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STATE OF OKLAHOMA
1st Session of the 60th Legislature (2025)
HOUSE BILL 1788 By: Lepak
AS INTRODUCED
An Act relating to revenue and taxation; amending 68
O.S. 2021, Section 2355, as last amended by Section
1, Chapter 27, 1st Extraordinary Session, O.S.L. 2023
(68 O.S. Supp. 2024, Section 2355), which relates to
individual income tax rates; modifying income tax
rates; amending 68 O.S. 2021, Section 2358, as last
amended by Section 155, Chapter 452, O.S.L. 2024 (68
O.S. Supp. 2024, Section 2358), which relates to
Oklahoma taxable income and Oklahoma adjusted gross
income; modifying standard deduction amounts; and
providing an effective date .
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 2355, as
last amended by Section 1, Chapter 27, 1st Extraordinary Session,
O.S.L. 2023 (68 O.S. Supp. 2024, Section 2355), is amended to read
as follows:
Section 2355. A. Individuals. For all taxable years beginning
after December 31, 1998, and before January 1, 2006, a tax is hereby
imposed upon the Oklahoma taxable income of every resident or
nonresident individual, which tax shall be computed at the option of
the taxpayer under one of the two following methods:
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1. METHOD 1.
a. Single individuals and married individuals filing
separately not deducting federal income tax:
(1) 1/2% tax on first $1,000.00 or part thereof,
(2) 1% tax on next $1,500.00 or part thereof,
(3) 2% tax on next $1,250.00 or part thereof,
(4) 3% tax on next $1,150.00 or part thereof,
(5) 4% tax on next $1,300.00 or part th ereof,
(6) 5% tax on next $1,500.00 or part thereof,
(7) 6% tax on next $2,300.00 or part thereof, and
(8) (a) for taxable years beginning after December
31, 1998, and before Jan uary 1, 2002, 6.75%
tax on the remainder,
(b) for taxable years beginning on or after
January 1, 2002, and before January 1, 2004,
7% tax on the remainder, and
(c) for taxable years beginning on or after
January 1, 2004, 6.65% tax on the remainder.
b. Married individuals filing jointly and surviving
spouse to the extent and in the m anner that a
surviving spouse is permitted to file a joint return
under the provisions of the Internal Revenue Code and
heads of households as defined in the Internal Revenue
Code not deducting federal income tax:
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(1) 1/2% tax on first $2,000.00 or part thereof,
(2) 1% tax on next $3,000.00 or part thereof,
(3) 2% tax on next $2,500.00 or part thereof,
(4) 3% tax on next $2,300.00 or part thereof,
(5) 4% tax on next $2,400.00 or p art thereof,
(6) 5% tax on next $2,800.00 or part thereof,
(7) 6% tax on next $6,000.00 or part thereof, and
(8) (a) for taxable years beginning after December
31, 1998, and before January 1, 2002, 6.75%
tax on the remainder,
(b) for taxable years beginnin g on or after
January 1, 2002, and before January 1, 2004,
7% tax on the remainder, and
(c) for taxable years beginning on or after
January 1, 2004, 6.65% tax on the remainder.
2. METHOD 2.
a. Single individuals and married individuals filing
separately deducting federal income tax:
(1) 1/2% tax on first $1,000.00 or part thereof,
(2) 1% tax on next $1,500.00 or part thereof,
(3) 2% tax on next $1,250.00 or part thereof,
(4) 3% tax on next $1,150.00 or part thereof,
(5) 4% tax on next $1,200.00 or part the reof,
(6) 5% tax on next $1,400.00 or part thereof,
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(7) 6% tax on next $1,500.00 or part thereof,
(8) 7% tax on next $1,500.00 or part thereof,
(9) 8% tax on next $2,000.00 or part thereof,
(10) 9% tax on next $3,500.00 or part thereof, and
(11) 10% tax on the remainder.
b. Married individuals filing jointly and surviving
spouse to the extent and in the manner that a
surviving spouse is permitted to file a joint return
under the provisions of the Internal Revenue Code and
heads of households as defined in t he Internal Revenue
Code deducting federal income tax:
(1) 1/2% tax on the first $2,000.00 or part thereof,
(2) 1% tax on the next $3,000.00 or part thereof,
(3) 2% tax on the next $2,500.00 or part thereof,
(4) 3% tax on the next $1,400.00 or part thereof ,
(5) 4% tax on the next $1,500.00 or part thereof,
(6) 5% tax on the next $1, 600.00 or part thereof,
(7) 6% tax on the next $1,250.00 or part thereof,
(8) 7% tax on the next $1,750.00 or part thereof,
(9) 8% tax on the next $3,000.00 or part thereof,
(10) 9% tax on the next $6,000.00 or part thereof, and
(11) 10% tax on the remainder.
B. Individuals. For all taxable years beginning on or after
January 1, 2008, and ending any tax year which begins after December
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31, 2015, for which the determination requi red pursuant to Sections
4 and 5 of this act is made by the State Board of Equ alization, a
tax is hereby imposed upon the Oklahoma taxable income of every
resident or nonresident individual, which tax shall be computed as
follows:
1. Single individuals an d married individuals filing
separately:
(a) 1/2% tax on first $1,000.00 or part thereof,
(b) 1% tax on next $1,500.00 or part thereof,
(c) 2% tax on next $1,250.00 or part thereof,
(d) 3% tax on next $1,150.00 or part thereof,
(e) 4% tax on next $2,300.00 or part thereof,
(f) 5% tax on next $1,500.00 or part thereof,
(g) 5.50% tax on the remainder for the 2008 tax year and
any subsequent tax year unless the rate prescribed by
subparagraph (h) of this paragraph is in effect, and
(h) 5.25% tax on the remaind er for the 2009 and subsequent
tax years. The decrease in the top marginal
individual income tax rate otherwise authorized by
this subparagraph shall be contingent upon the
determination required to be made by the State Board
of Equalization pursuant to S ection 2355.1A of this
title.
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2. Married individuals filing jointly and survi ving spouse to
the extent and in the manner that a surviving spouse is permitted to
file a joint return under the provisions of the Internal Revenue
Code and heads of households as defined in the Internal Revenue
Code:
(a) 1/2% tax on first $2,000.00 or part thereof,
(b) 1% tax on next $3,000.00 or part thereof,
(c) 2% tax on next $2,500.00 or part thereof,
(d) 3% tax on next $2,300.00 or part thereof,
(e) 4% tax on next $2,400.00 or part thereof,
(f) 5% tax on next $2,800.00 or part thereof,
(g) 5.50% tax on the remainder for the 2008 tax year and
any subsequent tax year unless the rate prescribed by
subparagraph (h) of this paragraph is in effect, and
(h) 5.25% tax on the remaind er for the 2009 and subsequent
tax years. The decrease in the top marginal
individual income tax rate otherwise authorized by
this subparagraph shall be contingent upon the
determination required to be made by the State Board
of Equalization pursuant to S ection 2355.1A of this
title.
