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STATE OF OKLAHOMA
1st Session of the 60th Legislature (2025)
SENATE BILL 689 By: Hall
AS INTRODUCED
An Act relating to ad valorem tax; amending 68 O.S.
2021, Section 2902, as last amended by Section 1,
Chapter 390, O.S.L. 2022 (68 O.S. Supp. 2024, Section
2902), which relates to the exemption from ad valorem
tax for manufacturing facilities; modifying payroll
requirement for certain industry; modifying
definitions; defining terms; prescribing certain
payroll calculation; prescribing application of
certain amendments; requiring the Oklahoma Tax
Commission to rescind certain denial and
determination upon request; updating statutory
language; and declaring an emergency.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 2902, as
last amended by Section 1, Chapter 390, O.S.L. 2022 (68 O.S. Supp.
2024, Section 2902), is amended to read as follows:
Section 2902. A. Except as otherwise provided by subsection H
of Section 3658 of this title pursuant to which the exemption
authorized by this section may not be claimed, a qualifying
manufacturing concern, as defined by Section 6B of Article X of the
Oklahoma Constitution, and as further defined herein, shall be
exempt from the levy of any ad valorem taxes upon new, expanded or
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acquired manufacturing facilities including facilities engaged in
research and development, for a period of five (5) years. The
provisions of Section 6B of Article X of the Oklahoma Constitution
requiring an existing facility to have been unoccupied for a period
of twelve (12) months prior to acquisition shall be construed as a
qualification for a facility to initially receive an exemption, and
shall not be deemed to be a qualification for that facility to
continue to receive an exemption in each of the four (4) years
following the initial year for which the exemption was granted.
Such facilities are hereby classified for the purposes of taxation
as provided in Section 22 of Article X of the Oklahoma Constitution.
B. For purposes of this section, the following definitions
shall apply:
1. “Manufacturing facilities” means facilities engaged in the
mechanical or chemical transformation of materials or substances
into new products and except as provided by paragraph 6 of
subsection C of this section shall include:
a. establishments which have received a manufacturer
exemption permit pursuant to the provisions of Section
1359.2 of this title,
b. facilities including repair and replacement parts,
primarily engaged in aircraft repair, building and
rebuilding whether or not on a factory basis,
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c. establishments primarily engaged in computer services
and data processing as defined under Industrial Group
Numbers 5112 and 5415, and U.S. Industry Number 334611
and 519130 of the NAICS Manual, latest revision, and
which derive at least fifty percent (50%) of their
annual gross revenues from the sale of a product or
service to an out-of-state buyer or consumer, and as
defined under Industrial Group Number 5182 of the
NAICS Manual, latest revision, which derive at least
eighty percent (80%) of their annual gross revenues
from the sale of a product or service to an out-of-
state buyer or consumer. Eligibility as a
manufacturing facility pursuant to this subparagraph
shall be established, subject to review by the
Oklahoma Tax Commission, by annually filing an
affidavit with the Tax Commission stating that the
facility so qualifies and such other information as
required by the Tax Commission. For purposes of
determining whether annual gross revenues are derived
from sales to out-of-state buyers, all sales to the
federal government shall be considered to be an out-
of-state buyer,
d. facilities that the investment cost of the
construction, acquisition or expansion is Five Hundred
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Thousand Dollars ($500,000.00) or more with respect to
assets placed into service during calendar year 2022.
For subsequent calendar years, the investment required
shall be increased annually by a percentage equal to
the previous year’s increase in the Consumer Price
Index-All Urban Consumers (“CPI-U”) and such adjusted
amount shall be the required investment cost in order
to qualify for the exemption authorized by this
section. The Oklahoma Department of Commerce shall
determine the amount of the increase, if any, on
January 1 of each year. The Oklahoma Tax Commission
shall publish on its website at least annually the
adjusted dollar amount in order to qualify for the
exemption authorized by this section and shall include
the adjusted dollar amount in any of its relevant
forms or publications with respect to the exemption.
