Current through Vol. 42, No. 7, December 16, 2024
(a)
Definitions. The following words and terms, when used in this
Section shall have the following meanings unless the context clearly indicates
otherwise:
(1)
Manufacturing
facilities means manufacturing facilities as defined in 68 O.S. §
2902(B)(1).
(2)
Facility or facilities means, except as otherwise provided
by Section
2902 of Title 68 of the Oklahoma
Statutes, and includes the land, building, structures, and improvements used
directly and exclusively in the manufacturing process. Effective January 1,
2022, and for each calendar year thereafter, for establishments which have
received a manufacturer exemption permit pursuant to the provisions of Section
1359.2 of Title 68 of the Oklahoma
Statutes, or facilities engaged in manufacturing activities defined or
classified in the NAICS Manual under Industry Nos. 311111 through 339999,
inclusive, but for no other establishments, facility and facilities means and
includes the land, buildings, structures, improvements, machinery, fixtures,
equipment and other personal property used directly and exclusively in the
manufacturing process. [68 O.S. § 2902(B)(2)].
(3)
Research &
development means activities directly related to and conducted for the
purpose of discovering, enhancing, increasing or improving future or existing
products or processes or productivity. [68 O.S. §
2902(B)(3)].
(4)
Base
payroll means total payroll for the calendar year the construction,
acquisition, or expansion assets are first placed in service and the subsequent
four (4) calendar years of eligibility.
(5)
Initial payroll means
payroll for the calendar year immediately preceding the initial construction,
acquisition or expansion. In the event initial payroll is not comprised of a
complete year's payroll, the amounts reported must be computed to arrive at an
annual figure.
(6)
New direct
job means the term "new direct job" as defined in 68 O.S. § 3603,
without the requirement to qualify for incentive payments pursuant to the
Oklahoma Quality Jobs Program Act.
(b)
Qualification or statutory
requirements. To qualify for exemption facilities other than those
discussed in subsections (c) and (d) must meet the requirements mandated by
statute and summarized in (1) through (6) of this subsection:
(1) Facilities must satisfy the requirement
of being new, expanded, or acquired.
(2) The investment cost of the construction,
acquisition or expansion of the manufacturing facility must be Two Hundred
Fifty Thousand Dollars ($250,000.00) or more within the calendar year in which
the construction, acquisition or expansion occurred. The investment cost of the
construction, acquisition or expansion of the manufacturing facility must be
Five Hundred Thousand Dollars ($500,000.00) or more with respect to assets
placed into service during calendar year 2022. For subsequent calendar years,
the investment required shall be increased annually by a percentage equal to
the previous year's increase in the Consumer Price Index-All Urban Consumers
("CPI-U") and such adjusted amount shall be the required investment cost in
order to qualify for the exemption authorized by 68 O.S. § 2902. The Oklahoma
Department of Commerce shall determine the amount of the increase, if any, on
January 1 of each year. The Oklahoma Tax Commission shall publish on its
website at least annually the adjusted dollar amount in order to qualify for
the exemption and shall include the adjusted dollar amount in any of its
relevant forms or publications with respect to the exemption. Investment Cost
shall not include the cost of direct replacement, refurbishment, repair or
maintenance of existing machinery or equipment, except that "investment cost"
shall include capital expenditures for direct replacement, refurbishment,
repair or maintenance of existing machinery or equipment that qualifies for
depreciation and/or amortization pursuant to the Internal Revenue Code of 1986,
as amended, and such expenditures shall be eligible as part of an "expansion"
that otherwise qualifies under this section.
(3) Base payroll for the calendar year the
assets are placed in service must be increased over initial payroll by at least
Two Hundred Fifty Thousand Dollars ($250,000.00) if the facility is located in
a county with a population of less than seventy-five thousand (75,000) persons
according to the most recent federal decennial census or by at least One
Million Dollars ($1,000,000.00) if the facility is located in a county with a
population of seventy-five thousand (75,000) or more, according to the most
recent federal decennial census. For the subsequent four years of eligibility,
base payroll must be maintained in an amount equal to, or greater than, the
base payroll amount established for the calendar year the assets are first
placed in service.
