OKLAHOMA CITY – The Oklahoma House and Senate passed measures which will create a fair and balanced system to evaluate tax credits and their impact on economic growth.
Speaker of the House Jeffrey W. Hickman, R-Fairview, introduced the legislation on February 2, the first day of the 2015 session. He signed authorship of House Bill 2182 and Senate Bill 806 over to the late Rep. David Dank on April 15.
Dank, an Oklahoma City legislator who passed away recently, was chairman of the House Revenue and Taxation Committee and had been laying the groundwork for tax credit reform since his election in 2006.
House Bill 2182, authored by Dank, R-Oklahoma City, creates the Incentive Evaluation Commission which will review current and future tax credits, report on their level of success and make recommendations on future policy. Currently, the annual price tag for tax credits, exemptions and incentives is roughly $1.7 billion.
While tax credits are often described as an essential part of creating a pro-business environment, there are no methods in place at this time to determine if a credit is spurring economic growth or simply keeping industries alive that would otherwise fail on their own.
Dank and Hickman worked together on changes to H.B. 2182 before it was voted on in the House.
In a message to Hickman a few weeks ago, Dank said:
“Mr. Speaker, thank you for sharing those changes with me. Feel free to tell anyone and everyone that I support your bill and think it will result in the type of reviews that are necessary to examine these hundreds of millions of dollars in credits, rebates and incentives. Not that I carry any weight, but some members know that I have been working on these for woe these many years. Thanks, again, to you, and others who are assisting you in this important matter.”
The Incentive Evaluation Commission called for in H.B. 2182, would be an eight-member commission including an accountant appointed by the Oklahoma Accountancy Board, the president of the Oklahoma Economic Development Council, an auditor from a private auditing firm appointed by the Governor, an economist appointed by the President Pro Tempore of the Senate, and a lay person appointed by the Speaker of the House. The chairman of the Oklahoma Tax Commission, the director of the Office of Management and Enterprise Services and the Oklahoma Secretary of Commerce will act as nonvoting members.
No member will be an elected official or be employed by or have substantial interest in a company that receives an incentive. The commission will ensure each tax credit is evaluated every four years by an independent auditor and scored on criteria specific to its purpose, starting with those that have the greatest fiscal impact to the state budget.
“Tax credits are a useful tool that can spark economic growth, but they must also be looked at as an investment of taxpayers’ money” Speaker Hickman said.
“Much like a family invests their money, it’s time for the Legislature to begin looking at our current investments and making judgments, based on reliable evidence, to determine which incentives are fulfilling economic goals and bringing back positive returns.”
On final consideration, the Dank-Hickman bill garnered unanimous support in the state Senate, and sailed through the House with 90 affirmative votes.
The House also voted in favor of Senate Bill 806 by Dank which ensures that tax incentives introduced in the future will state a clear measurable goal. The intention is that this will allow the Legislature and the Incentive Evaluation Commission to have a more transparent means to evaluate the merits of a proposed credit.
“This package of legislation finally sets us on a course to have a true cost-benefit analysis of tax credits and incentives in Oklahoma, something that should have been in place for decades before a penny of taxpayer money was given as an incentive,” said Hickman.
“I was honored to present these bills on behalf of Rep. Dank and am grateful for his friendship as well as his legacy that will continue to have a positive impact on our state for many future generations.”
Both H.B. 2182 and S.B. 806 now go to the desk of Gov. Mary Fallin.
NOTE:Editor Pat McGuigan contributed to this report