Provided, “investment cost” shall not include the cost
of direct replacement, refurbishment, repair or
maintenance of existing machinery or equipment, except
that “investment cost” investment cost shall include
capital expenditures for direct replacement,
refurbishment, repair or maintenance of existing
machinery or equipment that qualifies for depreciation
and/or amortization pursuant to the Internal Revenue
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Code of 1986, as amended, and such expenditures shall
be eligible as a part of an “expansion” expansion that
otherwise qualifies under this section,
e. establishments primarily engaged in distribution as
defined under Industry Numbers 49311, 49312, 49313 and
49319 and Industry Sector Number 42 of the NAICS
Manual, latest revision, and which meet the following
qualifications:
(1) construction with an initial capital investment
of at least Five Million Dollars ($5,000,000.00),
(2) employment of at least one hundred (100) full-
time-equivalent employees, as certified by the
Oklahoma Employment Security Commission,
(3) payment of wages or salaries to its employees at
a wage which equals or exceeds the average wage
requirements in the Oklahoma Quality Jobs Program
Act for the year in which the real property was
placed into service, and
(4) commencement of construction on or after November
1, 2007, with construction to be completed within
three (3) years from the date of the commencement
of construction,
f. facilities engaged in the manufacturing, compounding,
processing or fabrication of materials into articles
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of tangible personal property according to the special
order of a customer (custom order manufacturing) by
manufacturers classified as operating in North
American Industry Classification System (NAICS)
Sectors 32 and 33, but does not include such custom
order manufacturing by manufacturers classified in
other NAICS code sectors, and
g. with respect to any entity making an application for
the exemption authorized by this section on or after
January 1, 2023, the establishment making application
for exempt treatment of real or personal property
acquired or improved beginning January 1, 2022, and
for any calendar year thereafter, the entity shall be
required to pay new direct jobs, as defined by Section
3603 of this title for purposes of the Oklahoma
Quality Jobs Program Act, an average annualized wage
which equals or exceeds the average wage requirement
in the Oklahoma Quality Jobs Program Act for the year
in which the real or personal property was placed into
service. The Oklahoma Tax Commission may request
verification from the Oklahoma Department of Commerce
that an establishment seeking an exemption for real or
personal property pays an average annualized wage that
equals or exceeds the average wage requirement in
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effect for the year in which the real or personal
property was placed into service. For purposes of
this subparagraph, it shall not be necessary for the
establishment to qualify for incentive payments
pursuant to the Oklahoma Quality Jobs Program Act, but
the establishment shall be subject to the wage
requirements of the Oklahoma Quality Jobs Program Act
with respect to new direct jobs in order to qualify
for the exempt treatment authorized by this section.
Eligibility as a manufacturing facility pursuant to this
subparagraph shall be established, subject to review by the Tax
Commission, by annually filing an affidavit with the Tax Commission
stating that the facility so qualifies and containing such other
information as required by the Tax Commission.
Provided, eating and drinking places, as well as other retail
establishments, shall not qualify as manufacturing facilities for
purposes of this section, nor shall centrally assessed properties.
Eligibility as a manufacturing facility pursuant to this
subparagraph shall be established, subject to review by the Tax
Commission, by annually filing an application with the Tax
Commission stating that the facility so qualifies and containing
such other information as required by the Tax Commission;
2. “Facility” and “facilities”, except as otherwise provided by
this section, means and includes the land, buildings, structures and
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improvements used directly and exclusively in the manufacturing
process. Effective January 1, 2022, and for each calendar year
thereafter, for establishments which have received a manufacturer
exemption permit pursuant to the provisions of Section 1359.2 of
this title, or facilities engaged in manufacturing activities
defined or classified in the NAICS Manual under Industry Nos. 311111
through 339999, inclusive, but for no other establishments, facility
and facilities means and includes the land, buildings, structures,
improvements, machinery, fixtures, equipment and other personal
property used directly and exclusively in the manufacturing process;
and
3. “Research and development” means activities directly related
to and conducted for the purpose of discovering, enhancing,
increasing or improving future or existing products or processes or
productivity.
