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ENGROSSED HOUSE
BILL NO. 1953 By: McCall, O'Donnell, and
Lepak of the House
and
Bullard of the Senate
An Act relating to revenue and taxation; amending 68
O.S. 2021, Sections 2355, as amended by Section 45,
Chapter 228, O.S.L. 2022, and 2358, as last amended
by Section 2, Chapter 341, O.S.L. 2022 (68 O.S. Supp.
2022, Sections 2355 and 2358), which relate to income
taxation; modifying rates of individual income tax;
providing for certain rate of individual income tax
for specified periods; providing for income tax rat es
based upon certain contingency; providing for
modified rate of individual income tax for certain
period; modifying provisions related to standard
deduction amounts; amending 68 O.S. 2021, Section
2355.1P-4, which relates to the Pass-Through Entity
Tax Act; modifying reference to income tax rate for
certain natural persons; and providing an effective
date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 2355, as
amended by Section 45, Chapter 228, O.S.L. 2022 (68 O.S. Supp. 2022,
Section 2355), is amended to read as follows:
Section 2355. A. Individuals. For all taxable years beginning
after December 31, 1998, and before January 1, 2006, a tax is hereby
imposed upon the Oklahoma taxable income of every resident or
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nonresident individual, which tax shall be computed at the option of
the taxpayer under one of the two follow ing methods:
1. METHOD 1.
a. Single individuals and married individuals filing
separately not deducting federal income tax:
(1) 1/2% tax on first $1,000.00 or part thereof,
(2) 1% tax on next $1,500.00 or part thereof,
(3) 2% tax on next $1,250.00 or part thereof,
(4) 3% tax on next $1,150.00 or part thereof,
(5) 4% tax on next $1,300.00 or part thereof,
(6) 5% tax on next $1,500.00 or part thereof,
(7) 6% tax on next $2,300.00 or part thereof, and
(8) (a) for taxable years beginning after December
31, 1998, and before January 1, 2002, 6.75%
tax on the remainder,
(b) for taxable years beginning on or after
January 1, 2002, and before January 1, 2004,
7% tax on the remainder, and
(c) for taxable years beginning on or after
January 1, 2004, 6.65% tax on the r emainder.
b. Married individuals filing j ointly and surviving
spouse to the extent and in the manner that a
surviving spouse is permitted to file a joint return
under the provisions of the Internal Revenue Code and
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heads of households as defined in the Internal Revenue
Code not deducting federal income tax:
(1) 1/2% tax on first $2,000.00 or part thereof,
(2) 1% tax on next $3,000.00 or part th ereof,
(3) 2% tax on next $2,500.00 or part thereof,
(4) 3% tax on next $2,300.00 or part thereof,
(5) 4% tax on next $2,400.00 or part thereof,
(6) 5% tax on next $2,800.00 or part thereof,
(7) 6% tax on next $6,000.00 or part thereof, and
(8) (a) for taxable years beginning after December
31, 1998, and before January 1, 2002, 6.75%
tax on the remainder,
(b) for taxable years beginning on or after
January 1, 2002, and before January 1, 2004,
7% tax on the remainder, and
(c) for taxable years beginning on o r after
January 1, 2004, 6.65% tax on the remainder.
2. METHOD 2.
a. Single individuals and married individuals filing
separately deducting federal income tax:
(1) 1/2% tax on first $1,000.00 or part thereof,
(2) 1% tax on next $1,500.00 or part thereof,
(3) 2% tax on next $1,250.00 or part thereof,
(4) 3% tax on next $1,150.00 or part thereof,
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(5) 4% tax on next $1,200.00 or part thereof,
(6) 5% tax on next $1,400.00 or part thereof,
(7) 6% tax on next $1,500.00 or part thereof,
(8) 7% tax on next $1,500.00 or part thereof,
(9) 8% tax on next $2,000.00 or part thereof,
(10) 9% tax on next $3,500.00 or part thereof, and
(11) 10% tax on the remainder.
b. Married individuals filing jointly and surviving
spouse to the extent and in the manner that a
surviving spouse is permitted to file a joint return
under the provisions of the Internal Revenue Code and
heads of households as defined in the Internal Revenue
Code deducting federal income tax:
(1) 1/2% tax on the first $2,000.00 or part thereof,
(2) 1% tax on the next $3,000.00 or part thereof,
(3) 2% tax on the next $2,500.00 or part thereof,
(4) 3% tax on the next $1,400.00 or part thereof,
(5) 4% tax on the next $1,500.00 or part thereof,
(6) 5% tax on the next $1,600.00 or part thereof,
(7) 6% tax on the next $1,250.00 or part thereof,
(8) 7% tax on the next $1,750.00 or part thereof,
(9) 8% tax on the next $3,000.00 or part thereof,
(10) 9% tax on the next $6,0 00.00 or part thereof, and
(11) 10% tax on the remainder.
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B. Individuals. For all t axable years beginning on or after
January 1, 2008, and ending any tax year which begins after December
31, 2015, for which the determination required pursuant to Sections
4 2355.1F and 5 2355.1G of this act title is made by the State Board
of Equalization, a tax is hereby imposed upon the Oklahoma taxable
income of every resident or nonresident individual, which tax shall
be computed as follows:
1. Single individuals and married individuals filing
separately:
(a) 1/2% tax on first $1,000.00 or part thereo f,
(b) 1% tax on next $1,500.00 or part thereof,
(c) 2% tax on next $1,250.00 or part thereof,
(d) 3% tax on next $1,150.00 or part thereof,
(e) 4% tax on next $2,300.00 or part thereof,
(f) 5% tax on next $1,500.00 or part thereof,
(g) 5.50% tax on the remainder for the 2008 tax year and
any subsequent tax year unless the rate prescribed by
subparagraph (h) of this paragraph is in effect, and
(h) 5.25% tax on the remainder for th e 2009 and subsequent
tax years. The decrease in the top marginal
individual income tax rate otherwise authorized by
this subparagraph shall be contingent upon the
determination required to be made by the State Board
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of Equalization pursuant to Section 23 55.1A of this
title.
2. Married individuals filing jointly and surviving spou se to
the extent and in the manner that a surviving spouse is permitted to
file a joint return under the provisions of the Internal Revenue
Code and heads of households as define d in the Internal Revenue
Code:
(a) 1/2% tax on first $2,000.00 or part thereo f,
(b) 1% tax on next $3,000.00 or part thereof,
(c) 2% tax on next $2,500.00 or part thereof,
(d) 3% tax on next $2,300.00 or part thereof,
(e) 4% tax on next $2,400.00 or part thereof,
(f) 5% tax on next $2,800.00 or part thereof,
(g) 5.50% tax on the remainder for the 2008 tax year and
any subsequent tax year unless the rate prescribed by
subparagraph (h) of this paragraph is in effect, and
(h) 5.25% tax on the remainder for th e 2009 and subsequent
tax years. The decrease in the top marginal
individual income tax rate otherwise authorized by
this subparagraph shall be contingent upon the
determination required to be made by the State Board
of Equalization pursuant to Section 23 55.1A of this
title.
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C. Individuals. For Except as provided by subsection D of this
section, for all taxable years beginning on or after January 1, 2022
2024, and ending not later than December 31, 2025, a tax is hereby
imposed upon the Oklahoma taxable income of every resident or
nonresident individual, which tax shall be computed as follows:
1. Single individuals and married individuals filing
separately:
(a) 0.25% tax on first $1,000.00 or part thereof,
(b) 0.75% tax on next $1,500.00 or part thereof,
(c) 1.75% tax on next $1,250.00 or part thereof,
(d) 2.75% tax on next $1,150 .00 or part thereof,
(e) 3.75% tax on next $2,300.00 or part thereof,
(f) 4.75% tax on the remainder.
