Req. No. 7141 Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 STATE OF OKLAHOMA 1st Session of the 59th Le gislature (2023) HOUSE BILL 2285 By: Lepak AS INTRODUCED An Act relating to revenue and taxation; amending 68 O.S. 2021, Section 2355, as amended by Section 45, Chapter 228, O.S.L. 2022 , (68 O.S. Supp. 2022, Section 2355), which relates to income tax rates; modifying income tax rate for individuals; providing for certain determination related to total collections for the General Revenue Fund of the State Treasury; prescribing method for computations; providing for reduction of individual inc ome tax rates; imposing duties on State Board of Equalization; imposing limit on reductions based on revenue determinations; providing for individual income tax rate after successive rate reductions; amending 68 O.S. 2021, Section 2358, as amended by Section 2, Chapter 341, O.S.L. 2022 (68 O.S. Supp. 2022, Section 2358), which re lates to computation of Oklahoma adjusted gross income; modifying standard deduction amounts; and providing an effective date . BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA: SECTION 1. AMENDATORY 68 O.S. 2021, Section 2355, as amended by Section 45, Chapter 228, O.S.L. 2022 (68 O.S. Supp. 2022, Section 2355), is amended to read as follows: Section 2355. A. Individuals. For all taxable years beginning after December 31, 1998, and before January 1, 2006, a tax is hereby Req. No. 7141 Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 imposed upon the Oklahoma taxable income of every resident or nonresident individual, which tax shall be computed at the option of the taxpayer under one of the two following methods: 1. METHOD 1. a. Single individuals and married individuals filing separately not deducting federal income tax: (1) 1/2% tax on first $1,000.00 or part thereof, (2) 1% tax on next $1,500.00 or part thereof, (3) 2% tax on next $1,250.00 or part thereof, (4) 3% tax on next $1,150 .00 or part thereof, (5) 4% tax on next $1,300.00 or part th ereof, (6) 5% tax on next $1,50 0.00 or part thereof, (7) 6% tax on next $2,300.00 or part thereof, and (8) (a) for taxable years beginning after December 31, 1998, and before January 1, 2002, 6.75 % tax on the remainder, (b) for taxable years beginning on o r after January 1, 2002, and be fore January 1, 2004, 7% tax on the remainder, and (c) for taxable years beginni ng on or after January 1, 2004, 6.65% tax on the remainde r. b. Married individuals fi ling jointly and surviving spouse to the extent and in the m anner that a surviving spouse is permitted to file a joint return Req. No. 7141 Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 under the provisions of the Internal Revenue Code and heads of households as defined in the Internal Revenue Code not deducting fe deral income tax: (1) 1/2% tax on first $2,000.00 or part th ereof, (2) 1% tax on next $3,00 0.00 or part thereof, (3) 2% tax on next $2,500.00 or part thereof, (4) 3% tax on next $2,300.00 or part thereof, (5) 4% tax on next $2,400.00 or part thereof, (6) 5% tax on next $2,800.00 or part thereof, (7) 6% tax on next $6,000.00 or part thereof, and (8) (a) for taxable years beginning after December 31, 1998, and before January 1, 2002, 6.75% tax on the remainder, (b) for taxable years beginning on or after January 1, 2002, and before January 1, 2004, 7% tax on the remainder, and (c) for taxable years beginning on or after January 1, 2004, 6.65% tax on the remainder. 2. METHOD 2. a. Single individuals and married individu als filing separately deducting federal i ncome tax: (1) 1/2% tax on first $1,000.00 or part thereof, (2) 1% tax on next $1,500.00 or part thereof, (3) 2% tax on next $1,250.00 or part thereof, Req. No. 7141 Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (4) 3% tax on next $1,150.00 or part thereof, (5) 4% tax on next $1,200.00 or part thereof, (6) 5% tax on next $1,400.00 or part thereof, (7) 6% tax on next $1,500. 00 or part thereof, (8) 7% tax on next $1,500.00 or part thereof, (9) 8% tax on next $2,000.00 or part thereof, (10) 9% tax on next $3,500.00 or part thereof, and (11) 10% tax on the remainder. b. Married individuals filing jointly and surviving spouse to the extent and in the manner th at a surviving spouse is permitted to file a joint return under the provisions of the Internal Revenue Code and heads of households as defined in the Internal Revenu e Code deducting federal income tax: (1) 1/2% tax on the first $2,000.00 or part thereof, (2) 1% tax on the next $3,000.00 or part thereof, (3) 2% tax on the next $2,500.00 or part thereof, (4) 3% tax on the next $1,400.00 or part thereof, (5) 4% tax on the next $1,500.00 or part thereof, (6) 5% tax on the next $1, 600.00 or part thereof, (7) 6% tax on the next $1,250.00 or part thereof, (8) 7% tax on the next $1,750.00 or part thereof, (9) 8% tax on the next $3,000.00 or part thereof, (10) 9% tax on the next $6,000.00 or part thereof, and Req. No. 7141 Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (11) 10% tax on the remaind er. B. Individuals. For all taxable years beginning on or after January 1, 2008, and ending any tax year which begins after December 31, 2015, for which the determination required pursuant to Se ctions 4 and 5 of this act is made by the State Board of Equ alization, a tax is hereby imposed upon the Oklahoma taxable income of every resident or nonresident individual, which tax shall be computed as follows: 1. Single individuals and married individu als filing separately: (a) 1/2% tax on first $1,000.00 or pa rt thereof, (b) 1% tax on next $1,500.00 or part thereof, (c) 2% tax on next $1,250.00 or part thereof, (d) 3% tax on next $1,150.00 or part thereof, (e) 4% tax on next $2,300.00 or part thereof, (f) 5% tax on next $1,500.00 or part thereof, (g) 5.50% tax on the remainder for the 2008 t ax year and any subsequent tax year unless the rate prescribed by subparagraph (h) of this paragraph is in effect, and (h) 5.25% tax on the remainder for the 2009 an d subsequent tax years. The decrease in the top marginal individual income tax rate otherw ise authorized by this subparagraph shall be contingent upon the determination required to be made by the State Board Req. No. 7141 Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of Equalization pursuant to Section 2355.1A of this title. 2. Married individuals filing jointly and survi ving spouse to the extent and in the manner that a surviving spouse is permitted to file a joint return under t he provisions of the Internal Revenue Code and heads of households as defined in the Internal Revenue Code: (a) 1/2% tax on first $2,000.00 or pa rt thereof, (b) 1% tax on next $3,000.00 or part thereof, (c) 2% tax on next $2,500.00 or part thereof, (d) 3% tax on next $2,300.00 or part thereof, (e) 4% tax on next $2,400.00 or part thereof, (f) 5% tax on next $2,800.00 or part thereof, (g) 5.50% tax on the remainder for the 2008 t ax year and any subsequent tax year unless the rate prescribed by subparagraph (h) of this paragraph is in effect, and (h) 5.25% tax on the remainder for the 2009 an d subsequent tax years. The decrease in the top marginal individual income tax rate otherw ise authorized by this subparagraph shall be contingent upon the determination required to be made by the State Board of Equalization pursuant to Section 2355.1A of this title. Req. No. 7141 Page 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 C. Individuals. For Except as otherwise provided b y subsection D of this section, for all taxable years begi nning on or after January 1, 2022, a tax is hereby imposed upon the Oklahom a taxable income of every resident or non resident individual, which tax shall be computed as follows: 1. Single individuals and married individuals filing separately: (a) 0.25% tax on first $1,000.00 or part thereo f, (b) 0.75% tax on next $1,500.00 or part thereof, (c) 1.75% tax on next $1,250.00 or part thereof , (d) 2.75% tax on next $1,150.00 or part thereof, (e) 3.75% tax on next $2,300.00 or part thereof, (f) 4.75% tax on the remainder. 2. Married individuals filing jointly and surviving spouse to the extent and in the manner that a surviving spouse is permi tted to file a joint return under the provisions of the Internal Revenue Code and heads of households as defined in the I nternal Revenue Code: (a) 0.25% tax on first $2,000.00 or part thereof, (b) 0.75% tax on next $3,000.00 or part thereof, (c) 1.75% tax on next $2,500.00 or part thereof, (d) 2.75% tax on next $2,300.00 or part thereof, (e) 3.75% tax on next $2,400.00 or part thereof, (f) 4.75% tax on the remainder. Req. No. 7141 Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 No deduction for federal income taxes paid shall be allowed to any taxpayer to arrive at ta xable income. D. Individuals. Except as otherwise provided by subsection E of this section, for all taxable years beginning on or after January 1, 2024, a tax is hereby imposed upon the Oklahoma taxable income of every resident or nonresident individual, which tax shall be computed as follows: 1. Single individuals and married individuals filing separat ely at the rate of four and five-tenths percent (4.5%); 2. Married individuals filing jointly and surviving spouse to the extent and in the manne r that a surviving spouse is permitted to file a joint return under the provisions of the Interna l Revenue Code and heads of households as defined in the Inte rnal Revenue Code at the rate of four and five-tenths percent (4.5%). 3. Notwithstanding the provisions of subsection E of this section, the rate of tax prescribed by this subsection shall never be less than two and seventy -five hundredths percent (2.75%). No deduction for federal income taxes paid shall be allowed to any taxpayer to arrive at taxable inco me. E. The State Board of Equalization, at its February meeting each year, shall make a determination regarding the possibility of a decrease in the income tax rate othe rwise prescribed by subsection D of this section. If the revenue conditions prescribe d by this subsection are met, which shall be included as part of the findings Req. No. 7141 Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of the State Board of Equalization, then the income tax rate otherwise prescribed by subsection D of this section shall be reduced by twenty-five hundredths of one percent (0.002 5) effective on January 1 of the calendar immediately following the year during which the State Board of Equalization makes the finding that revenue growth as prescribed by this subsection is sufficient to red uce the income tax rate otherwise prescribed by subsection D of this section. For purposes of this subsection, the total collections from all revenue sources with respect to the General Revenue F und of the State Treasury for the fiscal year ending Jun e 30, 2021, based upon the certification made by the State Board of Equalization at its December 2021, meeting shall be the initial base year amount. Beginning with the February 2024 meeting of the State Board of Equalization and at each succeeding February meeting, the State Board shall compare the General Revenue Fund total collections amount for each fiscal year ending on the immediately preceding June 30 date, to the initial base year General Revenue Fund total collections amount. If there is an increase in the General Revenue Fund total collections amount equal to or greater than one and five- tenths percent (1.5%) compared to the initial base year General Revenue Fund total collections amount, the income tax rate otherwise prescribed by subsection D of this section sha ll be reduced effective January 1 of the immediately succeeding calendar year. If there is not an increase of at least one and five-tenths percent Req. No. 7141 Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (1.5%) in the General Revenue Fund total collections amoun t as reflected in the February certification of total collections compared to the initial base year General Revenue Fund total collection amount, there shall be no modification of the income tax rate as prescribed