OK
Oklahoma Senate Bill SB384

Oklahoma 2023 Regular Session

Oklahoma Senate Bill SB384 Compare Versions

Only one version of the bill is available at this time.
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5353 STATE OF OKLAHOMA
5454
5555 1st Session of the 59th Legislature (2023)
5656
5757 SENATE BILL 384 By: Garvin
5858
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6363 AS INTRODUCED
6464
6565 An Act relating to income tax; amending 68 O. S. 2021,
6666 Section 2358, as last amended by Section 1, Chapter
6767 377, O.S.L. 2022 (68 O.S. Supp. 2022, Section 2358),
6868 which relates to adjustments to arrive at Oklahoma
6969 taxable income and Oklahoma adjusted gross income;
7070 allowing deduction for a percentage of certain wages
7171 paid; requiring certain amount of wages paid to
7272 qualify for deduction; limiting deduction to wages
7373 paid to employee who takes leave for certain reasons;
7474 updating statutory language; and providing an
7575 effective date.
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8181 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
8282 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358, as
8383 last amended by Section 1, Chapter 377, O.S.L. 2022 (68 O.S. Supp.
8484 2022, Section 2358), is amended to read as follows:
8585 Section 2358. For all tax years beginning after December 31,
8686 1981, taxable income and adjusted gross incom e shall be adjusted to
8787 arrive at Oklahoma taxable income and Okl ahoma adjusted gross income
8888 as required by this section.
8989
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140140 A. The taxable income of any taxp ayer shall be adjusted to
141141 arrive at Oklahoma taxable income for corporations and Oklahoma
142142 adjusted gross income for individuals, as fol lows:
143143 1. There shall be added interest income on obligations of any
144144 state or political subdivision thereto which is not otherwise
145145 exempted pursuant to other laws of this state, to the extent that
146146 such interest is not incl uded in taxable income and adjuste d gross
147147 income.
148148 2. There shall be deducted amounts included in such income that
149149 the state is prohibited from taxing beca use of the provisions of the
150150 Federal Constitution, the State Constitution, federal laws , or laws
151151 of Oklahoma.
152152 3. The amount of any fede ral net operating loss deducti on shall
153153 be adjusted as follows:
154154 a. For carryovers and carrybacks to taxable years
155155 beginning before January 1, 1981, the amount of any
156156 net operating loss deduction allowed to a taxpayer for
157157 federal income tax purposes shall be reduced to an
158158 amount which is the same portion thereof as the loss
159159 from sources within this state, as determined pursuan t
160160 to this section and Section 2362 of this title, for
161161 the taxable year in which such loss is sustaine d is of
162162 the total loss for such ye ar; and
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214214 b. For carryovers and carr ybacks to taxable years
215215 beginning after December 31, 1980, the amount of any
216216 net operating loss deduction allowed for the taxable
217217 year shall be an amount equal to the aggregate of the
218218 Oklahoma net operating loss carryovers and carrybacks
219219 to such year. Oklahoma net operating losses shall b e
220220 separately determined by reference to Section 172 of
221221 the Internal Revenue Code, 26 U.S.C., Section 172, as
222222 modified by the Oklahoma Income Tax Act, Section 2351
223223 et seq. of this title, and sh all be allowed without
224224 regard to the existence of a federal net operating
225225 loss. For tax years beginning after December 3 1,
226226 2000, and ending before January 1, 2008, the years to
227227 which such losses may be carried shall be d etermined
228228 solely by reference to Se ction 172 of the Internal
229229 Revenue Code, 26 U.S.C., Section 172, with the
230230 exception that the terms “net operating loss” and
231231 “taxable income” shall be replaced with “Oklahoma net
232232 operating loss” and “Oklahoma taxable income ”. For
233233 tax years beginning after D ecember 31, 2007, and
234234 ending before January 1, 2009, years to wh ich such
235235 losses may be carried back shall be limited to t wo (2)
236236 years. For tax years beginning after December 31,
237237 2008, the years to which such losses may b e carried
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289289 back shall be determined solely by reference to
290290 Section 172 of the Internal Revenue Code, 26 U.S.C.,
291291 Section 172, with the exception that the term s “net
292292 operating loss” and “taxable income” shall be replaced
293293 with “Oklahoma net operating loss ” and “Oklahoma
294294 taxable income”.
295295 4. Items of the following nature sha ll be allocated as
296296 indicated. Allowable deductions attributable to items separately
297297 allocable in subparagraphs a, b, and c of this paragraph, whether or
298298 not such items of income were actuall y received, shall be allocated
299299 on the same basis as those items:
300300 a. Income from real and tangible p ersonal property, such
301301 as rents, oil and mining production or royalties, and
302302 gains or losses from sales of such property, shall be
303303 allocated in accordance wi th the situs of such
304304 property;
305305 b. Income from intangible personal property, such as
306306 interest, dividends, patent or copyright royalties,
307307 and gains or losses f rom sales of such property, shall
308308 be allocated in accordance with the domiciliary situs
309309 of the taxpayer, except that:
310310 (1) where such property has acquired a nonunit ary
311311 business or commercial situs a part from the
312312 domicile of the taxpayer such income shall be
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364364 allocated in accordance with such business or
365365 commercial situs; interest income from
366366 investments held to generate workin g capital for
367367 a unitary business enterpris e shall be included
368368 in apportionable income; a resident trust or
369369 resident estate shall be treated a s having a
370370 separate commercial or business situs insofar as
371371 undistributed income is concerne d, but shall not
372372 be treated as having a separate commercial or
373373 business situs insofar as distribute d income is
374374 concerned,
375375 (2) for taxable years beginning after Dece mber 31,
376376 2003, capital or ordinary gains or losses from
377377 the sale of an ownership interest in a publicly
378378 traded partnership, as defined by Section 7704(b)
379379 of the Internal Revenue Code, shall b e allocated
380380 to this state in the ratio of the original cost
381381 of such partnership’s tangible property in this
382382 state to the original cost of such partnership ’s
383383 tangible property every where, as determined at
384384 the time of the sale; if more than fifty percent
385385 (50%) of the value of the partnership ’s assets
386386 consists of intangibl e assets, capital or
387387 ordinary gains or losses from the sale of an
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439439 ownership interest in the partnership shall be
440440 allocated to this state in accordance with t he
441441 sales factor of the partnership for its first
442442 full tax period immediately preceding its tax
443443 period during which the ownership interest in the
444444 partnership was sold; the provisions of this
445445 division shall only appl y if the capital or
446446 ordinary gains or loss es from the sale of an
447447 ownership interest in a partnership do not
448448 constitute qualifying gain receiv ing capital
449449 treatment as defined in subparagraph a of
450450 paragraph 2 of subsection F of this se ction,
451451 (3) income from such property which is required to be
452452 allocated pursuant to the provisions o f paragraph
453453 5 of this subsection shall be allocated as herein
454454 provided;
455455 c. Net income or loss from a business activity which is
456456 not a part of business carrie d on within or without
457457 the state of a unitary character shall be separately
458458 allocated to the state in which such activity is
459459 conducted;
460460 d. In the case of a manufact uring or processing
461461 enterprise the business of which in Oklahoma consists
462462 solely of marketing its products by:
463463
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514514 (1) sales having a situs without this state, s hipped
515515 directly to a point from wi thout the state to a
516516 purchaser within the state, commonly known a s
517517 interstate sales,
518518 (2) sales of the product stored in public warehouses
519519 within the state pursuant to “in transit”
520520 tariffs, as prescribed and allowed by the
521521 Interstate Commerce Commission, to a purchaser
522522 within the state, or
523523 (3) sales of the product stored in public warehouses
524524 within the state where the shipment to such
525525 warehouses is not covered by “in transit”
526526 tariffs, as prescribed and allowed by the
527527 Interstate Commerce Commission, to a purc haser
528528 within or without the state,
529529 the Oklahoma net income shall, at the option of the
530530 taxpayer, be that portion of the total net income of
531531 the taxpayer for federal income tax purpose s derived
532532 from the manufacture and/or proc essing and sales
533533 everywhere as determined by the ratio of the sales
534534 defined in this section made to the purchaser within
535535 the state to the total sales everywhere. The term
536536 “public warehouse” as used in this subpara graph means
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588588 a licensed public warehouse, t he principal business of
589589 which is warehousing merchandise for the public;
590590 e. In the case of insuran ce companies, Oklahoma taxable
591591 income shall be taxable income of the taxpayer for
592592 federal tax purposes, as adjusted for the adjustments
593593 provided pursuant to the provisions of paragraphs 1
594594 and 2 of this subsection, apportioned as follows:
595595 (1) except as otherwise provided by division (2) of
596596 this subparagraph, taxable income of an insurance
597597 company for a taxable year shal l be apportioned
598598 to this state by multiply ing such income by a
599599 fraction, the numerator of which is the direct
600600 premiums written for insurance on property or
601601 risks in this state, and the denominator of which
602602 is the direct premiums w ritten for insurance on
603603 property or risks everywhere. For purposes of
604604 this subsection, the term “direct premiums
605605 written” means the total amount of direct
606606 premiums written, assessments, and annuity
607607 considerations as reported for the taxable year
608608 on the annual statement filed by the company with
609609 the Insurance Commissioner i n the form approved
610610 by the National Association of Insurance
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662662 Commissioners, or such other form as m ay be
663663 prescribed in lieu thereof,
664664 (2) if the principal source of premiums written by an
665665 insurance company consists of premiums for
666666 reinsurance accepted by it , the taxable income of
667667 such company shall be apportioned to this state
668668 by multiplying such income by a fraction, the
669669 numerator of which is the sum of (a) direct
670670 premiums written for insu rance on property or
671671 risks in this state, plus (b) premiums written
672672 for reinsurance accepted in res pect of property
673673 or risks in this state, and the denominator of
674674 which is the sum of (c) direct premiums written
675675 for insurance on property or risks everywhere ,
676676 plus (d) premiums written for reinsurance
677677 accepted in respect of pr operty or risks
678678 everywhere. For purposes of this paragraph,
679679 premiums written for reinsurance accep ted in
680680 respect of property or risks in this state,
681681 whether or not otherwise determinable , may at the
682682 election of the company be determined on the
683683 basis of the proportion which premiums wr itten
684684 for insurance accepted from companies
685685 commercially domiciled in Oklahoma bears to
686686
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737737 premiums written for reinsurance accepted from
738738 all sources, or altern atively in the proportion
739739 which the sum of the direct premiums writte n for
740740 insurance on property or risks in this state by
741741 each ceding company from which reinsurance is
742742 accepted bears to the sum of the total direct
743743 premiums written by each such ceding comp any for
744744 the taxable year.
