Oklahoma House Bill HB3388 Latest Draft

                            An Act 
ENROLLED HOUSE 
BILL NO. 3388 	By: McCall and Caldwell (Chad) 
of the House 
 
  and 
 
  Treat of the Senate 
 
 
 
 
 
 
An Act relating to income tax credit; amending 68 
O.S. 2021, Section 205.2, which relates to claims for 
deduction of refund; prohibiting claims fo r deduction 
from certain tax credit; amending 68 O.S. 2021, 
Section 2358, as amended by Section 1, Chapter 377, 
O.S.L. 2022 (68 O.S. Supp. 2023, Section 2358), which 
relates to adjustments to arrive at taxable income; 
providing exemption for certain tax cr edits received; 
amending Section 2, Chapter 278, O.S.L. 2023 (70 O.S. 
Supp. 2023, Section 28 -101), which relates to the 
Oklahoma Parental Choice Tax Credit Act; modifying 
definitions; modifying income limitations; all owing 
certain credit to qualifying stud ents; establishing 
credit amount for private schools serving certain 
student populations; prohibiting the use of tax 
credit to offset certain accrued liabilities; 
modifying annual credit limitations; prohibiting the 
Oklahoma Tax Commission from requiring c ertain 
taxpayers to reapply for certain credit; providing 
for calculation of credit amount; modifying 
limitations on credits allowed during certain fiscal 
years; exempting certain eligible taxpayers from 
providing additional income verification; requiring 
submission of enrollment verification form; 
prescribing application period; requiring credits and 
payments to be allocated by certain dates; providing 
deadline to receive priority consideration; allowing 
certain reallocation of credits; requiring certain 
notification; requiring the Commission to update 
certain information monthly; requiring the Commission 
to publish additional information; prohibiting 
credits from being considered taxable income;  ENR. H. B. NO. 3388 	Page 2 
updating statutory ref erences; updating statutory 
language; and declaring an emergency. 
 
 
 
 
SUBJECT: Income tax credit 
 
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA: 
 
SECTION 1.     AMENDATORY     68 O.S. 2021, Section 205.2, is 
amended to read as follows: 
 
Section 205.2 A.  For purposes of this section, a “qualified 
entity” shall mean a: 
 
1.  State agency; 
 
2.  Municipal court; 
 
3.  District court; 
 
4.  Public housing authority operating pursuant to Section 1062 
of Title 63 of the Oklahoma Statutes; 
 
5.  District attorney seeking to co llect unpaid court-ordered 
monetary obligations; or 
 
6.  The designee of an entity described in paragraphs 1 through 
5 of this subsection. 
 
B.  A qualified entity seeking to collect a debt, unpaid 
municipal or district court fines and costs or final judgment of at 
least Fifty Dollars ($50.00) from an individual who has filed a 
state income tax return may file a claim with the Oklahoma Tax 
Commission requesting that the amount owed to the qualified entity 
be deducted from any state income tax refund due to tha t individual.  
The claim shall be filed electronically in a form prescribed by the 
Tax Commission and shall contain information necessary to identify 
the person owing the debt, including the full name and Social 
Security number of the debtor. 
 
1.  Upon receiving a claim from a qualified entity, the Tax 
Commission shall deduct the claim amount, plus collection expenses 
as provided in this section, from the tax refund due to the debtor  ENR. H. B. NO. 3388 	Page 3 
and transfer the amount to the qualified entity.  Provided, the Tax 
Commission need not report available funds of less than Fifty 
Dollars ($50.00). 
 
2.  The qualified entity shall send notice to the debtor by 
regular mail at the last -known address of the debtor as shown by the 
records of the Tax Commission when seeking to collect a debt not 
reduced to final judgment.  The qualified entity shall send notice 
to the judgment debtor or defendant by first -class mail at the last -
known address of the judgment debtor or defendant as shown by the 
records of the Tax Commission when seeking to collect a final 
judgment or unpaid court fines and costs.  The Tax Commission shall 
provide in an agreed electronic format to the Department of Human 
Services the amount withheld by the Tax Commission, the home address 
and the Social Security number of the taxpayer.  The notice shall 
state: 
 
a. that a claim has been filed with the Tax Commission 
for any portion of the tax refund due to the debtor or 
defendant which would satisfy the debt, unpaid court 
fines and costs, or final judgment in full or in part , 
 
b. the basis for the claim, 
 
c. that the Tax Commission has deducted an amount from 
the refund and remitted it to such qualified entity, 
 
d. that the debtor or defendant has the right to contest 
the claim by sending a written request to the 
qualified entity for a hearing to protest the claim, 
and if the debtor or defendant fails to apply for a 
hearing within sixty (60) days after the date of the 
mailing of the notice, the debtor or defendant shall 
be deemed to have waived his or her opportunity to 
contest the claim.  Provided, if the claim was filed 
by the Department of Human Services, the notice shall 
state that the debtor must contest the claim by 
sending a written request to the Department within 
thirty (30) days after the date of the mailing of the 
notice, and 
 
e. that a collection expense of five percent (5%) of the 
gross proceeds owed to the qualified entity has been 
charged to the debtor or defendant and withheld from 
the refund.  ENR. H. B. NO. 3388 	Page 4 
 
3.  If the qualified entity determines that a refund is due to 
the taxpayer, the qualified entity shall reimburse the amount 
claimed plus the five -percent collection expense to the taxpayer.  
The qualified entity may request reimbursement of the two -percent 
collection expense retained by the Tax Commission.  Such request 
must be made within ninety (90) days of reimbursement to the 
taxpayer.  If timely requested, the Tax Commission shall make such 
reimbursement to the qualified entity within ninety (90) days of the 
request. 
 
4.  In the case of a joint return, the notice shall state: 
 
a. the name of any taxpayer named in the return against 
whom no debt, no unpaid court fines and costs, or 
final judgment is claimed, 
 
b. the fact that a debt, unpaid court fines and costs, or 
final judgment is not claimed against the taxpayer, 
 
c. the fact that the taxpayer is entitled to receive a 
refund if it is due regardless of the debt, court 
fines and costs, or final judgment asserted against 
the debtor or defendant, 
 
d. that in order to obtain the refund due, the taxpayer 
must apply, in writing, for a hearing with the 
qualified entity named in the notice within sixty (60) 
days after the date of the mailing of the notice.  
Provided, if the claim was filed by the Department of 
Human Services, the notice shall state that the 
taxpayer must apply, in writing, for a hearing with 
the Department within thirty (30) days after the date 
of the mailing of the notice, and 
 
e. if the taxpayer against whom no debt, no unpaid court 
fines and costs, or final judgment is claimed fails to 
apply in writing for a hearing within sixty (60) days 
after the mailing of the notice, the taxpayer shall 
have waived his or her right to a refund.  Provided, 
if the claim was filed by the Department of Human 
Services, the notice shall state that if the taxpayer 
fails to apply in writing for a hearing with the 
Department within thirty (30) days after the date of  ENR. H. B. NO. 3388 	Page 5 
the mailing of the notice, the taxpayer shall have 
waived his or her right to a refund. 
 
C.  If the qualified entity asserting the claim receives a 
written request for a hearing from the debtor or taxpayer against 
whom no debt, no court fines and costs, or final judgment is 
claimed, the qualified entity shall grant a hearing according to the 
provisions of the Administrative Procedures Act.  It shall be 
determined at the he aring whether the claimed sum is correct or 
whether an adjustment to the claim shall be made.  Pending final 
determination at the hearing of the validity of the debt, unpaid 
court fines and costs, or final judgment asserted by the qualified 
entity, no action shall be taken in furtherance of the collection of 
the debt, unpaid court fines and costs, or final judgment.  Appeals 
from actions taken at the hearing shall be in accordance with the 
provisions of the Administrative Procedures Act. 
 
D.  Upon final determination at a hearing, as provided for in 
subsection C of this section, of the amount of the debt, unpaid 
court fines and costs, or final judgment, or upon failure of the 
debtor or taxpayer against whom no debt, no unpaid court fines and 
costs, or final judgment is claimed to request such a hearing, the 
qualified entity shall apply the amount of the claim to the debt 
owed.  Any amounts held by the qualified entity in excess of the 
final determination of the debt and collection expense shall be 
refunded by the qualified entity to the taxpayer.  However, if the 
tax refund due is inadequate to pay the collection expense and debt, 
unpaid court fines and costs, or final judgment, the balance due the 
qualified entity shall be a continuing debt or final judgment until 
paid in full. 
 
E.  Upon receipt of a claim as provided in subsection A of this 
section, the Tax Commission shall: 
 
1.  Deduct from the refund five percent (5%) of the gross 
proceeds owed to the qualified entity, and distribute it by 
retaining two percent (2%) and transferring three percent (3%) to 
the qualified entity, as an expense of collection.  The two percent 
(2%) retained by the Tax Commission shall be deposited in the 
Oklahoma Tax Commission Fund; 
 
2.  Transfer the amount of the claimed debt, u npaid court fines 
and costs, or final judgment or so much thereof as is available to 
the qualified entity; 
  ENR. H. B. NO. 3388 	Page 6 
3.  Notify the debtor in writing as to how the refund was 
applied; and 
 
4.  Refund to the debtor any balance remaining after deducting 
the collection expense and debt, unpaid court fines and costs, or 
final judgment. 
 
F.  The Tax Commission shall deduct from any state tax refund 
due to a taxpayer the amount of delinquent state tax and penalty and 
interest thereon, which such taxpayer owes pursuant to any state tax 
law prior to payment of such refund. 
 
G.  The Tax Commission shall have first priority over all other 
qualified entities when the Tax Commission is collecting a debt, 
court fines and costs, or final judgment pursuant to the provisions 
of this section.  Subsequent to the Tax Commission priority, a claim 
filed by the Department of Human Services for the collection of 
child support and spousal support shall have priority over all other 
claims filed pursuant to this section.  Priority in multiple claims 
by other qualified entities pursuant to the provisions of this 
section shall be in the order in time in which the Tax Commission 
receives the claim from the qualified entities required by the 
provisions of subsection B of this section. 
 
H.  The Tax Commission shall prescr ibe or approve forms and 
promulgate rules and regulations for implementing the provisions of 
this section. 
 
I.  The information obtained by a qualified entity from the Tax 
Commission pursuant to the provisions of this section shall b e used 
only to aid in collection of the debt, unpaid court fines and costs, 
or final judgment owed to the qualified entity.  Disclosure of the 
information for any other purpose shall constitute a misdemeanor.  
Any employee of a qualified entity or person c onvicted of violating 
this provision shall be subject to a fine not exceeding One Thousand 
Dollars ($1,000.00) or imprisonment in the county jail for a term 
not exceeding one (1) year, or both fine and imprisonment and, if 
still employed by the qualified e ntity, shall be dismisse d from 
employment. 
 