2. Married individuals filing jointly and surviving spouse to
the extent and in the manner that a surviving spouse is permitted to
file a joint return un der the provisions of the Internal Revenue
Code and heads of households as defined i n the Internal Revenue
Code:
(a) 0.25% tax on first $2,000.00 or part thereof,
(b) 0.75% tax on next $3,000.00 or part thereof,
(c) 1.75% tax on next $2,500.00 or part ther eof,
(d) 2.75% tax on next $2,300.00 or part thereof,
(e) 3.75% tax on next $2,400.0 0 or part thereof,
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(f) 4.75% tax on the remainder levied at the rate of four
and twenty-five hundredths percent (4.25%).
No deduction for federal income taxes paid shall be allowed to
any taxpayer to arrive at taxable income. The tax levied pursuant
to this subsection shall be levied only upon the amounts of Oklahoma
taxable income in excess of:
1. Nine Thousand Seven Hundred Fifty Dollars ($9,750.00) for
taxpayers having a single or married filing separate status; or
2. Sixteen Thousand Two Hundred Fifty Dollars ( $16,250.00) for
head of household filing status; or
3. Nineteen Thousand Four Hundred Fifty Dollars ($19,450.00)
for taxpayers having a joint return filing stat us.
D. The rate of tax prescribed pur suant to subsection C of this
section may be extended for subsequent taxable years by law. If the
rate of taxation otherwise prescribed pursuant t o subsection C of
this section is not extended for tax years beginning on or after
January 1, 2026, the rate of taxation for the two (2) tax years
beginning January 1, 2026, and ending December 31, 2027, and for
each subsequent two (2) taxable years therea fter, shall be four and
seventy-five one hundredths percent (4.75%) upo n the amounts of
Oklahoma taxable inco me only in excess of:
1. Nine Thousand Seven Hundred Fifty Dollars ($9,750.00) for
taxpayers having a single or married filing separate status; or
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2. Sixteen Thousand Two Hundred Fifty Dollars ( $16,250.00) for
head of household filing status; or
3. Nineteen Thousand Four Hundred Fifty Dollars ($19,450.00)
for taxpayer having a joint return filing status.
E. Nonresident aliens. In lieu of the rates set forth in
subsection A above this section, there shall be imposed on
nonresident aliens, as defined in the Internal Revenue Code, a tax
of eight percent (8%) instead of thirty percent (30%) as used in the
Internal Revenue Code, with respect to the Oklahoma taxable income
of such nonresident aliens as determined under th e provision of the
Oklahoma Income Tax Act.
Every payer of amounts covered by this subsection shall deduct
and withhold from such amounts paid each payee an amount equal to
eight percent (8%) thereof. Every payer required to deduct and
withhold taxes under this subsection shall for each quarterly period
on or before the last day of the month following the close of each
such quarterly period, pay over the a mount so withheld as taxes to
the Tax Commission, and shall file a return with each such payment.
Such return shall be in such form as the Tax Commission shall
prescribe. Every payer required under this subsection to deduct and
withhold a tax from a paye e shall, as to the total amounts paid to
each payee during the calendar year, furnish to such payee, o n or
before January 31, of the succeeding year, a written statement
showing the name of the payer, the name of the payee and the payee's
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Social Security account number, if any, the total amount paid
subject to taxation, and the total amount deducted and wi thheld as
tax and such other information as the Tax Commission may require.
Any payer who fails to withhold or pay to the Tax Commission any
sums herein required to be withheld or paid shall be personally and
individually liable therefor to the State of O klahoma.
E. F. Corporations. For all taxable years beginning after
December 31, 2021, a tax is hereby imposed upon the Oklahoma taxable
income of every corporation doing business within this state or
deriving income from sources within this state in an a mount equal to
four percent (4%) thereof.
There shall be no additional Oklahoma income tax imposed on
accumulated taxable income or on undistributed personal holding
company income as those terms are defined in the Internal Revenue
Code.
F. G. Certain foreign corporations. In lieu of the tax imposed
in the first paragraph of subsection D F of this section, for all
taxable years beginning after December 31, 2021 , there shall be
imposed on foreign corporations, as defined in the Internal Revenue
Code, a tax of four percent (4%) instead of thirty percent (30%) as
used in the Internal Revenue Code, where such income is received
from sources within Oklahoma, in accor dance with the provisions of
the Internal Revenue Code and the Oklahoma Income Tax Act.
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Every payer of amounts covered by this subsection shall deduct
and withhold from such amounts paid each payee an amount equal to
four percent (4%) thereof. Every payer required to deduct and
withhold taxes under this subsection shall for each quarterly period
on or before the last day of the month following the close of each
such quarterly period, pay over the amount so withheld as taxes to
the Tax Commission, and shall file a return with each such payment.
Such return shall be in such form as the Tax Commission shall
prescribe. Every payer required under this subsection to deduct and
withhold a tax from a payee shall, as to the total amounts paid to
each payee during the calendar year, furnish to such payee, on or
before January 31, of the succeeding year, a wri tten statement
showing the name of the payer, the name of the payee and the payee's
Social Security account number, if any, the total amounts paid
subject to taxation, the total amount deducted and withheld as tax
and such other information as the Tax Comm ission may require. Any
payer who fails to withhold or pay to the Tax Commission any sums
herein required to be withheld or paid shall be personally and
individually liable therefor to the State of Oklahoma.
G. H. Fiduciaries. A tax is hereby imposed up on the Oklahoma
taxable income of every trust and estate at the same rates as are
provided in subsection A, B, or C, or D of this section for single
individuals. Fiduciaries are not allowed a deduction for any
federal income tax paid.
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H. I. Tax rate tables. For all taxable years beginning after
December 31, 1991, in lieu of the tax imposed by subsection A, B , or
C, or D of this section, as applicable there is he reby imposed for
each taxable year on the taxable income of every individual, whose
taxable income for such taxable year does not exceed the ceiling
amount, a tax determined under tables, applicable to such taxable
year which shall be prescribed by the Tax Commission and which shall
be in such form as it determines appropriate. In the table so
prescribed, the amounts of the tax shall be computed on the basis of
the rates prescribed by subsection A, B , or C, or D of this section.
For purposes of this sub section, the term "ceiling amount" means,
with respect to any taxpayer, the amount determined by th e Tax
Commission for the tax rate category in which such taxpayer falls.
SECTION 2. 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 adjusted to
arrive at Oklahoma taxable income and Oklahoma adjusted gross income
as required by this section.
A. The taxable income of any taxpayer shall be adjusted to
arrive at Oklahoma taxable income for corporations and Oklahoma
adjusted gross income for individuals, as follows:
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1. There shall be added interest income on obligations of any
state or political subdivision there to which is not otherwise
exempted pursuant to other laws of this state, to the extent that
such interest is not included in taxable income and adjusted gros s
income.
2. There shall be deducted amounts included in such income that
the state is prohibited from taxing because of the provisions of the
Federal Constitution, the State Constitution, federal laws or laws
of Oklahoma.