C. The following provisions shall apply:
1. A manufacturing concern shall be entitled to the exemption
herein provided for each new manufacturing facility constructed,
each existing manufacturing facility acquired and the expansion of
existing manufacturing facilities on the same site, as such terms
are defined by Section 6B of Article X of the Oklahoma Constitution
and by this section;
2. No manufacturing concern shall receive more than one five-
year exemption for any one manufacturing facility unless the
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expansion which qualifies the manufacturing facility for an
additional five-year exemption meets the requirements of paragraph 4
of this subsection and the employment level established for any
previous exemption is maintained;
3. Any exemption as to the expansion of an existing
manufacturing facility shall be limited to the increase in ad
valorem taxes directly attributable to the expansion;
4. All initial applications for any exemption for a new,
acquired or expanded manufacturing facility shall be granted only
if:
a. there is a net increase in annualized base payroll, or
for establishments primarily engaged in computer
services and data processing as defined under
Industrial Group Number 5182 of the NAICS Manual,
latest revision, with not less than One Billion
Dollars ($1,000,000,000.00) in existing capital
expenditures in the county in which the facility or
facilities are located, there is a net increase in
annual payroll, as defined in subparagraph c of
paragraph 5 of this subsection, over the initial
payroll of at least Two Hundred Fifty Thousand Dollars
($250,000.00) if the facility is located in a county
with a population of fewer than seventy-five thousand
(75,000), according to the most recent Federal
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Decennial Census, while maintaining or increasing base
payroll in subsequent years, or at least One Million
Dollars ($1,000,000.00) if the facility is located in
a county with a population of seventy-five thousand
(75,000) or more, according to the most recent Federal
Decennial Census, while maintaining or increasing base
payroll in subsequent years; provided, the payroll
requirement of this subparagraph shall be waived for
claims for exemptions including claims previously
denied or on appeal on March 3, 2010, for all initial
applications for exemption filed on or after January
1, 2004, and on or before March 31, 2009, and all
subsequent annual exemption applications filed related
to the initial application for exemption, for an
applicant, if the facility has been located in
Oklahoma for at least fifteen (15) years engaged in
marine engine manufacturing as defined under U.S.
Industry Number 333618 of the NAICS Manual, latest
revision, and has maintained an average employment of
five hundred (500) or more full-time-equivalent
employees over a ten-year period. Any applicant that
qualifies for the payroll requirement waiver as
outlined in the previous sentence and subsequently
closes its Oklahoma manufacturing plant prior to
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January 1, 2012, may be disqualified for exemption and
subject to recapture. For an applicant engaged in
paperboard manufacturing as defined under U.S.
Industry Number 322130 of the NAICS Manual, latest
revision, union master payouts paid by the buyer of
the facility to specified individuals employed by the
facility at the time of purchase, as specified under
the purchase agreement, shall be excluded from payroll
for purposes of this section.
In order to provide certainty with respect to
investments in manufacturing facilities pertaining to
all initial applications for exemption filed on or
after January 1, 2016, the following definitions shall
apply:
(1) except as otherwise provided in subparagraph c of
paragraph 5 of this subsection, “base payroll”
shall mean total payroll adjusted for any
nonrecurring bonuses, exercise of stock option or
stock rights and other nonrecurring,
extraordinary items included in total payroll,
and
(2) except as otherwise provided in subparagraph c of
paragraph 5 of this subsection, “initial payroll”
shall mean base payroll for the year immediately
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preceding the initial construction, acquisition,
or expansion.
