Tax credit moratorium: Sen. Ted Fisher, the Senate's majority floor leader, has scratched a
House-passed moratorium on two heavily criticized tax credit programs, The Associated Press
reported.
Fisher, D-Sapulpa, said he decided not to bring up the moratorium bill Wednesday before the
Senate adjourned for the weekend because "we are going for a permanent fix. A moratorium
is the last thing we want."
The House voted 100-0 on Monday to suspend the Capital Formation Incentive Act and the
Rural Venture Capital Formation Act until June 1, 2007.
Oklahoma Tax Commission officials say the tax credit programs cost the state $2 million a year
in their first few years, but that their cost is now estimated to be $66 million
for the 2005 calendar year alone.
Officials warn that the state could lose hundreds of millions of dollars in revenue if
the programs are not changed.
The House approved Senate Bill 1693, calling for a moratorium until June 1, 2007
Tulsa World, April 25, 2006
By MICK HINTON AND BARBARA HOBEROCK World Capitol Bureau
The House approved Senate Bill 1693, calling for a moratorium until June 1, 2007
House approves bill calling for moratorium on tax-credit issue
Tulsa World
By MICK HINTON AND BARBARA HOBEROCK World Capitol Bureau
4/25/2006
OKLAHOMA CITY -- The House ordered on Monday a moratorium for more than a year on a controversial
tax-credit program that officials say could cost the state several million dollars.
The House approved Senate Bill 1693, calling for a moratorium until June 1, 2007, in an effort to
prevent venture capitalists from earning tax credits on borrowed money. The bill returns to the Senate.
Oklahoma Tax Commission officials suspect that some of these ventures have operated without creating
jobs and expanding Oklahoma businesses. Once the companies get the tax credits from the state, they
pay off bank loans without using the money for economic expansion.
When the bill came up for consideration Monday, it provided for a moratorium until June 1 this year,
but it was amended on the floor by Rep. Fred Morgan, R-Oklahoma City.
Morgan and another GOP House member, Rep. Kevin Calvey of Del City, are among candidates seeking the
post of U.S. representative for the 5th Congressional District.
Records show that Calvey has received campaign contributions from several people involved in one of
the capital venture projects. Members of Altus Ventures LLC have contributed more than $21,900
to Calvey.
Altus - Ventures officials say they have not abused the program.
Rep. Mike Reynolds, R-Oklahoma City, said on the House floor Monday that only seven entities have
taken advantage of the program, which was costing the state about $2 million a year. However, last
year's estimated cost of the program jumped to $66 million.
The way the program was set up, companies can receive tax credits of 20 percent for urban projects
and 30 percent for rural projects. For example, investors might pool $2 million to start a rural
company and borrow $18 million from a bank. Based on the overall $20 million investment,
investors would be entitled to tax credits of $4 million.
The state tried to close a loophole a couple of years ago by requiring that borrowed money could not
be used to draw the tax credits. Companies have been skirting that requirement by forming another
limited liability corporation and turning the borrowed money over to the new firm, whose name would
not appear on a bank loan.
Ed note: The loophole was made legal, not closed in 2006! In other words those using the program didn't like being accused of using a loophole. Now no one has to skirt the requirement.
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