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STATE OF OKLAHOMA
1st Session of the 60th Legislature (2025)
SENATE BILL 227 By: Daniels
AS INTRODUCED
An Act relating to taxation; stating intent; amending
68 O.S. 2021, Section 1001.3a, as amended by Section
9, Chapter 346, O.S.L. 2022 ( 68 O.S. Supp. 2024,
Section 1001.3a), which relates to exemptions from
gross production tax; limiting exemption to certain
years; 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 income tax; modifying certain
income tax rate for certain tax years; modifying
certain withholding requirement for certain tax
years; amending 68 O.S. 2021, Section 2357.4, which
relates to tax credit for invest ments; limiting
credit to certain tax years; 68 O.S. 2021, Section
2357.43, which relates to the Oklahoma earned income
tax credit; limiting refundability of credit to
certain tax years; 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 adjustments; modifying amount of deduction
for qualifying gains receiving capital treatment for
certain tax years; modifying standard deduction
amount for certain tax years; amending 68 O.S. 2021,
Section 5011, which relates to the Sales Tax Relief
Act; limiting claims to certain years; updating
statutory references; updating statutory language;
clarifying statutory language; providing for
noncodificaton; providing an effective da te; and
declaring an emergency .
BE IT ENACTED BY THE PEOPLE OF TH E STATE OF OKLAHOMA:
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SECTION 1. NEW LAW A new section of law not to be
codified in the Oklahoma Statutes reads as follows:
It is the intent of the Legisla ture that the following
limitations and modifications to tax credits and deductions in this
act serve to mitigate the short-term decrease in collections caused
by reducing the burden on the taxpayers of this state.
SECTION 2. AMENDATORY 68 O.S. 2021, Section 1001.3a, as
amended by Section 9, Chapter 346, O. S.L. 2022 (68 O.S. Supp. 2024,
Section 1001.3a), is amended to read as follows:
Section 1001.3a. A. As used in this section:
1. Prior to January 1, 2015, “economically at-risk oil or gas
lease” means any oil or gas lease operated at a net loss or at a net
profit which is less than the total gross production tax remitted
for such lease during the previous calendar year;
2. On or after January 1, 2015, and before January 1, 2022 ,
“economically at-risk oil or gas lease ” means any oil or gas lease
with one or more producing wells with an average production volume
per well of ten (10) barrels of oil or sixty (60) MCF of natural gas
per day or less operated at a net loss or at a net profit which is
less than the total gross production tax remitted for such lease
during the previous calendar year;
3. For calendar year 2022 and subsequent calendar years 2022
through 2024, “economically at-risk oil or gas lease ” means any oil
or gas lease with one or more producing wells with an average
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production volume per well of ten (10) barrels of oil or sixty (60)
MCF or less of natural gas per day operated at a net loss or at a
net profit which is less than the total gross production tax
remitted for such lease during the previous calendar year, and any
oil lease operating while the gross value of the production of oil
is less than Fifty Dollars ($50.00), on an average monthly basis,
based on a per-barrel measurement of forty -two (42) U.S. gallons of
two hundred thirty-one (231) cubic inches per gallon, computed at a
temperature of sixty (60) degrees Fahrenheit or gas lease operating
while the gross value of the production of gas is less than Three
Dollars and fifty cents ($3.50), on an average mont hly basis, based
on a measurement of one million (1,000,000) British thermal units
(MMBtu); and
4. “Lease” shall be defined as in Section 1001.2 of this title.
B. When certified as such pursuant to the provisions of this
section, production from an econo mically at-risk oil or gas lease
shall be eligible for an exemption from the g ross production tax
levied pursuant to subsection B of Section 1001 of this title for
production on such lease during the previous calendar year in the
following amounts:
1. If the gross production tax rate levied pursuant to
subsection B of Section 1001 of this title was seven percent (7%),
then the exemption shall equal six -sevenths (6/7) of the gross
production tax levied; and
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2. If the gross production tax rate levied pursua nt to
subsection B of Section 1001 of this title was five percent (5%),
then the exemption shall equal four -fifths (4/5) of the gross
production tax levied.
C. For all production exempt from gross production taxes
pursuant to this section, a refund of gro ss production taxes paid
for production in the previous calendar year in the amounts
specified in subsection B of this section, subject to the
limitations and provisions specified in subsections D and J of this
section, shall be issued to the well operator or a designee. For
production in calendar years ending on or before December 31, 2015,
the refund shall not be claimed until after July 1 of the year
following the year of production. For production in the calendar
year ending December 31, 2016, the ref und shall be claimed before
July 1, 2017. For production in the calendar year 2024, the refund
shall be claimed on or before the effective date of this act . The
Oklahoma Tax Commission shall not accept or pay any claim for refund
filed after the effective date of this act.
D. For oil and natural gas produced from qualifying lease s in
calendar years 2015 and 2016, the total amount of refunds authorized
in this section for each calendar year shall not exceed Twelve
Million Five Hundred Thousand Dollars ($1 2,500,000.00) for all
products combined. For oil and natural gas produced from qualifying
leases in calendar year 2022 and subsequent calendar years 2022
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through 2024, the total amount of refunds authorized in this section
for each calendar year shall not exceed Ten Million Dollars
($10,000,000.00) for all products combined. If th e amount of claims
exceeds the limits provided in this subsection, the Tax Commission
shall determine the percentage of the refund which establishes the
proportionate share of th e refund which may be claimed by any
taxpayer so that the maximum amount authorized by this subsection is
not exceeded.
E. Any operator making application for an economically at -risk
oil or gas lease status under the provisions of this section shall
submit documentation to the Tax Commission, as determined by the Tax
Commission to be appropriate and necessary.
F. For the purposes of this section, determination of the
economically at-risk oil or gas lease status shall be made by
subtracting from the gross revenue of that lease for the previous
calendar year severance taxes, if any, royalty, operating expenses
of the lease to include expendable workover and recompletion costs
for the previous calendar year, and including overhead costs up to
the maximum overhead percentage allowed by the Council of Petroleum
Accountants Societies (COP AS) guidelines. For the purposes of this
calculation, depreciation, depletion or intangible drilling costs
shall not be included as lease operating expenses.
G. The Tax Commission shall have sole authority to determine if
an oil or gas lease qualifies for certification as an economically
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at-risk oil or gas lease. The Tax Commission shall promulgate rules
governing the certification process.
H. Except as provided in subsection I of this section, gross
production tax exemptions under the provisions of thi s section shall
be limited to production from calendar years 2005 through 2013 and
2022 and subsequent calendar years 2022 through 2024; provided, no
claims for refunds for calen dar years 2013 and before shall be paid
on or after December 31, 2015.
I. Gross production tax exemptions claimed under the provisions
of this section shall be limited to production from calendar years
2014, 2015 and 2016; provided, no claims for refunds for the
calendar years 2014 and 2015 shall be claimed or paid more than
eighteen (18) months after the first day of the fiscal year during
which the refund is first available. For production in calendar
year 2016, no claim for refund filed on or after Jul y 1, 2017, shall
be claimed or paid.
J. Claims for refunds pursuant to the provisions of this
section for production periods ending on or before December 31,
2016, shall be paid pursuant to the provisions of this subsection.
The claims for refunds refere nced herein shall be paid in equal
payments over a period of thirty -six (36) months. The first payment
shall be made after July 1, 2018, but prior to August 1, 2018. The
Tax Commission shall provide, not later than June 30, 2018, to the
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operator or designated interest owner, a schedule of rebates to be
paid out over the thirty -six-month period.
K. Claims for refunds pursuant to the provisions of this
section for production periods beginning and ending on or after
calendar year 2022 in calendar years 2022 through 2024 shall be paid
in the form of a one -time payment.
