ENGR. H. B. NO. 3849 Page 1 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
ENGROSSED HOUSE
BILL NO. 3849 By: Boatman of the House
and
Thompson of the Senate
[ revenue and taxation - Oklahoma taxable income and
adjusted gross income - authorizing certain
corporations to select apportionment method -
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 an d adjusted gross income shall be adjusted to
arrive at Oklahoma taxable income and Oklaho ma adjusted gross income
as required by this section.
A. The taxable income of any taxpayer shall be adjust ed to
arrive at Oklahoma taxable income for corporations an d Oklahoma
adjusted gross income for individuals, as follows:
1. There shall be added in terest income on obligations of any
state or political subdivision the reto which is not otherwise
exempted pursuant to other laws of this state, to the extent that
ENGR. H. B. NO. 3849 Page 2 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 prohibite d from taxing because of the provisi ons of the
Federal Constitution, the State Constitution, fede ral laws or laws
of Oklahoma.
3. The amount of any federal net operating loss deduction shall
be adjusted as follows:
a. For carryovers and carrybacks to taxa ble years
beginning before January 1, 1981, the amount of any
net operating loss deduction allowe d to a taxpayer for
federal income tax purposes shall be reduced to an
amount which is the same portion thereof as the 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;
b. For carryovers and carryba cks 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 agg regate of the
Oklahoma net operating loss carryovers and carrybacks
to such year. Oklahoma net operating losses shall be
separately determined by reference to Section 172 of
ENGR. H. B. NO. 3849 Page 3 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
the Internal Revenue Code, 26 U.S.C., Section 172, as
modified by the Oklahoma In come Tax Act, Section 2351
et seq. of this title, and shall be allowed without
regard to the existence of a federal net operating
loss. For tax years beginnin g after December 31,
2000, and ending before January 1, 2008, the years to
which such losses may be carried shall be determined
solely by reference to Section 172 of the Internal
Revenue Code, 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". For
tax years beginning after December 31, 2007, and
ending before January 1, 2009, years to which such
losses may be carried back sha ll be limited to two (2)
years. For tax years beginning after December 31,
2008, the years to wh ich such losses may be carried
back shall be determined solely by reference to
Section 172 of the Internal Revenue Code, 26 U.S.C.,
Section 172, with the excep tion that the terms "net
operating loss" and "taxable income" shall be replaced
with "Oklahoma net operating loss" and "Oklahoma
taxable income".
ENGR. H. B. NO. 3849 Page 4 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
4. Items of the following nature shall be allocated as
indicated. Allowable deductions attributable to items separately
allocable in subparagraphs a, b and c of this paragraph, whether or
not such items of income were actually received, shall be allocated
on the same basis as those items:
a. Income from real and tangible 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 intangible personal pro perty, such as
interest, dividends, patent or copyright royalties,
and gains or losses from sales of such property, shall
be allocated in accordance with the domicilia ry situs
of the taxpayer, except that:
(1) where such property has acquired a nonunitary
business or commercial situs apart from the
domicile of the taxpayer s uch income shall be
allocated in accordance with such business or
commercial situs; interest inco me from
investments held to generate working capital for
a unitary business enterprise sh all be included
in apportionable income; a resident trust or
resident estate shall be treated as having a
ENGR. H. B. NO. 3849 Page 5 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
separate commercial or business situs insofar as
undistributed income is concerned, but shall not
be treated as having a separate commercial or
business situs insofar as distributed income is
concerned,
(2) for taxable years beginning after December 31,
2003, capital or ordinary gains or losses from
the sale of an ownership interest in a publicly
traded partnership, as defined by Section 7704(b)
of the Internal Revenue Code, shall be allocated
to this state in the ratio o f 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 assets, capital or
ordinary gains or losses from the sale of an
ownership interest in the partnership shall be
allocated to this state in accordance with the
sales factor of the partnership for its first
full tax period immediate ly preceding its tax
period during which the ownership interest in the
partnership was sold; the provisions of this
ENGR. H. B. NO. 3849 Page 6 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
division shall only apply if the capital or
ordinary gains or losses f rom 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 provisions of paragraph
5 of this subsection shall b e allocated as herein
provided;
c. Net income or loss from a business activity which is
not a part of business carried on within or without
the state of a unitary character shall be sepa rately
allocated to the state in which such activity is
conducted;
d. In the case of a manufacturing or processing
enterprise the business of which in Oklahoma consist s
solely of marketing its products by:
(1) sales having a situs without this state, shipp ed
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"
ENGR. H. B. NO. 3849 Page 7 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
tariffs, as prescribed and allowed 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 purchaser
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 income tax purposes derived
from the manufacture and/or processi ng and sales
everywhere as determined by the ratio of the sales
defined in this section made to the purchaser within
the state to the total sales everywhere . The term
"public warehouse" as used in this subparagraph means
a licensed public warehouse, the p rincipal 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 tax payer for
federal tax purposes, as adjusted for the adjustments
provided pursuant to the provisions of paragraphs 1
and 2 of this subsection, apportioned as fo llows:
ENGR. H. B. NO. 3849 Page 8 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(1) except as otherwise provided by division (2) of
this subparagraph, taxable income of a n 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 insurance on property or
risks in this state, and the denominator of which
is the direct premiums written for 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 taxabl e year
on the annual statement filed by the company with
the Insurance Commissioner in th e form approved
by the National Association of Insurance
Commissioners, or such other form as may be
prescribed in lieu thereof,
(2) if the principal source of premium s written by an
insurance company consists of premiums for
reinsurance accepted by it, th e 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
ENGR. H. B. NO. 3849 Page 9 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
premiums written for insurance on property or
risks in this state, plus (b) premiums written
for reinsurance accepted in respect of property
or risks in this state, and the denominator of
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 proper ty or risks
everywhere. For purposes of this paragraph,
premiums written for reinsurance accepted in
respect of property or risks in this state,
whether or not otherw ise determinable, may at the
election of the company be determined on the
basis of the proportion which premiums written
for insurance accepted from companies
commercially domiciled in Oklahoma bears to
premiums written for reinsurance accepted from
all sources, or alternatively in the proportion
which the sum of the direct premiums written fo r
insurance on property or risks in this state by
each ceding company from which reinsurance is
accepted bears to the sum of the total direct
premiums written by each such ceding company for
the taxable year.
