Earlier this year, lawmakers passed Senate Bill 237, which would have excluded solar energy and related battery storage facilities from qualifying for property tax exemptions.
Gov. Kevin Stitt pocket vetoed the measure by not acting on it before the session ended, but Representative Mike Dobrinski of Okeene says the bill raised the need for an important discussion amid a shifting energy environment. So, he requested an interim study by the House Appropriations and Budget Committee, which took place Thursday at the statehouse.
"As Oklahoma's economy and energy industry evolve over the last 40 years, the scale of proposed developments makes this discussion timely," Dobrinski said to open the meeting.
"Oklahoma has more than 100 applications for solar and battery storage projects, representing approximately 17.6 Gigawatts, or basically 43% of Oklahoma's proposed queue," he said. "While the application does not guarantee a project will be built, these numbers demonstrate the potential magnitude of future development and the importance of understanding its tax implications."
House Fiscal staff compared Oklahoma's tax incentive policies with those in neighboring Texas and Kansas. Findings show both states have better incentive policies that could push renewable energy companies away from Oklahoma.
House fiscal analyst Mariah Searock said policy in those states contributes. Kansas offers a 10-year property tax exemption for renewable energy companies looking to build solar and wind production and the battery storage facilities they need.
"Kansas, they really want wind, solar and all the things," Searock said. "They have a huge property tax advantage."
Meanwhile, Texas allows certain local jurisdictions to grant temporary tax exemptions or reductions to companies looking to build renewable energy infrastructure nearby. The structure allows local Texas jurisdictions to weigh their communities' interests and needs on a case-by-case basis.
Right now, Oklahoma offers a 5-year tax break for several types of manufacturing companies, mostly in the oil and gas sector, but also in solar and computer processing, except for AI data centers.
But the Oklahoma Constitution, unlike that of its neighboring states, also ties property taxes paid by private owners and companies to the state to essential funding streams for local county jurisdictions. That means property tax exemptions for manufacturers can sometimes mean budget gaps for county public safety or education budgets.
So, when the exemptions were devised in the 1980s, the state promised to reimburse local jurisdictions by establishing a revolving fund. Rep. Melodee Blancett, D-Tulsa, pointed out the original intention of that legislation.
"One of the difficulties of recruiting manufacturing, and they're very valuable from an economic development perspective, is the upfront cost to build," Blancett said. "And so that therein was the reason for doing the manufacturing exemption to begin with."But the policy environment has changed, she noted.
"It appears to me that the definition of what a manufacturer has morphed significantly over the last 25 years from when it was completed based on its original objective, because it seems like a lot of the people that may today qualify really are not manufacturers."
The legislature has allocated money every year for local county reimbursements. Searock said the state fund, which is also meant to reimburse school districts and disabled veterans for property tax breaks, is sitting at about $50 million as of last year. The baseline appropriation for the fund each year totals 1% of the state's annual income tax revenue.
But that's not enough to cover all the reimbursements, she said, and it hasn't been for more than 20 years.
"Back in about 2003 was the first year that the funding into the ad valorem reimbursement fund was not sufficient to cover the reimbursement claims that came in from counties, so that since that point, the legislature has had to appropriate money to make up for that," Searock said.
During the 2026 legislative session the extra appropriation to make schools and veterans whole amounted to over nearly $65 million, according to the House and Senate budget transparency portals.
Major changes to Oklahoma's manufacturing ad valorem exemptions laws would require constitutional reforms, Searock said.
And for his part, Dobrinski is up for the challenge of tweaking the relevant Oklahoma law.
"I think it's been very, very successful when it comes to actually encouraging manufacturing," he said. "But I do think it is time to give an overall review of it because at the end of the day, whether it be solar, wind, battery storage, or, you know, computer data processing facilities, whether those be Bitcoin or AI they're going to go where the market leads them."