(A) To determine initial
and base payroll, the Tax Commission must verify all payroll information
through the Oklahoma Employment Security Commission (OESC) utilizing reports
filed with the OESC for the applicable calendar years. [See: 68
O.S. § 2902(C)(4)].
(B) The amount
of increased payroll shall include payroll for full-time-equivalent employees
in this state who are employed by an entity other than the facility which has
qualified to receive an exemption pursuant to the provisions of this Section
and who are leased or otherwise provided to the facility, if such employment
did not exist in this state prior to the start of initial construction or
expansion of the facility.
(C) A
manufacturing facility shall have the option of excluding certain components
from its payroll. Manufacturing facilities electing to exclude either of the
options in (i) or (ii) of this subparagraph, shall document the election by an
attached addendum to the application at time of filing which states in detail
any payroll exclusions. (
See: 68 O.S. § 2902(C)(4)
(i) Payments to sole proprietors, members of
partnerships, members of a limited liability company who own at least ten
percent (10%) of the capital of the limited liability company, or stockholder
employees of a corporation who own at least ten percent (10%) of the stock in
the corporation may be excluded from payroll.
(ii) Nonrecurring bonuses, exercise of stock
option or stock rights, or other nonrecurring, extraordinary items included in
total payroll numbers as reported by the OESC may be excluded from payroll.
Nonrecurring bonuses shall not include additional wages or other compensation
paid on the basis of length of service.
(D) A manufacturing concern which does not
meet the amount of increased payroll shall submit to the Tax Commission, with
the initial application year of exemption, an affidavit, signed by an officer.
The signed affidavit must state that from the start of initial construction,
acquisition, or expansion, to the completion of said construction, acquisition,
or expansion, or for three (3) years, whichever occurs first, the establishment
or expansion of the facility will result in a net increase of the required base
payroll. When the increased payroll requirement is met, the affidavit will be
considered satisfied and no longer in effect.
(4) The facility will offer within one
hundred eighty (180) days of the date of employment, a basic health benefit
plan to the full-time employees of the facility. [See: 68 O.S. §
2902(C)(4)(b)] Calculation of the number of employees shall be made in the same
manner as required pursuant to 68 O.S. § 2357.4 for an investment tax
credit.
(5) Entities shall be
subject to the wage requirements of the Oklahoma Quality Jobs Program Act with
respect to new direct jobs. If an entity making application for the exemption
set forth in this Section adds workers as new direct jobs at the manufacturing
facility, the entity must pay those new direct jobs an average annualized wage
which equals or exceeds the average wage by county required by the Oklahoma
Quality Jobs Program Act, up to the maximum state threshold wage, for the year
in which the real or personal property was placed into service.
(A) On each exemption application for a group
of assets, the entity shall provide a list or schedule of new direct jobs by
job title and annual salary. For subsequent calendar years, the list or
schedule shall include new direct jobs added that year and those new direct
jobs that have been maintained from previous years within the five-year
exemption period.
(B) Each year,
the list of new direct jobs added or maintained at the manufacturing facility
will be tracked to determine if the total new direct jobs meet the average
annualized wage requirement for the year the assets were placed into
service.
(C) The three-year
affidavit referenced above in (b)(3)(D) of this Section does not apply to the
new direct jobs wage requirements set forth in the Oklahoma Quality Jobs
Program Act.
(6) A
manufacturing facility requesting an exemption must hold title to real or
personal property or have an equity interest in real or personal
property.
(c)
Distribution facilities; qualification requirements. For
applications received after November 1, 2007, establishments primarily engaged
in distribution as defined under industry Numbers 49311, 49312, 49313 and 49319
and Industry Sector Number 42 of the NAICS Manual latest revision, must meet
all criteria required by statute and outlined in (4), (5) and (6) of subsection
(b) and the following paragraphs:
(1) Initial
capital investment of at least Five Million Dollars ($5,000,000.00);
(2) Employment of at least one hundred (100)
full-time-equivalent employees, as certified by OESC;
(3) Wages and salaries which equal or exceed
the average wage requirements in the Oklahoma Quality Jobs Program Act for the
year in which the real property was placed into service; and
(4) Commencement of construction on or after
November 1, 2007, to be completed within three (3) years from the date of
commencement of construction. [See: 68 O.S. §
2902(B)(1)(e)].
