2002-2003 Business Incentives & Tax Information Guide

2002-2003 Business Incentives & Tax Information Guide

INTRODUCTION

Oklahomans know that in business, the more flexibility in the business environment, the more business can respond to its needs in order to remain profitable and to increase profitability. That is why they voted overwhelmingly to pass Right-to-Work, which amends Oklahoma's Constitution. The measure is prospective and applies to future extensions of existing and new contracts.

Oklahoma knows that in business, the less it costs, the more you keep.

Based upon a combination of the costs of labor, energy, taxes and office space, Economy.com (2002) ranked Oklahoma as the third lowest cost of doing business state in the country. And, there are plenty of rewarding reasons listed in this tax and incentive guide that reinforce that ranking. Oklahoma's reduced tax rates and lower overall tax structure mean that businesses like yours will pay less and keep more.

In addition, according to the most recent Congressional Quarterly's CQ State Fact Finder, Oklahoma is ranked third lowest in property taxes per capita, and eighth-lowest in corporate income taxes per capita. Moreover, Expansion Management Magazine (Jan. 02) named Oklahoma City fourth in its 2002 America's Hottest Cities for manufacturing expansions and relocations issue. Tulsa ranked #26 and Lawton was #47. Tulsa was also named one of the top cities for entrepreneurs according to Entrepreneur Magazine (2002).

Oklahomans themselves are also reaping the benefits - as the state reported the third-highest percentage gain in per capita personal income growth in 2001 - growing at a rate of 4.8%. (Site Selection 7/02). So it comes as no surprise that now more than ever, businesses are taking a closer look at Oklahoma.

Oklahoma knows your business is driven by profit and bottom line results. Within this guide, you'll find not only low rates, but also a myriad of incentives to help you achieve your best bottom line. At the Office of Business Location, we are here to help you reduce your costs, increase your business and boost your profitability. Make no mistake - we want your business in Oklahoma. And once you've examined all the facts, crunched all the numbers and made all your comparisons, we think you will want your business in Oklahoma, too.

Oklahoma's Office of Business Location
The Office of Business Location, Oklahoma Department of Commerce, provides comprehensive site location assistance to companies considering new investment in Oklahoma. This confidential service is designed to provide you with the optimum location solution. While the location decision is often a difficult and lengthy procedure, our professional staff can streamline this process by tailoring each consulting assignment to your specific needs. We work closely with you at every turn - from initial site identification to project start-up and beyond - providing important services such as:

Site and Building Identification - The office maintains an extensive, up-to-date database of hundreds of available sites and facilities statewide. Check our website for the latest information, http://www.locateok.com/.

Labor Analysis - Comprehensive labor market plus wage data. Several labor surveys are currently available on the website.

Training Assistance - Customized training program provided at no cost to qualifying companies. A training specialist is on staff to assist you.

Tax Incentives and Abatements - Confidential analysis of all state and local incentives and abatements applicable to your project. Our tax specialist is here to find answers to all your questions.

One-Stop Coordination - Cooperative team approach simplifies the entire process by providing single-source coordination with other state agencies and local communities relative to your project and timelines. Reduced red tape means your project is on-time and within budget.

Comparative Cost Analysis - The office makes it easy to show comprehensive cost differentials between an Oklahoma location and other target sites, providing cost comparisons in critical areas such as transportation, taxes, utilities, labor rates and cost of living. Our research department has the latest U.S. data available, saving you time and effort.

Financial Resources - Identification of potential state and local finance sources.

Site Familiarization Tours - We provide specific information and escorted transportation to communities and sites that meet your requirements.

No matter how simple or extensive your site selection needs may be, no one knows more about Oklahoma's properties, profitability or potential than the Office of Business Location.

No idea is too small or too big for the experts at the Office of Business Location.

BUSINESS INCENTIVES

Introduction
Services of the Oklahoma Department of Commerce

I. TAX INCENTIVES OVERVIEW

Tax Incentives Pro Forma Overview

II. MAJOR TAX & FINANCIAL INCENTIVES - COMPREHENSIVE

A. Incentive Payments Programs

1. The Oklahoma Quality Jobs Program
2. Small Employer Quality Jobs Incentive Act
3. Oklahoma Film Act
4. Partial Unemployment Benefits Program

B. Ad Valorem Tax Exemptions

1. State Decision
2. Exempt Inventory
3. Aircraft Manufacturers in Lieu Payment
4. Local Incentive

C. Sales Tax Exemptions

1. Manufacturers
2. Computer Services and Data Processing
3. Aircraft Maintenance Facilities
4. Excise Tax Credit on Aircraft Sales
5. Telecommunications
6. Spaceport

D. Sales and Use Tax Refunds

1. Computer Services / Data Processing / Telecommunications Equipment
2. Construction Materials

E. Sales Tax Credits
1. Sales/Income Tax Credit for Tourism Attraction Projects

F. Income Tax Credits/Exclusions

1. The Investment/New Jobs Credit
2. Technology Transfer Income Tax Exemption
3. New Product Development Income Tax Exemption
4. Agricultural Commodity Processing Facility Income Tax Exemption
5. Income Tax Credit for Investment in Oklahoma Producer-Owned Agricultural Processing
6. Income Tax Credit for Computer / Data Processing/Research & Development Jobs
7. Insurance Premium Tax Credit
8. Rural Small Business Capital Formation Tax Credit
9. Small Business Capital Formation Tax Credit
10. Alternative Energy Sources Credits
11. Incubator Site Tenant Tax Exemption

12. Gas Usage Tax Credit for Manufacturing
13. Recycling, Reuse and Source Reduction Incentive Act
14. Small Business Administration (SBA) Guarantee Fee Tax Credit
15. Tax Credit for Banks Participation in the Oklahoma Rural Economic Development Loan Program
16. Income Tax Exemption for Interest Paid on Bonds Issued By or On Behalf of Public Agencies
17. Commercial Space Industry Credit
18. Historic Rehabilitation Tax Credit
19. Tax Incentives on Former Indian Reservation Lands
20. The Work Opportunity Tax Credit Program (WOTC)
21. The Welfare-to-Work Tax Credit (WtW)
22. Empowerment Zone Incentives

G. Employee Training

1. Training for Industry Program (TIP)
2. Advanced Degree Programs
3. Labor Surveys and Job Match
4. Workforce Investment Act

H. Enterprise Zones

1. Oklahoma Local Development and Enterprise Zone Incentive Leverage Act
2. Designated Enterprise Zones – FY '00
3. Enterprise Zones Within Counties
4. Enterprise Zones Within City Limits (Entire City)
5. Enterprise Zones Within City Limits (Portions of City)

I. Transportation & Distribution

1. Industrial Access Roads
2. Foreign-Trade Zones
3. Truck Registration Benefits

J. Finance Assistance

1. Oklahoma Finance Authorities
2. Technology Partnerships
3. The Oklahoma Technology Commercialization Center (OTCC)
4. Basic and Applied Research and Technology Programs
5. Oklahoma Institute of Technology
6. Small Business Linked Deposit Program
7. Rural Economic Development Loan Program
8. Public Trust Financing: IRBs
9. General Obligation Limited Tax Bonds (GOLTBs)
10. Tax Increment Financing (TIF)
11. Sales Tax Financing
12. Private Activity Bond Allocation
13. Oklahoma Capital Investment Board
14. The Oklahoma Capital Access Program
15. Community Development Block Grants (CDBG)
16. Oklahoma Export Finance Program
17. Small Business Loan Guarantees
18. Quality Jobs Investment Program
19. Empowerment Zone Facility Bonds

III. BUSINESS COSTS IN OKLAHOMA

A. General Overview

1. Balanced State Budget

B. Oklahoma Business Organizational Costs

1. Domestic Corporations
2. Foreign Corporations
3. Limited Liability Companies (LLCs)
4. Limited Liability Partnerships (LLPs)
5. Business License Information Office

C. Major Business Taxes and Premiums

Overview of Oklahoma Tax System
1. State Income Tax
2. General Property (Ad Valorem) Tax
3. Unemployment Compensation Tax
4. Annual Corporate Franchise Tax
5. Workers' Compensation Insurance
6. Retail Sales and Use Tax

IV. APPENDICES

A. Corporate Income Tax Overview

1. A Brief Overview
2. Three Factor Formula
3. Oklahoma Tax Formula
4. Corporate Tax Example

B. Corporate Income / Sales Tax Rates

(State by State)

C. Right-to-Work Constitutional Provision

D. Key Business Contacts

SERVICES OF THE DEPARTMENT OF COMMERCE

The Oklahoma Department of Commerce is the lead agency for economic development in the state. The department's mission is to stimulate the creation, expansion and retention of jobs and growth of investment in Oklahoma. In addition to the Office of Business Location, the Commerce Department offers three other lines of service: Office of Business Development, Office of Community Development and Office of International Trade.

OFFICE OF BUSINESS DEVELOPMENT

The Office of Business Development, Oklahoma Department of Commerce, provides assistance to entrepreneurial and established businesses in Oklahoma through a variety of programs.

The Regional Economic Development Directors are the first point of contact for Oklahoma businesses and communities and are dedicated to their region's economic growth by strategically planning for the future.

The Business Services Team provides technical assistance to new and established businesses through the Oklahoma Business License Information Office, Minority Business Development Program, Export Financing Assistance and certification programs for Business Incubators, Women-Owned Businesses and Industrial Parks.

The Information Management Team collects and analyzes economic and business data and statistics to assist businesses and communities in their growth plans. Resources include the Oklahoma State Data Center, labor surveys, building sites and more.

OFFICE OF COMMUNITY DEVELOPMENT
The Office of Community Development, Oklahoma Department of Commerce, provides technical assistance to meet communities' infrastructure needs, invests federal and state resources, stimulates enduring job-creating investments and integrates human development initiatives to provide Oklahomans the opportunity for growth and development. The resources of the Office of Community Development include but are not limited to:

Community and Economic Development Programs

Infrastructure Grant Loans

Human Development Programs

Century Communities (Certified Cities)

Capital Improvement Planning

Energy Conservation Programs

Oklahoma Main Street Center (Office is a separate operating division within the Commerce Department).

OFFICE OF INTERNATIONAL TRADE AND INVESTMENT

The Office of International Trade and Investment, Oklahoma Department of Commerce, provides confidential reliable site location assistance for the international business community, assists Oklahoma companies seeking new international markets by providing guidance, technical assistance, market research, export training and promotes Oklahoma products at trade shows throughout the world. Their mission is to expand global awareness of the state through the following programs:

International Trade Offices

The Oklahoma Export Assistance Center

The Oklahoma Sister State and Sister Cities Program

Foreign Investment Recruitment

Japan External Trade Office (JETRO)

I. TAX INCENTIVES PRO FORMA OVERVIEW

Major Oklahoma Benefits

The chart below is a brief view of incentives pertinent to businesses locating or expanding in Oklahoma. For manufacturers and certain types of service companies (research, development and computer services), Oklahoma offers two options:

1)Companies may choose either the Quality Jobs cash-back program or a derivative of it; or 2) the Investment or New Jobs' creation income tax credit package.

Ad valorem exemptions are available for capital investments made by these types of companies as long as the calendar year qualified investment exceeds $250,000.00 and $250,000 new payroll is created. The package may include refunding of sales taxes paid for construction materials by manufacturers. Incentives are also available for investment in equipment to curtail hazardous waste and in CNG conversion of vehicles.

As the chart displays, for most services companies, the cash-back program is the primary incentive. Training costs are generally covered for industries adding significantly to the numbers and quality of Oklahoma jobs. Many additional specialized incentives are explained in the following pages.

Benefits You Should Review For:	1. Cash Payments Quality Jobs	2. High Impact Cash Payments	3. Small Employer Cash Payments	4. Investment / New Jobs Income Tax Credit	5. Sales Tax Refunds	6. Ad Valorem Exemptions	7. Training For Industry	8. Inventory Tax Exemption	9. Sales Tax Exemptions
Large Manufacturers $2.5 Million New Payroll	X Unless taking # 4 or 5			X Unless taking # 1	X Unless taking # 1	X	X	X	X
Medium - size Manufacturers $1 Million New Payroll		X Unless taking # 4 or 5		X Unless taking # 2	x Unless taking # 2	X	X	X	X
Small Business Manufacturers 10 New Employees or More			X	X Unless taking # 3		X	X	X	X
Aircraft Manufacturing Or Maintenance	X Unless taking # 2, 3, 4 or 5	X Unless taking # 1, 3, 4 or 5	X Unless qualifying for 1 or 2	X Unless taking # 1, 2 or 3	X Unless taking # 1, 2 or 3	X	X	X	X
Computer Services or Data Processing	X	X Unless qualifying for # 1	X Unless qualifying for # 1 or 2	X Unless taking # 1, 2 or 3	X Unless taking # 1, 2, 3 or 9	X	X	X	X
Research and Development	X	X Unless qualifying for # 1	X Unless qualifying for # 1 or 2	X Unless taking # 1, 2 or 3	X Unless taking # 1, 2 or 3	X	X	X	No Refunds only
Large Service Companies $2.5 Million New Payroll	X			No	No	No	X	X	No
Small Business Service Companies	No	X	X Unless qualifying for # 2	No	No	No	X	X	No

This information is for planning purposes only. Generally, the Oklahoma Tax Commission determines when tax incentives apply.

