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STATE OF OKLAHOMA
2nd Session of the 58th Legislature (2022)
HOUSE BILL 3347 By: Fetgatter
AS INTRODUCED
An Act relating to revenue and taxation; am ending 68
O.S. 2021, Section 2358, which relates to computation
of Oklahoma taxable income and Oklahoma adjusted
gross income; providing for recomputation of federal
income taxable income amount using deductions
disallowed pursuant to Section 280E of the Internal
Revenue Code; providing additional deduction equal to
amount of disallowed deduction pursuant to Section
280E of the Internal Revenue Code; specifying taxable
years for which recomputations and additional
deductions authorized; and providing an effective
date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358, is
amended to read as follows:
Section 2358. For all tax years beginning after December 31,
1981, taxable income and adjusted gross income sh all be adjusted to
arrive at Oklahoma taxable in come and Oklahoma adjusted gross income
as required by this section.
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A. The taxable income of any taxpayer shall be adjust ed to
arrive at Oklahoma taxable income for corporations and Oklahoma
adjusted gross income for individuals, as follows:
1. There shall be added interest income on obligation s of any
state or political subdivision thereto which is not otherwise
exempted pursuant to other laws of this state, to the extent that
such interest is not included in taxable income and adjusted gross
income.
2. There shall be deducted amounts included in such income that
the state is prohibited from taxing because of the provisi ons of the
Federal Constitution, the State Constitution, federal laws or laws
of Oklahoma.
3. The amount of any federal net operating loss deduction shall
be adjusted as follow s:
a. For carryovers and carrybacks to taxable years
beginning before January 1, 1981, the amount of any
net operating loss deduction allowed to a taxpayer for
federal income tax purposes shall be reduced to an
amount which is the same portion thereof as t he loss
from sources within this state, as determined pursuant
to this section and Section 2362 of this title, for
the taxable year in which such loss is sustained is of
the total loss for such year;
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b. For carryovers and carrybacks to taxable years
beginning after December 31, 1980, the amount of any
net operating loss deduction allowed for the taxable
year shall be an amount equal to the aggregate of the
Oklahoma net operating loss carryovers and carrybacks
to such year. Oklahoma net operating losses sha ll be
separately determined by reference to Section 172 of
the Internal Revenue Code, 26 U.S.C., Section 172, as
modified by the Oklahoma Income Tax Act, Section 2351
et seq. of this title, and shall be allowed wit hout
regard to the existence of a federal net operating
loss. For tax years beginning after December 31,
2000, and ending before January 1, 2008, the years to
which such losses may be carried shall be determ ined
solely by reference to Section 172 of the I nternal
Revenue Code, 26 U.S.C., Section 1 72, with the
exception that the terms "net operating loss" and
"taxable income" shall be replaced with "Oklahoma net
operating loss" and "Oklahoma taxable income ". For
tax years beginning after December 31, 2007, and
ending before January 1, 2009, years t o which such
losses may be carried back shall be limited to two (2)
years. For tax years beginning after December 31,
2008, the years to which such losses may be car ried
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back shall be determined solely by referenc e to
Section 172 of the Internal Revenue C ode, 26 U.S.C.,
Section 172, with the exception that the terms "net
operating loss" and "taxable income" shall be replaced
with "Oklahoma net operating loss " and "Oklahoma
taxable income".
4. Items of the followin g nature shall be allocated as
indicated. Allowable deductions attributable to items separately
allocable in subpara graphs a, b and c of this paragraph, whether or
not such items of income were actually rece ived, shall be allocated
on the same basis as th ose items:
a. Income from real and tangibl e personal property, such
as rents, oil and mining production or royalties , and
gains or losses from sales of such property, shall be
allocated in accordance with the situs of such
property;
b. Income from intangib le personal property, such as
interest, dividends, patent or copyright royalties,
and gains or losses from sales of such property, shall
be allocated in accordance with the domiciliary situs
of the taxpayer, except that:
(1) where such property has acquire d a nonunitary
business or commercial situ s apart from the
domicile of the taxpayer such income shall be
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allocated in accordance with such business or
commercial situs; interest income from
investments held to generate working capital for
a unitary business enterprise shall be included
in apportionable income; a resident trust or
resident estate shall be treated as ha ving a
separate commercial or business situs insofar as
undistributed income is concerned, but shall not
be treated as having a separate comme rcial or
business situs insofar as distrib uted income is
concerned,
(2) for taxable years beginning after Decembe r 31,
2003, capital or ordinary gains or losses from
the sale of an ownership interest in a pub licly
traded partnership, as defined by Section 7704(b)
of the Internal Revenue Code, shal l be allocated
to this state in the ratio of the original cost
of such partnership's tangible property in this
state to the original cost of such partnership 's
tangible property everywhere, as determined at
the time of the sale; if more than fifty percent
(50%) of the value of the partnership 's assets
consists of intangible a ssets, capital or
ordinary gains or losses from the sale of an
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ownership interest in the partne rship shall be
allocated to this state in accord ance with the
sales factor of the partners hip for its first
full tax period immediately preceding its tax
period during which the ownership interest in the
partnership was sold; the provisions of this
division shall only apply if the capital or
ordinary gains or losses from the sale of an
ownership interest in a partnership do not
constitute qualifying gain receiving capital
treatment as defined in subparagraph a of
paragraph 2 of subsection F of this section,
(3) income from such property which is required to be
allocated pursuant to the provision s of paragraph
5 of this subsection shall be allocated as herein
provided;
c. Net income or loss from a business activity which is
not a part of business carried on w ithin or without
the state of a unitary characte r shall be separately
allocated to the sta te in which such activity is
conducted;
d. In the case of a manufact uring or processing
enterprise the business of which in Oklahoma consists
solely of marketing its products by:
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(1) sales having a situs without th is state, shipped
directly to a point from without the state to a
purchaser within the state, commonly known as
interstate sales,
(2) sales of the product stored in public warehouses
within the state pursuant to "in transit"
tariffs, as prescribed and allo wed by the
Interstate Commerce Commission, to a purchaser
within the state,
(3) sales of the product stored in public warehouses
within the state where the shipment to such
warehouses is not covered by "in transit"
tariffs, as prescribed and allowed by the
Interstate Commerce Commission, to a purc haser
within or without the state,
the Oklahoma net income shall , at the option of the
taxpayer, be that portion of the total net income of
the taxpayer for federal i ncome tax purposes derived
from the manufacture and/or processing and sales
everywhere as determined by the ratio of the sales
defined in this section mad e to the purchaser within
the state to the total sales everywhere . The term
"public warehouse" as used in this subparagraph means
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a licensed public warehouse, the principal business of
which is warehousing merchandise for the public;
e. In the case of insurance companies, Oklahoma taxable
income shall be taxable income of the taxpayer for
federal tax purposes, as adjusted for the adjustments
provided pursuant to the provisions of paragraphs 1
and 2 of this subsection, apportioned as follows:
(1) except as otherwise provided by division (2) of
this subparagraph, taxable income of an insurance
company for a taxable year shall be apportioned
to this state by multiplying such income by a
fraction, the numerator of which is the direct
premiums written for insu rance on property or
risks in this state, and the denominator of which
is the direct premiums written fo r insurance on
property or risks everywhere . For purposes of
this subsection, the term "direct premiums
written" means the total amount of direct
premiums written, assessments and annuity
considerations as reported for the taxable year
on the annual statement filed by the company with
the Insurance Commissioner in the form approved
by the National Association of Insurance
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Commissioners, or such other for m as may be
prescribed in lieu thereof,
(2) if the principal source of premiums written by an
insurance company consists of premiums for
reinsurance accepted by it, the taxable income of
such company shall be apportioned to this state
by multiplying such income by a fraction, the
numerator of which is the sum of (a) direct
premiums written for insurance on p roperty or
risks in this state, plus (b) premium s written
for reinsurance accepted in resp ect of property
or risks in this state, and the denominator o f
which is the sum of (c) direct premiums written
for insurance on property or risks everywhere,
plus (d) premiums written for reinsurance
accepted in respect of property or risks
everywhere. For purposes of this paragraph,
premiums written for reinsuranc e accepted in
respect of property or risks in this state,
whether or not otherwise determinable, may at t he
election of the company be determined on the
basis of the proportion which premiums wri tten
for insurance accepted from companies
commercially domiciled in Oklahoma bears to
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premiums written for reinsurance accepted from
all sources, or alternatively in the proportion
which the sum of the direct prem iums written for
insurance on property or risks in this state by
each ceding company from which reinsur ance is
accepted bears to the sum of the total direct
premiums written by each such ceding company for
the taxable year.