745745 5. The net income or loss remaining after the separate
746746 allocation in paragraph 4 of this subsection, being that which is
747747 derived from a unita ry business enterprise, shall be apportioned to
748748 this state on the basis of the arithmeti cal average of three facto rs
749749 consisting of property, payroll, and sales or gross revenue
750750 enumerated as subparagraphs a, b, and c of this paragraph. Net
751751 income or loss as used in this paragraph includes that derived from
752752 patent or copyright royalties, purc hase discounts, and interest on
753753 accounts receivable relating to or ar ising from a business activity ,
754754 the income from which is apportioned pursuant to this subsection ,
755755 including the sale or other disposition of such property and any
756756 other property used in t he unitary enterprise. Dedu ctions used in
757757 computing such net income or loss shall not include taxe s based on
758758 or measured by income. Provided, for corporations whose pro perty
759759 for purposes of the tax imposed by Section 2355 of this title has an
760760 initial investment cost equaling or exc eeding Two Hundred Million
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812812 Dollars ($200,000,000.00) and such investmen t is made on or after
813813 July 1, 1997, or for corporations which expand th eir property or
814814 facilities in this state and such expansion has an investment cost
815815 equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)
816816 over a period not to exceed three (3) years, and such expansion is
817817 commenced on or after January 1, 2000, the three factors shall be
818818 apportioned with property and payroll, each comprising twe nty-five
819819 percent (25%) of the apportionment factor and sales comprisi ng fifty
820820 percent (50%) of the apportionment factor. The apportionment
821821 factors shall be computed as f ollows:
822822 a. The property factor is a fraction, the numerator of
823823 which is the average va lue of the taxpayer’s real and
824824 tangible personal property owned or re nted and used in
825825 this state during the tax period and the denominator
826826 of which is the average value o f all the taxpayer’s
827827 real and tangible personal property everywhere owned
828828 or rented and used during the tax period.
829829 (1) Property, the income from which is separately
830830 allocated in paragraph 4 of this subsection,
831831 shall not be included in determining this
832832 fraction. The numerator of the fraction shall
833833 include a portion of the investment in
834834 transportation and other equipment having no
835835 fixed situs, such as rolli ng stock, buses, trucks
836836
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886886
887887 and trailers, including machinery and equipment
888888 carried thereon, airplanes, sa lespersons’
889889 automobiles, and other similar equipment, in the
890890 proportion that miles tra veled in Oklahoma by
891891 such equipment bears to total miles traveled,
892892 (2) Property owned by the taxpay er is valued at its
893893 original cost. Property rented by the taxpayer
894894 is valued at eight times the net annual rental
895895 rate. Net annual rental rate is the annua l
896896 rental rate paid by the taxpayer, less any annual
897897 rental rate received by the taxpayer from
898898 subrentals,
899899 (3) The average value of property shall be determined
900900 by averaging the values at the beginning and
901901 ending of the tax period, but the Oklahoma Tax
902902 Commission may require the averaging of monthly
903903 values during the tax period if reasonably
904904 required to reflect properly the average value of
905905 the taxpayer’s property;
906906 b. The payroll factor is a fraction, the numerator of
907907 which is the total compensation for serv ices rendered
908908 in the state during the tax period, and the
909909 denominator of which is the total compens ation for
910910 services rendered everywhere during the tax period.
911911
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962962 “Compensation”, as used in this subsection means those
963963 paid-for services to the extent related to the unitary
964964 business but does not include officers’ salaries,
965965 wages, and other compensation.
966966 (1) In the case of a transportation enterprise, the
967967 numerator of the fractio n shall include a portion
968968 of such expenditure in connection with employees
969969 operating equipment over a fixed route, such as
970970 railroad employees, airline pilots, or bus
971971 drivers, in this state only a part of the time,
972972 in the proportion that mileage traveled in
973973 Oklahoma bears to total mileage traveled by such
974974 employees,
975975 (2) In any case the numerator of the fraction shall
976976 include a portion of such expenditures in
977977 connection with itinerant e mployees, such as
978978 traveling salespersons, in this state only a part
979979 of the time, in the proportion that time spent in
980980 Oklahoma bears to total time spent in f urtherance
981981 of the enterprise by such employees;
982982 c. The sales factor is a fraction, the numerator of which
983983 is the total sales or gross revenue of the taxpayer in
984984 this state during the tax period, and the denominator
985985 of which is the total sales or gross reve nue of the
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10371037 taxpayer everywhere during the tax period. “Sales”,
10381038 as used in this subsection does not include sales or
10391039 gross revenue which are separately allocated in
10401040 paragraph 4 of this subsection.
10411041 (1) Sales of tangible personal property have a situs
10421042 in this state if the property is delivered or
10431043 shipped to a purchaser other than the United
10441044 States government, within this state regardless
10451045 of the FOB point or other conditions of the sale;
10461046 or the property is shipped from an office, store,
10471047 warehouse, factory, or other place of storage in
10481048 this state and (a) t he purchaser is the United
10491049 States government or (b) t he taxpayer is not
10501050 doing business in the state of the destination of
10511051 the shipment.
10521052 (2) In the case of a railroad or interurban railway
10531053 enterprise, the numera tor of the fraction shall
10541054 not be less than the allocation of revenues to
10551055 this state as shown in its annual report to the
10561056 Corporation Commission.
10571057 (3) In the case of an airline , truck, or bus
10581058 enterprise or freight car, tank car, refrigerator
10591059 car, or other railroad equipment enterprise, the
10601060 numerator of the fraction shall include a portion
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11121112 of revenue from interstate transportation in the
11131113 proportion that interstate mileage traveled in
11141114 Oklahoma bears to total interstate mileage
11151115 traveled.
11161116 (4) In the case of an oi l, gasoline or gas pipeline
11171117 enterprise, the nume rator of the fraction shall
11181118 be either the total of traffic units of the
11191119 enterprise within Oklahoma or the revenue
11201120 allocated to Oklahoma based upon miles moved, at
11211121 the option of the taxpayer, and the denominat or
11221122 of which shall be the total of traffic units of
11231123 the enterprise or the revenue of the enterprise
11241124 everywhere as appropriate to the numerator. A
11251125 “traffic unit” is hereby defined as the
11261126 transportation for a distance of one (1) mile of
11271127 one (1) barrel of oil , one (1) gallon of
11281128 gasoline, or one thousand (1,000) cubic feet of
11291129 natural or casinghead gas, as the case may be.
11301130 (5) In the case of a telephone or telegraph or other
11311131 communication enterprise, the numerator of the
11321132 fraction shall include that portion of th e
11331133 interstate revenue as is allocated pursuant to
11341134 the accounting procedures prescribed by the
11351135 Federal Communications Commission; provided that
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11871187 in respect to each corporation or b usiness entity
11881188 required by the Federal Communications Commission
11891189 to keep its books and records in accordance with
11901190 a uniform system of accounts prescribed by such
11911191 Commission, the intrastate net income shall be
11921192 determined separately in the manner provided by
11931193 such uniform system of accounts and only the
11941194 interstate income shall be subjec t to allocation
11951195 pursuant to the provisions of thi s subsection.
11961196 Provided further, that the gross revenue factors
11971197 shall be those as are determined pursuant to the
11981198 accounting procedures prescribed by the Federal
11991199 Communications Commission.
12001200 In any case where the apportionment of the three factors
12011201 prescribed in this paragraph attributes to Oklahoma a portion of net
12021202 income of the enterprise out of all appropriate proportion to the
12031203 property owned and/or business transacted within this state, because
12041204 of the fact that one or more of the factors so prescribed are not
12051205 employed to any appreciable extent in furtherance of the enterprise;
12061206 or because one or more factors not so prescribed are emp loyed to a
12071207 considerable extent in furtherance of the enterprise; or because of
12081208 other reasons, the Tax Commission is empowered to permit, after a
12091209 showing by a taxpayer that an excessive portion of net income has
12101210 been attributed to Oklahoma, or require, when in its judgment an
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12621262 insufficient portion of net income has been attributed to O klahoma,
12631263 the elimination, substitution, or use of a dditional factors, or
12641264 reduction or increase in the weight of such prescribed factors.
12651265 Provided, however, that any such varianc e from such prescribed
12661266 factors which has the effect of increasing the portion of net income
12671267 attributable to Oklahoma must not be inherently arbitrary, and
12681268 application of the recomputed final apportionment to the net income
12691269 of the enterprise must attribute to Oklahoma only a reasonable
12701270 portion thereof.
12711271 6. For calendar years 1997 and 1998, the owner of a new or
12721272 expanded agricultural commodity processing facility in this state
12731273 may exclude from Oklahoma taxable income, or in the case of an
12741274 individual, the Okla homa adjusted gross income, fifteen percent
12751275 (15%) of the investment by the own er in the new or expanded
12761276 agricultural commodity pr ocessing facility. For calendar year 1999,
12771277 and all subsequent years, the percentage, not to exceed fifteen
12781278 percent (15%), available to the owner of a new or expanded
12791279 agricultural commodity processing faci lity in this state claiming
12801280 the exemption shall be adjusted annually so that the total estimated
12811281 reduction in tax liability does not exceed One Million Dollars
12821282 ($1,000,000.00) annually. The Tax Commission shall promulgate rules
12831283 for determining the percent age of the investment which each eligible
12841284 taxpayer may exclude. The exclusion provided by this paragraph
12851285 shall be taken in the taxable year when the investment is made. In
12861286
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13371337 the event the total reduction in tax liability authorized by this
13381338 paragraph exceeds One Million Dollars ($1,000,000.00) in any
13391339 calendar year, the Tax Commission shall permit any excess over One
13401340 Million Dollars ($1,000,000.00) and shall factor such excess into
13411341 the percentage for subsequent years. Any amount of the exemption
13421342 permitted to be excluded pursuant to the provisions of this
13431343 paragraph but not used in any year may be carried forward as an
13441344 exemption from income pursuant to the provisions of this paragraph
13451345 for a period not exceeding six (6) years following the year in which
13461346 the investment was originally made.
