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STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
HOUSE BILL 1375 By: Boatman
AS INTRODUCED
An Act relating to revenue and taxation; a mending 68
O.S. 2021, Section 2358, as amended by Section 2,
Chapter 341, O.S.L. 2022 (68 O.S. Supp. 2022, Section
2358), which relates to computation of Oklahoma
taxable income and adjusted gross income; modifying
provisions related to apportionment of income;
providing for election with respect to certain
apportionment computations; modifying provisions
related to capital investment; defining terms;
providing for required ap portionment factors for
certain corporations; 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, as
amended by Section 2, Chapter 341, O.S.L. 2022 (68 O.S. Supp. 2022,
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 shall be adjus ted to
arrive at Oklahoma taxable income and Okla homa adjusted gross income
as required by this section.
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A. The taxable income of any taxpa yer shall be adjusted to
arrive at Oklahoma taxable inco me for corporations and Oklahoma
adjusted gross income for i ndividuals, as follows:
1. There shall be added interest income on obligations of any
state or political subdivision thereto which is not o therwise
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 suc h income that
the state is prohibited from taxing becau se of the provisions of the
Federal Constitution, the St ate Constitution, federal laws o r laws
of Oklahoma.
3. The amount of any federal net operating loss deductio n shall
be adjusted as follows:
a. For carryovers and carrybacks to taxable years
beginning before January 1, 1981, the amount of any
net operating loss deduction allowed to a tax payer for
federal income tax purposes shall be reduced to an
amount which is the same portion thereof as the lo ss
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 carry backs 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 l oss carryovers and carrybacks
to such year. Oklahoma net operating losses shall b e
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 A ct, 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 beginning 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 wh ich such
losses may be carried back shall be limited to tw o (2)
years. For tax years beginning after December 31,
2008, the years to which such l osses may be carried
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back 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 operatin g loss" and "Oklahoma
taxable income".
4. Items of the following nature shal l be allocated as
indicated. Allowable deductions attributable to items separately
allocable in subparagraphs a, b and c of this paragraph, whethe r or
not such items of income we re 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 pro perty, shall be
allocated in accordance with the situs of su ch
property;
b. Income from intangible personal p roperty, such as
interest, dividends, patent or copyright royalties,
and gains or losses fr om sales of such property, shall
be allocated in accorda nce with the domiciliary situs
of the taxpayer, except that:
(1) where such property has acquired a nonunitar y
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 w orking capital for
a unitary business enterprise shall be included
in apportionable income; a resident trust or
resident estate shall be tre ated as having a
separate commercial or business situs i nsofar as
undistributed income i s concerned, but shall not
be treated as having a separate commercial or
business situs insofar as distrib uted income is
concerned,
(2) for taxable years beginning afte r December 31,
2003, capital or ordinary gains or losses from
the sale of an ownership i nterest in a publicly
traded partnership, as defined by Section 7704(b)
of the Internal Revenue Code, sha ll 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 part nership'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
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ownership interest in the partnership shall be
allocated to this state in accordance with the
sales factor of the partner ship for its first
full tax period immediately preceding its ta x
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 provisi ons of paragraph
5 of this subsection shall be allocated as here in
provided;
c. Net income or loss from a business activ ity which is
not a part of business carried on within or wit hout
the state of a unitary character shall be se parately
allocated to the state in which such activity is
conducted;
d. In the case of a manufacturing or processing
enterprise the business of whi ch in Oklahoma consists
solely of marketing its products by:
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(1) sales having a situs without this state, shi pped
directly to a point from without the state to a
purchaser within the state, commonly known as
interstate sales,
(2) sales of the product store d in public warehouses
within the state pursuant to "in transit"
tariffs, as prescribed and allowed by the
Interstate Commerce Commi ssion, to a purchaser
within the state,
(3) sales of the product stored in public warehouses
within the state where the ship ment 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 incom e shall, at the option of t he
taxpayer, be that portion of th e total net income of
the taxpayer for federal income tax pu rposes derived
from the manufacture and/or proces sing and sales
everywhere as determined by the ratio of the sales
defined in this sect ion made to the purchaser w ithin
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, Ok lahoma taxable
income shall be taxable income of the taxpayer for
federal tax purposes, as adj usted for the adjustments
provided pursuant to th e provisions of paragraphs 1
and 2 of this subsection, apportioned as follows:
(1) except as otherwise provided b y division (2) of
this subparagraph, taxable income of an insuranc e
company for a taxable year shall be apportioned
to this state by multiplyin g 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 denomi nator 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 direc t
premiums written, assessmen ts and annuity
considerations as reported for the taxable year
on the annual statement filed b y the company with
the Insurance Commissioner in the form approved
by the National Association of Insurance
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Commissioners, or such ot her form as may be
prescribed in lieu thereof,
(2) if the principal source of premiums written by an
insurance company cons ists 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, t he
numerator of which is the sum o f (a) direct
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 denomi nator of
which is the sum of ( c) direct premiums written
for insurance on property or risks ever ywhere,
plus (d) premiums wr itten for reinsurance
accepted in respect of prop erty or risks
everywhere. For purposes of this paragraph,
premiums written for rei nsurance accepted in
respect of property or risks in this state,
whether or not otherwise determ inable, 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
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premiums written for reinsuranc e accepted from
all sources, or alternatively in the proport ion
which the sum of the direct premiums written for
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 cedin g company for
the taxable year.
