STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
HOUSE BILL 1600 By: Martinez
AS INTRODUCED
An Act relating to digital asset mining; creating the
Commercial Digital Asset Mining Act of 2023; stating
intent; defining terms; providing sales tax exemption
for the sale of certain equipment and machinery;
amending 68 O.S. 2021, Section 2357.4, which relates
to income tax credit for certain investments;
providing credit for investment in certain facility;
updating statutory language; providing for
codification; and providing an effective date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 1359.3 of Title 68, unless there
is created a duplication in numbering, reads as follows:
This act shall be known and may be cited as the "Commercial
Digital Asset Mining Act of 2023".
SECTION 2. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 1359.4 of Title 68, unless there
is created a duplication in numbering, reads as follows:
It is the intent of the Legislature that:
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 1. The State of Oklahoma provide appropriate incentives to
attract investments and jobs in innovative technological industries
and sectors to this state;
2. Blockchain technology is innovative technology that may be
utilized in multiple industries to secure data and reduce fraud;
3. Access to cost-effective energy is critical in the use of
blockchain technology, particularly in the commercial mining of
digital assets which requires large amounts of energy; and
4. The original intent of the Legislature that the Oklahoma Tax
Code recognize the continuing development of new and advanced
manufacturing and industrial processing technologies has led to new
industrial processes. Blockchain technology used in the commercial
mining of digital assets is an industrial process that should be
taxed in a manner similar to historical forms of manufacturing or
industrial processing in order to encourage the location and
expansion of such operations in this state rather than in competing
states.
SECTION 3. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 1359.5 of Title 68, unless there
is created a duplication in numbering, reads as follows:
A. 1. "Blockchain technology" means shared or distributed data
structures or digital ledgers governed by consensus protocols and
maintained by peer-to-peer networks that:
a. store digital transactions, and
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 b. verify and secure transactions cryptographically;
2. "Colocation facility" means a facility or facilities,
totaling not less than fifty thousand (50,000) square feet, located
in this state and utilized in the commercial mining of digital
assets or in hosting persons engaged in the commercial mining of
digital assets through utilization of the facility's infrastructure,
including servers and network hardware powered by Internet
bandwidth, electricity, and other services generally required for
mining operations;
3. "Commercial mining of digital assets" means the process
through which blockchain technology is used to mine digital assets
at a colocation facility;
4. "Digital assets" means a type of virtual currency that
utilizes blockchain technology and that:
a. can be digitally traded between users, or
b. can be converted or exchanged for legal tender; and
5. "Mine" means the process through which blockchain
transactions are verified and accepted by adding the transactions to
a blockchain ledger, which involves solving complex and mathematical
cryptographic problems associated with a block containing
transaction data.
B. Beginning on the effective date of this act and ending on
December 31, 2037, the sale of machinery and equipment including but
not limited to servers and computers, racks, power distribution
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units, cabling, switchgear, transformers, substations, software,
network equipment, and electricity used for commercial mining of
digital assets in a colocation facility shall be exempt from the tax
imposed by Section 1350 et seq. of Title 68 of the Oklahoma
Statutes.
SECTION 4. AMENDATORY 68 O.S. 2021, Section 2357.4, is
amended to read as follows:
Section 2357.4 A. Except as otherwise provided in subsection F
of Section 3658 of this title and in subsections J and K of this
section, for taxable years beginning after December 31, 1987, there
shall be allowed a credit against the tax imposed by Section 2355 of
this title for:
1. Investment in qualified depreciable property placed in
service during those years for use in a manufacturing operation, as
defined in Section 1352 of this title, which has received a
manufacturer exemption permit pursuant to the provisions of Section
1359.2 of this title or, a qualified aircraft maintenance or
manufacturing facility in this state as defined in Section 1357 of
this title in this state or, a qualified web search portal as
defined in Section 1357 of this title, or, for tax year 2023 and
subsequent tax years, for use in a colocation facility as defined in
Section 3 of this act; or
2. A net increase in the number of full-time-equivalent
employees in a manufacturing operation, as defined in Section 1352
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of this title, which has received a manufacturer exemption permit
pursuant to the provisions of Section 1359.2 of this title or, a
qualified aircraft maintenance or manufacturing facility defined in
Section 1357 of this title in this state or, in a qualified web
search portal as defined in Section 1357 of this title, or, for tax
year 2023 and subsequent tax years, in a colocation facility as
defined in Section 3 of this act including employees engaged in
support services.