13471347 For purposes of this paragraph:
13481348 a. “Agricultural commodity processing facility” means
13491349 building buildings, structures, fixtures , and
13501350 improvements used or operated primarily for the
13511351 processing or production of marketable products from
13521352 agricultural commoditie s. The term shall also mean a
13531353 dairy operation that requires a depreciable investment
13541354 of at least Two Hundred Fifty Thousand Dollars
13551355 ($250,000.00) and which produces milk from dairy cows.
13561356 The term does not include a facility th at provides
13571357 only, and nothing more than, storage, cleaning,
13581358 drying, or transportation of agricultural commodities,
13591359 and
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14111411 b. “Facility” means each part of the facility which is
14121412 used in a process primarily for:
14131413 (1) the processing of agricultural commodities ,
14141414 including receiving or storing agricultural
14151415 commodities, or the production of milk at a dairy
14161416 operation,
14171417 (2) transporting the agricultural commodities or
14181418 product before, during , or after the processing,
14191419 or
14201420 (3) packaging or otherwise preparing the product fo r
14211421 sale or shipment.
14221422 7. Despite any provision to the contrary in paragraph 3 of this
14231423 subsection, for taxable years begin ning after December 31, 1999, in
14241424 the case of a taxpayer wh ich has a farming loss, such farming loss
14251425 shall be considered a net operating loss carryback in accordance
14261426 with and to the extent of the Internal Revenue Code, 26 U.S.C.,
14271427 Section 172(b)(G). However , the amount of the net operating loss
14281428 carryback shall not exceed the lesser of:
14291429 a. Sixty Thousand Dollars ($60,000.00), or
14301430 b. the loss properly shown on Schedule F of the Internal
14311431 Revenue Service Form 1040 reduced by one-half (1/2) of
14321432 the income from all other sources other than reflected
14331433 on Schedule F.
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14851485 8. In taxable years beginning after December 31, 1995, all
14861486 qualified wages equal to t he federal income tax cre dit set forth in
14871487 26 U.S.C.A., Section 4 5A, shall be deducted from taxable income.
14881488 The deduction allowed pursuant to this paragraph shall only be
14891489 permitted for the tax years in which the federal tax credit pursuant
14901490 to 26 U.S.C.A., Section 45A, is allowed. For purposes of this
14911491 paragraph, “qualified wages” means those wages used to calculate the
14921492 federal credit pursuant to 26 U.S.C.A., Section 45A.
14931493 9. In taxable years beginning after December 31, 2005, an
14941494 employer that is eligible fo r and utilizes the Safet y Pays OSHA
14951495 Consultation Service provide d by the Oklahoma Department of Labor
14961496 shall receive an exemption from taxable income in the amount of One
14971497 Thousand Dollars ($1,000.00) for the tax year that the service is
14981498 utilized.
14991499 10. For taxable years beginning on or after January 1, 2010,
15001500 there shall be added to Oklahoma taxable income an amount equal to
15011501 the amount of deferred income not included in such taxable income
15021502 pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
15031503 as amended by Section 1231 of the American Recovery and Reinvestment
15041504 Act of 2009 (P.L. No. 111-5). There shall be subtracte d from
15051505 Oklahoma taxable income an amount equal to the amount of deferred
15061506 income included in such taxable income pursuant to Section 108( i)(1)
15071507 of the Internal Revenue Code by Section 1231 of the Americ an
15081508 Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
15091509
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15601560 11. For taxable years beginning on or after Ja nuary 1, 2019,
15611561 there shall be subtracted from Oklahoma taxable income or adjusted
15621562 gross income any item of i ncome or gain, and there shall be added to
15631563 Oklahoma taxable income or adjusted gross income any it em of loss or
15641564 deduction that in the absence of an election pursuant to the
15651565 provisions of the Pass-Through Entity Tax Equity Act of 2019 would
15661566 be allocated to a member or to an indirect member of an el ecting
15671567 pass-through entity pursuant to Section 2351 et s eq. of this title,
15681568 if (i) the electing pass -through entity has accounted for such item
15691569 in computing its Oklahoma net entity income or lo ss pursuant to the
15701570 provisions of the Pass-Through Entity Tax Equ ity Act of 2019, and
15711571 (ii) the total amount of tax attrib utable to any resulting Oklahoma
15721572 net entity income has been paid. The Oklahoma Tax Commission shall
15731573 promulgate rules for the reporting of such exclusion to d irect and
15741574 indirect members of the electing pass-through entity. As used in
15751575 this paragraph, “electing pass-through entity”, “indirect member”,
15761576 and “member” shall be defined in the same manner as prescribed by
15771577 Section 2355.1P-2 of this title. Notwithstanding the application of
15781578 this paragraph, the adjusted tax basis of any ownership interest in
15791579 a pass-through entity for purposes o f Section 2351 et seq. of this
15801580 title shall be equal to its adjusted tax basis for federal income
15811581 tax purposes.
15821582 12. For tax year 2024 and subsequent tax years the re shall be
15831583 deducted from Oklahoma taxable income or adjusted gross income an
15841584
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16351635 amount equal to one hundred fifty percent (150 %) of wages paid to an
16361636 employee while on leave pursuant to the Family Medical Leave Act of
16371637 1993, 29 U.S.C., Section 2601 et seq. To qualify for the de duction
16381638 provided in this paragraph, the employer shall have paid wages for
16391639 no less than four (4) weeks of leave taken, in an amount equivalent
16401640 to that which the employee earned for work performed on a full-time
16411641 basis and the employee shall be taking l eave for reasons of the
16421642 birth of a child, or placement of a child with the employee for
16431643 adoption or foster car e, and to bond with the new born or newly
16441644 placed child.
16451645 B. 1. The taxable income of any corporation shall be furth er
16461646 adjusted to arrive at Oklahoma taxable income, except those
16471647 corporations electing treatment as provided in subchapter S of the
16481648 Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section
16491649 2365 of this title, deductions pursuant to the provisions of the
16501650 Accelerated Cost Recovery System as defined and al lowed in the
16511651 Economic Recovery Tax Act of 1981, Public Law 97 -34, 26 U.S.C.,
16521652 Section 168, for depreciation of assets placed into service after
16531653 December 31, 1981, shall not be allowed in calculating O klahoma
16541654 taxable income. Such corporations shall be allow ed a deduction for
16551655 depreciation of assets placed into service after Dece mber 31, 1981,
16561656 in accordance with provisions of the Internal Revenue Cod e, 26
16571657 U.S.C., Section 1 et seq., in effect immediately prior to the
16581658 enactment of the Accelerated Cost Recovery S ystem. The Oklahoma tax
16591659
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17101710 basis for all such assets placed into service a fter December 31,
17111711 1981, calculated in this section shall be retained and utilized for
17121712 all Oklahoma income tax purposes through the final disposition of
17131713 such assets.
17141714 Notwithstanding any other provisions of the Okl ahoma Income Tax
17151715 Act, Section 2351 et seq. o f this title, or of the Internal Revenue
17161716 Code to the contrary, this subs ection shall control calculation of
17171717 depreciation of assets placed into service after December 31, 1981,
17181718 and before January 1, 1983.
17191719 For assets placed in service and held by a corporati on in which
17201720 accelerated cost recovery system was previously disallowed, an
17211721 adjustment to taxable income is required in the first taxable year
17221722 beginning after December 31, 1982, to reco ncile the basis of such
17231723 assets to the basis allowed in the Internal Reve nue Code. The
17241724 purpose of this adjustment is to equalize the basis and a llowance
17251725 for depreciation accounts between that reported to the Internal
17261726 Revenue Service and that reported to Ok lahoma.
17271727 2. For tax years be ginning on or after January 1, 2009, and
17281728 ending on or before December 31, 2009, there shall be added to
17291729 Oklahoma taxable income any amount in excess of One Hundred Seventy-
17301730 five Thousand Dollars ($175,000.00) which has been deduc ted as a
17311731 small business expense under Internal Revenue Code, Section 179 as
17321732 provided in the American Recovery and Reinvestment Act of 2009.
17331733
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17841784 C. 1. For taxable years beginning after December 31, 1987, the
17851785 taxable income of any corporation shall be further adjusted to
17861786 arrive at Oklahoma taxable income for transfers of technolog y to
17871787 qualified small businesses located in Oklahoma. Such transferor
17881788 corporation shall be allowed an exemption from taxable income of an
17891789 amount equal to the amount of royalty payment received as a result
17901790 of such transfer; provided, however, such amount sh all not exceed
17911791 ten percent (10%) of the amount of gross proceeds receive d by such
17921792 transferor corporation as a result of the technology transfer. Such
17931793 exemption shall be allowed for a period not to exceed ten (10 ) years
17941794 from the date of receipt of the firs t royalty payment accruing from
17951795 such transfer. No exemption may be clai med for transfers of
17961796 technology to qualified small businesses made prior to January 1,
17971797 1988.
17981798 2. For purposes of this subsection:
17991799 a. “Qualified small business” means an entity, whether
18001800 organized as a corporation, partnership, or
18011801 proprietorship, organized f or profit with its
18021802 principal place of business located within this state
18031803 and which meets the following criteria:
18041804 (1) Capitalization capitalization of not more than
18051805 Two Hundred Fifty Thousand Dolla rs ($250,000.00),
18061806
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18571857 (2) Having having at least fifty percent (50%) of its
18581858 employees and assets located in Oklahoma at the
18591859 time of the transfer, and
18601860 (3) Not not a subsidiary or affiliate of the
18611861 transferor corporation;
18621862 b. “Technology” means a proprietary proce ss, formula,
18631863 pattern, device, or compilation of scientific or
18641864 technical information which is not in the public
18651865 domain;
18661866 c. “Transferor corporation” means a corporation which is
18671867 the exclusive and undi sputed owner of the technolog y
18681868 at the time the transfer is made; and
18691869 d. “Gross proceeds” means the total amount of
18701870 consideration for the transfer of technology, whether
18711871 the consideration is in money or otherwise.