C. Individuals. For all taxable years beginnin g on or after
January 1, 2024, and ending December 31, 2025, a tax is hereby
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imposed upon the Oklahoma taxable income of every resident or
nonresident individual, which tax shall be computed as follows:
1. Single individuals and married individuals filing
separately:
(a) 0.25% tax on first $1,000.00 or part thereof,
(b) 0.75% tax on next $1,500.00 or part thereof,
(c) 1.75% tax on next $1,250.00 or part thereof,
(d) 2.75% tax on next $1,150.00 or part thereof,
(e) 3.75% tax on next $2,300.00 or part thereo f,
(f) 4.75% tax on the remainder.
2. Married individuals filing jointly and surviving spouse to
the extent and in the manner that a surviving spouse is permitted to
file a joint return under the provisions of the Internal Revenue
Code and heads of households as defined in the Internal Revenue
Code:
(a) 0.25% tax on first $2,000.00 or part thereof,
(b) 0.75% tax on next $3,000.00 or part thereof,
(c) 1.75% tax on next $2,500.00 o r part thereof,
(d) 2.75% tax on next $2,300.00 or part thereof,
(e) 3.75% tax on next $4,600.00 or part thereof,
(f) 4.75% tax on the remainder.
No deduction for federal income taxes paid shall be allowed to
any taxpayer to arrive at taxable income.
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D. Individuals. For all taxable years beginning on or after
January 1, 2026, a tax is hereby imposed upon the Oklahoma taxable
income of every resident or nonresident individual, which tax shall
be computed as follows:
1. Single individuals and married indiv iduals filing separately
at the rate of four and seventy -five hundredths perce nt (4.75%);
2. Married individuals filing jointly and surviving spouse to
the extent and in the manner that a surviving spouse is permitted to
file a joint return under the prov isions of the Internal Revenue
Code and heads of households as defined in the Internal Revenue Code
at the rate of four and seventy -five hundredths percent (4.75%).
No deduction for federal income taxes paid shall be allowed to
any taxpayer to arrive at ta xable income.
E. Nonresident aliens. In lieu of the rates set forth in
subsection A above this section, there shall be imposed on
nonresident aliens, as defined in the Internal Revenue Code, a tax
of eight percent (8%) instead of thirty percent (30%) as used in the
Internal Revenue Code, with respect to the Oklahoma taxable income
of such nonresident aliens as determined under the provision of the
Oklahoma Income Tax Act.
Every payer of amounts covered by this subsection shall deduct
and withhold from suc h amounts paid each payee an amount equal to
eight percent (8%) thereof. Ever y payer required to deduct and
withhold taxes under this subsection shall for each quarterly period
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on or before the last day of the month following the close of each
such quarterly period, pay over the amount so withheld as taxes to
the Tax Commission, and shall file a return with each such payment.
Such return shall be in such form as the Tax Commission shall
prescribe. Every payer required under this subsection to deduct and
withhold a tax from a payee shall, as to the total amounts paid to
each payee during the calendar year, furnish to such payee, on or
before January 31, of the succeeding year, a written statement
showing the name of the payer, the name of the payee and the payee's
Social Security account number, if any, the total amount paid
subject to taxation, and the total amount deducted and withheld as
tax and such other information as the Tax Commission may require.
Any payer who fails to withhold or pay to the Tax C ommission any
sums herein required to be withheld or paid shall be personally and
individually liable therefor to the State of Oklahoma.
E. F. Corporations. For all taxable years beginning after
December 31, 2021, a tax is hereby imposed upon the Oklahom a taxable
income of every corporation doing business within this state or
deriving income from sources within this state in an amount equal to
four percent (4%) thereof.
There shall be no additional Oklahoma income tax imposed on
accumulated taxable income or on undistributed personal holding
company income as those terms are define d in the Internal Revenue
Code.
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F. G. Certain foreign corporations. In lieu of the tax imposed
in the first paragraph of subsection D F of this section, for all
taxable years beginning after December 31, 2021, there shall be
imposed on foreign corporations, as defined in the Internal Revenue
Code, a tax of four percent (4%) instead of thirty percent (30%) as
used in the Internal Revenue Code, where such income is received
from sources within Oklahoma, in accordance with the provisions of
the Internal Revenue Code and the Oklahoma Income Tax Act.
Every payer of amounts covered by this subsection shall deduct
and withhold from such amounts paid each payee an amount equal to
four percent (4%) thereof. Every payer required to deduct and
withhold taxes under this subsection shall for each quarterly period
on or before the last day of the month following the close of each
such quarterly period, pay over the amount so withheld as taxes to
the Tax Commission, and shall file a return with each such payment.
Such return shall be in such form as the Tax Commission shall
prescribe. Every payer required under this subsection to deduct and
withhold a tax from a payee shall, as to the total am ounts paid to
each payee during the calendar year, furnish to such payee, on or
before January 31, of the succeeding year, a written statement
showing the name of the payer, the name of the payee and the payee 's
Social Security account number, if any, the total amounts paid
subject to taxation, the total amount deducted and withheld as tax
and such other information as the Tax Commission may require. Any
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payer who fails to withhold or pay to the Tax Commission any sums
herein required to be withheld or pai d shall be personally and
individually liable therefor to the State of Oklahoma.
G. H. Fiduciaries. A tax is hereby imposed upon the Oklahoma
taxable income of every trust and estate at the same rates as are
provided in subsection B or, C, or D of this section for single
individuals. Fiduciaries are not allowed a deduction for an y
federal income tax paid.
H. Tax rate tables. For all taxable years beginning after
December 31, 1991, in lieu of the tax imposed by subsection A, B or,
C or D of this section, as applicable there is hereby imposed for
each taxable year on the taxable income of every individual, whose
taxable income for such taxable year does not exceed the ceiling
amount, a tax determined under tables, applicable to such taxable
year which shall be prescribed by the Tax Commission and which shall
be in such form as it d etermines appropriate. In the table so
prescribed, the amounts of the tax shall be computed on the basis of
the rates prescribed by subsection A, B or, C or D of this section.
For purposes of this subsection, the term "ceiling amount" means,
with respect to any taxpayer, the amount determined by the Tax
Commission for the tax rate category in which such taxpayer falls.
SECTION 2. AMENDATORY 68 O.S. 2021 , Section 2358, as
last amended by Section 155, Chapter 452, O.S.L. 2024 (68 O .S. Supp.
2024, Section 2358), is amended to read as follows:
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Section 2358. For all tax years beginning after December 31,
1981, taxable income and adjusted gross income shall b e adjusted to
arrive at Oklahoma taxable income and Oklahoma adjusted gross income
as required by this section.
