Ed note: The amendment claimed to have stop, what is billed as abuse, by closing the loophole, was a ruse. Evidence is available to anyone, willing to examine. As can be seen in these articles; unsubstantiated, superficial excuses have been protecting this fraud that has been operating in ultra confidentiality, off the record, off the books, and undocumented, since the 1980s.
Another Tax credit letter causes public outcry
Bill to end tax credit abuse signed
Associated Press, June 8, 2006
Oklahoma CITY - A bill to stop abuses in two state tax credit programs was signed into law Wednesday by Gov. Brad Henry.
"This is sound legislation that will help ensure these worthwhile programs are used properly to foster economic development and job growth," Henry said. He said the new law "removes much of the ambiguity that had allowed abuse of the programs."
The Oklahoma Tax Commission says the state has lost tens of millions of dollars through abuse of the Small Business Capital Formation and Incentive Act, which provides tax credits of up to 20 percent, and the Rural Venture Capital Formation Incentive Act, which allows tax credits of up to 30 percent for rural projects.
Officials said the way the program has been used, investors got huge tax credits without necessarily providing any economic benefit to the state.
The Associated Press first reported on March 8 that investors were getting a higher return than intended under the two programs.
The Tax Commission at the time estimated state losses for the 2005 calendar year could hit $66 million. Officials involved in one project acknowledged investors were getting returns of 2-1 under the program.
Since the law allows investors and projects to be confidential, it was difficult to determine how widespread the abuse is, officials said.
Sen. Ted Fisher, D-Sapulpa, led the effort to stop the venture capital scheme. Under one example he gave, five people could put up $5 million for a business, create a second company with the same five people on the board, borrow $95 million and buy a certificate of deposit with those funds. Then the investors could get a 30 percent tax credit on $100 million, or $30 million. Only $5 million of that would go to the business being created.
The bill signed by the governor drops from 10 years to three years the tax liability investors can have wiped away under the program.
It also prohibits borrowed money from being used in venture capital projects unless the money is required to be paid back and is put into a business.
Ed Note: We should remind of Sen. Fisher's his quote in an Oklahoman article date March 26 2006
"Senator Ted Fisher said the abuses started after some unknown person 'tweaked' the law, and he failed to notice."
Apparently Sen Fisher is referring to the bill that left his senate in late Feb. 2006. Someone must have again tweaked the bill. The new bill only resurfaced the on the second to last day of the session where now containing a 50 plus page amendment went straight to the senate floor and received unanomous approval. It does not say "the money is required to be paid back and is put into a business."
Fisher said several other states have lost hundreds of millions of dollars through investors taking advantage of tax credit programs designed to create jobs.
Henry also signed a bill to modify requirements of the Small Employer Quality Jobs Act to provide that applicants in low-income areas pay employees 100 percent of the average county wage, or 110 percent if health insurance is not also offered.
He also signed a measure that strengthens education accountability requirements by requiring specific end-of-course testing and remediation for students who need it.