The Tax Commission shall verify payroll
information through the Oklahoma Employment
Security Commission by using reports from the
Oklahoma Employment Security Commission for the
calendar year immediately preceding the year for
which initial application is made for base-line
payroll, which must be maintained or increased
for each subsequent year; provided, a
manufacturing facility shall have the option of
excluding from its payroll, for purposes of this
section:
i. payments to sole proprietors, members
of a partnership, members of a limited
liability company who own at least ten
percent (10%) of the capital of the
limited liability company or
stockholder-employees of a corporation
who own at least ten percent (10%) of
the stock in the corporation, and
ii. any nonrecurring bonuses, exercise of
stock option or stock rights or other
nonrecurring, extraordinary items
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included in total payroll numbers as
reported by the Oklahoma Employment
Security Commission. A manufacturing
facility electing either option shall
indicate such election upon its
application for an exemption under this
section. Any manufacturing facility
electing either option shall submit
such information as the Tax Commission
may require in order to verify payroll
information. Payroll information
submitted pursuant to the provisions of
this paragraph shall be submitted to
the Tax Commission and shall be subject
to the provisions of Section 205 of
this title, and
b. the facility offers, or will offer within one hundred
eighty (180) days of the date of employment, a basic
health benefits plan to the full-time-equivalent
employees of the facility, which is determined by the
Oklahoma Department of Commerce to consist of the
elements specified in subparagraph b of paragraph 1 of
subsection A of Section 3603 of this title or elements
substantially equivalent thereto.
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For purposes of this section, calculation of the amount of
increased base payroll, or annual payroll for initial and renewal
applications for exemptions filed on or after January 1, 2019, by
establishments primarily engaged in computer services and data
processing as defined under Industrial Group Number 5182 of the
NAICS Manual, latest revision, with not less than One Billion
Dollars ($1,000,000,000.00) in existing capital expenditures in the
county in which the facility or facilities are located, shall be
measured from the start of initial construction or expansion to the
completion of such construction or expansion or for three (3) years
from the start of initial construction or expansion, whichever
occurs first. The amount of increased base or annual payroll shall
include payroll for full-time-equivalent employees in this state who
are employed by an entity other than the facility which has
previously or is currently qualified to receive an exemption
pursuant to the provisions of this section and who are leased or
otherwise provided to the facility, if such employment did not exist
in this state prior to the start of initial construction or
expansion of the facility. The manufacturing concern shall submit
an affidavit to the Tax Commission, signed by an officer, stating
that the construction, acquisition or expansion of the facility will
result in a net increase in the annualized base payroll or annual
payroll as required by this paragraph and that full-time-equivalent
employees of the facility are or will be offered a basic health
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benefits plan as required by this paragraph. If, after the
completion of such construction or expansion or after three (3)
years from the start of initial construction or expansion, whichever
occurs first, the construction, acquisition or expansion has not
resulted in a net increase in the amount of annualized base payroll,
if required, or any other qualification specified in this paragraph
has not been met, the manufacturing concern shall pay an amount
equal to the amount of any exemption granted including penalties and
interest thereon, to the Tax Commission for deposit to the Ad
Valorem Reimbursement Fund;
5. a. Except as otherwise provided by this paragraph, any
new, acquired or expanded computer data processing,
data preparation or information processing services
provider classified in U.S. Industry Number 518210 of
the North American Industrial Classification System
(NAICS) Manual, 2017 revision, may apply for
exemptions under this section for each year in which
new, acquired, or expanded capital improvements to the
facility are made for assets placed in service not
later than December 31, 2021, if:
a. (1) there is a net increase in annualized
payroll or annual payroll of the applicant at any
facility or facilities of the applicant in this
state of at least Two Hundred Fifty Thousand
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Dollars ($250,000.00), which is attributable to
the capital improvements, while maintaining or
increasing base payroll, or a net increase of
Seven Million Dollars ($7,000,000.00) or more in
capital improvements, while maintaining or
increasing payroll or initial payroll at the
facility or facilities in this state which are
included in the application, and
b. (2) the facility offers, or will offer within
one hundred eighty (180) days of the date of
employment of new employees attributable to the
capital improvements, a basic health benefits
plan to the full-time-equivalent employees of the
facility, which is determined by the Oklahoma
Department of Commerce to consist of the elements
specified in subparagraph b of paragraph 1 of
subsection A of Section 3603 of this title or
elements substantially equivalent thereto.,
b. An establishment described by this paragraph, the
primary business activity of which is described by
Industry No. 518210 of the North American Industry
Classification System (NAICS) Manual, 2017 revision,