A. The taxable income of any taxpayer shall be adjusted to
arrive at Oklahoma taxable income for corporations and Oklahoma
adjusted gross incom e for individuals, as follows:
1. There shall be added interest income on obl igations of any
state or political subdivision thereto which is not otherwise
exempted pursuant to other laws of this state, to the extent that
such interest is not included in t axable 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 Constitution, 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 deduction 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
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to this section and Section 2362 of this title, for
the taxable year in which such loss is sustained is of
the total loss for such year;
b. For carryovers and carrybacks to taxable years
beginning after December 31, 1980, the amount of any
net operating loss deduction allowed for the taxable
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 2351
et seq. of this title, and shall be allowed without
regard to the existence of a f ederal net operating
loss. For tax years beginning after December 31,
2000, and ending before January 1, 2008, the years to
which such losses may be carried shall be determined
solely by reference to Section 172 of the Internal
Revenue Code, 26 U.S.C., Section 172, with the
exception that the terms "net operating loss" and
"taxable income" shall be replaced with "Oklahoma 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
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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 paragraph, whether or
not such items of income were actually received, shall be allocated
on the same basis as those items:
a. Income from real and tangible personal property, such
as rents, oil and mining production or royalties, and
gains or losses from sales of such property, shall be
allocated in accordance with the situ s 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, excep t that:
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(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 business or
commercial situs; interest income from
investments held to gen erate 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 shal l 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 ordinary gains or losses from
the sale of an ownership interest in a publicly
traded partnership, as defined by Section 7704(b)
of the Internal Revenue Cod e, shall be allocated
to this state in the ratio of the original cost
of such partnership's tangible property in this
state to the original cost of such partnership 's
tangible property everywhere, as determined at
the time of the sale; if more than fifty percent
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(50%) of the value of the partnership 's assets
consists of intangible assets, capital or
ordinary gains or losses from the sale of an
ownership interest in the partnership shall be
allocated to this state in accordance with the
sales factor of the p artnership for its first
full tax period immediately preceding its tax
period during which the ownership interest in the
partnership was sold; the provisions of this
division shall only apply if the capital or
ordinary gains or losses from the sale of an
ownership interest in a partnership do not
constitute qualifying gain receiving capital
treatment as defined in subparagraph a of
paragraph 2 of subsection F of this section,
(3) income from such property which is required to be
allocated pursuant to the pr ovisions of paragraph
5 of this subsection shall be allocated as herein
provided;
c. Net income or loss from a business activity which is
not a part of business carried on within or without
the state of a unitary character shall be separately
allocated to the state in which such activity is
conducted;
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d. In the case of a manufacturing or processing
enterprise the business of which in Oklahoma consists
solely of marketing its produ cts 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 warehouses
within the state where the shipment to such
warehouses is not covered 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
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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
provided pursuant to the provisions of paragraphs 1
and 2 of this subsection, apportioned as follows:
(1) except as otherwise provided by division (2) of
this subparagraph, taxable income of an 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 ins urance on
property or risks everywhere. For purposes of
this subsection, the term "direct premiums
written" means the total amount of direct
premiums written, assessments and annuity
considerations as reported for the taxable year
on the annual statement filed by the company with
the Insurance Commissioner in the form approved
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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 fraction, the
numerator of which is the sum of (a) direct
premiums written for insurance on proper ty 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 everywhere,
plus (d) premiums written for reinsurance
accepted in respect of property or risks
everywhere. For purposes of this paragraph,
premiums written for reinsurance accepted in
respect of property or risks in this state,
whether or not otherwise determinable, may at the
election of the company be determined on the
basis of the proportion which premi ums written
for insurance accepted from companies
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commercially domiciled in Oklahoma bears to
premiums written for reinsurance accepted from
all sources, or alternatively in the proportion
which the sum of the direct premiums written for
insurance on property or risks in this state by
each ceding company from which reinsurance is
accepted bears to the sum of the total direct
premiums written by each such 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 of the arithmetical average of three factors
consisting of property, payroll and sales or gross revenue
enumerated as subparagraphs a, b and c of this paragraph. Net
income or loss as used in this paragraph includes that derived from
patent or copyright royalties, purchase discounts, a nd interest on
accounts receivable relating to or arising from a business acti vity,
the income from which is apportioned pursuant to this subsection,
including the sale or other disposition of such property and any
other property used in the unitary enterp rise. Deductions used in
computing such net income or loss shall not include taxes based on
or measured by income. Provided, for corporations whose property
for purposes of the tax imposed by Section 2355 of this title has an
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initial investment cost equa ling or exceeding Two Hundred Million
Dollars ($200,000,000.00) and such inves tment is made on or after
July 1, 1997, or for corporations which expand their property or
facilities in this state and such expansion has an investment cost
equaling or exceedin g Two Hundred Million Dollars ($200,000,000.00)
over a period not to exceed three (3) years, and such expansion is
commenced on or after January 1, 2000, the three factors shall be
apportioned with property and payroll, each comprising 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 taxpay er's real and
tangible personal property owned or rented and used in
this state during the tax period and the denominator
of which is the average value of all the taxpayer 's
real and tangible personal property everywhere owned
or rented and used during the tax period.
(1) Property, the income from which is separately
allocated in paragraph 4 of this subsection,
shall not be included in determining this
fraction. The numerator of the fraction shall
include a portion of the investment in
transportation and o ther equipment having no
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fixed situs, such as rolling stock, buses, trucks
and trailers, including machinery and equipment
carried thereon, airplanes, salespersons '
automobiles and other similar equipment, in the
proportion that miles traveled in Oklahoma by
such equipment bears to total miles traveled,
(2) Property owned by the tax payer is valued at its
original cost. Property rented by the taxpayer
is valued at eight times the net annual rental
rate. Net annual rental rate is the annual
rental rate paid by the taxpayer, less any annual
rental rate received by the taxpayer from
subrentals,
(3) The average value of property shall be determined
by averaging the values at the beginning and
ending of the tax period but the Oklahoma Tax
Commission may require the averaging of monthly
values during the tax period if reasonably
required to reflect properly the average value of
the taxpayer's property;
b. The payroll factor is a fraction, the numerator of
which is the total compensation for services rendered
in the state during the tax period, and the
denominator of which is the total compensation for
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services rendered everywhere during the tax period.
"Compensation", as used in this subsection means those
paid-for services to the extent related to the unitary
business but does not include officers ' salaries,
wages and other compensation.
(1) In the case of a transportation enterprise, the
numerator of the fraction shall include a portion
of such expenditure in connection with employees
operating equipment over a f ixed route, such as
railroad employees, airline pilots, or bus
drivers, in this state only a part of the time,
in the proportion that mileage traveled in
Oklahoma bears to total mileage traveled by such
employees,
(2) In any case the numerator of the fract ion shall
include a portion of such expenditures in
connection with itinerant employees, such as
traveling salespersons, in this state only a part
of the time, in the proportion that time spent in
Oklahoma bears to total time spent in furtherance
of the enterprise by such employees;
c. The sales factor is a fraction, the numerator of which
is the total sales or gross revenue of the taxpayer in
this state during the tax period, and the denominator
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of which is the total sales or gross revenue of the
taxpayer everywhere during the tax period. "Sales",
as used in this subsection does no t include sales or
gross revenue which are separately allocated in
paragraph 4 of this subsection.
(1) Sales of tangible personal property have a situs
in this state if the prope rty is delivered or
shipped to a purchaser other than the United
States government, within this state regardless
of the FOB point or other conditions of the sale;
or the property is shipped from an office, store,
warehouse, factory or other place of storag e in
this state and (a) the purchaser is the United
States government or (b) t he 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 s hall
not be less than the allocation of revenues to
this state as shown in its annual report to the
Corporation Commission.
(3) In the case of an airline, truck or bus
enterprise or freight car, tank car, refrigerator
car or other railroad equipment enterp rise, the
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numerator of the fraction shall include a portion
of revenue from interstate transportation in the
proportion that interstate mileage traveled in
Oklahoma bears to total interstate mileage
traveled.
