Newspaper article THE JOURNAL RECORD

Tax Exemption Sought for Municipal Bonds

Newspaper article THE JOURNAL RECORD

Tax Exemption Sought for Municipal Bonds

Article excerpt

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By Lou Anne Wolfe Municipal bonds that are exempt from federal taxation should also be exempt from Oklahoma taxation, the Revenue and Taxation Committee of the Oklahoma House of Representatives recommended Monday.

The committee approved the municipal bond issue and three other interim studies on lump-sum retirement distributions, sales tax rebates and recreational vehicle registration that were undertaken by subcommittees during the past few months.

Their findings will be given to House Speaker-designee Glen Johnson, D-Okemah to be considered for legislation during the 1991 session.

- Oklahoma considers the interest income from locally issued municipal bonds as taxable income. A House staff report said that while Oklahoma exempts a number of state-issued bonds and other specific issuers such as the Oklahoma Board of Regents of Oklahoma University, the Oklahoma Industrial Development Authority and the Oklahoma Turnpike Authority, most locally issued governmental purpose and private activity bonds are taxable under the Oklahoma income tax.

The study recommended that a bond exempt from federal taxation should also be exempt from Oklahoma taxation, except for 501(c)(3) bonds that are issued by certain entities for hospitals and other similar projects.

The study also said the exemption should apply only to bond issues after the measure is passed, and not be retroactive.

The staff report said if the state tax exemption was passed, the issuing entities could see their cost of borrowing, or interest rates, reduced as much as 10 to 20 basis points.

"Such savings could become a significant benefit to issuers, and may stimulate needed capital expenditures, particularly for school districts faced with physical plant modifications necessary for compliance with House Bill 1017," the report said.

The Oklahoma Tax Commission estimated a $6.3 million revenue loss if such a measure is enacted. Using a different method, the House staff calculated the revenue loss to be $795,195 the first year, compounding to $4.39 million by the fifth year.

Rep. Howard Cotner, D-Altus and subcommittee chairman, said the five years added together would mean a loss of $12.75 million in revenue from municipal bonds.

But, "Since we have certain state entities that have been exempt in the past, we thought we ought to extend that and make it a level playing field," he said. …

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