The nuts and bolts
of Oklahoma's
tax credit investment incentive program.

The state of Oklahoma will give *CAPCOS $2 for every $1 they find investors willing to invest in new business ventures. That will allow the CAPCOs to pay the entire investment cost, for their investors, and guarantee those investors a 100% profit on their paid investment. The state pays all of this upfront so the investors are not out one dime. In others words a CAPCO says -- if you will tell me you want to invest $100,000 in this new business opportunity, the state will give us $200,000. $100,000 to pay your investment cost and another $100,000 for your willingness to help the state create more jobs for the people whose taxes are paying you this $200,000. No strings attached. The $100,000 is your money to keep whether the business opportunity is a success or failure. If the business is a success then you also have a $100,000 share in the business.

Let's illustrate using a $32 million investment example, like the Altus Ventures/Quartz Mountain Aerospace project.

In this case the state gave Altus Venture's $66.3 million to cover their investors $32 million investment costs, plus another $32 million to reward those investors the promised profits. Then tossed in another $2.3 million for incidental out of pocket expenses..

The CAPCO decides it doesn't want to invest the entire $32 million. Only invest $16 million now, and keep the money for something else. That is ok because state only requires the CAPCOs invest at least one-half or $16 million of the $66 million receive for AV/QMA.

Why would state officials offer such a great deal? Our state officials say it has to be this generous to interest the investors they want to attract.

To ease the concerns expressed by some CAPCOs they would prefer the public not know what was going on with this program, state officials agreed to withhold all information about this program. The public is prevented from learning how much the program is costing, what the money is used for, who is involved and/or who is benefiting.

There is one other little piece of info the public should know. There is nothing in Oklahoma law that says state officials cannot be investors.

State officials could very well be those investors using public funds to pay their cost to invest in new business ventures and reward them with an immediate guaranteed 100% profit on that public money.

*Note: also referred to as fund managers, pass-through entities, and various other terms.

This program has been cloaked in secrecy preventing the public and state lawmakers from knowing (for different) how much the program was costing or who was receiving the money. The first definitive appeared with barely a whisper this spring (2008) when state finance officials revised 2008 corporate income tax projections down from $450 million to $284 million and even further for 2009. A whopping 37% reduction a time Oklahoma was riding the wave of an energy induced economic peak. This didn't include the larger drop in personal income tax for the wealthy which is not broken out from all personal income taxes.

Those involved in the scheme receive and sell the tax credits immediately after filing a statement of intent. There are delays of as much as 2 years before the first start showing up as lost revenue. Then another 3 years minimum, typicall more before all are used. With the secrecy it will take many more years possibly 5 to 10 years before the impact is so overwhelmingy obvious the general public will finally realize something is amiss. By that time the public will be totally helpless. Lawmakers include language in the law that prevented the state from recovering the money. To make matters even more insulting the maximum punishment allow if any are later convicted is - are you ready for this - they will no longer be able to participate. That is after lawmkakers and other state officals have potentially benefited by several million each. They will not be allowed to have more, but they can keep what they have.