5. The
a. Except as otherwise provided by subparagraph b or c of
this paragraph, for taxable years beginning not later
than December 31, 2023, the net income or loss
remaining 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 average of
three factors consisting o f property, payroll and
sales or gross revenue enumerated as subparagraphs a,
b and c of this paragraph divisions (1), (2) and (3)
of subparagraph d of this par agraph. Net income or
loss as used in this paragraph includes that derived
from patent or copyright royalties, purchase
discounts, and interest on accounts re ceivable
relating to or arisin g from a business activity, the
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income from which is apportioned pursuant to this
subsection, including the sale or other disposition of
such property and any other property 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 beginning on or after January 1,
2024, qualifying corporations may elect to use a
single sales factor apportionment comprising sales as
one hundred percent (100%) of 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 purposes of the
tax imposed by Section 2 355 of this title has an
initial cumulative investment cost equaling or
exceeding Two Hundred Million Dollars
($200,000,000.00) One Hundred Million Doll ars
($100,000,000.00) over three yea rs and such investment
is made on or after July 1, 1997, January 1, 2018, or
for corporations a corporation which expand expands
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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
expansion has, improvements, upgrades or expenditures
have an investment cost equaling or exceeding Two
Hundred Million Doll ars ($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 f ifty
percent (50%) of the apportionment factor January 1,
2018. 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),
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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.
c. For any other corporation, for taxable years beginning
on or after January 1, 2024, 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
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applicable tax years, or for qualifying corporations
electing the three-factor apportionment, the
apportionment factors shall b e 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 which is the
average value of all the taxpayer 's real and
tangible personal pr operty 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 included in
determining this fraction. The numerator of
the fraction shall includ e 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 carried
thereon, airplanes, salespersons'
automobiles and other similar equipmen t, in
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the proportion that miles trave led in
Oklahoma by such equ ipment 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,
(3)
(c) The average value of property shall be
determined by averaging the values at the
beginning and ending of the ta x 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.
(2) The payroll factor is a fraction, the numerator
of which is the total compensation for services
rendered in the state during the tax per iod, and
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the denominator of wh ich 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 u nitary
business but does not include officers' salaries,
wages and other compensation.
(1)
(a) In the case of a transportation enterprise,
the numerator of the fraction shall include
a portion of such expenditure in c onnection
with employees operating equi pment over a
fixed route, such as railro ad employees,
airline pilots, or bus drivers, in this
state only a part of the time, in the
proportion that mileage traveled in Oklahoma
bears to total mileage traveled by such
employees,
(2)
(b) In any case the nume rator of the fraction
shall include a portio n of such expenditures
in connection with itinerant employees, such
as traveling salespersons, in this state
only a part of the time, in the proportion
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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 fra ction, 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 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 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
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) th e purchaser is the
United States government or (b) the taxpayer
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is not doing business in the 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 report 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 port ion of revenue from
interstate transporta tion in the proportion
that interstate mileage traveled in Oklahoma
bears to total inters tate mileage traveled.
(4)
(d) In the case of an oil, gasoline or gas
pipeline enterprise, the numer ator of the
fraction shall be either the total of
traffic units of the enterprise within
Oklahoma or the revenue allocated to
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Oklahoma based upon miles move d, at the
option of the taxpayer, and the denominator
of which shall be the total of traffic units
of the enterprise or the revenu e of the
enterprise everywhere as appropr iate 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 of gasoline or one thousand
(1,000) cubic feet of natural or c asinghead
gas, as the case may be.