SECTION 3. 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 foll owing methods:
1. METHOD 1.
a. Single individuals and married individuals filing
separately not deducting federal income tax:
(1) 1/2% tax on first $1,000.00 or part thereof,
(2) 1% tax on next $1,500.00 or part thereof,
(3) 2% tax on next $1,250.00 or part thereof,
(4) 3% tax on next $1,150.00 or part thereof,
(5) 4% tax on next $1,300.00 or part thereof,
(6) 5% tax on next $1,500.00 or part thereof,
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(7) 6% tax on next $2,300.00 or part thereof, and
(8) (a) for taxable years beginning after December
31, 1998, and before January 1, 2002, 6.75%
tax on the remainder,
(b) for taxable years beginning on 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 manner that a
surviving spouse is permitted to file a joint return
under the provisions of the Internal Revenue Code of
1986, as amended, and heads of household s as defined
in the Internal Revenue Code of 1986, as amended, not
deducting federal income tax:
(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 part thereof,
(6) 5% tax on next $2,800.00 or part thereof,
(7) 6% tax on next $6,000.00 or part thereof, and
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(8) (a) for taxable years beginning after December
31, 1998, and before January 1, 200 2, 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 beginni ng 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 th ereof,
(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 thereof,
(6) 5% tax on next $1,400.00 or part thereof,
(7) 6% tax on next $1,500.00 or part thereof,
(8) 7% tax on next $1,500.00 or part thereof,
(9) 8% tax on next $2,000.00 or part thereof,
(10) 9% tax on next $3,500.00 or part thereof, and
(11) 10% tax on the remainder.
b. Married individuals filing jointly and surviving
spouse to the extent and in the manner that a
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surviving spouse is permitted to file a joint return
under the provisions of the Internal Revenue Code of
1986, as amended, and heads of households as defined
in the Internal Revenue Code of 1986, as amended,
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
31, 2015, for which the determination required pursuant to Sections
4 2355.1F and 5 2355.1G of this act title is made by the State Board
of Equalization, a tax is hereby imposed upon the Oklahoma taxable
income of every resident or nonresident individual, which tax shall
be computed as follows:
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1. Single individuals and 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 par t 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 remainder for the 2009 and subsequent
tax years. The decrea se 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 Section 2355.1A of this
title.
2. Married individuals filing jointly and surviving spouse to
the extent and in the manner that a su rviving spouse is permitted to
file a joint return under the provisions of the Internal Revenue
Code of 1986, as amended, and heads of households as defined in the
Internal Revenue Code of 1986, as amended:
(a) 1/2% tax on first $2,000.00 or part thereof,
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(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 the reof,
(f) 5% tax on next $2,800.00 or part thereof,
(g) 5.50% tax on the remai nder 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 remainder for the 2 009 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 Section 2355. 1A of this
title.
C. Individuals. For all taxable years beginning on or afte r
January 1, 2024 tax year 2024, a tax is hereby imposed upon the
Oklahoma taxable income of every resident or nonresident individual,
which tax shall be computed as follows:
1. Single individuals and married individuals filing
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,
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(d) 2.75% tax on next $1,150.00 or part there of,
(e) 3.75% tax on next $2,300.00 or part thereof, and
(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 provi sions of the Internal Revenue
Code of 1986, as amended, and heads of households as defined in the
Internal Revenue Code of 1986, as amended:
(a) 0.25% tax on first $2,000.00 or part thereof,
(b) 0.75% tax on next $3,000.00 or part thereof,
(c) 1.75% tax on next $2,500.00 or part thereof,
(d) 2.75% tax on next $2,300.00 or part there of,
(e) 3.75% tax on next $4,600.00 or part thereof, and
(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.
D. Individuals. For tax year 2025 and subsequent tax years, 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 i ndividuals filing
separately:
(a) 0.0% tax on first $1,000.00 or part thereof,
(b) 0.25% tax on next $1,500.00 or part thereof,
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(c) 1.25% tax on next $1,250.00 or part thereof,
(d) 2.25% tax on next $1,150.00 or part thereof,
(e) 3.25% tax on the next $2,300.00 or part thereof, and
(f) 4.25% 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 of 1986, as amended, and heads of households as defined in the
Internal Revenue Code of 1986, as amended:
(a) 0.0% tax on first $2,000.00 or part thereof,
(b) 0.25% tax on next $3,000.00 or part thereof,
(c) 1.25% tax on next $2,500.00 or part thereof ,
(d) 2.25% tax on next $2,300.00 or part thereof,
(e) 3.25% tax on the next $4,600.00 or part thereof, and
(f) 4.25% on the remainder.
No deduction for federal income taxes paid shall be allowed to
any taxpayer to arrive at taxable income.
E. Nonresident aliens. In lieu of the rates set forth in
subsection A above, there shall be imposed on nonresident aliens, as
defined in the Internal Revenue Code of 1986, as amended, a tax of
eight percent (8%) instead of thirty percent (30%) as used in the
Internal Revenue Code of 1986, as amended, with respect to the
Oklahoma taxable income of such nonresident aliens as determined
under the provision of the Oklahoma Income Tax Act.
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Every payer of amounts covered by this subsection shall deduct
and withhold from such amounts paid each payee an amount equal to
eight percent (8%) 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 Oklahoma 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 th e Tax Commission any
sums herein required to be withheld or paid shall be pers onally 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 Oklahoma taxable
income of every corporation doing business within this state or
deriving income from sources within this state in an amount equal to
four percent (4%) thereof.
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There shall be no additional Oklahoma income tax imposed on
accumulated taxable income or on undistributed personal holding
company income as those terms are defined in the Internal Revenue
Code of 1986, as amended.
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 of 1986, as amended, a tax of four percent (4%) instead of
thirty percent (30%) as used in the Internal Rev enue Code of 1986,
as amended, where such income is received from sources with in
Oklahoma this state, in accordance with the provisions of the
Internal Revenue Code of 1986, as amended, and the Oklahoma Income
Tax Act.
Every payer of amounts covered by thi s 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 amounts paid to
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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
payer who fails to withhold or pay to the Tax Commission any sums
herein required to be withheld or paid 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 subsections B through D of this
section for single individuals. Fiduciaries are not allowed a
deduction for any federal income tax paid.
H. I. Tax rate tables. For all t axable years beginning after
December 31, 1991, in lieu of the tax imposed by subsection A, B or
C subsections A through 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 determ ined under tables, applicable
to such taxable year which shall be prescribed by the Tax Commission
and which shall be in such form as it determines 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
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subsections A through 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 suc h taxpayer falls.
SECTION 4. AMENDATORY 68 O.S. 2021, Section 2357.4, is
amended to read as follows:
Section 2357.4. A. Except as otherwise provided i n subsection
F of Section 3658 of this title and in subsections J and K of this
section, for taxable years beginning after December 31, 1987 tax
years 1988 through 2024 , there shall be allowed a credit against the
tax imposed by Section 2355 of this title for:
1. Investment in qualified depreciable property placed in
service during those years for use in a manufacturing operation, as
defined in Section 1352 of this title, which has received a
manufacturer exemption permit pursuant to the provisions of Sect ion
1359.2 of this title or a qualified aircraft maintenance or
manufacturing facility as defined in Section 1357 of this title in
this state or a qualified web search portal as defined in Section
1357 of this title; or
2. A net increase in the number of full-time-equivalent
employees in a manufacturing operation, as defined in Sec tion 1352
of this title, which has received a manufacturer exemption permit
pursuant to the provisions of Section 1359.2 of this title or a
qualified aircraft maintenance or manu facturing facility defined in
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Section 1357 of this title in this state or in a qualified web
search portal as defined in Section 1357 of this title including
employees engaged in support services.
B. Except as otherwise provided in subsection F of Section 3658
of this title and in subsections J and K of this section, for
taxable years beginning after December 31, 1998 tax years 1999
through 2024, there shall be allowed a credit against the tax
imposed by Section 2355 of this title for:
1. Investment in qu alified depreciable property with a total
cost equal to or greater than Forty Million Dollars ($40,000,000.00)
within three (3) years from the date of initial qualifying
expenditure and placed in service in this state during those years
for use in the manufacture of products described by any Industry
Number contained in Division D o f Part I of the Standard Industrial
Classification (SIC) Manual, latest revision; or
2. A net increase in the number of full -time-equivalent
employees in this state engaged in t he manufacture of any goods
identified by any Industry Number contained in Division D of Part I
of the Standard Industrial Classification (SIC) Manual, latest
revision, if the total cost of qualified depreciable property placed
in service by the business e ntity within the state equals or exceeds
Forty Million Dollars ($40,000,000.00 ) within three (3) years from
the date of initial qualifying expenditure.
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C. The business entity may claim the credit authorized by
subsection B of this section for expenditures incurred or for a net
increase in the number of full -time-equivalent employees after the
business entity provides proof satisfactory to the Oklahoma Tax
Commission that the conditions imposed pursuant to paragraph 1 or
paragraph 2 of subsection B of this section have been satisfied.
D. If a business entity fails to expend the amou nt required by
paragraph 1 or paragraph 2 of subsection B of this section within
the time required, the business entity may not claim the credit
authorized by subsection B of thi s section but shall be allowed to
claim a credit pursuant to subsection A of this section if the
requirements of subsection A of this section are met with respect to
the investment in qualified depreciable property or net increase in
the number of full-time-equivalent employees.