J.  The Tax Commission may employ the procedures provided by 
this section in order to collect a debt owed to the Internal Revenue 
Service if the Internal Revenue Service requires such procedure as a 
condition to providing information to the Commission concerning 
federal income tax.  ENR. H. B. NO. 3388 	Page 7 
 
K.  The provisions of this section shall not apply to claims 
filed under the provisions of Section 2906 or Section 5011 of this 
title or Section 28-101 of Title 70 of the Oklahoma Statu tes. 
 
SECTION 2.     AMENDATORY    68 O.S. 2021, Section 2358 , as 
amended by Section 1, Chapter 377, O.S.L. 2022 (68 O.S. Supp. 2023, 
Section 2358), is amended to read as follows: 
 
Section 2358.  For all tax years beginning after Decembe r 31, 
1981, taxable income and adjusted gross income shall be adjusted to 
arrive at Oklahoma taxable income and Oklahoma adjusted gross income 
as required by this section. 
 
A.  The taxable income of any taxpayer shall be adjusted to 
arrive at Oklahoma taxa ble income for corporati ons and Oklahoma 
adjusted gross income for individuals, as follows: 
 
1.  There shall be added interest income on obligations of any 
state or political subdivision thereto which is not otherwise 
exempted pursuant to other laws of thi s state, to the extent t hat 
such interest is not inclu ded in taxable income and adjusted gross 
income. 
 
2.  There shall be deducted amounts included in such income that 
the state is prohibited from taxing because of the provisions of the 
Federal Constitution, the State Constituti on, federal laws or laws 
of Oklahoma. 
 
3.  The amount of any federal net operating loss deduction 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 deduct ion allowed to a taxpayer for 
federal income tax purposes shall be reduced to an 
amount which is the same portion thereof as the loss 
from sources within this state, as determined pursuant 
to this section and Section 2362 of this ti tle, for 
the taxable year in which such loss is sustained is of 
the total loss for such year; 
 
b. For carryovers and carrybacks to taxable years 
beginning after December 31, 1980, the amount of any 
net operating loss deduction allowed for the taxable  ENR. H. B. NO. 3388 	Page 8 
year shall be an amount equal to the aggregate of the 
Oklahoma net operating loss carryovers and carrybacks 
to such year.  Oklahoma net operating losses shall be 
separately determined by reference to Section 172 of 
the Internal Revenue Code, 26 U.S.C., Section 172, as 
modified by the Oklahoma Income Tax Act, Section 2 351 
et seq. of this title, and shall be allowed without 
regard to the existence of a federal net operating 
loss.  For tax years beginning after December 31, 
2000, and ending before January 1, 2008, the years to 
which such losses may be carried shall be det ermined 
solely by reference to Section 172 of the Internal 
Revenue Code, 26 U.S.C., Section 172, with the 
exception that the terms “net operating loss” and 
“taxable income” shall be replaced with “O klahoma net 
operating loss” and “Oklahoma taxable income”.  For 
tax years beginning after December 31, 2007, and 
ending before January 1, 2009, years to which such 
losses may be carried back shall be limited to two (2) 
years.  For tax years beginning after December 31, 
2008, the years to which such losses may be carried 
back shall be determined solely by reference to 
Section 172 of the Internal Revenue Code, 26 U.S.C., 
Section 172, with the 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 shall be allocated as 
indicated.  Allowable deductions attributable to items separately 
allocable in subparagraphs a, b and c of this par agraph, whether or 
not such items of income were actually r eceived, 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 sa les of such property, sh all be 
allocated in accordance with the situs of such 
property; 
 
b. Income from intangible personal property, such as 
interest, dividends, patent or copyright royalties, 
and gains or losses from sales of such property, shall 
be allocated in accordance with the domiciliary situs 
of the taxpayer, except that:  ENR. H. B. NO. 3388 	Page 9 
 
(1) where such property has acquired a nonunitary 
business or commercial situs apart from the 
domicile of the taxpayer such income shall be 
allocated in accordance with such busi ness 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 treated as having a 
separate commercial or business situs insofar as 
undistributed income is concerned, but shall not 
be treated as having a separate commercial or 
business situs insofar as distributed income is 
concerned, 
 
(2) for taxable years beginning after December 31, 
2003, capital or ordina ry gains or losses from 
the sale of an ownership interest in a publicly 
traded partnership, as defined by Section 7704(b) 
of the Internal Revenue Code, shall be allocated 
to this state in the ratio of the original cost 
of such partnership’s tangible proper ty in this 
state to the original cost of such partnership’s 
tangible property everywhere, as determined at 
the time of the sale; if more than fifty percent 
(50%) of the value of the partnership’s assets 
consists of intangible assets, capital or 
ordinary gains or losses from the s ale of an 
ownership interest in the par tnership shall be 
allocated to this state in accordance with the 
sales factor of the partnership for its first 
full tax period immediately preceding its tax 
period during which the ownership in terest in the 
partnership was sold; the provisions of this 
division shall only apply if the capital or 
ordinary gains or losses from the sale of an 
ownership interest in a partnership do not 
constitute qualifying gain receiving capital 
treatment as defined in subparagraph a of 
paragraph 2 of subsection F of this secti on, 
 
(3) income from such property which is required to be 
allocated pursuant to the provisions of paragraph  ENR. H. B. NO. 3388 	Page 10 
5 of this subsection shall be allocated as herein 
provided; 
 
c. Net income or loss f rom a business activity which is 
not a part of business carried o n within or without 
the state of a unitary character shall be separately 
allocated to the state in which such activity is 
conducted; 
 
d. In the case of a manufacturing or processing 
enterprise the business of which in Oklahoma this 
state consists solely of marketing its products by: 
 
(1) sales having a situs without this state, shipped 
directly to a point from without the state to a 
purchaser within the state, commonly known as 
interstate sales, 
 
(2) sales of the product stored in public warehouses 
within the state pursuant to “in transit” 
tariffs, as prescribed and allowed by the 
Interstate Commerce Commission, to a purchaser 
within the state, 
 
(3) sales of the product stored in public warehou ses 
within the state whe re the shipment to such 
warehouses is not cov ered by “in transit” 
tariffs, as prescribed and 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 the total net income of 
the taxpayer for federal income tax purposes derived 
from the manufacture and/or processing and sales 
everywhere as determined by the ratio of the sales 
defined in this section made to the purchaser within 
the state to the total sales everywhere.  The term 
“public warehouse” as used in this subparagraph means 
a licensed public warehouse, the principal business of 
which is warehousing merchandise for the public; 
 
e. In the case of insurance companies, Oklahoma taxable 
income shall be taxable income of the taxpayer for 
federal tax purposes, as adjusted for the adjustments  ENR. H. B. NO. 3388 	Page 11 
provided pursuant to the provisions of paragraphs 1 
and 2 of this subsection, apportioned as follows: 
 
(1) except as otherwise provid ed by division (2) of 
this subparagraph, taxable income of an insurance 
company for a taxable year shall be apportioned 
to this state by multiplying such income by a 
fraction, the numerator of which is the direct 
premiums written for insurance on property or 
risks in this state, and the denominator of which 
is the direct premiums written for insurance on 
property or risks everywhere.  For purposes of 
this subsection, the term “direct premiums 
written” means the total amount of direct 
premiums written, asses sments and annuity 
considerations as reported for the taxable year 
on the annual statement filed by the company with 
the Insurance Commissioner in the form approved 
by the National Association of Insurance 
Commissioners, or such other form as may be 
prescribed in lieu thereof, 
 
(2) if the principal source of premiums written by an 
insurance company consists of premiums for 
reinsurance accepted by it, the taxable income of 
such company shall be apportioned to this state 
by multiplying such income by a fracti on, the 
numerator of which is the sum of (a) direct 
premiums written for insurance on property or 
risks in this state, plus (b) premiums written 
for reinsurance accepted in respect of property 
or risks in this state, and the denominator of 
which is the sum of (c) direct premiums written 
for insurance on property or risks everyw here, 
plus (d) premiums written for reinsurance 
accepted in respect of property or risks 
everywhere.  For purposes of this paragraph, 
premiums written for reinsurance accepted in 
respect of property or risks in this state, 
whether or not otherwise determin able, may at the 
election of the company be determined on the 
basis of the proportion which premiums written 
for insurance accepted from companies 
commercially domiciled in Oklahoma this state 
bears to premiums written for reinsurance  ENR. H. B. NO. 3388 	Page 12 
accepted from all sou rces, 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 s um of 
the total direct premiums written by each s uch 
ceding company for the taxable year. 
 
5.  The net income or loss remaining after the separate 
allocation in paragraph 4 of this subsection, being that which is 
derived from a unitary business enterprise, shall be apportioned to 
this state on the basis o f 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 ro yalties, purchase discounts, and interest on 
accounts receivable relating to or arising from a business activity, 
the income from which is apportioned pursuant to this subsection, 
including the sale or othe r disposition of such property and any 
other property used in the unitary enterprise.  Deductions used in 
computing such net income or loss shall not include taxes based on 
or measured by income.  Provided, for corporations whose pr operty 
for purposes of the tax imposed by Section 2355 of this title has a n 
initial investment cost equaling or exceeding Two Hundred Million 
Dollars ($200,000,000.00) and such investment is made on or after 
July 1, 1997, or for corporations which expand t heir property or 
facilities in this state and such expansion has an invest ment cost 
equaling or exceeding Two Hundred Million Dollars ($200,000,000.00) 
over a period not to exceed three (3) years, and such expansion is 
commenced on or after January 1, 2000 , the three factors shal l be 
apportioned with property and payroll, each c omprising twenty-five 
percent (25%) of the apportionment factor and sales comprising fifty 
percent (50%) of the apportionment factor.  The apportionment 
factors shall be computed as follows: 
 
a. The property factor is a fraction, the numerator of 
which is the average value of the taxpayer’s real and 
tangible personal property owned or rented and used in 
this state during the tax period and the denominator 
of which is the average value of all the taxpayer’s 
real and tangible personal property everywhere owned 
or rented and used during the tax period. 
 
