2NEWS investigates: Tax breaks for sale

TULSA - When you talk about state tax credits, you're talking about a lot of money.

"It's billions," said state auditor Gary Jones.  "It's literally billions of dollars."

"That's the taxpayer's money that we're dealing with," said Rep. Earl Sears, R-Oklahoma.

Money that could be going to Oklahoma roads or schools.

"...assist Oklahoma in creating economic development and creating jobs," said Sears.

Instead, it's going to tax breaks for businesses.

There are dozens of state tax credits.  Some are awarded for expansion, job creation or investments, all with the idea that it has a positive financial impact on the state of Oklahoma.

But the 2NEWS investigators uncovered tens of millions of dollars of those state tax credits up for sale.

"There's almost a market out there for selling tax credits," said Jones.

It's happening, and in some cases it's legal in Oklahoma.  Nine of the dozens of state tax credits available can be sold.

"It is so blatant that when you start explaining this to people they say, 'Well that couldn't be happening, this couldn't be going on.  The state of Oklahoma couldn't be involved in something like this,' but we are," said Jones.

That leads us to businesses like Phoenix Coal Sales, a surface mine out of Vinita.

"It's a tough way to make a living," said owner Jim Brakefield.

When times got tough the company applied for and was granted state tax credits, which were supposed to pay for the company's taxes.

"If they're not transferable to where I can sell them and turn it into cash that I can go buy a lot of fuel or go buy a tire with they're not of value to me," said Brakefield.

But the company didn't owe any state taxes.  Instead, they needed money for things like employees salaries and equipment -- things the credits couldn't be used for.

So Brakefield says he sold the credit to another company.

He wouldn't tell us who he sold it to or how much the credit was, but Brakefield did tell us he sold the credit for less than it's worth -- about 80 cents on the dollar.

"In some cases, even less than that.  We're heard of tax credits that are sold at 50 cents on the dollar," said Jones.  "In some cases they should be outraged.  I think everybody ought to be concerned about it."

We don't know how widespread this is because the companies that buy up the tax credits aren't required to disclose that information.

Lawmakers told us this was common practice for insurance companies, so the 2NEWS investigators poured over data.

We found insurance companies are not eligible to apply for certain tax breaks -- like the one given to the coal company -- so they have to buy them.

The 2NEWS investigators found the insurance company that spent the most money over the past three years buying up tax credits in Oklahoma was Blue Cross Blue Shield.

They spent nearly $5 million.

Blue Cross Blue Shield wouldn't talk to us on camera but they did send us this statement, saying in part, "Purchasing these credits helps reduce our overall expenses, allowing us to better control health care premiums paid by our customers."

We also found Progressive Northern Insurance spent $3.1 million over the past three years buying state tax credits.  They sent us a similar statement saying, "Progressive purchased tax credits available under state law, to reduce its overall expenses.  Taxes are a part of the cost of doing business, and by reducing our cost of doing business, we can pass the savings on to customers."

In all, the 2NEWS investigators found insurance companies spent almost $19 million over the past three years buying up your tax dollars at a discount.

"We just shouldn't have transferable tax credits," said Sears.

Sears has been trying to stop the sale of state tax credits in Oklahoma.

Our state is among at least 38 states that have some type of transferable tax credits, but Sears thinks Oklahoma needs to provide more oversight for how tax credits are used.

"We have nothing in place to review these tax credits," said Sears.

It's something the 2NEWS investigators uncovered this past July.  There's no way for the public to see how companies spend their tax credits, even those that the state specifically granted.

"There's nothing to follow through to find out if they did do what they said they're going to do or in many cases what they intend to do with it to begin with," said Jones.

Jones knows that it's taxpayer money and he's determined to find out how it's being spent.

He's using a supreme court decision to give him the authority to review tax credits and he's already asking questions.

So are the 2NEWS investigators.

"We need to know, if we're extending dollars, those are dollars that citizens have to pay to make up the difference," said Jones.

Sears plans to file legislation that would require

tax credit recipients to explain how they used he credit.  He also hopes to stop the sale of tax credits in the future.

The 2NEWS investigators will continue to follow this story.

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