E. The credit provided for in subsection A of this se ction, if
based upon investment in qualified depreciable property, shall not
be allowed unless the investment in qualified depreciable property
is at least Fifty Thousand Dollars ($50,000.00). The credit
provided for in subsection A or B of this section shall not be
allowed if the applicable investment is the direct cause of a
decrease in the number of full -time-equivalent employees. Qualified
property shall be limited to machin ery, fixtures, equipment,
buildings or substantial improvements thereto, place d in service in
this state during the taxable year. The taxable years for which the
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credit may be allowed if based upon investment in qualified
depreciable property shall be mea sured from the year in which the
qualified property is placed in service. If the credit provided for
in subsection A or B of this section is calculated on the basis of
the cost of the qualified property, the credit shall be allowed in
each of the four (4) subsequent years. If the qualified property on
which a credit has previously been allowed is acquired from a
related party, the date such property is placed in service by the
transferor shall be considered to be the date such property is
placed in service by the transferee, for purposes of determining the
aggregate number of years for which credit may be allowed.
F. The credit provided for in subsection A or B of this
section, if based upon an increase in the number of full -time-
equivalent employees, sha ll be allowed in each of the four (4)
subsequent years only if the level of ne w employees is maintained in
the subsequent year. In calculating the credit by the number of new
employees, only those employees whose paid wages or salary were at
least Seven Thousand Dollars ($7,000.00) during each year the credit
is claimed shall be included in the calculation. Provided, that the
first year a credit is claimed for a new employee, such employee may
be included in the calculation notwithstanding paid wages of l ess
than Seven Thousand Dollars ($7,000.00) if the employee was hired in
the last three quarters of the tax year, has wages or salary which
will result in annual paid wages in excess of Seven Thousand Dollars
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($7,000.00) and the taxpayer submits an affidav it stating that the
employee’s position will be retained in the following tax year and
will result in the payment of wages in excess of Seven Thousand
Dollars ($7,000.00). The number of new employees shall be
determined by comparing the monthly average nu mber of full-time
employees subject to Oklahoma income tax withholding for the final
quarter of the taxable year with the corresponding period of the
prior taxable year, as substantiated by such reports as may be
required by the Tax Commission.
G. The credit allowed by subsection A of this section shall be
the greater amount of either:
1. One percent (1%) of the cost of the qualified property in
the year the property is placed in service; or
2. Five Hundred Dollars ($500.00) for each new employee. No
credit shall be allowed in any taxable year for a net increase in
the number of full-time-equivalent employees if such increase is a
result of an investment in qualified depreciable property for which
an income tax credit has been allowed as authorized by th is section.
H. The credit allowed by subsection B of this section shall be
the greater amount of either:
1. Two percent (2%) of the cost of the qualified property in
the year the property is placed in service; or
2. One Thousand Dollars ($1,000.00) for each new employee.
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No credit shall be allowed in any taxable year for a net
increase in the number of full -time-equivalent employees if such
increase is a result of an investment in qualified depreciable
property for which an income tax credit has been all owed as
authorized by this section.
I. Except as provided by subsection G of Section 3658 of this
title, any credits allowed but not used in any taxable year may be
carried over in order as follows:
1. To each of the four (4) years following the year of
qualification;
2. To the extent not used in those years in order to each of
the fifteen (15) years following the initial five -year period;
3. If a C corporation that otherwise qualified for the credits
under subsection A of this section subsequently chan ges its
operating status to that of a pass -through entity which is being
treated as the same entity for federal tax purposes, the credits
will continue to be available as if the pass -through entity had
originally qualified for the credits subject to the li mitations of
this section;
4. To the extent not used in paragraphs 1 and 2 of this
subsection, such credits from qualified depreciable property placed
in service on or after January 1, 2000, may be utilized in any
subsequent tax years after the initial tw enty-year period; and
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5. Provided, for tax years beginning on or after January 1,
2016, and ending on or before December 31, 2018, the amount of
credits available as an offset in a taxable year shall be limited to
the percentage calculated by the Tax Comm ission pursuant to the
provisions of subsection L of this section.
J. No credit otherwise authorized by the provisions of this
section may be claimed for any event, transaction, investment,
expenditure or other act occurring on or after July 1, 2010, for
which the credit would otherwise be allowable until the provisions
of this subsection shall cease to be operative on July 1, 2012.
Beginning July 1, 2012, the credit authorized by this section may be
claimed for any event, transaction, investment, expendi ture or other
act occurring on or after July 1, 2010, according to the provisi ons
of this section; provided, credits accrued during the period from
July 1, 2010, through June 30, 2012, shall be limited to a period of
two (2) taxable years. The credit shal l be limited in each taxable
year to fifty percent (50%) of the total amount of the accrued
credit. Any tax credits which accrue during the period of July 1,
2010, through June 30, 2012, may not be claimed for any period prior
to the taxable year beginnin g January 1, 2012. No credits which
accrue during the period of July 1, 2010, through June 30, 2012, may
be used to file an amended tax return for any taxable year prior to
the taxable year beginning January 1, 2012.
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K. Beginning January 1, 2017, except with respect to tax
credits allowed from investment or job creation occurring prior to
January 1, 2017, the credits authorized by this section shall not be
allowed for investment or job creation in electric power generation
by means of wind as described by the North American Industry
Classification System, No. 221119 221115.
L. For tax years beginning on or after January 1, 2016, and
ending on or before December 31, 2018, the total amount of credits
authorized by this section used to offset tax shall be ad justed
annually to limit the annual amount of credits to Twenty -five
Million Dollars ($25,000,000.00). The Tax Commission shall annually
calculate and publish a percentage by which the credits authorized
by this section shall be reduced so the total amoun t of credits used
to offset tax does not exceed Twenty -five Million Dollars
($25,000,000.00) per year. The formula to be used for the
percentage adjustment shall be Twenty -five Million Dollars
($25,000,000.00) divided by the credits used to offset tax in the
second preceding year.
M. Pursuant to subsection L of this section, in the event the
total tax credits authorized by this section exceed Twenty -five
Million Dollars ($25,000,000.00) in any calendar year, the Tax
Commission shall permit any excess over Twenty-five Million Dollars
($25,000,000.00) but shall factor such excess int o the percentage
adjustment formula for subsequent years.
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SECTION 5. AMENDATORY 68 O.S. 2021, Section 2357.43, is
amended to read as follows:
Section 2357.43. For tax years beginning on or after January 1,
2022, there shall be allowed to a resident individual or a part -year
resident individual as a credit against the tax imposed by Section
2355 of this title five percent (5%) of the earned income tax cre dit
allowed under Section 32 of the Internal Revenue Code of the United
States 1986, as amended, 26 U.S.C., Section 32, which for the
taxable year beginning January 1, 2022, and the taxable year
beginning each January 1 thereafter shall be computed using t he same
requirements, other than the five percent (5%) amount to compute the
credit as prescribed by this section which shall remain constant, in
effect for computation of the earned income tax credit for federal
income tax purposes for the 2020 income tax year. However, this
credit shall not be paid in advance pursuant to the prov isions of
Section 3507 of the Internal Revenue Code of 1986, as amended. For
tax years which begin on or after January 1, 2022 2022 through 2024,
if the credit exceeds the tax i mposed by Section 2355 of this title,
the excess amount shall be refunded to the taxpayer. For tax year
2025 and subsequent tax years, the credit allowed pursuant to this
section shall not be used to reduce the income tax liability of the
taxpayer to less than zero (0). The maximum earned income tax
credit allowable on the Oklahom a income tax return shall be prorated
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on the ratio that Oklahoma adjusted gross income bears to the
federal adjusted gross income.
SECTION 6. 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:
Section 2358. For all tax years beginning after December 31,
1981, taxable income and adjusted gross i ncome shall be adjusted to
arrive at Oklahoma taxable income and Oklahoma adju sted 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 income for individuals, as follows:
1. There shall be added interest income on obligations of any
state or political subdivision thereto which is not otherwise
exempted pursuant to other laws of this state, to the extent that
such interest is not included in taxable income and adjusted gross
income.
2. There shall be deduc ted amounts included in such income that
the state is prohibited from taxing because of the provisions of the
Federal United States Constitution, the State Oklahoma Constitution,
federal laws or laws of Oklahoma.