(d)
Computer data processing, data preparation or information processing
services provider; exemptions and qualification requirements. Computer
data processing, data preparation or information processing services providers
classified in U.S. Industry Number 518210 of the North American Industrial
Classification System (NAICS) Manual, 2017 revision, are eligible for exemption
as outlined below:
(1)
Real and personal
property exemption. Except as otherwise provided by this subsection, any
new, acquired, or expanded computer data processing, data preparation, or
information processing services provider as described in subsection (d) of this
Section may apply for real and personal exemptions under 68 O.S. § 2902 for
each year in which new, acquired, or expanded capital improvements to the
facility are made for assets placed in service not later than December 31,
2021.
(2)
Personal property
exemption. An establishment described by this subsection, the primary
business activity of which is outlined in Industry No. 518210 of the NAICS
Manual, 2017 revision, that has applied for and been granted an exemption for
personal property at any time within five (5) years prior to November 1, 2021,
may apply for exemption for items of eligible personal property to be located
within improvements to real property and such real property and improvements
having been exempt from ad valorem taxation prior to November 1, 2021 pursuant
to 68 O.S. § 2902 if such personal property is placed in service not later than
December 31, 2036. No additional personal property of such establishment placed
in service after such date shall qualify for the exempt treatment otherwise
authorized pursuant to this paragraph.
(3)
Exemption qualification
requirements. To qualify for exemption outlined in paragraphs (1) and
(2) of this subsection, an eligible establishment as classified under this
subsection must meet the following requirements:
(A) Net increase in annualized payroll of the
applicant at any facility or facilities of the applicant in this state of at
least Two Hundred Fifty Thousand Dollars ($250,000.00), which is attributable
to the capital improvements, or
(B)
Net increase of Seven Million Dollars ($7,000,000.00) or more in capital
improvements, while maintaining or increasing payroll at the facility or
facilities in this state which are included in the application, and
(C) The facility offers, or will offer within
one hundred eighty (180) days of the date of employment of new employees
attributable to the capital improvements, a basic health benefits plan to the
full-time-equivalent employees of the facility, which is determined by the
Department of Commerce to consist of the elements specified in subparagraph b
of paragraph 1 of subsection A of Section 3603 of this title or elements
substantially equivalent thereto.
(D) The wage requirements of the Oklahoma
Quality Jobs Program Act with respect to new direct jobs as set forth in
paragraph (b)(5) of this Section.
(e)
Wind electric generation facility;
exclusion as manufacturing facility. Effective January 1, 2017, an
entity engaged in the generation of electric power by means of wind, as
described in the North American Industry Classification System No. 221119,
shall not be defined as a qualifying manufacturing concern for purposes of the
exemption authorized pursuant to Section 6B of Article X of the Oklahoma
Constitution or qualify as a manufacturing facility as defined in this Section.
While facilities which qualified for exemption pursuant to the filing of an
exemption application before 2018 will be allowed to claim the exemption for
any periods remaining in the five (5) years provided all qualification
requirements are met, no initial application for exemption shall be filed by or
accepted from an entity engaged in electric power generation by means of wind
on or after January 1, 2018.
(f)
Review of facility eligibility. To confirm eligibility, the Tax
Commission may request any information from the applicant or require
verification of any information as needed. Failure to produce or allow
inspection of all information requested within thirty (30) calendar days of
written notification may result in denial of the exemption
application.
(g)
Requirements
for acquired existing facility. An acquired existing facility must be
unoccupied for a period of twelve (12) months prior to acquisition for initial
qualification. [See: Art. 10, Section 6B, Okla. Const. and 68 O.S.
§ 2902(A)].
(h)
Transfer of
exemption. If the ownership of a qualified facility currently enrolled
in the exemption program changes during the five-year exemption period, the
exemption shall continue in effect for the balance of the five-year period, so
long as all other qualifications are maintained.
Added at 24 Ok Reg 2343,
eff 6-25-07; Amended at 25 Ok Reg 2029, eff 7-1-08; Amended at 27 Ok Reg 2272,
eff 7-11-10; Amended at 29 Ok Reg 516, eff
5-11-12
