OK
Oklahoma Senate Bill SB743

Oklahoma 2023 Regular Session

Oklahoma Senate Bill SB743 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 743 By: Pederson
5858
5959
6060
6161
6262
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. Sup p. 2022, Section 2358),
6868 which relates to adjustments to arrive at Oklahoma
6969 taxable income and Oklahoma adjusted gross income;
7070 deleting limitation on exemption for retire ment
7171 benefits received by the Te achers’ Retirement System
7272 of Oklahoma for certain tax y ears; updating statutory
7373 language; and providing an effective date .
7474
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7979 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
8080 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358, as
8181 last amended by Section 1, Chapter 377, O.S.L. 2022 (68 O.S. Supp.
8282 2022, Section 2358), is amended to read as follows:
8383 Section 2358. For all tax years beginning after December 31,
8484 1981, taxable income and adjusted gross income shall be adjusted t o
8585 arrive at Oklahoma taxable income and Okl ahoma adjusted gross income
8686 as required by this section.
8787 A. The taxable income of any taxp ayer shall be adjusted to
8888 arrive at Oklahoma taxable income for corporations and Oklahoma
8989 adjusted gross income for indivi duals, as follows:
9090
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141141 1. There shall be added interest income on obligations of any
142142 state or political subdivision thereto which is not otherwise
143143 exempted pursuant to other laws of this state, to the extent that
144144 such interest is not included in taxable incom e and adjusted gross
145145 income.
146146 2. There shall be deducted amounts included in such income that
147147 the state is prohibited from taxing beca use of the provisions of the
148148 Federal Constitution, the State Constitution, federal laws , or laws
149149 of Oklahoma.
150150 3. The amount of any federal net operating loss deducti on shall
151151 be adjusted as follows:
152152 a. For carryovers and carrybacks to taxable years
153153 beginning before January 1, 1981, the amount of any
154154 net operating loss deduction allowed to a taxpayer for
155155 federal income tax pur poses shall be reduced to an
156156 amount which is the same portion thereof as the loss
157157 from sources within this state, as determined pursuan t
158158 to this section and Section 2362 of this title, for
159159 the taxable year in which such loss is s ustained is of
160160 the total loss for such year; and
161161 b. For carryovers and carr ybacks to taxable years
162162 beginning after December 31, 1980, the amount of any
163163 net operating loss deduction allowed for the taxable
164164 year shall be an amount equal to the aggregate of t he
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216216 Oklahoma net operating loss carryovers and carrybacks
217217 to such year. Oklahoma net operating losses shall b e
218218 separately determined by reference to Section 172 of
219219 the Internal Revenue Code, 26 U.S.C., Section 172, as
220220 modified by the Oklahoma Income Tax Ac t, Section 2351
221221 et seq. of this title, and shall be allowed without
222222 regard to the existence of a federal net operating
223223 loss. For tax years beginning after December 3 1,
224224 2000, and ending before January 1, 2008, the years to
225225 which such losses may be carried shall be determined
226226 solely by reference to Section 172 of the Internal
227227 Revenue Code, 26 U.S.C., Section 172, with the
228228 exception that the terms “net operating loss” and
229229 “taxable income” shall be replaced with “Oklahoma net
230230 operating loss” and “Oklahoma taxable income”. For
231231 tax years beginning after December 31, 2007, and
232232 ending before January 1, 2009, years to wh ich such
233233 losses may be carried back shall be limited to t wo (2)
234234 years. For tax years beginning after December 31,
235235 2008, the years to which such lo sses may be carried
236236 back shall be determined solely by reference to
237237 Section 172 of the Internal Revenue Code, 26 U.S.C.,
238238 Section 172, with the exception that the term s “net
239239 operating loss” and “taxable income” shall be replaced
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291291 with “Oklahoma net operating loss” and “Oklahoma
292292 taxable income”.
293293 4. Items of the following nature sha ll be allocated as
294294 indicated. Allowable deductions attributable to items separately
295295 allocable in subparagraphs a, b, and c of this paragraph, whether or
296296 not such items of income we re actually received, shall be allocated
297297 on the same basis as those items:
298298 a. Income from real and tangible p ersonal property, such
299299 as rents, oil and mining production or royalties, and
300300 gains or losses from sales of such property, shall be
301301 allocated in accordance with the situs of such
302302 property;
303303 b. Income from intangible personal property, such as
304304 interest, dividends, patent or copyright royalties,
305305 and gains or losses f rom sales of such property, shall
306306 be allocated in accordance with the domiciliary situs
307307 of the taxpayer, except that:
308308 (1) where such property has acquired a nonunit ary
309309 business or commercial situs a part from the
310310 domicile of the taxpayer such income shall be
311311 allocated in accordance with such business or
312312 commercial situs; interest income from
313313 investments held to generate working capital for
314314 a unitary business enterpris e shall be included
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366366 in apportionable income; a resident trust or
367367 resident estate shall be treated a s having a
368368 separate commercial or business situs insofar as
369369 undistributed income i s concerned, but shall not
370370 be treated as having a separate commercial or
371371 business situs insofar as distribute d income is
372372 concerned,
373373 (2) for taxable years beginning after Dece mber 31,
374374 2003, capital or ordinary gains or losses from
375375 the sale of an ownership i nterest in a publicly
376376 traded partnership, as defined by Section 7704(b)
377377 of the Internal Revenue Code, shall b e allocated
378378 to this state in the ratio of the original cost
379379 of such partnership’s tangible property in this
380380 state to the original cost of such part nership’s
381381 tangible property everywhere, as determined at
382382 the time of the sale; if more than fifty percent
383383 (50%) of the value of the partnership ’s assets
384384 consists of intangibl e assets, capital or
385385 ordinary gains or losses from the sale of an
386386 ownership interest in the partnership shall be
387387 allocated to this state in accordance with t he
388388 sales factor of the partnership for its first
389389 full tax period immediately preceding its tax
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441441 period during which the ownership interest in the
442442 partnership was sold; the provisions of this
443443 division shall only apply if the capital or
444444 ordinary gains or loss es from the sale of an
445445 ownership interest in a partnership do not
446446 constitute qualifying gain receiv ing capital
447447 treatment as defined in subparagraph a of
448448 paragraph 2 of subsection F of this section,
449449 (3) income from such property which is required to be
450450 allocated pursuant to the provisions o f paragraph
451451 5 of this subsection shall be allocated as herein
452452 provided;
453453 c. Net income or loss from a business activity which is
454454 not a part of business carried on within or without
455455 the state of a unitary character shall be separately
456456 allocated to the state in which such activity is
457457 conducted;
458458 d. In the case of a manufact uring or processing
459459 enterprise the business of which in Oklahoma consists
460460 solely of marketing its products by:
461461 (1) sales having a situs without this state, s hipped
462462 directly to a point from wi thout the state to a
463463 purchaser within the state, commonly known a s
464464 interstate sales,
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516516 (2) sales of the product stored in public warehouses
517517 within the state pursuant to “in transit”
518518 tariffs, as prescribed and allowed by the
519519 Interstate Commerce Commission, to a purchaser
520520 within the state, or
521521 (3) sales of the product stored in public warehouses
522522 within the state where the shipment to such
523523 warehouses is not covered by “in transit”
524524 tariffs, as prescribed and allowed by the
525525 Interstate Commerce Commission, to a purc haser
526526 within or without the state,
527527 the Oklahoma net income shall, at the option of the
528528 taxpayer, be that portion of the total net income of
529529 the taxpayer for federal income tax purposes derived
530530 from the manufacture and/or proc essing and sales
531531 everywhere as determined by the ratio of the sales
532532 defined in this section made to the purchaser within
533533 the state to the total sales everywhere. The term
534534 “public warehouse” as used in this subparagraph means
535535 a licensed public warehouse, t he principal business of
536536 which is warehousing merchandise for the public;
537537 e. In the case of insuran ce companies, Oklahoma taxable
538538 income shall be taxable income of the taxpayer f or
539539 federal tax purposes, as adjusted for the adjustments
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590590
591591 provided pursuant to the provisions of paragraphs 1
592592 and 2 of this subsection, apportioned as follows:
593593 (1) except as otherwise provided by division (2) of
594594 this subparagraph, taxable income of an insur ance
595595 company for a taxable year shall be apportioned
596596 to this state by multiply ing such income by a
597597 fraction, the numerator of which is the direct
598598 premiums written for insurance on property or
599599 risks in this state, and the denominator of which
600600 is the direct premiums written for insurance on
601601 property or risks everywhere. For purposes of
602602 this subsection, the term “direct premiums
603603 written” means the total amount of direct
604604 premiums written, assessments, and annuity
605605 considerations as reported for the taxable year
606606 on the annual statement filed by the company with
607607 the Insurance Commissioner in the form approved
608608 by the National Association of Insurance
609609 Commissioners, or such other form as m ay be
610610 prescribed in lieu thereof,
611611 (2) if the principal source of premiums writ ten by an
612612 insurance company consists of premiums for
613613 reinsurance accepted by i t, the taxable income of
614614 such company shall be apportioned to this state
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666666 by multiplying such income by a fraction, the
667667 numerator of which is the sum of (a) direct
668668 premiums written for insurance on property or
669669 risks in this state, plus (b) premiums written
670670 for reinsurance accepted in res pect of property
671671 or risks in this state, and the denominator of
672672 which is the sum of (c) direct premiums written
673673 for insurance on property or risks everywhere,
674674 plus (d) premiums written for reinsurance
675675 accepted in respect of p roperty or risks
676676 everywhere. For purposes of this paragraph,
677677 premiums written for reinsurance accep ted in
678678 respect of property or risks in this state,
679679 whether or not otherwise de terminable, may at the
680680 election of the company be determined on the
681681 basis of the proportion which premiums wr itten
682682 for insurance accepted from companies
683683 commercially domiciled in Oklahoma bears to
684684 premiums written for reinsurance accepted from
685685 all sources, or alternatively in the proportion
686686 which the sum of the direct premiums writt en for
687687 insurance on property or risks in this state by
688688 each ceding company from which reinsurance is
689689 accepted bears to the sum of the total direct
690690
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741741 premiums written by each such c eding company for
742742 the taxable year.