3. The amount of any federal net operating loss deduction shall
be adjusted as follows:
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a. For carryovers and carrybacks to taxable years
beginning before January 1, 1981, the amount of any
net operating loss deduction a llowed to a taxpayer for
federal income tax purposes shall be reduced to an
amount which is the same portion thereof as the loss
from sources within this state, as determined pursuant
to this section and Section 2362 of this 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 th e 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 of 1986, as amended, 26
U.S.C., Section 172, as mo dified by the Oklahoma
Income Tax Act, Section 2351 et seq. of this title,
and shall be allowed without regard to the existence
of a federal net operating loss. For tax years
beginning after December 31, 2000, and ending before
January 1, 2008, the years to which such losses may be
carried shall be determined solely by reference to
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Section 172 of the Internal Revenue Code of 1986, as
amended, 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 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 ba ck shall be
determined solely by reference to Section 172 of the
Internal Revenue Code of 1986, as amended, 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 subpara graphs 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
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allocated in accordance with the situs of such
property;
b. Income from intangible personal property, such as
interest, dividends, patent or copyright royalties,
and gains or losses from sales of s uch property, shall
be allocated in accordance with the domiciliary situs
of the taxpayer, except that:
(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 generate working capital for
a unitary business enterprise shall be included
in apportionable income; a resident trust or
resident estate shall be treated as havin g a
separate commercial or business situs insofar as
undistributed income is c oncerned, but shall not
be treated as having a separate commercial or
business situs insofar as distributed income is
concerned,
(2) for taxable years beginning after December 31 ,
2003, capital or ordinary gains or losses from
the sale of an ownership interest in a publicly
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traded partnership, as defined by Section 7704(b)
of the Internal Revenue Code of 1986, as amended,
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 (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
partnership 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 qualifyin g gain
receiving capital treatment as defined in
subparagraph a of paragraph 2 of subsection F of
this section,
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(3) income from such property which is required to be
allocated pursuant to the provisions 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;
d. In the case of a manufacturing or processing
enterprise the business of which in Oklahoma this
state consists solely of marketing its products by:
(1) sales having a situs without this state, shipped
directly to a point from without the state to a
purchaser within the state, commonly known as
interstate sales,
(2) sales of the product stored in public warehouses
within the state pursuant to “in transit”
tariffs, as prescribed and allowed by the
Interstate Commerce Commission, to a purchaser
within the state,
(3) sales of the product stored in public warehouses
within the state where the shipment to such
warehouses is not covered by “in transit”
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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 to tal net income of
the taxpayer for federal income tax purposes derived
from the manufacture and/or processing and sales
everywhere as determined by the ratio of the sales
defined in this section made to the purchaser within
the state to the total sales everywhere. The term
“public warehouse” as used in this subparagraph means
a licensed public warehouse, the principal business of
which is warehousing merchandise for the public;
e. In the case of insurance companies, Oklahoma taxable
income shall be taxable income of the taxpayer for
federal tax purposes, as adjusted for the adjustments
provided pursuant to the provisions of paragraphs 1
and 2 of this subsection, apportioned as fol lows:
(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
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risks in this state, and the denominato r of which
is the direct premiums written for insurance on
property or risks everywhere. For purposes of
this subsection, the term “direct premiums
written” means the total amou nt 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
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 property or
risks in this state, plus (b) premiums written
for reinsurance accepted in respect of property
or risks in this state, and the denominator of
which is the sum of (c) direct premiums written
for insurance on property or risks everywhere,
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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 premiums written
for insurance accepted from companies
commercially domiciled in Oklahoma this state
bears to premiums written for rei nsurance
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 cedin g 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 apportione d 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 thi s paragraph. Net
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income or loss as used in this paragraph includes that derived from
patent or copyright royalties, purchase discounts, and interest on
accounts receivable relating to or arising from a business activity,
the income from which is apportion ed pursuant to this subsection,
including the sale or other disposition of suc h property and any
other property used in the unitary enterprise. Deductions used in
computing such net income or loss shall not include taxes based on
or measured by income. P rovided, for corporations whose property
for purposes of the tax imposed by Section 2355 of this title has an
initial investment cost equaling or exceeding Two Hundred Million
Dollars ($200,000,000.00) and such investment is made on or after
July 1, 1997, or for corporations which expand their property or
facilities in this state an d such expansion has an investment cost
equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)
over a period not to exceed three (3) years, and such expansion is
commenced on or after January 1, 2000, the three factors 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 apportion ment
factors shall be computed as follows:
a. The property factor is a fractio n, the numerator of
which is the average value of the taxpayer ’s real and
tangible personal property owned or rented and used in
this state during the tax period and the denomina tor
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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 other equipment having no
fixed situs, such as rolling stock, buses, trucks
and trailers, including machinery and equip ment
carried thereon, airplanes, salespersons ’
automobiles and other similar equipment, in the
proportion that miles traveled in Oklahoma this
state by such equipment bears to total miles
traveled,
(2) Property owned by the taxpayer is valued at its
original cost. Property rented by the taxpayer
is valued at eight times the net ann ual 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,
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(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 averag e value of
the taxpayer’s property;
b. The payroll factor is a fraction, the n umerator of
which is the total compensation for services rendered
in the state during the tax period, and the
denominator of which is the total compensation for
services rendered everywhere during the tax 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 transpor tation enterprise, the
numerator of the fraction shall include a portion
of such expenditure in connection with employees
operating equipment over a fixed route, such as
railroad employees, airline pilots, or bus
drivers, in this state only a part of the t ime,
in the proportion that mileage traveled in
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Oklahoma this state bears to total mileage
traveled by such employees,
(2) In any case the numerator of the fraction shall
include a portion of such expenditures in
connection with itinerant employees, such a s
traveling salespersons, in this state only a part
of the time, in the propor tion that time spent in
Oklahoma this state bears to total time spent in
furtherance of the enterprise by such employees;
c. The sales factor is a fraction, the numerator of whic h
is the total sales or gross revenue of the taxpayer in
this state during the tax period, and the denominator
of which is the total sales or gross revenue of the
taxpayer everywhere during the tax period. “Sales”,
as used in this subsection , does not include sales or
gross revenue which are separately allocated in
paragraph 4 of this subsection.
(1) Sales of tangible personal property have a situs
in this state if the property is delivered or
shipped to a purchaser other than the United
States government, within this state regardless
of the FOB Freight on Board (FOB) point or other
conditions of the sale; or the property is
shipped from an office, store, warehouse, factory
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or other place of storage in this state and (a)
the purchaser is the United States g overnment or
(b) the taxpayer is not doing business in the
state of the destination of the shipment.
(2) In the case of a railroad or interurban railway
enterprise, the numerator of the fraction shall
not be less than the allocation of revenues to
this state as shown in its annual report to the
Corporation Commission.
(3) In the case of an airline, truck or bus
enterprise or freight car, tank car, refrigerator
car or other railroad equipment enterprise, the
numerator of the fraction shall include a portion
of revenue from interstate transportation in the
proportion that interstate mi leage traveled in
Oklahoma this state bears to total interstate
mileage traveled.
(4) In the case of an oil, gasoline or gas pipeline
enterprise, the numerator of the fraction sh all
be either the total of traffic units of the
enterprise within Oklahoma this state or the
revenue allocated to Oklahoma this state based
upon miles moved, at the option of the taxpayer,
and the denominator of which shall be the total
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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 gasoline or one thousand (1,00 0) 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
Federal Communications Commission; p rovided that
in respect to each corporation or business entity
required by the Federal Communications Commission
to keep its books and records in accordance with
a uniform system of accounts prescribed by such
Commission, the intrastate net 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 revenue factors
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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 this state a
portion of net income of the enterprise out of all appropriate
proportion to the property owned and/or business transacted within
this state, because of the fact that one or more of the factors so
prescribed are not employed to any appreciable 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 Commission is
empowered to permit, after a showing by taxpayer that an excessive
portion of net income has been attributed to Oklahoma this state, or
require, when in its judgment an insufficient portion of net income
has been attributed to Oklahoma this state, the elimination,
substitution, or use of additional factors, or reduction or increase
in the weight 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 attrib utable to Oklahoma
this state must not be inherently arbitrary, and application of the
recomputed final apportionment to the net income of the enterprise
must attribute to Oklahoma this state only a reasonable portion
thereof.
