that is used wholly as a facility, device or method for the desulphurization of gasoline or diesel fuel shall not be included in the capitalization used in the determination of fair market value of a small oil refinery. Application procedures are specified. Effective 1-1-03.
HB 2073 (Rice/Dickerson): Modifies income tax credits allowed to producers and purchasers of Oklahoma coal to extend the period of time for which they may be granted, make all credits transferable, allow certain credits to non-corporate taxpayers, and allow a five-year carry forward period. Effective 5-6-02.
HB 2904 (Roach/Williams): Allows tax-exempt housing projects to be financed by public trusts; modifies procedures for notice and hearings under the Local Development Act; specifies that transfers of property from a transferor to a business entity owned by the transferor or a family member are not considered sales for purposes of lifting the property valuation cap; allow school districts to pay visual inspection costs from building funds (see HB 1863); modifies property of charitable or nonprofit organizations which may be exempt from ad valorem taxes; allows leased employees to be counted toward employment threshold for five-year ad valorem tax exemption for companies for which construction started on or after 1-1-96. Effective 90 days after sine die adjournment.
Workers' Compensation Measures:
HB 2370 (Gray/Henry): Renames the managing executive of CompSource Oklahoma from "State Insurance Fund Commissioner" to "CompSource Oklahoma President and Chief Executive Officer". Effective 4-11-02.
HB 2723 (Bonny/Herbert): Exempts certain employers and personnel service companies from payment of search fees for requests for claim information from the Workers' Compensation Court. Effective 11-1-02.
HB 2752 (Askins/Henry): Modifies procedures relating to premiums assessed against insurance companies, self-insured employers and group self-insurance associations for the purpose of funding the Multiple Injury Trust Fund. Creates a tax rebate for payors of assessment. Authorizes payors to admit tax rebate as asset for purposes of financial solvency regulation by the Insurance Department. Extends rulemaking authority to Insurance Commissioner as necessary. Creates the Workers' Compensation Assessment Rebate Fund from which rebates will be paid. Repeals tax credit language of HB 1003X. Effective 4-10-02.
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