(5)
(e) In the case of a telephone or telegraph or
other communication enterprise, the
numerator of the fraction sha ll include that
portion of the interstate revenue as is
allocated pursuant to t he accounting
procedures prescribed by the Federal
Communications Commi ssion; provided that 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 prescribed by su ch
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Commission, the intrastate net income shall
be determined separately in the manner
provided by such uniform system of a ccounts
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 prescribed are no t 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 t he enterprise; or because of other
reasons, the Tax Commission is empowered to permit, after a show ing
by taxpayer that an excessive portion of net in come has been
attributed to Oklahoma, or require, when in its judgment an
insufficient portion of net inco me has been attributed to Oklahoma,
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the elimination, substitution, or use of ad ditional factors, or
reduction or increase in the weight of such prescr ibed 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 i nherently arbitrary, and
application of the recomputed final apportionm ent 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 c ommodity processing facility in this state
may exclude from Oklahoma ta xable income, 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 pro cessing facility. For calendar year 1999,
and all subsequent years, th e percentage, not to exceed fifteen
percent (15%), available to the owner of a new or expanded
agricultural commodity processing facility in this state claiming
the exemption shall be a djusted annually so that the total estimated
reduction in tax liability does not exceed One Million Dollars
($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 investment is made. In
the event the total reduction in tax liability authoriz ed by this
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paragraph exceeds One Million Dollars ($1,000,000.00) in any
calendar year, the Tax Comm ission shall permit any excess over One
Million Dollars ($1,000,000.00) and shall factor such excess into
the percentage for subsequent years . Any amount of the exemption
permitted to be excluded pursuant to the provisions of this
paragraph but not used i n any year may 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 which
the investment was originally made.
For purposes of this par agraph:
a. "Agricultural commodity processing facility" means
building, structures, fixtures and improvements used
or operated primarily for the processing or production
of marketable products from agricultural commodities .
The term shall also mean a dair y 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 that provides only, and nothing
more than, storage, cleaning, dry ing or transportatio n
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 agricultural
commodities, or the p roduction of milk at a dairy
operation,
(2) transporting the agricultur al 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 this
subsection, for taxable years beginning after Decem ber 31, 1999, in
the case of a taxpayer which h as a farming loss, such farming loss
shall be considered a net operating loss carryback in accordance
with and to the extent of the Intern al Revenue Code, 26 U.S.C.,
Section 172(b)(G). However, the amount of the net operating loss
carryback shall not exce ed the lesser of:
a. Sixty Thousand Dollars ($60,000.00), o r
b. the loss properly shown on Schedule F of the Internal
Revenue Service Form 1040 reduced by one-half (1/2) of
the income from all other sources ot her 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 forth in
26 U.S.C.A., Section 45 A, shall be deducted from taxable income.
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The deduction allowed pursua nt 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 used to calculate the
federal credit pursu ant to 26 U.S.C.A., Section 45A.
9. In taxable years beginning after December 31, 2005, an
employer that is eligible for and utilizes the Safety Pays OSHA
Consultation Service provided by the Oklahoma Department of Labor
shall receive an exemption from ta xable income 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 Oklahoma taxable income an amount equal to
the amount of deferred income not included in such taxable incom e
pursuant to Section 108(i)(1) of the Internal Revenue Cod e of 1986
as amended by Section 1231 of the American Recovery and Reinvestment
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 t o Section 108(i)(1)
of the Internal Revenue Code by Section 1231 of the America n
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 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 purs uant to the
provisions of the Pass -Through Entity Tax Equit y Act of 2019 would
be allocated to a member or to an indirect member of an ele cting
pass-through entity pursuant to Section 2351 et seq. of this titl e,
if (i) the electing pass-through entity has accounted for such item
in computing its Oklahoma net entit y income or loss pursuant to the
provisions of the Pass -Through Entity Tax Equi ty Act of 2019, and
(ii) the total amount of tax attributable to any re sulting Oklahoma
net entity income has been pai d. 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 application of
this paragraph, the a djusted tax basis of any ownership 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 inco me
tax purposes.
B. 1. The taxable income of any corporation shall be further
adjusted to arrive at Oklahoma taxable income, except those
corporations electing treatment as provided in subchapter S of the
Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section
2365 of this title, deductions pursuant to the provisions of the
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Accelerated Cost Recovery System 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 place d into service after
December 31, 1981, shall not be allowed in calculating Okl ahoma
taxable income. Such corporations shall be allowed a deduction f or
depreciation of assets placed into service a fter December 31, 1981,
in accordance with provisions of th e Internal Revenue Code, 26
U.S.C., Section 1 et seq., in effect immediately pr ior to the
enactment of the Accelerated Cost Recovery System . 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 th e final disposition of
such assets.
Notwithstanding any other provision s 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 calculation of
depreciation of asset s placed into service after December 31, 1981,
and before January 1, 19 83.