B. Except as otherwise provided in subsection F of Section 3658
of this title and in subsections J and K of this section, for
taxable years beginning after December 31, 1998, there shall be
allowed a credit against the tax imposed by Section 2355 of this
title for:
1. Investment in qualified depreciable property with a total
cost equal to or greater than Forty Million Dollars ($40,000,000.00)
within three (3) years from the date of initial qualifying
expenditure and placed in service in this state during those years
for use in the manufacture of products described by any Industry
Number contained in Division D of Part I of the Standard Industrial
Classification (SIC) Manual, latest revision; or
2. A net increase in the number of full-time-equivalent
employees in this state engaged in the manufacture of any goods
identified by any Industry Number contained in Division D of Part I
of the Standard Industrial Classification (SIC) Manual, latest
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revision, if the total cost of qualified depreciable property placed
in service by the business entity within the state equals or exceeds
Forty Million Dollars ($40,000,000.00) within three (3) years from
the date of initial qualifying expenditure.
C. The business entity may claim the credit authorized by
subsection B of this section for expenditures incurred or for a net
increase in the number of full-time-equivalent employees after the
business entity provides proof satisfactory to the Oklahoma Tax
Commission that the conditions imposed pursuant to paragraph 1 or
paragraph 2 of subsection B of this section have been satisfied.
D. If a business entity fails to expend the amount required by
paragraph 1 or paragraph 2 of subsection B of this section within
the time required, the business entity may not claim the credit
authorized by subsection B of this section but shall be allowed to
claim a credit pursuant to subsection A of this section if the
requirements of subsection A of this section are met with respect to
the investment in qualified depreciable property or net increase in
the number of full-time-equivalent employees.
E. The credit provided for in subsection A of this section, if
based upon investment in qualified depreciable property, shall not
be allowed unless the investment in qualified depreciable property
is at least Fifty Thousand Dollars ($50,000.00). The credit
provided for in subsection A or B of this section shall not be
allowed if the applicable investment is the direct cause of a
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decrease in the number of full-time-equivalent employees. Qualified
property shall be limited to machinery, fixtures, equipment,
buildings, or substantial improvements thereto, placed in service in
this state during the taxable year. The taxable years for which the
credit may be allowed if based upon investment in qualified
depreciable property shall be measured from the year in which the
qualified property is placed in service. If the credit provided for
in subsection A or B of this section is calculated on the basis of
the cost of the qualified property, the credit shall be allowed in
each of the four (4) subsequent years. If the qualified property on
which a credit has previously been allowed is acquired from a
related party, the date such the property is placed in service by
the transferor shall be considered to be the date such the property
is placed in service by the transferee, for purposes of determining
the aggregate number of years for which credit may be allowed.
F. The credit provided for in subsection A or B of this
section, if based upon an increase in the number of full-time-
equivalent employees, shall be allowed in each of the four (4)
subsequent years only if the level of new employees is maintained in
the subsequent year. In calculating the credit by the number of new
employees, only those employees whose paid wages or salary were at
least Seven Thousand Dollars ($7,000.00) during each year the credit
is claimed shall be included in the calculation. Provided, that the
first year a credit is claimed for a new employee, such the employee
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may be included in the calculation notwithstanding paid wages of
less than Seven Thousand Dollars ($7,000.00) if the employee was
hired in the last three quarters of the tax year, has wages or
salary which will result in annual paid wages in excess of Seven
Thousand Dollars ($7,000.00) and the taxpayer submits an affidavit
stating that the employee's position will be retained in the
following tax year and will result in the payment of wages in excess
of Seven Thousand Dollars ($7,000.00). The number of new employees
shall be determined by comparing the monthly average number of full-
time employees subject to Oklahoma income tax withholding for the
final quarter of the taxable year with the corresponding period of
the prior taxable year, as substantiated by such reports as may be
required by the Tax Commission.