(4) In the case of an oil, gasoline or gas pipe line
enterprise, the numerator of the fraction shall
be either the total of traffic units of the
enterprise within Oklahoma or the revenue
allocated to Oklahoma based upon miles moved, at
the option of the taxpayer, and the denominator
of which shall be th e total of traffic units of
the enterprise or the revenue of the enterprise
everywhere as appropriate to the numerator. A
"traffic unit" is hereby defined as the
transportation for a distance of one (1) mile of
one (1) barrel of oil, one (1) gallon of gas oline
or one thousand (1,000) cubic feet of natural or
casinghead gas, as the case may be.
(5) In the case of a telephone or telegraph or other
communication enterprise, the numerator of the
fraction shall include that portion of the
interstate revenue as is allocated pursuant to
the accounting procedures prescribed by the
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Federal Communications Commission; provided that
in respect to each corporation or business entity
required by the Federal Communications Commission
to keep its books and records in accor dance with
a uniform system of accounts prescribed by such
Commission, the intrastate net income shall be
determined separately in the manner provided by
such uniform system of accounts and only the
interstate income shall be subject to allocation
pursuant to the provisions of this subsection.
Provided further, that the gross reven ue factors
shall be those as are determined pursuant to the
accounting procedures prescribed by the Federal
Communications Commission.
In any case where the apportionment of the three factors
prescribed in this paragraph attributes to Oklahoma a portion of net
income of the enterprise out of all appropriate proportion to the
property owned and/or business transacted within this state, because
of the fact that one or more of the fa ctors so prescribed are not
employed to any appreciable extent in furtherance of the enterprise;
or because one or more factors not so prescribed are employed to a
considerable extent in furtherance of the enterprise; or because of
other reasons, the Tax C ommission is empowered to permit, after a
showing by taxpayer that an excessive portion of net income has been
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attributed to Oklahoma, or require, when in its judgment an
insufficient portion of net income has been attributed to Oklahoma,
the elimination, substitution, or use of additional factors, or
reduction or increase in the we ight of such prescribed factors.
Provided, however, that any such variance from such prescribed
factors which has the effect of increasing the portion of net income
attributable to Oklahoma must not be inherently arbitrary, and
application of the recomputed final apportionment to the net income
of the enterprise must attribute to Oklahoma only a reasonable
portion thereof.
6. For calendar years 1997 and 1998, the owner of a new or
expanded agricultural commodity processing 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 facility. For calendar year 1999,
and all subsequent years, the percentage, not to exceed fifteen
percent (15%), available to the owner of a new or expanded
agricultural commodity processing facility in this state claimin g
the exemption shall be adjusted annually 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 whic h each eligible
taxpayer may exclude. The exclusion provided by this paragraph
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shall be taken in the taxable 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 o ver 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 t he 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:
a. "Agricultural commodity processing facili ty" means
building, structures, fixtures and improvements used
or operated primarily for the processing or production
of marketable products from agricultural commodities.
The term 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, drying or transportation
of agricultural commodities, a nd
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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 agricultural commodities or
product before, during or after the processing,
or
(3) packaging or otherwise preparing the product for
sale or shipment.
7. Despite any provision to the contrary in paragraph 3 of this
subsection, for taxable years be ginning after December 31, 1999, in
the case of a taxpayer which has a farming loss, such farming loss
shall be considered a net operating loss carryback in accordance
with and to the extent of the Internal 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 the Int ernal
Revenue Service Form 1040 reduced by one -half (1/2) of
the income from all other sources other than reflected
on Schedule F.
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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.
The deduction allowed pursuant to this paragraph shall only be
permitted for the tax years in which the federal tax credit pursuant
to 26 U.S.C.A., Section 45A, is allowed. For purposes of this
paragraph, "qualified wages" means those wages used to calculate the
federal credit pursuant to 26 U.S.C.A., Section 45A.
9. In taxable years beginning after December 31, 2005, an
employer that is eligible for and utilizes the Safety Pays OSHA
Consultation Service provided by the Oklahoma Department of Labor
shall receive an exemption from taxable income in the amount of One
Thousand Dollars ($1,000.00) for the tax year that the service is
utilized.
10. For taxable years beginning on or after Janu ary 1, 2010,
there shall be added to Oklahoma taxable income an amount equal t o
the amount of deferred income not included in such taxable income
pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
as amended by Section 1231 of the American Recovery and Reinvestment
Act of 2009 (P.L. No. 111 -5). There shall be subtracted from
Oklahoma taxable income an amount equal to the amount of deferred
income included in such taxable income pursuant to Section 108(i)(1)
of the Internal Revenue Code by S ection 1231 of the American
Recovery and Reinvestment Act of 2009 (P.L. No. 11 1-5).
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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, an d there shall be added to
Oklahoma taxable income or adjusted gross income any item of loss or
deduction that in the absence of an election pursuant to the
provisions of the Pass -Through Entity Tax Equity Act of 2019 would
be allocated to a member or to an indirect member of an electing
pass-through entity pursuant to Section 2351 e t 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 Pa ss-Through Entity Tax Equity Act of 2019, and
(ii) the total amount of tax attributable to any resulting Oklahoma
net entity income has been paid. The Oklahoma Tax Commission shall
promulgate rules for the reporting of such exclusion to direct and
indirect members of the electing pass -through entity. As used in
this paragraph, "electing pass-through entity", "indirect member",
and "member" shall be defined in the same manner as prescribed by
Section 2355.1P-2 of this title. Notwithstanding the applicatio n 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
title shall be equal to its adjusted tax basis for federal income
tax purposes.
B. 1. The taxable income of any co rporation shall be further
adjusted to arrive at Oklahoma taxable income, exce pt those
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corporations electing treatment as provided in subchapter S of the
Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section
2365 of this title, deductions pur suant to the provisions of the
Accelerated Cost Recovery System as defined and allowed in the
Economic Recovery Tax Act of 1981, Public Law 97 -34, 26 U.S.C.,
Section 168, for depreciation of assets placed into service after
December 31, 1981, shall not be allowed in calculating Oklahoma
taxable income. Such corporations shall be al lowed a deduction for
depreciation of assets placed into service after December 31, 1981,
in accordance with provisions of the Internal Revenue Code, 26
U.S.C., Section 1 et seq. , in effect immediately prior 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 purposes through the final disposition of
such assets.
Notwithstanding any other provisions of the Oklahoma Income Tax
Act, Section 2351 et seq. of this title, or of the Internal Revenue
Code to the contrary, this subsection shall control calculatio n 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 was previously disallowed, an
adjustment to taxable income is required in the first taxable year
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beginning after December 31, 1982, to r econcile 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 allowance
for depreciation accou nts between that reported to the Internal
Revenue Service and that reported to Oklahoma.
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 exces s of One Hundred Seventy -
five Thousand Dollars ($175,000.00) which has been de ducted as a
small business expense under Internal Revenue Code, Section 179 as
provided in the American Recovery and Reinvestment Act of 2009.