For assets placed in service and held by a corporation in which
accelerated cost recovery system was p reviously disallowed, 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 Inte rnal Revenue Code. The
purpose of this adjustment is to eq ualize the basis and allowance
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for depreciation accounts between that reported to the Internal
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 Hundred Seventy -
five Thousand Dollars ($175,000.00) which has been deducted as a
small business expense under Internal Revenue Code, Se ction 179 as
provided in the American Recovery and Reinvest ment Act of 2009.
C. 1. For taxable years beginning after December 31, 1987, the
taxable income of any corporation shall be further adjusted to
arrive at Oklahoma taxable income for transfers of technology to
qualified small businesses located in Oklahom a. Such transferor
corporation shall be allowed an exemption from taxable inco me of an
amount equal to the amount of royalty payment received as a re sult
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 techn ology transfer. Such
exemption shall be allowed for a period not to ex ceed ten (10) years
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 busine sses 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 wi thin this state
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 affiliate of the transferor
corporation;
b. "Technology" means a proprietary process, f ormula,
pattern, device or compilation of scientific or
technical information which is not in the public
domain;
c. "Transferor corporatio n" means a corporation which is
the exclusive and undisputed owner of t he 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 December 31, 2005 , the
taxable income of any corporation, estate or trust, shall be further
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adjusted for qualifying gains re ceiving capital treatment . Such
corporations, estates or trusts shall be allow ed a deduction from
Oklahoma taxable income for the amount of qualifyi ng gains receiving
capital treatment earned by t he 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 capita l treatment" means
the amount of net capital gains , as defined in Section
1222(11) of the Internal Revenue Co de, included in the
federal income tax return of the corporation, estate
or trust that result from:
(1) the sale of real property or tangible pers onal
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 partner ship where such
stock or ownership interest has been directly or
indirectly owned by the corporation, estate or
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trust for a holding period of at least three (3)
years prior to the date of the trans action from
which the net capital gains arise, or
(3) the sale of real property, tangible personal
property or intangible personal propert y 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 entity owned by the
owners of such entity, and used in or derived
from such entity for a period of at least three
(3) years prior to the date of the trans action
from which the net capital gains arise,
b. "holding period" means an uninterrupted period of
time. The holding period shall inclu de 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 comp any", 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 fro m which the net capital gains
arise,
d. "direct" means the taxpayer directly owns the asset,
and
e. "indirect" means the taxpayer owns an in terest 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 rea l property or
tangible personal property located within
Oklahoma, the deduction described in this
subsection shall not appl y unless the pass-
through entity that makes the sale has he ld the
property for not less than five (5) 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 ha s
been a member, partner, or shareholder of the
pass-through entity in the tier immediately below
it for an uninterrupted period of n ot less than
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of all or substantially a ll
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, partn er 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 indi vidual
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 d ifference necessary
to allow personal exemptions of One Thousand Dollar s
($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 tax payer 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 t he better eye with
correcting lenses, or if the visual acui ty of the
individual is greater than 20/200, but is accompanied
by a limitation in the fields of vision such that the
widest diameter of the visual field subtends an angle
no greater than twenty (2 0) degrees.
c. There shall be allowed an additional exempti on 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 filin g status may claim
this exemption if the federal adjusted gross incom e
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 traditional individual r etirement
account to a Roth individ ual 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 standa rd
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 the large r of
fifteen percent (15%) of the Oklahoma adjusted gross
income or One Thousand Dollars ($1,000.0 0), but not to
exceed Two Thousand Dollars ($2,000.00), exc ept that
in the case of a married individual filing a separate
return such deduction shall be the l arger of fifteen
percent (15%) of such Oklahoma adjusted gross income
or Five Hundred Dollars ($50 0.00), but not to exceed
the maximum amount of One Thousand Dollars
($1,000.00).
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b. For taxable years beginning on or aft er January 1,
2006, and before Januar y 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 deduction in lieu of the standard
deduction allowed by th e Internal Revenue Code, in an
amount equal to:
(1) Three Thousand Dollars ($3,000.00), if the fil ing
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 married filing separate.
c. For the taxable year beginning on January 1, 2007, and
ending December 31, 200 7, in the case of individuals
who use the standard deductio n in determining taxable
income, there shall be added or de ducted, as the case
may be, the differen ce 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 m arried 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 separate.
d. For the taxable year beginning on January 1 , 2008, and
ending December 31, 2008, in the case o f individuals
who use the standard deduction in determining taxable
income, there shall be added or deduct ed, as the case
may be, the difference necessary to all ow a standard
deduction in lieu of the stand ard 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 f iling status is single or
married filing separate.
e. For the taxable year beginning on January 1, 2009, and
ending December 31, 2009, in the case of individu als
who use the standard deduction in determining t axable
income, there shall be added or deducted , as the case
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may be, the difference necessary to allow a s tandard
deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amo unt equal to:
(1) Eight Thousand Five Hundred Dolla rs ($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 Dollars
($4,250.00), if the filing status i s 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 necessary
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 individua l income
tax returns.