TAX INCENTIVES PRO FORMA OVERVIEW

Sample Incentives Worksheet

Project 1: Electronic components
(SIC 367) (NAICS 33441) $30 million investment / 650 jobs Salary $26K / yr

		Expected		Length
1a	Quality Jobs	$6,659,090		10 years
1b	Alternative to Quality Jobs
	- Investment/Jobs Tax Credit	$1,543,750		20 years
	- Sales Tax Reimbursements on Construction Materials	$ 213,750		One-Time
2	Five-Year Property Tax Exemption	$1,196,758		Five Years
3	Sales Tax Exemption on Machinery and Equipment	$1,603,125		One-Time
4	Freeport Tax Exemption	$72,222		Annual
5	Sales Tax Exemption on Goods Consumed in Mfg. Process	$3,412,500		Annual
6	Sales Tax Exemption on Energy Use in Mfg. Process	$97,500		Annual
x	x	z	z	x
Estimated Total Value of Incentives Over 10 Years:
	*With 1a, Quality Jobs Cash Incentive (These are the major incentives: Not comprehensive)	$45,281,195
	*With 1b, Investment Tax Credit Package (These are the major incentives: Not comprehensive)	$40,379,605

Project 2 - Data Processing Company
(SIC 7374) (NAICS 51421) $20 million investment / 3,000 jobs Salary $25K / yr

		Expected		Length
1a	Quality Jobs	$25,853,263		10 years
1b	Alternative to Quality Jobs
	- Investment/Jobs Tax Credit	Not Eligible		20 years
	- Sales Tax Reimbursements on Construction Materials	Not Eligible		One-Time
2	Five-Year Property Tax Exemption	$679,250		Five Years
3	Sales Tax Exemption on Machinery and Equipment	$890,625		One-Time
4	Freeport Tax Exemption	Not Eligible		Annual
5	Sales Tax Exemption on Goods Consumed in Mfg. Process	Not Eligible		Annual
6	Sales Tax Exemption on Energy Use in Mfg. Process	Not Eligible		Annual
x	x		z	x
Estimated Total Value of Incentives Over 10 Years:		$27,095,809

Project 3 - Fabricated Metal Products
(SIC 3442) (NAICS 33232) $1.5 million investment / 75 jobs Salary $24K / yr

		Expected		Length
1	- Investment/Jobs Tax Credit (Location in Enterprise Zones)	$356,250		20 years
2	Five-Year Property Tax Exemption	$61,445		Five Years
3	Sales Tax Exemption on Machinery and Equipment	$69,400		One-Time
4	Freeport Tax Exemption	$7,823		Annual
5	Sales Tax Exemption on Goods Consumed in Mfg. Process	$396,000		Annual
6	Sales Tax Exemption on Energy Use in Mfg. Process	$72,000		Annual
x	x	x	x	x
Estimated Total Value of Incentives Over Five Years:x		$2,558,654	z	x
x		x	x	x
Local Economic Development Participation
Financed equipment purchase through industrial authority. Provided a reduced rate on building lease. City provided free water/sewer hookups. Assisted with coordination of Training for Industry program, tax exemption processes, etc.

II. MAJOR TAX & FINANCIAL INCENTIVES – COMPREHENSIVE

A. Incentive Payments Programs
Contact: The Oklahoma Department of Commerce at 800-588-5959, (405) 815-5213, email: info@odoc.state.ok.us or website: www.locateok.com for forms.

1. The Oklahoma Quality Jobs Program
(68 O.S. §§ 3601 et seq.)
This program provides quarterly cash payments to a qualifying company of a percentage, not to exceed 5%, of newly created gross taxable payroll. A fully executed contract must be in place before any new direct jobs' salaries are included in the new taxable payroll. Payments are made quarterly for three years and if thresholds are achieved, they may extend for an additional 7 years.

A qualified company must achieve a $2.5 million annualized payroll for the new full-time employees for any four consecutive quarters during its first 13 quarters in the program. If this payroll amount is not achieved payments cease. The payments received do not have to be paid back.

All businesses must offer basic health insurance coverage to all employees whose pay is included in the payroll figures for qualification. Initially a company has 180 days to institute a qualified basic health insurance coverage policy. Employees must be allowed access to the coverage within 180 days of employment. Eighty percent (80%) of employees whose pay is included in the new payroll must work at least 25 hours per week. Under certain circumstances, leased employees may be included in payroll calculations.

Procedure: Companies contact an Oklahoma Quality Jobs Representative. A preliminary cost-benefit analysis estimating dollars a project may be eligible to obtain will be prepared immediately. Then, the company may submit a Quality Jobs Program Project Profile and Application form. A contract offer may follow.

Payments for most businesses will be in the range of 4% of payroll. New 2002 Legislation states that in depressed areas, a 5% net benefit rate applies. The percentage is most strongly affected by average weighted salary of new jobs.

A lower annualized payroll threshold of $1.5 million may apply to some additional applicants:

Food processors with 75% out-of-state sales, see NAICS Manual Nos. 3111 through 3119.
Firms performing Research, Development and Testing Services as described in NAIC Manual Nos. 5417- 10 and 541380.
Auxiliary Research and Development Labs of large enterprises.
Firms that locate on certain former military bases.

A lower threshold of $1 million annualized payroll is available to businesses that produce new direct jobs to the state that are equal to or greater than 1% of the total labor force of the county in which located. These high impact projects can be effectively located in over a third of Oklahoma counties. The payments, which are set at 2.5% of new qualified payroll, may extend for up to six years, not ten as in the original program.

No payroll threshold applies to those locating on at least ten acres that are on Superfund sites or the National Priorities List. Sites may still qualify if not on the list, if they have been formally deferred to the state or if they are being remediated pursuant to a clean-up plan approved by the Department of Environmental Quality. The Department of Environmental Quality notifies the Department of Commerce of the qualifying areas.

Businesses locating or expanding in cities with populations in excess of 60,000 and in metropolitan counties with 3.5% or less unemployment rates, must also meet an average annual wage minimum threshold of $26,000 for those employees whose salaries are included in the new payroll.

Employers have three years to achieve this average. Opportunity Zones within metropolitan areas are excepted from this annual wage requirement.

Qualifying Basic Industries for the Quality Jobs Cash Payments Programs:

Manufacturing: Industries classified under NAICS Manual Nos. 31, 32, 33, 5111, or 11331.
Research and Development and Testing laboratories. See NAICS Manual Nos. 541710 and 541380.
Central Administrative Offices and Research and Development and Testing divisions of other establishments or enterprises. See NAICS Manual Nos. 5611, 5612, 51421, 52232, 56142, 54191 and 524291.
Certain Warehouse/Distribution Operations (where 75% of inventory is shipped out of state).
Transportation by Air (See NAICS Manual No. 4811) if corporate headquarters and some reservations activities are within the state or 75% of air transport sales are to out-of-state consumers.
Services: The program covers the following service companies, if 75% of the sales are out-of-state:

NAICS No. 2111-Certain jobs related to the mining of oil and gas (New 2002 Legislation)
NAICS Nos. 493, 484, 4884-4889 - Motor Freight Transportation and Warehousing
NAICS Nos. 561510, 561520, 561599 - Arrangement of Passenger Transportation
NAICS No. 541614 - Transportation of Freight or Cargo
NAICS Nos. 51334 and 51339 - Certain Communications Services
NAICS No. 5622 - Certain Refuse Systems that distribute methane gas
NAICS No. 4224 and 4225 - Grocery Wholesale Distributing
NAICS No. 5241 - Insurance Carriers
NAICS Nos. 524210 and 524292 - Insurance Claims Processors only
NAICS No. 561440 - Adjustment and Collection Services (New 2002 Legislation)
NAICS Nos. 541430, 541860, 541922, 561439,561492 - Mailing, Reproduction, Commercial Art,Photography and Stenographic Services
NAICS No. 5617 - Services to Dwellings and Other Buildings; excluding 5617-30
NAICS Nos. 5323 and 5324 - Miscellaneous Equipment Rental
NAICS No. 5613 - Personnel Supply Services
NAICS Nos. 5112, 5141, 5142, 5415 - Computer Programming, Data Processing and Other Computer-Related Services
NAICS Nos. 561410 through 561439 and 5616, 51411 - Miscellaneous Business Services
NAICS No. 621511 - Medical and Dental Laboratories
NAICS Nos. 5412, 5414-5417, 54131, 54133, 54136-54138, 54182 - Engineering, Management and Related Services
The program also applies to electric services companies within NAICS Nos. 221111-221122 -exempt Electric Wholesale Generators if 90% of energy input is consumed from in-state sources and 90% of sales are out-of-state.

Certain income tax credits, sales tax refunds and low cost loan programs may not be used by companies enrolled in the cash payments programs.

2. SMALL EMPLOYER QUALITY JOBS INCENTIVE ACT (New 2002 Legislation) (68 0.S. §§ 3901 et seq.)

This program provides annual cash payments to a qualifying company. The payments may be for as much as 5% of new taxable payroll, for up to seven years. Qualifying payroll must be attributable to annual salaries that are at least 110% to 125% of the average wage of the county in which the jobs are located.

Generally companies locating in metropolitan counties will not qualify unless they locate in specified areas according to census data. Health premiums paid by the company may be added to the salaries. Basic health insurance must be offered to new employees within 12 months and at least 50% of the cost must be paid by employer. At least five, and possibly as many as 15, new employees must be added in the first 12 months after application approval.

Companies must be a basic industry as listed in the Quality Jobs Program, except companies engaged in mining of oil and gas (new 2002 Legislation HB 2904). All qualified businesses must make at least 75% of annual sales to out-of-state customers, to in-state customers if resold to an out-of-state consumer, or to the federal government. Qualified companies may not have had more than 90 existing employees for the 12 months prior to the time of application.

Companies that have received incentive payments under any other state Quality Jobs Program may not participate in this program. Companies benefiting from the Rural Economic Development Loan Act may not access this program. Companies contracting for this program are also prohibited from taking the investment/new jobs income tax credit, construction sales tax refunds and other tax benefits. The Oklahoma Department of Commerce determines eligibility.

3. OKLAHOMA FILM ACT

(68 O.S. §§ 3621-3626)

The Oklahoma Film Enhancement Rebate Act allows a rebate of up to 15% of qualified expenditures made in Oklahoma directly attributable to film, television and theatre, for expenditures for production costs which can include national advertising, wages and wardrobe, facilities and related services. Film budget must be $1 million or more.

4. PARTIAL UNEMPLOYMENT BENEFITS PROGRAM
(OESC rule 240:10-3-24)

Oklahoma permits payments of partial benefits for a reduced work week in order to retain workers until they return to full time.

B. AD VALOREM TAX EXEMPTIONS

Contact: The Tax Commission at (405) 521-3178, email: helpmaster@oktax.state.ok.us or website: www.oktax.state.ok.us for forms or call Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us or website: www.locateok.com

1. STATE DECISION

(68 O.S. § 2902)

New and expanding qualifying manufacturers, research and development companies, certain computer services and data processing companies with significant out-of-state sales and aircraft repair and distribution companies may be eligible for ad valorem exemptions for up to 5 years.

NOTE: Computer services and data processing companies must meet certain conditions. SIC Industry Group Numbers 7372 and 7373 must have out-of-state sales of at least 50%. SIC Code Industry Group Number 7374 must have out-of-state sales of at least 80%.

NOTE: Distribution centers in SIC Industry Groups 4221, 4222, 4225, 4226 and Major Groups 50 and 51 that have 100 employees, invest at least five million dollars ($5,000,000) and break ground before Dec. 31, 2002, also may qualify. Employees must be paid at least 150% of federal minimum wage.

Firms that include their building, or part of it, in the exemption must locate in a new building, expand an existing one, or locate in one that has been unoccupied for any purpose for the previous twelve months. An investment of at least $250,000 and addition of $250,000 annual payroll are threshold requirements. If a $2 million investment is made, no new payroll is required.

Eligible exempt property may include: Land, buildings, improvements, machinery, fixtures and equipment, used directly and exclusively in the primary activity or process of the qualified company located on the facility site.

Procedure: Firms must make annual application with the County Assessor. Upon approval of application, the state will reimburse tax dollars to local taxing jurisdictions which they would have otherwise received. As a result, although application for the exemption is made to the County Assessor, Oklahoma Tax Commission personnel are involved in the final review to allow the exemption. It is the responsibility of the company to apply for the exemption each year.

Contact: The local County Assessor for forms and to discuss what property may qualify for the exemption. The Ad Valorem Division of the Tax Commission will also supply information upon request.

2. EXEMPT INVENTORY

(Art. 10, § 6A Okla. Const.)(68 O.S. § 2902.2)

Oklahoma's Freeport Law exempts goods, wares, and merchandise from taxation which come from outside the state and leave the state within nine (9) months where such goods, wares, and merchandise are held for assembly, storage, manufacturing, processing or fabricating purposes within the state.

Intangibles: The State constitution and statutes (68 0. S. § 2805) also exempt intangible personal property from ad valorem taxation including: cash, receivables, bonds, stocks, annuities, etc.

Procedure: All tangible personal property is reported to the County Assessor no later than March 15 of each year. A freeport exemption application must accompany the report to avoid payment of property tax.

Forms are available from the County Assessor or the Oklahoma Tax Commission.

3. AIRCRAFT MANUFACTURERS IN LIEU PAYMENT

(3 O.S. § 254)

Manufacturers of aircraft may purchase an exemption license of $250 in lieu of any ad valorem tax upon aircraft owned by the manufacturer.

4. LOCAL INCENTIVE

(62 O.S. § 860)

Another method for firms to obtain ad valorem exemptions is for local taxing entities to designate Incentive Districts in the community and allow exemptions of some or a portion of local taxes by written agreement amongst all taxing units affected. The revenue is not reimbursed by the state using this method, so the decision to allow the exemption is strictly a local one. The exemption is allowed on new investment only and is not available to predominantly "retail" establishments, which by statutory definition do not include hotels or motels.

Exemptions are for five years unless the business is located in an enterprise zone. Then the exemptions may be for six years. The exemption is not allowed for ad valorem taxes if a firm qualifies under 68 O.S. § 2902, set out in number 1of this section.
It may be extended for the sixth year only for such firms by local taxing entities.

This information is for planning purposes only.

C. SALES TAX EXEMPTIONS

Contact: The Oklahoma Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us; or website: www.locateok.com or the Tax Commission at (405) 521-3133, email: helpmaster@oktax.state.ok.us or website: www.oktax.state.ok.us.

1. MANUFACTURERS
68 O.S. §§ 1354, 1359, 1364)

Oklahoma has a comprehensive sales tax exemption for manufacturers, for which a manufacturer must have a manufacturer's sales tax exemption permit from the Oklahoma Tax Commission. The permit must be renewed every three years. This permit must be presented to the vendor, and a claim for exemption made at or before the time of purchase to relieve the vendor of the liability for collecting sales tax. The exemptions cover purchases of machinery and equipment, energy and tangible personal property used in design, development and manufacturing.

Sales to a manufacturer of exempt property must be used in the manufacturing operation at a manufacturing site. The exemption is not extended to purchases used in: administration, sales, distribution, transportation, site construction or site maintenance.

2. COMPUTER SERVICES AND DATA PROCESSING
(68 0. S. § 1357 [19])

Oklahoma recognizes the importance of certain types of service companies by increasing favorable tax treatment for companies engaged in computer services or data processing activities by offering exemptions from sales tax on certain items:

· Machinery and equipment used by persons primarily engaged in activities described in SIC Code Industrial Group Numbers 7372 and 7373 that derive at least 50% of revenues from out-of-state purchasers, or primarily engaged in activities described in SIC Code Industrial Group Number 7374 and derive at least 80% of revenues from out-of-state purchasers.

