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ENGROSSED HOUSE
BILL NO. 2745 By: Caldwell (Trey) of the
House
and
Pugh of the Senate
[ revenue and taxation - banking privilege taxation –
references - additional treatment of tax -
deductions - eligibility - annual cap - effective
date ]
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 2370, is
amended to read as follows:
Section 2370. A. For taxable years beginning after December
31, 2021, for the privilege of d oing business within this state,
every state banking association, national banking association and
credit union organized under the laws of this state, located or
doing business within the limits of the State of Oklahoma this state
shall annually pay to th is state a privilege tax at the rate of four
percent (4%) of the amount of the taxable income as provided in this
section.
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B. 1. The privilege tax levied by this section shall be in
addition to the Business Activity Tax levied in Section 1218 of this
title and the franchise tax levied in Article 12 of this title and
in lieu of the tax levied by Section 2355 of this title and in lieu
of all taxes levied by the State of Oklahoma this state, or any
subdivision thereof, upon the shares of stock or personal pr operty
of any banking association or credit union subject to taxation under
this section.
2. Nothing in this section shall be construed to exempt the
real property of any banking associations or credit unions from
taxation to the same extent, according to its value, as other real
property is taxed. Nothing herein shall be construed to exempt an
association from payment of any fee or tax authorized or levied
pursuant to the banking laws.
3. Personal property which is subject to a lease agreement
between a bank or credit union, as lessor, and a nonbanking business
entity or individual, as lessee, is not exempt from personal
property ad valorem taxation. Provided further, that it shall be
the duty of the lessee of such personal property to return sworn
lists or schedules of their the lessee's taxable property within
each county to the county assessor of such county as provided in
Sections 2433 and 2434 of this title the Ad Valorem Tax Code .
C. Any tax levied under this section shall accrue on the last
day of the taxable year and be payable as provided in Section 2375
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of this title. The accrual of such tax for the first taxable year
to which this act applies, 1971 shall apply notwithstanding the
prior accrual of a tax in the same taxable year based upon the net
income of the next preceding taxable year; provided, however, any
additional deduction enuring inuring to the benefit of the taxpayer
shall be deducted in accordance with the optional transitional
deduction procedures in Section 2354 of this title.
D. The basis of the tax shall be United States taxable income
as defined in paragraph 10 of Section 2353 of this title and any
adjustments thereto under the provisions of Section 2358 of this
title with the following adjustments:
1. There shall be deducted all interest income on obligations
of the United States government and agencies thereof not otherwise
exempted and all interest income on obligations of the State of
Oklahoma this state or political subdivisions thereof, including
public trust authorities, not otherwise exempted under the laws of
this state; and
2. Expense deductions claimed in arriving at taxable income
under paragraph 10 of Section 2353 of this title shall be reduced by
an amount equal to fifty percent (50%) of excluded interest income
on obligations of the United States government or agencies thereof
and obligations of the State of Oklahoma this state or political
subdivisions thereof.
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E. 1. Except as otherwise provided in paragraph 2 of this
subsection, before January 1, 2017, there s hall be allowed a credit
against the tax levied in subsection A of this section in an amount
equal to the amount of taxable income received by a participating
financial institution as defined in Section 90.2 of Title 62 of the
Oklahoma Statutes pursuant to a loan made under the Rural Economic
Development Loan Act. Such credit shall be limited each year to
five percent (5%) of the amount of annual payroll certified by the
Oklahoma Rural Economic Development Loan Program Review Board
pursuant to the provisio ns of paragraph 3 of subsection B of Section
90.4 of Title 62 of the Oklahoma Statutes with respect to the loan
made by the participating financial institution and may be claimed
for any number of years necessary until the amount of total credits
claimed is equal to the total amount of taxable income received by
the participating financial institution pursuant to the loan. Any
credit allowed but not used in a taxable year may be carried forward
for a period not to exceed five (5) taxable years. In no even t
shall a credit allowed pursuant to the provisions of this subsection
be transferable or refundable.
2. No credit otherwise authorized by the provisions of this
subsection may be claimed for any event, transaction, investment,
expenditure or other act oc curring on or after July 1, 2010, for
which the credit would otherwise be allowable. The provisions of
this paragraph shall cease to be operative on July 1, 2012.
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Beginning July 1, 2012, the credit authorized by this subsection may
be claimed for any eve nt, transaction, investment, expenditure or
other act occurring on or after July 1, 2012, according to the
provisions of this subsection.
