1| STATE OF OKLAHOMA |
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2| 2nd Session of the 58th Legislature (2022) |
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3|CONFERENCE COMMITTEE SUBSTITUTE |
|FOR ENGROSSED |
4|SENATE BILL 590 By: Montgomery of the Senate |
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5| and |
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6| Martinez of the House |
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7| |
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8| |
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9| CONFERENCE COMMITTEE SUBSTITUTE |
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10| An Act relating to digital asset mining; creating the |
| Commercial Digital Asset Mining Act of 2022; stating |
11| intent; defining terms; providing sales tax exemption |
| for the sale of certain equipment and machinery; |
12| amending 68 O.S. 2021, Section 2357.4, which relates |
| to income tax credit for certain investments; |
13| providing credit for investment in certain |
| facilities; updating statutory language; limiting |
14| credit used to offset tax for certain entities; |
| providing for codification; and providing an |
15| effective date. |
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16| |
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17|BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA: |
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18| SECTION 1. NEW LAW A new section of law to be codified |
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19|in the Oklahoma Statutes as Section 1359.3 of Title 68, unless there |
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20|is created a duplication in numbering, reads as follows: |
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21| This act shall be known and may be cited as the "Commercial |
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22|Digital Asset Mining Act of 2022". |
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23| |
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1| SECTION 2. NEW LAW A new section of law to be codified |
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2|in the Oklahoma Statutes as Section 1359.4 of Title 68, unless there |
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3|is created a duplication in numbering, reads as follows: |
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4| It is the intent of the Legislature that: |
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5| 1. This state provide appropriate incentives to attract |
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6|investments and jobs in innovative technological industries and |
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7|sectors to this state; |
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8| 2. Blockchain technology is innovative technology that may be |
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9|utilized in multiple industries to secure data and reduce fraud; |
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10| 3. Access to cost-effective energy is critical in the use of |
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11|blockchain technology, particularly in the commercial mining of |
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12|digital assets which requires large amounts of energy; and |
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13| 4. The original intent of the Legislature that the Oklahoma Tax |
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14|Code recognize the continuing development of new and advanced |
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15|manufacturing and industrial processing technologies has led to new |
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16|manufacturing processes. Blockchain technology used in the |
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17|commercial mining of digital assets is a manufacturing process that |
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18|should be taxed in a manner similar to historical forms of |
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19|manufacturing or industrial processing in order to encourage the |
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20|location and expansion of such operations in this state rather than |
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21|in competing states. |
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22| SECTION 3. NEW LAW A new section of law to be codified |
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23|in the Oklahoma Statutes as Section 1359.5 of Title 68, unless there |
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24|is created a duplication in numbering, reads as follows: |
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Req. No. 3885 Page 2
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1| A. 1. "Blockchain technology" means shared or distributed data |
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2|structures or digital ledgers governed by consensus protocols and |
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3|maintained by peer-to-peer networks that: |
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4| a. store digital transactions, and |
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5| b. verify and secure transactions cryptographically; |
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6| 2. "Colocation facility" means a facility or facilities, |
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7|totaling not less than fifty thousand (50,000) square feet, located |
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8|in this state and utilized in the commercial mining of digital |
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9|assets or in hosting persons engaged in the commercial mining of |
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10|digital assets through utilization of the facility's infrastructure |
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11|including servers and network hardware powered by Internet |
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12|bandwidth, electricity, and other services generally required for |
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13|mining operations; |
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14| 3. "Commercial mining of digital assets" means the process |
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15|through which blockchain technology is used to mine digital assets |
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16|at a colocation facility; |
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17| 4. "Digital assets" means a type of virtual currency that |
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18|utilizes blockchain technology and that: |
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19| a. can be digitally traded between users, or |
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20| b. can be converted or exchanged for legal tender; |
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21| 5. "Mine" means the process through which blockchain |
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22|transactions are verified and accepted by adding the transactions to |
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23|a blockchain ledger, which involves solving complex and mathematical |
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Req. No. 3885 Page 3
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1|cryptographic problems associated with a block containing |
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2|transaction data; and |
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3| 6. "Small colocation facility" means a facility or facilities, |
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4|totaling not less than five thousand (5,000) square feet but less |
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5|than fifty thousand (50,000) square feet, located in this state and |
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6|utilized in the commercial mining of digital assets or in hosting |
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7|persons engaged in the commercial mining of digital assets through |