743743 5. The net income or loss remaining after the separate
744744 allocation in paragraph 4 of this subsection, being that which is
745745 derived from a unita ry business enterprise, shall be apportioned to
746746 this state on the basis of the arithmetical average of three factors
747747 consisting of property, payroll, and sales or gross revenue
748748 enumerated as subparagraphs a, b, and c of this paragraph. Net
749749 income or loss as used in this paragraph includes that derived from
750750 patent or copyright royal ties, purchase discounts, and interest on
751751 accounts receivable relating to or a rising from a business activity ,
752752 the income from which is apportioned pursuant to this subsection ,
753753 including the sale or other disposition of such property and any
754754 other property used in the unitary enterprise. Deductions used in
755755 computing such net income or loss shall not include taxe s based on
756756 or measured by income. Provided, for corporations whose pro perty
757757 for purposes of the tax imposed by Section 2355 of this title has an
758758 initial investment cost equaling or exceeding Two Hundred Million
759759 Dollars ($200,000,000.00) and such investmen t is made on or after
760760 July 1, 1997, or for corporations which expand th eir property or
761761 facilities in this state and such expansion has an investmen t cost
762762 equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)
763763 over a period not to exceed three (3) years, and such expansion is
764764 commenced on or after January 1, 2000, the three factors shall be
765765
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816816 apportioned with property and payroll, each comp rising twenty-five
817817 percent (25%) of the apportionment factor and sales compris ing fifty
818818 percent (50%) of the apportionment factor. The apportionment
819819 factors shall be computed as f ollows:
820820 a. The property factor is a fraction, the numerator of
821821 which is the average value of the taxpayer’s real and
822822 tangible personal property owned or rented and used in
823823 this state during the tax period and the denominator
824824 of which is the average value o f all the taxpayer’s
825825 real and tangible personal property everywhere owned
826826 or rented and used during the tax period.
827827 (1) Property, the income from which is separately
828828 allocated in paragraph 4 of this subsection,
829829 shall not be included in determining this
830830 fraction. The numerator of the fraction shall
831831 include a portion of the investm ent in
832832 transportation and other equipment having no
833833 fixed situs, such as rolli ng stock, buses, trucks
834834 and trailers, including machinery and equipment
835835 carried thereon, airplanes, sa lespersons’
836836 automobiles, and other similar equipment, in the
837837 proportion that miles traveled in Oklahoma by
838838 such equipment bears to total miles traveled,
839839
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890890 (2) Property owned by the taxpay er is valued at its
891891 original cost. Property rented by the taxpayer
892892 is valued at eight times the net annual rental
893893 rate. Net annual rental rate is the annual
894894 rental rate paid by the taxpayer, less any annual
895895 rental rate received by the taxpayer from
896896 subrentals,
897897 (3) The average value of property shall be determined
898898 by averaging the values at the beginning and
899899 ending of the tax period , but the Oklahoma Tax
900900 Commission may require the averaging of monthly
901901 values during the tax period if reasonably
902902 required to reflect properly the average value of
903903 the taxpayer’s property;
904904 b. The payroll factor is a fraction, the numerator of
905905 which is the total compensatio n for services rende red
906906 in the state during the tax period, and the
907907 denominator of which is the total compens ation for
908908 services rendered everywhere during the tax period.
909909 “Compensation”, as used in this subsection means those
910910 paid-for services to the exte nt related to the un itary
911911 business but does not include officers’ salaries,
912912 wages, and other compensation.
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964964 (1) In the case of a transportation enterprise, the
965965 numerator of the fractio n shall include a portion
966966 of such expenditure in connection with employee s
967967 operating equipment over a fixed route, such as
968968 railroad employees, airline pilots, or bus
969969 drivers, in this state only a part of the time,
970970 in the proportion that mileage traveled in
971971 Oklahoma bears to total mileage traveled by such
972972 employees,
973973 (2) In any case the numerator of the fraction shall
974974 include a portion of such expenditures in
975975 connection with itinerant e mployees, such as
976976 traveling salespersons, in this state only a part
977977 of the time, in the proportion that time spent in
978978 Oklahoma bears to total time spent in furtherance
979979 of the enterprise by such employees;
980980 c. The sales factor is a fraction, the numerator of which
981981 is the total sales or gross revenue of the taxpayer in
982982 this state during the tax period, and the denominator
983983 of which is the total sales or gross revenue of the
984984 taxpayer everywhere during the tax period. “Sales”,
985985 as used in this subsection does not include sales or
986986 gross revenue which are separately allocated in
987987 paragraph 4 of this subsection.
988988
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10391039 (1) Sales of tangible personal property have a si tus
10401040 in this state if the property is delivered or
10411041 shipped to a purchaser other than the United
10421042 States government, within this state regardless
10431043 of the FOB point or other conditions of the sale;
10441044 or the property is shipped from an office, store,
10451045 warehouse, factory, or other place of storage in
10461046 this state and (a) t he purchaser is the United
10471047 States government or (b) t he taxpayer is not
10481048 doing business in the state of the destination of
10491049 the shipment.
10501050 (2) In the case of a railroad or interurban railway
10511051 enterprise, the numerator of the f raction shall
10521052 not be less than the allocation of revenues to
10531053 this state as shown in its annual report to the
10541054 Corporation Commission.
10551055 (3) In the case of an airline , truck, or bus
10561056 enterprise or freight car, tank car, refrigerator
10571057 car, or other railroad equipme nt enterprise, the
10581058 numerator of the fraction shall include a portion
10591059 of revenue from interstate transportation in the
10601060 proportion that interstate mileage traveled in
10611061 Oklahoma bears to total interstate mileage
10621062 traveled.
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11141114 (4) In the case of an oil, gasoline or gas pipeline
11151115 enterprise, the nume rator of the fraction shall
11161116 be either the total of traffic units of the
11171117 enterprise within Oklahoma or the revenue
11181118 allocated to Oklahoma based upon miles moved, at
11191119 the option of the taxpayer, and the denominator
11201120 of which shall be the total of traffic units of
11211121 the enterprise or the revenue of the enterprise
11221122 everywhere as appropriate to the numerator. A
11231123 “traffic unit” is hereby defined as the
11241124 transportation for a distance of one (1) mile of
11251125 one (1) barrel of oil, one (1) gall on of
11261126 gasoline, or one thousand (1,000) cubic feet of
11271127 natural or casinghead gas, as the case may be.
11281128 (5) In the case of a telephone or telegraph or other
11291129 communication enterprise, the numerator of the
11301130 fraction shall include that por tion of the
11311131 interstate revenue as is allocated pursuant to
11321132 the accounting procedures prescribed by the
11331133 Federal Communications Commission; provided that
11341134 in respect to each corporation or b usiness entity
11351135 required by the Federal Communications Commission
11361136 to keep its books and records in accordance with
11371137 a uniform system of accounts prescribed by such
11381138
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11891189 Commission, the intrastate net income shall be
11901190 determined separately in the manner provided by
11911191 such uniform system of accounts and only the
11921192 interstate income shall be subject to allocation
11931193 pursuant to the provisions of thi s subsection.
11941194 Provided further, that the gross revenue factors
11951195 shall be those as are determined pursuant to the
11961196 accounting procedures prescribed by the Federal
11971197 Communications Commission.
11981198 In any case where the apportionmen t of the three factors
11991199 prescribed in this paragraph attributes to Oklahoma a portion of net
12001200 income of the enterprise out of all appropriate proportion to the
12011201 property owned and/or business transacted within this state, because
12021202 of the fact that one or more of the factors so prescribed are not
12031203 employed to any appreciable extent in furtherance of the enterprise;
12041204 or because one or more factors not so prescribed are emp loyed to a
12051205 considerable extent in furtherance of the enterprise; or b ecause of
12061206 other reasons, the Tax Commission is empowered to permit, after a
12071207 showing by a taxpayer that an excessive portion of net income has
12081208 been attributed to Oklahoma, or require, when i n its judgment an
12091209 insufficient portion of net income has been attri buted to Oklahoma,
12101210 the elimination, substitution, or use of a dditional factors, or
12111211 reduction or increase in the weight of such prescribed factors.
12121212 Provided, however, that any such variance from such prescribed
12131213
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12641264 factors which has the effect of increasing th e portion of net income
12651265 attributable to Oklahoma must not be inherently arbitrary, and
12661266 application of the recomputed final apportionment to the net income
12671267 of the enterprise must attribute t o Oklahoma only a reasonable
12681268 portion thereof.
12691269 6. For calendar year s 1997 and 1998, the owner of a new or
12701270 expanded agricultural commodity processing facility in this state
12711271 may exclude from Oklahoma taxable income, or in the case of an
12721272 individual, the Oklah oma adjusted gross income, fifteen percent
12731273 (15%) of the investment by the owner in the new or expanded
12741274 agricultural commodity pr ocessing facility. For calendar year 1999,
12751275 and all subsequent years, the percentage, not to exceed fifteen
12761276 percent (15%), avail able to the owner of a new or expanded
12771277 agricultural commodity proce ssing facility in this stat e claiming
12781278 the exemption shall be adjusted annually so that the total estimated
12791279 reduction in tax liability does not exceed One Million Dollars
12801280 ($1,000,000.00) annually. The Tax Commission shall promulgate rules
12811281 for determining the percentage of the invest ment which each eligible
12821282 taxpayer may exclude. The exclusion provided by this paragraph
12831283 shall be taken in the taxable year when the investment is made. In
12841284 the event the total reduction in tax liability authorized by this
12851285 paragraph exceeds One Million Dol lars ($1,000,000.00) in any
12861286 calendar year, the Tax Commission shall permit any excess over One
12871287 Million Dollars ($1,000,000.00) and shall factor such excess into
12881288
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13391339 the percentage for subsequent years. Any amount of the exemption
13401340 permitted to be excluded purs uant to the provisions of this
13411341 paragraph but not used in any year may be carried forward as an
13421342 exemption from income pursuant to the provisions of this paragraph
13431343 for a period not exceeding six (6) years following the year in whic h
13441344 the investment was origin ally made.
