OK Lawmakers Consider Court Challenge for Some Tax Credits

OKLAHOMA CITY (October 12, 2011) – In light of a recent attorney general’s opinion, lawmakers should seek Oklahoma Supreme Court rulings on many potentially unconstitutional tax credits, the chairman of the Task Force on State Tax Credits and Economic Incentives said today.

A 2010 opinion issued by the Office of the Attorney General stated that some state tax credits were not constitutional. To be legal, the opinion said tax-credit programs had to serve a public purpose, provide more benefit than cost, and include adequate controls and safeguards.

“I believe we need to ask the court to apply that three-part test to those tax credits the Attorney General determined to be constitutionally infirm,” said state Rep. David Dank, an Oklahoma City Republican who chairs the tax credit task force. “I think we need to get that process of testing these tax credits before the Supreme Court underway.”

Dank believes many state tax-credit programs fail the third test involving safeguards.

“We have reviewed enough of these tax credits so far to know that the controls and safeguards in place are often a joke,” Dank said. “In many cases, they are nonexistent.”

During today’s meeting, task force members reviewed tax incentives for the film industry.

“We all get excited when Hollywood comes to Oklahoma,” Dank said. “But we still need to ask if we are getting our money’s worth from these generous cash rebates we offer for movie production. Hollywood glamour is one thing, but we’re here first and foremost to balance the state budget with hard-earned taxpayer dollars.”

He noted that similar incentive programs across the nation appear to lack adequate controls. In Iowa, a similar program allowed film producers to subsidize the purchase of new Mercedes and Range Rover automobiles with taxpayer money while also providing filmmakers’ relatives with taxpayer-subsidized payments for work that was not clearly documented.

“I am not suggesting that we face a similar mess here in Oklahoma, but we do need to ask if these film tax credits are serving the public purpose, if they are supported by adequate consideration, and if there are adequate controls and safeguards in place,” Dank said.

The task force also reviewed the railroad modernization tax credit, which provides credits for every mile of track rebuilt or modernized, and revisited historical preservation tax credits.

“There does seem to be one common thread running through the tax credits we will be addressing today, and that is that they appear to create very few permanent or even long-term jobs,” Dank said. “Railroad construction ends when the project is finished. Filmmakers stop hiring people, and their out-of-state employees go home, when the movie is done.”

NOTE: For accompanying video, go to http://www.okhouse.tv/iViewVideo.aspx?VideoID=381