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8|utilization of the facility's infrastructure including servers and |
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9|network hardware powered by Internet bandwidth, electricity, and |
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10|other services generally required for mining operations. |
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11| B. Beginning on the effective date of this act and ending on |
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12|December 31, 2037, the sale of machinery and equipment including but |
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13|not limited to servers and computers, racks, power distribution |
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14|units, cabling, switchgear, transformers, substations, software, |
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15|network equipment, and electricity used for commercial mining of |
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16|digital assets in a colocation facility shall be exempt from the tax |
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17|imposed by Section 1350 et seq. of Title 68 of the Oklahoma |
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18|Statutes. |
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19| SECTION 4. AMENDATORY 68 O.S. 2021, Section 2357.4, is |
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20|amended to read as follows: |
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21| Section 2357.4. A. Except as otherwise provided in subsection |
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22|F of Section 3658 of this title and in subsections J and K of this |
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23|section, for taxable years beginning after December 31, 1987, there |
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24| |
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1|shall be allowed a credit against the tax imposed by Section 2355 of |
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2|this title for: |
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3| 1. Investment in qualified depreciable property placed in |
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4|service during those years for use in a manufacturing operation, as |
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5|defined in Section 1352 of this title, which has received a |
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6|manufacturer exemption permit pursuant to the provisions of Section |
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7|1359.2 of this title or, a qualified aircraft maintenance or |
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8|manufacturing facility in this state as defined in Section 1357 of |
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9|this title in this state or, a qualified web search portal as |
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10|defined in Section 1357 of this title, or, for tax year 2022 and |
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11|subsequent tax years, for use in a colocation facility and small |
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12|colocation facility as defined in Section 3 of this act; or |
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13| 2. A net increase in the number of full-time-equivalent |
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14|employees in a manufacturing operation, as defined in Section 1352 |
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15|of this title, which has received a manufacturer exemption permit |
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16|pursuant to the provisions of Section 1359.2 of this title or, a |
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17|qualified aircraft maintenance or manufacturing facility defined in |
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18|Section 1357 of this title in this state or, in a qualified web |
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19|search portal as defined in Section 1357 of this title, or, for tax |
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20|year 2022 and subsequent tax years, in a colocation facility and |
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21|small colocation facility as defined in Section 3 of this act |
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22|including employees engaged in support services. |
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23| B. Except as otherwise provided in subsection F of Section 3658 |
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24|of this title and in subsections J and K of this section, for |
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1|taxable years beginning after December 31, 1998, there shall be |
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2|allowed a credit against the tax imposed by Section 2355 of this |
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3|title for: |
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4| 1. Investment in qualified depreciable property with a total |
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5|cost equal to or greater than Forty Million Dollars ($40,000,000.00) |
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6|within three (3) years from the date of initial qualifying |
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7|expenditure and placed in service in this state during those years |
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8|for use in the manufacture of products described by any Industry |
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9|Number contained in Division D of Part I of the Standard Industrial |
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10|Classification (SIC) Manual, latest revision; or |
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11| 2. A net increase in the number of full-time-equivalent |
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12|employees in this state engaged in the manufacture of any goods |
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13|identified by any Industry Number contained in Division D of Part I |
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14|of the Standard Industrial Classification (SIC) Manual, latest |
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15|revision, if the total cost of qualified depreciable property placed |
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16|in service by the business entity within the state equals or exceeds |
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17|Forty Million Dollars ($40,000,000.00) within three (3) years from |
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18|the date of initial qualifying expenditure. |
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19| C. The business entity may claim the credit authorized by |
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20|subsection B of this section for expenditures incurred or for a net |
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21|increase in the number of full-time-equivalent employees after the |
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22|business entity provides proof satisfactory to the Oklahoma Tax |
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23|Commission that the conditions imposed pursuant to paragraph 1 or |
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24|paragraph 2 of subsection B of this section have been satisfied. |
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1| D. If a business entity fails to expend the amount required by |
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2|paragraph 1 or paragraph 2 of subsection B of this section within |
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3|the time required, the business entity may not claim the credit |
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4|authorized by subsection B of this section but shall be allowed to |
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5|claim a credit pursuant to subsection A of this section if the |
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6|requirements of subsection A of this section are met with respect to |