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g. For taxable years beginning on or after January 1,
2017, in the case of individ uals who use the standard
deduction in determin ing taxable income, there shall
be added or deducted, as th e case may be, the
difference necessary to al low a standard deduction in
lieu of the standard deduc tion allowed by the Internal
Revenue Code, as follo ws:
(1) Six Thousand Three Hundred Fifty Dollar s
($6,350.00) for single or married filing
separately,
(2) Twelve Thousand Seven Hundred Dollars
($12,700.00) for married filing jointly o r
qualifying widower with dependent child, and
(3) Nine Thousand Three Hundred Fifty Dollars
($9,350.00) for head of h ousehold.
3. a. In the case of resident and part -year resident
individuals having adjusted gross inc ome from sources
both within and witho ut the state, the it emized or
standard deductions and personal exemptio ns shall be
reduced to an amount which is the s ame portion of the
total thereof as Oklahoma adjusted gross income is of
adjusted gross income . To the extent itemized
deductions include allowable moving expense, proration
of moving expense shall not be req uired or permitted
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but allowable moving expense shall be fully deductible
for those taxpayers moving withi n or into Oklahoma and
no part of moving expense shall be deductible for
those taxpayers moving wit hout or out of Oklahoma.
All other itemized or sta ndard 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 deducti ons 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 deduct ible for
federal income tax purposes shall be excluded from the
amount of Seventeen Thousand Dollars ($17,000.00) as
specified by this subparagraph.
4. A resident individual wi th a physical disability
constituting a substantial handicap to employment may deduct from
Oklahoma adjusted gross income such expenditures to modify a motor
vehicle, home or workplace as are neces sary 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 presumed to be an individual with a
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physical disability constitu ting a substantial handicap to
employment. The Tax Commission shall promulgate rules containing a
list of combinations of common disabili ties and modificatio ns which
may be presumed to qualify for this deduct ion. The Tax Commission
shall prescribe necess ary requirements for verification.
5. a. Before July 1, 2010, the first One Thousand Five
Hundred Dollars ($1,500.00) received by any pers on
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 b e
deducted from taxable income.
c. Whenever the filing of a ti mely income tax return by a
member of the Armed For ces 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 Uni ted
States for treatment of wounds, injuries or
disease,
the time for filing a return and p aying an income tax
shall be and is hereby exte nded without incurring
liability for interest or penalties, to the fift eenth
day of the third month following the mont h in which:
(a) Such individual shall return to the United
States if the extension is gran ted 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 disch arged from such
hospital if the extension is granted
pursuant to subparagraph c of this
paragraph; or
(b) An executor, administrator, or c onservator
of the estate of the taxpayer is appointed,
whichever event occurs the earliest.
Provided, that the Tax Com mission may, in its discretion, grant
any member of the Arm ed Forces of the United State s an extension of
time for filing of income tax re turns and payment of income tax
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without incurring liabilities for inter est or penalties. Such
extension may be grante d only when in the judgment of the Tax
Commission a good ca use exists therefor and may b e for a period in
excess of six (6) months . A record of every such extension granted,
and the reason therefor, shall be kept.
6. Before July 1, 2010, the salary or an y other form of
compensation, received from the United Stat es by a member of any
component of the Armed Forces 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 pris oner of war or is
missing in action and not deceased; provi ded, after July 1, 2010,
all such salary or compensation shall be subject to th e 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
income taxes paid by the taxpay er during the taxable
year.
b. Federal taxes as desc ribed in subparagraph a of this
paragraph shall be deductible by any in dividual
taxpayer, whether resident or nonresid ent, only to the
extent they relate to income subject to ta xation
pursuant to the provisions of the Oklahoma Income Tax
Act. The maximum amount allowable in the preceding
paragraph shall be prorated on the ra tio of the
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Oklahoma adjusted gross income to fe deral adjusted
gross income.
c. For the purpose of this par agraph, "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 deductio n shall not
be adjusted by the amount of any accelerat ed 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 s hall not
be subject to taxation.
d. The provisions of this paragraph sh all apply to all
taxable years ending after Dec ember 31, 1978, and
beginning before January 1, 2006.