5. The net income or loss remai ning after the separate
allocation in paragraph 4 of this subsection, being that which is
derived from a unitary business enterprise, shall be apportioned to
this state on the basis of the arithmetical averag e of three factors
consisting of property, payro ll and sales or gross revenue
enumerated as subparagraphs a, b and c of this paragraph . Net
income or loss as used in this paragraph includes that derived from
patent or copyright royalties, purchase discoun ts, and interest on
accounts receivable relating to or arising from a business activity,
the income from which is apportioned pursuant to this subsect ion,
including the sale or other disposition of such property and any
other property used in the unitary e nterprise. Deductions used in
computing such net income or loss shall not include taxes b ased on
or measured by income . Provided, for corporations w hose property
for purposes of the tax imposed by Section 2355 of this title has an
initial investment cost equaling or exceeding Two Hundred Million
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Dollars ($200,000,000.00) and such investment i s made on or after
July 1, 1997, or for corporations which e xpand their property or
facilities in this state and such expansion has an investment cost
equaling or exceeding Two Hundred Million Dollars ($200,000,000 .00)
over a period not to exceed three (3) years, and such expansion is
commenced on or after January 1, 2000, the three factors shall be
apportioned with property and payroll, each comprising twenty -five
percent (25%) of the apportionment factor and sales comprising fifty
percent (50%) of the app ortionment factor. The apportionment
factors shall be compu ted as follows:
a. The property factor is a fraction, the numerator of
which is the average value of the t axpayer's real and
tangible personal property ow ned or rented and used in
this state during the tax period and the denominator
of which is the averag e value of all the taxpayer 's
real and tangible personal property everywhere owned
or rented and used durin g the tax period.
(1) Property, the income from which is separately
allocated in paragraph 4 of this subsection,
shall not be included in determinin g this
fraction. The numerator of the fraction shall
include a portion of the investment in
transportation and other equipment having no
fixed situs, such as rolling stock, buses, trucks
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and trailers, including machinery and equipment
carried thereon, air planes, salespersons '
automobiles and other similar equipment, in the
proportion that miles traveled in Okla homa by
such equipment bears to total miles trav eled,
(2) Property owned by the taxpayer i s valued at its
original cost. Property rented by the ta xpayer
is valued at eight times the net annual rental
rate. Net annual rental rate is the annual
rental rate paid by the taxpayer, less any annual
rental rate received by the taxpayer from
subrentals,
(3) The average value of property shall be determined
by averaging the values at the beginning and
ending of the tax period but the Oklahoma Tax
Commission may require the averaging of monthly
values during the tax period if reasonably
required to reflect properly the average value of
the taxpayer's property;
b. The payroll factor is a fraction, the numerator of
which is the total compensation for services rendered
in the state during the tax period, and the
denominator of which is the total compensation for
services rendered everywhere during the tax period .
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"Compensation", as used in this subsection means those
paid-for services to the extent related to the unitar y
business but does not include officers ' salaries,
wages and other compensation.
(1) In the case of a transportation enterprise, the
numerator of the fraction shall include a portion
of such expenditure in connection with employees
operating equipment ove r a fixed route, such as
railroad employees, air line pilots, or bus
drivers, in this state only a part of the time,
in the proportion that milea ge traveled in
Oklahoma bears to total mileage traveled by such
employees,
(2) In any case the numerator of the fraction shall
include a portion of such expendi tures in
connection with itinerant employe es, such as
traveling salespersons, in this state onl y a part
of the time, in the proportion that time spent in
Oklahoma bears to total time spent in furtherance
of the enterprise by such employees;
c. The sales factor is a fraction, the numerator of which
is the total sales or gross revenue of the taxpayer in
this state during the tax period, and the denominator
of which is the total sales or gross revenue of the
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taxpayer everywhere during the tax period . "Sales",
as used in this subsection, does not include sales or
gross revenue which are separately alloc ated in
paragraph 4 of this subsection.
(1) Sales of tangible personal property have a situs
in this state if the property is delivered or
shipped to a purchaser other than the United
States government, within this state regardless
of the FOB point or oth er conditions of the sale;
or the property is shipped from an office, store,
warehouse, factory or other place of s torage in
this state and (a) the purchaser is t he United
States government or (b) the tax payer is not
doing business in the state of the dest ination of
the shipment.
(2) In the case of a railroad or interurban railway
enterprise, the numerator of the fract ion shall
not be less than the allocation of re venues to
this state as shown in its annua l report to the
Corporation Commission.
(3) In the case of an airline, truck or bus
enterprise or freight car, tank car, refrigerator
car or other railroad equipment e nterprise, the
numerator of the fraction shall include a portion
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of revenue from intersta te transportation in the
proportion that interstat e mileage traveled in
Oklahoma bears to total interstate mileage
traveled.
(4) In the case of an oil, gasoline or gas pipeline
enterprise, the numerator of the frac tion shall
be either the total of traffic units of the
enterprise within Oklahoma or the re venue
allocated to Oklahoma based upon miles moved, at
the option of the taxpayer, and the denominator
of which shall be the total of traffic units of
the enterprise or the revenue of the enterprise
everywhere as appropriate to the numerator . A
"traffic unit" is hereby defined as the
transportation for a distance of one (1) mile of
one (1) barrel of oil, one (1) gallon o f gasoline
or one thousand (1,000) cubic feet o f natural or
casinghead gas, as the case m ay be.
(5) In the case of a telephone or telegra ph or other
communication enterprise, the numerator of the
fraction shall include that portion of the
interstate revenue as is allocated pursuant to
the accounting procedures prescribed by the
Federal Communications Commission; provided that
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in respect to each corporation or business entity
required by the Federal Communications Commission
to keep its books and records in accordance with
a uniform system of accounts pr escribed by such
Commission, the intrastat e net income shall be
determined separately in t he manner provided by
such uniform system of accounts and only the
interstate income shall be subject to allocation
pursuant to the provisions of this subsection .
Provided further, that the gross revenue fac tors
shall be those as are determined pursuant t o the
accounting procedures prescribed by the Federal
Communications Commission.
In any case where the apportionment of the three factors
prescribed in this paragraph attributes to Oklahoma a portion of net
income of the enterprise out of all appropriate proportion to the
property owned and/or business transacted within this state, because
of the fact that one or more of t he factors so prescribed are not
employed to any appreciable extent in furtherance of the enterprise;
or because one or more factors not so prescribed are employed to a
considerable extent in furtherance of the enterprise; or because of
other reasons, the Tax Commission is empowered to permit, after a
showing by taxpayer that an excessive port ion of net income has been
attributed to Oklaho ma, or require, when in its judgment an
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insufficient portion of net income has been attributed to Oklahoma,
the elimination, substitution, or use of additional factors , or
reduction or increase in the weight o f such prescribed factors .
Provided, however, that any such variance from such prescribed
factors which has the effect of increasing the portion of net income
attributable to Oklahoma must not be inherently arbitr ary, and
application of the recomputed fin al apportionment to the net income
of the enterprise must attribute to Oklahoma only a reasonable
portion thereof.