Procedure: Contact the Oklahoma Tax Commission to obtain information about filing the required affidavit. A letter of exemption will be sent to you. Presentation of the letter to vendors avoids payment of sales tax at time of purchase.

3. AIRCRAFT MAINTENANCE FACILITIES
(68 O.S. § 1357 [18] [26] )

· Sales at aircraft maintenance facilities operated by an air common carrier and that employs at least 2,000 workers for aircraft and aircraft parts are exempt.

· Sales of aircraft parts by maintenance facilities' operators to customers whose planes are between 9,000 and 300,000 pounds gross take-off weight and which were brought into Oklahoma exclusively for repairs or modification, are exempt.* This exemption applies to those operators who have recently expanded the facility or invested in research and development with respect to modifying aircraft. At least $3,000,000 must be expended or the facility must be a manufacturer's authorized service facility. (New 2002 Legislation -SB 1282)

Contact: The Oklahoma Tax Commission at (405) 522-3599 or certification.

4. EXCISE TAX ON AIRCRAFT SALES
(68 O.S. §§ 6001 et seq.)

· Generally excise tax in lieu of sales tax is imposed on sales or lease of aircraft. However, resident taxpayers may receive an excise tax credit (when purchasing an aircraft for $2.5 million or more) for certified expenditures for improvements to airports within the state.

· Sales of aircraft to commercial airlines or to non-residents or on behalf of non-residents, when the selling price exceeds $2.5 million, are free of the excise sale charge.

Contact: The Oklahoma Aeronautics Commission at (405) 521-2377 for certification.

5. TELECOMMUNICATIONS
(68 O.S. §§ 1354 and 1357 [16] [24] )

· Exemptions apply to Interstate 1-800, WATS and interstate private-line business telecommunication services and to cell phones sold to a vendor who transfers the equipment as part of an inducement to a consumer to contract for wireless telecommunications.

6. SPACEPORT
(68 O.S. 1356)

· Sales of any tangible property to a spaceport user as determined by the Oklahoma Space Industry Development Authority are exempt. Launch vehicles, satellites and related attached or used property may also be purchased free from sales and use tax.

D. SALES AND USE TAX REFUNDS

Contact: The Oklahoma Tax Commission at (405) 521-3133 or at: helpmaster@oktax.state.ok.us or website: www.oktax.state.ok.us.

Oklahoma offers sales tax refunds for qualified companies. A company submits an Application/Intent to Qualify to establish an interest-bearing account within the Tax Commission. For those qualifying, upon receiving the application and documentation concerning the sales/use taxes to be paid by the applicant or their contractors, the Tax Commission will immediately set up an account to track sales taxes paid on sales as shown by invoices submitted.

REFUND APPLICATION OVERVIEW:

· Interest accrues at the rate of a 3-month Treasury bill from the date invoiced items are approved.

· Sales taxes paid on construction materials incorporated in certain new manufacturing facility by the manufacturer or by a contractor or subcontractor on behalf of a qualified manufacturer are refundable.

· Sales taxes paid for machinery and equipment by certain service businesses (computer services, R & D and aircraft repair) are refundable.

· Invoices of each vendor that distinguish the state and local sales taxes paid must be submitted with claims.

· Affidavits from vendors or contractors that the sales taxes were charged, paid and have not been refunded by vendor must be submitted with claims.

· Eligible applicants must file for refund within 36 months of date of purchase.

· Oklahoma Tax Commission requires certification from the Oklahoma Employment Security Commission regarding jobs numbers.

Note: Participation in the Quality Jobs Program or other incentive payment programs prohibits these refunds.

1. COMPUTER SERVICES / DATA PROCESSING / TELECOMMUNICATIONS EQUIPMENT
(68 O.S. § 54003)

· Oklahoma offers a sales tax refund on purchase of computers, data processing equipment, related peripherals, telegraph or telecommunications services and equipment.

· Applies to SIC Codes 7372-7374 (Computer services and data processing) and 8731-8734 (Research and Development).

· New or expanding business.

· Addition of 10 new full-time employees (FTEs) that have an average salary of $35,000.

· These new FTEs are employed for at least 36 months.

· 50% of annual gross revenues result from sales to out-of-state buyers (includes federal government).

· 75% of annual gross income results from computer services, data processing activities, or research and development

activities.

· Special requirement if in SIC Code Industrial Group Number 7374: Must purchase $100,000 worth of exempt items.

Note: This refund is not as favorable to computer services and data processing companies as the sales tax exemption found at 68 0.S. § 1357 (19).

Applies to aircraft maintenance or manufacturing facility that (68 O.S. § 1357 [14] ):
- Is new or expanding.
- Is primarily engaged in aircraft repair, building or rebuilding.
- Has a total cost of construction exceeding $5 million.
- Employs at least 250 new FTEs upon completion.
- Pays at least $2 million for computer services/data processing equipment.

2. CONSTRUCTION MATERIALS
(68 O.S. § 1359 [8])

Oklahoma refunds sales taxes paid on construction materials for certain new or expanding manufacturing facilities, including:

· Facilities with construction costs exceeding $5 million that create 100 new manufacturing jobs maintained for a minimum of 36 months. Construction costs include building and construction cost and engineering and architectural fees, but not legal fees.

· Facilities with construction costs exceeding $10 million, and with combined total costs of material, construction and machinery exceeding $50 million, that add 75 new employees retained for 36 months.

· Warehousing/Distribution for Manufacturers: Structures or land used for packaging, re-packaging, labeling or assembling for distributing products that are at least 70% made in Oklahoma, but at an off-site, in-state manufacturing facility or facilities are also deemed manufacturing facilities for purposes of these sales tax refunds.

· Qualified new or expanding aircraft maintenance and overhaul facilities that create 250 or more jobs, with construction costs totaling at least $5 million.

These construction exemptions are unique not only because they are refunds, but also because they allow contractors or subcontractors that have previously entered into a written contractual relationship with the manufacturer or a qualified aircraft maintenance facility operator, to make refundable purchases on behalf of manufacturers. The manufacturer may use invoices made out in the contractors' names for proof when applying for sales tax refunds. Generally refundable purchases do NOT include machinery and equipment.

This information should be used for planning purposes only. The Oklahoma Tax Commission will determine when a tax exemption or refund may be approved.

E. SALES TAX CREDITS

1. SALES/INCOME TAX CREDIT FOR TOURISM ATTRACTION PROJECTS

(68 O.S. 2357.40)

Contact Doug Hawthorne at 405-521-6865 for information.

Oklahoma offers a credit against either income tax or sales tax liability by an approved company as a result of expenditures for projects that result in more tourists to Oklahoma. The credit is applicable to the increment of increased sales tax liability as compared to the same month the year before for the company. An inducement agreement with a 10-year term between the company and the Director of the Department of Tourism must be in place before any credits may be earned.

F. INCOME TAX CREDITS / EXCLUSIONS

Oklahoma offers a variety of income tax credits/exclusions. Most of the credits or exemptions are taken on the annual income tax return report. Some may require pre-qualification or additional forms filed with the return.

Contact: The Tax Commission at (405) 521-3133, email: helpmaster@oktax.state.ok.us, website: www.oktax.state.ok.us for forms or contact the Oklahoma Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us.ok for information or website: www.locateok.com .

1. THE INVESTMENT / NEW JOBS INCOME TAX CREDIT
(68 O.S. § 235 7.4)

Manufacturers who hold a manufacturers' exemptions permit may choose this income tax credit based on either an investment in depreciable property or on the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance. Such a choice prohibits a manufacturer from participating in the Quality Jobs Program.

The taxpayer that invests in qualifying property, and also hires new employees, may compute the tax credit either by calculating 1% of the qualifying investment or by multiplying $500 per new employee, and then choosing the credit in the larger amount. The credit accumulates up to 5% of investment or $2,500 per new employee during the first five years after investment or job creation. The credit doubles for most investments in excess of $40 million or for those qualified investments in state enterprise zones. Credits may reach as much as 10% of investment or $5,000 per new employee. Any credit allowed but not used in the initial five-year period may be carried over for an additional 15 years.

To qualify for the 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. Qualified property includes all machinery, fixtures and buildings, including warehousing or substantial improvements to buildings used in a manufacturing operation on a manufacturing site. Eligibility is initially determined each year by the taxpayer on the income tax return.

If a qualified employer wishes to take the credit based on an increase in the number of full-time equivalent employees engaged in manufacturing, processing, or aircraft maintenance, each new position on which the credit is based must earn at least $7,000 in wages or salary per year. After the year of initial employee increase, additional credit may be earned for four additional years. Eligibility is determined each year by the taxpayer on the annual tax return.

The credit is computed on a year-by-year basis. Therefore, a company that had qualified in one year for the credit based on hiring new employees, but experiences a reduction in employment the next year, would still qualify for a partial credit the year in which there was a reduction, unless qualified employment had been reduced to or below the employment level for the year prior to the first year the credit was allowable. If, in later years, additional qualifying employees are added, a new base employment level would be calculated and the new series of credits could be taken for the number of employees above that base level of employment.

Numbers of jobs may fluctuate if the credit is based on investment. However, loss in job numbers must not be attributable to the new investment.

2. TECHNOLOGY TRANSFER INCOME TAX EXEMPTION

(68 O.S. § 2358 [C])

The taxable income of any corporation is decreased for transfers of technology to qualified small businesses located in Oklahoma. Such transferor corporation shall be allowed an exemption from taxable income of the amount of royalty payment received as a result of such transfer, provided the exempted amount shall not exceed 10% of the amount of gross proceeds received by such corporation as a result of the technology transfer. Gross proceeds is defined as total amount of consideration for the transfer, whether it is money or otherwise. Such exemption shall be allowed for 10 years from the date of the receipt of the first royalty payment accruing from such transfer.

3. NEW PRODUCTS DEVELOPMENT INCOME TAX EXEMPTION

(74 O.S. § 5064.7)

Contact: (405) 524-1357, ext. 228, for registration information.

Royalties earned by an inventor on products developed and manufactured in Oklahoma are exempt from state income tax for seven years, when registered with the Oklahoma Center for the Advancement of Science and Technology (OCAST). OCAST, through the Oklahoma Inventors Assistance Service, provides seminars regarding patent searches, market analysis, product research and development.

An in-state manufacturer of a product developed in Oklahoma may exclude from taxable income 65% of the cost of depreciable property, including machinery, fixtures, equipment, buildings or substantial improvement of the building - purchased and used directly in manufacturing the product. The product must be patented or patent pending. The maximum exclusion is $500,000. If the credit is not fully used in the year the depreciable property is placed in service, it may be carried forward four years.

4. AGRICULTURAL COMMODITY PROCESSING FACILITY INCOME TAX EXEMPTION

(68 O.S. § 2358 [A] [6])

Owners of agricultural commodity processing facilities, which include buildings, fixtures, and improvements used to process or package agricultural commodities, as long as more than mere storage, cleaning or transporting takes place in the facility, may exclude a portion from Oklahoma taxable income based on investment. The exemption may be as much as 15% of the total investment in the facilities. Individual investors or the entity owned by such investors may take the exclusion. Certain dairy operations may qualify.

No more than a total of $1,000,000 annually may be excluded by all qualified investors. The Oklahoma Tax Commission applies a formula to reduce the percentage allowable to assure exclusions do not exceed the $1,000,000 total. Excluded amounts may be carried over for six years. The exclusion is taken on the income tax return at the end of the tax year, and for the five years following, if not fully depleted.

5. INCOME TAX CREDIT FOR INVESTMENT IN OKLAHOMA PRODUCER-OWNED
AGRICULTURE PROCESSING
(68 O.S. § 2357.25)

An income tax credit of up to 30% of investment is available to Oklahoma agricultural producer investors in
Oklahoma producer-owned agricultural processing ventures, cooperatives or marketing associations, including dairies. Qualified facilities may be processing plants, marketing associations, investment firms, etc. The facility must do more than merely store, clean or transport agricultural commodities.

The credit percentage is adjusted annually so the estimate of total credits taken by all investors does not exceed $1,000,000 annually. The tax credit is not available in any year in which the investor has received any payments pursuant to the Quality Jobs Program Act or the Saving Quality Jobs Act. The credits are taken on the annual income tax form and may be used up over a six-year period.

6. INCOME TAX CREDIT FOR COMPUTER / DATA PROCESSING / RESEARCH & DEVELOPMENT JOBS

(68 O.S. § 54006)

A state income tax credit is available for up to five years for a net increase in the number of full-time equivalent employees engaged in computer services, data processing or research and development. The credit is based on employees whose annual wages were at least $35,000. The credit allowed is $500 per employee, up to 50 employees. The credit may not exceed $25,000 annually.

This credit is not available to participants in the Quality Jobs Program.

7. INSURANCE PREMIUM TAX CREDIT

(36 0. S. § 625. 1)

Contact: Tina Aleshire at the Oklahoma Insurance Department at (405)521-3966.

Insurance companies that locate or expand regional home offices in Oklahoma and maintain an employee level above 200 are eligible for special tax credits against the tax imposed in the Insurance Code. Annual credits range from 15% to 50% based on numbers of full-time, year-round employees.

This credit is not available to participants in the Quality Jobs Program.

8. RURAL SMALL BUSINESS CAPITAL FORMATION TAX CREDIT (New 2002 Legislation)
(68 O.S. §§ 2357.72 et seq.)

The act authorizes an income tax credit of 30% of equity or near-equity investment for investing in an Oklahoma small business venture, either through a qualified rural small business capital company, or by an angel investor in conjunction with investment made by a qualified Oklahoma rural small business capital company. The credits are available for tax years between December 31, 2000, and January 1, 2008. There are limitations on amounts of investments to which the credits will apply. The credits are allowed when the investment funds are actually invested in a qualified company. The credit may be carried forward 10 years.

9. SMALL BUSINESS CAPITAL FORMATION TAX CREDIT
(68 O.S. § 2357.60)

The act authorizes an income tax credit of 20% of equity or near-equity investment for investors in qualified businesses, either by a qualified small business capital company, or by an angel investor in conjunction with investment by a qualified small business capital company. There are limitations on amounts of investment to which the credits apply. The credit is allowed when the investment funds are actually invested in an Oklahoma small business venture. Earned credit may be taken annually for up to 10 years.

