$5.40 in tax credits Scissortail received for investing $1 of the $5.40 in a business venture.
2006 CAPCO Tax Credits Report. Claimed investing $89,540,000
Note: The Rural Small Business "Investing Entities" and "Target Companies" were left off this report. This is a key part of the information the Taxpayer Transparency Act was created to force OTC to reveal. After nearly two years since the act was signed into law OTC is still withholding this information and defying the law.
Copy of Scissortail's tax credit scheme provided by an unidentified source. Click to download.
Were Oklahoma officials involved in Scissortail?
Why did OTC ok Scissortail taking as much as 540% profit in tax credits for an investment before investing in the business?
Recently uncovered OK Tax Commission documents reveals Scissortail was allowed $27 million ($26,862,000) in tax credits, for a plan describing investing as little as $5 million at risk. Scissortail was allowed to receive the $27 million first and use $5 million of the public's $27 million to pay its investment. Leaving $22 million in profit.
The lists of violations include but are not limited to, Scissortail being allowed to:
- use the 2006 Grandfather clause when evidence suggests Scissortail was not qualified.
- claim tax credits on funds that again evidence suggests did not qualify.
For those who may not be familiar with venture capital investing it is "the risk" that distinguishes venture capital investing from other forms of business investing. The heightened risk is the basis for offering much higher incentives to attract investors.
The Scissortail scheme (a different twist than Altus Venture used) involves claiming a secured loan as money at risk. Meaning if business fails the business assets are used to satisfy the loan, relieving the so called investors of repaying the loan and the risk.
The damage goes far beyond the monetary damage. The Scissortail plan specifically calls for restricting investments to business with sufficient unencumbered assets to secure loans. This is in direct conflict with the purpose of the program and eliminates the very business ventures, venture capital and this program exist to help. This is clear evidence the program is being used to reap huge profits selling unearned tax credits to others to avoid paying taxes.
Another equally significant key difference between the way some are allowed to abuse Oklahoma's program and venture capital (or any legitimate investment) is the timing. Legitimate investments return profits based on and after success.
Those using the Oklahoma program are allowed to take their rewards immediately before the investment capital is put to work. Scissortail was allowed to 540% in unearned profits immediately. This allowed Scissortail to use public money to pay the investment cost. And, for that they were allowed to pocket a $22 million profit.
How can this happen? It is the secrecy, and the fact that state officials are legally allowed to own and invest in these deals and shared in that $22 million, in return for nothing. The secrecy prevents the public from learning what is occurring and who is involved.