ENGR. H. B. NO. 3849 Page 10 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
5. The
a. Except as otherwise provided by subparagraph b or c of
this paragraph, for taxable years beginning not later
than December 31, 2022, the net income or loss
remaining after the separate allocation in para graph 4
of this subsection, b eing that which is derived fr om a
unitary business enterprise, shall be apportioned to
this state on the basis of the arithmetical average of
three factors consisting of property, payroll and
sales or gross revenue enumerated a s subparagraphs a,
b and c of this paragraph divisions (1), (2), and (3)
of subparagraph d of this paragraph. Net income or
loss as used in this paragraph in cludes that derived
from patent or copyright r oyalties, purchase
discounts, and interest on accoun ts receivable
relating to or arising from a business activity, the
income from which is appor tioned pursuant to this
subsection, including the sale or other d isposition of
such property and any other prop erty used in the
unitary enterprise. Deductions used in computing such
net income or loss shall not include taxes based on or
measured by income. Provided, for
b. For all taxable years beginnin g on or after January 1,
2023, qualifying corporations may elect to use a
ENGR. H. B. NO. 3849 Page 11 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
single sales factor apportionment comprising sales as
one hundred percent (100%) the apportionment or the
corporation may elect to compute Oklahoma taxable
income using the apportionment methodolo gy in which
each of the three factors in subparagraph d of this
paragraph is equally weighted and an ar ithmetical
average of the three factors is determined as
otherwise provided by this paragraph . A qualifying
corporation is one whose property for purpos es of the
tax imposed by Section 2355 of this title has an
initial cumulative investment cost equaling or
exceeding Two Hundred Million Dollars
($200,000,000.00) One Hundred Million Dollars
($100,000,000.00) over three (3) years and such
investment is made on or after July 1, 1997, January
1, 2017, or for corporations a corporation which
expand expands their property or facilities or which
makes improvements or upgrades or any combination of
such expenditures which shall be valued at the
original costs, prior to federal adjust ments, at the
time of acquisition by the corporation and adjusted by
subsequent capital additions or improvements t hereto
and partial disposition thereof, by reason of sale,
exchange or abandonment, in this state and such
ENGR. H. B. NO. 3849 Page 12 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
expansion has, improvements, upgrades, or expenditures
have an investment cost equaling or exceeding Two
Hundred Million Dollars ($200,000,000.00) One Hundred
Million Dollars ($100,000,000 .00) over a period not to
exceed three (3) years, and such expansion ,
improvements, upgrades, or any combination of such
expenditures 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 apportionment factor January 1,
2017. The As used in this subparagraph, investments,
improvements, or expenditures shall include but not be
limited to:
(1) Expenditures for intangible drilling costs , as
defined in Internal Revenue Code Section 263(c),
without regard to whether such intangible
drilling costs are capitalized or expensed for
federal income tax purposes, and
(2) Track structure expenditures, as defined in
Internal Revenue Procedure 2001-46, without
regard to whether such track costs are
capitalized or expensed for federal income tax
purposes.
ENGR. H. B. NO. 3849 Page 13 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
c. For any other corporation, for taxable years beginning
on or after January 1, 2023, Oklahoma taxable income
shall be computed using a single sales factor
comprising one hundred percent (100%) of the
apportionment and the corporation shall not use an
arithmetic average of the three f actors consisting of
property, payroll, and sales. For the applicable tax
years, the apportionment factors shall be computed as
follows and for corporations require d to use the
single sales factor the provisions of subparagraph d
of this paragraph shall be used to determine Oklahoma
taxable income as provided therein.
d. For corporations required or electing to use a single
sales factor apportionment, the provisions of division
(3) of this subparagraph shall be used to determine
Oklahoma taxable income as provided therein. For the
applicable tax years, or for qualifying corporations
electing the three-factor apportionment, the
apportionment factors shall be computed as follows:
a. (1) The property factor is a fraction, the numerator
of which is the average value of the taxpayer's
real and tangible personal property owned or
rented and used in this state during the tax
period and the denominator of whi ch is the
ENGR. H. B. NO. 3849 Page 14 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
average value of all the taxp ayer's real and
tangible personal property everywhere owned or
rented and used during the tax period.
(1) (a) Property, the income from which is
separately allocated in paragraph 4 of this
subsection, shall not be include d in
determining 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 and trailers,
including machinery and equipment carri ed
thereon, airplanes, salespersons'
automobiles and other similar equipment, in
the proportion that miles traveled in
Oklahoma by such equipment bears to total
miles traveled,
(2) (b) Property owned by the taxpayer is valued at
its original cost. Property rented by the
taxpayer 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,
ENGR. H. B. NO. 3849 Page 15 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(3) (c) 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 taxpay er's
property;
b. (2) The payroll factor is a fraction, the numerator
of which is the total comp ensation for services
rendered in the state during the tax period, and
the denominator of whic h is the total
compensation for services rendered everywhere
during the tax period. "Compensation", as used
in this subsection division means those paid-for
services to the extent related to the unitary
business but does not include officers ' salaries,
wages and other compensation.
(1) (a) In the case of a transportation en terprise,
the numerator of the fraction shall include
a portion of such expenditure in conne ction
with employees operating equipment over a
fixed route, such as railroad employees,
airline pilots, or bus drivers, in this
ENGR. H. B. NO. 3849 Page 16 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
state only a part of the time, in t he
proportion that mileage traveled in Oklahoma
bears to total mileage traveled by such
employees,
(2) (b) In any case the numerator of the fraction
shall include a portion of such expenditures
in connection with itinerant employees, such
as traveling salespersons, in this state
only a part of the time, in the proportion
that time spent in Oklaho ma bears to total
time spent in furtherance of the enterprise
by such employees;
c. (3) The sales factor is a fract ion, 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 w hich is the total sales or
gross revenue of the taxpayer everywhere during
the tax period. "Sales", as used in this
subsection division, does not include sales or
gross revenue which are separately allocated in
paragraph 4 of this subsection.
