Posted on November 22, 2011 by Mike Means

Once again there was a story in the paper about tax credits. (See the November 21 issue of Journal Record) I don't know what you may think about tax credits, but let me share a few of my thoughts.

First, the primary reason for a tax credit is to give an incentive to a party to take a particular action. That action depends on what the governmental leadership prioritizes as necessary for the local economy. A recent example in Oklahoma is the Historical Preservation Tax Credit. Let's take a closer look at the one supported by our industry - the Energy Efficient Residential Construction Tax Credit.

The leaders of our state government agreed with our industry that we needed to incentivize the construction of smaller, low-cost homes to be more energy efficient. The tax credit in question gave a credit to the construction of a home that was 2,000 square feet or less and achieved an energy efficiency of at least 20 percent greater than the building code. A higher credit was given if it was 40 percent greater than the building code. Why did this need to be incentivized? The extra cost involved to achieve this efficiency could not be recouped in the sales price because the appraisal industry would not give credit for it.

Now, if the government wanted to incentivize this type of construction and the builder complied with all of the rules then they received the tax credit. Action incentivized - goal accomplished.

Recently, a hurdle to receiving the tax credit has been thrown into the mix - transferability of the tax credit. It seems many in the Legislature are playing the class-envy card. If the goal was achieved, why does it matter who gets the credit? If a builder met all the requirements to achieve the credit and the credit becomes an asset of their business, why shouldn't they be able to sell the credit and help the bottom line of their business? The goals of the state were accomplished.

There will be more to come during the next legislative session. We shall see how it plays out.Please let us know your thoughts on this issue.

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