3. The amount of any federal ne t operating loss deduction shall
be adjusted as follows:
a. For carryovers and carrybacks to taxabl e years
beginning before January 1, 1981, the amount of any
net operating loss deduction allowed to a taxpayer for
federal income tax purposes shall be reduc ed to an
amount which is the same portion thereof as the loss
from sources within this state, as de termined 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 carrybacks to taxable years
beginning after December 31, 1980, the amount of an y
net operating loss deduction allowed for the taxable
year shall be an amount equal to the aggregate of the
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Oklahoma net operating loss carryovers and carry backs
to such year. Oklahoma net operating losses shall be
separately determined by reference to S ection 172 of
the Internal Revenue Code, 26 U.S.C., Section 172, as
modified by the Oklahoma Income Tax Act, Section 2351
et seq. of this title, and shall be allowed 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 op erating loss" and
"taxable income" shall be replaced with "Oklahoma net
operating loss" and "Oklahoma taxable income". For
tax years beginning after Decembe r 31, 2007, and
ending before January 1, 2009, years to which such
losses may be carried back shall be limited to two (2)
years. For tax years beginning after December 31,
2008, the years to which such losses may be carried
back shall be determined solely by reference to
Section 172 of the Internal Revenue Code, 26 U.S.C.,
Section 172, with the excepti on that the terms "net
operating loss" and "taxable income" shall be replaced
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with "Oklahoma net operating loss" and "Oklahoma
taxable income".
4. Items of the following nature shall be allocated as
indicated. Allowable deductions attributable to items s eparately
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 property, such as
interest, dividends, patent or copyright royalties,
and gains or losses from sales of such property, shall
be allocated in accordance with the domiciliary situs
of the taxpayer, except that:
(1) where such property has acquired a nonunitary
business or commercial situs apart from the
domicile of the taxpayer suc h income shall be
allocated in accordance with such business or
commercial situs; interest income from
investments held to generate working capital for
a unitary business enterprise shall be included
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in apportionable income; a resident trust or
resident estate shall be treated as having a
separate commercial or business situs insofar as
undistributed income is concerned, but shall not
be treated as having a se parate 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 of the original cost
of such partnership's tangible property in this
state to the original cost of such partnership's
tangible property everywhere, as determine d at
the time of the sale; if more than fifty percent
(50%) of the value of the partnership's asset s
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 sta te in accordance with the
sales factor of the partnership for its first
full tax period immediately preceding its tax
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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 provisions of paragraph
5 of this subsection shall be allocated as herein
provided;
c. Net income or loss from a business activity which is
not a part of business carried on within or without
the state of a unitary character shall be separately
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 consists
solely of marketing its products by:
(1) sales having a situs without this state, shipped
directly to a point from without the state to a
purchaser within the state, commonly known as
interstate sales,
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(2) sales of the product stored in public warehouses
within the state pursuant to "in transit"
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 al lowed 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 processing 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 principal business of
which is warehousing merchandise for the public;
e. In the case of insurance companies, Oklahoma taxable
income shall be taxable income of the taxpayer for
federal tax purposes, as adjusted for the adjustment s
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provided pursuant to the provisions of paragraphs 1
and 2 of this subsection, apportioned as foll ows:
(1) except as otherwise provided by division (2) of
this subparagraph, taxable income of an insurance
company for a taxable year shall be apportioned
to this state by multiplying such income by a
fraction, the numerator of which is the direct
premiums written for insurance on property or
risks in this state, and the denominator of which
is the direct premiums written for insurance on
property or risks eve rywhere. For purposes of
this subsection, the term "direct premiums
written" means the total amoun t of direct
premiums written, assessments and annuity
considerations as reported for the taxable year
on the annual statement filed by the company with
the Insurance Commissioner in the form approved
by the National Association of Insurance
Commissioners, or such other form as may be
prescribed in lieu thereof,
(2) if the principal source of premiums written by an
insurance company consists of premiums for
reinsurance accepted by it, the taxable income of
such company shall be apportioned to this state
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by multiplying such income by a fraction, the
numerator of which is the sum of (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 t he 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 property 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 otherwise determinable, may at the
election of the company be determ ined 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 for
insurance on property or risks in this state by
each ceding company fr om which reinsurance is
accepted bears to the sum of the total direct
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premiums written by each such ceding company for
the taxable year.
5. The net income o r 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 of property, payroll and sales or gross revenue
enumerated as subparagraphs a, b and c of this paragraph. Net
income or loss as used in this paragraph includes that derived from
patent or copyright royalties, purchase discounts, and interest on
accounts receivable relating to or arising from a business activity,
the 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 corporations whose property
for purposes of the tax imposed by Section 2355 of this title has an
initial investment cost equaling or exceeding Two Hundred M illion
Dollars ($200,000,000.00) and such investment is made on or after
July 1, 1997, or for corpo rations which expand their property or
facilities in this state and such expansion has an investment cost
equaling or exceeding Two Hundred Million Dollars ( $200,000,000.00)
over a period not to exceed three (3) years, and such expansion is
commenced on or after January 1, 2000, the three factors shall be
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apportioned with property and payroll, each comprising twenty -five
percent (25%) of the apportionment fact or and sales comprising fifty
percent (50%) of the apportionment factor. The apportionment
factors shall be computed as follows:
a. 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 property everywhere owned
or rented and used during the tax period.
(1) 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
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
carried thereon, airplanes, salespersons'
automobiles and other similar equipment, in the
proportion that miles traveled in Oklahoma by
such equipment bears to tota l miles traveled,
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(2) Property owned by the taxpayer is valued at its
original cost. Property rent ed 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 annu al
rental rate received by the taxpayer from
subrentals,
(3) The average value of property shall be determined
by averaging the values at the beginning and
ending of the tax period but the Oklahoma Tax
Commission may require the averaging of monthly
values during the tax period if reasonably
required to reflect properly the average value of
the taxpayer's property;
b. The payroll factor is a fraction, the numerator of
which is the total compensation for services rendered
in the state during the tax period, and the
denominator of which is the total compensation for
services rendered everywhere during the tax period.
"Compensation", as used in this subsection means those
paid-for services to the extent related to the unitary
business but does not include offi cers' salaries,
wages and other compensation.
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(1) In the case of a transportation enterprise, the
numerator of the fraction shall include a portion
of such expenditure in connection with employees
operating equipment over a fixed route, such as
railroad 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) 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 s tate only a part
of the time, in the proportion that time spent in
Oklahoma bears to total time spent in furtherance
of the enterprise by such employees;
c. The sales factor is a fraction, the numerator of which
is the total sales or gross revenue of the t axpayer 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 perio d. "Sales",
as used in this subsection does not include sales or
gross revenue which are separatel y allocated in
paragraph 4 of this subsection.
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(1) Sales of tangible personal property have a situs
in this state if the property is delivered or
shipped to a purchaser other than the United
States government, within this state regardless
of the FOB point or 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 pur chaser is the United
States government or (b) the taxpayer is not
doing business in the state of th e destination of
the shipment.
(2) In the case of a railroad or interurban railway
enterprise, the numerator of the fraction shall
not be less than the alloc ation of revenues to
this state as shown in its annual report to the
Corporation Commission.
(3) In the case of an airline, truck or bus
enterprise or freight car, tank car, refrigerator
car or other railroad equipment enterprise, the
numerator of the frac tion shall include a portion
of revenue from interstate transportation in the
proportion that inter state mileage traveled in
Oklahoma bears to total interstate mileage
traveled.
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(4) 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
enterprise within Oklahoma or the revenue
allocated to Oklahoma based upon miles moved, at
the option of the taxpayer, and the denominator
of which shall be the total of traffic units of
the enterprise or the revenue of the enterprise
everywhere as appropriate to the numerator. A
"traffic unit" is hereby defined as the
transportation for a distance of one (1) mile of
one (1) barrel of oil, one (1) gallon of gasoline
or one thousand (1,000) c ubic feet of natural or
casinghead gas, as the case may be.