(1) (a) Sales of tangible personal property hav e a
situs in this state if the property is
delivered or shipped to a purchaser other
ENGR. H. B. NO. 3849 Page 17 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
than the United States government, within
this state regardless of the FOB point or
other conditions of the sale; or the
property is shipped from an office, store,
warehouse, factory or other place of storage
in this state and (a) the purchaser is the
United States government or (b) the taxpayer
is not doing business in t he state of the
destination of the shipment.
(2) (b) In the case of a railroad or interurban
railway enterprise, the numerator of the
fraction shall not be less than the
allocation of revenues to this state as
shown in its annual rep ort to the
Corporation Commission.
(3) (c) In the case of an airline, truck or bus
enterprise or freight car, tank car,
refrigerator car or other railroad equipment
enterprise, the numerator of the fraction
shall include a portion of revenue from
interstate transportation in the proportion
that interstate mileage traveled in Oklahoma
bears to total interstate mileage traveled.
ENGR. H. B. NO. 3849 Page 18 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(4) (d) In the case of an oil, gasoline or gas
pipeline enterprise, the numerator of the
fraction shall be either the total of
traffic units of the enterpr ise within
Oklahoma or the revenue allocated to
Oklahoma based upon m iles 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 transporta tion for a distance
of one (1) mile of on e (1) barrel of oil,
one (1) gallon of gasoline or one thousand
(1,000) cubic feet of natural or casinghead
gas, as the case may be.
(5) (e) In the case of a telephone or tel egraph or
other communication enterprise, the
numerator of the fraction shall incl ude that
portion of the interstate revenue as is
allocated pursuant to the accounti ng
procedures prescribed by the Federal
Communications Commissi on; provided that in
respect to each corporation or business
ENGR. H. B. NO. 3849 Page 19 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
entity required by the Federal
Communications Commission to keep its books
and records in accordance with a uniform
system of accounts prescribed by such
Commission, the intrastate net income sha ll
be determined separately in the manner
provided by such uniform sy stem of accounts
and only the interstate income shall be
subject to allocation pursuant to the
provisions of paragraph 4 of this
subsection. Provided further, that the
gross revenue factors shall be those as are
determined pursuant to the accounting
procedures prescribed by the Federal
Communications Commission.
In any case where the apportionment of the three factors
prescribed in this paragraph division (1), (2), or (3) of this
subparagraph 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 the factors so prescr ibed are not employed t o
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
ENGR. H. B. NO. 3849 Page 20 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
reasons, the Tax Commission is em powered to permit, afte r a showing
by taxpayer that an excessive portion of net income has b een
attributed to Oklahoma, or require, when in its judgment an
insufficient portion of net income has been attri buted to Oklahoma,
the elimination, substitution, o r use of additional fac tors, or
reduction or increase in the weight of such prescribed facto rs.
Provided, however, that any such variance from such prescribed
factors which has the effect of increasing th e portion of net income
attributable to Oklahoma mu st not be inherently ar bitrary, and
application of the recomputed final 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 pro cessing facility in this state
may exclude from Oklahoma taxable inco me, or in the case of an
individual, the Oklahoma adjusted gross income, fifteen percent
(15%) of the investment by the owner in the new or expanded
agricultural commodity processing faci lity. For calendar year 1999,
and all subsequent years, the percenta ge, not to exceed fifteen
percent (15%), available to the owner of a new or expanded
agricultural commodity proce ssing facility in this state claiming
the exemption shall be adjusted annu ally so that the tot al estimated
reduction in tax liability does not exceed One Million Dollars
($1,000,000.00) annually. The Tax Commission shall promulgate rules
ENGR. H. B. NO. 3849 Page 21 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
for determining the percentage of the investment which each eligible
taxpayer may exclude . The exclusion provided by this paragraph
shall be taken in the taxab le year when the investment is made. In
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 One
Million Dollars ($1,0 00,000.00) and shall factor such excess into
the percentage for subsequent years . Any amount of the exemption
permitted to be excluded pursuant to the provisions o f this
paragraph but not used in any year m ay be carried forward as an
exemption from income pursuant to the provisions of this paragraph
for a period not exceeding six (6) years following the year in whic h
the investment was originally made.
For purposes of this paragraph:
a. "Agricultural commodi ty processing facility " means
building, structures, fixtures and improvements used
or operated primarily for the processing or production
of marketable products f rom agricultural commodities.
The term shall also mean a dairy operation that
requires a depreciable investment of at least Two
Hundred Fifty Thousand Dollars ($250,000.00) and which
produces milk from dairy cows . The term does not
include a facility tha t provides only, and nothing
ENGR. H. B. NO. 3849 Page 22 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
more than, storage, cl eaning, drying or trans portation
of agricultural commodities, and
b. "Facility" means each part of the facility which is
used in a process primarily for:
(1) the processing of agricultural commodities,
including receiving or storing agricultural
commodities, or the production of milk at a dairy
operation,
(2) transporting the agricultural commodi ties 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 c ontrary in paragraph 3 of this
subsection, for taxable years beginning after December 31, 19 99, in
the case of a taxpayer which has a farming loss, such farming loss
shall be considered a net operating los s carryback in accordance
with and to the extent of the Internal Revenue C ode, 26 U.S.C.,
Section 172(b)(G). However, the amount of the net op erating 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 the Internal
Revenue Service Form 1040 reduce d by one-half (1/2) of
ENGR. H. B. NO. 3849 Page 23 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
the income from all other sources other than r eflected
on Schedule F.
8. In taxable years beginning after December 31, 1995, all
qualified wages equal to the federal income tax credit set forth in
26 U.S.C.A., Section 45A, shall be deducted from taxabl e income.
The deduction allowed pursuant to this paragraph shall 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 use d to calculate the
federal credit pursuant to 26 U.S.C.A., Section 45A.