(1) Property, the income from which is separately 
allocated in paragraph 4 of this subsection,  ENR. H. B. NO. 3388 	Page 13 
shall not be included in determining this 
fraction.  The numerator of the fraction shall 
include a portion of the inve stment in 
transportation and other equipment having no 
fixed situs, such as rolling stock, buses, trucks 
and trailers, including machinery and equipment 
carried thereon, airplanes, salespersons’ 
automobiles and other similar equipment, in the 
proportion that miles traveled in Oklahoma this 
state by such equipment bears to total miles 
traveled, 
 
(2) Property owned by the taxpayer is valued at its 
original cost.  Property rented by th e taxpayer 
is valued at eight times the net annual rental 
rate.  Net annual rental rate is the annual 
rental rate paid by the taxpayer, less any annual 
rental rate received by the taxpayer from 
subrentals, 
 
(3) The average value of property shall be determ ined 
by averaging the values at the beginning and 
ending of the tax period but the Oklahoma Tax 
Commission may require the averaging of monthly 
values during the tax period if reasonably 
required to reflect properly the average value of 
the taxpayer’s property; 
 
b. The payroll factor is a fraction, the numerator of 
which is the total compensation for services rendered 
in the state during the tax period, and the 
denominator of which is the total compensation for 
services rendered everywhere during the tax pe riod.  
“Compensation”, as used in this subsection , means 
those paid-for services to the extent 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 sha ll include a portion 
of such expenditure in connection w ith 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  ENR. H. B. NO. 3388 	Page 14 
Oklahoma this state 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, i n this state only a part 
of the time, in the proportion that time spent in 
Oklahoma this state bears to total time spent in 
furtherance of the enterprise by such employees; 
 
c. The sales factor is a fraction, the numerator of which 
is the total sales or gr oss revenue of the taxpa yer in 
this state during the tax period, and the denominat or 
of which is the total sales or gross 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 a llocated in 
paragraph 4 of this subsection. 
 
(1) Sales of tangible personal property have a situs 
in this state if the property is delivered or 
shipped to a purchaser other than the United 
States government, within this state regard less 
of the FOB point or other conditions of the sale; 
or the property is shipped f rom an office, store, 
warehouse, factory or other place of storage in 
this state and (a) the 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 interurban railway 
enterprise, the numerator of the fraction shall 
not be less than the allocation of revenues to 
this state as shown in its annual report to the 
Corporation Commission. 
 
(3) In the case of an airline, truck or bus 
enterprise or freight c ar, tank car, refrigerator 
car or other railroad equipment enterprise, the 
numerator of the fraction shall include a portion 
of revenue from interstate transportation in t he 
proportion that inter state mileage traveled in  ENR. H. B. NO. 3388 	Page 15 
Oklahoma this state bears to total interstate 
mileage traveled. 
 
(4) In the case of an oil, gasoline or gas pipeline 
enterprise, the numerator of the fraction shall 
be either the total of traffic units of t he 
enterprise within Oklahoma this state or the 
revenue allocated to Oklahoma this state based 
upon miles moved, at the option of the taxpayer, 
and the denominator of which shall be the total 
of traffic units of the enterprise or the revenue 
of the enterprise everywhere as approp riate to 
the numerator.  A “traffic unit” is hereby 
defined as the transportation for a distance of 
one (1) mile of one (1) barrel of oil, one (1) 
gallon of gasoline or one thousand (1,000) cubic 
feet of natural or casinghead gas, a s 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 of the 
interstate revenue as is allocated pursuant to 
the accounting procedures prescribed by the 
Federal Communications Com mission; provided that 
in respect to each corporation or busine ss entity 
required by the Federal Communications Commission 
to keep its books and records in accordance with 
a uniform system of accounts prescribed by such 
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 subject to allocation 
pursuant to the provisions of this subsection.  
Provided further, that the gros s revenue factors 
shall be those as are determined pursuant to the 
accounting procedure s prescribed by the Federal 
Communications Commission. 
 
In any case where the apportionment of the three factors 
prescribed in this paragraph attributes to Oklahoma this state a 
portion of net income of the enterprise out of all appropriate 
proportion to the property owned and/or business transacted within 
this state, because of the fact that one or more of the factors so 
prescribed are not employed to any appreciable ext ent in furtherance  ENR. H. B. NO. 3388 	Page 16 
of the enterprise; or because one or more factors not so prescribed 
are employed to a considerable extent in furtherance of the 
enterprise; or because of other reasons, the Tax Commission is 
empowered to permit, after a showing by taxpay er that an excessive 
portion of net income has been attributed to Oklahoma this state, or 
require, when in its judgment an insufficient portion of net income 
has been attributed to Oklahoma this state, the elimination, 
substitution, or use of additional fa ctors, or reduction or i ncrease 
in the weight of such prescribed factors.  Provided, how ever, that 
any such variance from such prescribed factors which has the effect 
of increasing the portion of net income attributable to Oklahoma 
this state must not be inherently arbitrary, and application of the 
recomputed final apportionment to the net in come of the enterprise 
must attribute to Oklahoma this state only a reasonable portion 
thereof. 
 
6.  For calendar years 1997 and 1998, the owner of a new or 
expanded agricultural commodity pro cessing facility in 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 owner in the new or expanded 
agricultural commodity processing faci lity.  For calendar year 1999, 
and all subsequent years, the perc entage, not to exceed fifteen 
percent (15%), available to the owner of a new or expanded 
agricultural commodity processing facility in this state claiming 
the exemption shall be adjusted annu ally so that the total estimated 
reduction in tax liability does not exceed One Million Dollars 
($1,000,000.00) annually.  The Tax Commission shall promulgate rules 
for determining the percentage of the investment which each eligibl e 
taxpayer may exclude. The exclusion provided by this paragraph 
shall be taken in the t axable year when the investment is made.  In 
the event the total reduction in tax liability authorized by this 
paragraph exceeds One Million Dollars ($1,000,000.00) in any 
calendar year, the Tax Commission shall permit any excess over One 
Million Dollars ($1,000,000.00) and shall 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 paragraph: 
  ENR. H. B. NO. 3388 	Page 17 
a. “Agricultural commodity processing facility” means 
building buildings, structures, fixtures and 
improvements used or operated primarily for the 
processing or production of marketable products from 
agricultural commodities.  The ter m shall also mean a 
dairy operation that requires a depreciable investment 
of at least Two Hundred Fifty Thousand Dollars 
($250,000.00) and which produces milk from dairy cows.  
The term does not include a facility that provides 
only, and nothing more than , storage, cleaning, dry ing 
or transportation of agricultural commodities, and 
 
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 agricult ural 
commodities, or the production of milk at a dairy 
operation, 
 
(2) transporting the agricu ltural 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 contrar y in paragraph 3 of this 
subsection, for taxable years beginning after D ecember 31, 1999, in 
the case of a taxpayer which has a farming loss, such farming loss 
shall be considered a net operating loss carryback in accordance 
with and to the extent of the I nternal Revenue Code, 26 U.S.C., 
Section 172(b)(G).  However, the amount of the net operating loss 
carryback shall not exceed the lesser of: 
 
a. Sixty Thousand Dollars ($60,000.00), or 
 
b. the loss properly shown on Schedule F of th e Internal 
Revenue Service Form 1040 reduced by one -half (1/2) of 
the income from all other source s other than reflected 
on Schedule F. 
 
8.  In taxable years beginning after December 31, 1995, all 
qualified wages equal to the federal income tax credit set forth in 
26 U.S.C.A., Section 45A, shall be deducted from taxable income.   ENR. H. B. NO. 3388 	Page 18 
The deduction allowed pu rsuant 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 pur poses 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 utilizes the Safety Pays O SHA 
Consultation Service provided by the Oklahoma Department of Labor 
shall receive an exemption fro m 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 af ter 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 Code of 1986 
as amended by Section 1231 of the A merican Recovery and Rei nvestment 
Act of 2009 (P.L. No. 111 -5).  There shall be subtracted from 
Oklahoma taxable income an amount equal to the amount of deferred 
income included in such taxable income pursuant to Section 108(i)(1) 
of the Internal Revenue C ode by Section 1231 of t he American 
Recovery and Reinvestment Act of 2009 (P.L. No. 111 -5). 
 
11.  For taxable years beginning on or after January 1, 2019, 
there shall be subtracted from Oklahoma taxable income or adjusted 
gross income any item of income or gain, and there shall b e added to 
Oklahoma taxable income or adjusted gross income any item of loss o r 
deduction that in the absence of an election pursuant to the 
provisions of the Pass -Through Entity Tax Equity Act of 2019 would 
be allocated to a member or to an indirect membe r of an electing 
pass-through entity pursuant to Section 2351 et seq. of this title, 
if (i) the electing pass -through entity has accounted for such item 
in computing its Oklahoma net entity income or loss pursuant to the 
provisions of the Pass-Through Entity Tax Equity Act of 2019, and 
(ii) the total amount of tax attributable to an y resulting Oklahoma 
net entity income has been paid.  The Oklahoma Tax Commission shall 
promulgate rules for the reporting of such exclusion to direct an d 
indirect members of th e 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 a pplication of 
this paragraph, the adjusted tax basis of any ownership interest in 
a pass-through entity for purposes of Section 2351 et seq. of this  ENR. H. B. NO. 3388 	Page 19 
title shall be equal to its adjusted tax basis for federal income 
tax purposes. 
 
B.  1.  The taxable income of any corporation shal l be further 
adjusted to arrive at Oklahoma taxable income, except those 
corporations electing treatment as provided in subchapter S of the 
Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section 
2365 of this title, dedu ctions pursuant to the p rovisions 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 placed into service after 
December 31, 1981, sha ll not be allowed in cal culating Oklahoma 
taxable income.  Such corporations shall be allowed a deducti on for 
depreciation of assets placed into service after December 31, 1981, 
in accordance with provisions of the Internal Revenue Code, 26 
U.S.C., Section 1 et seq., in effect im mediately prior to the 
enactment of the Accelerated Cost Recovery System.  The Oklahoma tax 
basis for all such assets placed into service after December 31, 
1981, calculated in this section shall be retained and utilized for 
all Oklahoma income tax purpose s through the final disposition of 
such assets. 
 
Notwithstanding any other provi sions of the Oklahoma Income Tax 
Act, Section 2351 et seq. of this title, or of the Internal Revenue 
Code to the contrary, this subsection shall control calculation of 
depreciation of assets placed into service after December 31, 1981, 
and before January 1 , 1983. 
 
For assets placed in service and held by a corporation in which 
accelerated cost recovery system the Accelerated Cost Recovery 
System was previously disallowed, an adj ustment to taxable income is 
required in the first taxable year beginning after D ecember 31, 
1982, to reconcile the basis of such assets to the basis allowed in 
the Internal Revenue Code.  The purpose of this adjustment is to 
equalize the basis and allowan ce for depreciation accounts between 
that reported to the Internal Revenue Servic e and that reported to 
Oklahoma this state. 
 
2.  For tax years beginning on or after January 1, 2009, and 
ending on or before December 31, 2009, there shall be added to 
Oklahoma taxable income any amount in excess of One Hundred Seventy -
five Thousand Dollar s ($175,000.00) which has been deducted as a 
small business expense under Internal Revenue Code, Section 179 as 
provided in the American Recovery and Reinvestment Act of 2009 . 
  ENR. H. B. NO. 3388 	Page 20 
C.  1.  For taxable years beginning after December 31, 1987, the 
taxable income of any corporation shall be further adjusted to 
arrive at Oklahoma taxable income for transfers of technology to 
qualified small businesses located i n Oklahoma this state.  Such 
transferor corporation shall be allowed an exemption from taxable 
income of an amount equal to the amount of royalty payment received 
as a result of such transfer; provided, however, such amount shall 
not exceed ten percent (10 %) of the amount of gros s proceeds 
received by such transferor corporation as a result of the 
technology transfer.  Such exemption shall be allowed for a period 
not to exceed ten (10) years from the date of receipt of the first 
royalty payment accruing fro m such transfer.  No exe mption may be 
claimed for transfers of technology to qualified small businesses 
made prior to January 1, 1988. 
 