by this sec tion. For any year during which the General Revenue Fund total collection amount as determined at the February meeting equals or exceeds the base year General Revenue Fund total collection amount by one and five-tenths percent (1.5%) or more, the base year shall be adjusted for purposes of any succeeding comparison. The State Board of Equalization shall make computations as required by this subsection and shall use the prior base year amount which shall be multiplied by one and five-tenths percent (1.5%) and the result of that computa tion shall be added to the base year General Revenue Fund total collection figure for purposes of any succeeding comparison as prescribed by this subsection. After an adjustment is made to any base year amount, a reduction in the income tax rate otherwise prescribed pursuant to subsection D of this section, in increments of twenty-five hundredths of one percent (0.0025) may only occur if there is an increase of one and five-tenths percent (1.5%) or more in the adjusted base year General Revenue Fund total collection amount. If there are seven authorized reductions in the income tax rate otherwise prescribed by s ubsection D of this section, the eighth reduction in the income tax rate shall cause the income tax rate to Req. No. 7141 Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 be two and seventy-five hundredths perc ent (2.75%) for the applicable income tax year, and there shall be no further reductions in the income tax rates which shall remain at two and seventy -five hundredths percent (2.75% ). For purposes of implementing the reduction in income tax rates as set out in this subsection, the existing rates of tax shall be conv erted as they appear in subsection D of this section from a combined whole number and fraction into a decimal equivalent and for each re duction authorized, the amount subtracted from such converted numeral shall be an increment of 0.0025. F. Nonresident aliens. In lieu of the rates set forth in subsection A, B, C, or D above, there shall be imposed on nonresident aliens, as defi ned in the Internal Revenue Code, a tax of eight percent (8%) instead of thirty percent (30%) as used in the Internal Revenue Code, with respect to the Oklahoma taxable income of such nonresident aliens as determined under th e provision of the Oklahoma Income Tax Act. G. Every payer of amounts covered by this subsection shall deduct and withhold f rom such amounts paid each payee an amount equal to eight percent (8%) thereof . Every payer required to deduct and withhold taxes unde r this subsection shall for eac h quarterly period on or before the last day of the month following the close of each such quarterly period, pay over the amount so withheld as taxes to the Tax Commission, and shall file a return with each such Req. No. 7141 Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 payment. Such return shall be in such form as the Tax Commission shall prescribe. Every payer required under this subsection to deduct and withhold a tax from a payee shall, as to the total amounts paid to each payee during the calendar year, furnish to such payee, on or before January 31, of the succeeding year, a written statement showing the name of the payer, the name of the payee and the payee's Social Security account number, if any, the total amount paid subject to taxation, and the total amount deducted and wi thheld as tax and such other in formation as the Tax Commission may require. Any payer who fails to withhold or pay to th e Tax Commission any sums herein required to be withheld or paid shall be perso nally and individually liable therefor to the State of O klahoma. E. H. Corporations. For all taxable years beginning after December 31, 2021, a tax is hereby imposed upon the Oklahoma taxable income of every corporation doing business within this state or deriving income from sources within this state in an amount equal to four percent (4%) thereof. There shall be no additional Oklahoma income tax imposed on accumulated taxable income or on undistributed personal holding company income as those terms are defined in the Internal Revenue Code. F. I. Certain foreign corporatio ns. In lieu of the tax imposed in the first paragraph of subsection D F of this section, for all taxable years beginning after December 31, 2021, there shall be Req. No. 7141 Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 imposed on foreign corporations, as defined in the Internal Revenue Code, a tax of four percent (4%) instead of thirty percent (30%) as used in the Internal Revenue Code, where such income is received from sources within Oklahoma, in accordanc e with the provisions of the Internal Revenue Code and t he Oklahoma Income Tax Act. Every payer of amounts covered by this subsection shall deduct and withhold from such amounts paid each payee an amount equal to four percent (4%) thereof. Every payer required to deduct and withhold taxes under this subsection shall for eac h quarterly period on or before the last day of the month fo llowing the close of ea ch such quarterly period, pay over the amount so withheld as taxes to the Tax Commission, and shall file a return with each such payment . Such return shall be in such form as the Tax Commission shall prescribe. Every payer required under this subsection to deduct and withhold a tax from a payee shall, as to the total amounts paid to each payee during the calendar year, furnish to such payee, o n or before January 31, of the succeeding year, a written statement showing the name of the payer, the name of the payee and the payee's Social Security account number, if any, the total amounts paid subject to taxation, the total amount deducted and withh eld as tax and such other infor mation as the Tax Commission may require . Any payer who fails to withhold or pay t o the Tax Commission any sums herein required to be withheld or paid shall be personal ly and individually liable therefor to the State of Okla homa. Req. No. 7141 Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 G. J. Fiduciaries. A tax is hereby imposed upon the Oklahoma taxable income of every trust and estate at the same rates as are provided in subsection B or, C or D of this section for single individuals. Fiduciaries are not allowed a deduction for any federal income tax paid. H. K. Tax rate tables. For all taxable years beginning after December 31, 1991, in lieu of th e tax imposed by subsection A, B or, C or D of this section, as applicable there is hereby imp osed for each taxable year on the taxable income of ever y individual, whose taxable income for such taxable year does not exceed the ceiling amount, a tax determined under tables, applicable to such taxable year which shall be prescribed by the Tax Commiss ion and which shall be in such form as it determines app ropriate. In the table so prescribed, the amounts of the tax shall be computed on the ba sis of the rates prescribed by subsection A, B or, C or D of this section. For purposes of this subsection, the term "ceiling amount" means, with respect to any taxpayer, t he amount determined by the Tax Commission for the tax rate category in which such taxpay er falls. SECTION 2. AMENDATORY 68 O.S. 2021, Section 2358, as amended by Section 2, Chapter 341, O.S.L. 2022 (68 O.S. Supp. 2022, Section 2358), is amended to re ad as follows: Section 2358. For all tax years beginning after December 31, 1981, taxable income and a djusted gross income shall be adjusted to Req. No. 7141 Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 arrive at Oklahoma taxable income and Okla homa adjusted gross income as required by this section. A. The taxable income of any taxpa yer shall be adjusted to arrive at Oklahoma taxable inco me for corporations and O klahoma adjusted gross income for individuals, as foll ows: 1. There shall be added interest income on obligations of any state or political subdivision thereto which is not o therwise exempted pursuant to other laws of this state, to the extent that such interest is not included in taxable income and adjusted gross income. 2. There shall be deducted amounts included in suc h income that the state is prohibited from taxing becau se of the provisions of the Federal Constitution, the St ate Constitution, federal laws or laws of Oklahoma. 3. The amount of any feder al net operating loss deductio n shall be adjusted as follows: a. For carryovers and carrybacks to taxable years beginning before January 1, 1981, the amount of any net operating loss deduction allowed t o a taxpayer for federal income tax purposes shall be reduced to an amount which is the same portion thereof as the lo ss from sources within this state, as determined pursuant to this section and Section 2362 of this title, for Req. No. 7141 Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the taxable year in which su ch loss is sustained is of the total loss for such yea r; b. For carryovers and carry backs to taxable years beginning after December 31, 1980, the amount of any net operating loss deduction allowed for the taxable year shall be an amount equal to the aggreg ate of the Oklahoma net operating loss carryovers and carrybacks to such year. Oklahoma net operating losses shall b e separately determined by reference to Section 172 of the Internal Revenue Code, 26 U.S.C., Section 172, as modified by the Oklahoma Incom e Tax Act, Section 2351 et seq. of this title, and sha ll be allowed without regard to the existence of a federal net operating loss. For tax years beginning after December 31 , 2000, and ending before January 1, 2008, the years to which such losses may be carried shall be determined solely by reference to Sec tion 172 of the Internal Revenue Code, 26 U.S.C., Section 172, with the exception that the terms "net operating loss" and "taxable income" shall be replaced with "Oklahoma net operating loss" and "Oklahoma taxable income". For tax years beginning after De cember 31, 2007, and ending before January 1, 2009, years to wh ich such losses may be carried back shall be limited to tw o (2) Req. No. 7141 Page 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 years. For tax years beginning after December 31, 2008, the years to which such losses may be carried back shall be determined s olely by reference to Section 172 of the Internal Revenue Code, 26 U.S.C., Section 172, with the exception that the terms "net operating loss" and "taxable income" shall be replaced with "Oklahoma net operating loss" and "Oklahoma taxable income". 