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6. For calendar years 1997 a nd 1998, the owner of a new or
expanded agricultural commodity processing faci lity 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 o wner 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 fa cility in this state claiming
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 perce ntage of the investment which each eligible
taxpayer may exclude. The exclusion provided by this paragraph
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 Commissi on shall permit any excess over One
Million Dollars ($1,000,000.00) and shall factor such excess into
the percentage for subsequent years. Any amount of the exemption
permitted to be excluded pursuant to the provisions of this
paragraph but not used in any year may be carried forward as an
exemption from income pursuant to the provisions of this paragraph
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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 facility ” means
building buildings, 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 t hat provides
only, and nothing more than, storage, cleaning, drying
or transportation of agricultural commodities, and
b. “Facility” means each part of the facility which is
used in a process primarily for:
(1) the processing of agricultural commodities,
including receiving or storing agricultural
commodities, or the production of milk at a dairy
operation,
(2) transporting the agricultural commodities or
product before, during or after the processing,
or
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(3) packaging or otherwise preparing the product for
sale or shipment.
7. Despite any provision to the contrary in paragraph 3 of this
subsection, for taxable years beginning after December 31, 1999, in
the case of a taxpayer which has a farming loss, such farming loss
shall be considered a net operating l oss carryback in accordance
with and to the extent of the Internal Revenue Code of 1986, as
amended, 26 U.S.C., Section 172(b)(G) 172(b)(1)(B). However, the
amount of the net operating loss carryback shall not exceed the
lesser of:
a. Sixty Thousand Dolla rs ($60,000.00), or
b. the loss properly shown on Schedule F of the Internal
Revenue Service Form 1040 reduced by one -half (1/2) of
the income from all other sources other than reflected
on Schedule F.
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.
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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 January 1, 2010,
there shall be added to Oklahoma taxable income an amount equal to
the amount of deferred income not included in such taxable income
pursuant to Section 108(i)(1) of the In ternal 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 of 1986 as amended by Section 1231 of
the American Recovery and Reinvestment Act of 2009 (P.L. No. 111 -5).
11. For taxable years beginning on or after January 1, 2019,
there shall be subtr acted from Oklahoma taxable income or adjusted
gross income any item of income or gain, and there shall be added to
Oklahoma taxable income or adjusted gross income any item of loss or
deduction that in the absence of an election pursuant to the
provisions of the Pass-Through Entity Tax Equity Act of 2019 would
be allocated to a mem ber or to an indirect member of an electing
pass-through entity pursuant to Section 2351 et seq. of this title,
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if (i) the electing pass -through entity has accounted for such ite m
in computing its Oklahoma net entity income or loss pursuant to the
provisions of the Pass -Through Entity Tax Equity Act of 2019, and
(ii) the total amount of tax attributable to any resulting Oklahoma
net entity income has been paid. The Oklahoma Tax C ommission 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 sam e manner as prescribed by
Section 2355.1P-2 of this title. Notwithstanding the application 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 it s adjusted tax basis for federal income
tax purposes.
B. 1. The taxable inco me of any corporation shall be further
adjusted to arrive at Oklahoma taxable income, except those
corporations electing treatment as provided in subchapter S of the
Internal Revenue Code of 1986, as amended, 26 U.S.C., Section 1361
et seq., and Section 2365 of this title, deductions pursuant to the
provisions of the Accelerated Cost Recovery System as defined
provided 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
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allowed a deduction for depreciation of assets placed into se rvice
after December 31, 1981, in accordance with provisions of the
Internal Revenue Code of 1986, as amended, 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 a ll
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 In come Tax
Act, Section 2351 et seq. of this title, or of the Internal Revenue
Code of 1986, as amended, to the contrary, this subsection shall
control calculation of depreciation of assets placed into service
after December 31, 1981, and before January 1, 1 983.
For assets placed in service and held by a corporation in which
accelerated cost recovery system the Accelerated Cost Recovery
System was previously disallowed, an adjustment to taxable income is
required in the first taxable year beginning after Dece mber 31,
1982, to reconcile the basis of such assets to the basis allowed in
the Internal Revenue Code of 1986, as amended. The purpose of this
adjustment is to equalize the basis and allowance for depreciation
accounts between that reported to the Intern al Revenue Service and
that reported to Oklahoma this state.
2. For tax years beginning on or after January 1, 2009, and
ending on or before December 31, 2009, there shall be added to
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Oklahoma taxable income any amount in excess of One Hundred Seventy -
five Thousand Dollars ($175,000.00) which has been deducted as a
small business expense under Internal Revenue Code of 1986, as
amended, Section 179 as provided in the American Recovery and
Reinvestment Act of 2009.
C. 1. For taxable years beginning after D ecember 31, 1987, the
taxable income of any corporation shall be further adjus ted to
arrive at Oklahoma taxable income for transfers of technology to
qualified small businesses located in Oklahoma this state. Such
transferor corporation shall be allowed a n exemption from taxable
income of an amount equal to the amount of royalty payment received
as a result of such transfer; provided, however, such amount shall
not exceed ten percent (10%) of the amount of gross proceeds
received by such transferor corpora tion 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 technol ogy 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
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principal place of business located within this state
and which meets the following cri teria:
(1) Capitalization of not more than Two Hundred Fifty
Thousand Dollars ($250,000.00),
(2) Having at least fifty percent (50%) of its
employees and assets located in Oklahoma this
state at the time of the transfer, and
(3) Not a subsidiary or affiliate of the transferor
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
d. “Gross proceeds” means the total amount of
consideration for the transfer of technology, w hether
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, estates or trusts shall be allowed a deduction from
Oklahoma taxable income for one hundred percent (100%) of the amount
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for tax years 2006 through 2024 and , for tax year 2025 and
subsequent tax years, fifty percent (50%) of 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 t reatment” means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code of 1986, as
amended, included in the federal income tax return of
the corporation, estate or trust that result from:
(1) the sale of real property or tangible personal
property located within Oklahoma this state that
has been directly or indirectly owned by the
corporation, estate or trust for a holding period
of at least five (5) years prior to the date of
the transaction from which such net capital gains
arise,
(2) the sale of stock or on the sale of an ownership
interest in an Oklahoma company, 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)
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years prior to the date of the transaction from
which the net capital gains arise, or
(3) the sale of real property, tangible personal
property or intangible personal property located
within Oklahoma this state as part of the sale of
all or substantially all of the assets of an
Oklahoma company, limited liability company, or
partnership where such property has been directly
or indirectly owned by such entity owned by the
owners of such entity, and used in or derived
from such entity for a period of at least three
(3) years prior to the date of the transaction
from which the net capital gains arise,
b. “holding period” means an uninterrupted period of
time. The holding period shall include any additional
period when the property was held by another
individual or entity, if such additional peri od is
included in the taxpayer ’s holding period for the
asset pursuant to the Internal Revenue Code of 1986,
as amended,
c. “Oklahoma company”, “limited liability company ”, or
“partnership” means an entity whose primary
headquarters have been located in Oklahoma this state
for at least three (3) uninterrupted years prior to
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the date of the transaction from which the net capital
gains arise,
d. “direct” means the taxpayer directly owns the asset,
and
e. “indirect” means the taxpayer owns an interest in a
pass-through entity (or chain of pass -through
entities) that sells the asset that gives rise to the
qualifying gains receiving capital treatment.
(1) With respect to sales of real p roperty or
tangible personal property located within
Oklahoma this state, the deduction described in
this subsection shall not apply unless the pass -
through entity that makes the sale has held the
property for not less than five (5) 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 per iod 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
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liability company, or partnership, the deduction
described in this subsectio n 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 an y individual
taxpayer shall be further adjusted as follows to arrive at Oklaho ma
taxable income:
1. a. In the case of individuals, there shall be added or
deducted, as the case may be, the difference necessary
to allow personal exemptions of One Thousand D ollars
($1,000.00) in lieu of the personal exemptions allowed
by the Internal Revenue Code of 1986, as amended.
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 t he tax year. For
purposes of this subparagraph, an individual is blind
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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, b ut is accompanied
by a limitation in the fields of vision such that the
widest diameter of the visual field subtends an angle
no greater than twenty (20) degrees.
c. There shall be allowed an additional exemption of One
Thousand Dollars ($1,000.00) for eac h taxpayer 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 feder al adjusted gross income
does not exceed:
(1) Twenty-five Thousand Dollars ($25,000.00) if
married and filing jointly,
(2) Twelve Thousand Five Hundred Dollars ($12,500.00)
if married and filing separately,
(3) Fifteen Thousand Dollars ($15,000.00) if sing le,
and
(4) Nineteen Thousand Dollars ($19,000.00) if a
qualifying head of hou sehold.