C. 1. For taxable years beginning after December 31, 1987, the
taxable income of any corporation shall be further adjusted to
arrive at Oklahoma taxable income for transfers of technology to
qualified small businesses located in Oklahoma. Such transferor
corporation shall be allowed an e xemption from taxable income of an
amount equal to the amount of royalty payme nt received as a result
of such transfer; provided, however, such amount shall not exceed
ten percent (10%) of the amount of gross proceeds received by such
transferor corporatio n as a result of the technology transfer. Such
exemption shall be allowed for a period not to exceed ten (10) years
from the date of receipt of the first royalty payment accruing from
such transfer. No exemption may be claimed for transfers of
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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 this state
and which meets the following criteria:
(1) Capitalization of not more than Two Hundred Fifty
Thousand Dollars ($250,000.00),
(2) Having at least fifty percent (50%) of its
employees and assets located in Oklahoma at the
time of the transfer, and
(3) Not a subsidiary or affiliate of the tran sferor
corporation;
b. "Technology" means a proprietary process, formula,
pattern, device or compilation of scientific 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
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d. "Gross proceeds" means the total amount of
consideration for the transfer of technology, whether
the consideration is in money or otherwise.
D. 1. For taxable years beginning after December 31, 2005, the
taxable income of any corporation, estate or trust, shall be further
adjusted for qualifying gains receiving capital treatment. Such
corporations, estate s or trusts shall be allowed a deduction from
Oklahoma taxable income for the amount of qualifying gains receiving
capital treatment earned by the corporation, estate or trust during
the taxable year and included in the federal taxable income of such
corporation, estate or trust.
2. As used in this subsection:
a. "qualifying gains receiving capital treatment " means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code, included in the
federal income tax return of the corporation, estate
or trust that result from:
(1) the sale of real property or tangible personal
property located within Oklahoma that has been
directly or indirectly owned by the corporation,
estate or trust for a holding period of at least
five (5) years prior to the date of the
transaction from which such net capital gains
arise,
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(2) the sale of stock or on the sale of an ownership
interest in an Oklahoma company, limited
liability company, or partnership where such
stock or ownership interest has been directly or
indirectly owned by the corporation, estate or
trust for a holding period of at least three (3)
years prior to the date of the transaction from
which the net capital gains arise, or
(3) the sale of real property, tangible personal
property or intangible personal property located
within Oklahoma as part of the sale of all or
substantially all of the assets of an Oklahoma
company, limited liability company, or
partnership where such property has been directly
or indirectly owned by such entity own ed by the
owners of such entity, and used in or derived
from such entity for a period of at least three
(3) years prior to the date of the 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 b y another
individual or entity, if such additional period is
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included in the taxpayer 's holding period for the
asset pursuant to the Internal Revenue Code,
c. "Oklahoma company", "limited liability company ", or
"partnership" means an entity whose primary
headquarters have been located in Oklahoma for at
least three (3) uninterrupted years prior to the date
of the transaction from which the net capital gains
arise,
d. "direct" means the taxpayer directly owns the asset,
and
e. "indirect" means the taxpayer o wns 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, 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) uninterrup ted
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
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pass-through entity in the tier immediately below
it for an uninterrupted period of not less than
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of all or substantially all
of the assets of an Oklahoma company, limited
liability company, or partnership, the deduction
described in this subsection shall not apply
unless the pass-through entity that makes the
sale has held the stock or ownership interest or
the assets for not 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 arr ive 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 O ne Thousand Dollars
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($1,000.00) in lieu of the personal exemptions allowed
by the Internal Revenue Code.
b. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for each taxpayer or
spouse who is blind at the close of the tax year. For
purposes of this 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 a ccompanied
by a limitation in the fields of vision such that the
widest diameter of the visual field subtends an angle
no greater than twenty (20) degrees.
c. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for each taxpa yer or
spouse who is sixty-five (65) years of age or older at
the close of the tax year based upon the filing status
and federal adjusted gross income of the taxpayer.
Taxpayers with the following filing status may claim
this exemption if the federal adju sted gross income
does not exceed:
(1) Twenty-five Thousand Dollars ($25,000.00) if
married and filing jointly,
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(2) Twelve Thousand Five Hundred Dollars ($12,500.00)
if married and filing separately,
(3) Fifteen Thousand Dollars ($15,000.00) if single,
and
(4) Nineteen Thousand Dollars ($19,000.00) if a
qualifying head of household.
Provided, for taxable years beginning after December
31, 1999, amounts included in the calculation of
federal adjusted gross income pursuant to the
conversion of a traditional i ndividual retirement
account to a Roth individual retirement account shall
be excluded from federal adjusted gross income for
purposes of the income thresholds provided in this
subparagraph.
2. a. For taxable years beginning on or before December 31,
2005, in the case of individuals who use the standard
deduction in determining taxa ble 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 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
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in the case of a married individual filing a separate
return such deduction shall be the larger of fifteen
percent (15%) of such Oklahoma adjusted gross income
or Five Hundred Dollars ($500.00), but not to exceed
the maximum amount of One Thousand Dollars
($1,000.00).
b. For taxable years beginning on or after January 1,
2006, and before January 1, 2007, in the case of
individuals who use the standard deduction in
determining taxable income, there shall be added or
deducted, as the case may be, the difference necessary
to allow a standard deduction i n lieu of the standard
deduction allowed by the Internal Revenue Code, in an
amount equal to:
(1) Three Thousand Dollars ($3,000.00), if the filing
status is married filing joint, head of household
or qualifying widow, or
(2) Two Thousand Dollars ($2,000.0 0), if the filing
status is single or married filing separate.
c. For the taxable year beginning on January 1, 2007, and
ending December 31, 2007, in the case of individuals
who use the standard deduction in determining taxable
income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
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deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) 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 a llow a standard
deduction in lieu of the standard deduction allowed by
the Internal Revenue Code, in an amount equal to:
(1) Six Thousand Five Hundred Dollars ($6,500.00), if
the filing status is married filing joint or
qualifying widow,
(2) Four Thousand Eight Hundred Seventy -five Dollars
($4,875.00) for a head of household, or
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(3) Three Thousand Two Hundred Fifty Dollars
($3,250.00), if the filing status is single or
married filing separate.
e. For the taxable year beginning on January 1, 2009, and
ending December 31, 2009, in the case of individuals
who use the standard deduction in determining taxable
income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
deduction in lieu of the standard deduction allo wed by
the Internal Revenue Code, in an amount equal to:
(1) Eight Thousand Five Hundred Dollars ($8,500.00),
if the filing status is married filing joint or
qualifying widow,
(2) Six Thousand Three Hundred Seventy -five Dollars
($6,375.00) for a head of ho usehold, or
(3) Four Thousand Two Hundred Fifty Dollars
($4,250.00), if the filing status is single or
married filing separate.
Oklahoma adjusted gross income shall be increased by
any amounts paid for motor vehicle excise taxes which
were deducted as allo wed by the Internal Revenue Code.
f. For taxable years beginning on or after J anuary 1,
2010, and ending on December 31, 2016, in the case of
individuals who use the standard deduction in
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determining taxable income, there shall be added or
deducted, as the case may be, the difference necessary
to allow a standard deduction 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 federal individual income
tax returns.
g. For taxable years beginning on or after January 1,
2017, and ending December 31, 2025, in the case of
individuals who use the standard deduction in
determining taxable income, there shall be added or
deducted, as the case may be, the difference necessary
to allow a standard deduction in lieu of the standard
deduction allowed by the Internal Revenue Code, as
follows:
(1) Six Thousand Three Hundred Fifty Dollars
($6,350.00) for single or married filing
separately,
(2) Twelve Thousand Seven Hundred Dollars
($12,700.00) for married filing jointly or
qualifying widower with de pendent child, and
(3) Nine Thousand Three Hundred Fifty Dollars
($9,350.00) for head of household.