4. Items of the following nature shal l be allocated as indicated. Allowable deductions attributable to items separately allocable in subparagraphs a, b and c of this paragraph, whethe r or not such items of in come were actually received, shall be allocated on the same basis as those items: a. Income from real and tangible personal property, such as rents, oil and mining production or royalties, and gains or losses from sales of such pro perty, shall be allocated in accordance with the situs of such property; b. Income from intangible personal p roperty, such as interest, dividends, patent or copyright royalties, and gains or losses fr om sales of such property, shall be allocated in accorda nce with the domiciliary situs of the taxpayer, except that: Req. No. 7141 Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (1) where such property has acquired a nonunitar y business or commercial situ s apart from the domicile of the taxpayer such income shall be allocated in accordance with such business or commercial situs; interest income from investments held to generate working capital for a unitary business enterprise shall be included in apportionable income; a resident trust or resident estate shall be tre ated as having a separate commercial or business situs i nsofar as undistributed income is concerned, but shall not be treated as having a separate commercial or business situs insofar as distrib uted income is concerned, (2) for taxable years beginning afte r December 31, 2003, capital or ordinary gains or losses from the sale of an ownership interest in a publicly traded partnership, as de fined by Section 7704(b) of the Internal Revenue Code, sha ll be allocated to this state in the ratio of the original cost of such partnership's tangible property in this state to the original cost of su ch partnership's tangible property everywhere, as dete rmined at the time of the sale ; if more than fifty percent Req. No. 7141 Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (50%) of the value of the partnership's assets consists of intangible assets, capital or ordinary gains or losses from the sale of an ownership interest in the partnership shall be allocated to this state in accordance with the sales factor of the partner ship for its first full tax period immediately preceding its ta x period during which the ownership interest in the partnership was sold; the pro visions of this division shall only apply if the capit al or ordinary gains or losses from the sale of an ownership interest in a partnership do not constitute qualifying gain receiving capital treatment as defined in subparagraph a of paragraph 2 of subsec tion F of this section, (3) income from such property which is required to be allocated pursuant to the provisi ons of paragraph 5 of this subsection shall be allocated as here in provided; c. Net income or loss from a business activ ity which is not a part of business carried on within or without the state of a unitary character shall be se parately allocated to the state in which such activity is conducted; Req. No. 7141 Page 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 d. In the case of a manufacturing or processing enterprise the business of whi ch in Oklahoma consists solely of marketing its products by: (1) sales having a situs without this state, shi pped directly to a point from without the state to a purchaser within the state, commonly known as interstate sales, (2) sales of the product store d in public warehouses within the state pursuant to "in transit" tariffs, as prescribed and allowed by the Interstate Commerce Commi ssion, to a purchaser within the state, (3) sales of the product stored in public warehouses within the state where the ship ment to such warehouses is not covered by "in transit" tariffs, as prescribed a nd allowed by the Interstate Commerce Commission, to a purchaser within or without the state, the Oklahoma net income shall, at the option of the taxpayer, be that portion of th e total net income of the taxpayer for federal income tax purposes derived from the manufacture and/or proces sing and sales everywhere as determined by the ratio of the sales defined in this section made to the purchaser within Req. No. 7141 Page 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the state to the total sales everywhere. The term "public warehouse" as used in this subparagraph means a licensed public warehouse, the principal business of which is warehousing merchandise for the public; e. In the case of insurance companies, Oklahoma taxable income shall be taxable income of the taxpay er for federal tax purposes, as adjusted for the adjus tments provided pursuant to th e provisions of paragraphs 1 and 2 of this subsection, apportioned as follows: (1) except as otherwise provided by division (2) of this subparagraph, taxable income of an i nsurance company for a taxable year shall be apportion ed to this state by multiplyin g such income by a fraction, the numerator of which is the direct premiums written for insurance on property or risks in this state, and the denomi nator of which is the direct premiums written for insurance on property or risks everywhere. For purposes of this subsection, the term "direct premiums written" means the total amount of direct premiums written, assessments and annuity considerations as reported for the taxable y ear on the annual statement filed by the company with the Insurance Commissioner in the form approved Req. No. 7141 Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 by the National Association of Insurance Commissioners, or such other form as may be prescribed in lieu thereof, (2) if the principal source of premiums w ritten by an insurance company consists of premiums fo r reinsurance accepted by it, the taxable income of such company shall be apportioned to this state by multiplying such income by a fraction, the numerator of which is the sum o f (a) direct premiums written for insurance on property or risks in this state, plus (b) premiums written for reinsurance accepted in respect of property or risks in this state, and the denominator of which is the sum of (c) direct premiums written for insurance on property or ris ks everywhere, plus (d) premiums written for reinsuran ce accepted in respect of prop erty or risks everywhere. For purposes of this paragraph, premiums written for reinsurance accepted in respect of property or risks in this state, whether or not otherwise determinable, may at the election of the company be d etermined on the basis of the proportion which premiums written for insurance accepted from companies Req. No. 7141 Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 commercially domiciled in Oklahoma bears to premiums written for reinsuranc e accepted from all sources, or alternatively in the proportion which the sum of the direct premiums written for insurance on property or risks in this state by each ceding company from which reinsurance is accepted bears to the sum of the total direct premiums written by each suc h ceding company for the taxable year. 5. The net income or loss remaining after th e separate allocation in paragraph 4 of this subsection, being that which is derived from a unitary business enterprise, shall be apportioned to this state on the basis of the arithmetical average of three factors consisting of property, payroll and sales or gross revenue enumerated as subparagraphs a, b and c of this paragraph. Net income or loss as used in this paragraph includes that derived from patent or copyright roya lties, purchase discounts, and interest on accounts receivable relating to or arisin g from a business activity, the income from which is apportioned pursuant to this subsection, including the sale or other disposition of such prope rty and any other property used in the unitary enterprise. Deductions used in computing such net income or l oss shall not include taxes based on or measured by income. Provided, for corporations whose property for purposes of the tax imposed by Section 2 355 of this title has an Req. No. 7141 Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 initial investment cost equaling or exceeding Two Hund red Million Dollars ($200,000,000.00) and such investment is made on or after July 1, 1997, or for corporations which expand their property or facilities in this state and such expansion has an investme nt cost equaling or exceeding Two Hundred Million Doll ars ($200,000,000.00) over a period not to exceed three (3) years, and such expansion is commenced on or after January 1, 2000, the three factors shall be apportioned with prope rty and payroll, each com prising twenty-five percent (25%) of the apportionment factor and sales comprising f ifty percent (50%) of the apportionment factor. The apportionment factors shall be computed as follows: a. The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal pr operty everywhere owned or rented and used during the tax period. (1) Property, the income from which is sepa rately allocated in paragraph 4 of this subsection, shall not be included in determining this fraction. The numerator of the fraction shall include a portion of the invest ment in transportation and other equipment having no Req. No. 7141 Page 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 fixed situs, such as rolling st ock, buses, trucks and trailers, including machinery and equipment carried thereon, airplanes, salespersons' automobiles and other similar equipmen t, in the proportion that miles traveled in Oklahoma by such equipment bears to total miles traveled, (2) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer, less any annual rental rate received b y the taxpayer from subrentals, (3) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the Oklahoma Tax Commission may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property; b. The payroll factor is a fraction, the numerator of which is the total compensation for services rendered in the state during the tax per iod, and the denominator of which is the total compensation for Req. No. 7141 Page 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 services rendered everywhere during the tax period. "Compensation", as used in this subsection means those paid-for services to the exten t related to the unitary business but does not include officers' salaries, wages and other compensation. (1) In the case of a transportation enterprise, the numerator of the fraction shall include a portion of such expenditure in c onnection with employees operating equipment over a fixed route, such as railroad employees, airline pilots, or bus drivers, in this state only a part of the time, in the proportion that mileage traveled in Oklahoma bears to total mileage traveled by such employees, (2) In any case the numerator of the fraction shall include a portion of such expenditures in connection with itinerant employees, such as traveling salespersons, in this state only a part of the time, in the proportion that time spent in Oklahoma bears to total time sp ent in furtherance of the enterprise by such employees ; c. The sales factor is a fra ction, the numerator of which is the total sales or gross revenue of the taxpayer in this state during the tax period, and the denominator Req. No. 7141 Page 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of which is the total sales or gr oss revenue of the taxpayer everywhere during the tax period. "Sales", as used in this subsection does not include sales or gross revenue which are separately allocated in paragraph 4 of this subsection. (1) Sales of tangible pers onal property have a situ s in this state if the property is delivered or shipped to a purchaser other than th e United States government, within this state regardless of the FOB point or other conditions of the sale; or the property is shipped from an offic e, store, warehouse, factory or other place of storage in this state and (a) th e purchaser is the United States government or (b) the taxpayer is not doing business in the state of the destination of the shipment. (2) In the case of a railroad or interurba n railway enterprise, the numerator of the fraction shall not be less than the allocation of revenues to this state as shown in its annual report to the Corporation Commission. (3) In the case of an airline, truck or bus enterprise or freight car, tank car , refrigerator car or other railroad equipment enterprise, the Req. No. 7141 Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 numerator of the fraction shall include a port ion of revenue from interstate transportation in the proportion that interstate mileage traveled in Oklahoma bears to total interstate mileage traveled. (4) In the case of an oil, gasoline or gas pipeline enterprise, the numer ator of the fraction shall be either the total of traffic units of the enterprise within Oklahoma or the revenue allocated to Oklahoma based upon miles moved, at the option of the taxpayer, and the deno minator of which shall be the total of traffic units o f the enterprise or the revenu e of the enterprise everywhere as appropriate to the numerator. A "traffic unit" is hereby defined as the transportation for a distance of one (1) mile of one (1) barrel of oil, one (1) gallon of gasoline or one thousand (1,0 00) cubic feet of natural or casinghead gas, as the case may be. (5) In the case of a telephone or telegraph or other communication enterprise, the numerator of the fraction shall include that portion o f the interstate revenue as is allocated pursuant to the accounting procedures presc ribed by the Req. No. 7141 Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Federal Communications Com mission; provided that in respect to each corporation or business entity required by the Federal Communicati ons Commission to keep its books and records in accordance with a uniform system of accounts prescribed by su ch Commission, the intrastate net incom e shall be determined separately in the manner provided by such uniform system of accounts and only the interstate income shall be su bject to allocation pursuant to the provisions of this subsection. Provided further, that the gross revenue factors shall be those as are determined pursuant to the accounting procedures prescribed by the Federal Communications Commission. In any case where the apportionment of the three factors prescribed in this paragraph attributes to Oklahoma a portion of net income of the enterprise out of all appropriate proportion to the property owned and/or business transacted within this state, because of the fact that one or more of the factors so prescribed are no t employed to any appreciable extent in furtherance of the enterprise ; or because one or more factors not so prescribed are employed to a considerable extent in furtherance of t he enterprise; or because of other reasons, the Tax Commission is empowered to permit, after a showing by taxpayer that an excessive portion of net income has been Req. No. 7141 Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 attributed to Oklahoma, or require, when in its judgment an insufficient portion of net inco me has been attributed to Oklahoma, the elimination, substitution, or use of ad ditional factors, or reduction or increase in the weight of such pres cribed factors. Provided, however, that any such variance from such prescribed factors which has the effect of increasing the portio n of net income attributable to Oklahoma must not be i nherently arbitrary, and application of the recomputed final apportio nment to the net income of the enterprise must attribute to Oklahoma only a reasonable portion thereof. 6. For calendar years 1997 a nd 1998, the owner of a new or expanded agricultural c ommodity processing facility i n this state may exclude from Oklahoma taxable income, or in the case of an individual, the Oklahoma adjusted gross income, fifteen percent (15%) of the investment by the o wner in the new or expanded agricultural commodity pro cessing facility. For calendar year 1999, and all subsequent years, the percentage, not to exceed fifteen percent (15%), available to the owner of a new or expanded agricultural commodity processing fa cility in this state claiming the exemption shall be a djusted annually so that the t otal estimated reduction in tax liabili ty does not exceed One Million Dollars ($1,000,000.00) annually. The Tax Commission shall promulgate rules for determining the perce ntage of the investment which each eligible taxpayer may exclude. The exclusion provided by this paragraph Req. No. 7141 Page 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 shall be taken in the taxable year when the investment is made. In the event the total reduction in tax liability authoriz ed by this paragraph exceeds One Million Dollars ($1,000,000.00) in any calendar year, the Tax Commission sha ll permit any excess over One Million Dollars ($1,000,000.00) and shall factor such excess into the percentage for subsequent years . Any amount of the exemption permitted to be excluded pursuant to the provisions of this paragraph but not used in any year may be carried forward as an exemption from income pursuant to the provisions of this paragraph for a period not exceeding six (6) years following the year in which the investment was originally made. For purposes of this par agraph: a. "Agricultural commodity processing facility" means building, structures, fixtures and improvements used or operated primarily for the processing or production of marketable products from agri cultural commodities. The term shall also mean a dair y operation that requires a depreciable investment of at least Two Hundred Fifty Thousand Dollars ($250,000.00) and which produces milk from dairy cows. The term does not include a facility that provid es only, and nothing more than, storage, cleaning, dry ing or transportation of agricultural commodities, and Req. No. 7141 Page 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 b. "Facility" means each part of the facility which is used in a process primarily for: (1) the processing of agricultural commodities, including receiving or storing agricultural commodities, or the p roduction of milk at a dairy operation, (2) transporting the agricult ural commodities or product before, during or after the processing, or (3) packaging or otherwise preparing the product for sale or shipment. 7. Despite any provision to the contrary in paragraph 3 of this subsection, for taxable years beginning after Dec ember 31, 1999, in the case of a taxpayer which has a farming loss, such farming loss shall be considered a net operating loss carryb ack in accordance with and to the extent of the Intern al Revenue Code, 26 U.S.C ., Section 172(b)(G). However, the amount o f the net operating loss carryback shall not exceed the lesser of: a. Sixty Thousand Dollars ($60,000.00), o r b. the loss properly sh own on Schedule F of the Internal Revenue Service Form 1040 reduced by one-half (1/2) of the income from all other sources other than reflected on Schedule F. Req. No. 7141 Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 8. In taxable years beginning after December 31, 1995, all qualified wages equal to the federal income tax credit set forth in 26 U.S.C.A., Section 45 A, shall be deducted f rom taxable income. The deduction allowed purs uant to this paragraph shall only be permitted for the tax years in which the federal tax credit pursuant to 26 U.S.C.A., Section 45A , is allowed. For purposes of this paragraph, "qualified wages" means those wages used to calculate the federal credit pursuant to 26 U.S.C.A., Section 45A. 9. In taxable years beginning after December 31, 2005, an employer that is eligible for and utili zes the Safety Pays OSHA Consultation Service provided by the Oklahoma Depa rtment of Labor shall receive an exemption from taxable income in the amount of One Thousand Dollars ($1,000.00) for the tax year that the service is utilized. 10. For taxable years beginning on or after January 1, 2010, there shall be added to Oklahoma taxable income an amount equal to the amount of deferred income not included in such taxable income pursuant to Section 108(i)(1) of the Internal Revenue Cod e of 1986 as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009 (P.L. No . 111-5). There shall be subtracted from Oklahoma taxable income an amount equal to the amount of de ferred income included in such taxable income pursuant t o Section 108(i)(1) of the Internal Revenue Code by Section 1231 of the America n Recovery and Reinvestment Act of 2009 (P.L. No. 111-5). Req. No. 7141 Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 11. For taxable years beginning on or after January 1, 2019, there shall be subtracted from Oklahoma taxable income or adjusted gross income any item of income or gain, and there shall be added to Oklahoma taxable income or adjusted gross income any item of loss or deduction that in the absence of an election pursuan t to the provisions of the Pass-Through Entity Tax Equit y Act of 2019 would be allocated to a member or to an indirect member of an ele cting pass-through entity pursuant to Section 2351 et seq. of this ti tle, if (i) the electing pass-through entity has acc ounted for such item in computing its Oklahoma net entit y income or loss pursuant to the provisions of the Pass-Through Entity Tax Equi ty Act of 2019, and (ii) the total amount of tax attributable to any resulting Oklahoma net entity income has been paid . The Oklahoma Tax Commission shall promulgate rules for the reporting of such exc lusion to direct and indirect members of the electing pass-through entity. As used in this paragraph, "electing pass-through entity", "indirect member", and "member" shall be defined in the same manner as prescribed by Section 2355.1P-2 of this title. Notwithstanding the application of this paragraph, the a djusted tax basis of any ownership interest in a pass-through entity for purposes of Section 2351 et seq. of this title shall be equal to its adjusted tax basis for federal inco me tax purposes. B. 1. The taxable income of any corporation shall be further adjusted to arrive at Oklahoma taxable income, except those Req. No. 7141 Page 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 corporations electing treatment as provided in subchapter S of the Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section 2365 of this title, deductions pursuant to the provisions of the Accelerated Cost Recovery System as defined and allowed in the Economic Recovery Tax Act of 1981, Public Law 97-34, 26 U.S.C., Section 168, for depreciation of assets place d into service after December 31, 1981, shall not be allowed in calculating Okl ahoma taxable income. Such corporations shall be allowed a deduction for depreciation of assets placed into service afte r December 31, 1981, in accordance with provisions of th e Internal Revenue Code, 26 U.S.C., Section 1 et seq., in effect immediately pr ior to the enactment of the Accelerated Cost Recovery System . The Oklahoma tax basis for all such assets placed into ser vice after December 31, 1981, calculated in this section shall be retained and ut ilized for all Oklahoma income tax purposes through th e final disposition of such assets. Notwithstanding any other provisi ons of the Oklahoma Income Tax Act, Section 2351 et seq. of this title, or of the Internal Revenue Code to the contrary, this subsect ion shall control calculation of depreciation of asset s placed into service after December 31, 1981, and before January 1, 1983. For assets placed in service and held by a cor poration in which accelerated cost recovery system was p reviously disallowed, an adjustment to taxable income is required in the first taxable year Req. No. 7141 Page 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 beginning after December 31, 1982, to reconcile the basi s of such assets to the basis allowed in the Interna l Revenue Code. The purpose of this adjustment is to eq ualize the basis and allo wance for depreciation accounts between that reported to the Internal Revenue Service and that reported to Oklahoma. 2. For tax years beginning on or after January 1, 2009, a nd ending on or before December 31, 2009, there shall be added to Oklahoma taxable income any amount in excess of One Hundred Seventy - five Thousand Dollars ($175,000.00) which has been deducted as a small business expense under Internal Revenue Code, Secti on 179 as provided in the American Recovery and Reinvest ment Act of 2009. C. 1. For taxable years beginning after December 31, 1987, the taxable income of any corporation shall be further adjusted to arrive at Oklahoma taxable income for transfers of tec hnology to qualified small businesses located in Oklahom a. Such transferor corporation shall be allowed an exemption from taxable inco me of an amount equal to the amount of royalty payment received as a result of such transfer; provided, however, such amo unt shall not exceed ten percent (10%) of the amount of gross proceeds received b y such transferor corporation as a result of the techn ology transfer. Such exemption shall be allowed for a period not to exceed ten (10) years from the date of receipt of th e first royalty payment accruing from such transfer. No exemption may be claimed for transfers of Req. No. 7141 Page 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 technology to qualified small busine sses made prior to January 1, 1988. 