Officials Evaluate U.S. Law Designed to Boost Help Former Indian Lands Story-Date: 08:37 p.m. PST Thursday , April 9, 1998 ------------------------------------------------------------ Officials Evaluate U.S. Law Designed to Boost Help Former Indian Lands By D.R. Stewart, Tulsa World, Okla. Knight Ridder/Tribune Business News OKLAHOMA CITY--Apr. 10--The effects are unclear of a federal law designed to increase investment and employment on former American Indian lands by allowing accelerated depreciation of property and tax credits for Indian employees, state officials say. Although the Taxpayer Relief Act of 1997 provides benefits to new and established businesses operating within land that is identified as former Indian reservation land, state officials require clarification from the U.S. Department of the Interior on former reservation boundaries before they can calculate how the law will affect state tax revenue. State officials also need more financial information from public utilities in order to calculate the employment tax credit, said Jim Armstrong, of the public utility division of the commission. "The information from particular utilities is confidential for the most part ... and each utility is subject to audit," Armstrong said. "But the law gives these companies the ability to defer taxes to a later date, which gives you more cash available to retain within the business in the early years. If you have more cash today, you spend it, invest it, hire more people." Two-thirds of Oklahoma, including all of eastern and See Rates on E-8 southern Oklahoma and the west central part of the state, are classified as former Indian reservation land, state officials said. Since the Oklahoma Supreme Court has said the commission cannot retroactively adjust the effective tax rate or rate base of a business, state officials need to know to what extent utilities such as Oklahoma Natural Gas, Public Service Co. of Oklahoma and Southwestern Bell Telephone Co. are using the tax credits in order to adjust their taxable revenue. "We can't just do a one-issue rate case. That would not be an appropriate review of a company's earnings level," said Maribeth Snapp, senior attorney for the Oklahoma Corporation Commission. "And the Supreme Court very clearly said you cannot set rates today to remedy a past problem." The property depreciation incentive of the federal law provides a shorter recovery period of about 40 percent for most depreciable property. The property must be placed in service during the years 1994 to 2003 and must be used in an active trade or business. The tax deferral can substantially increase the after-tax income of business property. In two examples given the commission by Armstrong, one utility's after-tax income would have increased by $41 million between 1994 and 1996 as a result of the the accelerated depreciation of property and the other's would have risen $20 million in 1994 and 1995. Commissioner Bob Anthony said the first figure got his attention. "I'm persuaded that there are millions and millions of dollars in tax benefits as a result of this law," Anthony said. "I just want to make sure that the ratepayers are participating in it." Armstrong said the staff would have better information by the end of the third quarter to gauge how each utility had taken advantage of accelerated depreciation under the new tax law. In the other half of the tax benefits, businesses located on former Indian reservations are eligible for a tax creit based on the increase in qualifying annual 1993 wages paid to enrolled Indian tribal members or their spouses between 1994-2003. The credit equals 20 percent of the increased wages, including health insurance, of a qualified employee who earns less than $30,000. Spokesmen for Southwestern Bell and the other utilities have told the commission staff that they are unclear on some of the answers to questions posed by the staff. ----- Visit tworld, the World Wide Web site of The Tulsa (Okla.) World, at http://www.tulsaweb.com/tworld.htm ----- (c) 1998, The Tulsa (Okla.) World. Distributed by Knight Ridder/Tribune Business News. ------------------------------------------------------------