18721872 D. 1. For taxable years beginning after D ecember 31, 2005, the
18731873 taxable income of any corporation, e state, or trust, shall be
18741874 further adjusted for qualifying gains receiving capi tal treatment.
18751875 Such corporations, estates , or trusts shall be allowed a deduction
18761876 from Oklahoma taxable income for the amount of qualifying gains
18771877 receiving capital treatment ear ned by the corporation, estate, or
18781878 trust during the taxable year and included in the federal taxable
18791879 income of such corporat ion, estate, or trust.
18801880 2. As used in this subsection:
18811881
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19321932 a. “qualifying gains receiving capital treatment ” means
19331933 the amount of net cap ital gains, as defined in Section
19341934 1222(11) of the Internal Revenue Code, inclu ded in the
19351935 federal income tax return of the cor poration, estate,
19361936 or trust that result from:
19371937 (1) the sale of real property or tangible personal
19381938 property located within Oklahoma th at has been
19391939 directly or indirectly owned by the corporation,
19401940 estate, or trust for a holding period of at least
19411941 five (5) years prior to the date of the
19421942 transaction from which such net capital gains
19431943 arise,
19441944 (2) the sale of stock or on the sale of an ownership
19451945 interest in an Oklah oma company, limited
19461946 liability company, or partnership wh ere such
19471947 stock or ownership interest has been dir ectly or
19481948 indirectly owned by the corporation, estate, or
19491949 trust for a holding period of at least three (3)
19501950 years prior to the date of the transaction fr om
19511951 which the net capital gains arise, or
19521952 (3) the sale of real property, tangible personal
19531953 property, or intangible personal property located
19541954 within Oklahoma as part of the sale of all or
19551955 substantially all of the assets of an Oklahoma
19561956
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20072007 company, limited liabili ty company, or
20082008 partnership where such property has been directly
20092009 or indirectly owned by such entity owned by the
20102010 owners of such entity, and used in or derived
20112011 from such entity for a period of at least three
20122012 (3) years prior to the dat e of the transaction
20132013 from which the net capital gains arise,
20142014 b. “holding period” means an uninterrupted period of
20152015 time. The holding period shall inclu de any additional
20162016 period when the property was held by another
20172017 individual or entity, if such additional p eriod is
20182018 included in the taxpayer’s holding period for the
20192019 asset pursuant to the Internal Revenue Code,
20202020 c. “Oklahoma company”, “limited liability compa ny”, or
20212021 “partnership” means an entity whose primary
20222022 headquarters have been located in Oklahoma for at
20232023 least three (3) uninterrup ted years prior to the date
20242024 of the transaction from which the net capital gains
20252025 arise,
20262026 d. “direct” means the taxpayer directly o wns the asset,
20272027 and
20282028 e. “indirect” means the taxpayer owns an interest in a
20292029 pass-through entity (or chain o f pass-through
20302030
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20812081 entities) that sells the asset that gives rise to the
20822082 qualifying gains receiving capital treatment.
20832083 (1) With respect to sales of real pr operty or
20842084 tangible personal property located within
20852085 Oklahoma, the deduction described in this
20862086 subsection shall not apply unless the pass-
20872087 through entity that makes the sale has held the
20882088 property for not less than five (5) uninterrupt ed
20892089 years prior to the da te of the transaction that
20902090 created the capital gain, and each pass -through
20912091 entity included in the chain o f ownership has
20922092 been a member, partner, or shareholder of the
20932093 pass-through entity in the tier immediately below
20942094 it for an uninterrupted period of not l ess than
20952095 five (5) years.
20962096 (2) With respect to sales of stock or ownership
20972097 interest in or sales of all or s ubstantially all
20982098 of the assets of an Oklahoma company, limited
20992099 liability company, or partnership, the deduction
21002100 described in this subsection shall not apply
21012101 unless the pass-through entity that makes the
21022102 sale has held the stock or ownership interest or
21032103 the assets for not less tha n three (3)
21042104 uninterrupted years prior to the date of the
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21562156 transaction that created the capital gain, and
21572157 each pass-through entity included in the chain of
21582158 ownership has been a member, partner or
21592159 shareholder of the pass -through entity in the
21602160 tier immediately below it for an uninterrupted
21612161 period of not less than three (3) years.
21622162 E. The Oklahoma adjusted gross income of any individual
21632163 taxpayer shall be further adjusted as follows to arrive at Oklahoma
21642164 taxable income:
21652165 1. a. In the case of individuals, there sha ll be added or
21662166 deducted, as the case may be, the difference necessary
21672167 to allow personal exemptions of One Thousand Dollars
21682168 ($1,000.00) in lieu of the personal exemptions allowed
21692169 by the Internal Revenue Code.
21702170 b. There shall be allow ed an additional exemptio n of One
21712171 Thousand Dollars ($1,000.00) for each taxpayer or
21722172 spouse who is blind at the close of the tax year. For
21732173 purposes of this subparagraph, an individual is blind
21742174 only if the central visual acuity of the individual
21752175 does not exceed 20/200 in the better eye with
21762176 correcting lenses, or if the visual acuity of the
21772177 individual is greater than 20/200, but is accompanied
21782178 by a limitation in the fields of vision such that the
21792179
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22302230 widest diameter of the visual field subtends an angle
22312231 no greater than twenty (20) degree s.
22322232 c. There shall be allowed an additional exemption of One
22332233 Thousand Dollars ($1,000.00) for each taxpayer or
22342234 spouse who is sixty-five (65) years of age or older at
22352235 the close of the tax year based upon the filing status
22362236 and federal adjusted gross income of the taxpayer.
22372237 Taxpayers with the following filing status may claim
22382238 this exemption if the federal adjusted gross income
22392239 does not exceed:
22402240 (1) Twenty-five Thousand Dollars ($25,000.00) if
22412241 married and filing jointly ;,
22422242 (2) Twelve Thousand Five Hundred Dollars ($12,500.00)
22432243 if married and filing separately;,
22442244 (3) Fifteen Thousand Dollars ($15,000.00) if single;,
22452245 and
22462246 (4) Nineteen Thousand Do llars ($19,000.00) if a
22472247 qualifying head of household.
22482248 Provided, for taxable years beginning after De cember
22492249 31, 1999, amounts in cluded in the calculation of
22502250 federal adjusted gross income pursuant to the
22512251 conversion of a traditional individual retirement
22522252 account to a Roth individual retir ement account shall
22532253 be excluded from federal adjusted gross income for
22542254
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23052305 purposes of the income thr esholds provided in this
23062306 subparagraph.
23072307 2. a. For taxable years beginning on or before December 31,
23082308 2005, in the case of individua ls who use the standard
23092309 deduction in determining taxable income, there shall
23102310 be added or deducted, as the case may be, the
23112311 difference necessary to allow a standard deduction in
23122312 lieu of the standard deduction allowed by the Internal
23132313 Revenue Code, in an amou nt equal to the larger of
23142314 fifteen percent (15%) of the Oklahoma adjusted gross
23152315 income or One Thousand Dollars ($1,000.00), bu t not to
23162316 exceed Two Thousand Dollars ($2,000.00), except that
23172317 in the case of a married individual filing a separate
23182318 return such deduction shall be the larger of fifteen
23192319 percent (15%) of such Oklahoma adjusted gross income
23202320 or Five Hundred Dollars ($500.00), but not to exceed
23212321 the maximum amount of One Thousand Dollars
23222322 ($1,000.00).
23232323 b. For taxable years beginning on or after January 1,
23242324 2006, and before January 1, 2007 , in the case of
23252325 individuals who use the standard deduction in
23262326 determining taxable income, ther e shall be added or
23272327 deducted, as the case may be, the difference necessary
23282328 to allow a standard deduction in lieu of the standard
23292329
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23802380 deduction allowed by the Interna l Revenue Code, in an
23812381 amount equal to:
23822382 (1) Three Thousand Dollars ($ 3,000.00), if the filing
23832383 status is married filing joint, head of
23842384 household, or qualifying widow;, or
23852385 (2) Two Thousand Dollars ($2,000.00), if the filing
23862386 status is single or married filing se parate.
23872387 c. For the taxable year beginning on January 1, 2007, and
23882388 ending December 31, 2007, i n the case of individuals
23892389 who use the standard deduction in determining taxable
23902390 income, there shall be added or deducted, as the case
23912391 may be, the difference necess ary to allow a standard
23922392 deduction in lieu of the standard deductio n allowed by
23932393 the Internal Revenue Code, in an amount equal to:
23942394 (1) Five Thousand Five Hundred Dollars ($5,500.00),
23952395 if the filing status is married filing joint or
23962396 qualifying widow; or,
23972397 (2) Four Thousand One Hundred Twenty -five Dollars
23982398 ($4,125.00) for a hea d of household;, or
23992399 (3) Two Thousand Seven Hundred Fifty Dollars
24002400 ($2,750.00), if the filing status is single or
24012401 married filing separate.
24022402 d. For the taxable year b eginning on January 1, 2008, a nd
24032403 ending December 31, 2008, in the case of individuals
24042404
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24552455 who use the standard deduction in d etermining taxable
24562456 income, there shall be added or deducted, as the case
24572457 may be, the difference necessary to allo w a standard
24582458 deduction in lieu of the standard deduc tion allowed by
24592459 the Internal Revenue Code, in an amount equal to :
24602460 (1) Six Thousand Five Hun dred Dollars ($6,500.00), if
24612461 the filing status is married filing joint or
24622462 qualifying widow, or
24632463 (2) Four Thousand Eight Hundred Seventy -five Dollars
24642464 ($4,875.00) for a head of household, or
24652465 (3) Three Thousand Two Hundred Fifty Doll ars
24662466 ($3,250.00), if the fil ing status is single or
24672467 married filing separate.
