STATE OF OKLAHOMA

1st Session of the 53rd Legislature (2011)

SENATE BILL 323	By:	Sparks

AS INTRODUCED

An Act relating to income tax; defining terms; authorizing issuance of certain tax credits to qualified payload rocket enterprise; imposing limitations with respect to issuance of tax credits; prescribing procedures related to tax credit allocation process; providing for reduction of credit allocations based upon deficiency in qualifying matching income; prescribing requirements related to gross payroll; providing for reduction of credit allocations based upon deficiency in gross payroll amount; providing for final allocation of tax credits; providing for allocation of credits based upon prior year reductions; prescribing taxes against which credit claimable; prohibiting reduction of tax liability to less than designated amount; providing for carryover period; requiring reimbursement for certain expense related to credit allocation process; 
providing for codification; and declaring an emergency.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 2357.901 of Title 68, unless there is created a duplication in numbering, reads as follows:
A.  As used in this section:
1.  “Equity” means money or any other thing of value exchanged for a share or shares in a corporation or a membership interest or its equivalent in a limited liability company or an interest in a general or limited partnership or any document or account pursuant to which an investment in a qualified payload rocket enterprise is recorded;
2.  “Payload rocket system” means a device launched from the surface of the earth by means of chemical reactions using solid or liquid propellant to an altitude of at least two hundred thousand (200,000) feet bearing a payload weight of at least one thousand (1,000) pounds and capable of returning to the surface of the earth intact, as certified to the satisfaction of the Tax Commission by a qualified aerospace engineer not employed or compensated by any entity to which credits are to be issued pursuant to this section; 
3.  “Qualifying matching income sources” means:
a.	equity invested in a qualified payload rocket enterprise,
b.	proceeds from loans made to a qualified payload rocket enterprise which the business is legally obligated to repay,
c.	enforceable contracts requiring payment to a qualified payload rocket enterprise for the launch of a payload rocket system containing tangible personal property owned or controlled by a third party for propulsion into a suborbital or orbital trajectory, or
d.	payments actually received by a qualified payload rocket enterprise pursuant to a contract conforming to the description in subparagraph c of this paragraph; and
4.  “Qualified payload rocket enterprise” means a lawfully organized business entity:
a.	whose principal business activity is described by Industry No. 336414 of the North American Industry Classification System, latest edition,
b.	has maintained, at the time of the first allocation of any credits authorized to be issued to such entity, an average of at least One Million Dollars ($1,000,000.00) in payroll paid directly to persons whose wages are subject to the withholding tax imposed pursuant to Section 2385.2 of Title 68 of the Oklahoma Statutes for a period of at least three (3) years preceding the date of credit issuance, and
c.	has had, between June 2002, and June 2007, a certification from the United States Small Business Administration as an SBA 8(a) minority or disadvantaged business enterprise,
B.  Subject to the requirements of this section, the Tax Commission shall issue and transfer the sum of Twenty Million Dollars ($20,000,000.00) in tax credits to a qualified payload rocket enterprise.  The credits issued pursuant to the authority of this section shall be freely transferable.
C.  The Tax Commission shall not allocate more than Four Million Dollars ($4,000,000.00) in credits authorized by subsection A of this section per fiscal year.  The Tax Commission shall be authorized to issue the first increment of tax credits to a qualified payload rocket enterprise on or after July 1, 2011.
D.  All allocations of tax credits shall be subject to the further limitations imposed pursuant to subsections E, F, G and H of this section.
E.  After the initial allocation of Four Million Dollars ($4,000,000.00), at the end of the second fiscal year following the initial allocation, the qualified payload rocket enterprise shall determine the total amount of qualifying matching income received by the enterprise from qualifying matching income sources.  If the amount of qualifying matching income is equal to two times the amount of tax credits issued for the applicable fiscal year, the Tax Commission shall issue an additional increment of Four Million Dollars ($4,000,000.00) in tax credits to the qualified payload rocket enterprise for each fiscal year.  For each subsequent fiscal year, the qualified payload rocket enterprise shall determine the total amount of qualifying matching income received by the enterprise from qualifying matching income sources for the one (1) fiscal year concluding as of June 30 following the credit allocation.
F.  If the amount of qualifying matching income is less than two times the amount of tax credits issued for the applicable fiscal year, the Tax Commission shall reduce the amount of credits issued for the ensuing fiscal year by an amount equal to the difference between the actual qualifying matching income amount for the applicable period and two times the amount of tax credits issued for the applicable fiscal year.
G.  In addition to all other requirements imposed pursuant to this section, the Tax Commission shall determine the total gross payroll of the qualified rocket payload enterprise for the preceding fiscal year.  If the total gross payroll for the applicable period equals or exceeds Two Million Five Hundred Thousand Dollars ($2,500,000.00), the qualified payload rocket enterprise shall be eligible for the further issuance and transfer of credits as otherwise prescribed by this section.  If the total gross payroll for the applicable period is less than Two Million Five Hundred Thousand Dollars ($2,500,000.00), the Tax Commission shall reduce the amount of credits that would otherwise be issued in an amount equal to the difference between the actual total gross payroll for the applicable period and Two Million Five Hundred Thousand Dollars ($2,500,000.00).
H.  Except as otherwise provided by this subsection, the final allocation of tax credits authorized by this section shall be made for the fiscal year ending June 30, 2016, if all other requirements imposed by this section have been fulfilled by the qualified payload rocket enterprise.  If a qualified payload rocket enterprise receives less than full amount of tax credits for any fiscal year because of a reduction attributable to failure to maintain a required payroll level or failure to meet qualifying matching income requirements, or both, the tax credits authorized pursuant to this section may be issued for fiscal years ending after June 30, 2016, but in no event shall any tax credits be originally issued to a qualified payload rocket enterprise for a fiscal year ending after June 30, 2021.  The provisions of this section shall not affect the ability of a taxpayer to claim a credit acquired through transfer from a qualified payload rocket enterprise.
I.  For taxable years beginning after December 31, 2011, any credits issued originally to a qualified payload rocket enterprise may be utilized against a tax liability imposed by:
1.  The income tax levied by Section 2355 of Title 68 of the Oklahoma Statutes;
2.  The in lieu tax for financial institutions levied by Section 2370 of Title 68 of the Oklahoma Statutes;
3.  The gross production tax levied by Section 1001 of Title 68 of the Oklahoma Statutes; and 
4.  The insurance premium tax levied by Section 624 of Title 36 of the Oklahoma Statutes.
J.  The tax credits authorized pursuant to the provisions of this section shall not be used to reduce the liability of a taxpayer to less than zero (0).
K.  To the extent not used, tax credits issued pursuant to the authority of this section may be carried over, in order, for a period of five (5) taxable years.
L.  The qualified receiving entity shall reimburse the Tax Commission for reasonable expenses incurred in obtaining the certification required by paragraph 2 of subsection A of this section.
SECTION 2.  It being immediately necessary for the preservation of the public peace, health and safety, an emergency is hereby declared to exist, by reason whereof this act shall take effect and be in full force from and after its passage and approval.

53-1-760	JCR	1/14/2011 4:11:25 PM