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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 tradit ional individual 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 determini ng 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 I nternal
Revenue Code of 1986, as amended, in an amount equal
to the larger of fifteen percent (15%) of the Oklahoma
adjusted gross income or One Thousand Dollars
($1,000.00), but not to exceed Two Thousand Dollars
($2,000.00), except that in the case of a 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).
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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 in lieu of the standard
deduction allowed by the Int ernal Revenue Code of
1986, as amended, in an amount equal to:
(1) Three Thousand Dollars ($3,000.00), if the filing
status is married filing joint, head of household
or qualifying widow, or
(2) Two Thousand Dollars ($2,000.00), if the filing
status is single or married filing 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 d etermining 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 of 1986, as amended, 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
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(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 a dded 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 of 1986, as amended, 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
(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
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income, there shall be added or deducted, as the case
may be, the difference necessary to allow a standard
deduction in lieu of the standard deduc tion allowed by
the Internal Revenue Code of 1986, as amended, 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 household, or
(3) Four Thousand Two Hundred Fifty Dollars
($4,250.00), if the filing status is single or
married filing separate.
Oklahoma adjusted gro ss income shall be increased by
any amounts paid for motor vehicle excise taxe s which
were deducted as allowed by the Internal Revenue Code
of 1986, as amended.
f. For taxable years beginning on or after January 1,
2010, and ending on December 31, 2016, in the case of
individuals who use the standard deduction in
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 Reve nue Code of
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1986, as amended, 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 tax years 2017 through 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 of
1986, as amended, 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 dependent child , and
(3) Nine Thousand Three Hundred Fifty Dollars
($9,350.00) for head of household.
h. For tax year 2025 and subsequent tax years, 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
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deduction allowed by the Internal Revenue Code of
1986, as amended, as follows:
(1) Fifteen Thousand Dollars ($15,000.00) for single
or married filing separ ately,
(2) Thirty Thousand Dollars ($30,000.00) for married
filing jointly or qualifying widower with
dependent child, and
(3) Twenty-two Thousand Five Hundred Dollars
($22,500.00) for head of household.
3. a. In the case of resident and part -year resident
individuals having adjusted gross income from sources
both within and without the state, the itemized or
standard deductions and personal exemptions shall be
reduced to an amount which is the same portion of the
total thereof as Oklahoma adjusted gross in come is of
adjusted gross income. To the extent itemized
deductions include allowable moving expense, proration
of moving expense shall not be required or permitted
but allowable moving expense shall be fully deductible
for those taxpayers moving within o r into Oklahoma
this state and no part of moving expense shall be
deductible for those taxpayers moving without or out
of Oklahoma this state. All other itemized or
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standard deductions and personal exemptions shall be
subject to proration as provided by l aw.
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 med ical expenses deductible for
federal income tax purposes shall be excluded from the
amount of Seventeen Thousand Dollars ($17,000.00) as
specified by this subparagraph.
4. A resident individual with a physical disability
constituting a substantial handicap to employment may deduct from
Oklahoma adjusted gross income such expenditures to modify a motor
vehicle, home or workplace as are necessary to compensate for his or
her handicap. A veteran certified by the United States Department
of Veterans Affairs o f the federal government as having a service -
connected disability shall be conclusively presumed to be an
individual with a 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 deduction.
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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 Force s 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 me mber 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 accomplis hment by
reason of:
(1) absence from the United States, which term
includes only the states and the District of
Columbia,
(2) absence from the State of Oklahoma this state
while on active duty, or
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(3) confinement in a hospital within the United
States for treatment of wounds, injuries or
disease,
the time for filing a return and pay ing an income tax
shall be and is hereby extended without incurring
liability for interest or penalties, to the fifteenth
day of the third month following the month in which:
(a) Such individual shall return to the United
States if the extension is granted pursuant
to subparagraph a division 1 of this
paragraph subparagraph, return to the State
of Oklahoma this state if the extension is
granted pursuant to subparagraph b division
2 of this paragraph subparagraph or be
discharged from such hospital if the
extension is granted pursuant to
subparagraph c division 3 of this paragraph
subparagraph, or
(b) An executor, administrator, or conservator
of the estate of the taxpayer is appoin ted,
whichever event occurs the earliest.
Provided, that the Tax Commission may, in its discretion, grant
any member of the Armed Forces of the United States an extension of
time for filing of income tax returns and payment of income tax
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without incurring liabilities for interest or penalties. Such
extension may be granted only whe n 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 i n which the person is
detained by the enemy in a conflict, is a prisoner of wa r 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 amount 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 5 of this subsection shall be prorated on
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the ratio of the Oklahoma adjusted gross income to
federal adjusted gross income.
c. For the purpose of this paragraph, “federal income
taxes paid” shall mean federal income taxes, surtaxes
imposed on incomes or excess p rofits 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 Economic 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 taxati on.
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 tax 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 sy stems created by counties pursuant
to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the The
Uniform Retirement System for Justices and Judges, the Oklahoma
Wildlife Conservation Department Retirement Fund, the Oklahoma
Employment Security Commi ssion Retirement Plan, or the employee
retirement systems created by municipal ities 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 of 1986, as amended, 26 U.S.C.,
Section 86.
10. For taxable years beginning after December 31, 1994, lum p-
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 of 1986, as amended, 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 within this state, shall be excluded from taxable income
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in the same manner as a qualifying rollover contribution to an
individual retirement account within the meaning of Sectio n 408 of
the Internal Revenue Code of 1986, as amended, 26 U.S.C., Section
408. Amounts withdrawn from such bank or brokerage account,
including any earnings thereon, shall be i ncluded in taxable income
when withdrawn in the same manner as withdrawals from individual
retirement accounts within the meaning of Section 408 of the
Internal Revenue Code of 1986, as amended.
11. In taxable years beginning after December 31, 1995,
contributions made to and interest received from a medical savings
account established pursuant to Sections 2621 through 2623 of Title
63 of the Oklahoma Statutes shall be exempt from taxable income.
12. For taxable years beginning after December 31, 1996, th e
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 meth od elected for
federal income tax purposes except that the useful life shall b e
seven (7) years for purposes of this paragraph. If depreciation is
allowed as a deduction in determining the adjusted gross income of
an individual, any depreciation calculate d and claimed pursuant to
this section shall in no event be a duplication of any depreciation
allowed or permitted on the federal income tax return of the
individual.
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13. a. In taxable years beginning before January 1, 2005,
retirement benefits not to exce ed the amounts
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 hous ehold, or married filing
separate, or Fifty Thousand Dollars ($50,000.00) or
less if the filing status is married filing joint or
qualifying widow, shall be 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 p aragraph, the qualifying amount
shall be as follows:
(1) in taxable years beginning after December 31,
2004, and prior to January 1, 2007, the
qualifying amount shall be Thirty -seven Thousand
Five Hundred Dollars ($37,500.00) or less if the
filing status is single, head of household, or
married filing separate, or Seventy -five Thousand
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Dollars ($75,000.00) or less if the filing status
is married filing jointly or qualifying widow,
(2) in the taxable year beginning January 1, 2007,
the qualifying amount shal l 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 status is
married filing jointly or qualifying widow,
(3) in the taxable year beginning January 1, 2008,
the qualifying amount shall be Si xty-two Thousand
Five Hundred Dollars ($62,500.00) or less if the
filing status is single, head of household, or
married filing separate, or One Hundred Twenty -
five Thousand Dollars ($125,000.00) or less if
the filing status is married filing jointly or
qualifying widow,
(4) in the taxable year beginning January 1, 2009,
the qualifying amount shall be One Hundred
Thousand Dollars ($100,000.00) or less if the
filing status is singl e, head of household, or
married filing separate, or Two Hundred Thousand
Dollars ($200,000.00) or less if the filing
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status is married filing jointly or qualifying
widow, and
(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 Sec tion 401 of the Internal
Revenue Code of 1986, as amended, 26 U.S.C.,
Section 401,
(2) an eligible deferred compensation plan that
satisfies the requirements of Section 457 of the
Internal Revenue Code of 1986, as amended, 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 of 1986, as amended, 26
U.S.C., Section 408,
(4) an employee annuity subject to the provisions of
Section 403(a) or (b) of the Internal Revenue
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Code of 1986, as amended, 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 of 1986, as amended, 26 U.S.C.,
Section 86, or
(6) lump-sum distributions from a retirement plan
which satisfies the requirements of Section
402(e) of the Internal Revenue Code of 1986, as
amended, 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 T housand Five
Hundred Dollars ($7,500.00) for the 2005 tax year and
Ten Thousand Dollars ($10,000.00) for the tax year
2006 and for all subsequent tax years. Any individual
who claims the exemption provided for in paragraph 8
of this subsection shall not be permitted to claim a
combined total exemption pursuant to this paragraph
and paragraph 8 of this subsection in an amount
exceeding Five Thousand Five Hundred Dollars
($5,500.00) for the 2004 tax year, Seven Thousand Five
Hundred Dollars ($7,500.00) for t he 2005 tax year and
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Ten Thousand Dollars ($10,000.00) for the 2006 tax
year and all subsequent tax years.