13451345 For purposes of this paragraph:
13461346 a. “Agricultural commodity processing facility” means
13471347 building buildings, structures, fixtures , and
13481348 improvements used or operated primarily for the
13491349 processing or production of marketable products from
13501350 agricultural commodities. The term shall also mean a
13511351 dairy operation that requires a depreciable investment
13521352 of at least Two Hundred Fifty Thousand Dollars
13531353 ($250,000.00) and which produ ces milk from dairy cows.
13541354 The term does not include a f acility that provides
13551355 only, and nothing more than, storage, cleaning,
13561356 drying, or transportation of agricultural commodities,
13571357 and
13581358 b. “Facility” means each part of the facility which is
13591359 used in a process primarily for:
13601360 (1) the processing of agricultural comm odities,
13611361 including receiving or storing agricultural
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14131413 commodities, or the production of milk at a dairy
14141414 operation,
14151415 (2) transporting the agricultural commodities or
14161416 product before, during , or after the processing,
14171417 or
14181418 (3) packaging or otherwise preparing the product for
14191419 sale or shipment.
14201420 7. Despite any provision to the contrary in paragraph 3 of this
14211421 subsection, for taxable years begin ning after December 31, 1999, in
14221422 the case of a taxpayer which has a farm ing loss, such farming loss
14231423 shall be considered a net operating loss carryback in accordance
14241424 with and to the extent of the Internal Revenue Code, 26 U.S.C.,
14251425 Section 172(b)(G). However , the amount of the net operating loss
14261426 carryback shall not exceed the le sser of:
14271427 a. Sixty Thousand Dollars ($60,000.00), or
14281428 b. the loss properly shown on Schedule F of the Internal
14291429 Revenue Service Form 1040 reduced by one-half (1/2) of
14301430 the income from all other sources other than reflected
14311431 on Schedule F.
14321432 8. In taxable years b eginning after December 31, 1995, all
14331433 qualified wages equal to the federal income tax credit set forth in
14341434 26 U.S.C.A., Section 4 5A, shall be deducted from taxable income.
14351435 The deduction allowed pursuant to this paragraph shall only be
14361436 permitted for the tax years in which the federal tax credit pursuant
14371437
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14881488 to 26 U.S.C.A., Section 45A, is a llowed. For purposes of this
14891489 paragraph, “qualified wages” means those wages used to calculate the
14901490 federal credit pursuant to 26 U.S.C.A., Section 45A.
14911491 9. In taxable years be ginning after December 31, 2005, an
14921492 employer that is eligible for and utilizes th e Safety Pays OSHA
14931493 Consultation Service provide d by the Oklahoma Department of Labor
14941494 shall receive an exemption from taxable income in the amount of One
14951495 Thousand Dollars ($1,0 00.00) for the tax year that the service is
14961496 utilized.
14971497 10. For taxable years begi nning on or after January 1, 2010,
14981498 there shall be added to Oklahoma taxable income an amount equal to
14991499 the amount of deferred income not included in such taxable income
15001500 pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
15011501 as amended by Section 1231 of the American Recovery and Reinvestment
15021502 Act of 2009 (P.L. No. 111-5). There shall be subtracte d from
15031503 Oklahoma taxable income an amount equal to the amount of deferred
15041504 income included in such taxable income pursuant to Se ction 108(i)(1)
15051505 of the Internal Revenue Code by Section 1231 of the Americ an
15061506 Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
15071507 11. For taxable years beginning on or after Ja nuary 1, 2019,
15081508 there shall be subtracted from Oklahoma taxable income or adj usted
15091509 gross income any item of income or gain, and there shall be added to
15101510 Oklahoma taxable income or adjusted gross income any it em of loss or
15111511 deduction that in the absence of an election pursuant to t he
15121512
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15631563 provisions of the Pass-Through Entity Tax Equity Ac t of 2019 would
15641564 be allocated to a member or to an indirect member of an el ecting
15651565 pass-through entity pursuant to Section 2351 et s eq. of this title,
15661566 if (i) the electing pass -through entity has accounted for such item
15671567 in computing its Oklahoma net entity in come or loss pursuant to th e
15681568 provisions of the Pass-Through Entity Tax Equ ity Act of 2019, and
15691569 (ii) the total amount of tax attrib utable to any resulting Oklahoma
15701570 net entity income has been paid. The O klahoma Tax Commission shall
15711571 promulgate rules for the reporting of such exclusion to direct and
15721572 indirect members of the electing pass-through entity. As used in
15731573 this paragraph, “electing pass-through entity”, “indirect member”,
15741574 and “member” shall be defined in the same manner as prescribed by
15751575 Section 2355.1P-2 of this title. Notwithstanding the application of
15761576 this paragraph, the adjusted tax basis of any ownership interest in
15771577 a pass-through entity for purposes o f Section 2351 et seq. of this
15781578 title shall be equal to its adjusted tax basis for federal income
15791579 tax purposes.
15801580 B. 1. The taxable income of any corporation shall be furth er
15811581 adjusted to arrive at Oklahoma taxable income, except those
15821582 corporations electing treatment as provided in subchapter S of the
15831583 Internal Revenue Code, 26 U.S.C., Section 1361 et seq ., and Section
15841584 2365 of this title, deductions pursuant to the provisions of the
15851585 Accelerated Cost Recovery System as defined and al lowed in the
15861586 Economic Recovery Tax Act of 1981, Public Law 97 -34, 26 U.S.C.,
15871587
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16381638 Section 168, for depreciation of assets placed in to service after
16391639 December 31, 1981, shall not be allowed in calculating O klahoma
16401640 taxable income. Such corporations shall be allow ed a deduction for
16411641 depreciation of assets placed into service after Dece mber 31, 1981,
16421642 in accordance with provisions of the In ternal Revenue Code, 26
16431643 U.S.C., Section 1 et seq., in effect immediately prior to the
16441644 enactment of the Accelerated Cost Recovery S ystem. The Oklahoma tax
16451645 basis for all such assets placed into service a fter December 31,
16461646 1981, calculated in this section sha ll be retained and utilized for
16471647 all Oklahoma income tax purposes through the final disposition of
16481648 such assets.
16491649 Notwithstanding any other provisions of the Okl ahoma Income Tax
16501650 Act, Section 2351 et seq. o f this title, or of the Internal Revenue
16511651 Code to the contrary, this subsection shall control calculation o f
16521652 depreciation of assets placed into service after December 31, 1981,
16531653 and before January 1, 1983.
16541654 For assets placed in service and held by a corporati on in which
16551655 accelerated cost recovery system was previ ously disallowed, an
16561656 adjustment to taxable income is required in the first taxable year
16571657 beginning after December 31, 1982, to reco ncile the basis of such
16581658 assets to the basis allowed in the Internal Reve nue Code. The
16591659 purpose of this adjustment is to equali ze the basis and allowance
16601660 for depreciation accounts between that reported to the Internal
16611661 Revenue Service and that reported to Ok lahoma.
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17131713 2. For tax years be ginning on or after January 1, 2009, and
17141714 ending on or before December 31, 2009, there shall be add ed to
17151715 Oklahoma taxable income any amount in excess o f One Hundred Seventy-
17161716 five Thousand Dollars ($175,000.00) which has been deduc ted as a
17171717 small business expense under Internal Revenue Code, Section 179 as
17181718 provided in the American Recovery and Reinvestment Act of 2009.
17191719 C. 1. For taxable years beginning af ter December 31, 1987, the
17201720 taxable income of any corporation shall be further adjusted to
17211721 arrive at Oklahoma taxable income for transfers of technolog y to
17221722 qualified small businesses located in Oklahoma. Such transferor
17231723 corporation shall be allowed an exem ption from taxable income of an
17241724 amount equal to the amount of royalty payment received as a result
17251725 of such transfer; provided, however, such amount sh all not exceed
17261726 ten percent (10%) of the amount of gros s proceeds received by such
17271727 transferor corporation a s a result of the technology transfer. Such
17281728 exemption shall be allowed for a period not to exceed ten (10 ) years
17291729 from the date of receipt of the firs t royalty payment accruing from
17301730 such transfer. No exe mption may be claimed for transfers of
17311731 technology to qualified small businesses made prior to January 1,
17321732 1988.
17331733 2. For purposes of this subsection:
17341734 a. “Qualified small business” means an entity, whether
17351735 organized as a corporation, partnership, or
17361736 proprietorship, organized for profit with its
17371737
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17881788 principal place of business located within this state
17891789 and which meets the following criteria:
17901790 (1) Capitalization capitalization of not more than
17911791 Two Hundred Fifty Thousand Dollars ($250,000.00),
17921792 (2) Having having at least fifty percent (50%) of i ts
17931793 employees and assets located in Oklahoma at the
17941794 time of the transfer, and
17951795 (3) Not not a subsidiary or affiliate of the
17961796 transferor corporation;
17971797 b. “Technology” means a proprietary process, formula,
17981798 pattern, device, or compilation of scientific or
17991799 technical information which is not in the public
18001800 domain;
18011801 c. “Transferor corporation” means a corporation which is
18021802 the exclusive and undi sputed owner of the technolog y
18031803 at the time the transfer is made; and
18041804 d. “Gross proceeds” means the total amount of
18051805 consideration for the transfer of technology, whether
18061806 the consideration is in money or otherwise.
18071807 D. 1. For taxable years beginning after D ecember 31, 2005, the
18081808 taxable income of any corporation, estate , or trust, shall be
18091809 further adjusted for qualifying gains recei ving capital treatment.
18101810 Such corporations, estates , or trusts shall be allowed a deduction
18111811 from Oklahoma taxable income for the amount of qualifying gains
18121812
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18631863 receiving capital treatment earned by the corpor ation, estate, or
18641864 trust during the taxable year and included in the feder al taxable
18651865 income of such corporation, estate, or trust.