10. Alternative Energy Sources tax Credits

(68 O.S. § 2357.32A and B)

Oklahoma encourages alternative, zero-emission fuel production by providing tax credits to producers of electricity utilizing such sources and to small wind turbine manufacturers.

Producers may receive 75 one-hundredths of one cent per kilowatt-hour until 2005. The credit gradually decreases until it ceases in 2012. Credits may be earned for 10 years once production begins, and earned credits may be carried forward for 10 years. Non- taxable electric producers may transfer the credits.

Small wind turbine manufacturers may earn a credit of $25 per square foot of rotor swept area starting in 2003. The credit amount gradually decreases until it ceases at the end of 2005. The credits are freely transferable and may be carried forward 10 years.

11. INCUBATOR SITE TENANT TAX EXEMPTION

(74 O.S. §§ 5071-5079)

Contact: Rana Steeds at the Oklahoma Department of Commerce at (405) 815-5143 for certification details.

A business incubator site is a facility in which small businesses may rent space and where management provides business development services, such as financial consulting and marketing assistance. Sponsors of an incubator may be exempt from Oklahoma income taxes on income earned from rental fees, other income derived from services provided to the tenants, or for providing funding for an incubator site. This exemption is for 10 years from the date of the tenant's occupancy within an incubator. A sponsor must be a certified incubator with the Oklahoma Department of Commerce.

The tenant of a certified incubator, or its owner, is exempt from state tax liability on income earned as a result of activities conducted as an occupant in an incubator for up to 10 years from the occupancy date in an incubator site in accordance with rules of the Oklahoma Tax Commission. The exemption remains in effect after the date the tenant is no longer an occupant in an incubator, but not to exceed a total of 10 years. In order to qualify for the income tax exemption for the 6th through 10th year, the tenant must make at least 75% of its gross sales to buyers located outside the state or to the federal government.

12. GAS USAGE TAX CREDIT FOR MANUFACTURING
(68 0. S. § 235 7 [C])

Operators of manufacturing establishments in Oklahoma are allowed a credit against the tax proportioned to the amount of gas used or consumed in Oklahoma in manufacturing operations, at a rate of 3 mills per 1,000 cubic feet of gas during each taxable year (not applying to the first 25,000 MCF).

13. RECYCLING, REUSE AND SOURCE REDUCTION INCENTIVE ACT
(2 7 A O.S. §§ 2-11-301 et seq.)

Contact: The Department of Environmental Quality (DEQ) at (800) 869-1400 or Dianne Wilkins at (405) 702--9128 or the Oklahoma Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us or website: http://www.locateok.com/.

Manufacturing and service industries may receive an income tax credit of up to 20% of investment cost for equipment and installation of processes used to recycle, reuse or reduce the source of hazardous waste. Credits are limited to $50,000. Companies must apply to the DEQ, which, after approval, certifies an amount of net investment cost to the Oklahoma Tax Commission. The credit must be taken on the income tax return within three years of actual use of the equipment.

14. SMALL BUSINESS ADMINISTRATION (SBA) GUARANTEE FEE TAX CREDIT
(68 0.S. §§ 2370 and 2370- 1)

Every small business operating in Oklahoma may claim a credit against income tax liability resulting from the conduct of the small business. The credit shall be for the amount of fee paid to obtain financing from the SBA. The credit may be carried forward five years.

Banks receive a credit in the amount of quarterly fees paid to the SBA.

15. TAX CREDIT FOR BANKS PARTICIPATING IN THE OKLAHOMA RURAL ECONOMIC DEVELOPMENT LOAN PROGRAM

(68 O.S. § 2370 (E)

A credit of 5% of new annual payroll created in a loan made to a qualified business pursuant to the Rural Economic Development Loan Program. The credit accumulates until credits equal the amount of taxable income to the bank as a result of the program. Credits may be carried forward 5 years.*

16. INCOME TAX EXEMPTION FOR INTEREST PAID ON BONDS ISSUED By OR ON BEHALF OF PUBLIC AGENCIES

(68 O.S. § 2358)

Interest payments received as a result of obligations issued by cities, counties or public trusts on behalf of towns, cities, counties or Oklahoma educational institutions are not subject to Oklahoma income tax if such payments are exempt from federal income tax, unless such obligations are issued on behalf of nonprofit corporations.

Generally, interest payments on bonds issued by the Oklahoma Finance Authorities and the Department of Transportation are also state income tax exempt. (New 2002 Legislation)

Interest payments received as a result of obligations of nonprofit corporations issued on behalf of cities, counties and educational institutions for housing are not subject to Oklahoma income tax.

17. COMMERCIAL SPACE INDUSTRY CREDIT

(68 O.S. § 2357.13)

Investors may take a credit of 5% of investment in qualifying projects that encourage the development of commercial space industries as certified by the Oklahoma Tax Commission. One hundred new jobs must be created and at least $25 million dollars invested.

18. HISTORIC REHABILITATION TAX CREDIT
(68 O.S. § 2357.47)

Oklahoma has freely transferable tax credits for investment in any certified historic hotel or newspaper plant building in an increment district created pursuant to the Local Development Act. The state credit equals the federal rehabilitation credit allowed on such historic properties. The credits may be sold during the first five years after qualifying and may be carried forward a total of 10 years.

19. TAX INCENTIVES ON FORMER INDIAN RESERVATION LANDS

Contact: The lRS for forms at (800) TAX-1040 or via the website: www.irs.gov. Also, contact the Oklahoma Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us or website: www.locateok.com for information.

The Internal Revenue Code was clarified by Congress in 1997 to verify that former Indian Reservation lands comprise over two-thirds of Oklahoma. Businesses locating or expanding in these areas benefit by accelerated depreciation of investment or by employment tax credits when employing tribal members or their spouses.

The taxpayer must be in an active trade or business on the former Indian lands. (26 I.R.C. §§ 45A, 168 (j))

20. THE WORK OPPORTUNITY TAX CREDIT PROGRAM (WOTC)

Contact: Paul Williams at (405) 557-5371 for employee certification, IRS forms at (800) TAX FORM, website: www.irs.ustreas.gov or contact the Oklahoma Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us or website: www.locateok.com.

The Work Opportunity Tax Credit Program (WOTC) was designed to promote the hiring of target group individuals. The WOTC and Welfare-To-Work Tax Credits cannot be claimed for the same individual in the same taxable year.

The tax credit for WOTC is up to $2,400 for each new hire: 40% of qualified first year wages for those employed 400 hours or more, 25% for those employed at least 120 hours. Qualified wages are capped at $6,000. Summer Youth wages are capped at $3,000. See IRS forms 5884 and 8850.

Congress has retroactively authorized the WOTC and authorization has been extended until December 31, 2003.

21. THE WELFARE-TO-WORK TAX CREDIT (WTW)

Contact: Paul Williams at (405) 557-5371 for employee certification, IRS forms at (800) TAX FORM, website: www.irs.ustreas.gov or contact the Oklahoma Department of Commerce at (800) 588-5959, email: info@odoc.state.ok.us or website: www.locateok.com.

The tax credit is as much as $8,500 per new hire - 35% of qualified wages for the first and 50% for the second year of employment. Qualified wages, including tax exempt amounts received under health and accident plans, as well as educational and dependent assistance programs, are capped at $10,000 per year. Hires must work at least 400 hours or 180 days. The credit is part of the general business credit. See IRS forms 5884, 8850 and 8861.

Congress has retroactively authorized the WtW which had lapsed June 30, 1999. Reauthorization has been extended until December 31, 2003.

22. EMPOWERMENT ZONE INCENTIVES (New 2002 legislation)

Contact: Brenda Workman at OKC Metro Chamber at (405) 290-7067 or Karla Graham at ODOC (405) 815-5140.

Certain areas within Oklahoma City have been deemed to be an Empowerment Zone. Enhanced WOTC and WTW credits are applicable within the Zone. In addition, tax credits of up to $3,000 annually per new or existing employee that lives and works in the zone is available to businesses within the Zone. Qualifying salary amounts are an offset when taking more than one of these credits. See IRS form 8844.

Exclusions from taxable income are increased for business costs on machinery and equipment acquired after 2001. Additionally, capital gains on original issue stock, business interests and property purchased after 2000 and held for more than one year in an EZ business, is excluded from income if placed in another EZ business within 60 days. Those who hold stock in an EZ business for five years or more may exclude 60 percent of income from the sale of such stock from federal taxable income until 2014. State income tax is lowered as a result of these benefits, also.

EZ businesses must have at least 35% EZ residents as employees to qualify. Zone Facility bonds are also available to such businesses and are more fully discussed in the financing section of this Guide.

G. EMPLOYEE TRAINING

1. TRAINING FOR INDUSTRY PROGRAM (TIP)

Contact: Vikki Dearing at (405) 815-5110 or (800) 588-5959 or visit the website: www.okcareertech.org to begin the process.

The Oklahoma System of Career and Technology Education (CareerTech) assists qualifying businesses by providing training for employees in newly created jobs. Training can be done at one of 54 technology centers across the state or at the company's facility. Training agreements may include instructor costs, instructional materials and other relevant training costs. Program services are determined by the number of jobs created in targeted industries, wage rates, and benefits provided.

Beyond start-up, low-cost customized upgrade training is available to assure employees remain on the leading edge of industry practices.

2. ADVANCED DEGREE PROGRAMS

Contact: Vice Chancellor for System Advancement and Economic Development, Sid Hudson, Oklahoma State Regents for Higher Education at (405) 225-9100.

Oklahoma's Higher Education system includes 25 colleges and universities. Associate, bachelor's and advanced degree programs are tailored on an ongoing basis to respond to business and industry needs.

In addition, Oklahoma colleges and universities have established numerous alliances and partnerships with business and industry to ensure that Oklahoma graduates are prepared to compete in today's job market. New funds provide universities within Oklahoma's higher education system opportunities to develop programs for workforce training for fast changing, high paying job fields, to build expertise in targeted knowledge based industries and to transfer research to the marketplace.

3. LABOR SURVEYS AND JOB MATCH

Contact: Kirk Martin at (405) 815-5151 to learn if an area has been surveyed and, if so, to obtain a copy.

The Center for Economic and Management Research is developing labor surveys in partnership with Oklahoma local economies and the Oklahoma Department of Commerce. Local economies are communities and unincorporated areas within a commute area to specific communities. Unemployed as well as underemployed persons are included in the surveys.

Contact OESC at (405) 557-7121 for Richard Gilbertson or (405) 557-5317 for Ann Pendergraft.

The Oklahoma Employment Security Commission (OESC) provides computerized and customized assistance to serve the needs of employers and job seekers. There is no cost to business for screening and referrals of qualified job applicants by job service specialists.

4. WORKFORCE INVESTMENT ACT / RETENTION

Contact: Oklahoma Employment Security Commission at (405) 557-7294 for additional information or email Terry Watson.

The passage of the Workforce Investment Act (WIA) of 1998 represents the nation's attempt to align the delivery of employment and training programs in a one-stop environment with services for employers and job seekers. The Oklahoma Employment Security Commission (OESC) and Local Workforce Investment Boards (LWIB) are working together to stay responsive to changing needs in local economies. Currently, on the job training and customized training that reimburses employers for up to 50% of the cost of training qualified participants is available. Some individuals may also be sent to fully paid occupational training to accommodate local employment needs. OESC is working with local employers to design an incumbent worker program to help avert layoffs and/or plant closures.

H. ENTERPRISE ZONES

(62 0. S. §§ 690.1 et seq.)

Contact: The Oklahoma Department of Commerce at (800) 588-5959 or Jeff Wallace at (405) 815-5184, email: info@odoc.state.ok.us, website:

http://www.locateok.com/, for updates and specific zone information.

Enterprise Zones can be designated in either disadvantaged counties, cities or portions of cities. These zones provide extra incentives for business. Double the Investment / New Jobs Tax Credit is allowed, and low interest loans may be made available through enterprise district loan funds. Local communities may exempt local taxes for six years (instead of five) for qualifying businesses that are also in Incentive Districts (62 O.S. § 860). Small Linked Deposit Loans may be for longer terms (62 O.S.§§ 88. 1A et seq). The enterprise district management authorities created in some enterprise districts are empowered to establish venture capital loan programs and to solicit proposals from enterprises seeking to establish or expand facilities in the zones. By statute, funds for these programs would come from the issuance of general obligation bonds by the district involved. These loans can be for up to 100% of the estimated cost of the building and equipment.

The Oklahoma Local Development and Enterprise Zone Incentive Leverage Act

(62 O.S. §§ 840 et seq.)

Enterprises locating within an Enterprise Zone and an incentive district may qualify for state matches of local sales tax exemptions and ad valorem tax exemptions. The state match on local sales tax exemptions is in the form of a state sales tax reimbursement, and income tax credits are provided as a match on qualifying ad valorem exemptions. These local and state incentives are available for up to six years, however, an enterprise cannot receive more than $200,000 aggregate value in state payments and credits in any year.

There are also aggregate eligibility limitations based on county population. Counties with less than 100,000 population can qualify up to $20 million of aggregate investment for state matches. In no county can more than $40 million of investment be eligible for the state incentive match. Investment must be made prior to 2004 for existing zones/ districts. Investment must be made before 2005 for districts created between July 1, 2000 and July 1, 2003. Tax credits may be carried forward 10 years.