(5) In the case of a telephone or teleg raph or other
communication enterprise, the numerator of the
fraction shall include that portion of the
interstate revenue as is allocated pursuant to
the accounting procedures prescribed by the
Federal Communications Commission; provided that
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 such
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Commission, the intrastate net income shall be
determined separately in the manner provided by
such uniform system of accounts and only the
interstate income shall be subject to allocation
pursuant to the provisions of this subs ection.
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 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 not
employed to any appreciable extent in furtherance of the enterprise;
or because one or more factors no t so prescribed are employed to a
considerable extent in furtherance of the enterprise; or because of
other reasons, the Tax Commission is empowered to permi t, after a
showing by taxpayer that an excessive portion of net income has been
attributed to Oklahoma, or require, when in its judgment an
insufficient portion of net income has been attributed to Oklahoma,
the elimination, substitution, or use of additio nal factors, or
reduction or increase in the weight of such prescribed factors.
Provided, however, that any such variance from such prescribed
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factors which has the effect of increasing the portion of net income
attributable to Oklahoma must not be inhere ntly arbitrary, 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 commod ity processing facility in this state
may exclude from Oklahoma taxable income, or in the case of a n
individual, the Oklahoma adjusted gross income, fifteen percent
(15%) of the investment by the owner in the new or expanded
agricultural commodity processi ng facility. For calendar year 1999,
and all subsequent years, the percentage, not to exceed fifte en
percent (15%), available to the owner of a new or expanded
agricultural commodity processing facility in this state claiming
the exemption shall be adjust ed annually so that the total estimated
reduction in tax liability does not exceed One Million Doll ars
($1,000,000.00) annually. The Tax Commission shall promulgate rules
for determining the percentage of the investment which each eligible
taxpayer may exclude. The exclusion provided by this paragraph
shall be taken in the taxable year when the invest ment is made. In
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 ($1,000,000.00) and shall fa ctor such excess into
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the percentage for subsequent years. Any amount of the exemption
permitted to be excluded pursuant to the provisions of this
paragraph but not used in any year may be carried forward as an
exemption from income pursuant to the provis ions of this paragraph
for a period not exceeding six (6) years following the year in which
the investment was originally made.
For purposes of this paragrap h:
a. "Agricultural commodity processing facility" means
building, structures, fixtures and improve ments used
or operated primarily for the processing or production
of marketable products from agricultural commodities.
The term shall also mean a dairy ope ration 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, drying o r transportation
of agricultural commodities, and
b. "Facility" means each part of the facility whi ch is
used in a process primarily for:
(1) the processing of agricultural commodities,
including receiving or storing agricultur al
commodities, or the produc tion of milk at a dairy
operation,
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(2) transporting the agricultural commodities or
product before, during or after the processing,
or
(3) packaging or otherwise preparing the product for
sale or shipment.
7. Despite any provi sion to the contrary in parag raph 3 of this
subsection, for taxable years beginning after December 31, 1999, in
the case of a taxpayer which has a farming loss, such farming loss
shall be considered a net operating loss carryback in accordance
with and to the extent of the Internal Re venue Code, 26 U.S.C.,
Section 172(b)(G). However, the amount of the net operating loss
carryback shall not exceed the lesser of:
a. Sixty Thousand Dollars ($60,000.00), or
b. the loss properly shown on Schedule F of the Inter nal
Revenue Service Form 1040 reduced by one-half (1/2) of
the income from all other sources other than reflected
on Schedule F.
8. In taxable years beginning after December 31, 1995, all
qualified wages equal to the federal income tax credit set forth in
26 U.S.C.A., Section 45A, sh all be deducted from taxable income.
The deduction allowed pursuant to this paragraph shall only b e
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
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paragraph, "qualified w ages" means those wages used 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 and utilizes the Safety Pays OSHA
Consultation Service provided by t he Oklahoma Department of Labor
shall receive an exemption from taxable 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 Januar y 1, 2010,
there shall be added to Oklahoma taxable income an amount equal to
the amount of deferred income 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 Re covery 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 to Section 108(i)(1)
of the Internal Revenue Code by Sec tion 1231 of the American
Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
11. For taxable years beginning on or after J anuary 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
Oklahoma taxable income or adjusted gross income any item of loss or
deduction that in the absence of an election pursuant to the
provisions of the Pass -Through Entity Tax Equity Act of 2019 would
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be allocated to a member or to an i ndirect member of an electing
pass-through entity pursuant to Section 2351 et seq. of this title,
if (i) the electing pass -through entity has accounted for such item
in computing its Oklahoma net entity income or loss pursuant to the
provisions of the Pass -Through Entity Tax Equity Ac t of 2019, and
(ii) the total amount of tax attributable to any resulting Oklahoma
net entity income has been paid. The Oklahoma Tax Commission shall
promulgate rules for the reporting of such exclusion to direct and
indirect members of the electing pass -through entity. As used in
this paragraph, "electing pass-through entity", "indirect member",
and "member" shall be defined in the same manner as prescribed by
Section 2355.1P-2 of this title. Notwithstanding the application of
this paragraph, the adjust ed 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 income
tax purposes.
B. 1. The taxable income of any corp oration 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 pursu ant to the provisions of the
Accelerated Cost Recovery System as defined and allowed in the
Economic Recovery Tax Act of 1981, P ublic Law 97-34, 26 U.S.C.,
Section 168, for depreciation of assets placed into service after
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December 31, 1981, shall not be al lowed in calculating Oklahoma
taxable income. Such corporations shall be allowed a deduction for
depreciation of assets placed into service after December 31, 1981,
in accordance with provisions of the Internal Revenue Code, 26
U.S.C., Section 1 et seq., in effect immediately prior t o the
enactment of the Accelerated Cost Recovery System. The Oklahoma tax
basis for all such asset s placed into service after December 31,
1981, calculated in this section shall be retained and utilized for
all Oklahoma income tax purposes through the fin al disposition of
such assets.
Notwithstanding any other provisions of the Oklahoma Income Tax
Act, Section 2351 et seq. of this title, or of the Internal Revenue
Code to the contrary, this subsection shall control calculation of
depreciation of assets pla ced into service after December 31, 1981,
and before January 1, 1983.
For assets placed in service and held by a corporation in which
accelerated cost recovery system was previously disallowed, an
adjustment to taxable income i s required in the first taxab le year
beginning after December 31, 1982, to reconcile the basis of such
assets to the basis allow ed in the Internal Revenue Code. The
purpose of this adjustment is to equalize the basis and allowance
for depreciation account s between that reported to th e Internal
Revenue Service and that reported to Oklahoma.
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2. For tax years beginning on or after J anuary 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 Re venue Code, Section 179 as
provided in the American Recovery and Reinvestment Act of 2009.
C. 1. For taxable years beginning a fter 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 Oklahoma. Such transferor
corporation shall be allowed an exe mption from taxable income of an
amount equal to the amount 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 received by such
transferor corporation as a result of the technology transfer. Such
exemption shall be allowed for a period not to exceed 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 businesses made prior to January 1,
1988.
2. For purposes of this subsection:
a. "Qualified small business" m eans an entity, whether
organized as a corporation, partnership, or
proprietorship, organized for profit with its
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principal place of business located within 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, an d
(3) Not a subsidiary or affiliate of the transferor
corporation;
b. "Technology" means a propriet ary process, formula,
pattern, device or compilation of scientific or
technical information which is not in the public
domain;
c. "Transferor corporation" me ans a corporation which is
the exclusive and undisputed owner of the technology
at the time the transfer is made; and
d. "Gross proceeds" means the tot al amount of
consideration for the transfer of technology, whether
the consideration is in money or other wise.
