Oklahoma Direct Financial Incentives 2010
Oklahoma's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the Oklahoma Capital Investment Board, Oklahoma Technology Commercialization Center (OTCC), and the Oklahoma Industrial Finance Authority (OIFA).
This program provides quarterly cash payments to a qualifying company of a percentage, not to exceed five percent, of newly created gross taxable payroll. The company must enter into a contract with the Oklahoma Department of Commerce before it may receive any payments based on salaries of any new direct jobs. Payments are made quarterly for three years and if thresholds are achieved, they may extend for an additional seven years. A qualified company must achieve a $2.5 million annualized payroll for the new full-time employees for any four consecutive quarters during its first 12 quarters in the program. If this payroll amount is not achieved payments cease.
The payments received do not have to be paid back. All businesses must offer basic health insurance coverage to all employees whose pay is included in the payroll figures for qualification. Employees must be allowed access to the coverage within 180 days of employment. Eighty percent of employees whose pay is included in the new payroll must work at least 30 hours per week. New legislation introduced in 2003 set certain minimum average wage requirements based on an average county wage. Currently, wage requirements do not exceed $28,878 in any county regardless of average wage. The wage amounts, including the maximum wage, are adjusted annually. The minimum wage requirements do not apply to Opportunity Zones as designated by the Oklahoma Department of Commerce.
Under certain circumstances, leased employees may be included in payroll calculations. Payments for most businesses will be in the range of four percent of payroll. In certain designated depressed areas, a five percent net benefit rate automatically applies. The percentage is most strongly affected by average weighted salary of new jobs.
A lower annualized payroll threshold of $1.5 million may apply to some additional applicants including food processors with 75 percent out-of-state sales; firms performing research, development, and testing services; auxiliary research and development labs of large enterprises; and firms that locate on certain former military bases.
A lower threshold of $1 million annualized payroll is available to businesses that produce new direct jobs to the state that are equal to or greater than one percent of the total labor force of the county in which located. These high impact projects can be located in over a third of Oklahoma counties. The payments, which are set at 2.5 percent of new qualified payroll, may extend for up to six years, not 10 as in the original program.
No payroll threshold applies to those locating on at least 10 acres that is also a Superfund renewal site or listed on the National Priorities List. Sites may still qualify if not on the list, if they have been formally deferred to the state or if they are being remediated pursuant to a clean-up plan approved by the Department of Environmental Quality. The Department of Environmental Quality notifies the Department of Commerce of the qualifying areas. Certain income tax credits, sales tax refunds, and low-cost loan programs may not be used by companies enrolled in the cash payments programs.
Small Employer Quality Jobs Program:
This program provides annual cash payments to a qualifying company. The payments may be for as much as five percent of new taxable payroll, for up to seven years. Qualifying payroll must be attributable to annual salaries that are at least 110 percent to 125 percent of the average wage of the county in which the jobs are located.
Generally companies locating in metropolitan counties will not qualify unless they locate in specified areas according to census data. Life Science Research and Development Companies and Testing Laboratories may locate anywhere and still qualify. Health premiums paid by the company may be added to the base salaries to determine the total compensation for the average wage amount. Basic health insurance must be offered to new employees within 12 months, and at least 50 percent of the cost must be paid by employer. At least five, and possibly as many as 15, new employees must be added in the first 12 months after the contract start date.
Companies in the basic industries of R&D, Testing Labs and some Computer/Data Processing related services have 36 months to add the required amount of new jobs. Companies must be a basic industry as listed in the Quality Jobs Program, except companies engaged in mining of oil and gas may not participate. All qualified businesses must make at least 75 percent of annual sales to out-of-state customers, to in-state customers if resold to an out-of-state consumer, or to the federal government. Life Science Research and Development Companies and Testing Laboratories are exempt from this requirement.
Distribution centers for a larger operation are required to distribute 40 percent of their inventory out-of-state. Qualified companies may not have had more than 90 existing employees for the 12 months prior to the time of application.? ?Companies that have received incentive payments under any other state Quality Jobs Program may not participate in this program. Companies benefiting from the Rural Economic Development Loan Act may not access this program. Companies contracting for this program are also prohibited from taking the investment/new jobs income tax credit, construction sales tax refunds, and other tax benefits. The Oklahoma Department of Commerce determines eligibility.
