Is Your Business Entitled to a Tax Break or Credit? Can You Sell Your Credit? It is Worth Knowing.

The Daily Oklahoman has reported that Oklahomans are critical of transferability of certain tax credits available to many businesses and investors.  Citing several recent polls conducted by SoonerPoll.Com on behalf of Oklahoma Watch, the Oklahoman reports that citizens generally favor tax breaks for businesses.  75% of citizens surveyed, however, believe that Oklahoma should stop allowing businesses to sell their credits to other Oklahoma taxpayers.  These tax credits have reportedly drained the state of $88 million over the years.  

Here is how it works.  Taxpayers are offered a tax credit as an incentive to build energy efficient houses, for example.  The tax credit itself may be larger than the amount that the taxpayer owes the state in taxes.  For that reason, the taxpayer is allowed to sell its credit to another taxpayer, usually for around 80% of the credit.  Opponents urge that transferability misplaces the incentive to others and robs the state of valuable revenue, while acting as a gift to those who are allowed to sell their credit.  Proponents say that it is a valuable incentive to businesses in order to accomplish other specifically detailed legislative goals in the Oklahoma statutes.

 The credits themselves have been on moratorium since 2010, but are slated to be resurrected in July, 2012.  A legislative task force has been enacted to study the impact of these incentives.  Transferability only applies to the following credits: Coal Credit (for the purchase of coal to businesses providing water, heat, light or power from coal to citizens in Oklahoma or running a business primarily engaged in mining/extracting coal in Oklahoma); Credit for Nonstop Air Service from Oklahoma to the Coast (old investments in air transportation between Oklahoma and both coasts); Credit for Space Transportation Vehicle Provider; Credit for Qualified Rehabilitation Expenditures (rehabilitation of historical structures); Credit for Electricity Generated by Zero-Emission Facilities; Credit for Manufacturers of Small Wind Turbines; Credit for the Construction of Energy Efficient Homes (building of residential properties of 2,000 square feet or less); and Credit for Railroad Modernization.