2.  For purposes of this subsection: 
 
a. “Qualified small business” means an entity, whether 
organized as a corporation, partnership, or 
proprietorship, organized for profit with its 
principal place of business located within thi s 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 this 
state at the time of the tran sfer, and 
 
(3) Not a subsidiary or affiliate of the transferor 
corporation; 
 
b. “Technology” means a proprietary process, formula, 
pattern, device or compilation of scie ntific or 
technical information which is not in the public 
domain; 
 
c. “Transferor corporation” means a corporation which is 
the exclusive and undisputed owner of the technology 
at the time the transfer is made; and 
 
d. “Gross proceeds” means the total amo unt of 
consideration for the transfer of technology, whether 
the consideration is in money or otherwise.  ENR. H. B. NO. 3388 	Page 21 
 
D.  1.  For taxable years beginning after December 31, 2005, the 
taxable income of any corporation, estate or trust, shall be further 
adjusted for qualifying gains receiving capital treatment.  Such 
corporations, estates or trusts shall be al lowed a deduction from 
Oklahoma taxable income for the amount of qualifying gains receiving 
capital treatment earned by the corporation, est ate or trust during 
the taxable year and included in the federal taxable income of such 
corporation, estate or trust . 
 
2.  As used in this subsection: 
 
a. “qualifying gains receiving capital treatment” means 
the amount of net capital gains, as defined in S ection 
1222(11) of the Internal Revenue Code, included in the 
federal income tax return of the corporation, estate 
or trust that result from: 
 
(1) the sale of real property or tangible personal 
property located within Oklahoma this state that 
has been directly or indirectly owned by the 
corporation, estate or trust for a holding period 
of at least five (5) years prior to t he date of 
the transaction from which such net capital gains 
arise, 
 
(2) the sale of stock or on the sale of an ownership 
interest in an Oklahoma company, limite d 
liability company, or partnership where such 
stock or ownership interest has been directly or 
indirectly owned by the corporation, estate or 
trust for a holding period of at least three (3) 
years prior to the date of the transacti on from 
which the net capital gains arise, or 
 
(3) the sale of real property, tangible personal 
property or intangible pe rsonal property located 
within Oklahoma this state as part of the sale of 
all or substantially all of the assets of an 
Oklahoma company, limited liability comp any, or 
partnership where such property has been directly 
or indirectly owned by such entity owne d by the 
owners of such entity, and used in or derived 
from such entity for a period of at least three  ENR. H. B. NO. 3388 	Page 22 
(3) years prior to the date of t he 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 period is 
included in the taxp ayer’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 this state 
for at least three (3) unin terrupted years prior to 
the date of the transaction from which the net capital 
gains arise, 
 
d. “direct” means the taxpayer directly owns the asset, 
and 
 
e. “indirect” means the taxpayer owns an interest in a 
pass-through entity (or chain of pass-through 
entities) that sells the asset that gives rise to the 
qualifying gains receiving capital treatment. 
 
(1) With respect to sales of real property or 
tangible personal property located within 
Oklahoma this state, the deduction describe d in 
this subsection shall not apply unless the pass -
through entity that makes the sale has held the 
property for not less tha n 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 o wnership 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 sub stantially all 
of the assets of an Oklahoma company, limited 
liability company, or partnership, the ded uction 
described in this subsection shall not apply 
unless the pass-through entity that makes the  ENR. H. B. NO. 3388 	Page 23 
sale has held the stock or owne rship interest or 
the assets for not less than three (3) 
uninterrupted years prior to the date of the 
transaction that created the capital gain, and 
each pass-through entity included in the chain of 
ownership has been a member, partner or 
shareholder of the pass-through entity in the 
tier immediately below it for an uninterrupted 
period of not less than three (3) years. 
 
E.  The Oklahoma adjusted gross income of any individual 
taxpayer shall be further adjusted as follows to arrive at Oklahoma 
taxable income: 
 
1. a. In the case of individuals, there shall be added or 
deducted, as the case may be, the difference necessary 
to allow personal exemptions of One Thousand Dollars 
($1,000.00) in lieu of the personal exemptions allowed 
by the Internal Revenue Code. 
 
b. There shall be allowe d an additional exemption of One 
Thousand Dollars ($1,000.00) for each taxpayer or 
spouse who is blind at the close of the tax year.  For 
purposes of this 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 acuity 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 subt ends an angle 
no greater than twenty (20) degrees. 
 
c. There shall be allowed an additional exemption of One 
Thousand Dollars ($1,0 00.00) for each taxpayer or 
spouse who is sixty-five (65) years of age or older at 
the close of the tax year based upon the f iling status 
and federal adjusted gross income of the taxpayer.  
Taxpayers with the following filing status may claim 
this exemption if the federal adjusted gross income 
does not exceed: 
 
(1) Twenty-five Thousand Dollars ($25,000.00) if 
married and filing jointly; 
  ENR. H. B. NO. 3388 	Page 24 
(2) Twelve Thousand Five Hundred Dollars ($12,500.00) 
if married and filing separately; 
 
(3) Fifteen Thousand Dollars ($15,0 00.00) if single; 
and 
 
(4) Nineteen Thousand Dollars ($19,000.00) if a 
qualifying head of household. 
 
Provided, for taxabl e 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 retirement account shall 
be excluded from federal adjusted gross income f or 
purposes of the income thresholds provided in this 
subparagraph. 
 
2. a. For taxable years beginning on or befo re December 31, 
2005, in the case of individuals who use the standard 
deduction in determining taxable income, there sh all 
be added or deducted , as the case may be, the 
difference necessary to allow a standard deduction in 
lieu of the standard deduction al lowed 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), except that 
in the case of a marrie d individual filing a separate 
return such deduction shall be the larger of fifteen 
percent (15%) of such Oklahoma adju sted gross income 
or Five Hundred Dollars ($500.00), but not to exceed 
the maximum amount of One Thousand Dollars 
($1,000.00). 
 
b. For taxable years beginning on or after January 1, 
2006, and before January 1, 2007, in the case of 
individuals who use the s tandard deduction in 
determining taxable income, there shall be added or 
deducted, as the case may be, the difference necessary 
to allow a standard deduction in lieu of the standard 
deduction allowed by the Internal Revenue Code, in an 
amount equal to: 
  ENR. H. B. NO. 3388 	Page 25 
(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 separate. 
 
c. For the taxable year beginni ng on January 1, 2007, a nd 
ending December 31, 2007, in the case of individuals 
who use the standard deduction in determining taxable 
income, there shall be added or deducted, as the case 
may be, the difference necessary to allow a standard 
deduction in lieu of the standard deduc tion 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, and 
ending December 31, 2008, in the case of individuals 
who use the standard deduction in determining taxable 
income, there shall be added or deducted, as the case 
may be, the difference necessary to allow a standard 
deduction in lieu of the standard deduction allowed by 
the Internal Revenue Code, in an amount equ al to: 
 
(1) Six Thousand Five Hundred Dollars ($6,500.00), if 
the filing status is married filing joint or 
qualifying widow, or 
 
(2) Four Thousand Eight Hundred Seventy -five Dollars 
($4,875.00) for a head of household, or 
 
(3) Three Thousand Two Hundred Fi fty Dollars 
($3,250.00), if the filing status is single or 
married filing separate. 
  ENR. H. B. NO. 3388 	Page 26 
e. For the taxable year beginning on Jan uary 1, 2009, and 
ending December 31, 2009, in the case of individuals 
who use the standard deduction in de termining taxable 
income, there shall be added or deducted, as the case 
may be, the difference necessary to allow a standard 
deduction in lieu of the standard deduction allowed by 
the Internal Revenue Code, in an amount equal to: 
 
(1) Eight Thousand Five H undred Dollars ($8,500.0 0), 
if the filing status is married filing joint or 
qualifying widow, or 
 
(2) Six Thousand Three Hundred Seventy -five Dollars 
($6,375.00) for a head of household, or 
 
(3) Four Thousand Two Hundred Fifty Dollars 
($4,250.00), if the f iling status is single o r 
married filing separate. 
 
Oklahoma adjusted gross income shall be increased by 
any amounts paid for motor vehicle excise taxes which 
were deducted as allowed by the Internal Revenue Code. 
 
f. For taxable years beginning on or afte r January 1, 
2010, and ending on December 31, 2016, in the case of 
individuals who use the standard deduction in 
determining taxable income, there shall b e added or 
deducted, as the case may be, the difference necessary 
to allow a standard deduction equal to the standard 
deduction allowed by the Internal Revenue Code, based 
upon the amount and filing status prescribed by such 
Code for purposes of filing fed eral individual income 
tax returns. 
 
g. For taxable years beginning on or after January 1, 
2017, in the case of individuals wh o use the standard 
deduction in determining taxable income, there shall 
be added or deducted, as the case may be, the 
difference necessary to allow a standard deduction in 
lieu of the standard deduction allowed by the Internal 
Revenue Code, as follows: 
 
(1) Six Thousand Three Hundred Fifty Dollars 
($6,350.00) for single or married filing 
separately,  ENR. H. B. NO. 3388 	Page 27 
 
(2) Twelve Thousand Seven Hundred Do llars 
($12,700.00) for married filing jointly or 
qualifying widower with dependent child, and 
 
(3) Nine Thousand Three Hund red Fifty Dollars 
($9,350.00) for head of household. 
 
3. a. In the case of resident and part -year resident 
individuals having adjusted gross income from sources 
both within and without the state, the itemized or 
standard deductions and personal exemptions shall be 
reduced to an amount which is the same portion of the 
total thereof as Oklahoma adjusted gross income is of 
adjusted gross income.  To the extent itemized 
deductions include allowable moving expense, proration 
of moving expense shall not be requir ed or permitted 
but allowable moving expense shall be fully deductible 
for those taxpayers moving within or into Oklahoma 
this state and no part of moving expense shall be 
deductible for those taxpayers moving without or out 
of Oklahoma this state.  All other itemized or 
standard deductions and personal exemptions shall be 
subject to proration as provided by law. 
 
b. For taxable years begi nning on or after January 1, 
2018, the net amount of itemized deductions allowable 
on an Oklahoma income tax return, sub ject 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 deductible for 
federal income tax purposes shall be exclu ded from the 
amount of Seventeen Thousand Dollars ($17,000.00) as 
specified by this subparagraph. 
 