14. In taxable years beginning after December 31, 1999, for an
individual engaged in production agriculture who has filed a
Schedule F form with the taxpayer ’s federal income tax return for
such taxable year, there shall be excluded from taxable income any
amount which was included as federal taxable income or federal
adjusted gross income and which consists of the discharge of an
obligation by a cred itor of the taxpayer incurred to finance the
production of agricultural products.
15. In taxable years beginning December 31, 2000, an amount
equal to one hundred percent (100%) of the 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 aft er 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 account s, 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.
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b. In taxable years beginning after December 31, 2004,
each taxpayer shall be allowed a deduction for
contributions to accounts established pursuant to the
Oklahoma College Savings Plan Act. The maximum annual
deduction shall equal the amount of contributions to
all such accounts plus any contributions to such
accounts by the taxpayer for prior taxable years a fter
December 31, 2004, which were not deducted, but in no
event shall the deduction for each tax year exceed Ten
Thousand Dollars ($10,000.00) for each individual
taxpayer or Twenty Thousand Dollars ($20,000.00) for
taxpayers filing a joint return. Any a mount of a
contribution that is not deducted by the taxpayer in
the year for which the contribution is made may be
carried forward as a deduction from income for the
succeeding five (5) years. For taxable years
beginning after December 31, 2005, deduction s 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 cont ribution may
not be taken for two (2) different taxable years.
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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 qualifi ed for the five-year
carryforward election and who takes a rollover or
nonqualified withdrawal during that period, the
tax deduction otherwise available pursuant to
subparagraph b of this paragraph shall be reduced
by the amount which is equal to the rollo ver or
nonqualified withdrawal, and
(2) for a taxpayer who elects to take a ro llover 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 subparagr aph 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 contribution, the amou nt
of such rollover shall be included in the adjusted
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gross income of the taxpayer in the taxable year of
the rollover.
e. If a taxpayer makes a nonqualified withdrawal of
contributions for which a 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:
(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 de signated 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 of 1986, as
amended, received by the designated
beneficiary to the extent the amount of the
refund does not exceed the amount of the
scholarship, allowance, or payment, or
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(d) a rollover or change of designated
beneficiary as permitted by subsection F of
Section 3970.7 of Title 70 of the Oklahoma
Statutes, and
(2) “rollover” means the transfer of funds from the
Oklahoma College Savings Plan to any other plan
under Section 529 of the Internal Revenue Code of
1986, as amended.
17. For tax years 2006 through 2021, retirement benefits
received by an individual from any component of the Armed Forces of
the United States in an amount not to exc eed the greater of seventy -
five percent (75%) of such benefits or Ten Thousand Dollars
($10,000.00) shall be exempt from taxable income but in no case less
than the amount of the exemption provided by paragraph 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 December 31, 2006,
retirement benefits received by federal civil service retirees,
including survivor annuities, paid in lieu of Social Security
benefits shall be exempt from taxable income to the extent such
benefits are include d in the federal adjusted gross income pursuant
to the provisions of Section 86 of the Internal Revenue Code of
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1986, as amended, 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 Januar y 1, 2008, forty
percent (40%) of such benefits shall be exempt,
c. in the taxable year beginning January 1, 2009, sixty
percent (60%) of such benefits shall be exempt,
d. in the taxable year beginning January 1, 2010, eighty
percent (80%) of such benefits shall be exempt, and
e. in the taxable year beginning January 1, 2011, and
subsequent taxable years, one hundred percent (100%)
of such benefits shall be 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 Oklahoma adjusted gross
income if the individual, or the dependent of the
individual, while living, donates one or more human
organs of the individual to another human being for
human organ transplantation. As used in this
paragraph, “human organ” means all or part of a liver,
pancreas, kidney, intestine, lung, or bone marrow. A
deduction that is claimed under this paragraph may be
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claimed in the taxable year in which the human organ
transplantation occurs.
b. An individual may claim this deduction only once, and
the deduction may be claimed only for unreimbursed
expenses that are incurred by the individual and
related to the organ don ation of the individual.
c. The Oklahoma Tax Commission shall promulgate rules to
implement the provisions of this paragraph which shall
contain a specific list of expenses which may be
presumed to qualify for the deduction. The Tax
Commission shall presc ribe 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 th e Internal Revenue Code of 1986,
as amended, 26 U.S.C., Section 85(c) (2009).
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
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for participation in a competitive livestock show event. For
purposes of this paragraph, the payment shall be treated as a
scholarship amount paid by the entity sponsoring the event and the
sponsoring entity shall cause the payment to b e categorized as a
scholarship in its books and records.
23. For taxable year s beginning on or after January 1, 2016,
taxable income shall be increased by any amount of state and local
sales or income taxes deducted under 26 U.S.C., Section 164 of the
Internal Revenue Code of 1986, as amended. If the amount of state
and local taxes deducted on the federal return is limited, taxable
income on the state return shall be increased only by the amount
actually deducted after any such limitations are applied.
24. For taxable years beginning after December 31, 2020, each
taxpayer shall be allowed a deduction for contributions to accounts
established pursuant to the Achieving a Better Life Experience
(ABLE) Program 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
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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 of one hundred percent (100%) of the amount for tax years
2005 through 2024 and, for tax year 2025 and subsequent tax years,
fifty percent (50%) of the amount from the Oklahoma adjusted gross
income of any individual taxpayer shall be allowed for qualifying
gains receiving capital treatment that are included in the federal
adjusted gross income of such individual taxpayer during the taxable
year.
2. As used in this subsection:
a. “qualifying gains receiving capital treatment ” means
the amount of net capital gains, as defined in Section
1222(11) of the Internal Revenue Code of 1986, as
amended, included in an individual taxpayer ’s federal
income tax return that result from:
(1) the sale of real property or tangible personal
property located within Oklahoma this state that
has been directly or indirectly owned by the
individual taxpayer for a holding period of at
least five (5) years prior to the date of the
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transaction from which such net c apital 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 of
at least two (2) years prior to the date of the
transaction from which the net capital gains
arise, or
(3) the sale of real property, tangible personal
property or intangible personal property located
within Oklahoma this state as part of the sale of
all or substantially all of the assets of an
Oklahoma company, limited liability company, or
partnership or an Oklahoma proprietorship
business enterprise where such property has been
directly or indirectly owned by such entit y or
business enterprise or owned by the owners of
such entity or business enterprise for a period
of at least two (2) years prior to the date of
the transaction from which the net capital gains
arise,
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b. “holding period” means an uninterrupted period of
time. The holding period shall include any additional
period when the property was held by another
individual or entity, if such additional period is
included in the taxpayer ’s holding period for the
asset pursuant to the Internal Revenue Code of 1986,
as amended,
c. “Oklahoma company,” “limited liability company, ” or
“partnership” means an entity whose primary
headquarters have been located in Oklahoma this state
for at least three (3) uninterrupted years prior to
the date of the transaction from which the net capital
gains arise,
d. “direct” means the individual taxpayer directly o wns
the asset,
e. “indirect” means the individual taxpayer owns an
interest in a pass-through entity (or chain of pass -
through entities) that sells the asset that gives rise
to the qualifying gains receiving capital treatment.
(1) With respect to sales of real property or
tangible personal property located within
Oklahoma this state, the deduction described in
this subsection shall not apply unless the pass -
through entity that mak es the sale has held the
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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 period of not less than
five (5) years.
(2) With respect to sales of stock or ownership
interest in or sales of all or substantially all
of the assets of an Oklahoma company, limited
liability company, partnership or Oklahoma
proprietorship business ent erprise, the deduction
described in this subsection shall not apply
unless the pass-through entity that makes the
sale has held the stock or ownership interest for
not less than two (2) uninterrupted years prior
to the date of the transaction that created the
capital gain, and 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 bel ow it
for an uninterrupted period of not less than two
(2) years. For purpose s of this division,
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uninterrupted ownership prior to July 1, 2007,
shall be included in the determination of the
required holding period prescribed by this
division, and
f. “Oklahoma proprietorship business enterprise ” means a
business enterprise whose income and expenses have
been reported on Schedule C or F of an individual
taxpayer’s federal income tax return, or any similar
successor schedule published by the Internal Revenue
Service and whose primary headquarters have been
located in Oklahoma this state for at least three (3)
uninterrupted years prior to the date of the
transaction from which the net capital gains arise.
