Update: June 2007 Now the IRS is question the "tax loophole" claim.

How Tax Credit Loophole works
The tax credit program as explained to taxpayers.

An economic development program was created, by the Oklahoma legislator, to attract investments in new Oklahoma business ventures. The incentive was to be a 20 to 30% tax credit to help offset the risk. This guaranteed the investor they are only risking 70-80% of their investment with the venture. So goes the claim of what was intended? The cover!

A group of investors put up $10 million to invest in urban small business venture capital projects.

The investors borrow an additional $90 million. That money doesn't go into the project, but is instead left safely in the bank drawing interest until the scam is approved, at which time the investors pay off the loan.

The investors claim a $30 million tax credit based on his $100 million fake "investment." The Oklahoma Tax Commission approves the deal and issues the investors a letter of legality as protection in the event of legal action.

Two, at minimum, program violations.

• Investors were given credit for money not at risk.


• No jobs are created off the borrowed portion of the money.

The state treasury loses $27 million. $30 less the $3 million that meets the program criteria.

Investors now have $30 million in profit plus the $10 million investment.

Source: Extracted from Tax credit being abused, officials say [Ref A101]

Once the investors receive the tax credit authorization from the Oklahoma Tax Commission it is theirs, free of any and all obligations. Free if desired to scratch the business used to claim the tax credit. Use the credits on another business they own. Or, sell the credits to other businesses via a laundering scheme. Either way they are under no obligation to create more jobs. They received the tax credit for stating they intended to start a new business.

State Officials Response

State officials justify this by claiming there was nothing in the tax bill that said the investors couldn't ignore the business and use the money as they see fit.

In plain language, our state officials who took an oath to protect the public's interest are saying, to the taxpayer. Gotcha, it is your own fault for being so stupid as not to tell them they couldn't.

Based on turning their backs and avoiding the problem the Governor, Attorney General, and Legislators have demonstrated their allegiance is to the corrupt element of the state and not their constituents.