Workforce tax credit gives state competitive edge

Promoting both the momentum and the growth of the aerospace industry has been a top priority of the Greater Oklahoma City Chamber for many years.

The growing sector, which now employs more than 120,000 people and generates a $44 billion economic impact across the state, has developed beyond repair, maintenance and overhaul to include advanced engineering, weapons systems and unmanned aircraft.

The pandemic has undoubtedly created significant headwinds for firms of all sizes, but a simple fact remains--attracting and keeping top-flight talent is always a priority for innovative firms.

One stabilizing force is the continued use of aerospace companies taking advantage of the state’s ambitious Aerospace Engineer Workforce Tax Credit, a priority economic development program for the Chamber’s Economic Development and Government Relations divisions.

Aerospace companies hiring engineers in a variety of fields will receive a tax credit equal to 5% of the compensation paid to an engineer until January 1, 2026, or 10% if the engineer graduated from an Oklahoma college or university (up to $12,500 per employee per year), plus another credit of up to 50% of the tuition reimbursed to an employee until Jan. 1, 2026.

Additionally, the engineer hired receives a tax credit of $5,000 per year until Jan. 1, 2026.

The engineers don’t have to be aerospace-specific engineers, but an aerospace company must employ them. Aside from the direct tax credit to both parties, the incentive has become a valuable recruitment tool for firms with an operation in the state.

Boeing OKC

Boeing 503

“The engineering tax credits were a significant contributing factor in decisions to expand the Boeing
presence in Oklahoma,” said Steve Hendrickson, director of government operations for Boeing. “The credit is unique in the nation and places Oklahoma at a competitive advantage.”

Approved in 2009 and later extended in 2018 to run until at least 2026, the credit has generated an estimated economic impact of $1.5 billion to $2 billion for the state with well over 2,000 tax returns claiming the credit according to officials at the Greater Oklahoma City Partnership. The Partnership works closely with business and community leaders to grow existing industries, recruit new companies and develop an active entrepreneurial environment, resulting in quality job creation and a diverse economy for the 10-county region.

The tax credit has been so popular, a related program, the Software/Cybersecurity Workforce Tax was created by the state legislature following successful lobbying efforts by the Chamber. This new incentive program was pursued on the basis of conversations with the U.S. Air Force and other employees of the critical need to address a key workforce shortage at Tinker AFB and to allow for job expansions within our market.

It provides a tax credit of up to $2,200 annually for cybersecurity or software engineers who received a degree from an accredited institution; or $1,800 annually for qualifying employees with appropriate CareerTech certification.

The popularity of software/cybersecurity tax credit is a sign that the industry is continuing its growth throughout the state and in major hubs like Greater Oklahoma City.

The region itself boasts 36,600 aviation and aerospace workers. It has also added diversity to its large MRO presence by attracting operations for Boeing’s weapons systems, Kratos Defense & Security Solutions’ unmanned advanced aircraft and, in June, the headquarters of U.S.-Spanish aerospace startup Skydweller Aero, which produces renewable powered aircraft for defense and commercial industries.

 “The Oklahoma Aerospace Engineering Tax Credit is a clear statement by public policymakers that aerospace engineers are valued and encouraged to pursue professional development in Oklahoma,” Hendrickson says.

Kratos Defense

Kratos-58A

Kratos Defense, a manufacturer of military tactical and training drones, recently announced it will double the size of its footprint in Oklahoma City. The San Diego-based defense contractor’s 150,000-square-foot Oklahoma City plant is located at Will Rogers Business Park.

Steve Fendley, president of Kratos’ unmanned systems division, said his company will use the expansion for manufacturing and integration of the XQ-58 Valkyrie tactical aircraft and two other classified projects. Kratos hired 50 employees this year and plans to add another 50 to 100 next year.

“Kratos has been producing the MQM-178 Firejet at the Oklahoma City facility for some time,” Fendley said. “We are continuing to grow our team as we establish and ramp up the production of the Valkyrie XQ-58A at our OKC facility.”

The Valkyrie is an unmanned aerial vehicle (UAV) that operates much like a fighter aircraft. Kratos designs it to fly in tandem with a crewed fighter jet as a “loyal wingman.” Kratos pitched the aircraft for the U.S. Air Force’s $400 million Skyborg program, and is competing against legacy contractors General Atomics, Boeing and Northrop Grumman to fill the first orders.

“The OKC plant has exceeded expectations in the time it has taken to establish and ramp production,” Fendley said. “It thrills us with how rapidly we’ve been able to configure, outfit, and optimize the facility for our growing number of production lines.”

Kratos first opened its Oklahoma City facility in 2018, using the open space at Will Rogers Business Park to manufacture its “target” drones, which are advanced UAVs programmed to mimic hostile aircraft and missiles. The company added Valkyrie production last year after announcing all of its tactical drones would be built in Oklahoma.

“We expect the Kratos OKC plant production will continue increasing for the foreseeable future with additional quantities and vehicle types and are proud to produce these complete aircraft systems, not just components or subsystems, in Oklahoma.

“It’s really what has allowed us to move so rapidly and so effectively into that area and be competitive against tier-one (prime contractors) I believe it’s a whole philosophy difference,’ said Fendley.