9. In taxable years beginning after December 31, 2005, an
employer that is eligible for a nd utilizes the Safety Pays OSHA
Consultation Service provided by the Okla homa Department of L abor
shall receive an exemption from taxable inco me in the amount 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 O klahoma taxable inco me an amount equal to
the amount of deferred inco me not included in such taxable income
pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
as amended by Section 1231 of the American Recovery and Re investment
Act of 2009 (P.L. No. 111-5). There shall be subtracted from
Oklahoma taxable income an amount equal to the amount of deferred
income included in such taxable income pursuant to Section 108(i)( 1)
ENGR. H. B. NO. 3849 Page 24 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 gain, and there shall b e added to
Oklahoma taxable income or adjus ted 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 wou ld
be allocated to a member or to an indirect membe r of an electing
pass-through entity pursua nt 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 20 19, and
(ii) the total amount of tax attributable to any resulting Ok lahoma
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 th e 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 application of
this paragraph, the adjusted tax basis of any ownersh ip interest in
a pass-through entity for purposes of Section 2351 et seq. of this
title shall be equal to its adjusted tax basis for federal income
tax purposes.
ENGR. H. B. NO. 3849 Page 25 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
B. 1. The taxable income of any corporation shall be further
adjusted to arrive at Oklahoma taxable income, except those
corporations electin g treatment as provided in subchapter S of the
Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Sectio n
2365 of this title, deductions pursuant to the pr ovisions of the
Accelerated Cost Recovery S ystem as defined and allowed 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 af ter
December 31, 1981, shall not be allowed in calc ulating 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 Revenu e Code, 26
U.S.C., Section 1 et seq., in effect imm ediately prior to the
enactment of the Acce lerated Cost Recovery System . The Oklahoma tax
basis for all such assets placed into service after December 31,
1981, calculated in this section shall be retaine d and utilized for
all Oklahoma income tax purposes through the final disp osition of
such assets.
Notwithstanding any other provisions of the O klahoma Income Tax
Act, Section 2351 et seq. of this title, or of the Internal Revenue
Code to the contrary, this subsection shall control calculation of
depreciation of assets placed int o service after Dece mber 31, 1981,
and before January 1, 1983.
ENGR. H. B. NO. 3849 Page 26 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
For assets placed in service and held by a corporation in which
accelerated cost recovery system was previously disallo wed, an
adjustment to taxable income is required in the first taxable year
beginning after December 31, 1982, to reconcile 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
for depreciation accounts between tha t reported to the Inter nal
Revenue Service and that reported to Oklahoma.
2. For tax years beginning 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 Hundre d 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 beginning after December 31, 1987, the
taxable income of any corpor ation shall be further adjusted 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 t axable income of an
amount equal to the amo unt of royalty payment received as a result
of such transfer; provided, however, such amount shall not exceed
ten percent (10%) of the amount of gross proceeds re ceived by such
transferor corporation as a result o f the technology transf er. Such
exemption shall be allowed for a period not to exceed ten ( 10) years
ENGR. H. B. NO. 3849 Page 27 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 s mall businesses made pr ior to January 1,
1988.
2. For purposes of this subsection:
a. "Qualified small business" means an entity, whether
organized as a corporation, partnership, or
proprietorship, organi zed for profit with its
principal place of business located within this st ate
and which meets the following criteria:
(1) Capitalization of not more than Two Hundred Fifty
Thousand Dollars ($250,000.00),
(2) Having at least fifty percent (50%) of its
employees and assets located in Oklahoma at the
time of the transfer, and
(3) Not a subsidiary or a ffiliate of the transferor
corporation;
b. "Technology" means a proprietary process, formula,
pattern, device or compilation of scientific or
technical informatio n which is not in the public
domain;
c. "Transferor corporation" means a corporation which is
the exclusive and undisputed owner of the techn ology
at the time the transfer is made; and
ENGR. H. B. NO. 3849 Page 28 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
d. "Gross proceeds" means the total amount of
consideration for the tra nsfer of technology, whether
the consideration is i n money or otherwise.
D. 1. For taxable years beginning after December 31, 2005, the
taxable income of any corporation, estate or trust, shall be further
adjusted for qualifying gains receiving capital t reatment. Such
corporations, estates or trusts sha ll be allowed a deducti on from
Oklahoma taxable income for the amount of qualifying gain s 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 receiving capital treat ment" means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, included in t he
federal income tax return of the corporation, es tate
or trust 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 corporation,
estate or trust for a hold ing period of at least
five (5) years prior to the date of the
transaction from which such net capital gains
arise,
ENGR. H. B. NO. 3849 Page 29 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(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 co rporation, estate or
trust for a holding period of at least t hree (3)
years prior to the date of the transaction from
which the net capital gains arise, or
(3) the sale of real prope rty, tangible personal
property or intangible perso nal property located
within Oklahoma as par t 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 entity owned by the
owners of such entity, and u sed in or derived
from such entity for a period 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 s hall include any additi onal
period when the property was held by another
individual or entity, if such additional period is
ENGR. H. B. NO. 3849 Page 30 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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
of the transaction from which the net c apital 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 rece iving capital treatment.
(1) With respect to sales of real property or
tangible personal prope rty 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) uninterrupted
years prior to the date of the tra nsaction 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
ENGR. H. B. NO. 3849 Page 31 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
pass-through entity in the t ier immediately below
it for an uninterrupted perio d of not less than
five (5) years.
(2) With respect to sales of stock or owne rship
interest in or sales of all or substantially all
of the assets of an Oklahoma company, limited
liability company, or partn ership, 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, partner or
shareholder of the pass-through entity in the
tier immediately below it for an uninterrupted
period of not less than three (3) ye ars.
E. The Oklahoma adjusted gross income of any individual
taxpayer shall be further adjust ed as follows to arrive at Oklaho ma
taxable income:
1. a. In the case of individuals, there shall be added or
deducted, as the case may be, the difference necessa ry
to allow personal exemptions of One Thousand Dol lars
ENGR. H. B. NO. 3849 Page 32 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
($1,000.00) in lieu of the personal ex emptions 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 subparagra ph, an individual is blind
only if the central visu al 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 fiel ds of vision such th at the
widest diameter of the v isual 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 year based upon the filing status
and federal adjusted gross income of the taxpayer.