4.  A resident individual with a physi cal disability 
constituting a substantial handicap to employment may deduct from 
Oklahoma adjusted gross income such ex penditures to modify a motor 
vehicle, home or workplace as are necessary to compensate for his or 
her handicap.  A veteran certified by t he Department of Veterans 
Affairs of the federal government as having a service -connected 
disability shall be conclusiv ely presumed to be an individual with a 
physical disability constituting a substantial handicap to 
employment.  The Tax Commission shall promulgate rules containing a  ENR. H. B. NO. 3388 	Page 28 
list of combinations of common disabilities and modifications whi ch 
may be presumed to qu alify for this deduction.  The Tax Commission 
shall prescribe necessary requirements for verification. 
 
5. a. Before July 1, 2010, the fir st One Thousand Five 
Hundred Dollars ($1,500.00) received by any person 
from the United States as salary or compensati on in 
any form, other than retirement benefits, as a member 
of any component of the Armed Forces of the United 
States shall be deducted fr om taxable income. 
 
b. On or after July 1, 2010, one hundred percent (100%) 
of the income received by any person from the United 
States as salary or compensation in any form, other 
than retirement benefits, as a member of any component 
of the Armed Forces o f the United States shall be 
deducted from taxable income. 
 
c. Whenever the filing of a timel y income tax return by a 
member of the Armed Forces of the United States is 
made impracticable or impossible of accomplishment by 
reason of: 
 
(1) absence from the United States, which term 
includes only the states and the District of 
Columbia; 
 
(2) absence from the State of Oklahoma this state 
while on active duty; or 
 
(3) confinement in a hospital within the United 
States for treatment of wounds, injuries or 
disease, 
 
the time for filing a return and paying an income tax 
shall be and is hereby extended wit hout incurring 
liability for interest or penalties, to the fifteenth 
day of the third month following the month in which: 
 
(a) Such individual shall return to the United 
States if the extension is granted pursuant 
to subparagraph a of this paragraph, retur n 
to the State of Oklahoma this state if the 
extension is granted pursuant to 
subparagraph b of this paragraph or be  ENR. H. B. NO. 3388 	Page 29 
discharged from such hospital if the 
extension is granted pursuant to 
subparagraph c of this paragraph; or 
 
(b) An executor, administrator, or conservator 
of the estate of the taxpayer is appointed, 
whichever event occurs the earliest. 
 
Provided, that the Tax Commission may, in its discretion, grant 
any member of the Armed Forces of the United States an extension of 
time for filing of income tax returns and payment of income tax 
without incurring liabilities for interest or penalties.  Such 
extension may be granted only when in the judgment of the Tax 
Commission a good cause exists therefor and may be for a period in 
excess of six (6) months. A record of every such extension granted, 
and the reason therefor, shall be kept. 
 
6.  Before July 1, 2010, the salary or any other form of 
compensation, received from the United States by a member of any 
component of the Armed Forces of the United States , shall be 
deducted from taxable income during the time in which the person is 
detained by the enemy in a conflict, is a prisoner of war or is 
missing in action and not dec eased; provided, after July 1, 2010, 
all such salary or compensation shall be subjec t to the deduction as 
provided pursuant to paragraph 5 of this subsection. 
 
7. a. An individual taxpayer, whether resident or 
nonresident, may deduct an amount equal to the federal 
income taxes paid by the taxpayer during the taxable 
year. 
 
b. Federal taxes as described in subpar agraph a of this 
paragraph shall be deductible by any individual 
taxpayer, whether resident or nonresident, only to the 
extent they relate to income s ubject to taxation 
pursuant to the provisions of the Oklahoma Income Tax 
Act.  The maximum amount allowabl e in the preceding 
paragraph shall be prorated on the ratio of the 
Oklahoma adjusted gross income to federal adjusted 
gross income. 
 
c. For the purpose of this paragraph, “federal income 
taxes paid” shall mean federal income taxes, surtaxes 
imposed on incomes or excess profits taxes, as though 
the taxpayer was on the accrual basis.  In determining  ENR. H. B. NO. 3388 	Page 30 
the amount of deduction for federal income taxes for 
tax year 2001, the amount of the deduction shall not 
be adjusted by the amount of any accelerated 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 suc h credit shall not 
be subject to taxation. 
 
d. The provisions of this paragraph shall apply to all 
taxable years ending after December 31, 1978, and 
beginning before January 1, 2006. 
 
8.  Retirement benefits not to exceed Five Thousand Five Hundred 
Dollars ($5,500.00) for the 200 4 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 sub sequent tax 
years, which are received by an individual from the civil service o f 
the United States, the Oklahoma Public Employees Retirement System, 
the Teachers’ Retirement System of Oklahoma, the Oklahoma Law 
Enforcement Retirement System, the Oklahoma F irefighters Pension and 
Retirement System, the Oklahoma Police Pension and Reti rement 
System, the employee retirement systems created by counties pursuant 
to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the 
Uniform Retirement System for Justic es and Judges, the Oklahoma 
Wildlife Conservation Department Retirement Fund, t he 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 Ok lahoma Statutes shall be exempt 
from taxable income. 
 
9.  In taxable years begi nning after December 3l, 1984, Social 
Security benefits received by an individual shall be exempt from 
taxable income, to the extent such benefits are included in the 
federal adjusted gross income pursuant to the provisions of Section 
86 of the Internal Re venue Code, 26 U.S.C., S ection 86. 
 
10.  For taxable years beginning after December 31, 1994, lump -
sum distributions from employer plans of deferred compensation, 
which are not qualified plans within the meaning of Section 401(a) 
of the Internal Revenue Co de, 26 U.S.C., Section 4 01(a), and which 
are deposited in and accounted for within a separate bank account or 
brokerage account in a financial institution within this state, 
shall be excluded from taxable income in the same manner as a  ENR. H. B. NO. 3388 	Page 31 
qualifying rollover contribution to an indiv idual retirement account 
within the meaning of Section 408 of the Internal Revenue Code, 26 
U.S.C., Section 408.  Amounts withdrawn from such bank or broke rage 
account, including any earnings thereon, shall be included in 
taxable income when withdrawn in t he same manner as withdrawals from 
individual retirement accounts within the meaning of Section 408 of 
the Internal Revenue Code. 
 
11.  In taxable years beg inning after December 31, 1995, 
contributions made to and interest received from a medical savings 
account established pursuant to Sections 2621 through 2623 of Title 
63 of the Oklahoma Statutes shall be exempt from taxable income. 
 
12.  For taxable years b eginning after December 31, 1996, the 
Oklahoma adjusted gross income of any individual taxpayer who is a 
swine or poultry producer may be further adjusted for the deduction 
for depreciation allowed for new construction or expansion costs 
which may be computed using the same depreciation method elected for 
federal income tax purpo ses except that the usef ul life shall be 
seven (7) years for purposes of this paragraph.  If depreciation is 
allowed as a deduction in determining the adjusted gross income of 
an individual, any depreciation calculated and claimed pursuant to 
this section shall in no event be a d uplication of any depreciation 
allowed or permitted on the federal income tax return of the 
individual. 
 
13. a. In taxable years beginning after December 31, 2002, 
nonrecurring adoption expenses paid by a resident 
individual taxpayer in connection with: 
 
(1) the adoption of a minor, or 
 
(2) a proposed adoption of a minor which did not 
result in a decreed adoption, 
 
may be deducted from the Oklahoma adjusted gross 
income. 
 
b. The deductions for adoptions and proposed adoptions 
authorized by this paragraph sh all not exceed Twenty 
Thousand Dollars ($20,000.00) per calendar year. 
 
c. The Tax Commission shall promulgate rules to implement 
the provisions of this paragraph which shall contain a 
specific list of nonrecurring adoption expenses which  ENR. H. B. NO. 3388 	Page 32 
may be presumed to qualify for the deduction.  The Tax 
Commission shall prescribe necessary requirements for 
verification. 
 
d. “Nonrecurring adoption expenses” means adoption fees, 
court costs, medical expenses, attorney fees and 
expenses which are directly related to the legal 
process of adoption of a child including, but not 
limited to, costs relating to the adoption study, 
health and psychological examinations, transportation 
and reasonable costs of lodging and food for the child 
or adoptive parents which are incurred to complete the 
adoption process and are not reimbursed by other 
sources.  The term “nonrecurring adoption expenses” 
nonrecurring adoption expenses shall not include 
attorney fees incurred for the purpose of litigating a 
contested adoption, from and after th e point of the 
initiation of the contest, costs associated with 
physical remodeling, renovation and alteration of the 
adoptive parents’ home or property, except for a 
special needs child as authorized by the court. 
 
14. a. In taxable years beginning before January 1, 2005, 
retirement benefits not to exceed the amounts 
specified in this paragraph, which are received by an 
individual sixty-five (65) years of age or olde r 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 fi ling joint or 
qualifying widow, shall be exempt from taxable income .  
In taxable years begi nning after December 31, 2004, 
retirement benefits not to exceed the amounts 
specified in this paragraph, which are received by an 
individual whose Oklahoma adjusted gross income is 
less than the qualifying amount specified in this 
paragraph, shall be exem pt from taxable income. 
 
b. For purposes of this paragraph, the qualifying amount 
shall be as follows: 
 
(1) in taxable years beginning after December 31, 
2004, and prior to January 1, 2007, the 
qualifying amount shall be Thirty -seven Thousand  ENR. H. B. NO. 3388 	Page 33 
Five Hundred Dollars ($37,500.00) or less if the 
filing status is single, head of household, or 
married filing separate, or Seventy -five Thousand 
Dollars ($75,000.00) or less if th e filing status 
is married filing jointly or qualifying widow, 
 
(2) in the taxable year b eginning January 1, 2007, 
the qualifying amount shall be Fifty Thousand 
Dollars ($50,000.00) or less if the filing status 
is single, head of household, or married filin g 
separate, or One Hundred Thousand Dollars 
($100,000.00) or les s if the filing status i s 
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 ho usehold, or 
married filing separate, or One Hundred Twenty -
five Thousand Dollars ($125,000.00) or less if 
the filing status is married filing jointly or 
qualifying widow, 
 
(4) in the taxable year beginning January 1, 2009, 
the qualifying amount shall be On e 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 filin g 
status is married filing jointly or qualifying 
widow, and 
 
(5) in the taxable year b eginning January 1, 2010, 
and subsequent taxable years, there shall be no 
limitation upon the qualifying amount. 
 
c. For purposes of this paragraph, “retirement benefits” 
means the total distributions or withdrawals from the 
following: 
 
(1) an employee pension benefit plan which satisfies 
the requirements of Section 401 of the Internal 
Revenue Code, 26 U.S.C., Section 401, 
  ENR. H. B. NO. 3388 	Page 34 
(2) an eligible deferred compensation plan that 
satisfies the requirements of Section 457 of the 
Internal Revenue Code, 26 U.S.C., Sect ion 457, 
 
(3) an individual retirement account, annuity or 
trust or simplified employee pension that 
satisfies the requirements of Section 408 of the 
Internal Revenue Code, 26 U.S.C., Section 408, 
 
(4) an employee annuity subject to the provisions of 
Section 403(a) or (b) of the Internal Revenue 
Code, 26 U.S.C., Section 403(a) or (b), 
 
(5) United States Retirement Bonds 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 ret irement plan 
which satisfies the requirements of Section 
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 Dolla rs 
($5,500.00) for the 2 004 tax year, Seven Thousand Five 
Hundred Dollars ($7,500.00) for the 2005 tax year and 
Ten Thousand Dollars ($10,000.00) 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 permitted to claim a 
combined total exemption pursuant to this paragraph 
and paragraph 8 of this subsection in an amount 
exceeding Five Thousand Five Hundre d Dollars 
($5,500.00) for the 2004 tax year, Seven Th ousand Five 
Hundred Dollars ($7,500.00) for the 2005 tax year and 
Ten Thousand Dollars ($10,000.00) for the 2006 tax 
year and all subsequent tax years. 
 