6. For calendar years 1997 and 1998, the owner of a new or
expanded agricultural commodity process ing facility in this state
may exclude from Oklahoma taxable income, or in the case of a n
individual, the Oklahoma adjusted gross income, fifteen percent
(15%) of the investment by the owner in the new or expa nded
agricultural commodity processing facility . For calendar year 1999,
and all subsequent years, the percentage, not to exceed fifte en
percent (15%), available to the owner of a new or expanded
agricultural commodity processing facility in this state cl aiming
the exemption shall be adjusted annually so that the total estimated
reduction in tax liability does not exceed One Million Doll ars
($1,000,000.00) annually . The Tax Commission shall promulgate rules
for determining the percentage of the investment which each eligible
taxpayer may exclude . The exclusion provided by this paragraph
shall be taken in the taxable year when the invest ment is made. In
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the event the total reduction in tax liability authorized by this
paragraph exceeds One Million Dollars ($1,000,000.00) in any
calendar year, the Tax Commission shall permit any excess over On e
Million Dollars ($1,000,000.00) and shall fa ctor such excess into
the percentage for subsequent years . Any amount of the exemption
permitted to be excluded pursuant to the provisions of this
paragraph but not us ed in any year may be carried forward as a n
exemption from income pursuant to the provis ions of this paragraph
for a period not exceeding six (6) years following the year in which
the investment was originally made.
For purposes of this paragraph:
a. "Agricultural commodity processing facility " means
building, structures, fixtures and impro vements used
or operated primarily for the processing or production
of marketable products from agricultural commodities .
The term shall also mean a dairy operation that
requires a depreciable investment of at l east Two
Hundred Fifty Thousand Dollars ($25 0,000.00) and which
produces milk from dairy cows . The term does not
include a facility that provides only, and nothing
more than, storage, cleaning, drying or transport ation
of agricultural commodities, and
b. "Facility" means each part of the facility which is
used in a process primarily for:
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(1) the processing of agricultural commodities,
including receiving or storing agr icultural
commodities, or the production of mil k at a dairy
operation,
(2) transporting the agricultural commodities or
product before, during or after the processing,
or
(3) packaging or otherwise preparing the product for
sale or shipment.
7. Despite any provision to the contrary in paragraph 3 of t his
subsection, for taxable years beginnin g after December 31, 1999, in
the case of a taxpayer which has a farming loss, such farming loss
shall be considered a net operating loss carryback in accordance
with and to the extent of the Internal Revenue Code, 26 U.S.C.,
Section 172(b)(G). However, the amount of the net operating loss
carryback shall not exceed the lesser of:
a. Sixty Thousand Dollars ($60,000.00), or
b. the loss properly shown on Schedule F of th e Internal
Revenue Service Form 1040 reduced by one-half (1/2) of
the income from all oth er sources other than reflected
on Schedule F.
8. In taxable years beginning after December 31, 1995, all
qualified wages equal to the federal income tax credit set f orth in
26 U.S.C.A., Section 45A, shall be dedu cted from taxable income.
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The deduction allowed pursuant to this paragraph sh all only be
permitted for the tax years in which the federal tax credit pursuant
to 26 U.S.C.A., Section 45A, is allowed . For purposes of this
paragraph, "qualified wages" means those wages used to calculate the
federal credit pursuant to 26 U.S.C.A., Sec tion 45A.
9. In taxable years beginning after December 31, 2005, an
employer that is eligible for and utilizes the Safety Pays OSH A
Consultation Service provided by the Oklahoma Department of Labor
shall receive an exem ption from taxable income in the am ount of One
Thousand Dollars ($1,000.00) for the tax year that the service is
utilized.
10. For taxable years beginning on or after January 1, 2010,
there shall be added to Oklah oma taxable income an amount equal to
the amount of deferred income not incl uded in such taxable income
pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
as amended by Section 1231 of the Amer ican Recovery and Reinvestment
Act of 2009 (P.L. No. 111-5). There shall be subtracted f rom
Oklahoma taxable income an amo unt equal to the amount of deferred
income included in such taxable income pursuant to Section 108(i)(1)
of the Internal Revenue Code by Section 1231 of the American
Recovery and Reinvestment Act of 2009 (P.L. No. 111 -5).
11. For taxable years beginning on or after January 1, 2019,
there shall be subtracted from Oklahoma taxable income or adjusted
gross income any item of income or gai n, and there shall be added to
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Oklahoma taxable income or adjusted gross income any item of loss or
deduction that in the absence of an election pursuant to the
provisions of the Pass -Through Entity Tax Equity Act of 2019 would
be allocated to a member or to an indirect member of an electing
pass-through entity pursuant to Section 2351 et seq. of this title,
if (i) the electing pass-through entity has accounted for such item
in computing its Oklahoma net entity income or loss pursuant to the
provisions of the Pass-Through Entity Tax Equity Act of 2019, and
(ii) the total amount of tax attributa ble to any resulting Oklahoma
net entity income has been paid . The Oklahoma Tax Commission shall
promulgate rules for the reporting of such exclusion to direct and
indirect members of the electing pass -through entity. As used in
this paragraph, "electing pass-through entity", "indirect member",
and "member" shall be defined in the same manner as prescribed by
Section 2355.1P-2 of this title. Notwithstanding the appli cation of
this paragraph, the adjusted tax basi s of any ownership interest in
a pass-through entity for purposes of Sectio n 2351 et seq. of this
title shall be equal to its adjusted tax basis for federal income
tax purposes.
B. 1. The taxable income of a ny corporation shall be further
adjusted to arrive at Oklahoma taxable income, except tho se
corporations electing treatme nt as provided in subchapter S of the
Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section
2365 of this title, deduction s pursuant to the provisions of the
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Accelerated Cost Recovery System as defined and allow ed in the
Economic Recovery Tax Act of 1981, Public Law 97 -34, 26 U.S.C.,
Section 168, for depreciation of assets placed into service after
December 31, 1981, shall no t be allowed in calculating Oklahoma
taxable income. Such corporations shall be allowed a deduction for
depreciation of assets placed into service after December 31, 1981,
in accordance with provisions of the Internal Revenue Code, 26
U.S.C., Section 1 et seq., in effect immediately prior to the
enactment of the Accelerated Cost Recovery Syst em. The Oklahoma tax
basis for all such assets placed into service after December 31,
1981, calculated in this section shall be retained and utilized for
all Oklahoma income tax purposes through the final disposit ion of
such assets.
Notwithstanding any ot her provisions of the Oklahoma Income Tax
Act, Section 2351 et seq. of this title, or of the Internal Revenue
Code to the contrary, this subsection shall control calcu lation of
depreciation of assets placed into se rvice after December 31, 1981,
and before January 1, 1983.
For assets placed in service and held by a corporation in which
accelerated cost recovery system was previously disallowed, an
adjustment to taxable i ncome is required in the first taxable year
beginning after December 31, 1982, to reconci le the basis of such
assets to the basis allowed in the Internal Revenue Code . The
purpose of this adjustment is to equalize the basis and allowance
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for depreciation accounts between that reported to the Internal
Revenue Service and that reported to Oklah oma.
2. For tax years beginn ing on or after January 1, 2009, and
ending on or before December 31, 2009, there shall be added to
Oklahoma taxable income any amount in excess of One Hundred Seventy -
five Thousand Dollars ($175,000.00) which has been deducted as a
small business expense under Internal Revenue Code, Section 179 as
provided in the American Recovery and Reinvestment Act of 2009.
C. 1. For taxable years begi nning after December 31, 1987, the
taxable income of any corporation shall be further adj usted to
arrive at Oklahoma taxable income for transfers of technology to
qualified small businesses located in Oklahoma . Such transferor
corporation shall be allowed an exemption from taxable income of an
amount equal to the amount of royalty payment rec eived as a result
of such transfer; provided, however, such amount shall not exceed
ten percent (10%) of the amount of gross proceeds received by such
transferor corporation as a result of the technology transfer . Such
exemption shall be allowed for a per iod not to exceed ten (10) y ears
from the date of receipt of the first royalty payment accruing from
such transfer. No exemption may be claimed for transfers of
technology to qualified small businesses made prior to January 1,
1988.