24682468 e. For the taxable year beginning on January 1, 2009, and
24692469 ending December 31, 2009, in the case of individuals
24702470 who use the standard deduction in determining taxable
24712471 income, there shall be added or deducted, as the case
24722472 may be, the difference necessary to allow a standard
24732473 deduction in lieu of the standard deduction allo wed by
24742474 the Internal Revenue Code, in an amount equal to:
24752475 (1) Eight Thousand Five Hundred Dollars ($8,500.00),
24762476 if the filing status is married f iling joint or
24772477 qualifying widow, or
24782478
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25292529 (2) Six Thousand Three Hundred Seventy-five Dollars
25302530 ($6,375.00) for a head of household, or
25312531 (3) Four Thousand Two Hundred Fifty D ollars
25322532 ($4,250.00), if the filing status is single or
25332533 married filing separate.
25342534 Oklahoma adjusted gross income shall be increased by
25352535 any amounts paid for motor vehicle excise taxes which
25362536 were deducted as allowed by the Internal Revenue Code.
25372537 f. For taxable years beginning on or after January 1,
25382538 2010, and ending on Decem ber 31, 2016, in the case o f
25392539 individuals who use the standard deduction in
25402540 determining taxable income, there shall be added or
25412541 deducted, as the case may be, the d ifference necessary
25422542 to allow a standard deduction equal to the standard
25432543 deduction allowed by t he Internal Revenue Code, b ased
25442544 upon the amount and filing status prescribed by such
25452545 Code for purposes of filing federal individual income
25462546 tax returns.
25472547 g. For taxable years beginning on or aft er January 1,
25482548 2017, in the case of individuals who use the stand ard
25492549 deduction in determinin g taxable income, there shall
25502550 be added or deducted, as the case may be, the
25512551 difference necessary to allow a stand ard deduction in
25522552
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26032603 lieu of the standard deduction allo wed by the Internal
26042604 Revenue Code, as follows:
26052605 (1) Six Thousand Three Hundred Fifty Dollars
26062606 ($6,350.00) for single or married filing
26072607 separately,
26082608 (2) Twelve Thousand Seven Hundred Dollars
26092609 ($12,700.00) for married filing jointly or
26102610 qualifying widower with dep endent child, and
26112611 (3) Nine Thousand Three Hundred Fifty Dollars
26122612 ($9,350.00) for head of hou sehold.
26132613 3. a. In the case of resident and part-year resident
26142614 individuals having adjusted gross income from source s
26152615 both within and with out the state, the itemized or
26162616 standard deductions and personal exemptions shall be
26172617 reduced to an amount which is the s ame portion of the
26182618 total thereof as Oklahoma adjusted gross income is of
26192619 adjusted gross income. To the extent item ized
26202620 deductions include allowable moving expense, pr oration
26212621 of moving expense shall not be required or permitted
26222622 but allowable moving expense shall be fully deductible
26232623 for those taxpayers moving within or into Oklahoma and
26242624 no part of moving expense shall b e deductible for
26252625 those taxpayers moving without or o ut of Oklahoma.
26262626 All other itemized or standard deductions and personal
26272627
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26782678 exemptions shall be subject to proration as provided
26792679 by law.
26802680 b. For taxable years beginning on or after January 1,
26812681 2018, the net amount of itemized deduct ions allowable
26822682 on an Oklahoma income tax return, subject to the
26832683 provisions of paragraph 24 o f this subsection, shall
26842684 not exceed Seventeen Thousand Dollars ($17,000.00).
26852685 For purposes of this subparagraph, charitable
26862686 contributions and medical expenses deduc tible for
26872687 federal income tax p urposes shall be excluded from the
26882688 amount of Seventeen Thousan d Dollars ($17,000.00) as
26892689 specified by this subparagraph.
26902690 4. A resident individual with a physical disability
26912691 constituting a substantial hand icap to employment may deduct from
26922692 Oklahoma adjusted gross income such expenditures to modify a motor
26932693 vehicle, home, or workplace as are nece ssary to compensate for his
26942694 or her handicap. A veteran certified by the Department of Veterans
26952695 Affairs of the feder al government as havin g a service-connected
26962696 disability shall be conclusively presumed to be an individual with a
26972697 physical disability constit uting a substantial handicap to
26982698 employment. The Tax Commission shall promulgate rules containing a
26992699 list of combinations of common disabil ities and modifications which
27002700 may be presumed to qualify for this deduction. The Tax Commi ssion
27012701 shall prescribe neces sary requirements for verification.
27022702
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27532753 5. a. Before July 1, 2010, the first One Thousand Five
27542754 Hundred Dollars ($1,500.0 0) received by any per son
27552755 from the United States as salary or compensation in
27562756 any form, other than retirement b enefits, as a member
27572757 of any component of the Armed Forces of the United
27582758 States shall be deducted from taxable income.
27592759 b. On or after July 1, 2010 , one hundred percent (100%)
27602760 of the income received by any person from the United
27612761 States as salary or compensat ion in any form, other
27622762 than retirement benefits, as a member of any component
27632763 of the Armed Forces of the United States shall be
27642764 deducted from taxable income.
27652765 c. Whenever the filing of a timely inco me tax return by a
27662766 member of the Armed Forces of the United States is
27672767 made impracticable or impossible of accomplishment by
27682768 reason of:
27692769 (1) absence from the United States, which term
27702770 includes only the stat es and the District of
27712771 Columbia;,
27722772 (2) absence from the State of Oklahoma this state
27732773 while on active duty ;, or
27742774 (3) confinement in a hospita l within the United
27752775 States for treatment of wounds, injuries, or
27762776 disease,
27772777
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28282828 the time for filing a return and paying an income tax
28292829 shall be and is hereby ext ended without incurring
28302830 liability for interest or penalties, to the fifteen th
28312831 day of the third month f ollowing the month in which:
28322832 (a) Such such individual shall return to the
28332833 United States if the extension is granted
28342834 pursuant to subparagr aph a of this
28352835 paragraph, return to the State of Oklahoma
28362836 this state if the extension is gran ted
28372837 pursuant to subparagrap h b of this paragraph
28382838 or be discharged from such hospital if the
28392839 extension is granted pursuant to
28402840 subparagraph c of this paragraph;, or
28412841 (b) An an executor, administrator, or
28422842 conservator of the estate of t he taxpayer is
28432843 appointed, whichever event occurs the
28442844 earliest.
28452845 Provided, that the Tax Commission may, in its discretion, grant
28462846 any member of the Armed Forces of the United States an extension of
28472847 time for filing of income tax r eturns and payment of income t ax
28482848 without incurring liab ilities for interest or pen alties. Such
28492849 extension may be granted only when in the judgment of the Tax
28502850 Commission a good cause exists therefor and may be for a period in
28512851
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29022902 excess of six (6) months. A re cord of every such extension g ranted,
29032903 and the reason therefor, shall be kept.
29042904 6. Before July 1, 2010, the salary o r any other form of
29052905 compensation, received from the United States by a member of any
29062906 component of the Armed Forces of t he United States, shal l be
29072907 deducted from taxable inc ome during the time in wh ich the person is
29082908 detained by the enemy in a conflict, is a prisoner of war or is
29092909 missing in action and not deceased; provided, after July 1, 2010,
29102910 all such salary or compensation shall be subject to t he deduction as
29112911 provided pursuant to paragraph 5 of thi s subsection.
29122912 7. a. An individual taxpayer, whether reside nt or
29132913 nonresident, may deduct an amount equal to the federal
29142914 income taxes paid by the taxpayer during the taxable
29152915 year.
29162916 b. Federal taxes as des cribed in subparagraph a of th is
29172917 paragraph shall be d eductible by any individual
29182918 taxpayer, whether resident or no nresident, only to the
29192919 extent they relate to income subject to taxation
29202920 pursuant to the provisions of the Oklahoma Income Tax
29212921 Act. The maximum amount allowable in the prece ding
29222922 paragraph shall be prorated on the ratio of t he
29232923 Oklahoma adjusted gross income to federal adjusted
29242924 gross income.
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29762976 c. For the purpose of this paragraph, “federal income
29772977 taxes paid” shall mean federal i ncome taxes, surtaxes
29782978 imposed on incomes or excess p rofits taxes, as though
29792979 the taxpayer was on the ac crual basis. In determining
29802980 the amount of deduction for federal income taxes for
29812981 tax year 2001, the amount of the deduction shall not
29822982 be adjusted by the amount of any accelera ted ten
29832983 percent (10%) tax rate bracket credit or adva nced
29842984 refund of the credit r eceived during the tax year
29852985 provided pursuant to the federal Economic Growth and
29862986 Tax Relief Reconciliation Act of 2001, P.L. No. 107-
29872987 16, and the advanced refund of such credit shall not
29882988 be subject to taxati on.
29892989 d. The provisions of this paragraph shall appl y to all
29902990 taxable years ending aft er December 31, 1978, and
29912991 beginning before January 1, 2006.
29922992 8. Retirement benefits not to exceed Five Thousand Five Hund red
29932993 Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five
29942994 Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand
29952995 Dollars ($10,000.00) for the 2006 tax year and all subsequent tax
29962996 years, which are received by an individual from the civi l service of
29972997 the United States, the Oklahoma Public Employees Retirement Sy stem,
29982998 the Teachers’ Retirement System of Oklahoma, the Oklah oma Law
29992999 Enforcement Retirement System, the Oklahoma Firefighters Pension and
30003000
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30513051 Retirement System, the Oklahoma Police Pensi on and Retirement
30523052 System, the employee retirement sy stems created by counti es pursuant
30533053 to Section 951 et seq. of Title 19 of the Oklaho ma Statutes, the
30543054 Uniform Retirement System for Justices and Judges, the Oklahoma
30553055 Wildlife Conservation Department Retirem ent Fund, the Oklahoma
30563056 Employment Security Commissio n Retirement Plan, or the employee
30573057 retirement systems created by municipalities pur suant to Section 48-
30583058 101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
30593059 from taxable income.