8. Retirement benefits not to exceed 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 2006 tax year and all subsequent tax
years, which are receiv ed by an individual from the civil service of
the United States, the Oklahoma Public Employees Retirement System,
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the Teachers' Retirement System of Oklahoma, the Oklahoma La w
Enforcement Retirement System, the Oklahoma Firefighters Pension and
Retirement System, the Oklahoma Police Pension and Retirement
System, the employee retirement systems created by counties pursuant
to Section 951 et seq. of Title 19 of the Oklahoma Sta tutes, the
Uniform Retirement System for Justices and Judge s, the Oklahoma
Wildlife Conservation Department Retirement Fund, the 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 Statu tes shall be exempt
from taxable income.
9. In taxable years beginning after D ecember 3l, 1984, Social
Security benefits received by an individual sh all be exempt from
taxable income, to the exten t such benefits are included in the
federal adjusted gross income pursuant to the provisions of Section
86 of the Internal Revenue Code, 2 6 U.S.C., Section 86.
10. For taxable years beginning after December 3 1, 1994, lump-
sum distributions from employer p lans of deferred compensation,
which are not qualified plan s 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 t o an individual retirement account
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within the meaning of Section 408 of the Internal Revenue Code, 26
U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
account, including any earni ngs thereon, shall be included in
taxable income when with drawn in the same manner as withdrawals from
individual retirement acco unts within the meaning of Section 408 of
the Internal Revenue Code.
11. In taxable years beginning after December 31, 1995,
contributions made to and interest received from a medical savings
account established pursuant to Sections 2621 through 2623 of T itle
63 of the Oklahoma Statutes shall be exemp t from taxable income.
12. For taxable years beginning aft er December 31, 1996, the
Oklahoma adjusted gross income of any individual taxp ayer who is a
swine or poultry producer may be further adjusted for the deduction
for depreciation allowed for new con struction or expansion costs
which may be computed using th e same depreciation method elected for
federal income tax purposes except that the useful life 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 calculated and claimed pursuant to
this section shall in no even t be a duplication of any depreciation
allowed or permitted on the fede ral income tax return of the
individual.
13. a. In taxable years beginning before January 1, 2005,
retirement benefits not to exceed the amounts
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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
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 beginning after December 31, 200 4,
retirement benefits not to exceed the amounts
specified in this paragra ph, which are received by an
individual whose Oklahoma adjusted gross income is
less than the qualifying amount specified in this
paragraph, shall be exempt 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 separa te, or Seventy-five Thousand
Dollars ($75,000.00) or less if the filing status
is married filing jointly or qualifying widow,
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(2) in the taxable year beginning January 1, 2007,
the qualifying amount shall be Fifty Thousand
Dollars ($50,000.00) or less if t he filing status
is single, head of household, or married filing
separate, or One Hundred Tho usand Dollars
($100,000.00) or less if the filing status is
married filing jointly 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 Hundred Twenty-
five Thousand Dollars ($125,000.00) or less if
the filing status is mar ried 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 joi ntly or qualifying
widow, and
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(5) in the taxable year beginning January 1, 2010,
and subsequent taxable years, there shall be no
limitation upon the qualifying amo unt.
c. For purposes of this paragraph, "retirement benefits"
means the total distributions o r withdrawals from the
following:
(1) an employee pension benefit plan which sati sfies
the requirements of Section 401 of the Internal
Revenue Code, 26 U.S.C., Sec tion 401,
(2) an eligible deferred compensation plan that
satisfies the requirements of Secti on 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 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 Inte rnal Revenue
Code, 26 U.S.C., Section 403(a) or (b),
(5) United States Retirement Bon ds which satisfy the
requirements of Section 86 of the Internal
Revenue Code, 26 U.S.C., Sect ion 86, or
(6) lump-sum distributions from a retirement plan
which satisfies the requirements of Section
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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 Thou sand 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 ($10,00 0.00) 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 shall not be permi tted to claim a
combined total exemption pursuant to this paragraph
and paragraph 8 of t his subsection 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 year and
Ten Thousand Dollars ($10,000.00) for the 2006 tax
year and all subsequent tax years.
14. In taxable years beginning after December 31, 1999, for an
individual engaged in production agriculture who has filed a
Schedule F form with the t axpayer's federal income tax return for
such taxable year, there shall be excluded from t axable income any
amount which was included as federal taxable income or federal
adjusted gross income and which consists of the discharge of an
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obligation by a credit or of the taxpayer incurred to finance the
production of agricultural products.
15. In taxable years beginning December 31, 2000, an amount
equal to one hundred percent (100%) of the am ount of any scholarship
or stipend received from participation 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.