Taxpayers with the following filing status may clai m
this exemption if the federal adjusted gross inco me
does not exceed:
(1) Twenty-five Thousand Dollars ($25,000.00) if
married and filing join tly;
ENGR. H. B. NO. 3849 Page 33 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(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 ($19,00 0.00) if a
qualifying head of household.
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 traditional individual retir ement
account to a Roth individual retirement account shall
be excluded from federal adjuste d gross income for
purposes of the income thresholds provided in this
subparagraph.
2. a. For taxable years begin ning on or before December 31,
2005, in the case of individuals who use th e 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 t he larger 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
ENGR. H. B. NO. 3849 Page 34 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
in the case of a married individual filing a separate
return such deduction shall be the larger of fif teen
percent (15%) of such Oklahoma adjusted gros s income
or Five Hundred Dollars ($500.00), but not to exceed
the maximum amount of One Thousand Dollars
($1,000.00).
b. For taxable years beginning on or after Jan uary 1,
2006, and before January 1, 2007, i n the case of
individuals who use the standard de duction in
determining taxable income, there shall be added or
deducted, as the case may be, the difference neces sary
to allow a standard deduction in lieu of the s tandard
deduction allowed by the Internal R evenue 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; o r
(2) Two Thousand Dollars ($2,000.00), if the fili ng
status is single or married filing separ ate.
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, a s the case
may be, the difference necessary to allow a standard
ENGR. H. B. NO. 3849 Page 35 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
deduction in lieu of the sta ndard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Five Thousand Five Hundred Dolla rs ($5,500.00),
if the filing status is married fil ing joint or
qualifying widow; or
(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 separate.
d. For the taxable year beginning on J anuary 1, 2008, and
ending December 31, 2008, in the case of individu als
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 t he standard deductio n allowed by
the Internal Revenue Code, in an amo unt 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 Hundre d Seventy-five Dollars
($4,875.00) for a he ad of household, or
ENGR. H. B. NO. 3849 Page 36 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(3) Three Thousand Two Hundre d Fifty Dollars
($3,250.00), if the filing status is single or
married filing separate.
e. For the taxable year b eginning on January 1, 2009, and
ending December 31, 2009, 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, i n 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 Hundred Fifty Doll ars
($4,250.00), if the filing status is single o r
married filing separate.
Oklahoma adjusted gross income shall be increased by
any amounts paid for motor vehicl e excise taxes which
were deducted as allowed by th e 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
ENGR. H. B. NO. 3849 Page 37 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
determining taxable income , there shall be added or
deducted, as the case may be, the difference nec essary
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.
g. For taxable years be ginning on or after January 1,
2017, in the case of individuals who u se the standard
deduction in determining taxable income, there shall
be added or deducted, as the case may be, th e
difference necessary to allow a standard deductio n in
lieu of the standard deduction 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 filin g jointly or
qualifying widower with dependent child, and
(3) Nine Thousand Three Hundred Fi fty Dollars
($9,350.00) for head of household.
3. a. In the case of resident and part -year resident
individuals having adjusted gross income from sources
ENGR. H. B. NO. 3849 Page 38 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
both within and without the state , the itemized or
standard deductions and personal exemptions shall b e
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 m oving expense, prora tion
of moving expense shall not be required or p ermitted
but allowable moving expense shall be fully deductible
for those taxpayers moving within or into Oklahom a and
no part of moving expense shall be deductible for
those taxpayers moving without or out of Oklahoma.
All other itemized or standard dedu ctions and personal
exemptions shall be subject to proration as provided
by law.
b. For taxable years beginning o n or after January 1,
2018, the net amount of itemi zed deductions allowabl e
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 subp aragraph, charitable
contributions and medical expe nses deductible for
federal income tax purp oses shall be excluded from the
amount of Seventeen Thousand Dollars ($17,000.00) as
specified by this subparagraph.
ENGR. H. B. NO. 3849 Page 39 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
4. A resident individual with a physical dis ability
constituting a substantial handicap to empl oyment may deduct from
Oklahoma adjusted gr oss income such expenditures to modify a motor
vehicle, home or workplace as are necessary to compensate for his or
her handicap. A veteran certified by the Depa rtment of Veterans
Affairs of the federal governmen t as having a service -connected
disability shall be conclusively presumed to be an individua l with a
physical disability constituting a substantial handicap to
employment. The Tax Commission shall promulg ate rules containing a
list of combinations of comm on disabilities and mod ifications which
may be presumed to qualify for 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 retir ement benefits, as a member
of any component of the Armed Forces of the United
States shall be deducted from taxa ble income.
b. On or after July 1, 2010, one hundre d percent (100%)
of the income received by any person from the United
States as salary or co mpensation in any form, other
than retirement benefits, as a member of any component
of the Armed Forces of the U nited States shall be
deducted from taxable income.
ENGR. H. B. NO. 3849 Page 40 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 St ates, which term
includes only the states and the D istrict of
Columbia;
(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 incurring
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 thi s 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
ENGR. H. B. NO. 3849 Page 41 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
pursuant to subparagraph c of this
paragraph; or
(b) An executor, administ rator, 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 in come tax returns and pa yment of income tax
without incurring liabilities for interest or pen alties. Such
extension may be granted only when in the judgment of the Tax
Commission a good cause exists theref or and may be for a period in
excess of six (6) mon ths. A record of every such extension granted,
and the reason therefor, 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 Forces of the United St ates, 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 compensation shall be su bject to the deduction as
provided pursuant to paragraph 5 of this subsection.
7. a. An individual taxpayer, whether resident or
nonresident, may deduct an amount equal to the federal
ENGR. H. B. NO. 3849 Page 42 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
income taxes paid by the taxpayer during the taxable
year.
b. Federal taxes as described in sub paragraph a of this
paragraph shall be deductible 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 Oklahoma Income Tax
Act. The maximum amount allow able in the preceding
paragraph shall be prorated on the ratio of the
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 accr ual 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 an y accelerated ten
percent (10%) tax rate bracket credit or advanced
refund of the credit rec eived during the tax year
provided pursuant to the federal Economic Growth and
Tax Relief Reconciliation Act of 2 001, P.L. No. 107-
16, and the advanced refund of su ch credit shall not
be subject to taxation.