2. For purposes of this subsection:
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a. "Qualified small business" means an entity, whether
organized as a corporation, partnership, or
proprietorship, organized for profit with its
principal place of business located within this state
and which meets the following criteria:
(1) Capitalization of not m ore than Two Hundred Fifty
Thousand Dollars ($250,000.00),
(2) Having at least fifty percent (50%) of its
employees and assets located in Okla homa at the
time of the transfer, and
(3) Not a subsidiary or affiliate of the transferor
corporation;
b. "Technology" means a proprietary process, formula,
pattern, device or compilation of scientific or
technical information which is not in the public
domain;
c. "Transferor corporation " means a corporation which is
the exclusive and undisput ed owner of the technology
at the time the transfer is made; and
d. "Gross proceeds" means the total amount of
consideration for the transfer of technology, whether
the consideration is in money or otherwise.
D. 1. For taxable years beginning after Decem ber 31, 2005, the
taxable income of any corporation, estate or trust, shall be further
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adjusted for qualifying gains receiving capital treatment . Such
corporations, estates or trusts shall be allowed a deduction f rom
Oklahoma taxable income for the amount of qualifying gains receiving
capital treatment earned by the corporation, estate or trust during
the taxable year and included in the federal taxable income of such
corporation, estate or trust.
2. As used in this subsection:
a. "qualifying gains receiv ing capital treatment" means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, included in the
federal income tax return of the corporation, estate
or trust that result f rom:
(1) the sale of real property or tang ible personal
property located within Oklahoma that has been
directly or indirectly owned by the corporation,
estate or trust for a holding period of at least
five (5) years prior to the date of the
transaction from which such net capital gains
arise,
(2) the sale of stock or on the sale of an ownership
interest in an Oklahoma company, limited
liability company, or partnership where such
stock or ownership interest has been directly or
indirectly owned by the corpor ation, estate or
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trust for a holding perio d of at least three (3)
years prior to the date of the transaction from
which the net capital gains arise, or
(3) the sale of real property, tangible personal
property or intangible personal property located
within Oklahoma as part of the sale of all or
substantially all of the assets of an Oklahoma
company, limited liability company, or
partnership where such property has been directly
or indirectly owned by such entit y owned by the
owners of such entity, and used in or derived
from such entity for a perio d of at least three
(3) years prior to the date of the transaction
from which the net capital gains arise,
b. "holding period" means an uninterrupted period of
time. The holding period shall include any additional
period when the property was held by anot her
individual or entity, if such additional period is
included in the taxpayer 's holding period for the
asset pursuant to the Internal Revenue Code,
c. "Oklahoma company", "limited liability company ", or
"partnership" means an entity whose primary
headquarters have been located in Oklahoma for at
least three (3) uninterrupted years prior to the date
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of the transaction from which the net capital gains
arise,
d. "direct" means the taxpayer directly owns the asset,
and
e. "indirect" means the taxpayer owns an interest in a
pass-through entity (or chain of pass -through
entities) that sells the asset that gives rise to the
qualifying gains receiving capital treatment.
(1) With respect to sales of real property or
tangible personal property located within
Oklahoma, the deduction described in this
subsection shall not apply unless the pass -
through entity that makes the sale has held the
property for not less than five (5) unint errupted
years prior to the date of the transac tion that
created the capital gain, and ea ch pass-through
entity included in the chain of ownership has
been a member, partner, or shareholder of the
pass-through entity in the tier immediately below
it for an uninterrupted period of not less than
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of all or substantially all
of the assets of an Oklahoma company, limited
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liability company, or partnership, the deduction
described in this subsection shall not apply
unless the pass-through entity that makes the
sale has held the stock or ownership interest or
the assets for not less than three (3)
uninterrupted years prior to the date of the
transaction that created the capital gain , and
each pass-through entity included in the chain of
ownership has been a member, part ner or
shareholder of the pass -through entity in the
tier immediately below it for an uninterrupted
period of not less than three (3) years.
E. The Oklahoma adjusted gross income of any individual
taxpayer shall be further adjusted as follows to arrive at Oklahoma
taxable income:
1. a. In the case of individuals, there shall be added or
deducted, as the case may be, the difference necessary
to allow personal exemptions of One Thousand Dollars
($1,000.00) in lieu of the personal exemptions allowed
by the Internal Revenue Code.
b. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for each taxpayer or
spouse who is blind at the close of the tax year. For
purposes of this subparagraph, an individual is blind
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only if the central visual acuity of the individual
does not exceed 20/200 in the better eye with
correcting lenses, or if the visual acuity of the
individual is greater than 20/200, but is accompanied
by a limitation in the fields o f vision such that the
widest diameter of the visual field subtends an angle
no greater than twenty (20) degrees.
c. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for each taxpayer or
spouse who is sixty-five (65) years of age or older at
the close of the tax y ear based upon the filing status
and federal adjusted gross income of the taxpayer .
Taxpayers with the following filing status may claim
this exemption if the federal adjusted gross income
does not exceed:
(1) Twenty-five Thousand Dollars ($25,000.00) if
married and filing jointly;
(2) Twelve Thousand Five Hundred Dollars ($12,500.00)
if married and filing separately;
(3) Fifteen Thousand Dollars ($15,000.00) if single ;
and
(4) Nineteen Thousand Dollars ($19,000.00 ) if a
qualifying head of household.
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Provided, for taxable years beginning after December
31, 1999, amounts included in the calculation of
federal adjusted gross income pursuant to the
conversion of a traditio nal individual retirement
account to a Roth ind ividual retirement account shall
be excluded from federal adjusted gross income for
purposes of the income thresholds provided in this
subparagraph.
2. a. For taxable years beginning on or before December 31,
2005, in the case of individuals who use the st andard
deduction in determining taxable income, there shall
be added or deducted, as the case may be, the
difference necessary to allow a standard deduction in
lieu of the standard deduction allowed by the Int ernal
Revenue Code, in an amount equal to the l arger of
fifteen percent (15%) of the Ok lahoma adjusted gross
income or One Thousand Dollars ($1,000.00), but not to
exceed Two Thousand Dollars ($2,000.00), except that
in the case of a married individual fil ing a separate
return such deduction shall be t he larger of fifteen
percent (15%) of such Oklahoma adjusted gross income
or Five Hundred Dollars ($500.00), but not to exceed
the maximum amount of One Thousand Dollars
($1,000.00).
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b. For taxable years begin ning on or after January 1,
2006, and before January 1, 2007, in the case of
individuals who use the standard deduction in
determining taxable income, there shall be added or
deducted, as the case may be, the difference necessary
to allow a standard deduct ion in lieu of the standard
deduction allowed by the Internal Revenue Code, in an
amount equal to:
(1) Three Thousand Dollars ($3,000.00), if the filing
status is married filing joint, head of household
or qualifying widow; or
(2) Two Thousand Dollars ($2, 000.00), if the filing
status is single or marr ied filing separate.
c. For the taxable year beginning on January 1, 2007, and
ending December 31, 2007, in the case of individuals
who use the standard deduction in determining taxable
income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Five Thousand Five Hundred Dollars ($5,500.00),
if the filing status is married filing joint or
qualifying widow; or
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(2) Four Thousand One Hundred Twenty-five Dollars
($4,125.00) for a head of household; or
(3) Two Thousand Seven Hundred Fifty Dollars
($2,750.00), if the filing status is single or
married filing separ ate.
d. For the taxable year beginning on Janua ry 1, 2008, and
ending December 31, 2008, in the case of individuals
who use the standard deduction in determining taxable
income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
deduction in lieu of the s tandard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Six Thousand Five Hundred Dollars ($6,500.00), if
the filing status is married filing joint or
qualifying widow, or
(2) Four Thousand Eight Hundred Seventy -five Dollars
($4,875.00) for a head of household, or
(3) Three Thousand Two Hundred Fifty Dollars
($3,250.00), if the filing status is single or
married filing separate.
e. For the taxable year beginning on January 1, 2009, an d
ending December 31, 2009, in the case of indi viduals
who use the standard deduction in determining taxable
income, there shall be added or deducted, as the case
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may be, the difference necessary to allow a standard
deduction in lieu of the standard deduct ion allowed by
the Internal Revenue Code, in an amount equal to:
(1) Eight Thousand Five Hundred Dollars ($8,500.00),
if the filing status is married filing joint or
qualifying widow, or
(2) Six Thousand Three Hundred Seventy -five Dollars
($6,375.00) for a head of household, or
(3) Four Thousand Two Hu ndred Fifty Dollars
($4,250.00), if the filing status is single or
married filing separate.
