OKLAHOMA CITY — Nearly 1 in 4 aerospace industry engineers have received letters recently demanding they repay Oklahoma thousands of dollars after state auditors determined they’re ineligible for a popular tax credit under the state’s exacting standards.
Some of those engineers, meanwhile, said they feel they were misled by what seems to be a bait-and-switch initiative organized by state leaders to lure them to move to Oklahoma in exchange for a lucrative tax incentive. The problem, they said, isn’t the program itself, but the qualifying conditions are so complicated and convoluted they make eligibility unclear. In some cases, employers don’t even understand who is eligible.
Over several weeks, CNHI Oklahoma has spoken with and received emails from engineers who said they were shocked to receive the past-due tax bills after they thought they qualified for an incentive program.
The engineers agreed to speak about their tax travails on the condition of anonymity because they’re protesting — or considering contesting — their tax bills and fear retaliation.
The engineers said they accepted jobs in Oklahoma’s booming aerospace industry largely on promised eligibility for the $5,000 tax credit the state offers to attract top-notch talent.
The tax program offers an incentive to qualified aerospace employees who hold a degree in engineering from programs accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology, better known as ABET. The nonprofit promises that science, computing and engineering programs meet its quality standards.
The credit is granted each year for up to the first five years, according to the state Tax Commission.
Paula Ross, a spokeswoman for the Tax Commission, said the agency just finished reviewing all the aerospace tax credit filings for 2015 and 2016. Each review must be done manually because of the credit’s very specific requirements, Ross said.
In all, there were 1,999 returns filed in 2015, she said. Of those, 15% didn’t meet the qualifications.
In 2016, there were 2,283 filers. Of those, 23% didn’t qualify and received an assessment letter.
Ross said it’s not uncommon to audit tax filings several years later. Reviews are typically tied to when Oklahoma receives federal returns.
Engineers said they received assessment letters demanding $5,000 plus interest and penalties. Many said they obtained postgraduate degrees from well-respected schools across the country. Their undergraduate degrees were from schools that were not ABET-accredited and their post-graduate work was deemed ineligible.
The engineers are now bracing for additional assessments for tax years 2017 and 2018.
In tax year 2017, a record 2,384 filers claimed the credit.
One engineer said he knew of five colleagues who had been rejected, but it’s not a topic people want to discuss at work. He’s also heard military personnel who received degrees while serving overseas got rejected. Some colleges also have let their ABET certifications lapse in the years since engineers graduated.
Ross said engineers can request waivers of penalties and interest, “which in a situation like this, they have a good chance of getting.”
Vic Bird, director of the state Aeronautics Commission, said the incentive was not designed to be misleading, but he’s heard from a number of engineers who thought they were eligible for the credit, only to later learn they weren’t.
He said part of the issue is many schools don’t accredit their graduate programs. A number of engineers obtained their degrees abroad before moving to Oklahoma for graduate school.
“This works a particularly harsh result on someone who has gotten their engineering degree from abroad,” he said.
But he said the law has clear qualification standards.
“Do I think that clear law has resulted in some inequities and harsh results? Yes,” he said.
State officials estimate the credit had an economic impact of $1.5 to $2 billion since it took effect in 2009.
The dispute, meanwhile, is also spilling into the halls of the Capitol.
State Sen. Rob Standridge, R-Norman, said his office has been fielding complaints from Oklahomans statewide. He said he’s focused on helping his constituents navigate the system.
One constituent received a degree from the University of Oklahoma but faced rejection under the existing standards, he said.
Standridge said the vast majority of ABET-accredited programs are undergraduate. Few graduate programs receive accreditation, which is causing headaches for many engineers.
He’s proposing a new legislative measure to fill some of the existing gaps. His proposal would require the state to accept postgraduate degrees from schools that have their undergraduate programs accredited by ABET starting with budget year 2019.
“So it was very unfair,” he said. “It probably wasn’t intentionally done this way. It is what it is. I don’t blame it any on bad intentions, I just think it’s one of those unintended consequences of the legislation.”
Bird said the new law also will allow those obtaining a professional engineering license to qualify regardless of where they attended school.
Ideally, Bird said he’d like the law to go back to tax year 2017, but he’s not sure if that’s lawful.
“I think we’re going to end up in a better place that is much more fair and will obtain a better result,” he said.
Stecklein covers the Oklahoma Statehouse for CNHI's newspapers and websites. Reach her at email@example.com.