15.  In taxable years beginning after December 31, 1999, for an 
individual engaged in production agricu lture who has filed a 
Schedule F form with the taxpayer’s federal income tax return for 
such taxable year, there shall be excluded from taxable income any 
amount which was included as federal taxable inco me or federal 
adjusted gross income and which consis ts of the discharge of a n  ENR. H. B. NO. 3388 	Page 35 
obligation by a creditor of the taxpayer incurred to finance the 
production of agricultural products. 
 
16.  In taxable years beginning December 31, 2000, an amount 
equal to one hundred percent (100%) of the amount of any scholarsh ip 
or stipend received f rom 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. 
 
17. a. In taxable years beginning after December 31, 2001, 
and before January 1, 2005, ther e shall be allowed a 
deduction in the amount of contributions to accounts 
established pursuant to the Oklahoma College Savings 
Plan Act.  The deduction shall equal the amount of 
contributions to accounts, but in no event shall the 
deduction for each contri butor 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 establis hed 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 p rior taxable years after 
December 31, 2004, which were not deducted, but in no 
event shall the deduction for each tax year exceed Ten 
Thousand Dollars ($10,000.00) for each individual 
taxpayer or Twenty Thousand Dollars ($20,000.00) for 
taxpayers filing a joint return.  Any amount of a 
contribution that is not deducted by the t axpayer 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 contributi ons and rollovers made d uring a 
taxable year and up to April 15 of the succeeding 
year, or the due date of a taxpayer’s state income tax 
return, excluding extensions, whichever is later.  
Provided, a deduction for the same contribution may 
not be taken for two (2) different taxab le years. 
 
c. In taxable years beginning after December 31, 2006, 
deductions for contributions made pursuant to  ENR. H. B. NO. 3388 	Page 36 
subparagraph b of this paragraph shall be limited as 
follows: 
 
(1) for a taxpayer who qualified for the five -year 
carryforward election and who takes a rollover or 
nonqualified withdrawal during that period, the 
tax deduction otherwise available pursuant to 
subparagraph b of this paragraph shall be reduced 
by the amount which i s equal to the rollover or 
nonqualified withdra wal, and 
 
(2) for a taxpayer who elects to take a rollover or 
nonqualified withdrawal within the same tax year 
in which a contribution was made to the 
taxpayer’s account, the tax deduction otherwise 
available pursuant to subparagraph b of this 
paragraph shall be reduced by the am ount of the 
contribution which is equal to the rollover or 
nonqualified withdrawal. 
 
d. If a taxpayer elects to take a rollover on a 
contribution for which a deduction has been taken 
pursuant to subparagraph b of this paragraph with in 
one (1) year of the d ate of contribution, the amount 
of such rollover shall be included in the adjusted 
gross income of the taxpayer in the taxable year of 
the rollover. 
 
e. If a taxpayer makes a nonqualified withdrawal of 
contributions for which a dedu ction was taken pursuant 
to subparagraph b of this paragraph, such nonqualified 
withdrawal and any earnings thereon shall be included 
in the adjusted gross income of the taxpayer in the 
taxable year of the nonqua lified withdrawal. 
 
f. As used in this parag raph: 
 
(1) “non-qualified withdrawal” means a withdrawal 
from an Oklahoma College Savings Plan account 
other than one of the following: 
 
(a) a qualified withdrawal, 
  ENR. H. B. NO. 3388 	Page 37 
(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 beneficia ry to the extent 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 the Oklahoma 
Statutes, and 
 
(2) “rollover” means the transfer of f unds from the 
Oklahoma College Savings Plan to any other plan 
under Section 529 of the Internal Revenue Code. 
 
18.  For tax years 2006 through 2021, retirement benefits 
received by an individual from any component of the Armed Forces of 
the United States in an amount not to excee d 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 exemption provided by paragraph 14 of this 
subsection.  For tax year 2022 and s ubsequent tax years, retirement 
benefits received by an individual from any component of the Armed 
Forces of the United States shall be exempt from taxable income. 
 
19.  For taxable years beginning after December 31, 2006, 
retirement benefits received by f ederal civil service retirees, 
including survivor annuities, paid in lieu of Social Security 
benefits shall be exempt from taxable income to the extent such 
benefits are included in the federal adj usted 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 benefits shall be exempt, 
 
b. in the taxable year beginning J anuary 1, 2008, forty 
percent (40%) of such benefits shall be exempt,  ENR. H. B. NO. 3388 	Page 38 
 
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 b enefits shall be exempt, and 
 
e. in the taxable year beginning January 1, 2011, and 
subsequent taxable years, one hundred percent (100%) 
of such benefits shall be exempt. 
 
20. a. For taxable years beginning after December 31, 2 007, a 
resident individual ma y deduct up to Ten Thous and 
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 transplantat ion.  As used in this 
paragraph, “human organ” means all or part of a liver, 
pancreas, kidney, intestine, lung, or bone marrow.  A 
deduction that is claimed under this paragraph may be 
claimed in the taxable year in which the h uman 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 promu lgate 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. 
 
21.  For taxable yea rs beginning after Decem ber 31, 2009, there 
shall be exempt from taxable income any amount received by the 
beneficiary of the death benefit for an emergency medical technician 
or a registered emergency medical responder provided b y Section 1-
2505.1 of Title 63 of the Oklahoma Sta tutes. 
 
22.  For taxable years beginning after December 31, 2008, 
taxable income shall be increased by any unemployment compensation  ENR. H. B. NO. 3388 	Page 39 
exempted under Section 85(c) of the Internal Revenue Code, 26 
U.S.C., Section 85(c)(2009). 
 
23.  For taxable years beginnin g after December 31, 2008, there 
shall be exempt from taxable income any payment in an amount less 
than Six Hundred Dollars ($600.00) received by a person as an award 
for participation in a competitive livest ock show event.  For 
purposes of this paragraph, the payment shall be treated as a 
scholarship amount paid by the entity sponsoring the event and the 
sponsoring entity shall cause the payment to be categorized as a 
scholarship in its books and records. 
 
24. For taxable years beg inning on or after Janua ry 1, 2016, 
taxable income shall be increased by any amount of state and local 
sales or income taxes deducted under 26 U.S.C., Section 164 of the 
Internal Revenue Code.  If the amount of state and local taxes 
deducted on the federal return is limited, taxa ble income on the 
state return shall be increased only by the amount actually deducted 
after any such limitations are applied. 
 
25.  For taxable years beginning after December 31, 2020, each 
taxpayer shall be allowed a deduction for contributions to accoun ts 
established pursuant to the Achieving a Better Life Experience 
(ABLE) Program as established in Section 4001.1 et seq. of Title 56 
of the Oklahoma Statutes.  For any tax year, the deduction provided 
for in this paragraph shall no t exceed Ten Thousand Do llars 
($10,000.00) for an individual taxpayer or Twenty Thousand Dollars 
($20,000.00) for taxpayers filing a joint return.  Any amount of 
contribution not deducted by the taxpayer in the tax year for which 
the contribution is made m ay be carried forward as a deduction from 
income for up to five (5) tax years.  Deductions may be taken for 
contributions made during the tax year and through April 15 of the 
succeeding tax year, or through the due date of a taxpayer’ s state 
income tax return excluding extensions , whichever is later.  
Provided, a deduction for the same contribution may not be taken in 
more than one (1) tax year. 
 
26.  For tax year 2024 and subsequent tax years, tax credits 
received pursuant to the Oklah oma Parental Choice T ax Credit Act in 
Section 28-101 of Title 70 of the Oklahoma Statutes shall be exempt 
from taxable income. 
 
F.  1.  For taxable years beginning after December 31, 2004, a 
deduction from the Oklahoma adjusted gross income of any individua l 
taxpayer shall be allowed for qualifying g ains receiving capital  ENR. H. B. NO. 3388 	Page 40 
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 
individual taxpayer’s federal income tax return that 
result from: 
 
(1) the sale of real property or tangible personal 
property located within Oklahoma this state that 
has been directly or indirectly owned by the 
individual taxpayer for a holding period of at 
least five (5) years prior to the date of the 
transaction from which such net capital gains 
arise, 
 
(2) the sale of stock or the sale of a direct or 
indirect ownership i nterest in an Oklahoma 
company, limited liability 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 this state as part of the sale of 
all or substantially all of the assets of an 
Oklahoma company, limited liability company, or 
partnership or an Oklahoma proprietorship 
business enterprise where such property has been 
directly or indirectly owned by such entity or 
business enterprise or owned by the owners o f 
such entity or business enterprise fo r 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 additi onal  ENR. H. B. NO. 3388 	Page 41 
period when the property was held by another 
individual or entity, if such additional period is 
included in the taxpayer’s holding period for the 
asset pursuant to the Internal Revenue Code, 
 
c. “Oklahoma company,” “limited liability company,” or 
“partnership” means an entity whose primar y 
headquarters have been located in Oklahoma this state 
for at least three (3) uninterrupted years prior to 
the date of the transaction from which the net capital 
gains arise, 
 
d. “direct” means the individual taxpayer d irectly 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 gives rise 
to the qualifying gains receiving capital treatment. 
 
(1) With respect to sales of real property or 
tangible personal property located within 
Oklahoma this state, the deduction described in 
this subsection shall not apply unless the pass -
through entity that makes the sale has held the 
property for not less than five (5) uninterr upted 
years prior to the date of t he 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 tha n 
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 shall not apply 
unless the pass-through entity that makes the 
sale has held the stock or ownership interest for 
not less than two (2) uninterrupted years prior 
to the date of the transaction that created the 
capital gain, and ea ch pass-through entity  ENR. H. B. NO. 3388 	Page 42 
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 two 
(2) years.  For purposes of this division, 
uninterrupted ownership prior to July 1, 2007, 
shall be included in the determination of the 
required holding period prescribed by this 
division, and 
 
f. “Oklahoma proprietorship business 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 return, or any similar 
successor schedule published by the Internal Revenue 
Service and whose primary headquarters have been 
located in Oklahoma this state for at least three (3 ) 
uninterrupted years prior to the date of the 
transaction from which the net capital gains arise. 
 
