Oklahoma has been assessing the state’s business incentive programs on a regular schedule since 2016. State legislators and officials from state agencies, especially the Department of Commerce, have taken the lead to use findings and recommendations from the Incentive Evaluation Commission to make changes that contain costs and improve outcomes for Oklahoma. As a result of their efforts, more than a dozen statutory changes have passed to improve incentive program performance.
Not all of the Commission’s recommendations have been implemented. Nor have all the program changes been a result of the evaluations. Nevertheless, the evaluation process has provided the legislature and state agencies useful data and information as they consider how to modify incentives to better serve Oklahoma.
Statutory changes to Oklahoma business incentive programs since 2016 include:
- Five-Year Ad Valorem Tax Exemption – Clarified the definitions of qualifying construction costs and payroll
- Governor’s Quick Action Closing Fund – Added an average annualized wage requirement in order for projects to qualify; allowed monies to be used for high impact productions under the Film Enhancement Rebate Program; provided a regular funding mechanism; and established a sunset date
- Affordable Housing Tax Credit – Eliminated the population restrictions for qualified projects and reduced the carry forward period
- Oklahoma Aerospace Engineer Tax Credits – Sunset date extended
- Oklahoma Quality Events Program – Eliminated the economic impact requirement and designated the Oklahoma Tax Commission as a single point of contract for applicants. Reinstated the economic impact requirement in 2021 and extended the sunset date.
- Oklahoma Local Development and Enterprise Zone Incentive Leverage Act – Extended the sunset date; modified data used to calculate the maximum investment amount; and established reporting requirements for evaluation purposes
- Tax Credit for Electricity Generated by Zero Emission Facilities – $500,000 cap put in place for electricity generated by non-wind sources; required qualifying wind facilities to be in place not later than July 1, 2017; created carry forward and refundability terms; and established a sunset date
- Clean Burning Fuel Vehicle Credit – $20 million program cap put in place; amended the motor vehicle and infrastructure components of the credit; and extended the sunset date
- Coal Production Incentives – $5 million program cap put in place; allowed unused tax credits to be carried forward
- Small Business Incubators Tax Exemption – Eliminated the requirement that small business tenants make 75% of sales outside of Oklahoma and eliminated the exemption for sponsors
- Aircraft Tax Exemptions – Modified the definition of qualifying aircraft
- Repealed or allowed to sunset the Quality Jobs Investment Program, Economically At-Risk Lease Tax Rebate, Production Enhancement Tax Rebate, and Re-established Production Tax Rebate programs
Several additional bills were considered during the 2021 legislative session but did not pass. A proposal to consolidate, simplify and modernize Oklahoma’s Quality Jobs incentives passed both the House and Senate, but did not make it out of the conference committee. A bill to modify Incentive Evaluation Commission member terms and provide more flexibility to determine when individual incentive programs are evaluated did not advance. The legislature did not approve language to enable the Oklahoma Tax Commission to share aggregated data with the Incentive Evaluation Commission for the purpose of evaluating incentives.
The Incentive Evaluation Act of 2015 established the Oklahoma Incentive Evaluation Commission to produce objective evaluations of the State of Oklahoma’s economic incentives. The Act requires the Commission to conduct evaluations of all qualified state incentives over a four-year timeframe. The Commission has contracted with PFM Group Consulting to conduct the evaluations, which are now in their sixth year and second four-year cycle. Smart Incentives has been a project advisor since 2020.
The statutory changes are notable, and the evaluations have also been the catalyst to changes in the way departments administer the programs. For example, the evaluation of the state’s film credit identified process improvements related to incentive reporting, and the Oklahoma Film and Music Office revised its processes and increased its project reporting.