Owl: Far more evidence has surfaced since proving this act was a ruse. Not only are economic development tax credits used by organized crimes tax credit counterfeiting laundering operation
the Tax fraud is still flourishing. Legislation claimed to have closed the loophole,
in fact widened the loophole. More money has been lost to this abuse since the so
called "closing of the loophole, than was lost before the Governor and State Lawmakers
acted to close the loophole. See
Tax credit letter causes public outcry
more in abuses.
For complete details download the act in PDF format.
Senate approves plan to close loophole
Business tax credit raises fears of abuse
The Oklahoman, May 26, 2006
Randy Ellis, John Greiner And Paul Monies
SB 1577: Would plug a tax credit loophole that could cost the state hundreds of millions of dollars if left unchecked.
The Oklahoma Senate on Thursday unanimously passed a bill designed to plug a tax
credit loophole that could cost the state hundreds of millions of dollars if left
The House of Representatives is expected to consider the bill today.
"Everybody has worked real hard to get these loopholes plugged," said state Sen.
Ted Fisher, D-Sapulpa. "Tax Commission officials wrote the bill, and they say this
will do the job."
State Sen. Cal Hobson, D-Lexington, told colleagues that lawmakers who accepted
contributions from people who took advantage of the loophole should return the funds.
"Give the money back if you want the public to have any respect for this body and
you as an individual," Hobson said.
State finds loopholes
The Oklahoman reported previously that Kevin Calvey, chairman of the House
Revenue and Taxation Committee, accepted $21,900 in campaign contributions
from Altus residents who benefited from the loophole in connection with an
airplane manufacturing venture.
Although he accepted the contributions, Calvey has been one of the most vocal
legislators in pushing to close the loophole.
"Maybe Cal Hobson doesn't have the moral integrity to do the right thing when
contributors have different positions on issues, but this proves that I do,"
Calvey said. "They may not be happy about this legislation, but that's not the
reason they gave me the contributions."
Calvey, R-Del City, said he believes the Altus residents gave him donations
because he is a conservative Republican and said he sees no need to return the money.
Because of confidentiality laws, lawmakers may not be aware they've received
funds from taxpayers who took the credit. The Altus tax credit recipients became
known because they have openly discussed their participation in the program,
touted its economic benefits and pushed for its continuation.
Fisher said the goal of the bill passed by the Senate on Thursday is to retain
legitimate uses of tax credit programs to promote economic development while
eliminating abuses. Fisher said he believes the new legislation accomplishes
Tax Commission employees became alarmed last year after they received requests
for pre approval of the tax structure for projects that contained a twentyfold
increase in projected tax credits.
A tax credit reduces the amount of taxes a person owes by the amount of the
Fisher and Tax Commission officials say they have no idea how much the tax
credits will cost the state on projects already approved by the commission.
"There could be a couple hundred million dollars (in credits) floating around
out there," Fisher said. "It's very scary."
The loophole initially was discovered in two tax credit programs designed to
encourage Oklahomans to invest in new and expanding businesses.
Those companion programs are called the Small Business Capital Formation
Incentive Act and the Rural Venture Capital Formation Incentive Act. Fisher
authored the bills. They offer 20 percent or 30 percent tax credits on money
invested in qualified projects.
Individuals can participate in the programs with borrowed money to obtain tax
credits 200 percent or more of their investments - making financial gains at
the expense of the state Treasury.
In some cases, the borrowed money apparently never was intended to go into new or expanded businesses and was used solely to boost the amounts of the tax credits, Fisher said.
While researching to fix the problem, lawmakers discovered a nearly identical loophole in an older program, Calvey said.
At Calvey's insistence, the reform bill would close that loophole, as well. The older program was authorized by the Legislature in the mid 1980s, he said.
The program was closed to new participants in 1992, but companies using it were
allowed to continue taking advantage of the law.
A Tax Commission official said two companies use the old tax credit, but
commission confidentiality laws protect their identities.
However, Securities and Exchange Commission filings reveal that an affiliate
of BOK Financial Corp., the parent company of Bank of Oklahoma, is one of the two
companies authorized to buy and sell tax credits under the program.
The affiliate sold Oklahoma income tax credits worth $46.6 million to directors
and entities related to the bank within the last five years, records show.
Tax credits issued under the old program are transferable, while credits issued
under the newer programs are not. Calvey said he inquired about making all the
tax credits nontransferable, but Fisher insisted the older program be allowed
to keep its status. Fisher said he didn't think the older program had been abused.
A spokesman for BOK Financial said the company has not participated in the two
new tax credit programs and believes the older program it participates in is
"quite different from the small business credit provisions that have been the
subject of the reported abuse."
Will it hurt development?
Calvey said he believes the new law will eliminate abuses of the tax credit
programs while still allowing the state to use tax credits as an economic
development tool. Calvey said he is concerned that some legitimate projects
may be harmed by the reform bill, but believes it is better to "err on the
side of caution" in protecting the state treasury.