The Taxpayer Relief Act of 1997 clarified and made eligible over 2/3rds of Oklahoma for employment tax credits and accelerated depreciation. MidAmerica is an eligible area.

Employment Tax Credit
Companies can receive up to a $4,000 non-refundable federal tax credit at MidAmerica for certain increases in wages and health insurance costs incurred with respect to employees who are enrolled members of Indian tribes and their spouses earning less than $30,000 per year. The rules per employee detail a 3-year carry-back or a 15-year carry-forward.

Accelerated Depreciation
The depreciation incentive provides for a shorter recovery period of approximately 40% for depreciable property other than residential real property improvements. The property must be used in "active" trade or business. This federal tax deferral can substantially increase the after-tax income of businesses. The recovery periods follow:

• 3-year property, now 2 years
• 5-year property, now 3 years
• 7-year property, now 4 years
• 10-year property, now 6 years
• 15-year property, now 9 years
• 20-year property, now 12 years
• Real property (39-years), now 22 years

NOTE: The renewal of this legislation is currently under consideration by the US Congress.

Businesses must choose from the following two major Oklahoma incentive options for new or expanding industries:

Under the regular program, a company must achieve a $2.5 million taxable annual payroll for new full-time employees for any four consecutive quarters during its first 12 quarters in the program. If the payroll amount is not achieved, the company is disqualified, but is not required to pay-back previous payments. Once the threshold is achieved, a company must maintain the $2.5 million payroll for four consecutive calendar quarters. If payroll falls below the amount, the company may not receive additional incentive payments until the payroll requirement is again met.

Under special legislation, a smaller company may qualify for incentive payments at MidAmerica, if the third year payroll projections range between $1.5 million and $2.5 million. This obviously is a great incentive for small companies to locate at MidAmerica.

A payroll threshold of $1.5 million is also available for companies in SIC Code 20 (Food & Kindred Products) and for Research and Development firms whose total sales reflect 75% out-of-state sales or to purchasers who resell the product for ultimate use or consumption out-of-state to the federal government.

All companies must offer basic health insurance coverage to all employees whose pay is included in the payroll figures for qualification within 180 days of employment. Eighty percent of the employees must also work at least 30 hours per week.

Small Employer Quality Jobs Program
This program allows small qualified employers (less than 90 employees at the time of application) to receive quarterly cash payments of up to 5% of new taxable payroll for seven years. Qualifying annual payroll must be attributed to annual salaries that are at least 110% to 125% of the average county wage in which the jobs are located. New wage thresholds are published annually.

To qualify for credit, based on investment in depreciable property, requires an investment of at least $50,000 placed in service, and numbers of employees must not decrease as a result of the investment. Any credit allowed in the initial five-year period may be carried over until used by the company. Eligibility is initially determined each year by the taxpayer on the income tax return.

Because MidAmerica is a state-designated enterprise zone, tax credits are doubled. The investment tax credit becomes 2% and the new jobs tax credit becomes $1,000 per employee.

If a business wishes to take the credit based on full-time equivalent employees, each new position on which the credit is based must earn at least $7,000 per year.

Sales and use tax refunds are on purchases of data processing equipment, related peripherals and telephone or telecommunications service or equipment and for construction materials for qualifying companies.

• replacement parts and power tools which are directly used in processing
• tangible personal property used in the manufacturing process including fuel, electricity and many other materials
• tangible personal property which become part of the finished product
• interstate 1-800, WATS and private-line business telecommunications systems
• primary and secondary packaging material used in the process
• sale of containers (does not apply to returnable or reusable containers)
• aircraft and parts used at qualified aircraft maintenance facilities
• items used in treating hazardous industrial waste (approval required)
• machinery and equipment purchased and used by certain computer services and data processing companies with significant out-of-state sales

Five-Year Ad Valorem Tax Exemption
New and expanding qualifying manufacturers, research and development companies, certain computer services with significant out-of-state sales and air craft repair and certain distribution companies may be eligible.

Firms that include a building, or part of it, in the exemption must locate in a new building, expand and existing one, or locate in one that has been unoccupied for any purpose for the previous 12 months. An investment of at least $250,000 and addition of $250,000 annual payroll are threshold requirements. If a $7 million ($7,000,000) investment is made in new facilities for certain computer service companies, no new payroll is required. Direct replacement, repair or maintenance of existing machinery or equipment will not qualify. Applications for exemption must be filed with the local county assessor each year.

Exempt Property / Inventory (Freeport Law)
Goods, wares, and merchandise which come into Oklahoma from outside the state and leave within nine months where such goods, wares, and merchandise are so held for assembly, storage, manufacturing, processing or fabricating purposes, are not subject to taxation within the state.

Income Tax Credits / Exclusions
Numerous other income tax credits and exclusions which are offered by Oklahoma including:

• Technology Transfer Income Tax Exemption
• New Product Development Income Tax Exemption
• Agricultural Commodity Processing Facility Income Tax Exemption
• Clean Burning Motor Fuel
• Income Tax Credit For Computer / Data Processing / Research & Development
• Jobs Incubator Site Tenant Income Tax Exemption
• Insurance Premium Tax Credit
• Gas Usage Tax Credit For Manufacturing

Oklahoma Quality Investment Act Incentive
Oklahoma uses the Quality Investment Act Incentive to help retain manufacturing businesses and the jobs, wealth, and innovation these companies create.

The incentive is a 5-year Quality Investment Contract with the Oklahoma Department of Commerce. Incentive payments are in the form of a rebate from the Oklahoma Tax Commission for up to 10% of the capital costs incurred. All contracts are limited to a maximum annual payment of $10 million.

Eligible applicants are for-profit entities engaged in manufacturing activities within industry groups 31-33 of the NAICS Manual. Applicants must expect to incur capital costs for new retooling or modernization projected to equal or exceed $1 million within 24 months of the upgrade's start.

For details on the Quality Investment Act incentive, click here.

Workforce Training
New and expanding industries will benefit from FREE employee training provided by the Northeast Technology Centers and the Oklahoma Department of Career and Technical Training (also known as CareerTech). The training program is totally customized to fit the company needs. Please click here for more details.

Also, training programs are available for existing industries. Please click here for more details.

Advanced workforce training and development are also available from OSU-Okmulgee, a state-supported college that is now considered as one of the nation's leading technical institutions.

Want To Know More?
For a more comprehensive review of our incentive programs, please ask for the "Oklahoma Business Incentives and Tax Information Guide" publication as revisions can occur throughout the year via our Express Request email service. Or click here for the incentives guide.