Business Tax Modernization

Summary of Policy Considerations

The Legislature may consider the following policy changes:

• Simplify the tax structure for businesses. This could be accomplished through transitioning to a single factor apportionment, eliminating the throwback rule, or reducing compliance costs related to determining tax liability.
• Amend the participation parameters of the ad valorem exemption to be more NAICS code specific or provide tiers of exemptions that align with the State plan for economic growth.
• Provide statutory clarification on the eligibility and administration of the Manufacturers Sales Tax Exemption to align with the Legislature’s intent to grow all or part of Oklahoma’s manufacturing sector.
• Create a five-year, statewide economic growth plan which should address, at minimum:
• Aligning objectives of economic growth to key industries which support major economic hubs surrounding Oklahoma, such as Arizona’s manufacturing model
• Identifying infrastructure funding tools or adapt existing ones (such as the Pooled Finance Program or PREP Fund)
• Identifying businesses’ workforce development needs and developing a coordinated Statewide plan to address them
• Identify a Lead Coordinating Agency to implement the Statewide Strategic Plan. Among other duties, this agency should standardize data collection and reporting across responsible agencies involved in incentive evaluations.
• Require counties, the Oklahoma Tax Commission, and other stakeholders to collect necessary data, such as the number of jobs created, to allow the Incentive Evaluation Commission to determine the net benefit of the ad valorem tax exemption program.
• Enhance data sharing between the Oklahoma Department of Commerce and OTC by providing Commerce the same statutory authorization to view data as OTC.
• Raise the cap on total deposits allowable to the Revenue Stabilization Fund so the State can reach the recommended savings level of 15 percent of outlays as well as provide the ability to hold reserves to plan for transitioning tax policy.
• Alternatively, create an additional State savings fund not subject to constitutional limitations for the purpose of capturing revenues from a transitioning tax source for one year in order to offset potential revenue losses.
• Enhance transparency and align eligibility of the Quick Action Closing Fund to ensure funds expended align with State’s five-year economic growth plan.