G.  1.  For purposes of computing its Oklahoma taxable income 
under this section, the dividends -paid deduction otherwise allo wed 
by federal law in computing net income of a real estate investment 
trust that is subject to federal income tax shall be added back in 
computing the tax imposed by this state under this title if the real 
estate investment trust is a captive real estate investment trust. 
 
2.  For purposes of computing its Oklahoma taxable income under 
this section, a taxpayer shall add back otherwise deductible rents 
and interest expenses paid to a captive real estate investment trust 
that is not subject to the provisions of paragraph 1 of this 
subsection.  As used in this subsection: 
 
a. the term “real estate investment trust” or “REIT” 
means the meaning ascribed to such term in Section 856 
of the Internal Revenue Code, 
 
b. the term “captive real estate investment trust” mea ns 
a real estate investment trust, the shares or 
beneficial interests of which are not regularly traded 
on an established securities market and more than 
fifty percent (50%) of the voting power or value of 
the beneficial interests or shares of which are ow ned 
or controlled, directly or indirectly, or 
constructively, by a single entity that is:  ENR. H. B. NO. 3388 	Page 43 
 
(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 Secti on 501(a) of the Internal 
Revenue Code. 
 
The term shall not include a real estate investment 
trust that is intended to be regularly traded on an 
established securities market, and that satisfies the 
requirements of Section 856(a)(5) and (6) of the U.S. 
Internal Revenue Code by reas on of Section 856(h)(2) 
of the Internal Revenue Code, 
 
c. the term “association taxable as a corporation” shall 
not include the following entities: 
 
(1) any real estate investment trust as defined in 
paragraph a of this subsection o ther than a 
“captive real estate investment trust” captive 
real estate investment trust , or 
 
(2) any qualified real estate investment trust 
subsidiary under Section 856(i) of the Internal 
Revenue Code, other than a qualified REIT 
subsidiary of a “captive real estate investment 
trust” captive real estate investment trust , or 
 
(3) any Listed Australian Property Trust listed 
Australian property trust (meaning an Australian 
unit trust registered as a “Managed Investment 
Scheme” “managed investment scheme” under the 
Australian Corporations Act 2001 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 
listed Australian property trust owns or 
controls, directly or indirectly, seventy -five 
percent (75%) or more of the voting power or 
value of the beneficial interests or shares of 
such trust, or 
  ENR. H. B. NO. 3388 	Page 44 
(4) any Qualified Foreign Entity qualified foreign 
entity, meaning a corporation, trust, association 
or partnership organized outside the laws of the 
United States and which satisfies the following 
criteria: 
 
(a) at least seventy-five percent (75%) of the 
entity’s total asset value at the close of 
its taxable year is represented by real 
estate assets, as defined in Section 
856(c)(5)(B) of the Internal Revenue Code, 
thereby including shares or certificates of 
beneficial interest in any real estate 
investment trust, cash and cash equivalents, 
and U.S. Government securities, 
 
(b) the entity receives a dividend -paid 
deduction comparable to Section 561 of the 
Internal Revenue Code, or is exempt from 
entity level tax, 
 
(c) the entity is required to distribute at 
least eighty-five percent (85%) of its 
taxable income, as computed in the 
jurisdiction in which it is organized, to 
the holders of its shares or certificates of 
beneficial interest on an annual basis, 
 
(d) not more than ten percent (10%) of the 
voting power or value in such entity is held 
directly or indirectly or constructively by 
a single entity or individual, or the shares 
or beneficial interests of such entity are 
regularly traded on an established 
securities market, and 
 
(e) the entity is organized in a country 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 stock, assets, or net profits of any 
person. 
  ENR. H. B. NO. 3388 	Page 45 
4.  A real estate investment trust that does not become 
regularly traded on an established securities market within one (1) 
year of the date on which it first becomes a real estate investment 
trust shall be deemed not to hav e 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 retroactive designation for any tax year or 
part year occurring during its initial year of status as a real 
estate investment trust.  For purposes of this subsection, a real 
estate investment trust becomes a real estate investment trust on 
the first day it has both met the requirements of Section 856 of the 
Internal Revenue Code and has elected to be treated as a real estate 
investment trust pursuant to Section 856(c)(1) of the Internal 
Revenue Code. 
 
SECTION 3.     AMENDATORY     Section 2, Chapter 278, O.S.L. 
2023 (70 O.S. Supp. 2023, Section 28 -101), is amended to read as 
follows: 
 
Section 28-101.  A.  As used in the Oklahoma Parental Choice Tax 
Credit Act: 
 
1.  “Commission” means the Oklahoma Tax Commission; 
 
2.  “Curriculum” means a complete course of study for a 
particular content area or grade level; 
 
3.  “Department” means the State Department of Education; 
 
4.  “Education service provider” means a person, business, 
public school district, public charter school, magnet school, or 
organization that provides educational goods and/or services to 
eligible students in this state; 
 
5.  “Eligible student” means a resident of this state who is 
eligible to enroll in a public school in this state.  Eligible 
student shall include a student who is enrolled in and attends or is 
expected to enroll in a private school in this state accredited by 
the State Board of Education or another accrediting association or a 
student who is educated pursuant to the other means of education 
exception provided for in subsection A of Section 10 -105 of Title 70 
of the Oklahoma Statutes this title; 
 
6.  “Qualified expense” for the purpose of claiming the credit 
authorized by subparagraph a of paragraph 1 of subsection C of this  ENR. H. B. NO. 3388 	Page 46 
section means tuition and fees at a private school in this state 
accredited by the State Board of Education or anot her accrediting 
association.  Provided, the amount of tuition and fees considered a 
qualified expense pursuant to this paragraph shall not include 
tuition and fees paid with any scholarship or tuition and fees 
discounted or otherwise reduced by the school ; 
 
7.  “Qualified expense” for the purpose of claiming the credit 
authorized by subparagraph b of paragraph 1 2 of subsection C of 
this section means the following expenditures: 
 
a. tuition and fees for nonpublic online learning 
programs, online or in person, 
 
b. academic tutoring services provided by an individual 
or a private academic tutoring facility, 
 
c. textbooks, curriculum, or other instructional 
materials including, but not limited to, supplemental 
materials or associated online instruction required by 
an education service provider, and 
 
d. fees for nationally standardized assessments 
including, but not limited to, assessments used to 
determine college admission and advanced placement 
examinations as well as tuition and fees for tutoring 
or preparatory courses for the asses sments; and 
 
8.  “Taxpayer” means a biological or adoptive parent, 
grandparent, aunt, uncle, legal guardian, custodian, or other person 
with legal authority to act on behalf of an eligible student. 
 
B.  There is hereby created the O klahoma Parental Choice Tax 
Credit Program to provide an income tax credit to a taxpayer for 
qualified expenses to support the education of eligible students in 
this state. 
 
C.  For the tax year 2024 and subsequent tax years, and fiscal 
year 2026 and subsequent fiscal years, there shall be allowed 
against the tax imposed by Section 2355 of Title 68 of the Oklahoma 
Statutes a credit for any Oklahoma taxpayer who incurs a qualified 
expense on behalf of an eligible student, to be administered subject 
to the following amounts for each tax year: 
  ENR. H. B. NO. 3388 	Page 47 
1.  If the eligible student attends a private school in this 
state accredited by the State Board of Education or another 
accrediting association, the annual maximum credit amount for tax 
year 2024, fiscal year 2026, and each subsequent fiscal y ear shall 
be: 
 
a. (1) 
 
 Seven Thousand Five Hundred Dollars ($7,500.00) or the 
amount of tuition and fees for the private school, 
whichever is less, if the combined adjusted gross 
income of the parents or legal guardians of the 
eligible student is a member of a household in which 
the total adjusted gross income during the second 
preceding tax year does not exceed Seventy -five 
Thousand Dollars ($75,000.00), 
 
(2)  
 
b. Seven Thousand Dollars ($7,000.00) or the amount of 
tuition and fees for the private school, whichever is 
less, if the combined adjusted gross income of the 
parents or legal guardians of the eligible student is 
a member of a household in which the total adjusted 
gross income during the second preceding tax year is 
more than Seventy-five Thousand Dollars ($75,000.00) 
but does not exceed One Hundred Fifty Thousand Dollars 
($150,000.00), 
 
(3)  
 
c. Six Thousand Five Hundred Dollars ($6,500.00) or the 
amount of tuition and fees for the private school, 
whichever is less, if the combined adjusted gross 
income of the parents or legal guardians of the 
eligible student is a member of a household in which 
the total adjusted gross income during the second 
preceding tax year is more than One Hundred Fifty 
Thousand Dollars ($150,000.00) b ut does not exceed Two 
Hundred Twenty-five Thousand Dollars ($225,000.00), 
 
(4)  
 
d. Six Thousand Dollars ($6,000.00) or the amount of 
tuition and fees for the private school, whichever is  ENR. H. B. NO. 3388 	Page 48 
less, if the combined adjusted gross income of the 
parents or legal guardians of the eligible student is 
a member of a household in which the total adjusted 
gross income during the second preceding tax year is 
more than Two Hundred Twenty -five Thousand Dollars 
($225,000.00) but does not exceed Two Hundred Fifty 
Thousand Dollars ($250,000.00), or 
 
(5)  
 
e. Five Thousand Dollars ($5,000.00) or the amount of 
tuition and fees for the private school, whichever is 
less, if the combined adjusted gross income of the 
parents or legal guardians of the eligible student is 
a member of a household in which the total adjusted 
gross income during the second preceding tax year is 
more than Two Hundred Fifty Thousand Dollars 
($250,000.00), and; 
 
b.  
 