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h. For taxable years beginning on or after January 1,
2026, in the case of ind ividuals who use the standard
deduction in determining taxable income, there shall
be added or deducted, as the case may be, the
difference necessary to allow a standard deduction in
lieu of the standard deduction allowed by the Internal
Revenue Code, as follows:
(1) Ten Thousand Three Hundred Fifty Dollars
($10,350.00) for single o r married filing
separately,
(2) Twenty Thousand Seven Hundred Dollars
($20,700.00) for married filing jointly or
qualifying widower with dependent child, and
(3) Fifteen Thousand Three Hundred Dollars
($15,300.00) 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 exemp tions 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 required or permitted
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but allowable moving expense shall be fully deductible
for those taxpayers moving within or into Oklahoma and
no part of moving expense shall be deductible for
those taxpayers moving without or out of Oklahoma.
All other itemized or standard deductions and personal
exemptions shall be subject to proration as p rovided
by law.
b. For taxable years beginning on or after January 1,
2018, the net amount of itemized deductions allowable
on an Oklahoma income tax return, subject to the
provisions of paragraph 24 of this subsection, shall
not exceed Seventeen Thousand Dollars ($17,000.00).
For purposes of this subparagraph, charitable
contributions and medical expenses deductible for
federal income tax purposes shall be excluded from the
amount of Seventeen Thousand Dollars ($17,000.00) as
specified by this subparagrap h.
4. A resident individual with a physical disability
constituting a substantial handicap to employment may deduct from
Oklahoma adjusted gross income such expenditures to modi fy a motor
vehicle, home or workplace as are necessary to compensate for his or
her handicap. A veteran certified by the Department of Veterans
Affairs of the federal government as having a service -connected
disability shall be conclusively presumed to be an individual with a
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physical disability constituting a substantial handicap to
employment. The Tax Commission shall promulgate rules containing a
list of combinations of common disabilities and modifications which
may be presumed to qualify for this ded uction. The Tax Commission
shall prescribe necessary requirements for verification.
5. a. Before July 1, 2010, the first One Thousand Five
Hundred Dollars ($1,500.00) received by any person
from the United States as salary or compensation in
any form, other than retirement benefits, as a member
of any component of the Armed Forces of the United
States shall be deducted from taxable income.
b. On or after July 1, 2010, one hundred percent (100%)
of the income received by any person from the United
States as salary or compensation in any form, other
than retirement benefits, as a member of any component
of the Armed Forces of the United States shall be
deducted from taxable income.
c. Whenever the filing of a timely income tax return by a
member of the Armed Forces of the United States is
made impracticable or impossible of accomplishm ent by
reason of:
(1) absence from the United States, which term
includes only the states and the District of
Columbia,
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(2) absence from the State of Oklahoma while on
active duty, or
(3) confinement in a hospital within the United
States for treatment of wounds, injuries or
disease,
the time for filing a return and paying an income tax
shall be and is hereby extended without incurring
liability for interest or penalties, to the f ifteenth
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, return
to the State of Oklahoma if the extension is
granted pursuant to subparagraph b of this
paragraph or be discharged from such
hospital if the extension is 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 discreti on, grant
any member of the Armed Forces of the United States an extension of
time for filing of income tax returns and payment of income tax
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without incurring liabilities for in terest 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 deceased; provided, after July 1, 2010,
all such salary or compensation shall be subject to the deduction as
provided pursuant to paragraph 5 of this subsection.
7. a. An individual taxpayer, whether resident or
nonresident, may deduct an a mount equal to the federal
income taxes paid by the taxpayer during the taxable
year.
b. Federal taxes as described in subparagraph a of this
paragraph shall be deductible by any individual
taxpayer, whether resident or nonresident, only to the
extent they relate to income subject to taxation
pursuant to the provisions of the Oklahoma Income Tax
Act. The maximum amount allowable in the preceding
paragraph shall be prorated on the ratio of the
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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
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 Econom ic Growth and
Tax Relief Reconciliation Act of 2001, P.L. No. 107 -
16, and the advanced refund of such credit shall not
be subject to taxation.
d. The provisions of this paragraph shall apply to all
taxable years ending after December 31, 1978, and
beginning before January 1, 2006.
8. Retirement benefits not to exceed Five Thousand Five Hundred
Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five
Hundred Dollars ($7,500. 00) for the 2005 tax year and Ten Thousand
Dollars ($10,000.00) for the 2006 t ax year and all subsequent tax
years, which are received by an individual from the civil service of
the United States, the Oklahoma Public Employees Retirement System,
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the Teachers' Retirement System of Oklahoma, the Oklahoma Law
Enforcement Retirement System, the Oklahoma Firefighters Pension and
Retirement System, the Oklahoma Police Pension and Retirement
System, the employee retirement systems created by counties pursuant
to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the
Uniform Retirement System for Justices and Judges, the Oklahoma
Wildlife Conservation Department Retirement Fund, the Oklahoma
Employment Security Commission Retirement Plan, or the employee
retirement systems created by municipalities pursuant to Section 48 -
101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
from taxable income.
9. In taxable years beginning after 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 Revenue Code, 26 U.S.C., Section 86.
10. For taxable years beginning after Decembe r 31, 1994, lump-
sum distributions from employer plans of deferred compensation,
which are not qualified plans within the meaning of Section 401(a)
of the Internal Revenue Code, 26 U.S.C., Section 401(a), and which
are deposited in and accounted for within a separate bank account or
brokerage account in a financial institution withi n this state,
shall be excluded from taxable income in the same manner as a
qualifying rollover contribution to an individual retirement account
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within the meaning of Section 408 of the Internal Revenue Code, 26
U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
account, including any earnings thereon, shall be included in
taxable income when withdrawn in the same manner as withdrawals from
individual retirement a ccounts within the meaning of Section 408 of
the Internal Revenue Code.
11. In taxable years beginning after December 31, 1995,
contributions made to and interest received from a medical savings
account established pursuant to Sections 2621 through 2623 o f Title
63 of the Oklahoma Statutes shall be exempt from taxable income.
12. For taxable years beginning after December 31, 1996, the
Oklahoma adjusted gross income of any individual taxpayer who is a
swine or poultry producer may be further adjusted for the deduction
for depreciation allowed for new construction or expansion costs
which may be computed using the same depreciation method elected for
federal income tax purposes except that the useful life shall be
seven (7) years for purposes of this paragr aph. If depreciation is
allowed as a deduction in determining the adjusted gross income of
an individual, any depreciation calculated and claimed pursuant to
this section shall in no event be a duplication of any depreciation
allowed or permitted on the f ederal income tax return of the
individual.
13. a. In taxable years beginning before January 1, 2005,
retirement benefits not to exceed the amounts
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specified in this paragraph, which are received by an
individual sixty-five (65) years of age or older and
whose Oklahoma adjusted gross income is Twenty -five
Thousand Dollars ($25,000.00) or less if the filing
status is single, head of household, or married filing
separate, or Fifty Thousand Dollars ($50,000.00) or
less if the filing status is married filing jo int or
qualifying widow, shall be exempt from taxable income.