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7|the investment in qualified depreciable property or net increase in |
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8|the number of full-time-equivalent employees. |
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9| E. The credit provided for in subsection A of this section, if |
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10|based upon investment in qualified depreciable property, shall not |
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11|be allowed unless the investment in qualified depreciable property |
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12|is at least Fifty Thousand Dollars ($50,000.00). The credit |
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13|provided for in subsection A or B of this section shall not be |
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14|allowed if the applicable investment is the direct cause of a |
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15|decrease in the number of full-time-equivalent employees. Qualified |
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16|property shall be limited to machinery, fixtures, equipment, |
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17|buildings, or substantial improvements thereto, placed in service in |
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18|this state during the taxable year. The taxable years for which the |
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19|credit may be allowed if based upon investment in qualified |
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20|depreciable property shall be measured from the year in which the |
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21|qualified property is placed in service. If the credit provided for |
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22|in subsection A or B of this section is calculated on the basis of |
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23|the cost of the qualified property, the credit shall be allowed in |
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24|each of the four (4) subsequent years. If the qualified property on |
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1|which a credit has previously been allowed is acquired from a |
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2|related party, the date such the property is placed in service by |
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3|the transferor shall be considered to be the date such the property |
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4|is placed in service by the transferee, for purposes of determining |
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5|the aggregate number of years for which credit may be allowed. |
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6| F. The credit provided for in subsection A or B of this |
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7|section, if based upon an increase in the number of |
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8|full-time-equivalent employees, shall be allowed in each of the four |
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9|(4) subsequent years only if the level of new employees is |
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10|maintained in the subsequent year. In calculating the credit by the |
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11|number of new employees, only those employees whose paid wages or |
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12|salary were at least Seven Thousand Dollars ($7,000.00) during each |
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13|year the credit is claimed shall be included in the calculation. |
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14|Provided, that the first year a credit is claimed for a new |
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15|employee, such the employee may be included in the calculation |
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16|notwithstanding paid wages of less than Seven Thousand Dollars |
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17|($7,000.00) if the employee was hired in the last three quarters of |
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18|the tax year, has wages or salary which will result in annual paid |
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19|wages in excess of Seven Thousand Dollars ($7,000.00) and the |
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20|taxpayer submits an affidavit stating that the employee's position |
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21|will be retained in the following tax year and will result in the |
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22|payment of wages in excess of Seven Thousand Dollars ($7,000.00). |
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23|The number of new employees shall be determined by comparing the |
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24|monthly average number of full-time employees subject to Oklahoma |
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1|income tax withholding for the final quarter of the taxable year |
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2|with the corresponding period of the prior taxable year, as |
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3|substantiated by such reports as may be required by the Tax |
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4|Commission. |
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5| G. The credit allowed by subsection A of this section shall be |
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6|the greater amount of either: |
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7| 1. One percent (1%) of the cost of the qualified property in |
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8|the year the property is placed in service; or |
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9| 2. Five Hundred Dollars ($500.00) for each new employee. No |
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10|credit shall be allowed in any taxable year for a net increase in |
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11|the number of full-time-equivalent employees if such the increase is |
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12|a result of an investment in qualified depreciable property for |
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13|which an income tax credit has been allowed as authorized by this |
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14|section. |
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15| H. The credit allowed by subsection B of this section shall be |
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16|the greater amount of either: |
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17| 1. Two percent (2%) of the cost of the qualified property in |
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18|the year the property is placed in service; or |
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19| 2. One Thousand Dollars ($1,000.00) for each new employee. |
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20| No credit shall be allowed in any taxable year for a net |
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21|increase in the number of full-time-equivalent employees if such |
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22|increase is a result of an investment in qualified depreciable |
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23|property for which an income tax credit has been allowed as |
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24|authorized by this section. |
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1| I. Except as provided by subsection G of Section 3658 of this |
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2|title, any credits allowed but not used in any taxable year may be |
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3|carried over in order as follows: |
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4| 1. To each of the four (4) years following the year of |
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5|qualification; |