that has applied for and been granted an exemption for
personal property at any time within five (5) years
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prior to November 1, 2021, may apply for exemptions
for items of eligible personal property to be located
within improvements to real property and such real
property and improvements having been exempt from ad
valorem taxation prior to November 1, 2021, pursuant
to the provisions of this section if such personal
property is placed in service not later than December
31, 2036. No additional personal property of such
establishment placed in service after such date shall
qualify for the exempt treatment otherwise authorized
pursuant to this paragraph,
c. For all initial and renewal applications for exemption
filed on or after January 1, 2019, by establishments
primarily engaged in computer services and data
processing as defined under Industrial Group Number
5182 of the NAICS Manual, latest revision, with not
less than One Billion Dollars ($1,000,000,000.00) in
existing capital expenditures in the county in which
the facility or facilities are located, the following
definitions shall apply:
(1) “annual payroll” means total payroll adjusted for
any nonrecurring bonuses, exercise of stock
option or stock rights, and other nonrecurring,
extraordinary items included in total payroll,
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(2) “initial payroll” means the average annual
payroll for the three (3) years immediately
preceding the initial construction, acquisition,
or expansion, and
(3) “base payroll” means initial payroll plus
$250,000.00 if the facility is located in a
county with a population of fewer than seventy-
five thousand (75,000), or initial payroll plus
One Million Dollars ($1,000,000.00) if the
facility is located in a county with a population
of seventy-five thousand (75,000) or more
according to the latest Federal Decennial Census,
d. The Tax Commission shall verify the annual payroll,
initial payroll, and base payroll, as defined in this
paragraph, information through the Oklahoma Employment
Security Commission by using reports from the Oklahoma
Employment Security Commission, and
e. The amendments to this section made upon the effective
date of this act shall apply to all initial and
renewal applications submitted in the year 2024 and
prospectively, including without limitation any
renewal application relating to property for which an
initial or renewal application in a previous year was
denied so long as the property would have qualified
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for the exemption in that previous year under the
amendments to this section upon the effective date of
this act if the amendments applied in that year;
provided, however, the amendments shall not apply to
any application submitted by an establishment in the
year 2024 if the application of the amendments would
invalidate an exemption under this section for which
the manufacturing concern qualified on the effective
date of this act. The Tax Commission or county
assessor, as applicable, is hereby directed, upon
request, to rescind the following:
(1) any application denial, or
(2) any determination that an exemption was
erroneously or unlawfully granted in the year
2024 that is inconsistent with this subparagraph;
6. Effective January 1, 2017, an entity engaged in electric
power generation by means of wind, as described by the North
American Industry Classification System, No. 221119, shall not be
defined as a qualifying manufacturing concern for purposes of the
exemption otherwise authorized pursuant to Section 6B of Article X
of the Oklahoma Constitution or qualify as a “manufacturing
facility” manufacturing facility as defined in this section. No
initial application for exemption shall be filed by or accepted from
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an entity engaged in electric power generation by means of wind on
or after January 1, 2018;
7. An entity or applicant engaged in an industry as defined
under U.S. Industry Number 324110 of the NAICS Manual, latest
revision, which has applied for or been granted an exemption for a
time period which began on or after calendar year 2012 and before
calendar year 2016 but which did not meet the payroll requirements
of subparagraph a of paragraph 4 of this subsection because of
nonrecurring bonuses, exercise of stock option or stock rights or
other nonrecurring, extraordinary items included in total payroll in
the previous year, shall be allowed an exemption, beginning with
calendar year 2016, for the number of years including the calendar
year for which the exemption was denied, remaining in the entity’s
five-year exemption period, provided such entity attains or
increases payroll at or above the initial or base payroll
established for the exemption;
8. A facility engaged in manufacturing defined under U.S.
Industry Number 327310 of the NAICS Manual shall have the payroll
requirements of paragraph 4 of this subsection waived for tax year
2021, which is based in part on the 2020 calendar year payroll
reported to the Oklahoma Employment Security Commission, and may
continue to receive the exemption for the five-year period provided
in this section only if all other requirements of this section are
met; and
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9. A facility engaged in manufacturing which otherwise
qualifies for the exemption or exemptions pursuant to the provisions
of this section shall have the payroll requirements of paragraph 4
of this subsection waived for tax year 2021, which is based in part
on the 2020 calendar year payroll reported to the Oklahoma
Employment Security Commission, and for tax year 2022, which is
based in part on the 2021 calendar year payroll reported to the
Oklahoma Employment Security Commission, and may continue to receive
the exemption for the five-year period provided in this section only
if all other requirements of this section are met.