F. 1. For tax year 2025 and subsequent tax years, national
banking associations, state banks, trust companies, savin gs and loan
associations, and other lending institutions organized under the
laws of this state and whose main office is located in this state
shall be allowed as a de duction from net income the net interest
income received from qualified agricultural real estate loans
attributed to this state, net interest income received from
agricultural operating loans attributed to this state, and net
interest income received from single -family residence loans
attributed to this state, as defined in this subsection, to the
extent such interest is included in the Oklahoma taxable income of a
corporation.
2. The deduction authorized by this subsection may be claimed
for interest earned on eligible loans made after December 31, 2024 ,
and before January 1, 2028.
3. Financial institutions with Oklahoma -based deposits of more
than Seven Hundred Fifty Million Dollars ($750,000,000.00) shall be
entitled to no more than Five Hundred Thousand Dollars ($500,000.00)
per institution in deductible interest earned over a three -year
period under the provisions of this section. Financial institutions
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with Oklahoma-based deposits of Seven Hundred Fifty Million Dollars
($750,000,000.00) or less shall be entitled to no more than Two
Hundred Fifty Thousand Dollars ($250,000.00) per institu tion in
deductible interest earned over a three -year period under the
provisions of this section .
4. For tax year 2027 and subsequent tax years, the total amount
of deductions authorized by this subsection shall be adjusted
annually to limit the annual am ount of deductions to Five Million
Dollars ($5,000,000.00). The Oklahoma Tax Commission shall annually
calculate and publish a percentage by which the deductions
authorized by this subsection shall be reduced so the total amount
of deductions does not exc eed Five Million Dollars ($5,000,000.00)
per tax year. The formula to be used for the percentage adjustment
shall be Five Million Dollars ($5,000,000.00) divided by the amount
of deductions claimed in the second preceding tax year. In the
event the total deductions authorized by this subsection exceed Five
Million Dollars ($5,000,000.00) in any tax year, the Commission
shall permit any excess, but shall factor such excess into the
percentage adjustment formula for subsequent tax years.
5. As used in this subsection:
a. "interest" means interest on an indebtedness
attributed to this state and incurred in the ordinary
course of the active conduct of any business and
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interest on indebtedness incurred that is secured by a
single-family residence,
b. "qualified agricultural real estate loans " means loans
made on real property that are substantially used for
the production of one or more agricultural products ,
and:
(1) have maturities of not less than five (5) years
and not more than forty (40) years,
(2) are secured by a first lien interest in real
estate, except that the loans may be secured by a
second lien interest if the institution also
holds the first lien on the real property, and
(3) have an outstanding loan balance, which when
made, is less than eighty -five percent (85%) of
the appraised value of the real estate, except
loans for which private mortgage insurance is
obtained may exceed eighty -five percent (85%) of
the appraised value of the real estate to the
extent a loan amount in excess of eighty -five
percent (85%) is covered by such insurance,
c. "agriculture operating loans " means loans made for the
purpose of:
(1) the purchase, care, feeding, or refinancing of
livestock or poultry,
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(2) purchasing seed, and
(3) the purchase and maintenance of equipmen t, which
shall include, but is not limited to, fences,
barns, sheds, tractors, combines, and vehicles,
d. "single-family residence" means a residence that:
(1) is the principal residence of its occupant,
(2) is located in this state, in a rural area that i s
not within the city limits of a town with a
population of five thousand (5,000) or more as
determined according to the most recent Federal
Decennial Census for which data is available, and
(3) is purchased or improved with the proceeds of the
loan,
e. "net interest income received from qualified
agricultural real estate loans attributed to the
state" means the product of the ratio of the interest
income earned on qualified agricultural real estate
loans over total interest income earned, in relation
to the net income of the national banking association,
state bank, trust company, savings and loan
association, or other lending institution without
regard to this deduction,
f. "net interest income received from agricultural
operating loans attributed to this state" means the
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product of the ratio of the interest income earned on
agricultural operating loans over total interest
income earned, in relation to the net income of the
national banking association, state bank, trust
company, savings and loan associatio n, or other
lending institution without regard to this deduction,
and
g. "net interest income received from single -family
residence loans attributed to this state " means the
product of the ratio of the interest income earned on
single-family residence loan s over total interest
income earned, in relation to the net income of the
national banking association, state bank, trust
company, savings and loan association, or other
lending institution without regard to this deduction.
SECTION 2. This act shall become effective November 1, 2025.
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Passed the House of Representatives the 25th day of March, 2025.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2025.
Presiding Officer of the Sen ate