16. a. In taxable years beginning after December 31, 2001,
and before January 1, 2005, there shall be all owed a
deduction in the amount of contributions to accounts
established pursuant to the Oklaho ma 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 T wo 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 purs uant to the
Oklahoma College Savings 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 aft er
December 31, 2004, which were no t deducted, but in no
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event shall the deduction for each tax year exceed Ten
Thousand Dollars ($10,000.00) for each individua l
taxpayer or Twenty Thousand Dollars ($20,000.00) for
taxpayers filing a joint return . Any amount of a
contribution that is not d educted 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 rollovers made during a
taxable year and up to Apri l 15 of the succeeding
year, or the due date of a taxpayer's state income tax
return, excluding extensions, whichever is later.
Provided, a deduction for the same contri bution may
not be taken for two (2) different taxable years.
c. In taxable years begi nning after December 31, 2006,
deductions for contributions made pursuant t o
subparagraph b of this paragraph shall be limited as
follows:
(1) for a taxpayer who qualifi ed for the five-year
carryforward election and who takes a rollov er or
nonqualified withdrawal during that period, the
tax deduction otherwise available pursuant to
subparagraph b of this paragraph shall be reduced
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by the amount which is equal to the rollo ver or
nonqualified withdrawal, and
(2) for a taxpayer who elect s to take a rollover or
nonqualified withdrawal within the same tax year
in which a contribution w as made to the
taxpayer's account, the tax deduction otherwise
available pursuant to subparag raph b of this
paragraph shall be redu ced by the amount of the
contribution which is e qual to the rollover or
nonqualified withdrawal.
d. If a taxpayer elects to t ake a rollover on a
contribution for which a deduction has been taken
pursuant to subparagra ph b of this paragraph within
one (1) year of the date of contribution, the amount
of such rollover shall be included in the adjusted
gross income of the taxpayer i n the taxable year of
the rollover.
e. If a taxpayer makes a nonqualified withdrawal of
contributions for which a deduction was tak en pursuant
to subparagraph b of this paragrap h, 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:
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(1) "non-qualified withdrawal" means a withdrawal
from an Oklahoma College Savings Plan account
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 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 ex tent the
amount of the refund does not exceed the
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 Revenue Cod e.
17. For taxable years beginning aft er December 31, 2005,
retirement benefits received by an individual from any compo nent of
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the Armed Forces of the United States in an amount not to exceed the
greater of seventy-five percent (75%) of such benefits or Ten
Thousand Dollars ($10,000.00) shall be exempt from taxable income
but in no case less than the amount of the exemptio n provided by
paragraph 13 of this subsection.
18. For taxable years beginning after Dec ember 31, 2006,
retirement benefits received by federal civi l service retirees,
including survivor annuities, paid in lie u of Social Security
benefits shall be exempt from taxable income t o the extent such
benefits are included in the federal adjusted gros s income pursuant
to the provisions of Section 86 of the Int ernal Revenue Code, 26
U.S.C., Section 86, according to the f ollowing schedule:
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 exempt,
c. in the taxable year begin ning 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 January 1, 2011, and
subsequent taxable years, one hundred percent (100 %)
of such benefits shall be exemp t.
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19. a. For taxable years beginning after December 31, 2007, a
resident individual may deduct up to Ten Thousand
Dollars ($10,000.00) from Oklahoma adjusted gross
income if the individua l, 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, intest ine, lung, or bone marrow. A
deduction that is claimed under th is 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 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 expens es which may be
presumed to qualify for the deduction. The Tax
Commission shall prescribe necessary requirements for
verification.
20. For taxable years beginning after December 31, 2009, there
shall be exempt from taxable income any amount received by the
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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 Statutes.
21. 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).
22. For taxable years beginning after December 31, 2 008, there
shall be exempt from taxable income a ny payment in an amount less
than Six Hundred Dollars ($600.00) rec eived by a person as an award
for participation in a competitive livestock show event. For
purposes of this paragraph, the payment shall be treated as a
scholarship amount paid by the enti ty sponsoring the event and the
sponsoring entity shall cause the p ayment to be categorized as a
scholarship in its books and records.
23. For taxable years beginning on or after January 1, 2016,
taxable income shall be increased by any amount of stat e 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 feder al return is limited, taxable income on the
state return shall be increased only by the amoun t actually deducted
after any such limitations are applied.
24. For taxable years beginning after December 31, 202 0, each
taxpayer shall be allowed a deduction f or contributions to accounts
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established pursuant to the Achieving a Better Life Experienc e
(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 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 deduction from
income for up to five (5) tax years. Deductions may be taken for
contributions made during the tax year and throug h April 15 of the
succeeding tax year, or through the due date of a taxpayer's state
income tax return excluding extensions, whichever is later .
