A high stakes battle is being waged in the state Capitol over a bill that would kill a wind industry subsidy that currently is costing Oklahoma taxpayers about $70 million a year.
The Oklahoma House voted 51-46 Wednesday to kill the refundable aspect of the zero emissions tax credit. Senate Bill 888 is now awaiting further action in the Senate.
Mockingly referred to as “corporate welfare” and a “scam” by some Oklahoma House members, the zero-emissions tax credit already is scheduled to be phased out over the next 10 years.
That’s not soon enough for some state lawmakers, who want it to end with the tax year that begins Jan. 1, 2019.
“It’s time we stopped being a sugar daddy for wind,” said state Rep. Bobby Cleveland, R-Lexington.
Cleveland was among several lawmakers who cited projections that the incentive could cost the state treasury between $500 million and $750 million before the 10 years is up. They contend that money could better be spent on education and other core services.
State Rep. Leslie Osborn, R-Mustang, said she didn’t like the way the tax credit was structured, but warned her fellow lawmaker that ending the tax credit early would only lead to costly litigation.
“They’ve said they will litigate – they’ve done it in other states and they will win,” Osborn said.
Osborn said she remembers when Oklahoma went back on an incentive offered to bring General Motors to the state. General Motors ended up leaving, taking thousands of jobs with it, she said.
State Rep. Meloyde Blancett, D-Tulsa, said prematurely ending the refundable aspect of the subsidy would hurt economic development in the state, because business prospects would view it as going back on a commitment.
“Why would any business ever consider Oklahoma as a place they might find to be a friendly place to relocate or grow,” Blancett questioned.
“This is as anti-business as it gets,” complained Mark Yates, a spokesman for the Oklahoma wind industry.
Tax credit incentive
The zero-emissions tax credit initially was approved by the Democrat-controlled 2001 Legislature as an incentive to attract the then-fledgling wind and solar energy industries to locate in Oklahoma.
Republican former Gov. Frank Keating, who signed the bill into law, has since said that decision was a “mistake.”
The tax credit was touted to lawmakers as an incentive that would cost the state less than $2 million a year, he said in a 2017 column in the Tulsa World. Because of the tremendous growth of Oklahoma’s wind industry, it is now annually costing the state more than 35 times that amount.
“Because the tax credits weren’t limited or capped, the zero emissions tax credit has warped into a scam costing taxpayers millions to the detriment of other publicly funded services,” Keating said in his column.
“In 2014, the credits became directly refundable, meaning the state writes wind companies checks for 85 percent of the value of each credit,” he said. “That’s essentially a blank check funded by taxpayers that goes to multibillion-dollar corporations based outside of Oklahoma and mostly located in foreign countries. It’s the worst kind of corporate handout.”
Keating said he was “shocked and dismayed” that taxpayer money has been spent so recklessly.
Senate Bill 888
Senate Bill 888 would not abolish zero emission tax credits, but would make them no longer refundable.
That means wind companies could still use the income tax credits to offset taxes they might owe. However, once that tax liability goes down to zero, they would no longer be able to turn the remaining tax credits back to the Tax Commission and receive 85 cents on the dollar from the state treasury.
Wind companies, like many corporations, receive other tax breaks, so they often have little, if any, income tax liability that needs to be offset.
Records obtained from the Oklahoma Tax Commission show that of the $73,930,707 zero emissions tax credits issued in 2016, only $3,638,692 was used to offset any tax liability. So more than $70 million in revenue from other taxpayers was used to make direct subsidy payments to qualifying companies.
A new proposal surfaced in the Legislature Friday that might make ending the refundable feature of the zero emission tax credits somewhat more palatable to companies that have invested in Oklahoma wind farms.
That proposal – House Bill 3716 – is similar to SB 888 in that it would end the refundable feature of zero emissions tax credits. However, it would extend to 20 years the amount of time companies would be given to use those credits to offset income tax liabilities.
That bill was approved Friday by the House and Senate Joint Committees on Appropriations.
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