Oklahoma Incentives and Tax Guide for Fiscal Year 2014 For further information, please contact: Oklahoma’s Fast Forward Team E-mail: [email protected] Phone: (800) 588-5959 www.OKcommerce.gov/incentives www.OKcommerce.gov/fastforward 0 Table of Contents Welcome and Disclaimer 2 Economic development & Infrastructure Funding 3 Cash Rebate Programs 5 Quality Jobs Average County Wage Table 7 Small Employer Quality Jobs average County Wage Table 11 21st Century Quality Jobs Average County Wage: 2013 Table 14 Tax Exemptions 16 Tax Credits 18 Income Tax Credits and Exemptions for Investors 21 Income Tax Credits and Exemptions for Entrepreneurs 22 Worker Related Tax Credits 23 Sales Tax Exemptions and Refunds 24 Sales Tax Refunds 26 Transportation and Distribution Benefits 28 Tourism and Film Incentives 31 Major Finance Programs 32 Technology Finance Assistance 36 Investment Programs 38 Workforce Assistance 39 Employee Training Opportunities 40 Business Filing Costs 42 Business Taxes and Premiums 44 Appendix 49 Overview 57 Enterprise Zones 64 Key Business Contacts and Oklahoma State Resources 67 1 Oklahoma Business Incentives and Tax Guide for Fiscal Year 2014 Welcome to the Oklahoma Business Incentives and Tax Guide for Fiscal Year 2014.The rules, legislation and appropriations related to taxes and incentives are very dynamic, and as changes occur, this Tax Guide will be updated to reflect the changes for the Fiscal Year of 2014. Please refer to this on-line guide to get the most current information. The key changes from the previous year’s Tax Guide are highlighted here in brief. This guide is up to date as of November 1st, 2013. Disclaimer: The materials contained in this document have been prepared by the Oklahoma Department of Commerce for informational purposes only and do not constitute legal or tax advice. This information is subject to change based on judicial interpretation and legislative action. The application of the information is subject to your unique facts and circumstances. YOU SHOULD NOT ACT UPON ANY INFORMATION CONTAINED IN THESE MATERIALS WITHOUT SEEKING YOUR OWN PROFESSIONAL LEGAL AND TAX ADVICE. 2 Economic Development & Infrastructure Funding The Oklahoma Opportunity Fund (62 O.S. §§ 48) The fund is to be used for economic development and related infrastructure development. The Oklahoma Department of Commerce is responsible for the administration of the Oklahoma Opportunity Fund. No new appropriations were made to the Oklahoma Opportunity Fund in the 2013 legislative session. While the fund has not been appropriated monies for last few years, the program still exists for the possibility of future appropriations. Oklahoma Quick Action Closing Fund (62 O.S. §§ 48.1 – 48.2) In the 2013 legislative session the budget agreement included appropriating $3,000,000 to the Oklahoma Quick Action Closing Fund. The fund is to be used for economic development and related infrastructure development when expenditure of funds is likely a determining factor in locating a high- impact business. This is an important job creation tool that will help Oklahoma recruit new businesses and retain existing businesses. The Oklahoma Quick Action Closing Fund can be expended by the Governor for economic development and related infrastructure development to locate or retain a high-impact business project or facility in Oklahoma. The business making an application must be engaged in a business activity that is eligible for Oklahoma Quality Jobs Program Act incentive payments (68 O.S. § 3603) or in a “basic industry” as set forth in the 21st Century Quality Jobs Incentive Act (68 O.S. § 3913). The Oklahoma Department of Commerce is responsible for the administration of the Oklahoma Quick Action Closing Fund. The application will be made available once funds are appropriated to the Oklahoma Quick Action Closing Fund by the Oklahoma Legislature. Oklahoma Community Economic Development Pooled Finance (62 .S. § 891.1 et seq.) The Oklahoma Community Economic Development Pooled Finance incentive targets job creation and infrastructure development and establishes a foundation of ensuring Oklahoma’s infrastructure is high quality for attracting and retaining jobs. This incentive is comprised of two funding pools: an Infrastructure Pool and an Economic Development Pool. Their make up is as follows: Infrastructure Pool: A $100 million infrastructure pool is for public financing to local governments issued through the Oklahoma Development Finance Authority. Bonds issued from the Infrastructure Pool are financed or repaid from taxes voted on by local community. The Infrastructure Pool revenue must be used for infrastructure development such as: County/municipal roads & bridges Water treatment facilities Solid waste