Provided, a deduction for the same contri bution 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 inco me of any individual
taxpayer shall be allowed for qualifying 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 receiving capital treatment " means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, included in an
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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 bee n
directly or indirectly owned by the in dividual
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 sale of a direct or
indirect ownership inte rest in an Oklahoma
company, limited lia bility company, 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 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 or an Ok lahoma proprietorship
business enterprise where such property has been
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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 capital gains
arise,
b. "holding period" means an uninterrupted period of
time. The holding period shall include any add itional
period when the property was held by another
individual or entity, if such additional per iod 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
of the transaction fr om which the net capital gains
arise,
d. "direct" means the individual taxpayer directl y owns
the asset,
e. "indirect" means the individual taxpay er owns an
interest in a pass-through entity (or chain of pass-
through entities) that sells the asset that giv es rise
to the qualifying gains receiving capital treatment.
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(1) With respect to sales of real property or
tangible personal property located with in
Oklahoma, the deduction described in this
subsection shall not apply unless the pass-
through entity that ma kes the sale has held the
property for not less t han five (5) uninterrupted
years prior to the date of the transaction that
created the capital ga in, 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 immediate ly below
it for an uninterrupted period of not less than
five (5) years.
(2) With respect to sale s of stock or ownership
interest in or sales of all or substantially all
of the assets of an Oklahoma company, limited
liability company, partnership or Oklaho ma
proprietorship business enterprise, the deduction
described in this subsection shall not apply
unless the pass-through entity that mak es 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 each pass-through entity
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included in the chai n of ownership has been a
member, partner or shareholder of the pass-
through entity in the tier immediately be low it
for an uninterrupted period of not less th an two
(2) years. For purposes of this division,
uninterrupted ownership prior to July 1, 2007,
shall be included in the determination o f the
required holding period prescribed by this
division, and
f. "Oklahoma proprietorship b usiness enterprise" means a
business enterprise whose income and expenses have
been reported on Schedule C or F of an indivi dual
taxpayer's federal income tax retur n, or any similar
successor schedule published by the Internal Revenue
Service and whose pri mary 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 ari se.
G. 1. For purposes of computing its Oklahoma taxable income
under this section, the di vidends-paid deduction otherwise allowed
by federal law in computing net income of a real estate investment
trust that is subject to federal income tax shall be add ed back in
computing the tax imposed by this state under this title if the real
estate investment trust is a captive re al estate investment trust.
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2. For purposes of computing its Oklahoma taxable income under
this section, a taxpayer shall add back other wise deductible rents
and interest expenses paid to a captive real est ate investment trust
that is not subject to the p rovisions 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 Revenue Code,
b. the term "captive real estate investment trust" means
a real estate investment trust, the shares or
beneficial interests of which are not regularly traded
on an established secur ities market and more than
fifty percent (50%) of the voting power o r value of
the beneficial interests or shares of wh ich are owned
or controlled, directly or indirectly, or
constructively, by a single entity that i s:
(1) treated as an association taxable as a
corporation under the Internal Revenue Code, and
(2) not exempt from federal income ta x pursuant to
the provisions of Section 501(a) of the Internal
Revenue Code.
The term shall not include a real estate invest ment
trust that is intended to be regula rly traded on an
established securities market, and that satisfie s the
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requirements of Secti on 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 corporati on" shall
not include the following entities:
(1) any real estate investment trust as defined in
paragraph a of this sub section other than a
"captive real estate invest ment trust", or
(2) any qualified real estate inv estment trust
subsidiary under Section 856(i) of the Internal
Revenue Code, other than a qualified REI T
subsidiary of a "captive real estate investment
trust", or
(3) any Listed Australian Property Trust (me aning an
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 stoc k exchange in
Australia and is regularly traded on an
established securitie s market), or an entity
organized as a trust, pro vided that a Listed
Australian Property Trust owns or controls,
directly or indirectly, seventy -five percent
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(75%) or more of the vo ting 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 United States
and which satisfies the following criteri a:
(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 Revenue Code,
thereby including shares or certificates of
beneficial interest in an y real estate
investment trust, cash and cash equ ivalents,
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
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the holders of its sha res 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 stoc k, assets, or net profits of any
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 becomes a real estate investment
trust shall be deemed n ot to have been regularly traded on an
established securities market, retroactive to the date it first
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 d uring its initial year of status as a real
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estate investment trust. For purposes of this subsection, 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 be treated as a real estate
investment trust pursuant to Section 856(c)(1) of the Internal
Revenue Code.
SECTION 2. This act shall beco me effective November 1, 2023.
59-1-5156 MAH 01/15/23