PARTIAL COUNTY

Beckham
Blaine
Bryan
Canadian
Carter
Cleveland
Comanche
Cotton
Craig
Creek
Garfield
Garvin

Grady
Kingfisher
Lincoln
Logan
Marshall
Mayes
McClain
McCurtain
Muskogee
Noble
Oklahoma
Ottawa

Pawnee
Payne
Pittsburg
Pontotoc
Pottawatomie
Rogers
Stephens
Texas
Tulsa
Wagoner
Washington

ENTIRE COUNTY

Adair
Alfalfa
Atoka
Beaver
Caddo
Cherokee
Choctaw
Cimarron
Coal
Custer
Delaware
Dewey
Ellis
Grant

Greer
Harmon
Harper
Haskell
Hughes
Jackson
Jefferson
Johnston
Kay
Kiowa
Latimer
LeFlore
Love
Major

McIntosh
Murray
Nowata
Okfuskee
Okmulgee
Osage
Pushmataha
Roger Mills
Seminole
Sequoyah
Tillman
Washita
Woods
Woodward

PARTIAL CITY

Altus
Ardmore

Bartlesville
Billings
Blackwell
Catoosa
Duncan
Elk City
Enid
Fairview

Guthrie

Guymon
Lawton
Madill
McAlester
Midwest City
Muskogee
Newkirk
Norman
Oklahoma City

Owasso
Pryor
Sand Springs
Sapulpa
Shawnee
Sulphur
Tonkawa
Tulsa
Wagoner

ENTIRE CITY

Ada
Addington
Alva
Anadarko
Antlers
Arnett
Atoka
Avard
Beaver
Bessie
Boswell
Bristow
Buffalo
Burns Flat
Canton
Canute
Capron
Carmen
Chattanooga
Checotah
Chelsea
Cherokee
Cheyenne
Chickasha
Cleveland
Clinton
Coalgate
Colony
Cooperton
Cordell
Corn
Cornish
Cushing
Cyril
Dacoma
Davidson
Davis
Deer Creek
Delaware
Depew
Dill City
Drumright
Durant
Erick
Eufaula
Fairland
Fargo
Forgan
Ft Supply
Ft Towson

Foss
Frederick
Freedom
Gage
Gate
Geary
Gotebo
Gould
Grandfield
Greenfield
Hallett
Hammon
Hartshorne
Haskell
Hastings
Healdton
Heavener
Henryetta
Hitchcock
Hobart
Holdenville
Hollis
Hollister
Hugo
Hydro
Idabel
Jefferson
Knowles
Lamont
Laverne
Lenapah
Lone Wolf
Longdale
Loveland
Manchester
Mangum
Manitou
Mannsville
Marietta
May
Medford
Miami
Mooreland
Mountain Park
Mountain View
Mutual
New Alluwe
Nowata
Okeene
Okemah

Okmulgee
Pauls Valley
Pawhuska
Ponca City
Pond Creek
Poteau
Quinlan
Renfrow
Reydon
Ringling
Rocky
Roosevelt
Rosston
Rush Springs
Ryan
Sallisaw
Sayre
Seminole
Sentinel
Sharon
Shattuck
Snyder
Soper
South Coffeyville
Stigler
Stillwater
Stilwell
Strong City
Stroud
Sugden
Tahlequah
Tecumseh
Temple
Terlton
Terral
Tipton
Tishomingo
Wakita
Wann
Watonga
Waurika
Waynoka
Welch
Westville
Wewoka
Wilburton
Woodward
Wynnewood
Yale

Contact: The Oklahoma State Data Center for determination of eligibility in partial areas at 405 815-5184.

The Oklahoma Department of Commerce designates enterprise zones and publishes lists of eligible counties, cities and census tracts.

To designate counties, the Oklahoma Department of Commerce lists those that have experienced population decrease over the preceding 10-year period and the 25 counties with the lowest per capital income. Areas qualify based on census track data received from the US Census Bureau reflecting 30% of individuals in the track areas at or below the poverty level or per capita income 15 percent or more below the state per capita income.

For a list of qualifying census tracts contact the Oklahoma Department of Commerce.

I. TRANSPORTATION AND DISTRIBUTION

1. INDUSTRIAL ACCESS ROADS

Contact: the Director's office of the Department of Transportation at (405) 522-0290, email: Mitch.Surrett@ODOT.org for information.

The "Industrial Access Road Program" is designed to provide assistance to local industrial development efforts by funding, within practical limitations, access facilities connecting a specific industry or industrial area directly to the state or local road system. Application is through local governing bodies that in turn contact the DOT.

2. FOREIGN - TRADE ZONES

Businesses engaged in international trade within these zones benefit from special customs procedures when exporting and when warehousing, manufacturing or assembling with imported goods. Subzones may be established for single purpose manufacturing/fabricating operations. There are presently four zones in Oklahoma: Port of Muskogee (FTZ 164) and the Tulsa Port of Catoosa (FTZ 53), which are both on the McClellan Kerr Inland Waterway providing rail, barge and truck transportation services from Oklahoma to ports throughout the world; the Port Authority at Will Rogers International Airport of the Greater Oklahoma City Area (FTZ 106)

Oklahoma City, and the International Business Park in Durant (FTZ 227).

The Tulsa Port of Catoosa's (FTZ 53) also covers four other sites: Stillwater Industrial Park, Bartlesville Industrial Park, Mid-America Industrial Park at Pryor Creek and Tulsa International Airport. It also includes two subzones: the Mercruiser plant in Stillwater and the Arco facility in Cushing.

Contact: Tulsa Port of Catoosa, Bob Portiss, (918) 266-2291.

The Port Authority for the Oklahoma City Area is the governing board for Oklahoma's largest Foreign Trade Zone (FTZ 106) and has responsibility for a 42-county service area in central and western Oklahoma. The zone has expanded dramatically beyond its original locations, which were Will Rogers World Airport and Biagi Warehouse. Additions to the general purpose zone include nine sites in the Oklahoma City Area: Mid America Business Park I and II; South River Industrial Park; Western Heights Properties' Industrial Park; Oklahoma City Trust Authority's Airport NE; Kelley Pointe Industrial Park, Edmond; Kelley Avenue International Trade Center; and Tower Industrial Park, Tract II in Moore.

The Oklahoma City Area Zone has sponsored several subzones for specific manufacturers: General Motors Plant in Midwest City, VAC Corp., Xerox Corporation, Imation Enterprise Corp. in Weatherford, and the Conoco Refinery in Ponca City.

Contact: Oklahoma City Airport Trust, Luther Trent (405) 682-3200.

The Muskogee City - County Port Authority is FTZ 164.

Contact: Muskogee City / County Industrial Port Authority, Scott Robinson at (918) 682-7886.

FTZ 227 is located in the International Business Park in Durant.

Contact: Rural Enterprises, Inc., Phil Scoggins at (580) 924-5094.

BENEFITS

· Ability to hold most merchandise subject to quotas until the quota opens and/or the ability to bring such goods into the Zone and subsequently re-export them. There are several benefits to businesses locating in Foreign Trade Zones.

· Increases flexibility with just-in-time delivery, quotas and reduced Customs delays.

· Duty elimination on:

- Previously imported material, which is re-exported.
- Rejected, scrapped, waste or return-to-vendor imported material.
- Sales of imported materials or finished products containing imported components to companies operating in other U.S. FTZ's.

· Duty reduction by:

- Manufacturing in the U.S. and selling domestically.
- Utilizing pick-and-pack operations where the "set" has a lower duty rate than the individual pieces.

· Duty-Deferral until merchandise is shipped from the Zone into Customs territory. Merchandise may be held in a Zone indefinitely.

3. TRUCK REGISTRATION BENEFITS

Contact: The Oklahoma Tax Commission, Motor Vehicle Division, IFTA at (405) 521-3246, or the IRP at (405) 521-3036, for updates and additional information.

Oklahoma's economic and demographic advantages make it an optimum location for manufacturing, warehousing and distribution facilities, particularly for transportation-sensitive industries.

Oklahoma's participation in the International Registration Plan (IRP) and the International Fuel Tax Administration (IFTA) provides uniformity in vehicle registration and motor fuel tax for interstate motor carriers who base-license their vehicles in Oklahoma. Specific provisions in the statutes complement the IRP and IFTA and provide additional benefits for the Oklahoma-based licensed carrier.

OTHER BENEFITS INCLUDE

(47 0. S. §§ 1101 et seq.)

Permanent Trailer Registration - Your permanent registration plate remains with your trailer until there is a change in ownership. No annual renewal identification device is required.

Permanent Truck/Tractor Plates - A permanent tag is now available to a motor carrier registered under the International Registration Plan (IRP).

Transfer of Plates - To vehicles in the same fleet is permitted upon approval of application to the Tax Commission.
(47 0.S. § 1113A)

Tractor Excise Tax - For truck or truck tractor registered for a gross vehicle weight of 54,001 pounds or more, the excise tax is $10. The same applies to any cargo-carrying trailer.

Reciprocity Miles - The miles traveled in states that are not members of any pro rata agreements are no longer used in computing your Oklahoma mileage percentage factor for proportional registration.

Property Tax - Motor vehicles and cargo carrying trailers are NOT SUBJECT to any personal property tax in Oklahoma.

Temporary Registration Authority - Temporary registration authority for vehicles to be added to an established fleet of proportionally registered vehicles is valid for 45 days.

Electronic Registration by Data Transfer - Oklahoma now has the ability to customize your fleet registration program through its new, no paperwork, computerized, Electronic Registration Data Transfer (ERDT) system. ERDT saves time, saves money, eliminates errors and provides unparalleled fleet registration services.

One-Stop Shop - Oklahoma has established a one-stop shop for the convenience of the motor carrier. Motor Vehicle staff provides immediate personalized assistance in providing registration and fuel permitting.

BENEFITS UNDER IFTA

License and Identification -The motor fuel license and identification decal issued by Oklahoma are the ONLY license and decal required to operate interstate vehicles in IFTA member states. Temporary fuel permit is valid for five days.

Reporting -Only ONE report is filed for fuel tax liability on fuel consumption in the state for IFTA member states. Credit for over-purchase in any member IFTA state is accomplished in the ONE report filed with Oklahoma.

Auditing -Generally, Oklahoma will be the only state to audit the records of an Oklahoma license-based carrier for all other IFTA and IRP jurisdictions.

Deregulation -The Corporation Commission no longer regulates rates, routes and services of most motor carriers.

Member -Oklahoma is a member, as are all other states and most Canadian Provinces, in the International Registration Plan (IRP).

Member -International Fuel Tax Administration. All states are members except Alaska and Hawaii.

I-35 - which dissects Oklahoma, is a NAFTA Corridor (North American Free Trade Agreement).

J. FINANCING ASSISTANCE
Several state and local sponsored financing programs are available to firms wishing to locate or expand.

1. OKLAHOMA FINANCE AUTHORITIES
(74 O.S. §§ 851 et seq. and 5062.1 et seq.)

Contact: The Oklahoma Finance Authorities (OFA) at (405) 842-1145.

The OFA provides permanent financing for real estate and equipment. OFA has both tax-exempt and taxable financing available for most types of industries, including manufacturing, agricultural processing and certain mining or recreational/tourism facilities. Qualifying projects are: construction of a new plant expansion, an existing plant or replacement of all or part of the plant.

The Oklahoma Industrial Finance Authority (OIFA) funds bonds issued by local economic development authorities (public trusts). The maximum funding is $5 million on fixed collateral assets for up to 15 years. Loans are fixed rate and are below market for tax-exempt qualified projects.

The Oklahoma Development Finance Authority (ODFA) has established a credit enhancement program to bolster the credit of revenue bonds issued by the ODFA for loans to Oklahoma business or governmental borrowers. All bonds are state tax exempt and may be federally tax-exempt. The ODFA may also issue tax-exempt bonds to support certain exempt facilities such as transportation, infrastructure or environmental facilities.

2. TECHNOLOGY PARTNERSHIPS
(70 O.S. §§ 3206.3 et seq. and Art 10, §§ 14 and 15 of the Oklahoma Constitution)

Contacts:

Dr. J.W. Alexander, Interim V.P. for Research or Cindy Malayer (Mcindy@okstate.edu) at Oklahoma State University – TechnologyTransfer Office, (405) 744-6930.

Dan Davis (dgdavis@ou.edu) at the University of Oklahoma - Office of Technology Development, (405) 325-3800 (www.otd.ou.edu).

Al Soltow (allen-soltow@utulsa.edu) at University of Tulsa, (918) 631-2766, Fax (918) 631-2247.

Extensive research in information security, laser technology, robotics, biotechnology, food production, materials modification, energy, medicine, meteorology and aerospace at Oklahoma's universities helps Oklahoma businesses bring innovative products and services to the world marketplace. Constitutional changes and legislation enables transfer of technologies more readily from universities to the private sector. Applied research on technologies developed by private business may be performed in partnership with research universities. Such institutions may enter into collaborative arrangements with industry that facilitate commercial development. Each university develops its own policies and process for these activities.

3. THE OKLAHOMA TECHNOLOGY COMMERCIALIZATION CENTER (OTCC)

(74 O.S. §§ 5060.20 [a] [b])

Contact: The OTCC at (405) 235-2305.

Aids Oklahoma businesses bringing new products and processes to the marketplace.

4. BASIC AND APPLIED RESEARCH AND TECHNOLOGY PROGRAMS

(74 O.S. §§ 5060.1 et seq.)

Contact: OCAST at (405) 524-1357 or EPSCoR at (405) 744-9990.

The Oklahoma Center for the Advancement of Science and Technology supports basic and applied research and technology programs through matching grants. Also contact the Oklahoma Experimental Program to Stimulate Competitive Research (EPSCoR) within the Office of the Regents for Higher Education.

5. OKLAHOMA INSTITUTE OF TECHNOLOGY (New 2002 legislation)

(74 O.S. §§ 5060.3 et seq.)

Contact: OCAST at (405) 524-1357

The Institute participates with universities and investors to cause creation of technology businesses in Oklahoma. It has programs aimed at bringing more research funding to high technology projects in Oklahoma.

6. SMALL BUSINESS LINKED DEPOSIT PROGRAM

(62 O.S. §§ 881A et seq.)

Contact: The State Treasurer's Office at (405) 521-3191 for forms and further information.

The Small Business Linked Deposit Program provides below-market interest rates for qualified small businesses and certified industrial parks through local financing sources.

Loans to businesses with less than 200 employees and gross annual sales of less than $4 million are eligible for up to $1 million. Industrial parks certified by the Oklahoma Department of Commerce are eligible for up to $6 million. Loans are for a two-year term and may be renewed for three additional terms in accordance with guidelines of the State Treasurer's office. In Enterprise Zones, loans may be for three years with a three-year renewal and a two-year renewal. In Priority Enterprise Zones, loans may be for five years with a three-year renewal.

A new linked deposit program assists with financing housing through this mechanism. (62 O.S. sections 91.1 et seq.)

7. RURAL ECONOMIC DEVELOPMENT LOAN PROGRAM (New 2002 legislation)(62 0.S. §§ 90.1 through 90.9) (68 O.S. § 2370)

Contact: State Treasurer's Office at (405) 521-3191.

Banks and savings and loan associations may pledge between three to ten million dollars ($3,000,000-$10,000,000) to the Rural Economic Development Revolving Loan fund within the State Treasury. The Program's review board and the State Treasurer manage and approve use of the fund in conjunction with participating financial institutions. Loans are at below market interest rates set by the lender. Credits may offset the amount of any Oklahoma tax liability resulting to the lender as a result of the loan transaction. Privilege tax credits are for 5% of new payroll resulting from the loan.

8. PUBLIC TRUST FINANCING: IRBs

(60 O.S. §§ 176 et seq.)