2. For purposes of this subsecti on: a. "Qualified small business" means an entity, whether organized as a corporation, partnership, or proprietorship, organized for profit with its principal place of business located wi thin this state and which meets the following criteria: (1) Capitalization of not more than Two Hundred Fifty Thousand Dollars ($250,000.00), (2) Having at least fifty percent ( 50%) of its employees and assets located in Oklahoma at the time of the transfer, and (3) Not a subsidiary or affiliate of the transferor corporation; b. "Technology" means a proprietary process, form ula, pattern, device or compilation of scientific or technical information which is not in the public domain; c. "Transferor corporatio n" means a corporation which is the exclusive and undisputed owner of the technology at the time the transfer is made; an d Req. No. 7141 Page 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 d. "Gross proceeds" means the total amount of consideration for the transfer of technology, whether the consideration is in money or otherwise. D. 1. For taxable years beginning after December 31, 200 5, the taxable income of any corporation, estate or trust, shall be further adjusted for qualifying gains re ceiving capital treatment . Such corporations, estates or trusts shall be allow ed a deduction from Oklahoma taxable income for the amount of qualify ing gains receiving capital treatment earned by the corporation, estate or trust during the taxable year and included in the federal taxable income of such corporation, estate or trust. 2. As used in this subsection: a. "qualifying gains receiving capita l treatment" means the amount of net capital gains, a s defined in Section 1222(11) of the Internal Revenue Co de, included in the federal income tax return of the corporation, estate or trust that result from: (1) the sale of real property or tangible pers onal property located within Oklahoma that has been directly or indirectly owned by the corporation, estate or trust for a holding peri od of at least five (5) years prior to the date of the transaction from which such net capital gains arise, Req. No. 7141 Page 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (2) the sale of stock or on the sale of an ownership interest in an Oklahoma company, limited liability company, or partner ship where such stock or ownership interest has been directly or indirectly owned by the corporation, estate or trust for a holding period of at least three (3) years prior to the date of the transact ion from which the net capital gains arise, or (3) the sale of real property, tan gible personal property or intangible personal propert y located within Oklahoma as part of the sale of all or substantially all of the assets of an Oklahoma company, limited liability company, or partnership where such property has been directly or indirectly owned by such entity owned by the owners of such entity, and used in or derived from such entity for a period of at least three (3) years prior to the date of the transact ion from which the net capital gains arise, b. "holding period" means an uninterrupted period of time. The holding period shall inclu de any additional period when the property was held by another individual or entity, if such additional period is Req. No. 7141 Page 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 included in the taxpayer's holding period for the asset pursuant to the Internal Revenue Code, c. "Oklahoma company", "limited liability comp any", or "partnership" means an entity whose primary headquarters have been located in Oklahoma for at least three (3) unin terrupted years prior to the date of the transaction fro m which the net capital g ains arise, d. "direct" means the taxpayer directly owns the asset, and e. "indirect" means the taxpayer owns an in terest in a pass-through entity (or chain of pass-through entities) that sells the asset that gives rise to the qualifying gains receiving ca pital treatment. (1) With respect to sales of rea l property or tangible personal pro perty located within Oklahoma, the deduction described in this subsection shall not apply u nless the pass- through entity that makes the sale has he ld the property for not less than five (5) uninterrupted years prior to the date of the transaction that created the capital gain, and each pass-through entity included in the chain of ownership has been a member, partner, or shareholder of the Req. No. 7141 Page 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 pass-through entity in the tier imme diately below it for an uninterrupted period of n ot less than five (5) years. (2) With respect to sales of stock or ownership interest in or sales of all or substantially all of the assets of an Oklahoma company, limited liability company, or partnership, the deduction described in this subsection shall not apply unless the pass-through entity that makes the sale has held the stock or ownership interest or the assets for not le ss than three (3) uninterrupted years prior to the date of the transaction that created the capital gain, and each pass-through entity included in the chain of ownership has been a member, partn er or shareholder of the pass-through entity in the tier immediately below it for an uninterrupted period of not less than three (3) years. E. The Oklahoma adjusted gross income of any individual taxpayer shall be further adju sted as follows to arrive at Oklahoma taxable income: 1. a. In the case of individuals, the re shall be added or deducted, as the case may be, the d ifference necessary to allow personal exemptions of One Thousand Dollars Req. No. 7141 Page 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ($1,000.00) in lieu of the personal exemptions allowed by the Internal Revenue Code. b. There shall be allowed an additional ex emption of One Thousand Dollars ($1,000.00) for each tax payer or spouse who is blind at the close of the tax year. For purposes of this subparagraph, an individual is blind only if the central visual acuity of the individual does not exceed 20/200 in the better eye with correcting lenses, or if the visual acui ty of the individual is greater than 20/200, but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than twenty (20) degrees. c. There shall be allowed an additional exempti on of One Thousand Dollars ($1,000.00) for each taxpayer or spouse who is sixty-five (65) years of age or old er at the close of the tax year based upon the filing status and federal adjusted gross inc ome of the taxpayer. Taxpayers with the following filin g status may claim this exemption if the federal adjusted gross income does not exceed: (1) Twenty-five Thousand Dollars ($25,000.00) if married and filing jointly; Req. No. 7141 Page 43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (2) Twelve Thousand Five Hundred Do llars ($12,500.00) if married and filing separately; (3) Fifteen Thousand Dollars ($15,000.00) if single; and (4) Nineteen Thousand Dollars ($19,000.00) if a qualifying head of household. Provided, for taxable years beginning after December 31, 1999, amounts included in the calculation of federal adjusted gross income pursuant to the conversion of a traditional individual retirement account to a Roth individual retire ment account shall be excluded from federal adjusted gross income for purposes of the incom e thresholds provided in this subparagraph. 2. a. For taxable years beginning on or before December 31, 2005, in the case of individuals who use the standard deduction in determining taxable income, there shall be added or deducted, as the case may be, the difference necessary to allow a standard deduction in lieu of the standard dedu ction allowed by the Internal Revenue Code, in an amount equal to the larger of fifteen percent (15%) of the Oklahoma adjusted gross income or One Thousand Dollars ($1,000.00), but not to exceed Two Thousand Dollars ($2,000.00), exc ept that Req. No. 7141 Page 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 in the case of a married individual filing a separate return such deduction shall be the larger of f ifteen percent (15%) of such Oklahoma adjusted gross income or Five Hundred Dollars ($500.0 0), but not to exceed the maximum amount of One Thousand Dollars ($1,000.00). b. For taxable years beginning on or after January 1, 2006, and before January 1, 2007, in the case of individuals who use the standard deduction in determining taxable income, t here shall be added or deducted, as the case may be, the difference necessary to allow a standard deduction in lieu of the standard deduction allowed by the Internal Revenue Code, in an amount equal to: (1) Three Thousand Dollars ($3,000.00), if the filing status is married filing joint, head of household or qualifying widow; or (2) Two Thousand Dollars ($2,000.00), if the filing status is single or married filing sep arate. c. For the taxable year beginning on January 1, 2007, and ending December 31, 2007, in the case of individuals who use the standard deductio n in determining taxable income, there shall be added or deducted, as the case may be, the difference necessa ry to allow a standard Req. No. 7141 Page 45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 deduction in lieu of the standard deduction allowed by the Internal Revenue Code, in an amount equal to: (1) Five Thousand Five Hundred Dollars ($5, 500.00), if the filing status is married filing joint or qualifying widow; or (2) Four Thousand One Hundred Twenty-five Dollars ($4,125.00) for a head of household; or (3) Two Thousand Seven Hundred Fifty Dollars ($2,750.00), if the filing status is single or married filing separate. d. For the taxable year beginning on January 1, 2008, an d ending December 31, 2008, in the case of individuals who use the standard deduction in de termining taxable income, there shall be added or deduct ed, as the case may be, the difference necessary to allow a standard deduction in lieu of the standard deduct ion allowed by the Internal Revenue Cod e, in an amount equal to: (1) Six Thousand Five Hund red Dollars ($6,500.00), if the filing status is married filing joint or qualifying widow, or (2) Four Thousand Eight Hundred Seventy-five Dollars ($4,875.00) for a head of household, or Req. No. 7141 Page 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (3) Three Thousand Two Hundred Fifty Dollars ($3,250.00), if the fili ng status is single or married filing separate. e. For the taxable year beginnin g on January 1, 2009, and ending December 31, 2009, in the case of individuals who use the standard deduction in determining taxable income, there shall be added or deducted, a s the case may be, the difference necessary to allow a s tandard deduction in lieu of the standard deduction allowed by the Internal Revenue Code, in an amount equal to: (1) Eight Thousand Five Hundred Dol lars ($8,500.00), if the filing status is married fi ling joint or qualifying widow, or (2) Six Thousand Three Hundred Seventy-five Dollars ($6,375.00) for a head of household, or (3) Four Thousand Two Hundred Fifty Do llars ($4,250.00), if the filing status is single or married filing separate. Oklahoma adjusted gross income shall be increased by any amounts paid for motor vehicle excis e taxes which were deducted as allowed by the Internal Revenue Code. f. For taxable years beginning on or after January 1, 2010, and ending on December 31, 2016, in the case of individuals who use the standard deduction in Req. No. 7141 Page 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 determining taxable income, there shall be added or deducted, as the case may be, the difference necessary to allow a standard deduction equal to the standar d deduction allowed by the Internal Revenue Code, ba sed upon the amount and filing status prescribed by such Code for purposes of fi ling federal individual income tax returns. g. For taxable years beginning on or afte r January 1, 2017, and ending not later than December 31, 2023, in the case of individuals who use the standard deduction in determining taxable income, there shall be add ed or deducted, as the case may be, the difference necessary to allow a standard deduction in lieu of the standard deduction allowed by the Internal Revenue Code, as follows: (1) Six Thousand Three Hundred Fifty Dollars ($6,350.00) for single or married fi ling separately, (2) Twelve Thousand Seven Hundred Dollars ($12,700.00) for married filing jointly o r qualifying widower wit h dependent child, and (3) Nine Thousand Three Hundred Fifty Dollars ($9,350.00) for head of hous ehold. Req. No. 7141 Page 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 h. For taxable years beginning on or after January 1, 2024, in the case of individuals who use the standard deduction in determining taxable income, the re shall be added or deducted, as the case may be, the difference necessary to allow a st andard deduction in lieu of the standard deduction allowed by the Internal Revenue Code, as follows: (1) Six Thousand Three Hundred Fifty Dollars ($6,350.00) for single or married filing separately, (2) Ten Thousand Three Hundred Fifty Dollars ($10,350.00) for married filing jointly or qualifying widower with dependent child, and (3) Eight Thousand Three Hundred Fifty Dollars ($8,350.00) for head of household. 