2.  For tax year 2024 and subsequent tax years, the maximum 
credit amount shall be One Thousand Dollars ($1,000.00) in qualified 
expenses per eligible student in each tax year if the eligible 
student is educated pursuant to the other means of education 
exception provided for in subsection A of Section 10 -105 of Title 70 
of the Oklahoma Statutes this title.  To claim the credit, the 
taxpayer shall submit to the Commission receipts for qualified 
expenses as defined by paragraph 7 of subsection A of this section; 
 
3.  If the eligible student attends a private school in this 
state, accredited by the State Board of Education or another 
accrediting association, that exclusively serves students 
experiencing homelessness, the credit amount shall be Seven Thousand 
Five Hundred Dollars ($7,500.00) or the amount of the cost to 
educate the eligible student at the private school, whic hever is 
less; 
 
4.  If the eligible student attends a private school in this 
state, accredited by the State Board of Education or another 
accrediting association, that primarily serves financially 
disadvantaged students, the credit amount shall be the maxi mum 
credit amount authorized by paragraph 1 of this subsection or the 
amount of the cost to educate the eligible student at the private 
school, whichever is less.  The cost to educate the eligible student  ENR. H. B. NO. 3388 	Page 49 
shall be equal to the aver age cost to educate all s tudents attending 
the private school, which shall be calculated by dividing the 
private school’s total expenditures in the previous year by the 
total enrollment in the previous school year.  A private school 
shall be deemed to be primarily serving financially disadvantaged 
students if ninety percent (90%) of the private school’s admissions 
are based on enrolling students whose gross family income is two 
hundred fifty percent (250%) of the federal poverty threshold or 
below; 
 
2. 5. The taxpayer shall retain all receipts of qualified 
expenses as proof of the amounts paid each tax year the credit is 
claimed and shall submit them to the Commission upon request; and 
 
3. 6. If the credit exceeds the tax imposed by Section 2355 of 
Title 68 of the Oklahoma Statute s, the excess amount shall be 
refunded to the taxpayer ; and 
 
7.  Credits claimed by a taxpayer pursuant to the provisions of 
this section shall not be used to offset or pay the following: 
 
a. delinquent tax liability, 
 
b. accrued penalty or interest from t he failure to file a 
report or return, 
 
c. accrued penalty or interest from the failure to pay a 
state tax within the statutory period allowed for its 
payment, 
 
d. tax liability of the taxpayer from any prior tax year, 
or 
 
e. any debt, unpaid fine, final j udgment, or claim filed 
with the Commission by a qualified entity as defined 
in Section 205.2 of Title 68 of the Oklahoma Statutes . 
 
D. 1. a. For tax year 2024, the total amount of credits 
authorized by subparagraph a of paragraph 1 of 
subsection C of this section shall not exceed One 
Hundred Fifty Million Dollars ($150,000,000.00). 
 
b. For tax year 2025 the period of January 1, 2025, 
through June 30, 2025 , the total amount of credits 
authorized by subparagraph a of paragraph 1 of  ENR. H. B. NO. 3388 	Page 50 
subsection C of this secti on shall not exceed Two 
Hundred Million Dollars ($200,000,000.00) One Hundred 
Million Dollars ($100,000,000.00) . The Commission 
shall not require a taxpayer who received a credit 
pursuant to paragraph 1 of subsection C of this 
section in tax year 2024 to reapply for a credit 
payable during the period described in this 
subparagraph.  The Commission shall base the credit 
amount payable for the spring 2025 on the fall 2024 
installment disbursement payment amount . 
 
c. For tax year 2026, and subsequent tax year s fiscal 
year 2026 and subsequent fiscal years, the total 
amount of credits authorized by subparagraph a of 
paragraph 1 of subsection C of this section shall not 
exceed Two Hundred Fifty Million Dollars 
($250,000,000.00). 
 
2.  For tax year 2025, and subsequent tax years, the total 
amount of credits authorized by subparagraph b of paragraph 1 2 of 
subsection C of this section shall not exceed Five Million Dollars 
($5,000,000.00). 
 
E.  The Commission shall prescribe applications for t he purposes 
of claiming the credits authorized by the Oklahom a Parental Choice 
Tax Credit Act and a deadline by which applications shall be 
submitted.  A taxpayer claiming the credit authorized by 
subparagraph a of paragraph 1 of subsection C of this secti on shall 
submit an application prescribed by the Commission t o receive the 
credit in two installments, each of which shall be half of the 
expected amount of tuition and fees for the private school based on 
the affidavit enrollment verification form submitted pursuant to 
this subsection, but in no event shall an inst allment payment exceed 
half the amount of the credit authorized by subparagraph a of 
paragraph 1 of subsection C of this section.  If an eligible 
taxpayer provides documentation on the applicatio n that he or she is 
a recipient of income-based government benefits including the 
Supplemental Nutrition Assistance Program (SNAP), Temporary 
Assistance for Needy Families (TANF), or SoonerCare, the eligible 
taxpayer shall not be required to provide additi onal income 
verification. A taxpayer claiming the credit aut horized by 
subparagraph a of paragraph 1 of subsection C of this section shall 
submit to the Commission an affidavit enrollment verification form 
from the private school in which the eligible stu dent is enrolled or 
is expected to enroll with the tuition an d fees to be charged the  ENR. H. B. NO. 3388 	Page 51 
taxpayer for the applicable school year.  In reviewing applications 
submitted by eligible taxpayers to determine whether they qualify 
for a credit authorized by subparagraph a of paragraph 1 of 
subsection C of this section, the Com mission shall give first 
preference in making installments to taxpayers who qualify pursuant 
to divisions (1) and (2) of subparagraph a subparagraphs a and b of 
paragraph 1 of subsection C of thi s section.  The Commission shall 
make the installments based on the expected amount of tuition and 
fee amounts on the affidavit submitted pursuant to this subsection.  
For credits issued in the 2025 -2026 school year and subsequent 
school years, the applica tion period shall open on February 15 prior 
to the beginning of each school year.  For any eligible student 
whose parents or legal guardians have a combined adjusted gross 
income that does not exceed One Hundred Fifty Thousand Dollars 
($150,000.00), applic ations shall be submitted to the Commission 
within the first sixty (60) days of the opening of the application 
period to receive priority consideration.  For students enrolled in 
the full school year, the credit shall be paid in two installments, 
one per school semester, to be pai d no later than August 30 and 
January 15, each of which shall be half of the total expected amount 
of tuition and fees on the enrollment verification form submitted 
pursuant to this subsection. 
 
F.  In the event there are more appl ications submitted by 
eligible taxpayers for a credit authoriz ed by paragraph 1 of 
subsection C of this section than available credits pursuant to 
subsection D of this section, then the Commission shall give first 
preference in authorizing credits for elig ible students of taxpayer s 
who qualify pursuant to subparagrap hs a and b of paragraph 1 of 
subsection C of this section and have received the credit in the 
prior year. 
 
F. G. Taxpayers claiming the credit shall: 
 
1.  Only claim the credit for qualified ex penses as defined in 
paragraphs 6 and 7 of subsection A of this section to provide an 
education for an eligible student; 
 
2.  Ensure no other person is claiming a credit for the eligible 
student; 
 
3.  Not claim the credit for an eligible student who enroll s as 
a full-time student in a public school district, public chart er 
school, public virtual charter school, or magnet school; and 
  ENR. H. B. NO. 3388 	Page 52 
4.  Comply with rules and requirements established by the 
Commission for administration of the Oklahoma Parental Choice Tax 
Credit Program; and 
 
5.  Notify the Commission not later than thirty (30) days after 
the date on which the eligible student: 
 
a. enrolls in a public school, including an open -
enrollment charter school, 
 
b. enrolls in a nonaccredited private school, 
 
c. graduates from high school, o r 
 
d. is no longer utilizing credits authorized by paragraph 
1 of subsection C of this section for any reason . 
 
G. H. Eligible students may accept a scholarship from the 
Lindsey Nicole Henry Scholarships for Students with Disabili ties 
Program created by S ection 13-101.2 of Title 70 of the Oklahoma 
Statutes this title while participating in the Oklahoma Parental 
Choice Tax Credit Program. 
 
H. I. 1.  The Commission shall have the authority to conduct an 
audit or contract for the aud iting of receipts for qua lified 
expenses submitted pursuant to subparagraph b of paragraph 1 2 of 
subsection C of this section. 
 
2.  The Commission shall be authorized to recapture the credits 
otherwise authorized by the provisions of this act the Oklahoma 
Parental Choice Tax Cred it Act on a prorated basis if an audit 
conducted pursuant to this subsection shows that the credit was 
claimed for expenditures that were not qualified expenses or it 
finds that the taxpayer has claimed an eligible student who no 
longer attends a private s chool or has enrolled in a public school 
in the state. 
 
3.  The Commission shall be authorized to reallocate credits to 
the next eligible taxpayer in line when a taxpayer, on behalf of an 
eligible student in the program, chooses no t to participate, is no 
longer eligible to participate, or chooses to forgo participation in 
the program for any reason. 
 
4.  The Commission shall provide notification of approval status 
to applicants within thirty (30) days of closure of the application  ENR. H. B. NO. 3388 	Page 53 
window.  Notice to applica nts with an eligible student, whose 
parents or legal guardians have a combined adjusted gross income of 
more than One Hundred Fifty Thousand Dollars ($150,000.00) , shall be 
sent within thirty (30) days or no later than thirty (30) days after 
the last day of the priority consideration period. 
 
I. J. In the event of a failure of revenue pursuant to the 
Oklahoma State Finance Act, the tax credits otherwise authorized in 
subsection C of this section shall be reduced proportionately to the 
reduction in the amount of money appropriated to the State Board of 
Education for the financial support of public schools for the fiscal 
year in which the failure of revenue occurs. 
 
J. K. The Commission shall make available on its website the to 
be updated monthly: 
 
1.  The total amount of credits claimed each tax year pursuant 
to subparagraphs a and b of paragraph 1 paragraphs 1 through 4 of 
subsection C of this section ; 
 
2.  The amount of credits claimed and number of students awarded 
each fiscal year pursuant to paragraph 1 of subsection C of this 
section disaggregated by income categories; 
 
3.  The total amount of credits claimed and number of students 
awarded who attended a public school in the semester immediately 
preceding the school year for wh ich the application is made each 
year; and 
 
4.  The total number of applications deni ed and total amount of 
credits the denied applications represent for each fiscal year. 
 
L.  Credits received pursuant to the Oklahoma Parental Choice 
Tax Credit Act shall not constitute taxable inco me to a taxpayer who 
received the credit on behalf of an el igible student. 
 
SECTION 4.  It being immediately necessary for the preservation 
of the public peace, health, or safety, an emergency is hereby 
declared to exist, by reason whereof this act shall take effect and 
be in full force from and aft er its passage and approval. 
 
 
 
 
  ENR. H. B. NO. 3388 	Page 54 
Passed the House of Representatives the 1st day of May, 2024. 
 
 
  
 	Presiding Officer of the House 
 	of Representatives 
 
Passed the Senate the 25th day of April, 2024. 
 
 
  
 	Presiding Officer of the Senate 
 
 
OFFICE OF THE GOVERNOR 
Received by the Office of the Governor this ____________________ 
day of ___________________, 20_______, at _______ o'clock _______ M. 
By: _________________________________ 
Approved by the Governor of the State of Oklahoma this _____ ____ 
day of ___________________, 20_______, at _______ o'clock _______ M. 
 
 
 	_________________________________ 
 	Governor of the State of Oklahoma 
 
OFFICE OF THE SECRETARY OF STATE 
Received by the Office of the Sec retary of State this __________ 
day of ___________________, 20_______, at _______ o'clock _______ M. 
By: _________________________________