If voters agree, intangible assets will not face new ad valorem taxation
Published: May 25th, 2012
Quietly, one of the most significant achievements of the 2012 legislative session –- which largely left the state’s spending, tax and policy priorities undisturbed –- is passage of affirmative protections for businesses against what might have been draconian new property taxes.
Ultimately, voters will decide whether or not to prevent “intangible property” from becoming subject to taxation. The measure got to the ballot as result of this week’s final House passage of Senate Joint Resolution 52. The measure cleared the House easily, 65-29, on Thursday.
When he was still in the Senate as President Pro Temp, Secretary of State Glenn Coffee worked to establish a framework for discussion and eventual resolution of thorny issues of “intangible property” taxation.
With worth that began in 2010, a task force of legislators and private citizens laid out a framework to reverse or limit the effect of a controversial judicial decision allowing taxation of “intangible” assets such as trademarks, copyrights, membership, clients lists, good name and reputation.
It required nearly three years of methodical work to get the proposal ready for the 2012 general election ballot.
In the end, it did not hurt that voices as diverse as Michael Carnuccio of the Oklahoma Council of Public Affairs and David Blatt of the Oklahoma Policy Institute agreed in this instance.
At a task force hearing last fall, Carnuccio argued intangible property should remain exempt from ad valorem taxes. The conservative “think tank” executive pointed out that no surrounding states tax intangible personal property and, in fact (according to the Tax Foundation) only ten states do so. Carnuccio said allowing such taxation to take effect would put Oklahoma “at a significant disadvantage” for business location decisions, and lead many companies to relocate out of the state.
Carnuccio echoed other analysts in arguing that “the volatile, subjective and constantly changing nature” of such taxation would make it difficult to administer. Such taxes penalize and stifle research, innovation, development and capital generation, he said.
OCPA is the state’s leading free market research organization, with a mission to promote policy ideas “consistent with the principles of free enterprize, limited government, and individual initiative.”
Blatt, at the same hearing, did not argue against intangible taxation per se, but said expansion of the tax on locally-assessed entities might trigger major tax hikes and make assessment more difficult. He agreed the best outcome would be a state constitutional amendment to restore “the status quo ante,” i.e. to limit intangible property taxation to centrally-assessed entities.
Yesterday (May 24), in comments sent to CapitolBeatOK, Fred Morgan of the State Chamber said “This is a complicated subject and I would like to thank our state lawmakers for taking the time to study the issue and come up with a solution that prevents the largest tax increase on Oklahoma businesses in state history.
“This legislation will help keep capital and investment in our Oklahoma businesses, allowing them to grow and create more jobs. It is now critical that we work to educate all Oklahomans on the importance of this change to ensure it is approved by the voters in November.”
Roots of the current discussion among the policy groups and across the broad spectrum of thought in the Legislature can be traced directly to the 2009-10 Legislature, and a hugely controversial state Supreme Court decision in the S.W. Bell case.
The September 2009 High Court ruling concluded that only items specifically listed in Article 10, Section 6A of the state Constitution are exempt from “intangible” property tax levies.
Without a measure buying time for study of the issue, passed in 2010, legal analysts agreed the “intangible” levy could have become quite tangible, indeed: allowing taxation of things such as trademarks, copyrights, membership and client lists.
Then-Pro Tem Glenn Coffee crafted the original short-term fix that bought time needed to craft the constitutional proposal. Now, as secretary of state, he will oversee the measure’s submission to the statewide ballot.