3. a. In the case of resident and p art-year resident individuals having ad justed gross income from sources both within and witho ut the state, the itemized or standard deductions and personal exemptio ns shall be reduced to an amount which is the same portion of the total thereof as Oklahoma adjusted gross income is of adjusted gross income. To the extent itemized deductions include allowable moving expense, proration of moving expense shall not be req uired or permitted Req. No. 7141 Page 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 but allowable moving expense sh all be fully deductible for those taxpayers moving within or into Oklahoma and no part of moving expense shall be deductible for those taxpayers moving without or out of Oklahoma. All other itemized or sta ndard deductions and personal exemptions shall be subject to proration as provided by law. b. For taxable years beginning on or aft er January 1, 2018, the net amount of itemized deducti ons allowable on an Oklahoma income tax return, subject to the provisions of paragraph 24 of this subsection, shall not exceed Seventeen Thousand Dollars ($17,000. 00). For purposes of this subparagraph , charitable contributions and medical expenses deduct ible for federal income tax purposes shall be excluded from the amount of Seventeen Thousand Dollars ($17,000.00) as specified by this subparagraph. 4. A resident individual with a physical disability constituting a substantial handicap to employment may deduct from Oklahoma adjusted gross income such expenditures to modify a motor vehicle, home or workplace as are necessar y to compensate for his or her handicap. A veteran certified by the Department o f Veterans Affairs of the federal government as having a service-connected disability shall be conclusively presumed to be an individual with a Req. No. 7141 Page 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 physical disability constitutin g a substantial handicap to employment. The Tax Commission shall promulgate rule s containing a list of combinations of common disabili ties and modifications which may be presumed to qualify for this deduct ion. The Tax Commission shall prescribe necessary requirements for verification. 5. a. Before July 1, 2010, the first One Thousand Five Hundred Dollars ($1,500.00) received by any pers on from the United States as salary or compensation in any form, other than retirement benefits, as a member of any component of the Armed Forces of the United States shall be deducted from taxable inco me. b. On or after July 1, 2010, one hundred percent ( 100%) of the income received by any person from the United States as salary or compensation in any form, other than retirement benefits, as a member of any compone nt of the Armed Forces of the United St ates shall be deducted from taxable income. c. Whenever the filing of a timely income tax return by a member of the Armed For ces of the United States is made impracticable or impossible of accomplishment by reason of: (1) absence from the United States, wh ich term includes only the states and the District of Columbia; Req. No. 7141 Page 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (2) absence from the State of Oklahoma while on active duty; or (3) confinement in a hospital within the United States for treatment of wounds, injuries or disease, the time for filing a retur n and paying an income tax shall be and is hereby exte nded without incurring liability for interest or penalties, to the fift eenth day of the third month following the month i n which: (a) Such individual shall return to the United States if the extension i s granted pursuant to subparagraph a of this paragraph , return to the State of Oklahoma if the extension is granted pursuant to subparagraph b of this paragraph or be discharg ed from such hospital if the extension is granted pursuant to subparagraph c of t his paragraph; or (b) An executor, administrator, or c onservator of the estate of the taxpayer is appointed, whichever event occurs the earliest. Provided, that the Tax Commis sion may, in its discretion, grant any member of the Armed Forces of the United S tates an extension of time for filing of income tax re turns and payment of income tax Req. No. 7141 Page 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 without incurring liabilities for inter est or penalties. Such extension may be granted o nly when in the judgment of the Tax Commission a good cause exists therefor and m ay be for a period in excess of six (6) months . A record of every such extension granted, and the reason therefor, shall be kept. 6. Before July 1, 2010, the salary or any o ther form of compensation, received from t he United States by a member of any component of the Armed Forces of the United States, shall be deducted from taxable income during the time in which the person is detained by the enemy in a conflict, is a prisone r of war or is missing in action and not deceased; provided, after July 1, 2010, all such salary or compensation shall be subject to th e deduction as provided pursuant to paragraph 5 of this subsection. 7. a. An individual taxpayer, whether resident or nonresident, may deduct an amount equal to th e federal income taxes paid by the taxp ayer during the taxable year. b. Federal taxes as desc ribed in subparagraph a of this paragraph shall be deductible by any in dividual taxpayer, whether resident or nonresident , only to the extent they relate to income subject to taxation pursuant to the provisions of the Oklahoma Income Tax Act. The maximum amount allowable in the preceding paragraph shall be prorated on the ra tio of the Req. No. 7141 Page 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Oklahoma adjusted gross income to feder al adjusted gross income. c. For the purpose of this paragraph, "federal income taxes paid" shall mean federal income taxes, surtaxes imposed on incomes or excess profits taxes, as though the taxpayer was on the accrual basis. In determining the amount of deduction for federal income taxes for tax year 2001, the amount of the deductio n shall not be adjusted by the amount of any accelerat ed ten percent (10%) tax rate bracket credit or advanced refund of the credit received during the tax year provided pursuant to the federal Economic Growth and Tax Relief Reconciliation Act of 2001, P.L . No. 107- 16, and the advanced refund of such credit s hall not be subject to taxation. d. The provisions of this paragraph sh all apply to all taxable years ending after Decemb er 31, 1978, and beginning before January 1, 2006. 8. Retirement benefits not to exceed Five Thousand Five Hundred Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand Dollars ($10,000.00) for the 2006 tax year and all s ubsequent tax years, which are receiv ed by an individual from the civil service of the United States, the Oklahoma Public Employees Retirement System, Req. No. 7141 Page 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the Teachers' Retirement System of Oklahoma, the Oklahoma Law Enforcement Retirement System, the Oklahoma Firefighters Pension and Retirement System, the Oklahoma Police Pension and Retirement System, the employee retirement systems created by counties pursuant to Section 951 et seq. of Title 19 of the Oklahoma Statut es, the Uniform Retirement System for Just ices and Judges, the Oklahoma Wildlife Conservation Department Retirement Fund, the Oklahoma Employment Security Commission Retirement Plan, or the employee retirement systems created by municipalities pursuant to Section 48- 101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt from taxable income. 9. In taxable years beginning after D ecember 3l, 1984, Social Security benefits received by an individual sh all be exempt from taxable income, to the extent s uch benefits are included in the federal adjusted gross income pursuant to the provisions of Section 86 of the Internal Revenue Code, 2 6 U.S.C., Section 86. 10. For taxable years beginning after December 3 1, 1994, lump- sum distributions from employer plan s of deferred compensation, which are not qualified plans within the meaning of Section 401(a) of the Internal Revenue Code, 26 U.S.C., Section 401(a), and which are deposited in and accounted for within a separate bank account or brokerage account in a fi nancial institution within this state, shall be excluded from taxable income in the same manner as a qualifying rollover contribution t o an individual retirement account Req. No. 7141 Page 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 within the meaning of Section 408 of the Internal Revenue Code, 26 U.S.C., Section 408. Amounts withdrawn from such bank or bro kerage account, including any earni ngs thereon, shall be included in taxable income when with drawn in the same manner as withdrawals from individual retirement acco unts within the meaning of Section 408 of the Internal Revenue Code. 11. In taxable years beginning after December 31, 1995, contributions made to and interest received from a medical savings account established pursuant to Sections 2621 through 2623 of T itle 63 of the Oklahoma Statutes shall be exempt f rom taxable income. 12. For taxable years beginning after December 31, 1996, the Oklahoma adjusted gross income of any individual taxp ayer who is a swine or poultry producer may be further adjusted for the deduction for depreciation allowed for new constr uction or expansion costs which may be computed using the same depreciation method elected for federal income tax purposes except that the useful life shall be seven (7) years for purposes of this paragraph . If depreciation is allowed as a deduction in de termining the adjusted gross income of an individual, any depreciation calculated and claimed pursuant to this section shall in no even t be a duplication of any depreciation allowed or permitted on the fede ral income tax return of the individual. 