18661866 2. As used in this subsection:
18671867 a. “qualifying gains receiving capital treatment ” means
18681868 the amount of net capital gains, as defi ned in Section
18691869 1222(11) of the Internal Revenue Code, included in the
18701870 federal income tax return of th e corporation, estate,
18711871 or trust that result from:
18721872 (1) the sale of real property or tangible personal
18731873 property located within Oklahoma that has been
18741874 directly or indirectly owned by the corporation,
18751875 estate, or trust for a holdin g period of at least
18761876 five (5) years prior to the date of the
18771877 transaction from which such net capital gains
18781878 arise,
18791879 (2) the sale of stock or on the sale of an ownership
18801880 interest in an Oklah oma company, limited
18811881 liability company, or partnership where such
18821882 stock or ownership interest has b een directly or
18831883 indirectly owned by the corporation, estate, or
18841884 trust for a holding period of at least three (3)
18851885 years prior to the date of the transaction fr om
18861886 which the net capital gains arise, or
18871887
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19381938 (3) the sale of real prope rty, tangible personal
19391939 property, or intangible personal property located
19401940 within Oklahoma as part of the sale of all or
19411941 substantially all of the assets of an Oklahoma
19421942 company, limited liabili ty company, or
19431943 partnership where such property has been directly
19441944 or indirectly owned by such enti ty owned by the
19451945 owners of such entity, and used in or derived
19461946 from such entity for a period of at least three
19471947 (3) years prior to the date of the transaction
19481948 from which the net capital gains arise,
19491949 b. “holding period” means an uninterrupted period of
19501950 time. The holding period shall inclu de any additional
19511951 period when the property was held by a nother
19521952 individual or entity , if such additional period is
19531953 included in the taxpayer’s holding period for the
19541954 asset pursuant to the Internal Revenue Code,
19551955 c. “Oklahoma company”, “limited liability compa ny”, or
19561956 “partnership” means an entity whose primary
19571957 headquarters have been located in Oklahoma for at
19581958 least three (3) uninterrup ted years prior to the date
19591959 of the transaction from which the net capital gains
19601960 arise,
19611961
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20122012 d. “direct” means the taxpayer directly o wns the asset,
20132013 and
20142014 e. “indirect” means the taxpayer owns an interest in a
20152015 pass-through entity (or chain of pass -through
20162016 entities) that sells the asset that gives rise to the
20172017 qualifying gains receiving capital treatment.
20182018 (1) With respect to sales of real pr operty or
20192019 tangible personal property located within
20202020 Oklahoma, the deduction describ ed in this
20212021 subsection shall not apply unless the pass-
20222022 through entity that makes the sale has held the
20232023 property for not less than five (5) uninterrupted
20242024 years prior to the da te of the transaction that
20252025 created the capital gain, and each pass-through
20262026 entity included in the chain of ownership has
20272027 been a member, partner, or shareholder of the
20282028 pass-through entity in the tier immediately below
20292029 it for an uninterrupted period of not l ess than
20302030 five (5) years.
20312031 (2) With respect to sales of st ock or ownership
20322032 interest in or sales of all or substantially all
20332033 of the assets of an Oklahoma company, limited
20342034 liability company, or partnership, the deduction
20352035 described in this subsection shall not apply
20362036
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20872087 unless the pass-through entity that makes the
20882088 sale has held the stock or owne rship interest or
20892089 the assets for not less tha n three (3)
20902090 uninterrupted years prior to the date of the
20912091 transaction that created the capital gain, and
20922092 each pass-through entity included in the chain of
20932093 ownership has been a member, p artner or
20942094 shareholder of the pass-through entity in the
20952095 tier immediately below it for an uninterrupted
20962096 period of not less than three (3) years.
20972097 E. The Oklahoma adjusted gross income of any individual
20982098 taxpayer shall be further adjusted as follows to arrive at Oklahoma
20992099 taxable income:
21002100 1. a. In the case of individuals, there sha ll be added or
21012101 deducted, as the case may be, the difference necessary
21022102 to allow personal exemptions of One Thousand Dollars
21032103 ($1,000.00) in lieu of the personal exemptions allowed
21042104 by the Internal Revenue Code.
21052105 b. There shall be allowed an additional exemptio n of One
21062106 Thousand Dollars ($1,000.00) for each taxpayer or
21072107 spouse who is blind at the close of the tax year. For
21082108 purposes of this subparagraph, an individual is blind
21092109 only if the central visual acuity of the individual
21102110 does not exceed 20/200 in the better eye with
21112111
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21622162 correcting lenses, or if the visual acuity of the
21632163 individual is greater than 20/200, but is accompanied
21642164 by a limitation in the fields of vision such that the
21652165 widest diameter of the visual field subte nds an angle
21662166 no greater than twenty (20) degree s.
21672167 c. There shall be allowed an additional exemption of One
21682168 Thousand Dollars ($1,000.00) for each taxpayer or
21692169 spouse who is sixty-five (65) years of age or older at
21702170 the close of the tax year based upon the fil ing status
21712171 and federal adjusted gross income of the taxpayer.
21722172 Taxpayers with the following filing status may claim
21732173 this exemption if the federal adjusted gross income
21742174 does not exceed:
21752175 (1) Twenty-five Thousand Dollars ($25,000.00 ) if
21762176 married and filing joi ntly;,
21772177 (2) Twelve Thousand Five Hundred Dollars ($12,500.00)
21782178 if married and filing separately;,
21792179 (3) Fifteen Thousand Dollars ($15,000.00) if single;,
21802180 and
21812181 (4) Nineteen Thousand Do llars ($19,000.00) if a
21822182 qualifying head of househol d.
21832183 Provided, for taxable ye ars beginning after December
21842184 31, 1999, amounts inc luded in the calculation of
21852185 federal adjusted gross income pursuant to the
21862186
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22372237 conversion of a traditional individual retirement
22382238 account to a Roth individual retir ement account shall
22392239 be excluded from federal adj usted gross income for
22402240 purposes of the income thre sholds provided in this
22412241 subparagraph.
22422242 2. a. For taxable years beginning on or before December 31,
22432243 2005, in the case of individua ls who use the standard
22442244 deduction in determining taxable income, there shall
22452245 be added or deducted, as the case may be, the
22462246 difference necessary to allow a standard deduction in
22472247 lieu of the standard deduction allowed by the Internal
22482248 Revenue Code, in an amou nt equal to the larger of
22492249 fifteen percent (15%) of the Oklahoma adjusted gro ss
22502250 income or One Thousand Dollars ($1,000.00), but n ot to
22512251 exceed Two Thousand Dollars ($2,000.00), except that
22522252 in the case of a married individual filing a separate
22532253 return such deduction shall be the larger of fifteen
22542254 percent (15%) of such Oklahoma adjuste d gross income
22552255 or Five Hundred Dollars ($500.00), bu t not to exceed
22562256 the maximum amount of One Thousand Dollars
22572257 ($1,000.00).
22582258 b. For taxable years beginning on or after January 1,
22592259 2006, and before January 1, 2007 , in the case of
22602260 individuals who use the stand ard deduction in
22612261
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23122312 determining taxable income, there s hall be added or
23132313 deducted, as the case may be, the difference necessary
23142314 to allow a standard deduction in lieu of the standard
23152315 deduction allowed by the Interna l Revenue Code, in an
23162316 amount equal to:
23172317 (1) Three Thousand Dollars ($3,000.00), if the filing
23182318 status is married filing joint, head of
23192319 household, or qualifying widow;, or
23202320 (2) Two Thousand Dollars ($2,000.00), if the filing
23212321 status is single or married filing se parate.
23222322 c. For the taxable year beginning on January 1, 2007, and
23232323 ending December 31, 2007, in the case of individuals
23242324 who use the standard deduction in determining taxable
23252325 income, there shall be added or deducted, as the case
23262326 may be, the difference necess ary to allow a standard
23272327 deduction in lieu of the standard deduction allowed by
23282328 the Internal Revenue Code, in an amount equal to:
23292329 (1) Five Thousand Five Hundred Dollars ($5,500.00),
23302330 if the filing status is married filing joint or
23312331 qualifying widow; or,
23322332 (2) Four Thousand One Hundred Twenty-five Dollars
23332333 ($4,125.00) for a head of household ;, or
23342334
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23852385 (3) Two Thousand Seven Hundred Fifty Dollars
23862386 ($2,750.00), if the filing status is single or
23872387 married filing separate.
23882388 d. For the taxable year b eginning on January 1, 2008, a nd
23892389 ending December 31, 2008, in the case o f individuals
23902390 who use the standard deduction in determin ing taxable
23912391 income, there shall be added or deducted, as the case
23922392 may be, the difference necessary to allo w a standard
23932393 deduction in lieu of the standard deduc tion allowed by
23942394 the Internal Revenue Code, in an amount equal to:
23952395 (1) Six Thousand Five Hundred Do llars ($6,500.00), if
23962396 the filing status is married filing joint or
23972397 qualifying widow, or
23982398 (2) Four Thousand Eight Hundred Seventy -five Dollars
23992399 ($4,875.00) for a head of household, or
24002400 (3) Three Thousand Two Hundred Fifty Dollars
24012401 ($3,250.00), if the filing sta tus is single or
24022402 married filing separate.
24032403 e. For the taxable year beginning on January 1, 2009, and
24042404 ending December 31, 2009, in the case of individuals
24052405 who use the standard deduction in determining t axable
24062406 income, there shall be added or deducted, as the case
24072407 may be, the difference necessary to allow a standard
24082408
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24592459 deduction in lieu of the standard deduction allo wed by
24602460 the Internal Revenue Code, in an amount equal to:
24612461 (1) Eight Thousand Five Hundred Dolla rs ($8,500.00),
24622462 if the filing status is married filing j oint or
24632463 qualifying widow, or
24642464 (2) Six Thousand Three Hundred Seventy-five Dollars
24652465 ($6,375.00) for a head of household, or
24662466 (3) Four Thousand Two Hundred Fifty D ollars
24672467 ($4,250.00), if the filing status i s single or
24682468 married filing separate.
