Lawmakers, governor move to close tax loophole 
Capitol Spotlight for weeklies for week of April 2, 2006
By Jim Campbell
OPA Capitol News Bureau

Stop the looting before it breaks the bank, but don't scrap tools vital to rural Oklahoma's economic health.
So a House committee was told repeatedly during consideration of Senate Bill 1693, aimed at closing a loophole in economic development incentive programs that cost the state treasury $66 million, maybe much more, last year alone. 
"This incentive is the only tool I've got to recruit industry," said retired Air Force Col. E. Gene Redmon, director of military and economic development for the City of Altus.
The problem was that tax accountants and attorneys have found a way for wealthy clients to use borrowed money to manipulate that tool.
The House Revenue and Taxation Committee advanced the bill to an early vote and Gov. Brad Henry stepped in with an executive order that places a barrier in the path of potential profiteers.
"The incentive programs were designed to create new jobs in Oklahoma, not to reward individuals who operate an accounting shell game to claim inflated tax credits," Henry said. "Every day that passes potentially costs the state and Oklahoma taxpayers millions of dollars."
Sen. Ted Fisher, D-Sapulpa, author of the original legislation, wrote the current bill to enact a moratorium until June 1 on tax credits granted under the Small Business Capital Formation Incentive Act and the Rural Venture Capital Formation Act. Rep. Odilia Dank, R-Oklahoma City, is House author.
Some speakers before the committee, however, said the moratorium might harm projects currently under way to attract industry.
"Suspending the program for a period of time during which we can sort out what's wheat and what's the chaff I think is certainly appropriate," said Rep. Kevin Calvey, R-Del City, committee chairman.  "The question is coming up with a solution that solves whatever problems there are without killing rural development in Oklahoma."
The programs give a tax credit of up to 20 percent of investments in small businesses and up to 30 percent of investments in rural firms. Despite a prohibition against using borrowed money to generate the tax credit, some have figured how to set up affiliated capital companies and channel the borrowed money through them.
 Rep. John Nance, R-Bethany, was outraged that names of people gaming the system for taxpayers' money are protected tax confidentiality.
"It seems incredible to me," he said.
***
Tax incentive programs were among a number of rural issues at stake as the Legislature reached the halfway point of the 2006 session.
Rural firefighters got $8.9 million when Henry signed SB 1190, ending weeks of partisan friction over aid to departments tapped out by months of fighting wildfires.
And the Rural Economic Development Initiative (REDI) program sparked an exchange between Republicans and Democrats over dedication to rural Oklahoma.
An economic task force that included two Democratic House members called on the Democratic controlled Senate to hear 18 REDI bills passed by the House. The centerpiece is House Bill 3126, the "Come Home Oklahoma Act," granting a five-year income tax exemption to families moving from out-of-state to rural areas of Oklahoma that have lost population.
"I am worried that Senate Democrats are about to turn their backs on rural Oklahoma," said House Speaker Todd Hiett, R-Kellyville.
Rep. Dale DeWitt, R-Braman, said Senate refusal to hear the measures would "set back rural Oklahoma for years to come."
Senate President Pro Tempore Mike Morgan, D-Stillwater, replied, "We understand House leaders need to change the subject, but trying to distort the record is wrong."
He said Senate Democrats continue to be strongest supporters of rural people and business owners. He said each of the bills would be considered on its merit.
Sen. Susan Paddack, D-Ada, and Rep. Wes Hilliard, D-Sulphur, urged passage of SB 1587. It would modify the Quality Jobs Act by providing protection to communities and giving incentives to companies that want to set up in an area hit by a negative economic event, such as the tornado that destroyed the Stroud Outlet Mall.
***
House Democratic Leader Jari Askins of Duncan said House Republicans' approval of a standstill $6.039 billion General Appropriations bill "comes nowhere close to meeting the myriad needs we have right now in Oklahoma."
Rep. Debbie Blackburn, D-Oklahoma City, said the needs include additional funds for the Corrections Department, matching funds to attract federal Medicaid dollars and funds for training nurses to meet the growing demand.
House Appropriations Chairman Chris Benge, R-Tulsa, said the GA was a first step, and would keep government operation in case of a stalemate in House-Senate negotiations.
Senate Appropriations Chairman Johnnie Crutchfield, D-Ardmore, indicated the Senate would have none of the standstill budget. He suggested senators "not plan anything for June" when they might have to hold a special session.