management facilities Railway and utility systems Other infrastructure assets owned by local government 3 Economic Development Pool: A $100 million economic development pool for public finance to local governments in conjunction with a for-profit entity through the Oklahoma Development Finance Authority (ODFA). The Economic Development Pool shall be used for economic development projects in the state. Debt issued from the Economic Development Pool may be paid from withholdings taxes, and other revenue, at the for‐profit entity benefitted by the financing. For debt obligations issued under the Oklahoma Community Economic Development Pooled Finance Act, there is a maximum maturity of 25 years and a maximum coupon rate of 14%. Sixty‐five percent of the net proceeds from both the Infrastructure Pool and the Economic Development Pool shall be used by ODFA for municipalities that do not exceed 300,000 people. The remaining thirty‐five percent may be used by the ODFA for any eligible local government. Effective September 1, 2010 an evergreen clause permits the renewal of issuing capacity by ODFA. Effective November 1, 2013 the Economic Development funding pool and Infrastructure funding pools of the Oklahoma Community Economic Development Pooled Finance Act were combined creating a larger financing incentive that targets job creation and infrastructure development. For information contact Martin Roberts with the Oklahoma Department of Commerce at (405) 815- 5262 or [email protected]. State Small Business Credit Initiative The State of Oklahoma was awarded $13,168,350 by the U.S Treasury for the State Small Business Credit Initiative. The award will be used to make capital investment in new and expanding small businesses in Oklahoma. i2E will manage the funds on behalf of the State of Oklahoma. For more information please contact i2E at (405) 235-2305 or www.i2e.org. 4 Cash Rebate Programs The Oklahoma Quality Jobs Program (68 O.S. §§ 3601 et seq.) The Oklahoma Quality Jobs Program promotes job growth and helps improve your company’s bottom line by injecting cash back into your business as you expand and create new jobs in Oklahoma. The Quality Jobs (QJ) Program provides a cash rebate to companies that create well-paid jobs and promote economic development. Benefits: Cash payments of up to 5% of new payroll for up to 10 years. Requirements: Must meet average county wage or state threshold wage, whichever is lower (see top of chart on pg. 7). Company must achieve $2.5M new annual payroll within 3 years. Must offer basic health insurance. May be combined with Investment/New Jobs Tax Credit under certain circumstances. Up to 6% rebate if at least 10% of workforce are veterans. Legislation enacted in 2013 added the following provisions to the Quality Jobs Program. NAICS additions for Ecosystems to Quality Jobs Program The Oklahoma Department of Commerce identified five ecosystems in which the state has a competitive advantage, the jobs have relatively high wages and the industries in the ecosystems have growth potential. The NAICS additions of the industries within the Information & Financial Services, Transportation & Distribution, and Energy/Transportation & Distribution ecosystems to the Quality jobs program will help the state maintain a competitive advantage in these industries and attract and promote growth for companies that demand higher skill employment. Veterans Inclusion Many industries, particularly in aerospace and defense which are part of Oklahoma’s economic engine, pay higher than average wages and also employ a high percentage of veterans. An incentive that rewards companies for investing in a veteran labor force would increase the competitiveness of the state to attract expansion and location of new jobs. By effect, this would increase the number of jobs available for and supportive of veterans. This also provides for a higher benefit payout if payroll of new jobs is comprised of a minimum of 10% veterans’ payroll. Clawback Provision The Quality Jobs statute did not contain language that holds accountable a company that lacks good faith intent to invest in the state yet proceeds with a Quality Jobs application and contract. Including a clawback provision in the statutes could not only discourage companies with no interest in Oklahoma’s fiscal security, but also increase public and legislative trust in the Quality Jobs Program by ensuring accountability and stewardship of public resources. Waiting Period for companies Dismissed from the Quality Jobs Program Dismissal Introducing a waiting period for companies that have been dismissed from the Quality Jobs Program gives the program integrity and ensures accountability and stewardship of public resources. 5 A lower annualized payroll threshold