Effective July 1, 2011, Oklahoma aerospace companies hiring engineers receive a tax credit equal to 10% of the compensation paid to an engineer during the first five years of his or her employment depending on the date of hire if the engineer graduated from an Oklahoma college, or a tax credit equal to 5% of the compensation paid to the engineer during the first five years of his or her employment depending on the date of hire if the engineer graduated from a college outside Oklahoma. The maximum credit is $12,500 per qualified employee per year.
In addition, effective July 1, 2011 Oklahoma aerospace companies may receive a tax credit in the amount of 50% of the tuition reimbursed to a new engineer graduate for the first four years of his or her employment depending on the date of hire. The tax credit is limited to 50% of the average annual tuition paid by an engineer at a qualified program at a public university in Oklahoma.
Also, effective July 1, 2011 engineers hired by an Oklahoma aerospace company may also receive an individual tax credit of up to $5,000 per year for a period of 5 years depending on the date of hire. Absent additional legislative action, this tax credit is set to expire on December 31, 2014.
During the 2010 legislative session, state lawmakers placed a two year moratorium on the Aerospace Industry Engineer Tax Credit program. However, with the signing of HB 1008 by Governor Mary Fallin in early April 2011, the Aerospace Industry Engineer Credit was restored effective July 1, 2011.
It should be noted that between July 1, 2010 and June 30, 2011 no tax credit may be claimed for any event, transaction, investment, expenditure or other act for which the engineer tax credit would otherwise be allowable. For more information see Chapter 50 Income, Subchapter 15 Oklahoma Taxable Income, Part 7 Credits Against Tax at Credits Against Tax on the Oklahoma Tax Commission website.
For more information, contact Vince Howie at (405) 815-5128 or email@example.com.
- What is the purpose of the program and what does it do?
- It provides income tax credits to engineers hired by or contracting with aerospace companies between January 1, 2009 and July 1, 2011 until January 1, 2015, and the companies that hire them, with the purpose of enhancing the state’s ability to attract and retain a top-notch workforce pool for the Oklahoma aerospace industry.
- What are the specific tax credits?
- Employee Tax Credit
Provides an income tax credit for qualified employees of up to $5,000 per year for a maximum of 5 years. Any amount of unused credit can be carried over to the following year. If there is still an amount of credit remaining after 5 years, that unused amount may be carried over to subsequent years. However, the qualified employee stops accruing the $5,000 tax credit per year after the 5th year.
- Employer Tax Credit for Compensation Paid
Provides an annual income tax credit of up to five years for qualified employers of 10% of the compensation paid to a qualified employee if the employee received his or her degree from a university or college in Oklahoma and 5% if the employee received his or her degree from outside Oklahoma. This credit cannot exceed $12,500 for each qualified employee annually.
- Employer Tax Credit for Tuition Reimbursement
Provides an annual income tax credit of up to four years for qualified employers for tuition reimbursed to qualified employees. This credit shall be 50% of the tuition reimbursed to a qualified employee but cannot exceed 50% of the average annual tuition in a qualified program at a public university in Oklahoma. This credit may only be claimed if the qualified employee received his or her undergraduate or graduate degree within one year of beginning employment with the qualified employer. Note: None of these income tax credits may be used to reduce the tax liability of the qualified employee or qualified employer to less than zero.
- Who qualifies for these tax credits?
- The legislation (House Bill 3239) provides that “qualified employees” and “qualified employers” may claim these tax credits.
- A “qualified employee” is any person hired by or contracting with a “qualified employer”, who has been awarded an undergraduate or graduate degree from a “qualified program” by a college or university, and who was not employed in the aerospace sector in this state immediately preceding employment or contacting with a qualified employer. Aerospace, mechanical, industrial, electrical engineers in addition to other that are qualified employees are also eligible for these tax credits.
- A “qualified employer” is any legally recognized business entity such as a general or limited partnership, or a corporation, or a public entity whose principal business activity involves the aerospace sector.
- A “qualified program” is a program that has been accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology, and awards an undergraduate or graduate degree. A 2-year Associate’s Degree does not qualify.
- With respect to the compensation-based tax credit for the qualified employers, is there a cap on the number of qualified employees (engineers) the employer can claim on an annual basis?
- What agency administers this tax credit program?
- The Oklahoma Tax Commission — call (405) 521-3160.
- Where are the tax guidelines that define the eligibility for this tax credit? What forms need to be filled out and to whom are they submitted? What additional documentation is required and when is it due? How do I file my Oklahoma Tax return as it pertains to this incentive?
- The Oklahoma Tax Commission has prepared guidelines (rules) that are described on the following tax forms used to file for this credit.
Form 564 – Credit for Employees in the Aerospace Sector
Form 565 – Credits for Employers in the Aerospace Sector
Oklahoma Tax Commission Rules, Chapter 50 Income Tax Subchapter 15 Oklahoma Taxable Income Part 7. Credits Against Tax
Tax forms for the current and previous years are available on the Income Tax Forms page of the Oklahoma Tax Commission.
Tax rules for the current and previous years are available on the Oklahoma Tax Commission Rules page.
If you have questions concerning the preparation of your tax return and claiming these credits, contact your tax preparer or the Oklahoma Tax Commission.
- Will this lower my taxable income or my tax liability?
- These are income tax credits; therefore, they will reduce your tax liability.
- What happens to the tuition rebate and the employee tax credit if an employee moves to another company within the first four years of his/her employment?
- If the new employer gives a tuition rebate, the tax credit base upon that rebate applies until a total of four years of credit for the employee is reached. Also, if you are working for an Oklahoma aerospace company and subsequently get hired by a second Oklahoma company, you do not qualify for the tax credit.
- Can I resign from my current job with an Oklahoma aerospace company and get rehired by the same company, therefore, qualifying me for this tax credit?
- An engineer choosing this path would not qualify in view of the language in the law defining a “qualified employee.: If a reasonable amount of time passes before the engineer is rehired (2-3 months), the engineer will qualify for the tax credit because it would not violate the “immediately preceding” requirement in the definition of “qualified employee.”
- Where can I find more information?
- The Oklahoma Aeronautics Commission at (405) 604-6900 or firstname.lastname@example.org
- Where can I read House Bill 3239 that establishes this tax credit program?
- You can read about it at the Oklahoma Aeronautics Commission page on the state of Oklahoma website. The information included in this FAQ is not based upon an official interpretation or rules of the Oklahoma Tax Commission. The information included in this FAQ is current as of May 6, 2011.
The materials contained on this website have been prepared by the Oklahoma Department of Commerce for informational purposes only and do not constitute legal or tax advice. This information is subject to change based on judicial interpretation and legislative action. The application of the information is subject to your unique facts and circumstances. YOU SHOULD NOT ACT UPON ANY INFORMATION CONTAINED IN THESE MATERIALS WITHOUT SEEKING YOUR OWN PROFESSIONAL LEGAL AND TAX ADVICE.