13. a. In taxable years beginning before January 1, 2005, retirement benefits not to exceed the amounts Req. No. 7141 Page 56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 specified in this paragraph, which are received by an individual sixty-five (65) years of age or older and whose Oklahoma adjusted gross income is Twenty-five Thousand Dollars ($25,000.00) or less if the filing status is single, head of household, or married filing separate, or Fifty Thousand Dollars ($50,000.00) or less if the filing status is married filing joint or qualifying widow, shall be ex empt from taxable income. In taxable years beginning after December 31, 2004, retirement benefits not to exceed the amounts specified in this paragra ph, which are received by an individual whose Oklahoma adjusted gross income is less than the qualifying a mount specified in this paragraph, shall be exempt from tax able income. b. For purposes of this paragraph, the qualifying amount shall be as follows: (1) in taxable years beginning after December 31, 2004, and prior to January 1, 2007, the qualifying amount shall be Thirty-seven Thousand Five Hundred Dollars ($37, 500.00) or less if the filing status is single, head of household, or married filing separa te, or Seventy-five Thousand Dollars ($75,000.00) or less if the filing status is married filing jointly o r qualifying widow, Req. No. 7141 Page 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (2) in the taxable year beginning Janua ry 1, 2007, the qualifying amount shall be Fifty Thousand Dollars ($50,000.00) or less if t he filing status is single, head of household, or married filing separate, or One Hundred Thousand Dollars ($100,000.00) or less if the filing status is married filing jointly or qualifying widow, (3) in the taxable year beginning January 1, 2008, the qualifying amount shall be Sixty-two Thousand Five Hundred Dollars ($62,500.00) or less if the filing status is single, head of household, or married filing separate, or One Hundred Twenty- five Thousand Dollars ($125,000.00) or less if the filing status is mar ried filing jointly or qualifying widow, (4) in the taxable year beginning January 1, 2009, the qualifying amount shall be One Hundred Thousand Dollars ($100,000.00) or less if the filing status is single, head of household, or married filing separate, or Two Hundred Thousand Dollars ($200,000.00) or less if the filing status is married filing jointly or quali fying widow, and Req. No. 7141 Page 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (5) in the taxable year beginning January 1, 2010, and subsequent taxable years, there shall be no limitation upon the qualifying amo unt. c. For purposes of this paragraph, "retirement benefits" means the total distributions or withdrawals from the following: (1) an employee pension benefit plan w hich satisfies the requirements of Section 401 of the Internal Revenue Code, 26 U.S.C., Sec tion 401, (2) an eligible deferred compensation plan that satisfies the requirements of Section 457 of the Internal Revenue Code, 26 U.S.C., Section 457, (3) an individual retirement account, annuity or trust or simplified employee pension that satisfies the requirements of Section 408 of the Internal Revenue Code, 26 U.S.C., Section 408, (4) an employee annuity subject to the provisions of Section 403(a) or (b) of the Internal Revenue Code, 26 U.S.C., Section 403(a) or (b), (5) United States Retirement Bon ds which satisfy the requirements of Section 86 of the Internal Revenue Code, 26 U.S.C., Section 86, or (6) lump-sum distributions from a retirement plan which satisfies the requirements of Section Req. No. 7141 Page 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 402(e) of the Internal Revenue Code, 26 U.S.C., Section 402(e). d. The amount of the exemption provided by this paragraph shall be limited to Five Thousand Five Hundred Dollars ($5,500.00) for the 2004 tax year, Seven Thous and Five Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand Dollars ($10,00 0.00) for the tax year 2006 and for all subsequent tax years. Any individual who claims the exemption provided for in paragraph 8 of this subsection shall not be pe rmitted to claim a combined total exemption pursuant to this paragraph and paragraph 8 of t his subsection in an amount exceeding Five Thousand Five Hundred Dollars ($5,500.00) for the 2004 tax y ear, Seven Thousand Five Hundred Dollars ($7,500.00) for the 2 005 tax year and Ten Thousand Dollars ($10,000.00) for the 2006 tax year and all subsequent tax years. 14. In taxable years beginning after December 31, 1999, for an individual engaged in production agriculture who has filed a Schedule F form with the taxpayer's federal income tax return for such taxable year, there shall be excluded from t axable income any amount which was included as federal taxable income or federal adjusted gross income and which consists of the discharge of an Req. No. 7141 Page 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 obligation by a creditor of the taxpayer incurred to finance the production of agricultural products. 15. In taxable years beginning December 31, 2000, an amount equal to one hundred percent (100%) of the am ount of any scholarship or stipend received from participation in the Oklahoma Police Corps Program, as established in Section 2-140.3 of Title 47 of the Oklahoma Statutes shall be exempt from taxable income. 16. a. In taxable years beginning after December 31, 2001, and before January 1, 2005, th ere shall be allowed a deduction in the amount of contributions to accounts established pursuant to the Oklaho ma College Savings Plan Act. The deduction shall equal the amount of contributions to accounts, but in no event shall the deduction for each cont ributor exceed Two Thousand Five Hundred Dollars ($2,500.00) each taxable year for each account. b. In taxable years beginning after December 31, 2004, each taxpayer shall be allowed a deduction for contributions to accounts established pursuant to the Oklahoma College Savings Plan Act. The maximum annual deduction shall equal the amount of contributions to all such accounts plus any contributions to such accounts by the taxpayer for prior taxable years aft er December 31, 2004, which were not deducted, but in no Req. No. 7141 Page 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 event shall the deduction for each tax year exceed Ten Thousand Dollars ($10,000.00) for each individua l taxpayer or Twenty Thousand Dollars ($20,000.00) for taxpayers filing a joint return . Any amount of a contribution that is not deducted by the taxpayer in the year for which the contribution is made may be carried forward as a deduction from income for the succeeding five (5) years. For taxable years beginning after December 31, 2005, deductions may be taken for contributions and rollovers made during a taxable year and up to April 15 of the succeeding year, or the due date of a taxpayer's state income tax return, excluding extensions, whichever is later. Provided, a deduction for the same contri bution may not be taken for two (2) different taxa ble years. c. In taxable years beginning after December 31, 2006, deductions for contributions made pursuant t o subparagraph b of this paragraph shall be limited as follows: (1) for a taxpayer who qualifi ed for the five-year carryforward election and who t akes a rollover or nonqualified withdrawal during that period, the tax deduction otherwise available pursuant to subparagraph b of this paragraph shall be reduced Req. No. 7141 Page 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 by the amount which is equal to the rollo ver or nonqualified withdrawal, and (2) for a taxpayer who elects to take a rollover or nonqualified withdrawal within the same tax year in which a contribution w as made to the taxpayer's account, the tax deduction otherwise available pursuant to subparag raph b of this paragraph shall be reduced by the amou nt of the contribution which is equal to the rollover or nonqualified withdrawal. d. If a taxpayer elects to t ake a rollover on a contribution for which a deduction has been taken pursuant to subparagra ph b of this paragraph within one (1) year of the date of contribution, the amount of such rollover shall be included in the adjusted gross income of the taxpayer i n the taxable year of the rollover. e. If a taxpayer makes a nonqualified withdrawal of contributions for which a deduction was taken pursuant to subparagraph b of this paragra ph, such nonqualified withdrawal and any earnings thereon shall be included in the adjusted gross income of the taxpayer in the taxable year of the nonqualified withdrawal . f. As used in this paragraph: Req. No. 7141 Page 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (1) "non-qualified withdrawal" means a withdrawal from an Oklahoma College Savings Plan account other than one of the following: (a) a qualified withdrawal, (b) a withdrawal made as a result of the death or disability of the designated beneficiary of an account, (c) a withdrawal that is made on the account of a scholarship or the allowance or payment described in Section 135(d)(1)(B) or (C) or by the Internal Revenue Code, received by the designated beneficiary to the ex tent the amount of the refund does not exceed the amount of the scholarship, allowance, or payment, or (d) a rollover or change of designated beneficiary as permitted by subsection F of Section 3970.7 of Title 70 of Oklahoma Statutes, and (2) "rollover" means the transfer of funds from the Oklahoma College Savings Plan to any other plan under Section 529 of the Internal Revenue Cod e. 17. For taxable years beginning aft er December 31, 2005, retirement benefits received by an individual from any compo nent of Req. No. 7141 Page 64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the Armed Forces of the United States in an amount not to exceed the greater of seventy-five percent (75%) of such benefits or Ten Thousand Dollars ($10,000.00) shall be exempt from taxable income but in no case less than the amount of the exemptio n provided by paragraph 13 of this subsection. 18. For taxable years beginning after December 31, 2006, retirement benefits received by federal civil service retirees, including survivor annuities, paid in lieu of Social Security benefits shall be exempt from taxable income t o the extent such benefits are included in the federal adjusted gross income pursuant to the provisions of Section 86 of the Internal Revenue Code, 26 U.S.C., Section 86, according to the following schedule: a. in the taxable year beginning January 1, 2007 , twenty percent (20%) of such bene fits shall be exempt, b. in the taxable year beginning January 1, 2008, forty percent (40%) of such benefits shall be exempt, c. in the taxable year beginning January 1, 2009, sixty percent (60%) of such benefits shall be exempt, d. in the taxable year beginning January 1, 2010, eighty percent (80%) of such benefits shall be exempt, and e. in the taxable year beginning January 1, 2011, and subsequent taxable years, one hundred percent (100 %) of such benefits shall be exemp t. Req. No. 7141 Page 65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 19. a. For taxable years beginning after De cember 31, 2007, a resident individual may deduct up to Ten Thousand Dollars ($10,000.00) from Oklahoma adjusted gross income if the individual, or the dependent of the individual, while living, donates one or more human organs of the individual to another human being for human organ transplantation. As used in this paragraph, "human organ" means all or part of a liver, pancreas, kidney, intestine, lung, or bone marrow. A deduction that is claimed under th is paragraph may be claimed in the taxable year in which the human organ transplantation occurs. b. An individual may claim this deduction only once, and the deduction may be claimed only for unreimbursed expenses that are incurred by the individual and related to the organ donation of the individual. c. The Oklahoma Tax Commission shall promulgate rules to implement the provisions of this paragraph which shall contain a specific list of expenses which may be presumed to qualify for the deduction. The Tax Commission shall prescribe necessary requirements for verification. 20. For taxable years beginning after December 31, 2009, there shall be exempt from taxable income any amount received by the Req. No. 7141 Page 66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 beneficiary of the death benefit for an emergency medical technician or a registered emergency medical responde r provided by Section 1- 2505.1 of Title 63 of the Oklahoma Statutes. 21. For taxable years beginning after December 31, 2008, taxable income shall be increased by any unemployment compensation exempted under Section 85(c) of the Internal Revenue Code, 26 U.S.C., Section 85(c)(2009). 22. For taxable years beginning after D ecember 31, 2008, there shall be exempt from taxable income a ny payment in an amount less than Six Hundred Dollars ($600.00) rec eived by a person as an award for participation in a compet itive livestock show event. For purposes of this paragraph, the paym ent shall be treated as a scholarship amount paid by the enti ty sponsoring the event and the sponsoring entity shall cause the p ayment to be categor ized as a scholarship in its books and records. 