G. 1. For purposes of computing its Oklahoma taxable i ncome
under this section, the dividends -paid deduction otherwise allowed
by federal law in computing net income of a real estate investment
trust that is subject to federal income tax shall be added back in
computing the tax imposed by this state under thi s title if the real
estate investment trust is a captive real estate investmen t 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 captiv e real estate investment trust
that is not subject to the provisions of paragraph 1 of this
subsection. As used in this subsection:
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a. the term “real estate investment trust ” or “REIT”
means the meaning ascribed to such term in Section 856
of the Internal Revenue Code of 1986, as amended,
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 Rev enue Code of
1986, as amended, and
(2) not exempt from federal income tax purs uant to
the provisions of Section 501(a) of the Internal
Revenue Code of 1986, as amended.
The term shall not include a real estate investment
trust that is intended to be regula rly traded on an
established securities market, and that satisfies the
requirements of Section 856(a)(5) and (6) of the U.S.
Internal Revenue Code of 1986, as amended, by reason
of Section 856(h)(2) of the Internal Revenue Code of
1986, as amended,
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c. the term “association taxable as a corporation ” shall
not include the following en tities:
(1) any real estate investment trust as defined in
paragraph a of this subsection other than a
“captive real estate investment trust ” captive
real estate investment trust ,
(2) any qualified real estate investment trust
subsidiary under Section 856(i) of the Internal
Revenue Code of 1986, as amended, other than a
qualified REIT subsidiary of a “captive real
estate investment trust ” captive real estate
investment trust,
(3) any Listed Australian Property Trust listed
Australian property trust (meaning an Australian
unit trust registered as a “Managed Investment
Scheme” “managed investment scheme ” under the
Australian Corporations Act 2001 in which the
principal class of units is listed on a
recognized stock exchange in Australia and is
regularly traded on an established securities
market), or an entity organized as a trust,
provided that a Listed Australian Property Trust
listed Australian property trust owns or
controls, directly or indirectly, seventy -five
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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 qualified foreign
entity, meaning a corporation, trust, association
or partnership organized outside the laws of the
United States and which satisfies the following
criteria:
(a) at least seventy-five percent (75%) of the
entity’s total asset value at the close of
its taxable year is represented by real
estate assets, as defined in Secti on
856(c)(5)(B) of the Internal Revenue Code of
1986, as amended, 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 divi dend-paid
deduction comparable to Section 561 of the
Internal Revenue Code of 1986, as amended,
or is exempt from entity level tax,
(c) the entity is required to distribute at
least eighty-five percent (85%) of its
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taxable income, as computed in the
jurisdiction in which it is organized, to
the holders of its shares or certificates of
beneficial interest on an annual basis,
(d) not more than ten percent (10%) of the
voting power or value in such entity is held
directly or indirectly or constructively by
a single entity or individual, or the shares
or beneficial interests of such entity are
regularly traded on an established
securities market, and
(e) the entity is organized in a country which
has a tax treaty with the United States.
3. For purposes of this subsection, the constructive ownership
rules of Section 318(a) of the Internal Revenue Code, as modified by
Section 856(d)(5) of the Internal Revenue Code of 1986, as amended,
shall apply in determining the ownership of stock, assets, or net
profits of any person.
4. A real estate investment trust that does not become
regularly traded on an established securities market within one (1)
year of the date on which it first becomes a real estate investment
trust shall be deemed not to have been regularly traded on an
established securities market, retroactive to the date it first
became a real estate investment trust, and shall file an amended
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return reflecting such retroactive designation for any tax year or
part year occurring during its initial year of status as a real
estate investment trust. For purposes of this subsection, a real
estate investment trust becomes a real estate investment trust on
the first day it has both met the requirements of Section 856 of the
Internal Revenue Code of 1986, as amended, and has elected to be
treated as a real estate investment trust pursuant to Sec tion
856(c)(1) of the Internal Revenue Code of 1986, as amended.
SECTION 7. AMENDATORY 68 O.S. 2021, Section 5011, is
amended to read as follows:
Section 5011. A. Except as otherwise provided by this section,
beginning with the calendar year 1990 and for each calendar year
through 1998, and for calendar year 2003, any individual who is a
resident of and is domiciled in this state during the entire
calendar year for which the filing is made and whose gross household
income for such year does not exceed Twelve Thousand Dollars
($12,000.00) may file a claim for sales tax relief.
B. For calendar years 1999, 2002 , and 2004, any individual who
is a resident of and is domiciled in this state during the entire
calendar year for which the filing is made may file a claim for
sales tax relief if the gross household income for such year does
not exceed the following amounts:
1. For an individual not subject to the provisions of paragraph
2 of this subsection and claiming no allowable persona l exemption
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other than the allowable personal exemption for that individual or
the spouse of that individual, Fifteen Thousand Dollars
($15,000.00); or
2. For an individual clai ming one or more allowable personal
exemptions other than the allowable personal exemption for that
individual or the spouse of that individual, an individual with a
physical disability constituting a substantial handicap disability
to employment, or an in dividual who is sixty -five (65) years of age
or older at the close of the tax year, Thirty Thousand Dollars
($30,000.00).
C. For calendar years 2000, 2001, 2005 and following and 2005
through 2024, an individual who is a resident of and is domiciled in
this state during the entire calendar year for which the filing is
made may file a claim for sales tax relief if the gross household
income for such year does not exceed the following amounts:
1. For an individual not subject to the provisions of paragraph
2 of this subsection and claiming no allowable personal exemption
other than the allowable personal exemption for that individual or
the spouse of that individual, Twenty Thousand Dollars ($20,000.00);
or
2. For an individual claiming one or more allowabl e personal
exemptions other than the allowable personal exemption for that
individual or the spouse of that individual, an individual with a
physical disability constituting a substantial handicap disability
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to employment, or an individual who is sixty -five (65) years of age
or older at the close of the tax year, Fifty Thousand Doll ars
($50,000.00).
D. The For calendar year 2024 and previous calendar years, the
amount of the claim filed pursuant to the Sales Tax Relief Act shall
be Forty Dollars ($40.00) m ultiplied by the number of allowable
personal exemptions. No claims for sales tax relief shall be filed
for calendar year 2025 and subsequent calendar years. As used in
the Sales Tax Relief Act, “allowable personal exemption ” means a
personal exemption t o which the taxpayer would be entitled pursuant
to the provisions of the Oklah oma Income Tax Act, except for:
1. The exemptions such taxpayer would be entitled to pursuant
to Section 2358 of this title if such taxpayer or spouse is blind or
sixty-five (65) years of age or older at the close of the tax year;
2. An exemption for a person convicted of a felony if during
all or any part of the calendar year for which the claim is filed
such person was an inmate in the custody of the Department of
Corrections; or
3. An exemption for a person if during all or any part of the
calendar year for which the claim is filed such person resided
outside of this state.
E. A person convicted of a felony shall not be permitted to
file a claim for sales tax relief pursuant to the provisions of
Sections 5010 through 5016 of this title for the period of time
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during which the person is an inmate in the custody of the
Department of Corrections. Such period of time shall include the
entire calendar year if the person is in the custody of the
Department of Corrections during any part of the calendar year. The
provisions of this subsection shall not prohibit all other members
of the household of an inmate from filing a claim based upon the
personal exemptions to which the househo ld members would be entitled
pursuant to the provisions of the Oklahoma Income Tax Act.
F. The Department of Corrections shall withhold up to fifty
percent (50%) of any money inmates receive for claims made pursuant
to the Sales Tax Relief Act prior to Se ptember 1, 1991, for costs of
incarceration.
G. For purposes of Section 139.1 05 of Title 17 of the Oklahoma
Statutes, the gross household income of any individual who may file
a claim for sales tax relief shall not exceed Twelve Thousand
Dollars ($12,000.00).
SECTION 8. This act shall become effective July 1, 2025.
SECTION 9. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereo f this act shall take effect and
be in full force from and after its passage a nd approval.
60-1-974 QD 12/30/2024 4:55:48 PM