ENGR. H. B. NO. 3849 Page 43 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 Five Hundred
Dollars ($5,500.00) for the 200 4 tax year, Seven Thousand Five
Hundred Dollars ($7,500.00) for the 2 005 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 Oklahoma Public Employees Retirement System,
the Teachers' Retirement System of Oklahoma, the Oklahoma Law
Enforcement Retirement System, the Oklahoma Firefighters Pension and
Retirement System, the Oklahoma Police Pension and Retir ement
System, the employee retirement systems created by counties pursuant
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, th e Oklahoma
Employment Security Commission Retirement Plan, or the employee
retirement systems created by municipalities pursuant to Section 48-
101 et seq. of Title 11 of the Oklahoma Statutes shall be exem pt
from taxable income.
9. In taxable years beginn ing after December 3l, 1984, Social
Security benefits received by an individual shall be exe mpt from
taxable income, to the extent such benefits are included in the
ENGR. H. B. NO. 3849 Page 44 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
federal adjusted gross income pursuant t o the provisions of Section
86 of the Internal Reve nue Code, 26 U.S.C., Se ction 86.
10. For taxable years beginning after December 31, 1994, l ump-
sum distributions from employer plans of deferred compensation,
which are not qualified plans within the mean ing 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 b ank account or
brokerage account in a financial institution within this state,
shall be excluded from taxable inc ome in the same manner as a
qualifying rollover con tribution to an individ ual retirement account
within the meaning of Section 408 of the Inter nal Revenue Code, 26
U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
account, including any e arnings thereon, shall be included in
taxable income when withdrawn in the same manner as withdrawals from
individual retirement accounts withi n the meaning of Section 408 of
the Internal Revenue Code.
11. In taxable years beginning after December 31, 199 5,
contributions made to and interest received from a medical savings
account established pursuant to Sections 2621 through 2623 of Title
63 of the Oklahoma Statutes shall be exempt from taxable income.
12. For taxable years beginning after December 31, 1 996, the
Oklahoma adjusted gross income of any indi vidual taxpayer who is a
swine or poultry producer may be further adjusted for the deduction
for depreciation allowed for new construction or expansion costs
ENGR. H. B. NO. 3849 Page 45 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
which may be computed using the same depreciati on method elected for
federal income tax purposes e xcept that the useful l ife shall be
seven (7) years for purposes of this paragraph . If depreciation is
allowed as a deduction in determining the adjusted gross income of
an individual, any depreciation ca lculated and claimed pursuant to
this section shall in no event be a dupli cation of any deprec iation
allowed or permitted on the federal income tax return of the
individual.
13. a. In taxable years beginning after December 31, 2002,
nonrecurring adoption e xpenses paid by a resident
individual taxpayer in c onnection 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 adoptions
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 qualify for the deduction. The Tax
ENGR. H. B. NO. 3849 Page 46 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Commission shall prescribe necessary requ irements for
verification.
d. "Nonrecurring adoption expenses " means adoption fees,
court costs, medical expenses , attorney fees and
expenses which are directly rel ated to the legal
process of adoption of a child including, but not
limited to, costs relati ng to the adoption study,
health and psychological examinations, transportation
and reasonable costs of lodging a nd food for the child
or adoptive parents which are incurred to complete 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 conte sted adoption, from and
after the point of the init iation of the contest,
costs associated wit h physical remodeling, renovation
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 paragraph, which are received by an
individual sixty-five (65) years of age or older and
whose Oklahoma adjusted gross income is Twenty -five
ENGR. H. B. NO. 3849 Page 47 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Thousand Dollars ($25,000.00) or less if the filing
status is single, head of household, or marr ied filing
separate, or Fifty Thousand Dollars ($ 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 beginning after December 31, 2004,
retirement benefits not to excee d the amounts
specified in this paragraph, which are received by an
individual whose Oklahoma adjusted gross income is
less than the qualifying amount specified i n this
paragraph, shall be exempt from taxable inco me.
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) o r less if the
filing status is single, head of household, or
married filing separate, or Sev enty-five Thousand
Dollars ($75,000.00) or less if the filing status
is married filing jointly or qualifying wido w,
(2) in the taxable year beginning January 1, 200 7,
the qualifying amount shall be Fifty Tho usand
Dollars ($50,000.00) or less if the filing status
ENGR. H. B. NO. 3849 Page 48 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 jointl y or qualifying widow,
(3) in the taxable year beginning January 1, 2008,
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 Hund red Twenty-
five Thousand Dollars ($125,000. 00) or less if
the filing status is married filin g 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 Hundre d Thousand
Dollars ($200,000.00) or less if the filing
status is married filing jointly or qualifying
widow, and
(5) in the taxable year beginning January 1, 2010,
and subsequent taxable years, there shall b e no
limitation upon the qualifying amount.
ENGR. H. B. NO. 3849 Page 49 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
c. For purposes of this paragraph, "retirement benefits"
means the total distributions or withdrawals from the
following:
(1) an employee pension benefit plan which sati sfies
the requirements of Section 401 of th e 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,
(3) an individual retirement account, annuity or
trust or simplified employee pension that
satisfies the require ments 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 Interna l Revenue
Code, 26 U.S.C., Section 403(a) o r (b),
(5) United States Retirement Bonds which s atisfy 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 requirements of Section
402(e) of the Internal Revenue Code, 26 U.S.C.,
Section 402(e).
ENGR. H. B. NO. 3849 Page 50 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 ta x 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 para graph 8
of this subsection shall not be permitted t o claim a
combined total exemption pursuant to this paragraph
and paragraph 8 of this subsec tion in an amount
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 y ear and
Ten Thousand Dollars ($10,000.00) f or 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 wh o has filed a
Schedule F form with the taxpayer 's federal income tax retur n for
such taxable year, there shall be excluded from taxable income any
amount which was included as federal taxable income or federal
adjusted gross income and which consists of th e discharge of an
obligation by a creditor of the t axpayer incurred to fin ance the
production of agricultural products.