D. 1. For taxable years beginning after December 31, 2005, the
taxable income of any corpor ation, estate or trust, shall be further
adjusted for qualifying gains receiving capital treatment. Such
corporations, estates or trusts shall be allowed a deduction from
Oklahoma taxable income for the amount of qualifying gains receiving
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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 treatment" means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, included in the
federal income tax return of the corporation, estate
or trust that result from:
(1) the sale of real property or tangible personal
property located within Oklahoma that has been
directly or indirectly owned by the c orporation,
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 ownersh ip
interest in an Oklahoma company, limited
liability company, or partnership where such
stock or ownership interest has been directly or
indirectly owned by the corporation, estate or
trust for a holding period of at least three (3)
years prior to the dat e of the transaction from
which the net capital gain s arise, or
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(3) the sale of real property, tangible personal
property or intangible personal property loc ated
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 dat e of the transaction
from which the net capital gain s arise,
b. "holding period" means an uninterrupted period of
time. The holding period shall include any additional
period when the property was held by another
individual or entity, if such additional p eriod is
included in the taxpayer's holding period f or the
asset pursuant to the Internal Revenue Code,
c. "Oklahoma company", "limited liability company", o r
"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 capital gains
arise,
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d. "direct" means the taxpayer directly owns th e asset,
and
e. "indirect" means the taxpayer owns an interest in a
pass-through entity (or chain o f pass-through
entities) that sells the asset that g ives rise to the
qualifying gains receiving capital treatment.
(1) With respect to sales of real property or
tangible personal property located within
Oklahoma, the deduction described in this
subsection shall not apply unless the pass -
through entity that makes the sale has held the
property for not less than five (5) uninterrupted
years prior to the date of the transaction that
created the capital gain, and each pass-through
entity included in the chain o f ownership has
been a member, partner, or sharehold er of the
pass-through entity in the tier immediately below
it for an uninterrupted period of not less th an
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of all or s ubstantially all
of the assets of an Oklahoma company, limited
liability company, or partnership, the deduction
described in this subsection shall not apply
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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 inclu ded 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) years.
E. The Oklahoma adjusted gross income of any individual
taxpayer shall be further adjusted as follows to arrive at Oklahoma
taxable income:
1. a. In the case of individuals, there shall be added or
deducted, as the case may be, the difference necessary
to allow personal exemptions of One Thousand Dollars
($1,000.00) in lieu of the personal exemptions allowed
by the Internal Revenue Code.
b. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for each taxpayer or
spouse who is blind at the close of the tax year. For
purposes of this sub paragraph, an individual is blind
only if the central visual acuity of the individual
does not exceed 20/200 in the better eye with
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correcting lenses, or if the visual acuity of the
individual is greater than 20/200, but is accompanied
by a limitation in t he fields of vision such that the
widest diameter of the visual field subtends an angle
no greater than twenty (20) degrees.
c. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for each taxpayer or
spouse who is sixty-five (65) years of age or older at
the close of the tax year based upon the filing status
and federal adjusted gross income of the taxpayer.
Taxpayers with the following filing status may claim
this exemption if the federal adjusted gross income
does not exceed:
(1) Twenty-five Thousand Dollars ($25,000.00) if
married and filing jointly;
(2) Twelve Thousand Five Hundred Dollars ($12,500.00)
if married and filing separately;
(3) Fifteen Thousand Dollars ($15,000.00) if single;
and
(4) Nineteen Thousand Dollars ($19,000.00) if a
qualifying head of household.
Provided, for taxable years beginning after Decembe r
31, 1999, amounts included in the calculation of
federal adjusted gross income pursuant to the
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conversion of a traditional individual retirement
account to a Roth individual 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 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 equ al to the larger of
fifteen percent (15%) of the Oklahoma adjusted gross
income or One Thousand Dol lars ($1,000.00), but not to
exceed Two Thousand Dollars ($2,000.00), except that
in the case of a married individual filing a separate
return such deduction shall be the larger of fifteen
percent (15%) of such Oklahoma adjusted gross income
or Five Hundred Dollars ($500.00), but not to exceed
the maximum amount of One Thousand Dollars
($1,000.00).
b. For taxable years beginning on or after January 1,
2006, and before January 1, 2007, in the case of
individuals who use the standard deduction in
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determining taxable income, there shall be added or
deducted, as the case may be, the difference necessary
to allow a standard deduction in lieu of the standard
deduction allowed by the Internal Revenue Code, in an
amount equal to:
(1) Three Thousand Dollars ($3,000.0 0), if the filing
status is married filing joint, head of household
or qualifying widow; or
(2) Two Thousand Dollars ($2,000.00), if the filing
status is single or married filing separate.
c. For the taxable year beginning on January 1, 2007, and
ending December 31, 2007, in the case of individuals
who use the standard deduction in determining taxabl e
income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Five Thousand Five Hundred Dollars ($5 ,500.00),
if the filing status is married filing joint or
qualifying widow; or
(2) Four Thousand One Hundred Twenty-five Dollars
($4,125.00) for a head of house hold; or
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(3) Two Thousand Seven Hundred Fifty Dollars
($2,750.00), if the filing status is singl e or
married filing separate.
d. For the taxable year beginni ng on January 1, 2008, and
ending December 31, 2008, in the case of individuals
who use the standard deduction in determining taxable
income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Six Thousand Five Hundred Dollars ($6,500.00), if
the filing status is married filing joint or
qualifying widow, or
(2) Four Thousand Eight Hundred Seventy -five Dollars
($4,875.00) for a head of household, or
(3) Three Thousand Two Hundred Fifty Dollars
($3,250.00), if the filing status is single or
married filing separate.
e. For the taxable year beginni ng on January 1, 2009, and
ending December 31, 2009, in the c ase of individuals
who use the standard deduction in determining taxable
income, there shall be add ed or deducted, as the case
may be, the difference necessary to allow a standard
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deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Eight Thousand Five Hundred Dollars ($8,500.00),
if the filing status is married filing joint or
qualifying widow, or
(2) Six Thousand Three Hundred Seventy -five Dollars
($6,375.00) for a head of household, or
(3) Four Thousand Two Hundred Fifty Dollars
($4,250.00), if the filing status is single or
married filing separa te.
Oklahoma adjusted gross income shall be increased by
any amounts paid for motor vehicle exci se taxes which
were deducted as allowed by the Internal Reven ue Code.
f. For taxable years beginning on or after January 1,
2010, and ending on December 31, 201 6, in the case of
individuals who use the standard deduction in
determining taxable income, ther e shall be added or
deducted, as the case may be, the differe nce 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 f iling federal individual income
tax returns.
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g. For taxable years beginning on or after January 1,
2017, in the case of individuals who use the standard
deduction in determining taxable income, there shall
be added or deducted, as the case may be, the
difference necessary to allow a standard deduction in
lieu of the standard deduction allowed by the Internal
Revenue Code, as follows:
(1) Six Thousand Three Hundre d Fifty Dollars
($6,350.00) for single or married filing
separately,
(2) Twelve Thousand Seven H undred Dollars
($12,700.00) for married filing jointly or
qualifying widower with dependent child, and
(3) Nine Thousand Three Hundred Fifty Dollars
($9,350.00) for head of household.