Contact: The State Bond Advisors Office at (405) 602-3100 or local communities' economic development offices. For more information, call

the Oklahoma Department of Commerce at (800) 588-5959 or (405) 815-5151.

Oklahoma authorizes public trust financing for economic development purposes at the state, county and city level. Trusts may enter into lease-leaseback, sale-leaseback, interest rate swaps and similar transactions as well as issuing bonds.

Local authorities may access the Oklahoma Industrial Finance Authority's pool to fund bonds or notes issued. There are over 700 public trust authorities in Oklahoma. An allocation from the Private Activity Bond allocation pool through the State Bond Advisor's Office is necessary if a federal income tax exemption of interest earned is allowed on private activity bonds.

9. GENERAL OBLIGATION LIMITED TAX BONDS (GOLTBs)

(Art 10, § 35, Okla. Const.)

Contact: Local communities' economic development offices. For more information, call the Oklahoma Department of Commerce at (800) 588-

5959 or (405) 815-5151.

Many Oklahoma counties and cities have approved General Obligation Limited Tax Bonds for industrial development. Generally, revenue bonds are issued in association with a particular project. Lease income is the primary revenue source to retire the bonds. The funding from the tax levy is secondary and is accessed when lease income is inadequate to meet interest and principal payments on the bonds. This credit enhancement through GOLTBs enables a community to finance 100% of fixed assets.

10. TAX INCREMENT FINANCING (TIF)

(62 O.S. §§ 850 et seq.)

Contact: Local communities' economic development offices. For more information, call the Oklahoma Department of Commerce at (800) 588-

5959 or (405) 815-5151.

Cities and counties in Oklahoma may create tax increment districts to provide funding for economic development in distressed areas for up to 25 years.

The tax increment is determined in accordance with the following:

· The base assessed value includes all real and personal property on the tax rolls and assessed as of January 1 of the year during which the district is designated.

· Incremental tax dollars are those assessed in excess of the base, on the January 1 after the district has been declared, and continuously until the increment district ceases, less the amount attributable to general reassessment levy of real and personal property in the county.

· Proceeds from TIF may be used in accordance with approved plans for projects in the designated district such as facilities, infrastructure, parks, sidewalks and other public projects.

11. SALES TAX FINANCING

(68 0. S. § 1370) (68 O.S. § 2701)

Contact: Local communities' economic development offices. For more information, call the Oklahoma Department of Commerce at (800) 588-5959 or (405) 815-5213.

Oklahoma cities and counties are authorized, upon a vote of the people, to build facilities and provide other economic development benefits for businesses financed by sales tax collections. Some have pooled economic development funds from this method.

12. PRIVATE ACTIVITY BOND ALLOCATION

(62 0. S. §§ 695. 23 et seq.)

Contact: the State Bond Advisor's Office at (405) 602-3100 for application.

You will find more information about Oklahoma Private Activity bonds - and other state bond activity - at the State Bond Advisor's website: www.ok-bonds.state.ok.us.

Private Activity Bonds that render interest payments that are federally tax-exempt, in accordance with the Internal Revenue Code, must receive an allocation from the State Bond Advisor's Office. Public Issuers in Oklahoma may issue approximately $250 million in Private Activity Bonds each year. The state's allocation is divided into various pools each year: Qualified Small Issue Pool, Beginning Agricultural Producers Pool, Exempt Facility Pool, Student Loan Pool, Local Issuer Single Family Pool, the State Issuer Pool, the Oklahoma Housing Finance Agency Pool and the Economic Development Pool. On September 2 of each year, all pools are consolidated. Generally allocations are on a first come, first-serve basis, with some size limitation.

13. OKLAHOMA CAPITAL INVESTMENT BOARD

(74 O.S. § 5085.1)

Contact: the Oklahoma Capital Investment Board at (405) 848-9456 for further information.

Through its venture capital program, the Oklahoma Capital Investment Board (OCIB) facilitates investment in venture capital companies that focus on investing in quality Oklahoma companies. To date $41.3 million in OCIB funds have been committed to 11 venture capital firms. These investments are in Ventures Medical II, a $14 million firm specializing in early stage, technology-based medical companies; Richland Ventures, a $50 million fund specializing in later stage services companies; Intersouth Partners III, a $27 million seed capital investor in both technology and non technology companies; Davis, Tuttle Venture, Partners, a $45 million fund investor in basic industries, Chisholm Private Capital Partners, an $11.3 million opportunistic fund; Richland II, a later stage $89 million fund; Pacesetter Growth Fund, a $41 million later stage fund investor focused on businesses that are owned/led by minorities; Rocky Mountain Mezzanine Fund II, a $120 million mezzanine and equity investment fund specializing in later-stage, low technology companies; Dolphin Communications Fund II, a $146 million fund focused on start-up to early stage communications companies; Tullis-Dickerson Capital Focus III, a healthcare focused fund currently capitalized at $87 million; and Emergent Technologies Oklahoma, a seed stage, technology focused fund targeting $3 - $5 million in commitments. The Board anticipates making additional commitments over the coming months.

14. THE OKLAHOMA CAPITAL ACCESS PROGRAM

Contact: The Oklahoma Capital Investment Board at (405) 848-9456 for further information.

The Oklahoma Capital Investment Board manages this easy-to-use economic service that encourages additional business lending activity. It provides a "credit insurance" reserve for Oklahoma banks through a fee-matching arrangement for loans enrolled in the program. It gives banks additional resources to finance economic development and community reinvestment activities.

15. COMMUNITY DEVELOPMENT BLOCK GRANTS (CDBG)

Contact: The Oklahoma Department of Commerce, Community Affairs and Development Division at (405) 815-5356 for information.

Non-entitlement cities, towns and counties may apply for grants and or grants/loans toward the creation of jobs for targeted income groups. Local units of government apply to the Oklahoma Department of Commerce on behalf of a business. The use of the CDBG resources is for the development of publicly-owned infrastructure that is directly related to the business location or expansion. Projects financed through CDBG must create one new job for $10,000 of CDBG investment. Grants may be for $100,000 per project. Low interest loans may be for $400,000 per project.

16. OKLAHOMA EXPORT FINANCE PROGRAM

Contact: The Oklahoma Department of Commerce at (405) 815-5143, for further information.

The Oklahoma Department of Commerce works with Oklahoma firms by identifying financing options for exports. Assistance is available through a relationship with the Export-Import Bank of the United States (Ex-Im Bank) to facilitate export financing with working capital guarantees, credit insurance and foreign buyer financing.

17. SMALL BUSINESS LOAN GUARANTEES

Contact: The Small Business Administration at (405) 231-5521 for information.

The Small Business Administration's Loan Guarantee Program is for manufacturers of 500 employees or less, wholesalers of 100 employees or less, or retailers with international sales ranging from $3.5 million to $14.5 million. The State of Oklahoma, through its Oklahoma Development Finance Authority and in partnership with Rural Enterprises, Inc., enlarges loans through additional state funding.

Businesses applying to the program must receive funding from a private lender.

18. QUALITY JOBS INVESTMENT PROGRAM
(74 O.S. § 5062.8A)

Contact: The Oklahoma Development Finance Authority at (405) 842-1145.

The Quality Jobs Investment Program encourages the growth of equity and near equity capital for Oklahoma businesses. Under the Program, the ODFA can match dollar for dollar an investment enterprise's private capital for helping new and expanding businesses. An investment enterprise includes any corporation, limited partnership or similar business entity, including entities qualifying as Small Business Investment Companies under applicable federal law. The primary function of the Program is to use private and public resources to build a more comprehensive and efficient financing infrastructure for businesses expanding or relocating in the State of Oklahoma.

19. EMPOWERMENT ZONE FACILITY BONDS (New 2002 Legislation)
(IRS Pub 954)

Contact: Brenda Workman at OKC Metro Chamber (405) 297-7067 or Karla Graham at ODOC (405) 815-5140.

State and local governments can issue bonds that pay interest that is federally tax exempt to benefit EZ businesses to finance qualified Zone property. Businesses have two years to achieve compliance as an EZ business after the bonds are issued or the assets purchased with the proceeds are placed in service. No more than three million dollars in bonds may be issued for any one EZ business. Qualified expenditures may include land, building, and machinery and equipment assets necessary to perform the EZ business' activities within the Zone. Pooled issuances for several EZ businesses are permitted and may enhance feasibility of this method of financing.

An allocation from the Private Activity Bond Volume Cap is necessary for issuance of the bonds through the State Bond Advisor's Office.

III. BUSINESS COSTS IN OKLAHOMA

A. GENERAL OVERVIEW

Contact: The Oklahoma Department of Commerce at (405) 815-5210 or our website: www.locateok.com for information, or the Oklahoma Tax Commission at (405) 521-4325 or website: www.oktax.state.ok.us.

Generally, business corporations are subject to the following taxes, fees or required premiums in Oklahoma:

· Organizational fees

· State income tax

· Local property (ad valorem) tax on real and personal property

· Unemployment compensation tax

· Annual corporate franchise (capital stock) tax

· Sales tax (state and local)

· Workers' Compensation Insurance

These are the usual costs applicable to business corporations, which in one form or another are to be found in most of the 50 states. Pertinent provisions, with special reference to firms in Oklahoma, are presented here.

Consumer excise taxes, such as those on cigarettes and tobacco, the tax on alcoholic beverages and various minor special taxes applicable to a single line of business (e.g., coin-operated devices, motor carriers, etc.), have been omitted; but the sales tax and use tax are included, primarily because of the exemptions granted. Production tax on textile mill products, gross receipts taxes on petroleum production, insurance premiums, privately-owned freight cars, rural electric cooperatives, privately owned airports and motor fuel tax are not included.

BALANCED STATE BUDGET

Oklahoma's revenue system has been stabilized upon broadly based taxes levied at moderate rates. Not only have state revenues been stabilized, with consistent increases in collections representing sound state growth, but also the tax system has been stabilized in the sense of relieving the necessity of frequent legislative action. State revenues automatically increase with economic growth or the advance of inflationary conditions nationally; business and industry are free from the fear of being singled out for special taxes, imposed at punitive rates, which they alone would have to pay.

· In 1941, Oklahoma adopted a constitutional amendment, which requires state government to operate on a balanced budget. Warrants cannot be drawn against any appropriation unless revenues have accumulated for their payment. This fiscal plan assures stability of state finances and control of indebtedness.

· In 1990, the corporate income tax was raised from 5% to 6%, primarily to provide increased funding for education (See State Comparison in Appendix. This was only the second increase since 1947).

· Unemployment compensation tax rates have been reduced four times. In 1959 a trust fund safeguard provision was enacted in the form of a rate escalator clause; but in 1981, again to keep employers' rates from going too high in any one year, the law was amended to provide that no employers' rate increase may exceed 2% per year. In 1997, new employer rates were 1.1%, the current statewide two-year average. In 2002, new employer rates are 1%.

· State business and tax incentives are available to both new and expanding manufacturers and service companies.

· Article 5, § 33 of the Oklahoma Constitution, amended in 1992, requires that either a 75% majority of the Legislature or a vote of the people is necessary to raise state taxes.

· Local property taxes have been stabilized by constitutional amendment in 1996, in Article 10, §§ 8 and 8B, by limiting assessment valuations and percentages of change from year to year.

B. OKLAHOMA BUSINESS ORGANIZATIONAL COSTS

Contact: the Secretary of State at (405) 521-3911 for information or website: www.sos.state.ok.us.

1. DOMESTIC CORPORATIONS
(18 O.S. §§ 1001 et seq.)

Corporations organized in Oklahoma must file their Certificates of Incorporation with the Secretary of State. A filing fee of one-tenth of 1% per total authorized capital stock is required. The minimum filing fee is $50.

Corporations may check on the availability of a name by contacting the Secretary of State's office. A name may be reserved for a period of 60 days by filing an application for Reservation of Name with the Secretary of State and paying a fee of $10.

Corporations must maintain a registered office and registered agent whose address is identical to the registered office address. The agent may be an individual, a domestic corporation, which may be itself, or a foreign corporation authorized to transact business in Oklahoma. The Secretary of State is an additional agent. A fee of $100 must be paid with the annual franchise tax return.

2. FOREIGN CORPORATIONS
(18 O.S. §§ 1130, 1131, 1135)

A filing fee of $1 per $1,000 on the total authorized capital or on the amount of capital to be invested in Oklahoma during the current fiscal year is required for profit corporations. If the invested capital is more than the total authorized capital, corporations pay only on that authorized. The minimum filing fee is $300. The filing fee for a nonprofit corporation is $300.
Oklahoma law requires the Secretary of State to be the primary registered agent for foreign corporations. An additional agent may be appointed for service of process. The additional agent must be either an individual residing in Oklahoma when appointed or another corporation authorized to transact business in Oklahoma. A service agent fee of $100 per year is due upon qualification and with the annual franchise tax return each year thereafter. The fee is payable to the Oklahoma Tax Commission.

3. LIMITED LIABILITY COMPANIES (LLCs)
(18 O.S. §§ 2000 et seq.)

LLCs may conduct any lawful business in Oklahoma except banking or domestic insurance. One or more persons file Certificates of Organization with the Secretary of State. A filing fee of $100 is required.

LLCs must maintain a principal office and a registered agent within the State. An annual fee of $40 must be paid to the Secretary of State for acting as a registered agent. Foreign LLCs may register with the Secretary of State upon approved application and paying of a filing fee of $300.

4. LIMITED LIABILITY PARTNERSHIPS (LLPs)
(54 O.S. §§ 54-1-1002 et seq.)

Oklahoma has provisions for general partnerships and for Limited Partnerships. Filing may be accomplished with the Secretary of State. Filing fees vary but do not exceed $100 for domestic partnership. Foreign Limited Partnerships must pay a filing fee of $200.

5. BUSINESS LICENSE INFORMATION OFFICE
(74 O.S. § 5058.4)

Contact: the Oklahoma Department of Commerce at (877) 655-2287 or (405) 815-5183 for information.

The Business License Information Office in the Oklahoma Department of Commerce assists businesses in identifying state licenses and permits needed for establishing or engaging in business in Oklahoma. Where feasible, the office will respond to questions about local and federal requirements. The office will publish a directory containing all identified Oklahoma state business licenses, permits and forms. The services are optional. Any person may deal directly with the issuing agency.

B. OKLAHOMA BUSINESS ORGANIZATIONAL COSTS

Contact: the Secretary of State at (405) 521-3911 for information or website: www.sos.state.ok.us.