ENGR. H. B. NO. 3849 Page 51 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 participation in the Oklahoma P olice Corps
Program, as established in Secti on 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 allowed a
deduction in the amount of contribution s to accounts
established pursuant to the Oklahoma College Savings
Plan Act. The deduction shall equal the amount of
contributions to accounts, but in no event shall the
deduction for each contributor exceed Two Thousand
Five Hundred Dollars ($2,500.00) e ach taxable year for
each account.
b. In taxable years beginning afte r December 31, 2004,
each taxpayer shall be allowed a deduction for
contributions to accounts established pursuan t to the
Oklahoma College Savings Plan Act . The maximum annual
deduction shall equal the amou nt 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 d educted, but in no
event shall the deduction for each tax year exceed Ten
Thousand Dollars ($1 0,000.00) for each individual
ENGR. H. B. NO. 3849 Page 52 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
taxpayer or Twenty Thousand Dollars ($20,000.00) for
taxpayers filing a joint return . Any amount of a
contribution that is not dedu cted by the taxpayer in
the year for which the c ontribution is made may be
carried forward as a deduction from income for the
succeeding five (5) years. For taxable years
beginning after December 31, 2005, deductions may be
taken for contributions and rol lovers made during a
taxable year and up to Apri l 15 of the succeeding
year, or the due date o f a taxpayer's state income tax
return, excluding extensions, whichever is later.
Provided, a deduction for the same contribution may
not be taken for two (2) di fferent taxable years.
c. In taxable years begi nning after December 31, 20 06,
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 pursuant to
subparagraph b of this paragraph shall be reduced
by the amount which is equal to the rollover or
nonqualified withdrawal, and
ENGR. H. B. NO. 3849 Page 53 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(2) for a taxpayer who elects to take a rollover or
nonqualified withdrawal wi thin the same tax ye ar
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 e qual 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
one (1) year of the date of contribution, the amount
of such rollover shall be include d 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 this paragrap h, such nonqualified
withdrawal and any earnings thereon shall be included
in the adjusted gross inc ome of the taxpayer in the
taxable year of the nonqualified withdrawal.
f. As used in this paragraph:
ENGR. H. B. NO. 3849 Page 54 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(1) "non-qualified withdrawal" means a withdrawal
from an Oklahoma College Savings Pl an account
other than one of the following:
(a) a qualified withdrawa l,
(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 the accou nt 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 th e
amount of the scholarship, allowance , or
payment, or
(d) a rollover or change of designated
beneficiary as permitted by 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 plan
under Section 529 of the Internal Reven ue Code.
18. For taxable years beginning after December 31, 2005,
retirement benefits received by an individual from any component of
ENGR. H. B. NO. 3849 Page 55 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
the Armed Forces of the United States in an amo unt not to exceed the
greater of seventy-five percent (75%) of such benefi ts or 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 Dec ember 31, 2006,
retirement benefits rece ived by federal civi l 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 gros s income pursuant
to the provisions of S ection 86 of the Int ernal Revenue Code, 26
U.S.C., Section 86, accord ing to the following schedule:
a. in the taxable year beginning January 1, 2007, twenty
percent (20%) of such ben efits shall be exempt,
b. in the taxable year beginning January 1, 2008, f orty
percent (40%) of such benefits shall be exempt,
c. in the taxable year beginning January 1, 2009, sixty
percent (60%) of such benefits shall be exempt,
d. in the taxable year be ginning January 1, 2010, eighty
percent (80%) of such benefits shall be ex empt, and
e. in the taxable year beginning January 1, 2011, and
subsequent taxable years, one hundred percent (100%)
of such benefits shall be exempt.
ENGR. H. B. NO. 3849 Page 56 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
20. a. For taxable years beginn ing after December 31, 2007, a
resident individual may deduct up to Ten Th ousand
Dollars ($10,000.00) from Oklahoma adjusted gross
income if the individual, or the dependent of the
individual, while living, donates one or more human
organs of the individua l to another human being for
human organ transplant ation. 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.
b. An individual may claim this ded uction only once, and
the deduction may be claime d only for unreimbursed
expenses that are incurred by the individual and
related to the organ donation of the ind ividual.
c. The Oklahoma Tax Commission shall promu lgate rules to
implement the provisions of this paragraph which shall
contain a specific lis t of expenses which may be
presumed to qualify for the deduction . The Tax
Commission shall prescribe necessary r equirements for
verification.
21. For taxable years beginning after Decem ber 31, 2009, there
shall be exempt from taxable income any amount re ceived by the
ENGR. H. B. NO. 3849 Page 57 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
beneficiary of the death benefit for an emergency medical technician
or a registered emergency medi cal responder provided by Section 1-
2505.1 of Title 63 of the Oklahoma Sta tutes.
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 Reven ue Code, 26
U.S.C., Section 85(c)(2009).
23. For taxable years beginning after December 31, 2 008, there
shall be exempt from taxable income an y payment in an amount less
than Six Hundred Dollars ($600.00) received by a person as an award
for participation in a competitive livestock show event. For
purposes of this paragraph, t he payment shall be treated as a
scholarship amount paid by the entit y 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 beginni ng on or after January 1, 2016,
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 taxes
deducted on the federal ret urn is limited, taxable income on the
state return shall be increased only by the amount act ually deducted
after any such limitations are applied.
25. For taxable years beginning after December 31, 2020, each
taxpayer shall be allowed a deduction for cont ributions to accounts
ENGR. H. B. NO. 3849 Page 58 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 ded uction provided
for in this paragraph shall not exc eed Ten Thousand Dollar s
($10,000.00) for an individual taxpayer or Twenty 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 d eduction from
income for up to five (5) tax years . 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 taxpayer's state
income tax return excluding extensions, wh ichever is later.
Provided, a deduction for the same contribution may not be taken in
more than one (1) tax year.