Industrial development bonds:
Local governments are authorized to establish trusts and authorities to issue industrial development bonds for facilities in order to stimulate economic development. Interest rates are negotiated between the purchaser of the bonds, the user of the facility financed, and any guarantors. Bond terms are usually limited to 30 years.
The Oklahoma Development Finance Authority, a statewide trust, may also perform this function. It has a credit enhancement tool backed by the full faith and credit of the state.
Direct state loans:
The Oklahoma Industrial Finance Authority (OIFA) has the total lending capacity of $90 million. It makes loans to industrial development agencies for financing manufacturing and processing firms, recreation facilities, agricultural processing and mine resource-processing firms, and industrial parks. The loans can apply to 66 2/3 percent of the cost of land and buildings on a secured first mortgage and 33 1/3 percent on a second mortgage. The maximum loan amounts are $5 million (first mortgage position) and $1 million (second mortgage position).
Oklahoma communities may offer special financing programs, including sales tax financing, tax-increment financing and build-to-suit programs. Communities are also empowered to abate local taxes under certain conditions.
Customized industrial training:
The Oklahoma Department of Career and Technology Education administers the Training for Industry Program (TIP) to provide training to meet the needs of new firms locating in the state or firms expanding their operations. The program pays costs associated with such training.
Both pre-employment and on-the-job training are available. Training may take place in a company facility, vocational school or community college, or leased facility. There is no commitment by the company to hire trainees, nor are trainees required to accept job offers after completion of training.
Local vocational schools may offer training to upgrade worker skills.
The Technology Extension Program is a creation of the Oklahoma Alliance for Manufacturing Excellence, a private nonprofit organization to coordinate the development of a statewide "industrial extension" system to deliver modernization services to small and medium-sized manufacturing firms.
The Oklahoma Center for Science and Technology is authorized to provide grants, loans and investments in technology-related businesses. A statewide Bid Assistance Network helps companies compete for federal government contracts.
The Oklahoma Technology Commercialization Center (OTCC) is operated under the auspices of a state agency, the Oklahoma Center for the Advancement of Science and Technology (OCAST). The OTCC is a not-for-profit corporation that contracts with OCAST to assist Oklahoma companies or individuals that are in the process of commercializing new technology. Besides the Oklahoma City location, the OTCC also has offices in Norman, Stillwater, Tulsa and Lawton.
Former Indian lands tax incentive: The Taxpayer Relief Act of 1997 clarifies qualifying areas of the state that constitute former Indian reservation land as determined by the federal Secretary of the Interior. More than two-thirds of all land in Oklahoma meet the definition and qualify for the accelerated depreciation of real and personal property (capital goods, equipment, etc.) that are currently in place or will be located in the former Indian lands during the relevant tax years.
The incentive provides a shorter recovery of approximately 40 percent for most nonresidential depreciable property placed in service during the calendar years 1994 to 2009. The federal tax deferral can substantially increase the after-tax income of a business.
Since Oklahoma business taxable income is based on federal taxable income, the depreciation benefits will automatically apply for Oklahoma tax purposes. A federal income tax credit is also available for businesses located on former Indian lands and employing American Indians. The amount of the credit is based on increased wages paid to enrolled tribal members and their spouses during the 1994 to 2009 time period, compared to the wages paid in 1993. An annual tax credit of up to $4,000 for each such qualified employee is available. Congressional legislation to extend this program through December 31, 2010 has passed the House and is in a Senate Finance Committee.
Other financing programs:
The Oklahoma Capital Investment Board is empowered to commit or guarantee up to $100 million in privately managed venture capital. The board may fund up to 50 percent of qualified investment portfolios.
Oklahoma State Contact:
Oklahoma Department of Commerce
900 N. Stiles
P.O. Box 26980
Oklahoma City, OK 73126-0980
(405) 815-5148 or (800) 588-5959
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.