24692469 Oklahoma adjusted gross income shall be increased by
24702470 any amounts paid for motor vehicle excise taxes which
24712471 were deducted as allowed by the Internal Revenue Code.
24722472 f. For taxable years beginning on or after January 1,
24732473 2010, and ending on December 31, 2016, in the case of
24742474 individuals who use the standard deduction in
24752475 determining taxable income, there shall be added or
24762476 deducted, as the case may be, the d ifference necessary
24772477 to allow a standard deduction equal to the standard
24782478 deduction allowed by the Internal Revenue Code, based
24792479 upon the amount and filing status prescribed by such
24802480 Code for purposes of filing federal individual income
24812481 tax returns.
24822482
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25332533 g. For taxable years beginning on or aft er January 1,
25342534 2017, in the case of individ uals who use the standard
25352535 deduction in determining taxab le income, there shall
25362536 be added or deducted, as the case may be, the
25372537 difference necessary to allow a stand ard deduction in
25382538 lieu of the standard deduction allo wed by the Internal
25392539 Revenue Code, as follo ws:
25402540 (1) Six Thousand Three Hundred Fifty Dollars
25412541 ($6,350.00) for single or married filing
25422542 separately,
25432543 (2) Twelve Thousand Seven Hundred Dollars
25442544 ($12,700.00) for married filing jointly or
25452545 qualifying widower with dep endent child, and
25462546 (3) Nine Thousand Three Hundred Fifty Dollars
25472547 ($9,350.00) for head of household.
25482548 3. a. In the case of resident and part-year resident
25492549 individuals having adjusted gross income from source s
25502550 both within and with out the state, the itemized or
25512551 standard deductions and personal exempt ions shall be
25522552 reduced to an amount which is the same porti on of the
25532553 total thereof as Oklahoma adjusted gross income is of
25542554 adjusted gross income. To the extent item ized
25552555 deductions include allowable moving expense, pr oration
25562556 of moving expense shall not be r equired or permitted
25572557
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26082608 but allowable moving expense shall be fully deductible
26092609 for those taxpayers moving within or into Oklahoma and
26102610 no part of moving expense shall b e deductible for
26112611 those taxpayers moving without or o ut of Oklahoma.
26122612 All other itemized or s tandard deductions and personal
26132613 exemptions shall be subjec t to proration as provided
26142614 by law.
26152615 b. For taxable years beginning on or after January 1,
26162616 2018, the net amount of itemized deduct ions allowable
26172617 on an Oklahoma income tax return, subject to the
26182618 provisions of paragraph 24 of this subsection, shall
26192619 not exceed Seventeen Thousand Dollars ($17,000.00).
26202620 For purposes of this subparagraph, charitable
26212621 contributions and medical expenses deduc tible for
26222622 federal income tax p urposes shall be excluded from the
26232623 amount of Seventeen Thousand Dollars ($17,000.00) as
26242624 specified by this subparagraph.
26252625 4. A resident individual with a physical disability
26262626 constituting a substantial hand icap to employment may deduct from
26272627 Oklahoma adjusted gross income such expenditures to modif y a motor
26282628 vehicle, home, or workplace as are necessary to c ompensate for his
26292629 or her handicap. A veteran certified by the Department of Veterans
26302630 Affairs of the feder al government as havin g a service-connected
26312631 disability shall be conclusively presumed to be an individual with a
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26832683 physical disability constituting a su bstantial handicap to
26842684 employment. The Tax Commission shall promulgate rules containing a
26852685 list of combinations of common disabil ities and modifications which
26862686 may be presumed to qualify for this ded uction. The Tax Commission
26872687 shall prescribe necessary requi rements for verification.
26882688 5. a. Before July 1, 2010, the first One Thousand Five
26892689 Hundred Dollars ($1,500.0 0) received by any per son
26902690 from the United States as salary or compensation in
26912691 any form, other than retirement benefits, as a member
26922692 of any component of the Armed Forces of the United
26932693 States shall be deducted from taxable income.
26942694 b. On or after July 1, 2010 , one hundred percent (100%)
26952695 of the income received by any person from the United
26962696 States as salary or compensation in any form, other
26972697 than retirement benefits, as a member of any component
26982698 of the Armed Forces of the United States shall be
26992699 deducted from taxable income.
27002700 c. Whenever the filing of a timely inco me tax return by a
27012701 member of the Armed Forces of the United States is
27022702 made impracticable or imposs ible of accomplishment by
27032703 reason of:
27042704 (1) absence from the United States, which term
27052705 includes only the stat es and the District of
27062706 Columbia;,
27072707
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27582758 (2) absence from the State of Oklahoma this state
27592759 while on active duty;, or
27602760 (3) confinement in a hospital within the United
27612761 States for treatment of wounds, injuries, or
27622762 disease,
27632763 the time for filing a return and paying an income tax
27642764 shall be and is hereby ext ended without incurring
27652765 liability for interest or pen alties, to the fifteenth
27662766 day of the third month following the month in whic h:
27672767 (a) Such such individual shall return to the
27682768 United States if the extension is granted
27692769 pursuant to subparagr aph a of this
27702770 paragraph, return to the State of Oklahoma
27712771 this state if the extension is granted
27722772 pursuant to subparagraph b of this paragraph
27732773 or be discharged from such hospital if the
27742774 extension is granted pursuant to
27752775 subparagraph c of this paragraph;, or
27762776 (b) An an executor, administrator, or
27772777 conservator of the estate of t he taxpayer is
27782778 appointed, whichever event occurs the
27792779 earliest.
27802780 Provided, that the Tax Commission may, in its discretion, grant
27812781 any member of the Armed Forces of the United States an extension of
27822782
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28332833 time for filing of income tax r eturns and payment of income t ax
28342834 without incurring liabilities for interest or penalties. Such
28352835 extension may be granted only when in the judgment of the Tax
28362836 Commission a good cause exists therefor and may be for a period in
28372837 excess of six (6) months. A re cord of every such extension g ranted,
28382838 and the reason therefor, shall be kept.
28392839 6. Before July 1, 2010, the salary o r any other form of
28402840 compensation, received from the United States by a member of any
28412841 component of the Armed Forces of t he United States, shal l be
28422842 deducted from taxable inc ome during the time in which the person is
28432843 detained by the enemy in a conflict, is a prisoner of war or is
28442844 missing in action and not deceased; provided, after July 1, 2010,
28452845 all such salary or compensation shall be subject to t he deduction as
28462846 provided pursuant to paragraph 5 of this subsection.
28472847 7. a. An individual taxpayer, whether reside nt or
28482848 nonresident, may deduct an amount equal to the federal
28492849 income taxes paid by the taxpayer during the taxable
28502850 year.
28512851 b. Federal taxes as des cribed in subparagraph a of th is
28522852 paragraph shall be deductible by any individual
28532853 taxpayer, whether resident or no nresident, only to the
28542854 extent they relate to income subject to taxation
28552855 pursuant to the provisions of the Oklahoma Income Tax
28562856 Act. The maximum amount allowable in the prece ding
28572857
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29082908 paragraph shall be prorated on the ratio of the
29092909 Oklahoma adjusted gross income to federal adjusted
29102910 gross income.
29112911 c. For the purpose of this paragraph, “federal income
29122912 taxes paid” shall mean federal i ncome taxes, surtaxes
29132913 imposed on incomes or excess p rofits taxes, as though
29142914 the taxpayer was on the accrual basis. In determining
29152915 the amount of deduction for federal income taxes for
29162916 tax year 2001, the amount of the deduction shall not
29172917 be adjusted by the amount of any accelera ted ten
29182918 percent (10%) tax rate bracket credit or advanced
29192919 refund of the credit received during the tax year
29202920 provided pursuant to the federal Economic Growth and
29212921 Tax Relief Reconciliation Act of 2001, P.L. No. 107-
29222922 16, and the advanced refund of such credit shall not
29232923 be subject to taxati on.
29242924 d. The provisions of this paragraph shall apply to all
29252925 taxable years ending aft er December 31, 1978, and
29262926 beginning before January 1, 2006.
29272927 8. a. Retirement benefits not to exceed Five Thousand Five
29282928 Hundred Dollars ($5,500.00 ) for the 2004 tax year,
29292929 Seven Thousand Five Hundred Dollars ($7,500.00) for
29302930 the 2005 tax year and Ten Thousand D ollars
29312931 ($10,000.00) for the 2006 tax year and all subsequent
29322932
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29832983 tax years, which are received by an individual from
29842984 the civil service of the Unite d States, the Oklahoma
29852985 Public Employees Retirement System, the Teachers ’
29862986 Retirement System of Oklahoma, the Oklah oma Law
29872987 Enforcement Retirement System, the Oklahoma
29882988 Firefighters Pension and Retirement System, the
29892989 Oklahoma Police Pensi on and Retirement Syst em, the
29902990 employee retirement systems created by counties
29912991 pursuant to Section 951 et seq. of Title 19 of the
29922992 Oklahoma Statutes, the Uniform Retirement System for
29932993 Justices and Judges, the Oklahoma Wildlife
29942994 Conservation Department Retirem ent Fund, the Oklahoma
29952995 Employment Security Commis sion Retirement Plan, or the
29962996 employee retirement systems created by municipalities
29972997 pursuant to Section 48-101 et seq. of Title 11 of the
29982998 Oklahoma Statutes shall be exempt from taxable income.
29992999 b. Retirement benefits not to exceed Five Thousand Five
30003000 Hundred Dollars ($5,500.00) for tax year 2004, Seven
30013001 Thousand Five Hundred Dollars ($7,500.00) for tax year
30023002 2005, Ten Thousand Dollars ($10,000.00) fo r tax years
30033003 2006 through 2023, and all retirement benefits for tax
30043004 year 2024 and subsequent tax years, which are received
30053005 by an individual from the Teachers’ Retirement System
30063006 of Oklahoma shall be exempt from taxable income.