30603060 9. In taxable years beginning after December 3l, 1984, Social
30613061 Security benefits received by an individual shall be e xempt from
30623062 taxable income, to the extent such benefits are included in the
30633063 federal adjusted gross income pursuant to the provisions of Section
30643064 86 of the Internal Revenue Code, 26 U.S.C., Section 86.
30653065 10. For taxable years beginni ng after December 31, 1994, lump-
30663066 sum distributions from empl oyer plans of deferred compensation,
30673067 which are not qualified plans within the meaning of Section 401(a)
30683068 of the Internal Revenue Code, 26 U.S.C. , Section 401(a), and which
30693069 are deposited in and acco unted for within a separate bank account or
30703070 brokerage account in a financial institution within this state,
30713071 shall be excluded from taxable income in the same manner as a
30723072 qualifying rollover contribution to an individual retirement ac count
30733073 within the meaning of Section 408 of the Int ernal Revenue Code, 26
30743074 U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
30753075
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31263126 account, including any earnings thereon, shall be included in
31273127 taxable income when wit hdrawn in the same manner as w ithdrawals from
31283128 individual retirement accounts wit hin the meaning of Section 408 of
31293129 the Internal Revenue Code.
31303130 11. In taxable years beginning after December 31, 1995,
31313131 contributions made to and interest r eceived from a medical savings
31323132 account established p ursuant to Sections 262 1 through 2623 of Title
31333133 63 of the Oklahoma Statutes shall be exempt from taxable income.
31343134 12. For taxable years beginning after December 31, 1996, the
31353135 Oklahoma adjusted gross income of any individual tax payer who is a
31363136 swine or poultry producer may be furth er adjusted for the deducti on
31373137 for depreciation allowed for n ew construction or expansion costs
31383138 which may be computed using the same depreciation method elected for
31393139 federal income tax purposes except that the useful life shall be
31403140 seven (7) years for purpose s of this paragraph. If de preciation is
31413141 allowed as a deduction in determining the adjusted gross income of
31423142 an individual, any depreciation calculated and claimed pursuant to
31433143 this section shall in no eve nt be a duplication of any dep reciation
31443144 allowed or permitted on the federal inco me tax return of the
31453145 individual.
31463146 13. a. In taxable years beginning after December 31, 2002,
31473147 nonrecurring adoption expenses paid by a resident
31483148 individual taxpayer in connection with:
31493149 (1) the adoption of a mi nor, or
31503150
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32013201 (2) a proposed adoption of a minor which d id not
32023202 result in a decreed adopti on,
32033203 may be deducted from the Oklahoma adjusted gross
32043204 income.
32053205 b. The deductions for adoptions and proposed adoptions
32063206 authorized by this paragrap h shall not exceed Twenty
32073207 Thousand Dollars ($20,000.0 0) per calendar year.
32083208 c. The Tax Commission shall promulgate rules to implement
32093209 the provisions of this paragraph which shall contain a
32103210 specific list of nonrecurring adoption expense s which
32113211 may be presumed to qualify for the deduction . The Tax
32123212 Commission shall prescribe necessary re quirements for
32133213 verification.
32143214 d. “Nonrecurring adoption expenses” means adoption fees,
32153215 court costs, medical expenses, attorney fees, and
32163216 expenses which are directly related to th e legal
32173217 process of adoption of a child including, bu t not
32183218 limited to, costs rel ating to the adoption study,
32193219 health and psychological examinations, transportation,
32203220 and reasonable costs of lodging and food for the child
32213221 or adoptive parents which are incurred to complete the
32223222 adoption process and are not reimbu rsed by other
32233223 sources. The term “nonrecurring adoption expe nses”
32243224 shall not include attorney fees incurred for the
32253225
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32763276 purpose of litigating a contested adoption, from and
32773277 after the point of the initiation of the contest,
32783278 costs associated with physical remodel ing, renovation
32793279 and alteration of the adoptive parents’ home or
32803280 property, except for a special needs child as
32813281 authorized by the court.
32823282 14. a. In taxable years beginning before January 1, 2005,
32833283 retirement benefits not to exceed the amou nts
32843284 specified in this paragraph, which are rec eived by an
32853285 individual sixty-five (65) years of age or older and
32863286 whose Oklahoma adjusted gross income is Twenty-five
32873287 Thousand Dollars ($25,000.00) or less if the filing
32883288 status is single, head of household, or m arried filing
32893289 separate, or Fifty Thousand Doll ars ($50,000.00) or
32903290 less if the filing status is married filing joint or
32913291 qualifying widow, shall be exempt from taxable income.
32923292 In taxable years beginning af ter December 31, 2004,
32933293 retirement benefits not to ex ceed the amounts
32943294 specified in this paragraph, which are received by an
32953295 individual whose Oklahoma adjusted gross income is
32963296 less than the qualifying amount specified in this
32973297 paragraph, shall be exempt from taxable income.
32983298 b. For purposes of this paragraph, t he qualifying amount
32993299 shall be as follows:
33003300
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33513351 (1) in taxable years beginning after December 31,
33523352 2004, and prior to January 1, 2007, the
33533353 qualifying amount shall be Thirty-seven Thousand
33543354 Five Hundred Dollars ($ 37,500.00) or less if the
33553355 filing status is single, h ead of household, or
33563356 married filing separate, or Seventy-five Thousand
33573357 Dollars ($75,000.00) or less if the filing status
33583358 is married filing jointly or qualifying widow,
33593359 (2) in the taxable year beginning Ja nuary 1, 2007,
33603360 the qualifying amount shall be Fifty Thousand
33613361 Dollars ($50,000.00) or less if the f iling status
33623362 is single, head of h ousehold, or married filing
33633363 separate, or One Hundred Thousand Dollars
33643364 ($100,000.00) or less if the filing status is
33653365 married filing jointly or quali fying widow,
33663366 (3) in the taxable year beginning January 1, 2008,
33673367 the qualifying amount shall be Sixty-two Thousand
33683368 Five Hundred Dollars ($62,500.00) or less if the
33693369 filing status is single, head of household, or
33703370 married filing separate, or One Hundred Twenty -
33713371 five Thousand Dollars ($125,0 00.00) or less if
33723372 the filing status is married filing jointly or
33733373 qualifying widow,
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34253425 (4) in the taxable year beginning January 1, 2009,
34263426 the qualifying amount shall be One Hundred
34273427 Thousand Dollars ($100,000. 00) or less if the
34283428 filing status is single, head of household, or
34293429 married filing separate, or Two Hundred Thousand
34303430 Dollars ($200,000.00) or less if the filing
34313431 status is married filing jointly or qualifying
34323432 widow, and
34333433 (5) in the taxable year beginning Janua ry 1, 2010,
34343434 and subsequent taxable years, there shal l be no
34353435 limitation upon the qualifying amount.
34363436 c. For purposes of this paragrap h, “retirement benefits”
34373437 means the total distributions or withdrawals from the
34383438 following:
34393439 (1) an employee pension benefit pla n which satisfies
34403440 the requirements of Section 401 of the Internal
34413441 Revenue Code, 26 U.S.C., Section 401,
34423442 (2) an eligible deferred co mpensation plan that
34433443 satisfies the requirements of Section 457 of the
34443444 Internal Revenue Code, 26 U.S.C., Section 457,
34453445 (3) an individual retirement a ccount, annuity or
34463446 trust, or simplified employee pension that
34473447 satisfies the requirements of Section 408 of th e
34483448 Internal Revenue Code, 26 U.S.C., Section 408,
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35003500 (4) an employee annuity subject to the provisions of
35013501 Section 403(a) or (b) of the Internal Revenue
35023502 Code, 26 U.S.C., Section 403(a ) or (b),
35033503 (5) United States Retirement Bonds which satisfy the
35043504 requirements of Section 86 of the Internal
35053505 Revenue Code, 26 U.S.C., Section 86, or
35063506 (6) lump-sum distributions from a retirement plan
35073507 which satisfies the requiremen ts of Section
35083508 402(e) of the Internal Revenue Code, 26 U.S.C.,
35093509 Section 402(e).
35103510 d. The amount of the exemption provided by this paragraph
35113511 shall be limited to Five Thousand Five Hundre d Dollars
35123512 ($5,500.00) for the 2004 tax year, Seven Th ousand Five
35133513 Hundred Dollars ($7,500.00) for the 2005 tax year and
35143514 Ten Thousand Dollars ($10,000.0 0) for the tax year
35153515 2006 and for all subsequent tax years. Any individual
35163516 who claims the exemption provid ed for in paragraph 8
35173517 of this subsection shall not be permitted to claim a
35183518 combined total exemption pursu ant to this paragraph
35193519 and paragraph 8 of this subsection in an amount
35203520 exceeding Five Thousand Five Hundred Dollars
35213521 ($5,500.00) for the 2004 tax year, S even Thousand Five
35223522 Hundred Dollars ($7,500.00) for th e 2005 tax year and
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35743574 Ten Thousand Dollars ($10,000.00 ) for the 2006 tax
35753575 year and all subsequent ta x years.
35763576 15. In taxable years be ginning after December 31, 1999, for an
35773577 individual engaged in production agriculture who has filed a
35783578 Schedule F form with the taxpayer’s federal income tax return for
35793579 such taxable year, there shall be excluded from taxable income any
35803580 amount which was inclu ded as federal taxable income or federal
35813581 adjusted gross income and which consists of the discharge of an
35823582 obligation by a credi tor of the taxpayer in curred to finance the
35833583 production of agricultural products.
35843584 16. In taxable years beginning December 31, 2000 , an amount
35853585 equal to one hundred percent (100%) of the amount of any scho larship
35863586 or stipend received from participation in the Oklahoma Police Corps
35873587 Program, as established in Se ction 2-140.3 of Title 47 of the
35883588 Oklahoma Statutes shall be exempt from taxabl e income.
35893589 17. a. In taxable years beginning after December 31, 2001,
35903590 and before January 1, 2005, there shall be allowed a
35913591 deduction in the amount of contributions to accounts
35923592 established pursuant to the Oklahoma College Sav ings
35933593 Plan Act. The deduction sha ll equal the amount of
35943594 contributions to accounts, but in no event shall t he
35953595 deduction for each contributor exceed Two Thousand
35963596 Five Hundred Dollars ($2,500.00) each taxable year for
35973597 each account.
