Rep. David Dank, an Oklahoma City Republican, is serving as chairman of the Oklahoma Task Force for the Study of State Tax Credits and Economic Incentives.
This summer and fall, Dank has conducted hearings on tax credits for business and industry before lawmakers, state officer holders and other interested parties. The purpose has been to determine whether the tax credits, exemptions, abatements and other policies in question are still considered necessary and useful to Oklahoma as well as Oklahoma taxpayers.
Dank has stressed frequently that even the detailed hearings he is guiding will only look intently at some two dozen (more or less) programs that effect state coffers by some $500 million or less. In an interview broadcast Sunday on OETA, Dank noted that although the task force is not focused on tax credits and exemptions beyond the business programs, fresh scrutiny is being paid even to broader impacts.
While most attention in recent months has focused on the high-impact programs that benefit larger business interests, what many do not know is there are $1 billion to $2 billion in tax credits and exemptions which benefit individual taxpayers as well as small businesses, and those who invest in small businesses.
The credits or “expenditures” (as they are termed in state finance parlance) range from volunteer firefighters, charitable contributions, standard tax deductions, to earned income credits, capital gains exemptions, and those who are married, and to blind people and others.
What follow is a list of many of these credits and exemptions as well as now much each credit or exemptions benefited the taxpayer.
Editor’s Disclaimer: Information provided here is in no way meant to supersede the advice of a tax professional.
Working with Oklahoma Tax Commission data for the 2009-2010 tax year, these estimates are based upon information from actual tax returns and secondary data sources. Each estimate has a different level of reliability based upon the accuracy of both the data and the estimation procedure.
Different categories of broad interest are as follows:
Sales Tax Relief
Citation: 68 O.S. §5011 Description: a sales tax credit for Oklahomans with income of $20,000 or less for individuals or those with $50,000 or less with a dependent. Or, if the taxpayer are at least 65 years old and have a substantial handicap affecting their ability to work. Estimate: $43.2 million. Number of returns: 520,746.
Low Income Property Tax Relief
Citation: 68 O.S. §2907 Description: A tax credit for an Oklahoma, head of household taxpayer at least 65 years old or totally disabled, with a gross income of $12,000 or less. The credit is based on the property tax that exceeds 1% of the household income. It is capped at $200.00. Estimate: $226,000.00. Claimed on 1,402 tax returns
Oklahoma Earned Income Tax Credit
Citation: 68 O.S. §2357.43 Description: Allows an Oklahoma Earned Income Tax Credit equal to 5% of the federal Earned Income Tax Credit. Estimate: $31.8 million. Claimed on 307,253 returns
Taxes Paid to another State
Citation: 68 O.S. §2357 Description: Nonrefundable credit for taxes paid to another state by Oklahomans upon personal services compensation. Estimate: $33.9 million. Returns: 87,000.00
Child Care / Child Tax Credit
Citation: 68 O.S. §2357 Description: An income tax credit for child care expenses 20% of the federal child care credit. Starting in 2008, taxpayers could elect to take the greater of the child care credit or 5% of the federal child tax credit. In both cases, federal adjusted gross income cannot exceed $100,000.00 Estimate: $28.9 million. Claimed on 362,470 returns.
Small Business Guaranty Fee
Citation: 68 O.S. §2357.3 Description: A nonrefundable income tax credit for Oklahoma small businesses for guaranty fees paid for obtaining Small Business Administration loans. Estimate: $227,000. Claimed on 154 returns
Credit for Manufacturers of Advanced Small Wind Turbines
Citation: 68 O.S. §2357.32B Description: A credit for Oklahoma manufacturers of advanced small wind turbine products, including rotor blades and alternators. The credit is based on the square footage of rotor-swept area of advanced small wind turbines manufactured in this state. Estimate: $775,000.00. Claimed on 59 returns
Credit for Donations to Biomedical Research Foundations
Citation: 68 O.S. §2357.45 Description: A nonrefundable income tax credit for donations to a qualified independent biomedical research institute. The credit is 50% of the amount donated, not to exceed $1,000.00. Estimate: $364,000.00. Claimed on ,321 returns
Venture Capital
Citation: 68 O.S. §2357.7 Description: Tax credit of 20% of the amount of investments made in qualified venture capital companies. Estimate: $12.2 million. Claimed on 41 returns
Investment in Qualified Small Business Capital Companies and Small Business Ventures
Citation: 68 O.S. §2357.62 and §2357.63 Description: An income tax credit for investments in qualified small business capital companies based on twenty percent 20% of the qualified investment in the capital company. Estimate: $11 million. Claimed on 286 returns
Investment in Rural Venture Capital Companies and Rural Small Business Ventures
Citation: 68 O.S. §2357.73 and §2357.74 Description: An income tax credit for investments in a qualified rural small business capital company based on thirty percent 30% of the qualified investment in the company. Estimate: $37.4 million. Claimed on: 711 returns
Poultry Litter Tax Credit
Citation: 68 O.S. §2357.100 Description: An income tax credit of Five Dollars ($5.00) per ton of poultry litter purchased from a registered Oklahoma-based poultry operation. Estimate: $173,000.00. Claimed on 111 returns
Specially Trained Canine Credit
Citation: 68 O.S. §2357.203 Description: An income tax credit of 50% of the qualified direct costs associated with a business which specially trains dogs. Estimate: $129,000.00. Claimed on 21 returns
Volunteer Firefighter Credit
Citation: 68 O.S. §2358.7 Description: A $200 income tax credit for a volunteer firefighter who has completed at least 12 hours toward the Volunteer Firefighter Practices program offered by the OSU Fire Service Training. Additionally, there is subsequently a $400 tax credit annually for volunteer firefighters who complete at least 30 hours of instruction to meet additional training requirements. Estimate: $418,000.00 . Claimed on 1,719 returns
Editors Note: Oklahoma allows deductions and exemptions to taxpayers in computing Oklahoma taxable income under certain conditions. The amount of deduction or exemption varies by type.Exemptions generally refer to a personal allowance or specific monetary exemption which maybe claimed by an individual to reduce Oklahoma taxable income. A tax deduction is a reduction of a taxpayer’s total income that decreases the amount of taxable income used in calculating the income tax.