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30583058 9. In taxable years beginning after December 3l, 1984, Social
30593059 Security benefits received by an individual shall be e xempt from
30603060 taxable income, to the extent such benefits are included in the
30613061 federal adjusted gross income pursuant to the provisions of Section
30623062 86 of the Internal Revenue Code, 26 U.S.C., Section 86.
30633063 10. For taxable years beginning after December 31, 1994, lump-
30643064 sum distributions from employer plans of deferred compensation,
30653065 which are not qualified plans within the meaning of Section 401(a)
30663066 of the Internal Revenue Code, 26 U.S.C., Section 401(a), and which
30673067 are deposited in and accounted for within a separate bank account or
30683068 brokerage account in a financial institution within this state,
30693069 shall be excluded from taxable income in the same manner as a
30703070 qualifying rollover contribution to an individual retirement ac count
30713071 within the meaning of Section 408 of the Int ernal Revenue Code, 26
30723072 U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
30733073 account, including any earnings thereon, shall be included in
30743074 taxable income when withdrawn in the same manner as w ithdrawals from
30753075 individual retirement accounts wit hin the meaning of Section 4 08 of
30763076 the Internal Revenue Code.
30773077 11. In taxable years beginning after December 31, 1995,
30783078 contributions made to and interest r eceived from a medical savings
30793079 account established p ursuant to Sections 2621 through 2623 of Title
30803080 63 of the Oklahoma Statutes sha ll be exempt from taxable income.
30813081
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31323132 12. For taxable years beginning after December 31, 1996, the
31333133 Oklahoma adjusted gross income of any individual taxpayer who is a
31343134 swine or poultry producer may be further adjusted for the deducti on
31353135 for depreciation allowed for new construction or expansion costs
31363136 which may be computed using the same depreciation method elected for
31373137 federal income tax purposes except that the useful life shall be
31383138 seven (7) years for purposes of this paragraph. If de preciation is
31393139 allowed as a deduction in determining the adjusted gross income of
31403140 an individual, any depreciation calculated and claimed pursuant to
31413141 this section shall in no event be a duplication of any dep reciation
31423142 allowed or permitted on the federal inco me tax return of the
31433143 individual.
31443144 13. a. In taxable years beginning after December 31, 2002,
31453145 nonrecurring adoption expenses paid by a resident
31463146 individual taxpayer in connection with:
31473147 (1) the adoption of a mi nor, or
31483148 (2) a proposed adoption of a minor which d id not
31493149 result in a decreed a doption,
31503150 may be deducted from the Oklahoma adjusted gross
31513151 income.
31523152 b. The deductions for adoptions and proposed adoptions
31533153 authorized by this paragraph shall not exceed Twenty
31543154 Thousand Dollars ($20,000.00) per calendar year.
31553155
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32063206 c. The Tax Commission shall promu lgate rules to implement
32073207 the provisions of this paragraph which shall contain a
32083208 specific list of nonrecurring adoption expense s which
32093209 may be presumed to qualify for the deduction . The Tax
32103210 Commission shall prescribe necessary re quirements for
32113211 verification.
32123212 d. “Nonrecurring adoption expenses” means adoption fees,
32133213 court costs, medical expenses, attorney fees, and
32143214 expenses which are directly related to the legal
32153215 process of adoption of a child including, but not
32163216 limited to, costs rel ating to the adoption study,
32173217 health and psychological examinations, transportation,
32183218 and reasonable costs of lodging and food for the child
32193219 or adoptive parents which are incurred to complete the
32203220 adoption process and are not reimbursed by other
32213221 sources. The term “nonrecurring adoption expenses”
32223222 shall not include attorney fees incurred for the
32233223 purpose of litigating a contested adoption, from and
32243224 after the point of the initiation of the contest,
32253225 costs associated with physical remodeling, renovation
32263226 and alteration of the adoptive parents ’ home or
32273227 property, except for a special needs child as
32283228 authorized by the court.
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32803280 14. a. In taxable years beginning before January 1, 2005,
32813281 retirement benefits not to exceed the amou nts
32823282 specified in this paragraph, which are rec eived by an
32833283 individual sixty-five (65) years of age or older and
32843284 whose Oklahoma adjusted gross income is Twenty-five
32853285 Thousand Dollars ($25,000.00) or less if the filing
32863286 status is single, head of household, or m arried filing
32873287 separate, or Fifty Thousand Doll ars ($50,000.00) or
32883288 less if the filing status is married filing joint or
32893289 qualifying widow, shall be exempt from taxable income.
32903290 In taxable years beginning af ter December 31, 2004,
32913291 retirement benefits not to ex ceed the amounts
32923292 specified in this paragraph, which are received by an
32933293 individual whose Oklahoma adjusted gross income is
32943294 less than the qualifying amount specified in this
32953295 paragraph, shall be exempt from taxable income.
32963296 b. For purposes of this paragraph, t he qualifying amount
32973297 shall be as follows:
32983298 (1) in taxable years beginning a fter December 31,
32993299 2004, and prior to January 1, 2007, the
33003300 qualifying amount shall be Thirty-seven Thousand
33013301 Five Hundred Dollars ($ 37,500.00) or less if the
33023302 filing status is single, h ead of household, or
33033303 married filing separate, or Seventy-five Thousand
33043304
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33553355 Dollars ($75,000.00) or less if the filing status
33563356 is married filing jointly or qualifying widow,
33573357 (2) in the taxable year beginning Ja nuary 1, 2007,
33583358 the qualifying amount shall be Fifty Thousand
33593359 Dollars ($50,000.00) or less if the f iling status
33603360 is single, head of household, or married filing
33613361 separate, or One Hundred Thousand Dollars
33623362 ($100,000.00) or less if the filing status is
33633363 married filing jointly or qualifying widow,
33643364 (3) in the taxable year beginning January 1, 2008,
33653365 the qualifying amount shall be Sixty -two Thousand
33663366 Five Hundred Dollars ($62,500.00) or less if the
33673367 filing status is single, head of household, or
33683368 married filing separate, or One Hundred Twenty-
33693369 five Thousand Dollars ($125,0 00.00) or less if
33703370 the filing status is married filing jointly or
33713371 qualifying widow,
33723372 (4) in the taxable year beginning January 1, 2009,
33733373 the qualifying amount shall be One Hundred
33743374 Thousand Dollars ($100,000. 00) or less if the
33753375 filing status is single, head of household, or
33763376 married filing separate, or Two Hundred Thousand
33773377 Dollars ($200,000.00) or less if the filing
33783378
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34293429 status is married filing jointly or qualifying
34303430 widow, and
34313431 (5) in the taxable year beginning Janua ry 1, 2010,
34323432 and subsequent taxable years, there shal l be no
34333433 limitation upon the qualifying amount.
34343434 c. For purposes of this par agraph, “retirement benefits”
34353435 means the total distributions or withdrawals from the
34363436 following:
34373437 (1) an employee pension benefit pla n which satisfies
34383438 the requirements of Section 401 of the Internal
34393439 Revenue Code, 26 U.S.C., Section 401,
34403440 (2) an eligible deferred compensation plan that
34413441 satisfies the requirements of Section 457 of the
34423442 Internal Revenue Code, 26 U.S.C., Section 457,
34433443 (3) an individual retirement account, annuity or
34443444 trust, or simplified employee pension that
34453445 satisfies the requirements of Section 408 of the
34463446 Internal Revenue Code, 26 U.S.C., Section 408,
34473447 (4) an employee annuity subject to the provisions of
34483448 Section 403(a) or (b) of the Internal Revenue
34493449 Code, 26 U.S.C., Section 403(a ) or (b),
34503450 (5) United States Retirement Bonds which satisfy the
34513451 requirements of Section 86 of the Internal
34523452 Revenue Code, 26 U.S.C., Section 86, or
34533453
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35043504 (6) lump-sum distributions from a retirement plan
35053505 which satisfies the requirements of Section
35063506 402(e) of the Internal Revenue Code, 26 U.S.C.,
35073507 Section 402(e).
35083508 d. The amount of the exem ption provided by this paragraph
35093509 shall be limited to Five Thousand Five Hundre d Dollars
35103510 ($5,500.00) for the 2004 tax year, Seven Th ousand Five
35113511 Hundred Dollars ($7,500.00) for the 2005 tax year and
35123512 Ten Thousand Dollars ($10,000.0 0) for the tax year
35133513 2006 and for all subsequent tax years. Any individual
35143514 who claims the exemption provid ed for in paragraph 8
35153515 of this subsection shall not be permitted to claim a
35163516 combined total exemption pursu ant to this paragraph
35173517 and paragraph 8 of this subsection in an amount
35183518 exceeding Five Thousand Five Hundred Dollars
35193519 ($5,500.00) for the 2004 tax year, S even Thousand Five
35203520 Hundred Dollars ($7,500.00) for th e 2005 tax year and
35213521 Ten Thousand Dollars ($10,000.00 ) for the 2006 tax
35223522 year and all subsequent ta x years.
35233523 15. In taxable years beginning after December 31, 1999, for an
35243524 individual engaged in production agriculture who has filed a
35253525 Schedule F form with the taxpayer’s federal income tax return for
35263526 such taxable year, there shall be excluded from taxable income any
35273527 amount which was included as federal taxable income or federal
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35793579 adjusted gross income and which consists of the discharge of an
35803580 obligation by a credi tor of the taxpayer incurred to finance the
35813581 production of agricultural products.
35823582 16. In taxable years beginning December 31, 2000, an amount
35833583 equal to one hundred percent (100%) of the amount of any scho larship
35843584 or stipend received from participation in the Oklahoma Police Corps
35853585 Program, as established in Se ction 2-140.3 of Title 47 of the
35863586 Oklahoma Statutes shall be exempt from t axable income.
35873587 17. a. In taxable years beginning after December 31, 2001,
35883588 and before January 1, 2005, there shall be allowed a
35893589 deduction in the amount of contributions to accounts
35903590 established pursuant to the Oklahoma College Sav ings
35913591 Plan Act. The deductio n shall equal the amount of
35923592 contributions to accounts, but in no event shall t he
35933593 deduction for each contributor exceed Two Thousand
35943594 Five Hundred Dollars ($2,500.00) each taxable year for
35953595 each account.