23. For taxable years beginning on or after January 1, 2016 , taxable income shall be increased by any amount of stat e and local sales or income taxes deducted under 26 U.S.C., Section 164 of the Internal Revenue Code. If the amount of state and local taxes deducted on the federal return is limited, taxable income on the state return shall be increased only by the amoun t actually deducted after any such limitations are applied. 24. For taxable years beginning after December 31, 2020, each taxpayer shall be allowed a deduction for contributions to accounts Req. No. 7141 Page 67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 established pursuant to the Achieving a Better Life Experienc e (ABLE) Program as established in Section 4001.1 et seq. of Title 56 of the Oklahoma Statutes. For any tax year, the deduction provi ded for in this paragraph shall not exceed Ten Thousand Dollars ($10,000.00) for an individual taxpayer or Twenty Thousand Dollars ($20,000.00) for taxpayers filing a joint return . Any amount of contribution not deducted by the taxpayer in the tax year fo r which the contribution is ma de may be carried forward as a deductio n from income for up to five (5) tax years. Deductions may be taken for contributions made during the tax year and throug h April 15 of the succeeding tax year, or through the due date of a taxpayer's state income tax return excluding extensions, whichever is later. Provided, a deduction for the same contri bution may not be taken in more than one (1) tax year. F. 1. For taxable years beginning after December 31, 2004, a deduction from the Oklahoma adjusted gross inc ome of any individual taxpayer shall be allowed for qualifying gains receiving capital treatment that are included in the federal adjusted gross income of such individual taxpayer during the taxable year. 2. As used in this subsection: a. "qualifying gains receiving capital treatment " means the amount of net capital gains, as defined in Section 1222(11) of the Internal Revenue Code, included in an Req. No. 7141 Page 68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 individual taxpayer's federal income tax return that result from: (1) the sale of real property or tangible personal property located within Oklahoma that has been directly or indirectly owned by the in dividual taxpayer for a holding period of at least five (5) years prior to the date of the transaction from which such net capital gai ns arise, (2) the sale of stock or the sale of a direct or indirect ownership interest in an Oklahoma company, limited lia bility company, or partnership where such stock or ownership interest has been directly or indirectly owned by the individual taxpayer for a holding period of at least two (2) years prior to the date of the transaction from which the net capital gains arise, or (3) the sale of real property, tangible personal property or intangible personal property located within Oklahoma as part of the sale of all or substantially all of the assets of an Oklahoma company, limited liability company, or partnership or an Ok lahoma proprietorship business enterprise where such property has been Req. No. 7141 Page 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 directly or indirectly owned by such entity or business enterprise or owned by the owners of such entity or business enterprise for a period of at least two (2) years prior to the date of the transaction from which the net capital gains arise, b. "holding period" means an uninterrupted period of time. The holding period shall include any additional period when the property was held by another individual or entity, if such additional per iod is included in the taxpayer's holding period for the asset pursuant to the Internal Revenue Code, c. "Oklahoma company," "limited liability company," or "partnership" means an entity whose primary headquarters have been located in Oklahoma for at least three (3) uninterrupted years prior to the date of the transaction fr om which the net capital gains arise, d. "direct" means the individual taxpayer directly owns the asset, e. "indirect" means the individual taxpayer owns an interest in a pass-through entity (or chain of pass- through entities) that sells the asset that giv es rise to the qualifying gains receiving capital treatment. Req. No. 7141 Page 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (1) With respect to sales of real property or tangible personal property located within Oklahoma, the deduction described in this subsection shall not apply unless the pass- through entity that ma kes the sale has held the property for not less than five (5) u ninterrupted years prior to the date of the transaction that created the capital gain, and each pass-through entity included in the chain of ownership has been a member, partner, or shareholder of the pass-through entity in the tier immediately below it for an uninterrupted period of not less than five (5) years. (2) With respect to sales of stock or ownership interest in or sales of all or substantially all of the assets of an Oklahoma company, limited liability company, partnership or Oklahoma proprietorship business enterprise, the deduction described in this subsection sh all not apply unless the pass-through entity that mak es the sale has held the stock or ownership interest for not less than two (2) uninterrupted years prior to the date of the transact ion that created the capital gain, and each pass-through entity Req. No. 7141 Page 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 included in the chain of ownership has been a member, partner or shareholder of the pass- through entity in the tier immediately be low it for an uninterrupted period of not less than two (2) years. For purposes of this division, uninterrupted ownership prior to J uly 1, 2007, shall be included in the determination o f the required holding period prescribed by this division, and f. "Oklahoma proprietorship business enterprise " means a business enterprise whose income and expenses have been reported on Schedule C or F of an individual taxpayer's federal income tax retur n, or any similar successor schedule published by the Internal Revenue Service and whose primary headquarters have been located in Oklahoma for at least three (3) uninterrupted years prior to the date of the transaction from which the net capital gains ari se. G. 1. For purposes of computing its Oklahoma taxable income under this section, the dividends -paid deduction otherwise allow ed by federal law in computing net income of a real estate investment trust that is subject to federal income tax shall be add ed back in computing the tax imposed by this state under this title if the real estate investment trust is a captive real estate i nvestment trust. Req. No. 7141 Page 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2. For purposes of computing its Oklahoma taxable incom e under this section, a taxpayer shall add back other wise deductible rents and interest expenses paid to a captive real est ate investment trust that is not subject to the provisions of paragraph 1 of this subsection. As used in this subsection: a. the term "real estate investment trust" or "REIT" means the meaning ascribed to such term in Section 856 of the Internal Revenue Code, b. the term "captive real estate investment trust " means a real estate investment trust, the shares or beneficial interests of w hich are not regularly traded on an established secur ities market and more than fifty percent (50%) of the voting power o r value of the beneficial interests or shares of which are owned or controlled, directly or indirectly, or constructively, by a single entity that is: (1) treated as an association taxable as a corporation under the Internal Revenue Code, and (2) not exempt from federal income tax pursuant to the provisions of Section 501(a) of the Internal Revenue Code. The term shall not include a real estate investment trust that is intended to be regula rly traded on an established securities market, and that satisfie s the Req. No. 7141 Page 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 requirements of Section 856(a)(5) and (6) of the U.S. Internal Revenue Code by reason of Section 856(h)(2) of the Internal Revenue C ode, c. the term "association taxable as a corporati on" shall not include the following entities: (1) any real estate investment trust as defined in paragraph a of this subsec tion other than a "captive real estate inv estment trust", or (2) any qualified real estate investment trust subsidiary under Section 856(i) of the Internal Revenue Code, other than a qualified REI T subsidiary of a "captive real estate investment trust", or (3) any Listed Australian Property Trust (meaning an Australian unit trust regis tered as a "Managed Investment Scheme" under the Australian Corporations Act in which the principal class of units is listed on a recognized stock exchange in Australia and is regularly traded on an established securities market), or an entity organized as a trust, provided that a Listed Australian Property Trust owns or controls, directly or indirectly, seventy -five percent Req. No. 7141 Page 74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (75%) or more of the voting power or value of the beneficial interests or shares of such trust, or (4) any Qualified Foreign Entity, m eaning a corporation, trust, association or partnership organized outside the laws of the United States and which satisfies the following criteria: (a) at least seventy-five percent (75%) of the entity's total asset value at the close of its taxable year is represented by real estate assets, as defined in Section 856(c)(5)(B) of the Internal Revenue Code, thereby including shares or certificates of beneficial interest in an y real estate investment trust, cash and cash equivalents, and U.S. Government securi ties, (b) the entity receives a dividend-paid deduction comparable to Section 561 of the Internal Revenue Code, or is exempt from entity level tax, (c) the entity is required to distribute at least eighty-five percent (85%) of its taxable income, as comput ed in the jurisdiction in which it is organized, to Req. No. 7141 Page 75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the holders of its shares or certificates of beneficial interest on an annual basis, (d) not more than ten percent ( 10%) of the voting power or value in such entity is held directly or indirectly or const ructively by a single entity or individual, or the shares or beneficial interests of such entity are regularly traded on an established securities market, and (e) the entity is organized in a country which has a tax treaty with the United States. 3. For purposes of this subsection, the constructive ownership rules of Section 318(a) of the Internal Revenue Code , as modified by Section 856(d)(5) of the Internal Revenue Code, shall apply in determining the ownership of s tock, assets, or net profits of any person. 4. A real estate investment trust that does not become regularly traded on an established securities market within one (1) year of the date on which it first b ecomes a real estate i nvestment trust shall be deeme d not to have been regularly traded on an established securities market, retroactive to the date it first became a real estate investment trust, and shall file an amended return reflecting such retroactiv e designation for any tax year or part year occurring during its initial year of status as a real Req. No. 7141 Page 76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 estate investment trust. For purposes of this subsection, a real estate investment trust becomes a real estate investment trust on the first day it has both met the requirements o f Section 856 of the Internal Revenue Code and has elected to be trea ted as a real estate investment trust pursuant to Section 856(c)(1) of the Internal Revenue Code. SECTION 3. This act shall become effective November 1, 2023. 59-1-7141 MAH 01/17/23