D. 1. Except as provided in paragraph 2 of this subsection,
the five-year period of exemption from ad valorem taxes for any
qualifying manufacturing facility property shall begin on January 1
following the initial qualifying use of the property in the
manufacturing process.
2. The five-year period of exemption from ad valorem taxes for
any qualifying manufacturing facility, as specified in subparagraphs
a and b of this paragraph, which is located within a tax incentive
district created pursuant to the Local Development Act by a county
having a population of at least five hundred thousand (500,000),
according to the most recent Federal Decennial Census, shall begin
on January 1 following the expiration or termination of the ad
valorem exemption, abatement, or other incentive provided through
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the tax incentive district. Facilities qualifying pursuant to this
subsection shall include:
a. a manufacturing facility as defined in subparagraph c
of paragraph 1 of subsection B of this section, and
b. an establishment primarily engaged in distribution as
defined under Industry Number 49311 of the North
American Industry Classification System for which the
initial capital investment was at least One Hundred
Eighty Million Dollars ($180,000,000.00); provided,
that the qualifying job creation and depreciable
property investment occurred prior to calendar year
2017 but not earlier than calendar year 2013.
E. Any person, firm or corporation claiming the exemption
herein provided for shall file each year for which exemption is
claimed, an application therefor with the county assessor of the
county in which the new, expanded or acquired facility is located.
The application shall be on a form or forms prescribed by the Tax
Commission, and shall be filed on or before March 15, except as
provided in Section 2902.1 of this title, of each year in which the
facility desires to take the exemption or within thirty (30) days
from and after receipt by such person, firm or corporation of notice
of valuation increase, whichever is later. In a case where
completion of the facility or facilities will occur after January 1
of a given year, a facility may apply to claim the ad valorem tax
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exemption for that year. If such facility is found to be qualified
for exemption, the ad valorem tax exemption provided for herein
shall be granted for that entire year and shall apply to the ad
valorem valuation as of January 1 of that given year. For
applicants who qualify under the provisions of subparagraph b of
paragraph 1 of subsection B of this section, the application shall
include a copy of the affidavit and any other information required
to be filed with the Tax Commission.
F. The application shall be examined by the county assessor and
approved or rejected in the same manner as provided by law for
approval or rejection of claims for homestead exemptions. The
taxpayer shall have the same right of review by and appeal from the
county board of equalization, in the same manner and subject to the
same requirements as provided by law for review and appeals
concerning homestead exemption claims. Approved applications shall
be filed by the county assessor with the Tax Commission no later
than June 15, except as provided in Section 2902.1 of this title, of
the year in which the facility desires to take the exemption.
Incomplete applications and applications filed after June 15 will be
declared null and void by the Tax Commission. In the event that a
taxpayer qualified to receive an exemption pursuant to the
provisions of this section shall make payment of ad valorem taxes in
excess of the amount due, the county treasurer shall have the
authority to credit the taxpayer’s real or personal property tax
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overpayment against current taxes due. The county treasurer may
establish a schedule of up to five (5) years of credit to resolve
the overpayment.
G. Nothing herein shall in any manner affect, alter or impair
any law relating to the assessment of property, and all property,
real or personal, which may be entitled to exemption hereunder shall
be valued and assessed as is other like property and as provided by
law. The valuation and assessment of property for which an
exemption is granted hereunder shall be performed by the Tax
Commission using one or more of the cost, income and expense and
sales comparison approaches to estimate fair cash value in
accordance with the Uniform Standards of Professional Appraisal
Practice.
H. The Tax Commission shall have the authority and duty to
prescribe forms and to promulgate rules as may be necessary to carry
out and administer the terms and provisions of this section.
SECTION 2. It being immediately necessary for the preservation
of the public peace, health or 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.
60-1-1278 QD 1/19/2025 5:41:25 AM