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June 28, 2014

Suits threaten to nullify 2014 state tax legislation

OKLAHOMA CITY — Legal challenges that threaten to nullify two tax laws that were among the 2014 Oklahoma Legislature’s major accomplishments will have little impact on the state budget that goes into effect Tuesday, state fiscal analysts said Friday.

But organizations that represent Oklahoma oil and natural gas producers said the industry that historically fuels the state economy could be harmed if a law adjusting Oklahoma’s tax on oil and gas production is ruled unconstitutional.

“It gave tax certainty to oil and gas producers while they plan their budget,” said Cody Bannister, vice president of communications for the 2,700-member Oklahoma Independent Petroleum Association. A prolonged legal battle or a court ruling that would force the Legislature to revisit the issue next year “has the potential to jeopardize some drilling budgets in Oklahoma,” Bannister said.

State budget writers have already made minor adjustments in the upcoming budget year following an Oklahoma Attorney General’s Office opinion that invalidated the legislative diversion of about $7.9 million from a program that provides free college tuition to students from low-income families.

A total of 66 state agencies will receive an 0.12 percent cut in their budgets to make up for the revenue, said John Estus, spokesman for the Office of Management and Enterprise Services.

“That’s not a budget buster. It is an inconvenience,” Estus said.

The tax law challenges were filed with the Oklahoma Supreme Court by Oklahoma City attorney Jerry Fent, who has successfully challenged a variety of legislation in the past. The state high court has not yet decided whether to consider the challenges.

One lawsuit filed on May 22, a day before the Legislature adjourned its regular session, challenges legislation that cuts the state top income tax rate from 5.25 percent to 5 percent in 2016 if revenue triggers are met. A second reduction from 5 percent to 4.85 percent will occur no sooner than two years after the 5 percent rate is enacted, providing there’s enough money to cover the cost of the reduction.

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