Oil and Gas Depletion Allowance
Citation: 68 O.S. §2353 Description: An income tax deduction for individual investors in certain oil and gas enterprises. Estimate: $15.6 million. Claimed on 89,898 returns
Taxpayers with Physical Disabilities
Citation: 68 O.S. §2358 Description: Individual Oklahoma resident taxpayers with physical disabilities may deduct some expenses related to modifying vehicles, homes or workplaces to compensate for their handicaps. Estimate: $40,000. Claimed on 447 returns
Adoption Expenses
Citation: 68 O.S. §2358 Description: One-time adoption expenses of a minor may be deducted from Oklahoma adjusted gross income. The deduction is limited $20,000.00 a year. Estimate: $187 million. Claimed on: 752 returns
Oklahoma College Savings Plan Act
Citation: 68 O.S. §2358 Description: Deduction of up to $10,000.00 for contributions Oklahoma College Savings Plan account for each individual taxpayer or $20,000.00 for taxpayers filing a joint return. Estimate: $2.8 million. Claimed on 10,362 returns
Members of the Armed Services
Citation: 68 O.S. §2358 Description: The first $1,500.00 of compensation received by an individual from any component of the Armed Services may be deducted from taxable income. This
does not include retirement benefits. Also exempts salary and compensation Armed Services members detained by the enemy in a conflict, while a prisoner of war or if missing in action. Estimate: $1.3 million. Claimed on 19,298 returns
Itemized/Standard Deductions
Citation: 68 O.S. §2358 Description: Individual taxpayers may either itemize their deductions or claim an Oklahoma standard deduction. If using itemized deductions, those will be the same as claimed for federal income tax purposes. Taxpayers utilizing the standard deductions are entitled to an Oklahoma standard deduction of $6,500.00 if filing as married filing joint; $4,875.00 if filing as head of household and $3,250.00 if filing as single or married filing separate for tax year. Estimate: $733 million. Claimed on 1.61 million returns
Oklahoma Source Capital Gain Deduction
Citation: 68 O.S. §2358 Description: Taxpayers may deduct certain qualifying capital gains included in federal adjusted gross income or federal taxable income. The qualifying gain must be earned on real or tangible personal property located within Oklahoma; be earned on the sale of stock or ownership interest in an Oklahoma-based business; or be earned on the sale of real property, tangible or intangible personal property in Oklahoma as part of the sale of all or substantially all of the of an Oklahoma –based company. Estimate: $76.6 million. Claimed on 14,381 returns
Personal Exemption
Citation: 68 O.S. §2358 Description: A personal exemption of $1,000.00 in lieu of the federal personal exemption is allowed in calculating Oklahoma taxable income for an individual taxpayer. Estimate: $137 million. Claimed on 1.5 million returns
Blind Individuals
Citation: 68 O.S. §2358 Description: An income tax exemption of $1,000.00 for each individual taxpayer or spouse who is blind at the close of the tax year. Estimate: $143,000.00. Claimed on 4,705 returns
Political Contributions
Citation: 68 O.S. §2358.3 Description: Contributions to a political party or to a candidate or candidate committee may be deducted from adjusted gross income. The deduction can’t exceed $100.00. Estimate: $188,000.00. Claimed on 27,511 returns
Seniors 65 or Older
Citation: 68 O.S. §2358 Description: An income exemption of $1,000.00 for individual taxpayer or spouse who is 65 or older. Income limitations apply. Estimate: $651,000.00. Claimed on 72,506 returns
Government Retirement Benefits
Citation: 68 O.S. §2358 Description: Exemption for the first $10,000.00 of most Oklahoma and federal government retirement benefits which are included in federal adjusted gross income. Estimate $35.5 million. Claimed on 84,699 returns
Social Security Benefits
Citation: 68 O.S. §2358 Description: Exemption for all Social Security benefits to the extent the Social Security benefits are included in federal adjusted gross income. Estimate $88.8 million. Claimed on 160,029 returns
Military Retirement Benefits
Citation: 68 O.S. §2358 Description: An income tax exemption for military retirees, either 75% of their retirement benefits or $10,000, but may not exceed the amount included in the federal adjusted gross income. Estimate: $15.1 million. Claimed on 25,178 returns
Private Retirement Benefits
Citation: 68 O.S. §2358 Description: Exemption of no more than $10,000.00) of the amount included in the federal adjusted gross income. The exemption is limited to taxpayers who meet certain income and filing status requirements. Estimate: $30.4 million. Claimed on 120,877 returns
Dividend/Interest Income Exclusion
Citation: 68 O.S. §2358 Description: Dividend/Interest income exclusion to individual taxpayers of $100.00 for an individual filer or $200 for joint filers. Estimate: $2.1 million. Claimed on 420,376 returns
Net Operating Losses
Citation: 68 O.S. §2358 Description: Oklahoma net operating losses can be used to offset another year’s taxable income, carried forward or carried back for losses between 1996 and 2001. (Losses may be carried forward or backward, depending on the year.) Estimate: $15.4 million. Claimed on 13,405 returns (individual income tax returns only)
Note: Editor Patrick B. McGuigan contributed to this report.