35963596 b. In taxable years beginni ng after December 31, 2004,
35973597 each taxpayer shall be allowed a deduction for
35983598 contributions to accounts estab lished pursuant to the
35993599 Oklahoma College Savings Plan Act. The maximum annual
36003600 deduction shall equal the a mount of contributions to
36013601 all such accounts plus any contributions to suc h
36023602 accounts by the taxpayer for prior taxable years after
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36543654 December 31, 2004, wh ich were not deducted, but in no
36553655 event shall the dedu ction for each tax year exceed Ten
36563656 Thousand Dollars ($10,000.00) for each individual
36573657 taxpayer or Twenty Thousand Dollars ($20 ,000.00) for
36583658 taxpayers filing a joint return. Any amount of a
36593659 contribution that is not deducted by the taxpayer in
36603660 the year for which the contribution is made may be
36613661 carried forward as a deduction from income for the
36623662 succeeding five (5) years. For taxabl e years
36633663 beginning after December 31, 2005, deductions may be
36643664 taken for contributions and rollovers made during a
36653665 taxable year and up to April 15 of the succeeding
36663666 year, or the due dat e of a taxpayer’s state income tax
36673667 return, excluding extensions, whicheve r is later.
36683668 Provided, a deduction for the same contribution may
36693669 not be taken for two (2) different taxable years.
36703670 c. In taxable years beginning after December 31, 2006,
36713671 deductions for contributions made pursuant to
36723672 subparagraph b of this paragraph shall b e limited as
36733673 follows:
36743674 (1) for a taxpayer who qualified for the five-year
36753675 carryforward election and who takes a rollover or
36763676 nonqualified withdrawal during that period, the
36773677 tax deduction otherwise available pursuant to
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37293729 subparagraph b of this paragraph shall be reduced
37303730 by the amount which is equal to the rollover or
37313731 nonqualified withdrawal, and
37323732 (2) for a taxpayer who elects to take a rol lover or
37333733 nonqualified withdrawal within the same tax year
37343734 in which a contribution was made to the
37353735 taxpayer’s account, the tax deduction otherwise
37363736 available pursuant to subparagraph b of this
37373737 paragraph shall be reduced by the amount of the
37383738 contribution which is equal to the rollover or
37393739 nonqualified withdrawa l.
37403740 d. If a taxpayer elects to take a rollover on a
37413741 contribution for which a deduction has been tak en
37423742 pursuant to subparagraph b of this paragraph withi n
37433743 one (1) year of the date of contribution, the amoun t
37443744 of such rollover shall be included in the adjusted
37453745 gross income of the taxpayer in the taxable year of
37463746 the rollover.
37473747 e. If a taxpayer makes a nonqua lified withdrawal of
37483748 contributions for which a deduct ion was taken pursuant
37493749 to subparagraph b of this para graph, such nonqualified
37503750 withdrawal and any earnings thereon shall be included
37513751 in the adjusted gross income of the taxpayer i n the
37523752 taxable year of the nonqualified withdrawal.
37533753
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38043804 f. As used in this paragrap h:
38053805 (1) “non-qualified withdrawal” means a withdrawal
38063806 from an Oklahoma College Savings Plan account
38073807 other than one of the following:
38083808 (a) a qualified withdrawal,
38093809 (b) a withdrawal made as a result of the de ath
38103810 or disability of the designated beneficiary
38113811 of an account,
38123812 (c) a withdrawal that is made on the accoun t of
38133813 a scholarship or the allowance or payment
38143814 described in Section 135(d)(1)(B) or (C) or
38153815 by the Internal Revenue Code, received by
38163816 the designated beneficiary to the extent the
38173817 amount of the refund does not exceed the
38183818 amount of the scholarship, allowance, or
38193819 payment, or
38203820 (d) a rollover or change of designat ed
38213821 beneficiary as permitted by subsection F o f
38223822 Section 3970.7 of Tit le 70 of Oklahoma
38233823 Statutes, and
38243824 (2) “rollover” means the transfer of funds from the
38253825 Oklahoma College Savings Plan to any other plan
38263826 under Section 529 of the Internal Revenue Code.
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38783878 18. For tax years 2006 through 2021, retirement benefits
38793879 received by an individual from any component of the Armed Forces of
38803880 the United States in an amount no t to exceed the greater of seventy-
38813881 five percent (75%) of such be nefits or Ten Thousand Dollars
38823882 ($10,000.00) shall be exempt from taxable income but in no case less
38833883 than the amount of the exemption provided by paragraph 14 of t his
38843884 subsection. For tax year 2022 and subsequent tax years, retirement
38853885 benefits received by a n individual from any component of the A rmed
38863886 Forces of the United States shall be exem pt from taxable income.
38873887 19. For taxable years beginning after December 31, 2006,
38883888 retirement benefits rece ived by federal civil service retirees,
38893889 including survivor annui ties, paid in lieu of Social Security
38903890 benefits shall be exempt from taxable income to the extent such
38913891 benefits are included in the federal adjusted gross income p ursuant
38923892 to the provisions of S ection 86 of the Internal Revenue Code, 26
38933893 U.S.C., Section 86, a ccording to the following schedule:
38943894 a. in the taxable year beginning January 1, 2007, twenty
38953895 percent (20%) of such benefits shall be exempt,
38963896 b. in the taxable year beginning January 1, 2008, f orty
38973897 percent (40%) of such benefits shall be exempt,
38983898 c. in the taxable year beginning January 1, 2009, s ixty
38993899 percent (60%) of such benefits shall be e xempt,
39003900 d. in the taxable year beginning January 1, 2010, eighty
39013901 percent (80%) of such benefits shall be ex empt, and
39023902
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39533953 e. in the taxable year beginning January 1, 2011, and
39543954 subsequent taxable years, one hundred pe rcent (100%)
39553955 of such benefits shall be exempt.
39563956 20. a. For taxable years beginning after December 31, 2007, a
39573957 resident individual may deduct up to Ten Th ousand
39583958 Dollars ($10,000.00) from Oklahoma adjusted gross
39593959 income if the individual, or the dependent of t he
39603960 individual, while living, donates one or m ore human
39613961 organs of the individual to another human being for
39623962 human organ transplantation. As used in this
39633963 paragraph, “human organ” means all or part of a liver,
39643964 pancreas, kidney, intestine, lung, or bone marro w. A
39653965 deduction that is claimed under this pa ragraph may be
39663966 claimed in the taxable year in which the human organ
39673967 transplantation occurs.
39683968 b. An individual may claim this deduction only once, and
39693969 the deduction may be claimed only for unreimbursed
39703970 expenses that are incurred by the individual and
39713971 related to the organ donation of the individual.
39723972 c. The Oklahoma Tax Commission shal l promulgate rules to
39733973 implement the provisions of this paragraph which shall
39743974 contain a specific list of expenses which may be
39753975 presumed to qualify for the deduction. The Tax
39763976
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40274027 Commission shall prescribe necessary requirements for
40284028 verification.
40294029 21. For taxable years beginning after Decem ber 31, 2009, there
40304030 shall be exempt from taxable income any amo unt received by the
40314031 beneficiary of the de ath benefit for an emergency medical technici an
40324032 or a registered emergency medical responder provided by Section 1-
40334033 2505.1 of Title 63 of the Oklahoma Sta tutes.
40344034 22. For taxable years beginning after December 31, 2008 ,
40354035 taxable income shall be increased by any unemployment compensation
40364036 exempted under Section 85(c) of the Internal Revenue Code, 26
40374037 U.S.C., Section 85(c)(2009).
40384038 23. For taxable years beginning after December 31, 2008, there
40394039 shall be exempt from taxable inc ome any payment in an amou nt less
40404040 than Six Hundred Dollars ($600.00) received by a per son as an award
40414041 for participation in a competitive livestock show event. For
40424042 purposes of this paragraph, t he payment shall be treated as a
40434043 scholarship amount paid by the entity sponsoring the eve nt and the
40444044 sponsoring entity shall cause the payment to be c ategorized as a
40454045 scholarship in its books and records.
40464046 24. For taxable years beginning on or after January 1, 2016,
40474047 taxable income shall be increased by any amount of sta te and local
40484048 sales or income taxes deducted under 26 U.S.C., Section 164 of the
40494049 Internal Revenue Code. If the amount of state and local taxes
40504050 deducted on the fede ral return is limited, taxable income on the
40514051
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41024102 state return shall be increased only by the amou nt actually deducted
41034103 after any such limitations are applied.
41044104 25. For taxable years be ginning after December 31, 2020, each
41054105 taxpayer shall be allowed a deduction f or contributions to accounts
41064106 established pursuant to the Achieving a Better Life Experience
41074107 (ABLE) Program as established in Section 40 01.1 et seq. of Title 56
41084108 of the Oklahoma Statutes. For any tax year, the deduction provided
41094109 for in this paragraph shall not exceed Ten Thousand Dollar s
41104110 ($10,000.00) for an individual taxpayer or Twenty Thousand Do llars
41114111 ($20,000.00) for taxpayers filing a joint return. Any amount of
41124112 contribution not deducted by the taxpayer in the tax year for which
41134113 the contribution is made may be carried forward as a d eduction from
41144114 income for up to five (5) tax years. Deductions may be taken for
41154115 contributions made during the tax year and through April 15 of the
41164116 succeeding tax year, or through the due date of a taxpayer’s state
41174117 income tax return excluding extensions, wh ichever is later.
41184118 Provided, a deduction for the same contribut ion may not be taken in
41194119 more than one (1) tax year.
41204120 F. 1. For taxable years beginnin g after December 31, 2004, a
41214121 deduction from the Oklahoma adjusted gross income of any individual
41224122 taxpayer shall be allowed for qualifying gains receiving capital
41234123 treatment that are included in the federal adjuste d gross income of
41244124 such individual taxpayer d uring the taxable year.