Oklahoma adjusted gross income shall be increased by
any amounts paid for motor vehicle excise taxes which
were deducted as allowed by the Internal Revenue Code.
f. For taxable years beginning on or after January 1,
2010, and ending on December 31, 2016, in the case of
individuals who use the standard deduction in
determining taxable income, there shall be added or
deducted, as the case may be, the difference necessa ry
to allow a standard deduction equal to the standard
deduction allowed by the Internal Revenue Code, based
upon the amount and filing status prescribed by such
Code for purposes of filing federal individual income
tax returns.
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g. For taxable years beginn ing on or after January 1,
2017, in the case of individuals who use the standard
deduction in determining taxable income, there shall
be added or deducted, as the case may be, the
difference necessary to allow a standard deduction in
lieu of the standard d eduction allowed by the Internal
Revenue Code, as follows:
(1) Six Thousand Three Hundred Fifty Dollars
($6,350.00) for single or married filing
separately,
(2) Twelve Thousand Seven Hundred Dollars
($12,700.00) for married filing jointly or
qualifying widower with dependent child, and
(3) Nine Thousand Three Hundred Fifty Dollars
($9,350.00) for head of household.
3. a. In the case of resident and part -year resident
individuals having adjusted gross income fro m sources
both within and without the state, th e itemized or
standard deductions and pers onal exemptions shall be
reduced to an amount which is the same portion of the
total thereof as Oklahoma adjusted gross income is of
adjusted gross income . To the extent itemized
deductions include allowable movin g expense, proration
of moving expense sha ll not be required or permitted
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but allowable moving expense shall be fully deductible
for those taxpayers moving within or into Oklahoma and
no part of moving expense shall be deductible for
those taxpayers moving without or out of Oklahoma.
All other itemized or standard deductions and personal
exemptions shall be subject to proration as provided
by law.
b. For taxable years beginning on or after January 1,
2018, the net amount of itemized deductions allowable
on an Oklahoma income tax return, subject to the
provisions of paragraph 24 of this subsection, shall
not exceed Seventeen Thousand Dollars ($17,000.00) .
For purposes of this subparagraph, charitable
contributions and medical expenses deductible for
federal income tax purposes shall be excluded fro m the
amount of Seventeen Thousand Dollars ($17,000.00) as
specified by this subparagraph.
4. A resident individual with a physical disability
constituting a substant ial handicap to employment may deduct from
Oklahoma adjusted gross income such expenditur es to modify a motor
vehicle, home or workplace as are necessary to compensate for his or
her handicap. A veteran certified by the Department of Veterans
Affairs of the federal government as having a service -connected
disability shall be conclusively pres umed to be an individual with a
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physical disability constituting a substantial handicap to
employment. The Tax Commission shall promulgate rules containing a
list of combinations of common disabilities and modific ations which
may be presumed to qualify fo r this deduction. The Tax Commission
shall prescribe necessary requirements for verification.
5. a. Before July 1, 2010, the first One Thousand Five
Hundred Dollars ($1,500.00) received by any person
from the United States as salary or compensation in
any form, other than retirement benefits, as a member
of any component of the Armed Forces of the United
States shall be deducted from taxable income.
b. On or after July 1, 2010, one hundred percent (100%)
of the income received by any person from the United
States as salary or compensation in any form, other
than retirement benefits, as a member of any component
of the Armed Forces of the United States shall be
deducted from taxable income.
c. Whenever the filing of a timely income tax return by a
member of the Armed Forces of the United States is
made impracticable or impossible of accomplishment by
reason of:
(1) absence from the United States, which term
includes only the states and the District of
Columbia;
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(2) absence from the State of Oklahoma while on
active duty; or
(3) confinement in a hospital within the United
States for treatment of wounds, injuries or
disease,
the time for filing a return and paying an income tax
shall be and is hereby extended without inc urring
liability for interest or penalties , to the fifteenth
day of the third month following the month in which:
(a) Such individual shall return to the United
States if the extension is granted pursuant
to subparagraph a of this paragraph, return
to the State of Oklahoma if the extension is
granted pursuant to subparagraph b of this
paragraph or be discharged from such
hospital if the extension is granted
pursuant to subparagraph c of this
paragraph; or
(b) An executor, administrator, or conservator
of the estate of the taxpayer is appointed,
whichever event occurs the earliest.
Provided, that the Tax Commission may, in its discretion, grant
any member of the Armed Forces of the United States an extension of
time for filing of income tax returns and paymen t of income tax
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without incurring liabilit ies for interest or penalties . Such
extension may be granted only when in the judgment of the Tax
Commission a good cause exists therefor and may be for a period in
excess of six (6) months . A record of every suc h extension granted,
and the reason theref or, shall be kept.
6. Before July 1, 2010, the salary or any other form of
compensation, received from the United States by a member of any
component of the Armed For ces of the United States, shall be
deducted from taxable income during the time in which the person is
detained by the enemy in a conflict, is a prisoner of war or is
missing in action and not deceased; provided, after July 1, 2010,
all such salary or comp ensation shall be subject to the deduction as
provided pursuant to paragraph 5 of this su bsection.
7. a. An individual taxpayer, whether resident or
nonresident, may deduct an amount equal to the federal
income taxes paid by the taxpayer during the taxable
year.
b. Federal taxes as described in subpara graph a of this
paragraph shall be deducti ble by any individual
taxpayer, whether resident or nonresident, only to the
extent they relate to income subject to taxation
pursuant to the provisions of the Oklahom a Income Tax
Act. The maximum amount allowable in the preceding
paragraph shall be prora ted on the ratio of the
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Oklahoma adjusted gross income to federal adjusted
gross income.
c. For the purpose of this paragraph, "federal income
taxes paid" shall mean federal income taxes, surtaxes
imposed on incomes or excess profits taxes, as though
the taxpayer was on the accrual basis . In determining
the amount of deduction for federal income taxes for
tax year 2001, the amount of the deduction shall not
be adjusted by the amount of any accelerated ten
percent (10%) tax rate bracket credit or advanced
refund of the credit received during the tax year
provided pursuant to the federal Economic Growth and
Tax Relief Reconciliation Act of 2001, P.L. No. 107 -
16, and the advanced refund of such credit shall not
be subject to taxation.
d. The provisions of this paragraph shall apply to all
taxable years ending after December 31, 1978, and
beginning before January 1, 2006.
8. Retirement benefits not to exceed Five Thousand F ive Hundred
Dollars ($5,500.00) for the 2004 ta x year, Seven Thousand Five
Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand
Dollars ($10,000.00) for the 2006 tax year and all subsequent tax
years, which are received by an individual from the civil service of
the United States, the Okl ahoma Public Employees Retirement System,
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the Teachers' Retirement System of Oklahoma, the Oklahoma Law
Enforcement Retirement System, the Oklahoma Firefighters Pension and
Retirement System, the Oklahoma Poli ce Pension and Retirement
System, the employee retirement systems created by counties pur suant
to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the
Uniform Retirement System for Justices and Judges, the Oklahoma
Wildlife Conservation Department Retirement Fund, the Oklahoma
Employment Security Commission Retirement Plan, or the emp loyee
retirement systems created by municipalities pursuant to Section 48 -
101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
from taxable income.
9. In taxable years beginning after December 3l, 198 4, Social
Security benefits received by an individual shall be exempt from
taxable income, to the extent such benefits are included in the
federal adjusted gross income pursuant to the provisions of Section
86 of the Internal Revenue Code, 26 U.S.C., Secti on 86.