In taxable years beginning 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 exempt from taxable income.
b. For purposes of this paragraph, the qualifying amount
shall be as follows:
(1) in taxable years beginning after December 31,
2004, and prior to J anuary 1, 2007, the
qualifying amount shall be Thirty -seven Thousand
Five Hundred Dollars ($37,500.00) or less if the
filing status is single, head of household, or
married filing separate, or Seventy -five Thousand
Dollars ($75,000.00) or less if the filin g status
is married filing jointly or qualifying widow,
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(2) in the taxable year beginning January 1, 2007,
the qualifying amount shall be Fifty Thousand
Dollars ($50,000.00) or less if the filing status
is single, head of household, or married filing
separate, or One Hundred Thousand Dollars
($100,000.00) or less if the filing statu s is
married filing jointly or qualifying widow,
(3) in the taxable year beginning January 1, 2008,
the qualifying amount shall be Sixty -two Thousand
Five Hundred Dollars ($62,50 0.00) or less if the
filing status is single, head of household, or
married filing separate, or One Hundred Twenty -
five Thousand Dollars ($125,000.00) or less if
the filing status is married filing jointly or
qualifying widow,
(4) in the taxable year begin ning January 1, 2009,
the qualifying amount shall be One Hundred
Thousand Dollars ($100,000.00) or less if the
filing status is single, head of household, or
married filing separate, or Two Hundred Thousand
Dollars ($200,000.00) or less if the filing
status is married filing jointly or qualifying
widow, and
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(5) in the taxable year beginning January 1, 2010,
and subsequent taxable years, there shall be no
limitation upon the qualifying amount.
c. For purposes of this paragraph, "retirement benefits"
means the total distributions or withdrawals from the
following:
(1) an employee pension benefit plan which satisfies
the requirements of Section 401 of the Internal
Revenue Code, 26 U.S.C., Section 401,
(2) an eligible deferred compensation plan that
satisfies the requirements of Section 457 of the
Internal Revenue Code, 26 U.S.C., Section 457,
(3) an individual retirement account, annuity or
trust or simplified employee pension that
satisfies the requirements of Section 408 of the
Internal Revenue Code, 26 U.S.C. , Section 408,
(4) an employee annuity subject to the provisions of
Section 403(a) or (b) of the Internal Revenue
Code, 26 U.S.C., Section 403(a) or (b),
(5) United States Retirement 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 retirement plan
which satisfies the requirements of Section
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402(e) of the Internal Revenue Code, 26 U.S.C.,
Section 402(e).
d. The amount of the exemption provided by this paragraph
shall be limited to Five Thousand Five Hundred Dollars
($5,500.00) for the 2004 tax year, Seven Thousand Five
Hundred Dollars ($7,500.00) for the 2005 tax year and
Ten Thousand Dollars ($10,000.00) for the tax year
2006 and for all subsequent tax years. Any ind ividual
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 Hundred Dolla rs
($5,500.00) for the 2004 tax year, Seven Thousand Five
Hundred Dollars ($7, 500.00) for the 2005 tax year and
Ten Thousand Dollars ($10,000.00) for the 2006 tax
year and all subsequent tax years.
14. In taxable years beginning after December 31, 1999, f or an
individual engaged in production agriculture who has filed a
Schedule F form with the taxpayer 's federal income tax return for
such taxable year, there shall be excluded from taxable income any
amount which was included as federal taxable income or f ederal
adjusted gross income and which consists of the discharge of an
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obligation by a creditor of the taxpayer incurred to finance the
production of agricultural products.
15. In taxable years beginning December 31, 2000, an amount
equal to one hundred p ercent (100%) of the amount of any scholarship
or stipend received from participation in the Oklahoma Police Corps
Program, as established in Section 2 -140.3 of Title 47 of the
Oklahoma Statutes shall be exempt from taxable income.
16. a. In taxable years beginning after December 31, 2001,
and before January 1, 2005, there shall be allowed a
deduction in the amount of contributions to accounts
established pursuant to the Oklahoma College Savings
Plan Act. The deduction shall equal the amount of
contributions to accounts, but in no event shall the
deduction for each contributor exceed Two Thousand
Five Hundred Dollars ($2,500.00) each taxable year for
each account.
b. In taxable years beginning after December 31, 2004,
each taxpayer shall be allowed a deduct ion for
contributions to accounts established pursuant to the
Oklahoma College Savings Plan Act. The maximum annual
deduction shall equal the amount of contributions to
all such accounts plus any contributions to such
accounts by the taxpayer for prior ta xable years after
December 31, 2004, which were not deducted, but in no
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event shall the deduction for each tax year exceed Ten
Thousand Dollars ($10,000.00) for each individual
taxpayer or Twenty Thousand Dollars ($20,000.00) for
taxpayers filing a joint r eturn. Any amount of a
contribution that is not deducted by the taxpayer in
the year for which the contribution is made may be
carried forward as a deduction from income for the
succeeding five (5) years. For taxable years
beginning after December 31, 20 05, deductions may be
taken for contributions and rollovers made during a
taxable year and up to April 15 of the succeeding
year, or the due date of a taxpayer 's state income tax
return, excluding extensions, whichever is later.
Provided, a deduction for the same contribution may
not be taken for two (2) different taxable years.
c. In taxable years beginning after December 31, 2006,
deductions for contributions made pursuant to
subparagraph b of this paragraph shall be limited as
follows:
(1) for a taxpayer who qualified for the five -year
carryforward election and who takes a rollover or
nonqualified withdrawal during that period, the
tax deduction otherwise available pursuant to
subparagraph b of this paragraph shall be reduced
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by the amount which is equal to the rollover or
nonqualified withdrawal, and
(2) for a taxpayer who elects to take a rollover or
nonqualified withdrawal within the same tax year
in which a contribution was made to the
taxpayer's account, the tax deduction otherwise
available pursuant to subparagraph b of this
paragraph shall be reduced by the amount of the
contribution which is equal to the rollover or
nonqualified withdrawal.
d. If a taxpayer elects to take a rollover on a
contribution for which a deduction has been taken
pursuant to subparagraph b of this paragraph within
one (1) year of the date of contribut ion, 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 withdra wal of
contributions for which a deduction was taken pursuant
to subparagraph b of this paragraph, such nonqualified
withdrawal and any earnings thereon shall be included
in the adjusted gross income of the taxpayer in the
taxable year of the nonqualified withdrawal.
f. As used in this paragraph:
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(1) "non-qualified withdrawal " means a withdrawal
from an Oklahoma College Savings Plan account
other than one of the following:
(a) a qualified withdrawal,
(b) a withdrawal made as a result of the death
or disability of the designated beneficiary
of an account,
(c) a withdrawal that is made on the account of
a scholarship or the allowance or payment
described in Section 135(d)(1)(B) or (C) or
by the Internal Revenue Code, received by
the designated beneficiary to t he extent the
amount of the refund does not exceed the
amount of the scholarsh ip, allowance, or
payment, or
(d) a rollover or change of designated
beneficiary as permitted by subsection F of
Section 3970.7 of Title 70 of Oklahoma
Statutes, and
(2) "rollover" means the transfer of funds from the
Oklahoma College Savings Plan to any other plan
under Section 529 of the Internal Revenue Code.