1. DOMESTIC CORPORATIONS
(18 O.S. §§ 1001 et seq.)

2. FOREIGN CORPORATIONS
(18 O.S. §§ 1130, 1131, 1135)

Generally, in order to qualify to do business in Oklahoma, a foreign corporation must file two signed Certificates of Qualification with the Secretary of State. Also, a certificate issued by an authorized office of the jurisdiction of its incorporation evidencing its corporate existence must be filed with the Secretary of State. If the certificate is in a foreign language, a translation must be attached.

A filing fee of $1 per $1,000 on the total authorized capital or on the amount of capital to be invested in Oklahoma during the current fiscal year is required for profit corporations. If the invested capital is more than the total authorized capital, corporations pay only on that authorized. The minimum filing fee is $300. The filing fee for a nonprofit corporation is $300.

Oklahoma law requires the Secretary of State to be the primary registered agent for foreign corporations. An additional agent may be appointed for service of process. The additional agent must be either an individual residing in Oklahoma when appointed or another corporation authorized to transact business in Oklahoma. A service agent fee of $100 per year is due upon qualification and with the annual franchise tax return each year thereafter. The fee is payable to the Oklahoma Tax Commission.

3. LIMITED LIABILITY COMPANIES (LLCs)
(18 O.S. §§ 2000 et seq.)

4. LIMITED LIABILITY PARTNERSHIPS (LLPs)
(54 O.S. §§ 54-1-1002 et seq.)

5. BUSINESS LICENSE INFORMATION OFFICE
(74 O.S. § 5058.4)

C. MAJOR BUSINESS TAXES AND PREMIUMS

Overview of Oklahoma Tax System

The Oklahoma tax system is composed of a range of taxes that are administered and collected by various state and local agencies. Each tax has a different base, and rate. The following outlines the most significant taxes.

Type	Base or Measure	Rate	Administering Agency
Corporate Income Tax	Net Income	6%	Oklahoma Tax Commission
Franchise Tax	Capital Employed to produce state income	$10-20,000 $1.25 per $1,000	Oklahoma Tax Commission
State Sales & Use Tax	Receipts from sales/use of taxable items	4.50%	Oklahoma Tax Commission
Local Sales & Use Tax	Receipts from sales/use of taxable items	Approximately 3% County/City	Oklahoma Tax Commission
Unemployment Insurance Tax	Wages to approximately $10,500	0 - 5.4%, 1% new	Oklahoma Employment Security Commission
Workers' Compensation Insurance	Payroll and Occupation	Variable	Workers' Compensation Court
Personal Income Tax	Taxable Income	0.5-7.0% max. (Most purposes)	Oklahoma Tax Commission
Local Property Tax	Valuation of Property	Approximately 1% of Value	County Assessor

1. STATE INCOME TAX
(68 0. S. §§ 2355, 2358)

INDIVIDUALS

Rate: Generally, Oklahoma taxable income is initially defined by Internal Revenue Code, and applies to income resulting from property owned and business done in Oklahoma. Rates vary from 0.5% on the first $1,000 of taxable income to 7% on that income in excess of $16,000. A personal exemption of $1,000 is allowed. The standard deduction is 15% with a minimum of $1,000 and maximum of $2,000. A deduction for Federal Income Tax or on tax paid to other states may be allowed. Senior citizens (over 65) may qualify for additional exemptions ($1,000 single / $2,000) joint return if both spouses are over 65. All person's income tax returns are due by April 15, or by the 15th day of the fourth month after the end of the fiscal year.

CORPORATIONS

Rate: The portion of corporate income earned in Oklahoma and therefore subject to the 6% tax is based on a three-factor formula.

Corporate Sales Factor: Total sales attributed to Oklahoma divided by sales everywhere.

Property Factor: Taxpayer's average value of property (real and tangible personal property) owned or rented and used in Oklahoma divided by the average value of property (real and tangible personal property) used everywhere during the tax period. Property is valued at its original cost. Rented property is valued at eight times the net annual rate.

Payroll Factor: Compensation for services rendered (less officer's compensation) in Oklahoma divided by compensation for services rendered (less officer's compensation) everywhere.

· Double emphasis is placed on the sales factor for capital-intensive firms of $200 million investment in a single project (must be completed within 3 years).

· Oklahoma wishes to tax only the income attributable to the Oklahoma operation. If the apportionment of business income of the enterprise by the Three Factor formula does not give a fair reflection of the taxpayers' activity in the state, with the Oklahoma Tax Commission approval, alternate methods may be used.

· Net operating losses may be carried forward 15 years and may be carried back two years for most companies.

· Corporate Income Tax returns are due by March 15 or by the 15th day of the third month after the end of the taxable year.

· Oklahoma recognizes an automatic extension granted by the Internal Revenue Service. A copy of that extension request should be attached to the Oklahoma return. A taxpayer may request original or additional extension on form 504. A corporation may request an extension of up to one month in excess of the federal extension.

· Generally, tax estimate payments are due quarterly or as specified on vouchers: April 15, June 15, September 15 and January 15; however, if the tax return is filed and payment made by January 31, the January 15 payment does not have to be made.

· Taxpayers with Oklahoma taxable income of at least $1 million in one of three preceding years may annualize estimates as is allowed in the Internal Revenue Code on federal taxable income.

· Withholding reports from businesses are due weekly, monthly, (large companies) or quarterly (small companies). Every employer owing an average of $100,000 or more per month shall make deposits semi-weekly in accordance with federal schedules. Employers owing an average of $10,000 but less than $500 must pay monthly. Less than $500 pays quarterly.

2. GENERAL PROPERTY (AD VALOREM) TAX

(68 O.S. § 2801 et seq.)

Low Tax Rates: Property tax rates in Oklahoma are among the lowest in the United States. The tax is collected by county governments. There is no state property tax. The average effective tax rate for locally assessed property is about 1% of the value of the property. The average effective tax rate is determined by the amount of tax divided by the market value. Property taxes are stable in Oklahoma. In 1996, Oklahoma limited the amount of fair cash value that can be increased from year to year to 5%. Transfers or improvements, however, are separately taken into account.

About two-thirds of the property tax is used for the support of local schools, with lesser portions going to county government, cities, career technical schools, junior colleges, health departments, libraries and emergency medical service districts, etc.

Inventories: Inventories are valued according to the average amount on hand during the preceding year, or the average amount on hand during such part of the preceding year the inventory was at its January 1 location.

Uniform Assessment Practices:
The assessment procedure involves:

· a determination of the fair cash value.

· the application of a uniform assessment percentage to determine the assessed value.

· the application of the total mill levy by all eligible local taxing units, applicable to all property at its location to determine the amount of tax.

EXAMPLE:

$100,000 Property Value x 11% Assessment = $11,000 Assessed
$11,000 Assessed Value x 0.08 Millage Rate ($0.08 x $11,000) = $880 Tax Due

The Constitution of the State of Oklahoma requires uniform methods of determining fair cash value and requires the County Assessor to apply the same percentage of assessment to all like property in the county to determine assessed values. All real property in the state is required to be inspected at least once every four years.

The percentage of assessment, which a County Assessor may select and apply to all real property in the county, must be at least 11% and not more than 13.5%. Personal property must be assessed at not less than 10% and not more than 15%.

An in-lieu vehicle stamp tax on aircraft, new vehicles, automobiles, trucks, manufactured homes, travel trailers, motor homes, boats and boat motors exempt dealers' inventories and certain farm equipment from the personal property tax (68 O.S. § 2805).

Property taxes are due and payable on November 1. If one-half of the tax is paid on or before January 1, the remaining one-half may be paid any time until April 1 without accruing interest. Mortgagees paying taxes on behalf of mortgagors must pay the entire tax no later than December 31.

Taxable personal property, including business inventory, must be listed with the County Assessor on or before March 15 of each year. Exemption applications from real, personal and inventory property tax must be filed by this date.

3. UNEMPLOYMENT COMPENSATION TAX
(40 O.S. §§ 1-101 to 9-104)

Contact: The rate department at the Oklahoma Employment Security Commission at (405) 557-7141.

· Oklahoma statutes set out the methods for figuring amounts of contributions to be paid to the Unemployment Compensation Fund by employers.

· Employer contribution rates are recalculated annually. By March 31 of each year, the Oklahoma Employment Security Commission (OESC) notifies every employer of its contribution rate. The rate will remain the same for the entire calendar year if there are no changes in the status of the account. The employer can file a written request for review of its rate within 20 days of mailing of the notification. A Commission review order may be appealed to District Court.

· A new employer with no unemployment insurance experience shall pay contributions at a rate of 1% of taxable wages for the calendar year 2002. The new employer rate can change annually, and it is based on an average of all contribution rates of state employers, with the minimum new employer rate being 1%.

· Generally, each employer with two or more years of experience is assigned an earned rate. The earned rate is based on the employer's experience by calculating a benefit wage ratio and two statewide factors known as the state experience factor and the conditional factor.

· The benefit wage ratio is a ratio of the benefit wage charges made against an employer account divided by the employer's taxable payroll for the preceding three years on which taxes have peen paid by January 31 of the rate year.

· The state experience factor is a measure of the total unemployment benefits paid in Oklahoma, and the conditional factor is a measure of the Trust Fund balance for the state.

· There are tables found at 40 O.S. § 3-109 that list a range of state experience factors next to a range of possible employer's benefit wage ratios, with conditional factors listed at the bottom. Once the benefit wage ratio, the state experience factor and the conditional factor are calculated, an employer's earned rate can be determined by consulting the table.

· The taxable wage base is determined as a percentage of the state's average annual wage. This figure changes annually and represents the amount of wages that are to be taxed per employee. In the year 2002, the taxable wage base is $10,500. Each employer is to report all wages on its quarterly report forms, but taxes are paid at the assigned rate only up to the amount of the taxable wage base on each employee.

· A successor or acquiring employer is one that meets the terms of 40 O.S. § 3-111 and regulations of the OESC. To become a successor, an employer or business entity must substantially acquire one or all of the trade, organization, business or assets of another employer and continue the operations of that predecessor employer as an ongoing business. If this occurs, the successor shall acquire the rating account of the predecessor employer, including the predecessor's actual contribution and benefit experience, annual payrolls and contribution rate.

4. ANNUAL CORPORATE FRANCHISE TAX
68 O.S. §§ 1201 et seq.)

Contact: The Oklahoma Tax Commission Taxpayers Resource Center at (405) 521-3279 or email: helpmaster@oktax.state.ok.us for more information.

Base: Capital employed within the state. Capital includes the outstanding capital stock, surplus and undivided profits, plus any evidence of indebtedness maturing more than three years after issuance. Borrowed capital, evidenced by notes maturing within three years from date of issuance, is not included in the tax base. If business is transacted outside Oklahoma, or if there are assets located outside Oklahoma, capital employed is allocated to Oklahoma on the basis of the percentage that assets and business done in Oklahoma bear to the total assets and business done everywhere.

Rate: $1.25 per $1,000 of capital employed in Oklahoma; minimum tax $10; maximum tax $20,000. Initial organization fees are in lieu of franchise tax for the fiscal year in which a corporate certificate or a certificate of domestication is issued. Title 18 O.S. § 1022 requires all foreign or domesticated corporations to retain Secretary of State as their Oklahoma registered agent. The annual fee for this service is $100 and is remitted to the Oklahoma Tax Commission with the franchise tax return.

The Franchise Tax returns for all corporations becomes due July 1 or the date of the income tax year of the taxpayer, and is considered delinquent September 1 or the date the income tax return of taxpayer becomes delinquent.

5. WORKERS' COMPENSATION INSURANCE

Contact: The Workers' Compensation Court at (405) 522-8600 for forms and further information.

Oklahoma's workers' compensation system is governed by the body of law found in Title 85 of the Oklahoma Statutes. That law provides for medical indemnity and rehabilitation benefits to injured workers.

Administration: The law is administered by the Oklahoma Workers' Compensation Court. Claimants may request a hearing before a judge or may settle without a trial. Appeals from a trial judge's ruling may be made to the Court En Banc, then to the Oklahoma Supreme Court. The Court Administrator's responsibilities include the regulation of all self-insurance and the application of the Schedule of Medical Fees

Coverage: Generally, coverage is mandatory for all employers with a few exceptions. Coverage for workers' compensation can be obtained by securing coverage from a private carrier, CompSource (a state agency that must offer the insurance) or by obtaining approval from the Court to self-insure if they:

· Have a $1 million annual payroll for the preceding three years.

· Have at least 100 workers.

· Have continuously engaged in business for at least five years.

· Have shareholders' equity of at least $500,000.

The Workers' Compensation Court implemented a strengthened workers' compensation reform package targeted to reduce costs and improve the system. This includes an advocacy program, voluntary mediation system, optional workplace medical plans, mandatory safety plans, medical and legal fee limitation, expanded Independent Medical Examiner (IME) authority, expanded court efficiencies, broadening fraud definition and revised benefit payment procedures.

6. RETAIL SALES AND USE TAX
(68 O.S. §§ 1350 et seq. and 1401 et seq.)

Base: Sales Tax - gross proceeds or gross receipts from sales of tangible personal property and a few enumerated services to consumers or users.

Use Tax: Purchase price of tangible personal property purchased outside the state of Oklahoma for use and/or consumption within the state by the purchaser.

Rate: A 4.5% sales tax and use tax is levied by the state. Municipalities may levy an additional city sales tax by vote of the people. Counties may levy a county sales tax not to exceed 2% after voter approval. The governing body of a municipality or county levying a sales tax may also levy use tax at a rate that does not exceed the sales tax rate on tangible personal property purchased that is brought into the municipality or county.

Sales Tax reports are due the 20th day of the month for sales during the first half of the month. For sales occurring during the second half of the month, sales tax reports are due on the 20th of the month following the sales – reports are delinquent if not received on that date. Except for vendors of certain building materials, (New 2002 Legislation - SB 1415) vendors who reported an average of $25,000 per month in the prior fiscal year, must participate in the Tax Commission's electronic funds transfer and electronic data interchange program. If good faith payments are made, as described in section 365 of Title 68, a taxpayer is considered to be in compliance. Direct pay permits may be obtained by those making purchases in excess of $800,000 annually.

IV. APPENDICES

A. Corporate Income Tax Overview

1. Brief Overview

The following discussion of taxes and tax rates is a general outlining of the primary taxes applicable to corporate businesses conducted in Oklahoma at the time of this publication. It should not be relied upon as a complete guide to all taxes, exemptions and rates applicable to individual corporations or business operations. It is generally advisable to review corporate operations with a tax specialist to determine the rate and application of taxes to be paid by a specific corporation or business.