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36493649 b. In taxable years beginni ng after December 31, 2004,
36503650 each taxpayer shall be allowed a deduction for
36513651 contributions to accounts estab lished pursuant to the
36523652 Oklahoma College Savings Plan Act. The maximum annu al
36533653 deduction shall equal the a mount of contributions to
36543654 all such accounts plus any contributions to such
36553655 accounts by the taxpayer for prior taxable years after
36563656 December 31, 2004, wh ich were not deducted, but in no
36573657 event shall the dedu ction for each tax yea r exceed Ten
36583658 Thousand Dollars ($10,000.00) for each individual
36593659 taxpayer or Twenty Thousand Dollars ($20,000. 00) for
36603660 taxpayers filing a joint return. Any amount of a
36613661 contribution that is not deducted by the taxpayer in
36623662 the year for which the contribution i s made may be
36633663 carried forward as a deduction from income for the
36643664 succeeding five (5) years. For taxable yea rs
36653665 beginning after December 31, 2005, deductions may be
36663666 taken for contributions and rollovers made during a
36673667 taxable year and up to April 15 of the s ucceeding
36683668 year, or the due dat e of a taxpayer’s state income tax
36693669 return, excluding extensions, whichever is later.
36703670 Provided, a deduction for the same contribution may
36713671 not be taken for two (2) different taxable years.
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37233723 c. In taxable years beginning after De cember 31, 2006,
37243724 deductions for contributions made pursuant to
37253725 subparagraph b of this paragraph shall be lim ited as
37263726 follows:
37273727 (1) for a taxpayer who qualified for the five-year
37283728 carryforward election and who takes a rollover or
37293729 nonqualified withdrawal during that period, the
37303730 tax deduction otherwise available pursuant to
37313731 subparagraph b of this paragraph shall be r educed
37323732 by the amount which is equal to the rollover or
37333733 nonqualified withdrawal, and
37343734 (2) for a taxpayer who elects to take a rol lover or
37353735 nonqualified withdrawal within the same tax year
37363736 in which a contribution was made to the
37373737 taxpayer’s account, the tax de duction otherwise
37383738 available pursuant to subparagraph b of this
37393739 paragraph shall be reduced by the amount of the
37403740 contribution which is equal to the roll over or
37413741 nonqualified withdrawa l.
37423742 d. If a taxpayer elects to take a rollover on a
37433743 contribution for which a deduction has been taken
37443744 pursuant to subparagraph b of this paragraph withi n
37453745 one (1) year of the date of contribution, the amoun t
37463746 of such rollover sha ll be included in the adjusted
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37983798 gross income of the taxpayer in the taxable year of
37993799 the rollover.
38003800 e. If a taxpayer makes a nonqualified withdrawal of
38013801 contributions for which a deduct ion was taken pursuant
38023802 to subparagraph b of this para graph, such nonqualifi ed
38033803 withdrawal and any earnings thereon shall be included
38043804 in the adjusted gross income of the taxpayer in the
38053805 taxable year of the nonqualified withdrawal.
38063806 f. As used in this paragrap h:
38073807 (1) “non-qualified withdrawal” means a withdrawal
38083808 from an Oklahoma Colle ge Savings Plan account
38093809 other than one of the following:
38103810 (a) a qualified withdrawal,
38113811 (b) a withdrawal made as a result of the death
38123812 or disability of the designated beneficiary
38133813 of an account,
38143814 (c) a withdrawal that is made on the accoun t of
38153815 a scholarship or the allowance or payment
38163816 described in Section 135(d)(1)(B) or (C) or
38173817 by the Internal Revenue Code, received by
38183818 the designated beneficiary to the extent the
38193819 amount of the refund does not exceed the
38203820 amount of the scholarship, allowance, or
38213821 payment, or
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38733873 (d) a rollover or change of designat ed
38743874 beneficiary as permitted by subsection F o f
38753875 Section 3970.7 of Title 70 of Oklahoma
38763876 Statutes, and
38773877 (2) “rollover” means the transfer of funds from the
38783878 Oklahoma College Savings Plan to any other plan
38793879 under Section 529 of the I nternal Revenue Code.
38803880 18. For tax years 2006 through 2021, retirement benefits
38813881 received by an individual from any component of the Armed Forces of
38823882 the United States in an amount no t to exceed the greater of seventy-
38833883 five percent (75%) of such benefits or Ten Thousand Dollars
38843884 ($10,000.00) shall be exempt from taxable income but in no case less
38853885 than the amount of the exemption provided by paragraph 14 of t his
38863886 subsection. For tax year 2022 and subsequent tax yea rs, retirement
38873887 benefits received by an individual from any component of the A rmed
38883888 Forces of the United States shall be exem pt from taxable income.
38893889 19. For taxable years beginning after December 31, 2006,
38903890 retirement benefits rece ived by federal civil servi ce retirees,
38913891 including survivor annuities, paid in lieu of Social Security
38923892 benefits shall be exempt from taxable income to the extent such
38933893 benefits are included in the federal adjusted gross income p ursuant
38943894 to the provisions of S ection 86 of the Internal R evenue Code, 26
38953895 U.S.C., Section 86, according to the following schedule:
38963896
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39473947 a. in the taxable year beginning January 1, 2007, twenty
39483948 percent (20%) of such benefits shall be exempt,
39493949 b. in the taxable year beginning January 1, 2008, f orty
39503950 percent (40%) of such benefits shall be exempt,
39513951 c. in the taxable year beginning January 1, 2009, s ixty
39523952 percent (60%) of such benefits shall be e xempt,
39533953 d. in the taxable year beginning January 1, 2010, eighty
39543954 percent (80%) of such benefits shall be ex empt, and
39553955 e. in the taxable year beginning January 1, 2011, and
39563956 subsequent taxable years, one hundred pe rcent (100%)
39573957 of such benefits shall be exempt.
39583958 20. a. For taxable years beginning after December 31, 2007, a
39593959 resident individual may deduct up to Ten Th ousand
39603960 Dollars ($10,000.00) from Oklahoma adjusted gross
39613961 income if the individual, or the dependent of t he
39623962 individual, while living, donates one or m ore human
39633963 organs of the individual to another human being for
39643964 human organ transplantation. As used in this
39653965 paragraph, “human organ” means all or part of a liver,
39663966 pancreas, kidney, intestine, lung, or bone marro w. A
39673967 deduction that is claimed under this pa ragraph may be
39683968 claimed in the taxable year in which the human organ
39693969 transplantation occurs.
39703970
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40214021 b. An individual may claim this deduction only once, and
40224022 the deduction may be claimed only for unreimbursed
40234023 expenses that are incurred by the individual and
40244024 related to the organ donation of the individual.
40254025 c. The Oklahoma Tax Commission shal l promulgate rules to
40264026 implement the provisions of this pa ragraph which shall
40274027 contain a specific list of expenses which may be
40284028 presumed to qualify for the deduction. The Tax
40294029 Commission shall prescribe necessary requirements for
40304030 verification.
40314031 21. For taxable years beginning after Decem ber 31, 2009, there
40324032 shall be exempt from taxable income any amount received by the
40334033 beneficiary of the de ath benefit for an emergency medical technici an
40344034 or a registered emergency medical responder provided by Section 1-
40354035 2505.1 of Title 63 of the Oklahoma Sta tutes.
40364036 22. For taxable yea rs beginning after December 31, 2008,
40374037 taxable income shall be increased by any unemployment compensation
40384038 exempted under Section 85(c) of the Internal Revenue Code, 26
40394039 U.S.C., Section 85(c)(2009).
40404040 23. For taxable years beginning after December 31, 2008, th ere
40414041 shall be exempt from taxable income any payment in an amou nt less
40424042 than Six Hundred Dollars ($600.00) received by a per son as an award
40434043 for participation in a competitive livestock show event. For
40444044 purposes of this paragraph, t he payment shall be treated as a
40454045
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40964096 scholarship amount paid by the entity sponsoring the eve nt and the
40974097 sponsoring entity shall cause the payment to be c ategorized as a
40984098 scholarship in its books and records.
40994099 24. For taxable years beginning on or after January 1, 2016,
41004100 taxable income shall be increased by any amount of state and local
41014101 sales or income taxes deducted under 26 U.S.C., Section 164 of the
41024102 Internal Revenue Code. If the amount of state and local taxes
41034103 deducted on the fede ral return is limited, taxable income on the
41044104 state return shall be increased only by the amount actually deducted
41054105 after any such limitations are applied.
41064106 25. For taxable years be ginning after December 31, 2020, each
41074107 taxpayer shall be allowed a deduction f or contributions to accounts
41084108 established pursuant to the Achieving a Better Life Experience
41094109 (ABLE) Program as established in Section 40 01.1 et seq. of Title 56
41104110 of the Oklahoma Statutes. For any tax year, the deduction provided
41114111 for in this paragraph shall not exceed Ten Thousand Dollar s
41124112 ($10,000.00) for an individual taxpayer or Twenty Thousand Dollars
41134113 ($20,000.00) for taxpayers filing a joint return. Any amount of
41144114 contribution not deducted by the taxpayer in the tax year for which
41154115 the contribution is made may be carried forward as a d eduction from
41164116 income for up to five (5) tax years. Deductions may be taken for
41174117 contributions made during the tax year and through April 15 of the
41184118 succeeding tax year, or through the due date of a taxpayer’s state
41194119 income tax return excluding extensions, wh ichever is later.
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41714171 Provided, a deduction for the same contribution may not be taken in
41724172 more than one (1) tax year.