10. For taxable years beginning aft er December 31, 1994, lump -
sum distributions from employer plans of deferred compensation,
which are not qualified plans within the meaning of Section 401(a)
of the Internal Revenue Code, 26 U.S.C., Section 401(a ), and which
are deposited in and accounted for within a separate bank account or
brokerage account in a financial institution within this state,
shall be excluded from taxable income in the same manner as a
qualifying rollover contribution to an individua l retirement account
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within the meaning of S ection 408 of the Internal Revenue Code, 26
U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
account, including any earnings thereon, shall be inclu ded in
taxable income when withdrawn in the s ame manner as withdrawals from
individual retirement accounts within the meaning of Section 408 of
the Internal Revenue Code.
11. In taxable years beginning after December 31, 1995,
contributions made to and in terest received from a medical savings
account established pursuant to Sections 2621 thro ugh 2623 of Title
63 of the Oklahoma Statutes shall be exempt from taxable income.
12. For taxable years beginning after December 31, 1996, the
Oklahoma adjusted gros s income of any individual taxpayer who is a
swine or poultry producer may be further adj usted for the deduction
for depreciation allowed for new construction or expansion costs
which may be computed using the same depreciation method elected for
federal income tax purposes except that the useful l ife shall be
seven (7) years for purposes of t his paragraph. If depreciation is
allowed as a deduction in determining the adjusted gross income of
an individual, any depreciation calculated and claimed pursuant t o
this section shall in no event be a dupli cation of any depreciation
allowed or permitted on the federal income tax return of the
individual.
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13. a. In taxable years beginning after December 31, 2002,
nonrecurring adoption expenses paid by a resident
individual taxpayer in connection with:
(1) the adoption of a minor, or
(2) a proposed adoption of a minor which did not
result in a decreed adoption,
may be deducted from the Oklahoma adjusted gross
income.
b. The deductions for adoptions and proposed adoptio ns
authorized by this paragraph shall not exceed Twenty
Thousand Dollars ($20,000.00) per calendar year.
c. The Tax Commission shall promulgate rules to implement
the provisions of this paragraph which shall contain a
specific list of nonrecurring adoption expenses which
may be presumed to qu alify for the deduction. The Tax
Commission shall prescribe necessary requirements for
verification.
d. "Nonrecurring adoption expenses " means adoption fees,
court costs, medical expenses, attorney fees and
expenses which are directly related to the lega l
process of adoption of a child including, but not
limited to, costs relating to the adoption study,
health and psychological examinations, transportation
and reasonable costs of lodging and food for the child
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or adoptive parents which are incurred to com plete the
adoption process and are not reimbursed by other
sources. The term "nonrecurring adoption expenses "
shall not include attorney fees incurred for the
purpose of litigating a contested adoption, from and
after the point of the initiation of the co ntest,
costs associated with physical remodeling, ren ovation
and alteration of the adoptive parents ' home or
property, except for a special needs child as
authorized by the court.
14. a. In taxable years beginning before January 1, 2005,
retirement benefits not to exceed the amounts
specified in this paragra ph, which are received by an
individual sixty-five (65) years of age or older and
whose Oklahoma adjusted gross income is Twenty -five
Thousand Dollars ($25,000.00) or less if the filing
status is single, head of household, or married filing
separate, or Fifty Thousand Dollars ($50,000.00) or
less if the filing status is married filing joint or
qualifying widow, shall be exempt from taxable income .
In taxable years begi nning after December 31, 2004,
retirement benefits not to exceed the amounts
specified in this paragraph, which are received by an
individual whose Oklahoma adjusted gross income is
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less than the qualifying amount specified in this
paragraph, shall be exem pt from taxable income.
b. For purposes of this paragraph, the qualifying amount
shall be as follows:
(1) in taxable years beginning after December 31,
2004, and prior to January 1, 2007, the
qualifying amount shall be Thirty -seven Thousand
Five Hundred Dollars ($37,500.00) or less if the
filing status is single, head of household, or
married filing separate, or Seventy -five Thousand
Dollars ($75,000.00) or less if the filing status
is married filing jointly or qualifying widow,
(2) in the taxable year begi nning January 1, 2007,
the qualifying amount shall be Fifty Thousand
Dollars ($50,000.00) or less if the filing status
is single, head of household, or married filing
separate, or One Hundred Thousand Dollars
($100,000.00) or less if the filing status is
married filing jointly or qualify ing widow,
(3) in the taxable year beginning January 1, 2 008,
the qualifying amount shall be Sixty -two Thousand
Five Hundred Dollars ($62,500.00) or less if the
filing status is single, head of household, or
married filing separate, or One Hundred Twenty -
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five Thousand Dollars ($125,000.00) or less if
the filing status is married filing jointly or
qualifying widow,
(4) in the taxable year beginning January 1, 2009,
the qualifying amount shall be One Hundred
Thousand Dollars ($100,000.00) or less if the
filing status is single, head of household, or
married filing separate, or Two Hundred Thousand
Dollars ($200,000.00) or less if the filing
status is married filing jointly or qualifying
widow, and
(5) in the taxable year beginni ng January 1, 2010,
and subsequent taxable years, there shall be no
limitation upon the q ualifying amount.
c. For purposes of this paragraph, "retirement benefits"
means the total distributions or withdrawals from the
following:
(1) an employee pension ben efit plan which satisfies
the requirements of S ection 401 of the Internal
Revenue Code, 26 U.S.C., Section 401,
(2) an eligible deferred compensation plan that
satisfies the requirements of Section 457 of the
Internal Revenue Code, 26 U.S.C., Section 457,
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(3) an individual retirem ent account, annuity o r
trust or simplified employee pension tha t
satisfies the requirements of Section 408 of the
Internal Revenue Code, 26 U.S.C., Section 408,
(4) an employee annuity subject to the provisions of
Section 403(a) or (b) of the Internal Re venue
Code, 26 U.S.C., Section 403(a) or (b),
(5) United States Retirement Bonds which satisfy the
requirements of Section 86 of the Internal
Revenue Code, 26 U.S.C., Section 86, or
(6) lump-sum distributions from a retirement plan
which satisfies the re quirements of Section
402(e) of the Internal Revenue Code, 26 U.S.C .,
Section 402(e).
d. The amount of the exemption provided by this paragraph
shall be limited to Five Thousand Five Hundred Dollars
($5,500.00) for the 2004 tax year, Seven Thousand Five
Hundred Dollars ($7,500.00) for the 2005 tax year and
Ten Thousand Dollars ($10,000.00) for the tax year
2006 and for all subsequent tax years . Any individual
who claims the exemption provided for in paragraph 8
of this subsection shal l not be permitted to claim a
combined total exemption pursuant to this paragraph
and paragraph 8 of this subsection in an amount
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exceeding Five Thousand Five Hundred Dollars
($5,500.00) for the 2004 tax year, Seven Thousand Five
Hundred Dollars ($7,500.00 ) for the 2005 tax ye ar and
Ten Thousand Dollars ($10,000.00) for the 2006 tax
year and all subsequent tax years.
15. In taxable years beginning after December 31, 1999, for an
individual engaged in production agriculture who has filed a
Schedule F form with the taxpayer's federal income tax return fo r
such taxable year, there shall be exclud ed from taxable income any
amount which was included as federal taxable income or federal
adjusted gross income and which consists of the discharge of an
obligation by a creditor of the taxpayer incurred to finance the
production of agricultural products.
16. In taxable years beginning December 31, 2000, an amount
equal to one hundred percent (100%) of the amount of any scholarship
or stipend received from participatio n in the Oklahoma Police Corps
Program, as established in Section 2-140.3 of Title 47 of the
Oklahoma Statutes shall be exempt from taxable income.