G. The credit allowed by subsection A of this section shall be
the greater amount of either:
1. One percent (1%) of the cost of the qualified property in
the year the property is placed in service; or
2. Five Hundred Dollars ($500.00) for each new employee. No
credit shall be allowed in any taxable year for a net increase in
the number of full-time-equivalent employees if such the increase is
a result of an investment in qualified depreciable property for
which an income tax credit has been allowed as authorized by this
section.
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 H. The credit allowed by subsection B of this section shall be
the greater amount of either:
1. Two percent (2%) of the cost of the qualified property in
the year the property is placed in service; or
2. One Thousand Dollars ($1,000.00) for each new employee.
No credit shall be allowed in any taxable year for a net
increase in the number of full-time-equivalent employees if such
increase is a result of an investment in qualified depreciable
property for which an income tax credit has been allowed as
authorized by this section.
I. Except as provided by subsection G of Section 3658 of this
title, any credits allowed but not used in any taxable year may be
carried over in order as follows:
1. To each of the four (4) years following the year of
qualification;
2. To the extent not used in those years in order to each of
the fifteen (15) years following the initial five-year period;
3. If a C corporation that otherwise qualified for the credits
under subsection A of this section subsequently changes its
operating status to that of a pass-through entity which is being
treated as the same entity for federal tax purposes, the credits
will continue to be available as if the pass-through entity had
originally qualified for the credits subject to the limitations of
this section;
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 4. To the extent not used in paragraphs 1 and 2 of this
subsection, such credits from qualified depreciable property placed
in service on or after January 1, 2000, may be utilized in any
subsequent tax years after the initial twenty-year period; and
5. Provided, for tax years beginning on or after January 1,
2016, and ending on or before December 31, 2018, the amount of
credits available as an offset in a taxable year shall be limited to
the percentage calculated by the Tax Commission pursuant to the
provisions of subsection L of this section.
J. No credit otherwise authorized by the provisions of this
section may be claimed for any event, transaction, investment,
expenditure, or other act occurring on or after July 1, 2010, for
which the credit would otherwise be allowable until the provisions
of this subsection shall cease to be operative on July 1, 2012.
Beginning July 1, 2012, the credit authorized by this section may be
claimed for any event, transaction, investment, expenditure, or
other act occurring on or after July 1, 2010, according to the
provisions of this section; provided, credits accrued during the
period from July 1, 2010, through June 30, 2012, shall be limited to
a period of two (2) taxable years. The credit shall be limited in
each taxable year to fifty percent (50%) of the total amount of the
accrued credit. Any tax credits which accrue during the period of
July 1, 2010, through June 30, 2012, may not be claimed for any
period prior to the taxable year beginning January 1, 2012. No
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credits which accrue during the period of July 1, 2010, through June
30, 2012, may be used to file an amended tax return for any taxable
year prior to the taxable year beginning January 1, 2012.
K. Beginning January 1, 2017, except with respect to tax
credits allowed from investment or job creation occurring prior to
January 1, 2017, the credits authorized by this section shall not be
allowed for investment or job creation in electric power generation
by means of wind as described by the North American Industry
Classification System, No. 221119.
L. For tax years beginning on or after January 1, 2016, and
ending on or before December 31, 2018, the total amount of credits
authorized by this section used to offset tax shall be adjusted
annually to limit the annual amount of credits to Twenty-five
Million Dollars ($25,000,000.00). The Tax Commission shall annually
calculate and publish a percentage by which the credits authorized
by this section shall be reduced so the total amount of credits used
to offset tax does not exceed Twenty-five Million Dollars
($25,000,000.00) per year. The formula to be used for the
percentage adjustment shall be Twenty-five Million Dollars
($25,000,000.00) divided by the credits used to offset tax in the
second preceding year.
M. Pursuant to subsection L of this section, in the event the
total tax credits authorized by this section exceed Twenty-five
Million Dollars ($25,000,000.00) in any calendar year, the Tax
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Commission shall permit any excess over Twenty-five Million Dollars
($25,000,000.00) but shall factor such excess into the percentage
adjustment formula for subsequent years.
SECTION 5. This act shall become effective November 1, 2023.
59-1-5315 MJ 11/21/22
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