3. a. In the case of resident and part -year resident
individuals having adjusted gross income from sources
both within and without th e state, the itemized or
standard deductions and personal exemptions shall be
reduced to an amount which is the same portion of the
total thereof as Oklahoma adjusted gross income is of
adjusted gross income. To the extent itemized
deductions include allo wable moving expense, proration
of moving expense shall not be required or permitted
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but allowable moving expense shall be fully deductible
for those taxpayers moving within or into Oklahoma and
no part of moving expense shall be deductible for
those taxpayers moving without or out of Oklahoma.
All other itemized or standard deductions and personal
exemptions shall be subject to proration as provided
by law.
b. For taxable years beginning on or after January 1,
2018, the net amount of itemized deductions a llowable
on an Oklahoma income tax return, subject to the
provisions of paragraph 24 of this subsec tion, shall
not exceed Seventeen Thousand Dollars ($17,000.00).
For purposes of this subparagraph, charitable
contributions and medical expenses deductible for
federal income tax purposes shall be excluded from the
amount of Seventeen Thousand Dollars ($1 7,000.00) as
specified by this subparagraph.
4. A resident indiv idual with a physical disability
constituting a substantial handicap to employment may deduc t from
Oklahoma adjusted gross income such expenditures to modify a motor
vehicle, home or workplac e as are necessary to compensate for his or
her handicap. A vete ran certified by the Department of Veterans
Affairs of the federal government as having a se rvice-connected
disability shall be conclusively presumed to be an individual with a
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physical disability constituting a substantial handicap to
employment. The Tax Commission shall promulgate rules containing a
list of combinations of common disabilities and modifications 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 retirement benefits, as a me mber
of any component of the Armed Forces of the United
States shall be deducted from taxable income.
b. On or after July 1, 2010, one hundred percent (100%)
of the income received by any person from the United
States as salary or compensation in any form, other
than retirement benefits, as a member of any component
of the Armed Forces of the United States shall be
deducted from taxable income.
c. Whenever the filing of a timely income tax return by a
member of the Armed Forces of the United States is
made impracticable or impossible of accomplishment by
reason of:
(1) absence from the United States, which term
includes only the states and the District of
Columbia;
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(2) absence from the State of Oklahoma while on
active duty; or
(3) confinement in a hospital within the United
States for treatment of wounds, injuries or
disease,
the time for filing a return and paying an income tax
shall be and is hereby extended without incurring
liability for interest or penalties, to the fifteenth
day of the third month foll owing the month in which:
(a) Such individual shall return to the United
States if the extension is granted pursuant
to subparagraph a of this paragraph, ret urn
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 grante d
pursuant to subparagraph c of this
paragraph; or
(b) An executor, administrator, or conser vator
of the estate of the taxpayer is appointed,
whichever event occurs the earliest.
Provided, that the Tax Commission may, in its discretion, grant
any member of the Armed Forces of the United States an extension of
time for filing of income tax returns and payment of income tax
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without incurring liabilities for interest or penalties. Such
extension may be granted only when in the judgment of the Tax
Commission a good cause exists therefor and may be for a period in
excess of six (6) months. A record o f every such extension granted,
and the reason therefor, shall be kept.
6. Before July 1, 2010, th e 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 States, shall be
deducted from taxable income during the time in which the person is
detained by the enemy in a confl ict, 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 subject to the ded uction as
provided pursuant to paragraph 5 of this subsection.
7. a. An individual taxpayer, whethe r resident or
nonresident, may deduct an amount equal to the federal
income taxes paid by the taxpayer during the taxable
year.
b. Federal taxes as described in subparagraph a of this
paragraph shall be deductible by any individual
taxpayer, whether reside nt 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 amoun t allowable in the preceding
paragraph shall be prorated on the ratio of the
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Oklahoma adjusted gros s income to federal adjusted
gross income.
c. For the purpose of this paragraph, "federal income
taxes paid" shall mean federal income taxes, surtaxes
imposed on incomes or excess profits taxes, as though
the taxpayer was on the accrual basis. In determin ing
the amount of deduction for federal income taxes for
tax year 2001, the amount of the deduction shall not
be adjusted by the amount of any accelerated te n
percent (10%) tax rate bracket credit or advanced
refund of the credit received during the tax ye ar
provided pursuant to the federal Economic Growth and
Tax Relief Reconciliation Act of 2001, P.L. No. 107 -
16, and the advanced refund of such credit shall not
be subject to taxation.
d. The provisions of this paragraph shall apply to all
taxable years ending after December 31, 1978, and
beginning before January 1, 2006.
8. Retirement benefits not to exceed Five Thousand 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 Th ousand
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,
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the Teachers' Retirement System of Oklahoma, t he Oklahoma Law
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 th e Oklahoma Statutes, the
Uniform Retirement System for Justices and Judges, the Oklahoma
Wildlife Conservation Department Retirement Fund, the Oklahoma
Employment Security Commission Retirement Plan, or the employee
retirement systems created by municipali ties pursuant to Section 48-
101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
from taxable income.
9. In taxable years beginning after Decemb er 3l, 1984, Social
Security benefits received by an individual shall be exempt from
taxable income, to the extent such benefits are included in the
federal adjusted gross income pursuant to the provisions of Section
86 of the Internal Revenue Code, 26 U.S .C., Section 86.
10. For taxable years beginning after December 31, 1994, lump -
sum distributions from employer plans of deferred compensation,
which are not qualified plans within the meaning of Section 401(a)
of the Internal Revenue Code, 26 U.S.C., Sect ion 401(a), and which
are deposited in and accounted for within a separate bank account or
brokerage account in a financial institution within this state,
shall be excluded from taxable income in the same manner as a
qualifying rollover contribution to an 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 earnings thereon, shall be included in
taxable income when withdrawn in the same manner as withdrawals from
individual retirement accounts within the meaning of Sectio n 408 of
the Internal Revenue Code.
11. In taxable years beginning after December 31, 1995,
contributions made to and interest received from a medical savin gs
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, 1996, the
Oklahoma adjusted gross income of any individual taxpayer who is a
swine or poultry producer may be further adjusted for the deduction
for depreciation allow ed for new construction or expansion costs
which may be computed using the same depreciation method elected for
federal income tax purposes except that the u seful 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 event be a duplication of any depreciation
allowed or permitted on the federal 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 receiv ed 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 ex empt from taxable income.
In taxable years beginning after December 31, 2004,
retirement benefits not to exceed the amounts
specified in this paragraph, whi ch are received by an
individual whose Oklahoma adjusted gross income is
less than the qualifying a mount 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 separate, or Seventy-five Thousand
Dollars ($75,000.00) or less if the filing status
is married filing jointly o r 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 the fili ng status
is single, head of household, or married filing
separate, or One Hundred Thousand Dollars
($100,000.00) or less if the filing status is
married filing jointly or 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 married fi ling 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 Hun dred Thousand
Dollars ($200,000.00) or less if the filing
status is married filing jointly or quali fying
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 amount.
c. For purposes of this paragraph, "retirement benefits"
means the total distributions or withdrawals from the
following:
(1) an employee pension benefit plan which satisfies
the requirements of Section 401 of the Internal
Revenue Code, 26 U.S.C., Section 40 1,
(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 requirements of Section 408 of the
Internal Revenue Code, 26 U.S.C., Section 408,
(4) an employee annuity subject to the provisions of
Section 403(a) or (b) of the Internal Revenue
Code, 26 U.S.C., Section 403(a) or (b),
(5) United States Retirement Bonds whic h satisfy the
requirements of Section 86 of the Internal
Revenue Code, 26 U.S.C., Section 86, or
(6) lump-sum distributions from a retirement plan
which satisfies the 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 Thousand Five Hun dred 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) f or the tax year
2006 and for all subsequent tax years. Any individual
who claims the exemption pro vided for in paragraph 8
of this subsection shall not be permitted to claim a
combined total exemption pursuant to this paragraph
and paragraph 8 of this sub section 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 ye ars.