17. a. In taxable years beginning after December 31, 2001,
and before January 1, 2005, there shall be allowe d a
deduction in the amount of contributions to accounts
established pursuant to the Okla homa College Savings
Plan Act. The deduction shall equal the amount of
contributions to accounts, but in no event shall the
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deduction for each contributor exceed Two Thousand
Five Hundred Dollars ($2,500.00) each taxable year for
each account.
b. In taxable years beginning after December 31, 2004,
each taxpayer shall be allowed a deduction for
contributions to accounts established pursuant to the
Oklahoma College Savin gs Plan Act. The maximum annual
deduction shall equal the amount of contributions to
all such accounts plus any contributions to such
accounts by the taxpayer for prior taxable years after
December 31, 2004, which were not deducted, but in no
event shall the deduction for each tax year exceed Ten
Thousand Dollars ($10,000.00) for each individ ual
taxpayer or Twenty Thousand Dollars ($20,000.00) for
taxpayers filing a joint return . Any amount of a
contribution that is not deducted by the taxpayer in
the year for which the contribution is made may be
carried forward as a deduction from income fo r the
succeeding five (5) years . For taxable years
beginning after December 31, 2005, deductions may be
taken for contributions and rollovers made during a
taxable year and up to April 15 of the succeeding
year, or the due date of a taxpayer's state income tax
return, excluding extensions, whichever is later .
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Provided, a deduction for the same contribution may
not be taken for two (2) different taxable years.
c. In taxable years beginning after December 31, 2006,
deductions for contributions made pursuant to
subparagraph b of this paragraph shall be limited as
follows:
(1) for a taxpayer who qualified for the five -year
carryforward election and who takes a rollover or
nonqualified withdrawal during that period, the
tax deduction otherwise available pursuan t to
subparagraph b of this paragraph shall be reduced
by the amount which is equal to the rollover or
nonqualified withdrawal, and
(2) for a taxpayer who elects to ta ke a rollover or
nonqualified withdrawal within the same tax year
in which a contribution was made to the
taxpayer's account, the tax deduction otherwise
available pursuant to subparagraph b of this
paragraph shall be reduced by the amount of the
contribution which is equal to the rollover or
nonqualified withdrawal.
d. If a taxpayer elects to take a rollover on a
contribution for which a deduction has been taken
pursuant to subparagraph b of this paragraph within
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one (1) year of the date of contribution, t he amount
of such rollover shall be included in the adjusted
gross income of the taxpayer in the taxable year of
the rollover.
e. If a taxpayer makes a nonqualified withdrawal of
contributions for which a deduction was taken pursuant
to subparagraph b of t his paragraph, such nonqualified
withdrawal and any earnings thereon shall be included
in the adjusted gross income of the taxpayer in the
taxable year of the nonqualified withdrawal.
f. As used in this paragraph:
(1) "non-qualified withdrawal " means a withdrawal
from an Oklahoma College Savings Plan a ccount
other than one of the following:
(a) a qualified withdrawal,
(b) a withdrawal made as a result of the death
or disability of the designated beneficiary
of an account,
(c) a withdrawal that is made on th e account of
a scholarship or the allowance or payment
described in Section 135(d)(1)(B) or (C) or
by the Internal Revenue Code, received by
the designated beneficiary to the extent the
amount of the refund does not exceed the
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amount of the scholarship, al lowance, or
payment, or
(d) a rollover or change of designated
beneficiary as permitted b y subsection F of
Section 3970.7 of Title 70 of Oklahoma
Statutes, and
(2) "rollover" means the transfer of funds from the
Oklahoma College Savings Plan to any other p lan
under Section 529 of the Internal Revenue C ode.
18. For taxable years beginning afte r December 31, 2005,
retirement benefits received by an individual from any component of
the Armed Forces of the United States in an amount not to exceed the
greater of seventy-five percent (75%) of such benefits o r Ten
Thousand Dollars ($10,000.00) shall be exempt from taxable income
but in no case less than the amount of the exemption provided by
paragraph 14 of this subsection.
19. For taxable years beginning after December 31, 2006,
retirement benefits received by federal civil service retirees,
including survivor annuities, paid in lieu of Social Security
benefits shall be exempt from taxable income to the extent such
benefits are included in the federal adjusted g ross income pursuant
to the provisions of Secti on 86 of the Internal Revenue Code, 26
U.S.C., Section 86, according to the following schedule:
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a. in the taxable year beginning January 1, 2007, twenty
percent (20%) of such benefits shall be exempt,
b. in the taxable year beginning January 1, 2008, forty
percent (40%) of such benefits shall be e xempt,
c. in the taxable year beginning January 1, 2009, sixty
percent (60%) of such benefits shall be exempt,
d. in the taxable year beginning January 1, 2010, eight y
percent (80%) of such benefits shall be exempt , and
e. in the taxable year beginning Jan uary 1, 2011, and
subsequent taxable years, one hundred percent (100%)
of such benefits shall be exempt.
20. a. For taxable years beginning after December 31, 2007, a
resident individual may deduct up to Ten Thousa nd
Dollars ($10,000.00) from Oklahoma adju sted gross
income if the individual, or the dependent of the
individual, while living, donates one or more human
organs of the individual to another human being for
human organ transplantation . As used in this
paragraph, "human organ" means all or part of a liver,
pancreas, kidney, intestine, lung, or bone marrow . A
deduction that is claimed under this paragraph may be
claimed in the taxable year in which the human organ
transplantation occurs.
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b. An individual may claim this deduction only once, and
the deduction may be claimed only for unreimbursed
expenses that are incurred by the individual and
related to the organ donation of the individual.
c. The Oklahoma Tax Commission shall promulgate rules to
implement the provisions of this paragraph which shall
contain a specific list of expenses which may be
presumed to qualify for the deduction . The Tax
Commission shall prescribe necessary requirements for
verification.
21. For taxable years beginning after December 31, 2009, there
shall be exempt from taxab le income any amount received by the
beneficiary of the death benefit for an emergency medical technician
or a registered emergency medical responder provided by Section 1-
2505.1 of Title 63 of the Oklahoma Statute s.
22. For taxable years beginning after December 31, 2008,
taxable income shall be increased by any unemployment compensation
exempted under Section 85(c) of the Internal Revenue Code, 26
U.S.C., Section 85(c)(2009).
23. For taxable years beginning afte r December 31, 2008, there
shall be exempt from taxable income any payment in an amount less
than Six Hundred Dollars ($600.00) received by a person as an award
for participation in a competitive lives tock show event. For
purposes of this paragraph, the p ayment shall be treated as a
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scholarship amount paid by the entity sponsoring the event and the
sponsoring entity shall cause the payment to be categorized as a
scholarship in its books and records.
24. For taxable years beginning on or after January 1, 2 016,
taxable income shall be increased by any amount of state and local
sales or income taxes deducted under 26 U.S.C., Section 164 of the
Internal Revenue Code . If the amount of state and local taxe s
deducted on the federal return is limited, taxable inc ome on the
state return shall be increased only by the amount actually deducted
after any such limitations are applied.
25. For taxable years beginning after December 31, 2020, each
taxpayer shall be allowed a deduction for contributions to accounts
established pursuant to the Achieving a Better Life Experience
(ABLE) Program as established in Section 4001.1 et seq. of Title 56
of the Oklahoma Statutes . For any tax year, the deduction provided
for in this paragraph shall not exceed Ten Thousand Dollars
($10,000.00) for an individual taxpayer or T wenty Thousand Dollars
($20,000.00) for taxpayers filing a joint return . Any amount of
contribution not deducted by the taxpayer in the tax year for which
the contribution is made may be carried forward as a deduc tion from
income for up to five (5) tax ye ars. Deductions may be taken for
contributions made during the tax year and through April 15 of the
succeeding tax year, or through the due date of a taxpay er's state
income tax return excluding extensions, whiche ver is later.
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Provided, a deduction for th e same contribution may not be taken in
more than one (1) tax year.
26. For taxable years beg inning on or after January 1, 2023,
there shall be allowed a deduction to recompute the federal taxa ble
income amount for any for-profit business entity licensed pursuant
to Oklahoma law to engage in the production, transport, sale , or
other licensed activity related to medical marijuana equal to the
amount of any deduction related to the applicable licensed business
activity within this state which was disallowed for the same tax
year pursuant to the provisions of Section 280E of the Internal
Revenue Code of 1986, as amended, and for taxable years beginning on
or after January 1, 2023, there shall also be allowed an additio nal
deduction from Oklahoma taxable income equal to the amount of any
deduction for business expense incurred in conducting applicable
licensed medical marijuana business activity within this state which
was disallowed for the same tax year pursuant to the provisions of
Section 280E of the Interna l Revenue Code of 198 6, as amended.