Federal Taxes: All taxes imposed by the Federal Government are applicable throughout the USA. All employers are subject to three major taxes:

· Corporate Income Tax - on net income.

· Social Security Tax - payable on each employee's earnings.

· Unemployment Tax - on wages paid to each employee.

Currently the maximum FEDERAL corporate tax on net incomes is 34%. The maximum Oklahoma corporate tax on net income is 6% of the portion of corporate income earned in Oklahoma.

Oklahoma State Income Taxes:

· Corporate Income Tax - on income received for business transacted within the state.

The portion of corporate income earned in Oklahoma and therefore subject to the 6% tax is determined by a three-factor formula. (See Three Factor Chart below.)

THREE FACTOR FORMULA

Property in Oklahoma +
Per Federal Income Tax Return

Payroll in Oklahoma +
Per Federal Income Tax Return

Sales in Oklahoma
Per Federal Income Tax Return

Oklahoma Apportionment % of Income

Oklahoma corporate tax liability is usually arrived at by giving equal weight to property, payroll and sales within Oklahoma. However, the sales factor for corporations having capital investment in Oklahoma in a project of $200 million or more is 50% of the apportionment while property and payroll are each 25%.

The Oklahoma apportioned percentage of income is then multiplied by the corporation's reported net Federal taxable income (after Oklahoma adjustments) to determine the Oklahoma taxable income. This figure is then multiplied by the 6% Oklahoma corporate income tax rate to determine the Oklahoma tax.

OKLAHOMA TAX FORMULA

(1) >	(2) >	(3) >	(4) >	(5)
Oklahoma Apportioned Percentage from the 3 Factor Formula	Net Income Reported after Oklahoma adjustments	Oklahoma taxable income	6% Oklahoma Corporate income tax rate	Oklahoma Income Tax

The Oklahoma Legislature passed SB 1415 requiring a portion of the bonus depreciation permitted pursuant to the federal Job Creation and Worker Assistance Act to be added back and then reclaimed in a later year for Oklahoma income tax purposes

80% of the bonus depreciation taken on the federal return must be added to Oklahoma taxable income on Oklahoma's return. However, the bonus depreciation may be fully recovered on the Oklahoma return over the next four years. (68 O.S. § 2358.6)

The following is a corporate tax example assuming the facts as set out:

CORPORATE TAX EXAMPLE

· Manufacturing company "A" in Oklahoma with a sales office in another state.

· The company has an income of $1 million.

· After adjustments the company reports a Federal taxable income of $500,000.

· Three Factor Formula:

A. Property in Oklahoma is 95% of Total USA Property

B. Payroll in Oklahoma is 85% of Total USA Payroll

C. Sales in Oklahoma are 10% of Total USA Sales

A+B+C =	95%+85%+10% =	190 =	63 1/3
3	3	3

Three Factor Formula x Reported Fed. Income = Oklahoma Taxable Income = 63 1/3% x $500,000 = $316,650 (Less Okla. Adjustments).

Oklahoma Taxable Income x Oklahoma Income Tax Rate = Oklahoma Income Tax = $316,650 x 6% = $18,999.

B. Corporate Income/Sales Tax Rates (State by State)

Oklahoma's overall business and personal tax burden is relatively low when compared to the rest of the country. The corporate income tax is 6% of federal taxable income; the state sales tax rate is 4.5%. When comparing the maximum corporate tax and sales tax rates of all 50 states, Oklahoma ranks in the bottom third.

The following shows a comparison of U.S. state corporate income and sales tax rates.

State	Corporate Rate	Sales Tax Rate
Alabama	6.50%	4.00%
Alaska	1.00 - 9.40%	(Local Only)
Arizona	6.968%	5.60%
Arkansas	1.00-6.50%	5.125%
California	8.84%	7.25%
Colorado	4.63%	2.90%
Connecticut	7.50%	6.00%
Delaware	8.70%	None
District of Columbia	9.975%	5.75%
Florida	5.50%	5.75%
Georgia	6.00%	4.00%
Hawaii	4.40-6.40%	4.00%
Idaho	7.60%	5.00%
Illinois	7.30%	6.25%
Indiana	7.90%	5.00%
Iowa	6.00-12.00	5.00%
Kansas*	4.00%	5.30%
Kentucky	4.00-8.25%	6.00%
Louisiana	4.00-8.00%	4.00%
Maine	3.50-8.93%	5.00%
Maryland	7.00%	5.00%
Massachusetts	9.50%	5.00%
Michigan	2.10%	6.00%
Minnesota	9.80%	6.50%
Mississippi	3.00-5.00%	7.00%
Missouri	6.25%	4.225%
Montana	6.75%	None
Nebraska	5.58-7.81%	5.00%
Nevada	None	6.50%
New Hampshire	8.50%	None
New Jersey	9.00%	6.00%
New Mexico	4.80 - 7.60%	5.00%
New York	7.50%	4.00%
North Carolina	6.90%	4.50%
North Dakota	3.00- 10.50	5.00%
Ohio	5.10-8.50%	5.00%
Oklahoma	6.00%	4.50%
Oregon	6.60%	None
Pennsylvania	9.99%	6.00%
Rhode Island	9.00%	7.00%
South Carolina	5.00%	5.00%
South Dakota	None	4.00%
Tennessee	6.00%	6.00%
Texas**	4.50%	6.25%
Utah	5.00%	5.75%
Vermont	7.00-9.75%	5.00%
Virginia	6.00%	4.50%
Washington	None	6.50%
West Virginia	9.00%	6.00%
Wisconsin	7.90%	5.00%
Wyoming	None	4.00%

*3.35% Surtax on over $50M
**4.5% Franchise or Gross Receipts Tax
Source: January 2001 Federation of Tax Administrators

C. RIGHT-TO-WORK, ARTICLE 13, SECTION 1A OF OKLAHOMA'S CONSTITUTION READS:

A. As used in this section, "labor organization" means any organization of any kind, or agency or employee representation committee or union, that exists for the purpose, in whole or in part, of dealing with employers concerning wages, rates of pay, hours of work, other conditions of employment, or other forms of compensation.

B. No person shall be required, as a condition of employment or continuation of employment, to:

1. Resign or refrain from voluntary membership in, voluntary affiliation with, or voluntary financial support of a labor organization;

2. Become or remain a member of a labor organization;

3. Pay any dues, fees, assessments, or other charges of any kind or amount to a labor organization;

4. Pay to any charity or other third party, in lieu of such payments, any amount equivalent to or pro rata portion of dues, fees, assessments, or other charges regularly required of members of a labor organization; or

5. Be recommended, approved, referred, or cleared by or through a labor organization.

C. It shall be unlawful to deduct from the wages, earnings, or compensation of an employee any union dues, fees, assessments, or other charges to be held for, transferred to, or paid over to a labor organization unless the employee has first authorized such deduction.

D. The provisions of this section shall apply to all employment contracts entered into after the effective date of this section and shall apply to any renewal or extension of any existing contract.

E. Any person who directly or indirectly violates any provision of this section shall be guilty of a misdemeanor.

This constitutional amendment was voted into the constitution in 2001.

D. KEY BUSINESS CONTACTS

Oklahoma Department of Commerce (ODOC)
P.O. Box 26980
Oklahoma City, OK 73126-0980
(800) 879-6552
(405) 815-5261

New Investments and New Jobs
(800) 588-5959
Email: info@odoc.state.ok.us
Website: www.locateok.com

Russell M. Perry (405) 815-5202
Governor's Special Assistant For Economic Development

Ronald E. Bussert (405) 815-5264
Executive Director

George Sneed (405) 815-5278
General Counsel

John Reid (405) 815-5251
Deputy Director of Business Location
Email: John_Reid@odoc.state.ok.us
(Business Location and Expansion)

Beth VanHorn (405) 815-5148
Deputy Director of Business Development
Email: Beth_Van_Horn@odoc.state.ok.us
(In-state Business Development, Retention and Expansion)

Brenda Williams
Deputy Director of Community Development
Email: Brenda_Williams@odoc.state.ok.us

Kevin Chambers (405) 815-5217
Director, International Trade and Investment
International Location and Exporting
Email: Kevin_Chambers@odoc.state.ok.us

Brenda Vincent (405) 815-5210
Director, Business Incentives Policy Analysis
Email: Brenda_Vincent@odoc.state.ok.us

OTHER KEY CONTACTS

Agriculture, Oklahoma Department of
Dennis Howard, Commissioner
Rick Maloney, Director of Market Development
2800 N. Lincoln
Oklahoma City, OK 73105-4298
(405) 521-3864
Email: Rick@odagis.oklaosf.state.ok.us

Commissioners of the Land Office
Keith Kuhlman, Director
Real Estate Management Division
Suite 200, Paragon Building
5801 N. Broadway
P.O. Box 269810
Oklahoma City, OK 73126
(405) 604-8199
Fax: (405) 604-8140
Email: Keith.Kuhlman@clo.state.ok.us

CompSource Oklahoma
(State Workers' Compensation Fund)
David Fain, Underwriting Manager
Underwriting Division-Price Quotes
(405) 552-5860
E-Mail: David_F@Okcomp.Com
Barney Taylor, Special Counsel
P.O. Box 53505
Oklahoma City, Ok 73152
(405) 232-7663
Email: Barney_T@Okcomp.Com

Employment Security Commission, Oklahoma
Jon Brock, Executive Director
Jeff Haddad, Program Chief, Economic Research And Analysis Division
Robert Reagan, Program Chief, Contributions Department
2401 N. Lincoln
Oklahoma City, Ok 73105
(405) 557-7201 Or (405) 557-7131
Email: Jon.Brock@Oesc.State.Ok.Us

Environmental Quality, Oklahoma Department Of
Dave Dillon, Assistant Division Director
Customer Services Division
707 N. Robinson
Oklahoma City, Ok 73102
(405) 702-9100
(800) 869-1400
Email: Dave.Dillon@Deqmail.State.Ok.Us

Governor, Office Of
Room 212, State Capitol
Oklahoma City, Ok 73105-4890
(405) 521-2345

Industrial Access Road Program
Department Of Transportation
Mitch Surrett, Special Assistant To The Director
Oklahoma Department Of Transportation
200 N.E. 21st
Oklahoma City, Ok 73105
(405) 522-0290
Email: Mitch.Surrett@Odot.Org

Lieutenant Governor, Office Of
Lt. Governor's Office
Room 211, State Capitol
Oklahoma City, Ok 73105-2890
(405) 521-2161
Email: Ltgovernor@Ltgov.State.Ok.Us

Oklahoma Alliance For Manufacturing Excellence
Roy Peters, President
525 S. Main, Suite 210
Tulsa, Ok 74103
(918) 592-0722
Email: Roy.Peters@Okalliance.Com

Oklahoma Capital Investment Board (OCIB)
Robert Heard, President
301 N.W. 63rd, Suite 520
Oklahoma City, Ok 73116
(405) 848-9456
Email: Rheard@Edgecapital.Com

Oklahoma Center For The Advancement Of Science And Technology (OCAST)
And Oklahoma Institute Of Technology
Dr. William Sibley, President
4545 N. Lincoln Blvd., Suite 116
Oklahoma City, Ok 73105
(405) 524-1357
Email: Bsibley@Ocast.State.Ok.Us

Oklahoma Corporation Commission
Larry Fiddler, Director
Oil And Gas Division
Jim Thorpe Building, Room 255
Oklahoma City, Ok 73105
(405) 521-2302
Email: L.Fiddler@Occmail.Occ.State.Ok.Us

Oklahoma Finance Authorities (OFA)
-Oklahoma Industrial Finance Authority (OIFA)
- Oklahoma Development Finance Authority (ODFA)
Jim Fulmer, President
5900 N. Classen Court
Oklahoma City, Ok 73118
(405) 842-1145
Email: Ofa@Okfinance.Com

Oklahoma System Of Career & Technology Education
Training For Industry Program
Vikki Dearing, (405) 815-5110
Economic Development Liaison
P.O. Box 26980
Oklahoma City, Ok 73126-0980
(800) 879-6552, Ext. 110
Email: Vikki_Dearing@Odoc.State.Ok.Us

Oklahoma Technology Commercialization Center
Randy Goldsmith, President
840 Research Parkway, Suite #240
Oklahoma City, Ok 73104
(405) 235-2305
Email: Randy_Goldsmith@Otcc.Org

Oklahoma Work Opportunity Act And Welfare To Work Program, Employment Security Commission
Paul Williams
P.O. Box 52003
Oklahoma City, Ok 73152
(405) 557-5371
E-Mail: Paul.Williams@Oesc.State.Ok.Us

Secretary Of State, Oklahoma
Dawn Amundsen, Assistant Secretary Of State
Secretary Of State Office
101 State Capitol Bldg.
Oklahoma City, Ok 73105
(405) 521-3912
Email: Dawn.Amundsen@Oklaosf.State.Ok.Us

State Bond Advisor
Tim Martin, Senior Bond Analyst
State Bond Oversight Commission
5900 N. Classen Court
Oklahoma City, Ok 73118
(405) 602-3100
Email: Tmartin@Oklsba.Org

Tax Commission, Oklahoma
Bill Johnson, Commerce And Industry Administrator
M.C. Conners Building
Oklahoma City, Ok 73194
(405) 521-4325
Email: Bjohnson@Oktax.State.Ok.Us

Workers' Compensation Court
Mike Sykes, Counselor, Program Director
1915 N. Stiles
Oklahoma City, Ok 73105
(405) 522-8760
Email: Msykes@Owcc.State.Ok.Us

Table of Contents

BUSINESS INCENTIVES

Tax Incentives Pro Forma Overview

D. SALES AND USE TAX REFUNDS

F. INCOME TAX CREDITS / EXCLUSIONS

G. EMPLOYEE TRAINING

H. ENTERPRISE ZONES

I. TRANSPORTATION AND DISTRIBUTION

BENEFITS

OTHER BENEFITS INCLUDE

A. GENERAL OVERVIEW

B. OKLAHOMA BUSINESS ORGANIZATIONAL COSTS

B. OKLAHOMA BUSINESS ORGANIZATIONAL COSTS

C. MAJOR BUSINESS TAXES AND PREMIUMS

INDIVIDUALS

CORPORATIONS

A. Corporate Income Tax Overview

D. KEY BUSINESS CONTACTS