14. In taxable years beginning after December 31, 1999, for an
individual engaged in producti on agriculture who has filed a
Schedule F form with the taxpayer's federal income tax return for
such taxable year, there shall be excluded from taxable inco me any
amount which was included as federal taxable income or federal
adjusted gross income and whi ch consists of the discharge of an
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obligation by a creditor of the taxpayer incurred to finance the
production of agricultural products.
15. In taxable year s beginning December 31, 2000, an amount
equal to one hundred percent (100%) of the amount of any s cholarship
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 allowed a
deduction in the amount of contributions 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 shal l the
deduction for each contributor exceed Two Thousand
Five Hundred Dollars ($2,500.00) each taxable year for
each account.
b. In taxable years beginning a fter December 31, 2004,
each taxpayer shall be allowed a deduction for
contributions to accounts es tablished pursuant 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 after
December 31, 2004, which were not 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 individual
taxpayer or Twenty Thousand Dollars ($20,000.00) for
taxpayers filing a joint return. Any amount of a
contribution that is not deducted by the taxpayer in
the year for which the contribution is made may be
carried forward as a deduction from income 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 April 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 contribution may
not be taken for two (2) different taxable years.
c. In taxable years beginning after December 31, 2006,
deductions for contributions made pursuant to
subparagraph b of this paragraph shall be limited as
follows:
(1) for a taxpayer who qualified for the five -year
carryforward election and who takes a rollover or
nonqualified withdrawal during that period, the
tax deduction otherwise available pursuant to
subparagraph b of this paragraph shall be reduced
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by the amount which is equal to the rollover or
nonqualified withdrawal, and
(2) for a taxpayer who elects to take a rollover or
nonqualified withdrawal within the same tax year
in which a contribution was made to the
taxpayer's account, the tax deduction otherwise
available pursuant to subparagraph b of this
paragraph shall be reduced by the amount of the
contribution which is equal to the rollover or
nonqualified withdrawal.
d. If a taxpayer elects to take a rollover on a
contribution for which a deduction has been taken
pursuant to subparagraph b of this paragraph wi thin
one (1) year of the date of contribution, the amount
of such rollover shall be included in the adjusted
gross income of the taxpayer in the taxable year of
the rollover.
e. If a taxpayer makes a nonqualified withdrawal of
contributions for which a ded uction was taken pursuant
to subparagraph b of this paragraph, such nonqualified
withdrawal and any earnings thereon shall be included
in the adjusted gross income of the taxpayer in the
taxable year of the nonqualified withdrawal.
f. As used in this parag raph:
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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 account of
a scholarship or the allowance or payment
described in Section 135(d)(1)(B) or (C) or
by the Internal Revenue Code, received by
the designated beneficiary to the extent the
amount of the refund d oes 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 Code.
17. For taxable years beginning after December 31, 2005,
retirement benefits received by an individual from any component 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 taxab le income
but in no case less than the amount of the exemption provided by
paragraph 13 of this sub section.
18. For taxable years beginning after December 31, 2006,
retirement benefits received by federal civil service retirees,
including survivor annuiti es, paid in lieu of Social Security
benefits shall be exempt from taxable income to the extent such
benefits are included in the federal adjusted gross income pursuant
to the provisions of Section 86 of the Internal Revenue Code, 26
U.S.C., Section 86, acc ording to the following 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 beginning January 1, 2009, sixty
percent (60%) of such benefits shall be exempt,
d. in the taxable year beginning January 1, 2010, eighty
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 exempt.
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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 individual, or the dependent of the
individual, while living, donates one or more human
organs of the individual to another human being for
human organ transplantation. As used in this
paragraph, "human organ" means all or part of a liver,
pancreas, kidney, intestine, lung, or bone marrow. A
deduction that is claimed under this paragraph may be
claimed in the taxable year in which the human organ
transplantation occurs.
b. An individual may claim this deduction only once, and
the deduction may be cla imed only for unreimbursed
expenses that are incurred by the individual and
related to the organ do nation of the individual.
c. The Oklahoma Tax Commission shall promulgate rules to
implement the provisions of this paragraph which shall
contain a specific list of expenses which may be
presumed to qualify for the deduction. The Tax
Commission shall pres cribe 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 t he Internal Revenue Code, 26
U.S.C., Section 85(c)(2009).
22. For taxable years beginning after December 31, 2008, there
shall be exempt from taxable income any payment in an amount less
than Six Hundred Dollars ($600.00) received by a person as an award
for participation in a competitive livestock show event. For
purposes of this paragraph, the payment shall be treated as a
scholarship amount paid by the en tity sponsoring the event and the
sponsoring entity shall cause the payment 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 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 return is limited, taxable income on the
state return shall be increased only by the amount actually deducted
after any such limitations are applied.
24. For taxable years beginning after De cember 31, 2020, each
taxpayer shall be allowed a deducti on for contributions to accounts
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established pursuant to the Achieving a Better Life Experience
(ABLE) Program as established in Section 4001.1 et seq. of Title 56
of the Oklahoma Statutes. For any tax year, the deduction provided
for in this paragraph sh all not exceed Ten Thousand Dollars
($10,000.00) for an individual taxpayer or Twenty Thousand Dolla rs
($20,000.00) for taxpayers filing a joint return. Any amount of
contribution not deducted by th e 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 through 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 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 i ncome 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 taxabl e 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 tha t
result from:
(1) the sale of real property or tangible personal
property located within Oklahoma that has been
directly or indirectly owned by the individu al
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 interest in an Oklahoma
company, limited liability company, or
partnership where such stock or ownership
interest has been directly or indirectly own ed 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 Oklahoma proprietorship
business enterprise where such property has been
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directly or indirectly owned by su ch entity or
business enterprise or owned by the owners o f
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 per iod of
time. The holding period shall include any additi onal
period when the property was held by another
individual or entity, if such additional period is
included in the taxpayer's holding period for the
asset pursuant to the Internal Revenue Code,
c. "Oklahoma company," "limited liability company," or
"partnership" means an entity whose primary
headquarters have been located in Oklahoma for at
least three (3) uninterrupted years prior to the date
of the transaction from which the net capital gains
arise,
d. "direct" means the individual taxpayer directly own s
the asset,
e. "indirect" means the individual 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 rec eiving capital treatment.
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(1) With respect to sales of re al property or
tangible personal property located within
Oklahoma, the deduction described in this
subsection shall not apply unless the pass-
through entity that makes the sale has held the
property for not less than five (5) uninterrupted
years prior to the date of the transaction that
created the capital gain, and each pass -through
entity included in t he chain of ownership has
been a member, partner, or shareholder of the
pass-through entity in the tier immediately below
it for an uninterrupted period of not less than
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales o f all or substantially all
of the assets of an Oklahoma company, limited
liability company, partner ship or Oklahoma
proprietorship business enterprise, 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 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 chain of ownership has been a
member, partner or s hareholder of the pass-
through entity in the tier immediately below it
for an uninterrupted period of not less than two
(2) years. For purposes of this div ision,
uninterrupted ownership prior to July 1, 2007,
shall be included in the determination of the
required holding period prescribed by this
division, and
f. "Oklahoma proprietorship business enter prise" means a
business enterprise whose income and expen ses have
been reported on Schedule C or F of an individual
taxpayer's federal income tax return, or any similar
successor schedule published by the Internal Revenue
Service and whose primary headquar ters have been
located in Oklahoma for at least three (3)
uninterrupted years prior to the date of the
transaction from which the net capital gains arise.