17. For tax years 2006 through 2021, retirement benefits
received by an individual from any component of the Armed Forc es of
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the United States in an amount not to exceed the greater of seventy -
five percent (75%) of such benefits or Ten Thousand Dollars
($10,000.00) shall be exempt from taxable income but in no case less
than the amount of the exemption provided by paragrap h 13 of this
subsection. For tax year 2022 and subsequent 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.
18. For taxable years beginning after Dece mber 31, 2006,
retirement benefits received by federal civil service retirees,
including survivor annuities, paid in lieu of Social Security
benefits shall be exempt from taxable income to the extent such
benefits are included in the federal adjusted gross income pursuant
to the provisions of Section 86 of the Internal Revenue Code, 26
U.S.C., Section 86, 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 January 1, 2008, forty
percent (40%) of such benefits sha ll be exempt,
c. in the taxable year beginning January 1, 2009, sixty
percent (60%) of such benefits shall be exempt,
d. in the taxable year beginning January 1, 2010, eighty
percent (80%) of such benefits shall be exempt, and
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e. in the taxable year beginning January 1, 2011, and
subsequent taxable years, one hundred percent (100%)
of such benefits shall be exempt.
19. a. For taxable years beginning after December 31, 2007, a
resident individual may deduct up to Ten Thousand
Dollars ($10,000.00) from Oklaho ma adjusted gross
income if the individual, or the dependent of the
individual, while living, donates one or more human
organs of the individual to another human being for
human organ transplantation. As used in this
paragraph, "human organ" means all or part of a liver,
pancreas, kidney, intestine, lung, or bone marrow. A
deduction that is claimed under this paragraph may be
claimed in the taxable year in which the human organ
transplantation occurs.
b. An individual may claim this deduction only once, a nd
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 Commis sion shall promulgate rules to
implement the provisions of this paragraph which shall
contain a specific list of expenses which may be
presumed to qualify for the deduction. The Tax
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Commission shall prescribe necessary requirements for
verification.
20. For taxable years beginning after December 31, 2009, there
shall be exempt from taxable income any amount received by the
beneficiary of the death benefit for an emergency medical technician
or a registered emergency medical responder provided by Section 1 -
2505.1 of Title 63 of the Oklahoma Statutes.
21. For taxable years beginning after December 31, 2008,
taxable income shall be increased by any unemployment compensation
exempted under Section 85(c) of the Internal Revenue Code, 26
U.S.C., Section 85(c)(2 009).
22. For taxable years beginning after December 31, 2008, there
shall be exempt from taxable income any payment in an amount less
than Six Hundred Dollars ($600.00) received by a person as an award
for participation in a competitive livestock show ev ent. 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.
23. For taxable years beginning on or after January 1, 2016,
taxable income shall be increa sed by any amount of state and local
sales or income taxes deducted under 26 U.S.C., Section 164 of the
Internal Revenue Code. If the amount of state and local taxes
deducted on the federal return is limited, taxable income on the
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state return shall be increased only by the amount actually deducted
after any such limitations are applied.
24. For taxable years beginning after December 31, 2020, each
taxpayer shall be allowed a de duction for contributions to accounts
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 not exceed Ten Thousand Dollars
($10,000.00) for an individual taxpayer or Twenty Thousand Dollars
($20,000.00) for taxpayers filing a joint return. Any amount of
contribution not deducted by the taxpayer in the tax year for which
the contribution is made may be carried forward as a deduction from
income for up to five (5) tax years. Deductions may be taken for
contributions made during the tax year and through April 15 of the
succeeding tax year, or through the due date of a taxpayer 's state
income tax return excluding extensions, whichever is later.
Provided, a deduction for the same contribution may not be taken in
more than one (1) tax year.
F. 1. For taxable years beginning after December 31, 2004, a
deduction from the Oklahoma adjusted gr oss income of any individual
taxpayer shall be allowed for qualifying gains re ceiving capital
treatment that are included in the federal adjusted gross income of
such individual taxpayer during the taxable year.
2. As used in this subsection:
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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 tang ible personal
property located within Oklahoma 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 interest 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 o f
at least two (2) years prior to the date of the
transaction from which the n et capital gains
arise, or
(3) the sale of real property, tangible personal
property or intangible personal property located
within Oklahoma as part of the sale of all or
substantially all of the assets of an Oklahoma
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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 own ers of
such entity or business enterprise for a period
of at least two (2) yea rs 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 a dditional
period when the property was held by another
individual or entity, if such additional period is
included in the taxpayer 's holding period for the
asset pursuant to the Internal Revenue Code,
c. "Oklahoma company," "limited liability company, " or
"partnership" means an entity whose primary
headquarters have been located in Oklahoma for at
least three (3) uninterrupted years prior to the date
of the transaction from which the net capital gains
arise,
d. "direct" means the individual taxpayer directl y owns
the asset,
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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, the deduction described in this
subsection shall not apply unless the pass -
through entity that makes the sale has held the
property for not less than five (5) uninterrupted
years prior to the date of the transaction that
created the capital gain, and each pass -through
entity included in the chain of ownership has
been a member, partner, or shareholder of the
pass-through entity in the tier immediately below
it for an uninterrupted perio d of not less than
five (5) years.
(2) With respect to sales of stock or owner ship
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
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sale has held the stock or ownership interest for
not less than two (2) uninterrupted years prior
to the date of the transaction that created the
capital gain, and each pass -through entity
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 thi s 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 for at least thre e (3)
uninterrupted years prior to the date of the
transaction from which the net capital gains arise.
G. 1. For purposes of computing its Oklahoma taxable income
under this section, the dividends -paid deduction otherwise allowed
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by federal law in comput ing net income of a real estate investment
trust that is subject to federal in come 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 " means
a real estate investment trust, the shares or
beneficial interests of which are not regularly traded
on an established securities market and more than
fifty percent (50%) of the voting power or value of
the beneficial interests or shares of which are owned
or controlled, directly or indirectly, or
constructively, by a single entity that is:
(1) treated as an association taxable as a
corporation under the Internal Revenue Code, and
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(2) not exempt from federal income tax pursuant to
the provisions of Section 501(a) of the Internal
Revenue Code.
The term shall not include a real estate investment
trust that is intended to be 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 reason 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 other than a
"captive real estate investment trust ",
(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",
(3) any Listed Australian Property Trust (meaning an
Australian unit trust registered as a "Managed
Investment Scheme" under the Australian
Corporations Act in which the principal class of
units is listed on a recognized stock exchange in
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Australia and is regularly traded on an
established securities market), or an entity
organized as a trust, provided that a Listed
Australian Property Trust owns or controls,
directly or indirectly, seventy -five percent
(75%) or more of the voting power or value of the
beneficial interests or shares of such trust , or
(4) any Qualified Foreign Entity, meaning a
corporation, trust, associati on 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 divide nd-paid
deduction comparable to Section 561 of the
Internal Revenue Code, or is exempt from
entity level tax,
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(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 indivi dual, 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.
4. A real estate investment trus t 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 have been regularly traded on an
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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 p urposes 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. This act shall become effective January 1, 2026.
60-1-10214 MAH 01/13/25