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6| 2. To the extent not used in those years in order to each of |
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7|the fifteen (15) years following the initial five-year period; |
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8| 3. If a C corporation that otherwise qualified for the credits |
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9|under subsection A of this section subsequently changes its |
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10|operating status to that of a pass-through entity which is being |
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11|treated as the same entity for federal tax purposes, the credits |
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12|will continue to be available as if the pass-through entity had |
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13|originally qualified for the credits subject to the limitations of |
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14|this section; |
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15| 4. To the extent not used in paragraphs 1 and 2 of this |
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16|subsection, such credits from qualified depreciable property placed |
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17|in service on or after January 1, 2000, may be utilized in any |
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18|subsequent tax years after the initial twenty-year period; and |
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19| 5. Provided, for tax years beginning on or after January 1, |
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20|2016, and ending on or before December 31, 2018, the amount of |
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21|credits available as an offset in a taxable year shall be limited to |
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22|the percentage calculated by the Tax Commission pursuant to the |
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23|provisions of subsection L of this section. |
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1| J. No credit otherwise authorized by the provisions of this |
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2|section may be claimed for any event, transaction, investment, |
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3|expenditure, or other act occurring on or after July 1, 2010, for |
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4|which the credit would otherwise be allowable until the provisions |
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5|of this subsection shall cease to be operative on July 1, 2012. |
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6|Beginning July 1, 2012, the credit authorized by this section may be |
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7|claimed for any event, transaction, investment, expenditure, or |
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8|other act occurring on or after July 1, 2010, according to the |
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9|provisions of this section; provided, credits accrued during the |
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10|period from July 1, 2010, through June 30, 2012, shall be limited to |
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11|a period of two (2) taxable years. The credit shall be limited in |
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12|each taxable year to fifty percent (50%) of the total amount of the |
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13|accrued credit. Any tax credits which accrue during the period of |
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14|July 1, 2010, through June 30, 2012, may not be claimed for any |
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15|period prior to the taxable year beginning January 1, 2012. No |
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16|credits which accrue during the period of July 1, 2010, through June |
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17|30, 2012, may be used to file an amended tax return for any taxable |
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18|year prior to the taxable year beginning January 1, 2012. |
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19| K. Beginning January 1, 2017, except with respect to tax |
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20|credits allowed from investment or job creation occurring prior to |
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21|January 1, 2017, the credits authorized by this section shall not be |
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22|allowed for investment or job creation in electric power generation |
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23|by means of wind as described by the North American Industry |
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24|Classification System, No. 221119. |
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1| L. For tax years beginning on or after January 1, 2016, and |
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2|ending on or before December 31, 2018, the total amount of credits |
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3|authorized by this section used to offset tax shall be adjusted |
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4|annually to limit the annual amount of credits to Twenty-five |
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5|Million Dollars ($25,000,000.00). The Tax Commission shall annually |
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6|calculate and publish a percentage by which the credits authorized |
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7|by this section shall be reduced so the total amount of credits used |
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8|to offset tax does not exceed Twenty-five Million Dollars |
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9|($25,000,000.00) per year. The formula to be used for the |
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10|percentage adjustment shall be Twenty-five Million Dollars |
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11|($25,000,000.00) divided by the credits used to offset tax in the |
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12|second preceding year. |
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13| M. Pursuant to subsection L of this section, in the event the |
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14|total tax credits authorized by this section exceed Twenty-five |
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15|Million Dollars ($25,000,000.00) in any calendar year, the Tax |
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16|Commission shall permit any excess over Twenty-five Million Dollars |
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17|($25,000,000.00) but shall factor such excess into the percentage |
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18|adjustment formula for subsequent years. |
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19| N. For tax year 2022 and subsequent tax years, the total amount |
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20|of credits authorized pursuant to this section used to offset tax |
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21|shall be limited annually not to exceed Five Million Dollars |
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22|($5,000,000.00) for a small colocation facility and Ten Million |
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23|Dollars ($10,000,000.00) for a colocation facility. Any credits |
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24|authorized but not used in a tax year as provided by the limitations |
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1|in this subsection may be carried over as provided in subsection I |
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2|of this section. |
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3| SECTION 5. This act shall become effective November 1, 2022. |
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5| 58-2-3885 QD 5/19/2022 6:31:47 AM |
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