G. 1. For purposes of computing its Oklahoma taxable income
under this section, the dividends -paid deduction otherwise allowed
by federal law in computing n et income of a real estate investment
trust that is subject to federal income tax shall be added bac k in
computing the tax imposed by this state under this title if the real
estate investment trust i s a captive real estate investment trust.
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2. For purposes of computing its Oklahoma taxable income under
this section, a taxpayer shall add back otherwise d eductible rents
and interest expenses paid to a captive real estate investment trust
that is not subject to the provisions of paragraph 1 of this
subsection. As used in this subsection:
a. the term "real estate investment trust" or "REIT"
means the meaning ascribed to such term in Section 856
of the Internal Revenue Code,
b. the term "captive real esta te investment trust" means
a real estate investment trust, the shares or
beneficial interests of which are not regularly traded
on an established securities market and more than
fifty percent (50%) of the voting power or value of
the beneficial interests o r shares of which are owned
or controlled, directly or indirectly, or
constructively, by a single entity that is:
(1) treated as an association taxable as a
corporation under the Internal Revenue Code, and
(2) not exempt from federal income tax pursuant to
the provisions of Section 501(a) of the Inter nal
Revenue Code.
The term shall not include a real estate investment
trust that is intended to be regularly tr aded on an
established securities market, and that satisfies the
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requirements of Section 856(a)(5) and (6) of the U.S.
Internal Revenue Code by r eason of Section 856(h)(2)
of the Internal Revenue Code,
c. the term "association taxable as a corporation" sha ll
not include the following entities:
(1) any real estate investment trust as defined in
paragraph a of this subsection other than a
"captive real estate investment trust", or
(2) any qualified real estate investment trust
subsidiary under Section 856(i) of the Internal
Revenue Code, other than a qualified REIT
subsidiary of a "captive real estate inve stment
trust", or
(3) any Listed Australian Pr operty Trust (meaning 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 stock exchange in
Australia and is regularly traded on an
established securities market), or an entity
organized as a trust, provided that a Listed
Australian Property Trust owns or controls,
directly or indirectly, seventy-five percent
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(75%) or more of the voting power or value of the
beneficial interests or shares o f 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 criteria:
(a) at least seventy-five percent (75%) of the
entity's total asset value at the close of
its taxable year is represented by real
estate assets, as defined in Section
856(c)(5)(B) of the Internal Revenue Code,
thereby including shares or certificates of
beneficial interest in any real estate
investment trust, cash and cash equivalents,
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 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 whic h
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, assets, or net profits of any
person.
4. A real estate investment trust that does not becom e
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 not to have been regularly traded on an
established securities market, retroactive to the date i t first
became a real estate investment trust, and shall file an amended
return reflecting such ret roactive designation for any tax year or
part year occurring during its initial year of status as a real
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estate investment trust. For purposes of this subse ction, 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 8 56(c)(1) of the Internal
Revenue Code.
SECTION 3. AMENDATORY 68 O.S. 2021 , Section 2355.1P-4,
is amended to read as follows:
Section 2355.1P-4 A. For tax years beginning on or after
January 1, 2022, there is hereby levied on eac h electing pass-
through entity the pass-through entity tax which shall be calculated
as follows:
1. With regard to each member of an electing pass -through
entity, the electing pass -through entity shall multiply such
member's Oklahoma distributive share of the electing pass-through
entity's Oklahoma net entity income for the tax year by:
a. the highest Oklahoma marginal income tax rate levied
on the taxable income of natural persons pursuant to
Section 2355 of this title if the member is an
individual, trust, or estate,
b. four percent (4%) if the member is classified as a
corporation pursuant to the Int ernal Revenue Code, and
is not classified as an S corporation,
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c. four percent (4%) if the member is a pass -through
entity,
d. four percent (4%) if the membe r is a financial
institution subject to tax imposed pursuant to the
provisions of Section 2370 of t his title, and
e. the highest Oklahoma marginal income tax rate that
would be applicable to any item of the electing pass -
through entity's income or gain wit hout the election
made pursuant to subsection F of this section, if the
member is an organization d escribed in Section 2359 of
this title; and
2. The electing pass -through entity shall aggregate the amounts
determined with respect to all members pursuant to paragraph 1 of
this subsection and the pass-through entity tax for the applicable
tax year shall be equal to such aggregated tax amount for the tax
year with respect to which the election has been made.
B. Sections 2385.29, 2385.30 and 2385.31 of this title shall
not be applicable to an electing pass-through entity.
C. The pass-through entity tax s hall be due and payable on the
same date as provided for the filing of the electing pass -through
entity's Oklahoma income tax return, and for tax years begin ning on
or after January 1, 2020, estimated tax payments shall be required
as provided in Section 2 385.9 of this title.
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D. If the pass-through entity election results in a net entity
loss for Oklahoma income tax purposes in any tax year, the net
entity loss may be carried back and carried forward by the electing
pass-through entity for Oklahoma income tax purposes as set forth in
subparagraph b of paragraph 3 of subsection A of Section 2358 of
this title.
E. Notwithstanding paragraph 2 of subsection C of Section 2368
of this title, a nonresident individual who is a member of an
electing pass-through entity is not required to file an Oklahoma
income tax return, if, for the taxable year, the only source of
income allocable or apportionable to this state for the member, or,
if a joint income tax return is filed, the member and his or her
spouse, is from one or more electing pass -through entities, and each
electing pass-through entity files and pays the taxes due under this
section.
F. Any entity required to f ile an Oklahoma partnership income
tax return or an Oklahoma S corporation income tax return may el ect
to become an electing pass -through entity. The election shall be
made on such form and in such manner as the Oklahoma Tax Commission
may prescribe, and any election under this subsection shall have
priority over and revoke any election to file a compo site Oklahoma
partnership return or requirement of a Subchapter S corporation to
report and pay tax on behalf of a nonresident shareholder for the
same tax year.
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G. Pursuant to procedures prescribed by the Tax Commission, if
the amount of tax required to be paid by a pass-through entity
pursuant to the provisions of this section is not paid when due, the
Oklahoma Tax Commission may revoke the pass -through entity's
election under subsection F of this section effective for the first
year for which the tax is not paid.
H. The election authorized by the provisions of this section
shall be made pursuant to procedures prescribed by the Tax
Commission and shall be filed (i) within sixty (60) days of
enactment and pursuant to procedures prescribed by the Oklahoma Tax
Commission for any income tax year beginning on or after January 1,
2019, and prior to January 1, 2020, or (ii) for any income tax year
beginning on or after January 1, 2020, at any time during the
preceding tax year or two (2) months and fifteen (15) days after the
beginning of the tax year. Any such election shall be binding until
revoked pursuant to procedures prescribed by the Tax Commission.
The effective date of a revocation (i) made within two (2) months
and fifteen (15) days of the electing p ass-through entity's taxable
year shall be the first day of such taxable year and (ii) made
during the electing pass -through entity's taxable year but after
such fifteenth day shall be effective on the first day of the
following taxable year. No election made by a pass-through entity
with respect to income tax to be paid by such entity using the
calculations prescribed by this section shall be binding on any
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other pass-through entity, and each pass-through entity shall be
able to make an election under the provisions of this act
independently.
SECTION 4. This act shall become effective January 1, 2024.
Passed the House of Representatives the 23rd day of March, 2023.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2023.
Presiding Officer of the Senate