Ad Valorem is Latin for “according to value” and of course, wonderful things such as value-added taxes were invented by a Frenchman. According to Wikipedia (I know, I wouldn’t really cite this in a scholarly article):

The VAT was invented by a French economist in 1954. Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, as taxe sur la valeur ajoutée (TVA in French) was first to introduce VAT with effect from 10 April 1954 for large businesses, and extended over time to all business sectors. InFrance, it is the most important source of state finance, accounting for approximately 45% of state revenues.

While this doesn’t explain the few thousand years of usage from 1711 until 1954, it doesn’t surprise me that its usage was popularized by the French. So what does that have to do with Oklahoma, you ask?

Well, in September, the Oklahoma Supreme Court (2009 OK 72) upheld the Oklahoma State Board of Equalization’s assessment of ad valorem taxes against AT&T (Southwestern Bell) and denial of the requested exemptions for intangible property such as customer lists, goodwill, copyrights, trademarks, employment contracts and lease agreements. The Court held that since SWB’s exemptions did not fall under an Article 10 Sec. 6A exemption, the Board of Equalization properly denied the exemptions.

Article 10, Section 6A of the OK Constitution outlines intangible personal property exemptions as follows:

§ 6A. Intangible personal property exempt from ad valorem or other tax.

Intangible personal property as below defined shall not be subject to ad valorem tax or to any other tax in lieu of ad valorem tax within this State:

(a) Money and cash on hand, including currency, gold, silver, and other coin, bank drafts, certified checks, and cashier’s checks.

(b) Money on deposit in any bank, trust company, or other depository of money, within or without the State of Oklahoma, including certificates of deposit.

(c) Accounts and bills receivable, including brokerage accounts, and other credits, whether secured or unsecured.

(d) Bonds, promissory notes, debentures, and all other evidences of debt whether secured or unsecured; except notes, debentures, and other evidences of debt secured by real estate mortgages which are subject to the Mortgage Registration Tax under Sections 12351 – 12362, inclusive, Oklahoma Statutes, 1931 (68 O.S. 1961, Sections 1171 – 1182).

(e) Shares of stock or other written evidence or proportional shares of beneficial interests in corporations, joint stock companies, associations, syndicates, express or business trusts, special or limited partnerships, or other business organizations.

(f) All interests in property held in trust or on deposit within or without this State, and whether or not evidenced by certificates, shares, or other written evidence of beneficial ownership.

(g) Final judgments for the payment of money.

(h) All annuities and annuity contracts

Interesting (or maybe boring) as that is, the real problematic language from the Court follows, and seemed to extend the reach of ad valorem taxes to all non-exempt intangible property of private businesses, rather than specifically to public service providers.

In light of what has been said in the foregoing pages of this opinion, it is readily apparent that the Legislature was excluding intangible property that was exempted by Okla. Const. art. 10, § 6A from local listing and assessment, not all intangible property. Even if the Legislature intended this statute as an indirect way to exempt intangible property not covered by Okla. Const. art. 10, § 6A, the statute would be void to that extent. (29 OK 72, para. 20).

In a time when the state budget is seeing massive shortfalls, this ruling (which is on appeal) has local School Boards salivating: “Those intangibles are taxable,” said Jeff MIlls, exec. dir. of the OK State School Board Association, in a recent Journal Record article. “Schools live and die many times on their local ad valorem dollars…[w]hen state dollars come up short, those local dollars have become final. Anything that can boost those dollars is a benefit to schools.” According to the article, some analysts fear this could become a multi-million dollar yoke on OK taxpayers—not to mention the stifling effects on economic growth and development. Interesting to note, Oklahoma is one of only a few states that even taxes intangibles. With a MAPS project list, increased taxes coming down from the Federal level, economic contraction and massive unemployment, the last thing we need is for businesses to leave or avoid Oklahoma because of the specter of higher taxes on intangibles.

Chamber of Commerce Executive Director Dick Rush said the Chamber will seek a legislative or constitutional reversal of the ruling:

“That will do nothing but destroy the tax base of the state,” Rush said, suggesting the ruling could tax everything from wall pictures to client lists. “If that’s the case, you will see a sucking sound of businesses leaving the state.”

Apparently the legislature thinks it is time for a changing of the guard on two Oklahoma Commissions: (1) the OK Apportionment Commission–SQ 748 and (2) the OK Judicial Nomination Commission–SQ 752. In this post, I will talk about the former. If SQ 748 passes, the Apportionment Commission (a commission designed to divide Oklahoma into Legislative Districts) will change from 3 to 7 members and will be required to have 4, instead of 2, member signatures on any apportionment order. This measure would also rename the Commission the “Bipartisan Commission of Legislative Apportionment” and as the name implies, both Republicans and Democrats must be appointed to the commission (3+3), with the 7th member being the chairman–the Lieutenant Governor–who will be a non-voting member.

This legislative initiative was authored by Senator Glenn Coffee-R, & Representative Chris Benge-R. Of course, the commission is not needed if the Legislature is able to agree on a redistricting scheme within 90 days of the federal census results. However, in the event of a legislative impasse, the commission would be required to redraw the voting districts according to the new census results.

“We want to ensure the redistricting process is bipartisan and this resolution would require that the commission is made up of an equal number of members from each party,” said Benge, R-Tulsa. “It is my hope that the commission is never needed to break a legislative deadlock, but if it is we want to make sure it is a bipartisan effort.”

Here is a look at the oh so legislative language you will see on Nov. 2:

This measure amends Sections 11A and 11B of Article 5 of the Oklahoma Constitution. These provisions deal with how the Legislature is divided into districts. This process is known as apportionment. The Legislature must make an apportionment after each ten-year federal census. If the Legislature fails to act, an Apportionment Commission must do so. The measure changes the name of this Commission. It removes all three existing Commission members. It removes the Attorney General. It removes the Superintendent of Public Instruction. It also removes the State Treasurer.

The measure increases the number of members from three to seven. The President Pro Tempore of the Senate appoints one Democrat and on Republican. The Speaker of the House of Representatives appoints one Democrat and one Republican. The Governor appoints one Democrat and one Republican.

The measure provides that the Lieutenant Governor chairs the Commission and is a nonvoting member. It requires orders of apportionment to be signed by at least four members of the Commission.

Another important note–this commission has never had to draw the redistricting lines since its inception in 1964. The Legislature has somehow always found a way to draw its own lines.

For those of you who are visual, following are some links to various maps from the 2000 apportionment.

• OK Representative districts
• Tulsa area Senate districts
• OKC area Senate districts

FYI:Click here for a map of Oklahoma’s U.S. Congressional districts.