F. 1. For taxable years beginning after December 31, 2004, a
deduction from the Oklahoma adjusted gross income of any individual
taxpayer shall be allowed for q ualifying gains receiving capital
treatment that are inclu ded in the federal ad justed gross income of
such individual taxpayer during the taxable year.
2. As used in this subsection:
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a. "qualifying gains receiving capital treatment " means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, i ncluded in an
individual taxpayer's federal income tax return that
result from:
(1) the sale of real property or tangible personal
property located within Oklahoma that has been
directly or indirectly owned by the individual
taxpayer for a holding period o f at least five
(5) years prior to the date of the transaction
from which such net capital gains arise,
(2) the sale of stock or the sale of a direct or
indirect ownership inter est in an Oklahoma
company, limited liability company, or
partnership where suc h stock or ownership
interest has been directly or indirectly owned by
the individual taxpa yer for a holding period of
at least two (2) years prior to the date of the
transaction from which the net capital gains
arise, or
(3) the sale of real property, tan gible personal
property or intangible personal property located
within Oklahoma as part of the sale of all or
substantially all of the assets of an Oklahoma
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company, limited lia bility company, or
partnership or an Oklahoma proprietorsh ip
business enterprise where such property has been
directly or indirectly owned by such entity or
business enterprise or owned by the owners of
such entity or business enterprise for a period
of at least two (2) years prior to the date of
the transaction from which the net ca pital gains
arise,
b. "holding period" means an uninterrupted period of
time. The holding period shall include any additional
period when the property was held by another
individual or entity, if such additional period is
included in the taxpayer's holding period for the
asset pursuant to the Internal Revenue Code,
c. "Oklahoma company," "limited liability company," or
"partnership" means an entity whose primary
headquarters have been located in Oklahoma for at
least three (3) uninterr upted years prior to the date
of the transaction from which the net capital gains
arise,
d. "direct" means the individual taxpayer directly owns
the asset,
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e. "indirect" means the individual taxpaye r owns an
interest in a pass-through entity (or chain of p ass-
through entities) that sells the asset that gives rise
to the qualifying gains receiving capital treatment.
(1) With respect to sales of real property or
tangible personal property located withi n
Oklahoma, the deduction described in this
subsection shall not apply unless t he pass-
through entity that makes the sale has held the
property for not less than five (5) uninterrupted
years prior to the date of the transaction that
created the capital gai n, and each pass-through
entity included in the chain of o wnership has
been a member, partner, or shareho lder of the
pass-through entity in the tier immediately below
it for an uninterrupted period of not less than
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of all or subs tantially all
of the assets of an Oklahoma comp any, limited
liability company, partnership or Oklahoma
proprietorship business enterprise, the deduction
described in this subsection shall not apply
unless the pass-through entity that makes the
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sale has held the stock or owners hip interest for
not less than two (2) uninterrupted years prior
to the date of the transac tion that created the
capital gain, and each pass -through entity
included in the chain of ownership has been a
member, partner or shareholder of the pass-
through entity in the tier immediatel y below it
for an uninterrupted period of not less than two
(2) years. For purposes of this division,
uninterrupted ownership prior to July 1, 2007,
shall be included in the determination of the
required holding period prescribed by this
division, and
f. "Oklahoma proprietorship business enterprise " means a
business enterprise whose income and expenses have
been reported on Schedule C or F of an individ ual
taxpayer's federal income tax return, or any similar
successor schedule pub lished by the Internal Rev enue
Service and whose primary headquarters have been
located in Oklahoma for at least three (3)
uninterrupted years prior to the date of the
transaction from which the net capital gains arise.
G. 1. For purposes of computing it s Oklahoma taxable income
under this section, the dividends -paid deduction otherwise allow ed
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by federal law in computing net income of a real estate investment
trust that is subject to federal income tax shall be added back in
computing the tax imposed by this state under this titl e if the real
estate investment trust is a captive real estate i nvestment trust.
2. For purposes of computing its Oklahoma taxable income under
this section, a taxpayer shall add back otherwise deductible ren ts
and interest expenses paid to a captive real estate investment trust
that is not subject to the provisions of paragraph 1 of this
subsection. As used in this subsection:
a. the term "real estate investment trust" or "REIT"
means the meaning ascribed to such term in Section 856
of the Internal Reven ue Code,
b. the term "captive real estate investment trust " means
a real estate investment trust, the shares or
beneficial interests of which are not r egularly traded
on an established securities market and mo re than
fifty percent (50%) of the voting power or value of
the beneficial interests or shares of which are owned
or controlled, directly or indirectly, or
constructively, by a single entity that is :
(1) treated as an association taxable as a
corporation under the Internal Rev enue Code, and
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(2) not exempt from federal income tax pursuant to
the provisions of Section 501(a) of the Internal
Revenue Code.
The term shall not include a real estate investm ent
trust that is intended to be regularly traded on an
established securities market, and that satisfies the
requirements of Section 856(a)(5) and (6) of the U.S.
Internal Revenue Code by reason of Section 856(h)(2)
of the Internal Revenue Code,
c. the term "association taxable as a corporation " shall
not include the following entit ies:
(1) any real estate investment trust as defined in
paragraph a of this subsec tion other than a
"captive real estate investment trust ", or
(2) any qualified real estate inve stment trust
subsidiary under Section 856(i) of the Intern al
Revenue Code, other than a qualified REIT
subsidiary of a "captive real estate investment
trust", or
(3) any Listed Australian Property Trust (meaning an
Australian unit trust registered as a "Managed
Investment Scheme" under the Australian
Corporations Act in which the pri ncipal class of
units is listed on a recognized stock exchange in
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Australia and is regularly traded on an
established securities market), or an entity
organized as a trust, prov ided that a Listed
Australian Property Trust owns or contr ols,
directly or indirectly, seventy-five percent
(75%) or more of the voting power or value of the
beneficial interests or shares of such trust, or
(4) any Qualified Foreign Entity, meaning a
corporation, trust, association or partnership
organized outside the laws of the Uni ted States
and which satisfies the following criteria:
(a) at least seventy-five percent (75%) of the
entity's total asset value at the close of
its taxable year is represented by real
estate assets, as defined in Section
856(c)(5)(B) of the Internal Reven ue Code,
thereby including shares or certificates of
beneficial interest in an y real estate
investment trust, cash and cash equivalents,
and U.S. Government securities,
(b) the entity receives a dividend-paid
deduction comparable to Se ction 561 of the
Internal Revenue Code, or is e xempt from
entity level tax,
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(c) the entity is required to distribute at
least eighty-five percent (85%) of its
taxable income, as computed in the
jurisdiction in which it is organized, to
the holders of its s hares or certificates of
beneficial interest on an annual basis,
(d) not more than ten percent ( 10%) of the
voting power or value in such entity is held
directly or indirectly or constructively by
a single entity or individual, or the shares
or beneficial interests of such ent ity are
regularly traded on an established
securities market, and
(e) the entity is organized in a country which
has a tax treaty with the United States.
3. For purposes of this subsection, the constructive ownership
rules of Section 318(a) of the Interna l Revenue Code, as modifie d by
Section 856(d)(5) of the Internal Revenue Code, shall apply in
determining the ownership of stock, assets, or net profits of any
person.
4. A real estate investment trust that does not become
regularly traded on an establish ed securities market withi n one (1)
year of the date on which it first b ecomes a real estate investment
trust shall be deemed not to have been regularly traded on an
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established securities market, retroactive to the date it first
became a real estate inves tment trust, and shall fil e an amended
return reflecting such retroactiv e designation for any tax year or
part year occurring during its initial year of status as a real
estate investment trust. For purposes of this subsection, a real
estate investment tr ust becomes a real estate investment trust on
the first day it has both met the requirements of Section 856 of the
Internal Revenue Code and has elected to be treated as a real estate
investment trust pursuant to Section 856(c)(1) of t he Internal
Revenue Code.
SECTION 2. This act shall become effective January 1, 2023.
58-2-8965 MAH 01/19/22