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 included in the federal adjusted gross income of
such individual taxpayer during the taxable year.
2. As used in this subsection:
a. "qualifying gains receivin g capital treatment" means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, included in an
ENGR. H. B. NO. 3849 Page 59 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
individual taxpayer's federal income tax return that
result from:
(1) the sale of real property or tangible personal
property located within Ok lahoma that has been
directly or indirectly owned by the individual
taxpayer 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 the s ale of a direct or
indirect ownership inter est in an Oklahoma
company, limited liability com pany, or
partnership where such stock or ownership
interest has been directly or indirectly owned by
the individual taxpayer for a holding period of
at least two (2) years prior to the da te 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 lia bility company, or
partnership or an Oklahoma pro prietorship
business enterprise where such property has been
ENGR. H. B. NO. 3849 Page 60 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
directly or indirectly owned by such entity or
business enterprise or owned by the owners of
such entity or business enterpris e for a period
of at least two (2) 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 h eld 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 prim ary
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,
d. "direct" means the individual taxpayer directly owns
the asset,
e. "indirect" means the individual taxpaye r owns an
interest in a pass-through entity (or c hain of pass-
through entities) that sells the asset that gives rise
to the qualifying gains receiving capital tre atment.
ENGR. H. B. NO. 3849 Page 61 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(1) With respect to sales of real property or
tangible personal pr operty located withi n
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) uninterrupted
years prior to the date of t he transaction that
created the capital gai n, and each pass-through
entity included in the c hain of ownership has
been a member, partner, or shareholder of the
pass-through entity in the tier immediately b elow
it for an uninterrupted period of not less tha n
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of al l or substantially all
of the assets of an Oklahoma company, limited
liability company, partnership or Oklahoma
proprietorship business enterprise, the deduction
described in this subsect ion shall not apply
unless the pass-through entity that makes the
sale has held the stock or ownership interest for
not less than two (2) uninterrupted years prior
to the date of the transaction that created the
capital gain, and eac h pass-through entity
ENGR. H. B. NO. 3849 Page 62 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
included in the chain of ownership has been a
member, partner or share holder of the pass-
through entity in the tier immediately below it
for an uninterrupted period of not less than t wo
(2) years. For purposes of this division,
uninterrupted ownership prio r 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 published by the Internal Revenue
Service and whose primary headquarters have been
located in Oklahoma for at least three (3)
uninterrupted years prior to the d ate of the
transaction from which the net capital gains arise.
G. 1. For purposes of computing its Oklahoma taxable income
under this section, the dividends -paid deduction otherwis e allowed
by federal law in computing net income of a real estate investme nt
trust that is subject to federal income tax shall be added back in
computing the tax imposed by this state under this title if the real
estate investment trust is a captive real e state investment trust.
ENGR. H. B. NO. 3849 Page 63 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
2. For purposes of computi ng its Oklahoma taxable income under
this section, a taxpayer shall add back otherwise deduc tible rents
and interest expenses paid to a captive real estate investment trust
that is not subject to the provi sions of paragraph 1 of this
subsection. As used in this subsection:
a. the term "real estate investment trust" or "REIT"
means the meaning as cribed to such term in Section 856
of the Internal Revenue Code,
b. the term "captive real estate investment trus t" means
a real estate investment trust, the shares or
beneficial interests of which are not r egularly traded
on an established securities mark et and more 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 s ingle entity that is :
(1) treated as an association taxable as a
corporation under the Internal Revenue Code, and
(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 investment
trust that is intended to be regularly traded on an
established securities market, and that satisfies the
ENGR. H. B. NO. 3849 Page 64 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
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 entities:
(1) any real estate investment trust as defined in
paragraph a of this subsec tion other than a
"captive real estate investment tr ust", or
(2) any qualified real estate inve stment trust
subsidiary under Section 856(i) of t he Internal
Revenue Code, other than a qualified REIT
subsidiary of a "captive real estate investment
trust", or
(3) any Listed Australian Property Trust (meaning a n
Australian unit trust registered as a "Managed
Investment Scheme" under the Australian
Corporations Act in which the principal class of
units is listed on a recognized stock exchange in
Australia and is regularly traded on an
established securities marke t), or an entity
organized as a trust, prov ided that a Listed
Australian Property Trust owns or controls,
directly or indirectly, seventy-five percent
ENGR. H. B. NO. 3849 Page 65 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
(75%) or more of the voting power or value of the
beneficial interests or shares of such trust, or
(4) any Qualified Foreign Ent ity, meaning a
corporation, trust, association or partnership
organized outside the laws of the United States
and which satisfies the following criteria:
(a) at least seventy-five percent (75%) of the
entity's total asset value at th e close of
its taxable year is represented by real
estate assets, as defined in Section
856(c)(5)(B) of the Internal Revenue Code,
thereby including shares or certificates of
beneficial interest in an y real estate
investment trust, cash and cash equivalent s,
and U.S. Government securities,
(b) the entity receives a dividend -paid
deduction comparable to Section 561 of the
Internal Revenue Code, or is exempt from
entity level tax,
(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
ENGR. H. B. NO. 3849 Page 66 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
the holders of its shares 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 entity 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 Internal Revenue Code, as modified by
Section 856(d)(5) of the Internal Revenue Code, shall apply in
determining the ownership of stock, asse ts, or net profits of a ny
person.
4. A real estate investment trust that does not become
regularly traded on an established securities market within one (1)
year of the date on which it first b ecomes a real estate investment
trust shall be deemed not to h ave been regularly trad ed on an
established securities market, retroactive to the date it fi rst
became a real estate investment trust, and shall file an amended
return reflecting such retroactiv e designation for any tax year or
part year occurring during i ts initial year of stat us as a real
ENGR. H. B. NO. 3849 Page 67 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
estate investment trust. For purposes of this subsectio n, a real
estate investment trust 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 b e treated as a real estate
investment trust pursuant to Section 856(c )(1) of the Internal
Revenue Code.
SECTION 2. This act shall become effective November 1, 2022.
Passed the House of Representatives the 23rd day of March, 2022.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2022.
Presiding Officer of the Senate