41254125 2. As used in this subsection:
41264126
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41774177 a. “qualifying gains receiving capital treatment” means
41784178 the amount of net capital gains, as defined in Section
41794179 1222(11) of the Internal Revenue Code, includ ed in an
41804180 individual taxpayer’s federal income tax return that
41814181 result from:
41824182 (1) the sale of real property or tangible personal
41834183 property located within Oklahoma that has been
41844184 directly or indirectly owned by the indiv idual
41854185 taxpayer for a holding period of at least five
41864186 (5) years prior to the date of the transaction
41874187 from which such net capital gains arise,
41884188 (2) the sale of stock or the sale of a direct or
41894189 indirect ownership interest in an Oklahoma
41904190 company, limited liabil ity company, or
41914191 partnership where such st ock or ownership
41924192 interest has been directl y or indirectly owned by
41934193 the individual taxpayer for a holding period of
41944194 at least two (2) years prior to the date of the
41954195 transaction from which the net capital gains
41964196 arise, or
41974197 (3) the sale of real property, tangib le personal
41984198 property, or intangible persona l property located
41994199 within Oklahoma as part of the sale of all or
42004200 substantially all of the assets of an Oklahoma
42014201
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42524252 company, limited liability company, or
42534253 partnership, or an Oklahoma proprietorship
42544254 business enterprise w here such property has been
42554255 directly or indirectly owned by such entity or
42564256 business enterprise or owned by the owners of
42574257 such entity or business enterprise for a period
42584258 of at least two (2) years prior to the date o f
42594259 the transaction from which the net capit al gains
42604260 arise,
42614261 b. “holding period” means an uninterrupted period of
42624262 time. The holding period shall include any additional
42634263 period when the property was held by another
42644264 individual or entity, if such additional period is
42654265 included in the taxpayer’s holding period for the
42664266 asset pursuant to the Internal Revenue Code,
42674267 c. “Oklahoma company,” company”, “limited liability
42684268 company,” company”, or “partnership” means an entity
42694269 whose primary headquarters have been located in
42704270 Oklahoma for at least thr ee (3) uninterrupted years
42714271 prior to the date of the transaction from wh ich the
42724272 net capital gains arise,
42734273 d. “direct” means the individual taxpayer directly owns
42744274 the asset,
42754275
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43264326 e. “indirect” means the individual taxpayer owns an
43274327 interest in a pass-through entity (or chain of pass-
43284328 through entities) that sells the asset that gives ri se
43294329 to the qualifying gains receiving capital treatment.
43304330 (1) With respect to sales of real property or
43314331 tangible personal property located within
43324332 Oklahoma, the deduction described in this
43334333 subsection shall not apply unless the pass-
43344334 through entity that makes t he sale has held the
43354335 property for not less than five (5) uninterrupted
43364336 years prior to the date of the transacti on that
43374337 created the capital gain, and each pass-through
43384338 entity included in the chain of ownership has
43394339 been a member, partner, or shareholder of t he
43404340 pass-through entity in the tier immediately below
43414341 it for an uninterrupted period of not less than
43424342 five (5) years.
43434343 (2) With respect to sales of sto ck or ownership
43444344 interest in or sales of all or substantially all
43454345 of the assets of an Oklahoma company, limi ted
43464346 liability company, partnership, or Oklahoma
43474347 proprietorship business enterprise, the deduction
43484348 described in this subsection shall not apply
43494349 unless the pass-through entity that makes the
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44014401 sale has held the stock or ownership interest for
44024402 not less than two (2) uninterrupted years prior
44034403 to the date of the transaction that created the
44044404 capital gain, and each pass -through entity
44054405 included in the chain of own ership has been a
44064406 member, partner, or shareholder of the pass-
44074407 through entity in the tier immediately below it
44084408 for an uninterrupted period of not less than two
44094409 (2) years. For purposes of this division,
44104410 uninterrupted ownership prior to July 1, 2007,
44114411 shall be included in the determination of the
44124412 required holding period prescribed by this
44134413 division, and
44144414 f. “Oklahoma proprietorship business enterprise” means a
44154415 business enterprise whose income and expenses have
44164416 been reported on Schedule C or F of an individual
44174417 taxpayer’s federal income tax return, or any similar
44184418 successor schedule published by the Internal Revenue
44194419 Service and whose primary headquarters have been
44204420 located in Oklahoma for at least three (3)
44214421 uninterrupted years p rior to the date of the
44224422 transaction from which the net capital gains arise .
44234423 G. 1. For purposes of computing its Oklahoma taxable income
44244424 under this section, the dividends-paid deduction otherwise allowed
44254425
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44764476 by federal law in computing net income of a real es tate investment
44774477 trust that is subject to federal income tax shall be added back in
44784478 computing the tax imposed by this state under this title if the real
44794479 estate investment trust is a captive real estate investment trust.
44804480 2. For purposes of computing its Okl ahoma taxable income under
44814481 this section, a taxpayer shall add back otherwi se deductible rents
44824482 and interest expenses paid to a captive real estate investment trust
44834483 that is not subject to the provisions of paragraph 1 of this
44844484 subsection. As used in this sub section:
44854485 a. the term “real estate investment trust” or “REIT”
44864486 means the meaning ascribed to such term in Section 856
44874487 of the Internal Revenue Code,
44884488 b. the term “captive real estate investment trust” means
44894489 a real estate investment trust, the shares or
44904490 beneficial interests of which are not regularl y traded
44914491 on an established securit ies market and more than
44924492 fifty percent (50%) of the voting power or valu e of
44934493 the beneficial interests or shares of which are owned
44944494 or controlled, directly or indirectly, or
44954495 constructively, by a single entity that is:
44964496 (1) treated as an association taxable a s a
44974497 corporation under the Int ernal Revenue Code, and
44984498
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45494549 (2) not exempt from federal income tax pursuant t o
45504550 the provisions of Section 501(a) of the Internal
45514551 Revenue Code.
45524552 The term shall not include a real estate investment
45534553 trust that is intended to be regularl y traded on an
45544554 established securities market, and that satisfies the
45554555 requirements of Section 856(a)(5) and (6) of the U.S.
45564556 Internal Revenue Code by reason of Section 856(h)(2)
45574557 of the Internal Revenue Code,
45584558 c. the term “association taxable as a corporation ” shall
45594559 not include the following entities:
45604560 (1) any real estate inve stment trust as defined in
45614561 paragraph a of this subsection other than a
45624562 “captive real estate investment trust”, or
45634563 (2) any qualified real estate investment trust
45644564 subsidiary under Section 856 (i) of the Internal
45654565 Revenue Code, other than a qualified REIT
45664566 subsidiary of a “captive captive real estate
45674567 investment trust”, or trust,
45684568 (3) any Listed Australian Property Trust (meaning an
45694569 Australian unit trust registered as a “Managed
45704570 Investment Scheme” under the Australian
45714571 Corporations Act in which the principa l class of
45724572 units is listed on a recognized stock exchange i n
45734573
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46244624 Australia and is regularly traded on an
46254625 established securities market), or an entity
46264626 organized as a trust, pr ovided that a Listed
46274627 Australian Property Trust owns or controls,
46284628 directly or indirectl y, seventy-five percent
46294629 (75%) or more of the voting power o r value of the
46304630 beneficial interests or shares of such trust, or
46314631 (4) any Qualified Foreig n Entity, meaning a
46324632 corporation, trust, association or partnership
46334633 organized outside the laws of the United S tates
46344634 and which satisfies the following criteria:
46354635 (a) at least seventy-five percent (75%) of the
46364636 entity’s total asset value at the close of
46374637 its taxable year is represente d by real
46384638 estate assets, as defined in Section
46394639 856(c)(5)(B) of the Internal Revenue Co de,
46404640 thereby including shares or certificates of
46414641 beneficial interest in any real estate
46424642 investment trust, cash and cash equivalents,
46434643 and U.S. Government securities,
46444644 (b) the entity receives a dividend-paid
46454645 deduction comparable to Section 561 of the
46464646 Internal Revenue Code, or is exempt from
46474647 entity level tax,
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46994699 (c) the entity is required to distribute at
47004700 least eighty-five percent (85%) of its
47014701 taxable income, as computed in the
47024702 jurisdiction in which it is organized, to
47034703 the holders of its shares or certificates of
47044704 beneficial interest on an annual basis,
47054705 (d) not more than ten percent (10%) of the
47064706 voting power or value in such entity is held
47074707 directly or indirect ly or constructively by
47084708 a single entity or individual, or the shares
47094709 or beneficial interests of such entity a re
47104710 regularly traded on an established
47114711 securities market, an d
47124712 (e) the entity is organized in a country which
47134713 has a tax treaty with the United States .
47144714 3. For purposes of t his subsection, the constructive ownership
47154715 rules of Section 318(a) of the Internal Rev enue Code, as modified by
47164716 Section 856(d)(5) of the Internal Revenue Code, shall apply in
47174717 determining the ownership of stock, assets, or net profits of any
47184718 person.
47194719 4. A real estate investment trust that does not become
47204720 regularly traded on an established se curities market within one (1)
47214721 year of the date on which it first becomes a real estate investment
47224722 trust shall be deemed not to have been regularly traded on an
47234723
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47744774 established securities market, retroactive to the date it first
47754775 became a real estate investment trust, and shall file an amended
47764776 return reflecting such re troactive designation for any tax year or
47774777 part year occurring during its initial year of status as a real
47784778 estate investment trust. For purposes of this subsection, a re al
47794779 estate investment trust b ecomes a real estate investment trust on
47804780 the first day it has both met the requirements of Section 856 of the
47814781 Internal Revenue Code and has elected to be treated as a rea l estate
47824782 investment trust pursuant to Section 856(c)(1) of the Internal
47834783 Revenue Code.
47844784 SECTION 2. This act shall become effective November 1, 2023.
47854785
47864786 59-1-1165 QD 1/18/2023 5:09:49 PM