41734173 F. 1. For taxable years beginnin g after December 31, 2004, a
41744174 deduction from the Oklahoma adjusted gross income of any individual
41754175 taxpayer shall be allowed for qualifyi ng gains receiving capital
41764176 treatment that are includ ed in the federal adjuste d gross income of
41774177 such individual taxpayer d uring the taxable year.
41784178 2. As used in this subsection:
41794179 a. “qualifying gains receiving capital treatment” means
41804180 the amount of net capit al gains, as defined in Section
41814181 1222(11) of the Inte rnal Revenue Code, includ ed in an
41824182 individual taxpayer’s federal income tax return that
41834183 result from:
41844184 (1) the sale of real property or tangible personal
41854185 property located within Oklahoma that has been
41864186 directly or indirectly owned by the individual
41874187 taxpayer for a holding period of at least five
41884188 (5) years prior to the date of the transaction
41894189 from which such net capital gains arise,
41904190 (2) the sale of stock or the sale of a direct or
41914191 indirect ownership interest in an Oklahoma
41924192 company, limited liability company, or
41934193 partnership where such st ock or ownership
41944194 interest has been directl y or indirectly owned by
41954195
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42464246 the individual taxpayer for a holding period of
42474247 at least two (2) years prior to the date of the
42484248 transaction from which the net capital gains
42494249 arise, or
42504250 (3) the sale of real property, tangib le personal
42514251 property, or intangible persona l property located
42524252 within Oklahoma as part of the sale of all or
42534253 substantially all of the assets of an Oklahoma
42544254 company, limited liability company, or
42554255 partnership, or an Oklahoma proprietorshi p
42564256 business enterprise w here such property has been
42574257 directly or indirectly owned by such entity or
42584258 business enterprise or owned by the owners of
42594259 such entity or business enterprise for a period
42604260 of at least two (2) years prior to the date of
42614261 the transaction from which the net capit al gains
42624262 arise,
42634263 b. “holding period” means an uninterrupted period of
42644264 time. The holding period shall include any additional
42654265 period when the property was held by another
42664266 individual or entity, if such additional period is
42674267 included in the taxpayer’s holding period for the
42684268 asset pursuant to the Internal Revenue Code,
42694269
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43204320 c. “Oklahoma company,” company”, “limited liability
43214321 company,” company”, or “partnership” means an entity
43224322 whose primary headquarters have been located in
43234323 Oklahoma for at least three ( 3) uninterrupted years
43244324 prior to the date of the transaction from which the
43254325 net capital gains arise,
43264326 d. “direct” means the individual taxpayer directly owns
43274327 the asset,
43284328 e. “indirect” means the individual taxpayer owns an
43294329 interest in a pass-through entity (or chain of pass-
43304330 through entities) that sells the asset that gives rise
43314331 to the qualifying gains receiving capital treatment.
43324332 (1) With respect to sales of real property or
43334333 tangible personal property located within
43344334 Oklahoma, the deduction described in this
43354335 subsection shall not apply unless the pass-
43364336 through entity that makes the sale has held the
43374337 property for not less than five (5) uninterrupted
43384338 years prior to the date of the transaction tha t
43394339 created the capital gain, and each pass-through
43404340 entity included in the chain of ownership has
43414341 been a member, partner, or sharehol der of the
43424342 pass-through entity in the tier immediately below
43434343
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43944394 it for an uninterrupted period of not less than
43954395 five (5) years.
43964396 (2) With respect to sales of sto ck or ownership
43974397 interest in or sales of all or substantially all
43984398 of the assets of an Oklahoma compa ny, limited
43994399 liability company, partnership, or Oklahoma
44004400 proprietorship business enterprise, the deduction
44014401 described in this su bsection shall not apply
44024402 unless the pass-through entity that makes the
44034403 sale has held the stock or ownership interest for
44044404 not less than two (2) uninterrupted years prior
44054405 to the date of the transaction that created the
44064406 capital gain, and each pass -through entity
44074407 included in the chain of own ership has been a
44084408 member, partner, or shareholder of the pass-
44094409 through entity in the tier immediately below it
44104410 for an uninterrupted period of not less than two
44114411 (2) years. For purposes of this division,
44124412 uninterrupted ownership prior to July 1, 2007,
44134413 shall be included in the determination of the
44144414 required holding period prescribed by this
44154415 division, and
44164416 f. “Oklahoma proprietorship business enterprise” means a
44174417 business enterprise whose income and expenses have
44184418
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44694469 been reported on Sche dule C or F of an individual
44704470 taxpayer’s federal income tax return, or any similar
44714471 successor schedule published by the Internal Revenue
44724472 Service and whose primary headquarters have been
44734473 located in Oklahoma for at least three (3)
44744474 uninterrupted years prior to the date of the
44754475 transaction from which the net capital gains arise.
44764476 G. 1. For purposes of computing its Oklahoma taxable income
44774477 under this section, the dividends-paid deduction otherwise allowed
44784478 by federal law in computing net income of a real estate inv estment
44794479 trust that is subject to federal income tax shall be added bac k in
44804480 computing the tax imposed by this state under this title if the real
44814481 estate investment trust is a captive real estate investment trust.
44824482 2. For purposes of computing its Oklahoma ta xable income under
44834483 this section, a taxpayer shall add back otherwise d eductible rents
44844484 and interest expenses paid to a captive real estate investment trust
44854485 that is not subject to the provisions of paragraph 1 of this
44864486 subsection. As used in this subsection:
44874487 a. the term “real estate investment trust” or “REIT”
44884488 means the meaning ascribed to such term in Section 856
44894489 of the Internal Revenue Code,
44904490 b. the term “captive real estate investment trust” means
44914491 a real estate investment trust, the shares or
44924492 beneficial interests of which are not regularl y traded
44934493
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45444544 on an established securities market and more than
45454545 fifty percent (50%) of the voting power or value of
45464546 the beneficial interests or shares of which are owned
45474547 or controlled, directly or indirectly, or
45484548 constructively, by a single entity that is:
45494549 (1) treated as an association taxable as a
45504550 corporation under the Int ernal Revenue Code, and
45514551 (2) not exempt from federal income tax pursuant t o
45524552 the provisions of Section 501(a) of the Internal
45534553 Revenue Code.
45544554 The term shall not incl ude a real estate investment
45554555 trust that is intended to be regularly tr aded on an
45564556 established securities market, and that satisfies the
45574557 requirements of Section 856(a)(5) and (6) of the U.S.
45584558 Internal Revenue Code by reason of Section 856(h)(2)
45594559 of the Internal Revenue Code,
45604560 c. the term “association taxable as a corporation ” shall
45614561 not include the following entities:
45624562 (1) any real estate investment trust as defined in
45634563 paragraph a of this subsection other than a
45644564 “captive real estate investment trust”, or
45654565 (2) any qualified real estate investment trust
45664566 subsidiary under Section 856(i) of the Internal
45674567 Revenue Code, other than a qualified REIT
45684568
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46194619 subsidiary of a “captive captive real estate
46204620 investment trust”, or trust,
46214621 (3) any Listed Australian Property Trust (meaning an
46224622 Australian unit trust registered as a “Managed
46234623 Investment Scheme” under the Australian
46244624 Corporations Act in which the principa l class of
46254625 units is listed on a recognized stock exchange in
46264626 Australia and is regularly traded on an
46274627 established securities market), or an entity
46284628 organized as a trust, provided th at a Listed
46294629 Australian Property Trust owns or controls,
46304630 directly or indirectl y, seventy-five percent
46314631 (75%) or more of the voting power or value of the
46324632 beneficial interests or shares of such trust, or
46334633 (4) any Qualified Foreig n Entity, meaning a
46344634 corporation, trust, association or partnership
46354635 organized outside the laws of the United S tates
46364636 and which satisfies the following criteria:
46374637 (a) at least seventy-five percent (75%) of the
46384638 entity’s total asset value at the close of
46394639 its taxable year is represented by real
46404640 estate assets, as defined in Section
46414641 856(c)(5)(B) of the Internal Revenue Co de,
46424642 thereby including shares or certificates of
46434643
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46944694 beneficial interest in any real estate
46954695 investment trust, cash and cash equivalents,
46964696 and U.S. Government securities,
46974697 (b) the entity receives a dividend-paid
46984698 deduction comparable to Section 561 of the
46994699 Internal Revenue Code, or is exempt from
47004700 entity level tax,
47014701 (c) the entity is required to distribute at
47024702 least eighty-five percent (85%) of its
47034703 taxable income, as computed in the
47044704 jurisdiction in which it is organized, to
47054705 the holders of its shares or certificates of
47064706 beneficial interest on an annual basis,
47074707 (d) not more than ten percent (10%) of the
47084708 voting power or value in such entity is held
47094709 directly or indirect ly or constructively by
47104710 a single entity or individual, or the shares
47114711 or beneficial interests of such entity a re
47124712 regularly traded on an established
47134713 securities market, and
47144714 (e) the entity is organized in a country which
47154715 has a tax treaty with the United States .
47164716 3. For purposes of this subse ction, the constructive ownership
47174717 rules of Section 318(a) of the Internal Rev enue Code, as modified by
47184718
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47694769 Section 856(d)(5) of the Internal Revenue Code, shall apply in
47704770 determining the ownership of stock, assets, or net profits of any
47714771 person.
47724772 4. A real estate investment trust that does not become
47734773 regularly traded on an established se curities market within one (1)
47744774 year of the date on which it first becomes a real estate investment
47754775 trust shall be deemed not to have been regularly traded on an
47764776 established securities market, retroactive to the date it first
47774777 became a real estate investment trust, and shall file an amended
47784778 return reflecting such retroactive designation for any tax year or
47794779 part year occurring during its initial year of status as a real
47804780 estate investment trust. For purposes of this subsection, a re al
47814781 estate investment trust b ecomes a real estate investment trust on
47824782 the first day it has both met the requirements of Section 856 of the
47834783 Internal Revenue Code and has elected to be treated as a real estate
47844784 investment trust pursuant to Section 856(c)(1) of the Internal
47854785 Revenue Code.
47864786 SECTION 2. This act shall become effective November 1, 2023.
47874787
47884788 59-1-1555 QD 1/15/2023 9:22:21 PM