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1 STATE OF OKLAHOMA
2 2nd Session of the 60th Legislature (2026)
3 HOUSE BILL 3603 By: Lepak
4
5
6 AS INTRODUCED
7 An Act relating to revenue and taxation; amending 68
O.S. 2021, Section 2358, as last amended by Section
8 155, Chapter 452, O.S.L. 2024 (68 O.S. Supp. 2025,
Section 2358), which relates to adjustments to
9 taxable income and adjusted gross income; modifying
provisions related to certain factor based on situs
10 of tangible personal property; and providing an
effective date.
11
12
13
14 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
15 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358, as
16 last amended by Section 155, Chapter 452, O.S.L. 2024 (68 O.S. Supp.
17 2025, Section 2358), is amended to read as follows:
18 Section 2358. For all tax years beginning after December 31,
19 1981, taxable income and adjusted gross income shall be adjusted to
20 arrive at Oklahoma taxable income and Oklahoma adjusted gross income
21 as required by this section.
22 A. The taxable income of any taxpayer shall be adjusted to
23 arrive at Oklahoma taxable income for corporations and Oklahoma
24 adjusted gross income for individuals, as follows:
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1 1. There shall be added interest income on obligations of any
2 state or political subdivision thereto which is not otherwise
3 exempted pursuant to other laws of this state, to the extent that
4 such interest is not included in taxable income and adjusted gross
5 income.
6 2. There shall be deducted amounts included in such income that
7 the state is prohibited from taxing because of the provisions of the
8 Federal Constitution, the State Constitution, federal laws or laws
9 of Oklahoma.
10 3. The amount of any federal net operating loss deduction shall
11 be adjusted as follows:
12 a. For carryovers and carrybacks to taxable years
13 beginning before January 1, 1981, the amount of any
14 net operating loss deduction allowed to a taxpayer for
15 federal income tax purposes shall be reduced to an
16 amount which is the same portion thereof as the loss
17 from sources within this state, as determined pursuant
18 to this section and Section 2362 of this title, for
19 the taxable year in which such loss is sustained is of
20 the total loss for such year;
21 b. For carryovers and carrybacks to taxable years
22 beginning after December 31, 1980, the amount of any
23 net operating loss deduction allowed for the taxable
24 year shall be an amount equal to the aggregate of the
Req. No. 14774 Page 2
1 Oklahoma net operating loss carryovers and carrybacks
2 to such year. Oklahoma net operating losses shall be
3 separately determined by reference to Section 172 of
4 the Internal Revenue Code, 26 U.S.C., Section 172, as
5 modified by the Oklahoma Income Tax Act, Section 2351
6 et seq. of this title, and shall be allowed without
7 regard to the existence of a federal net operating
8 loss. For tax years beginning after December 31,
9 2000, and ending before January 1, 2008, the years to
10 which such losses may be carried shall be determined
11 solely by reference to Section 172 of the Internal
12 Revenue Code, 26 U.S.C., Section 172, with the
13 exception that the terms "net operating loss" and
14 "taxable income" shall be replaced with "Oklahoma net
15 operating loss" and "Oklahoma taxable income". For
16 tax years beginning after December 31, 2007, and
17 ending before January 1, 2009, years to which such
18 losses may be carried back shall be limited to two (2)
19 years. For tax years beginning after December 31,
20 2008, the years to which such losses may be carried
21 back shall be determined solely by reference to
22 Section 172 of the Internal Revenue Code, 26 U.S.C.,
23 Section 172, with the exception that the terms "net
24 operating loss" and "taxable income" shall be replaced
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1 with "Oklahoma net operating loss" and "Oklahoma
2 taxable income".
3 4. Items of the following nature shall be allocated as
4 indicated. Allowable deductions attributable to items separately
5 allocable in subparagraphs a, b and c of this paragraph, whether or
6 not such items of income were actually received, shall be allocated
7 on the same basis as those items:
8 a. Income from real and tangible personal property, such
9 as rents, oil and mining production or royalties, and
10 gains or losses from sales of such property, shall be
11 allocated in accordance with the situs of such
12 property;
13 b. Income from intangible personal property, such as
14 interest, dividends, patent or copyright royalties,
15 and gains or losses from sales of such property, shall
16 be allocated in accordance with the domiciliary situs
17 of the taxpayer, except that:
18 (1) where such property has acquired a nonunitary
19 business or commercial situs apart from the
20 domicile of the taxpayer such income shall be
21 allocated in accordance with such business or
22 commercial situs; interest income from
23 investments held to generate working capital for
24 a unitary business enterprise shall be included
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1 in apportionable income; a resident trust or
2 resident estate shall be treated as having a
3 separate commercial or business situs insofar as
4 undistributed income is concerned, but shall not
5 be treated as having a separate commercial or
6 business situs insofar as distributed income is
7 concerned,
8 (2) for taxable years beginning after December 31,
9 2003, capital or ordinary gains or losses from
10 the sale of an ownership interest in a publicly
11 traded partnership, as defined by Section 7704(b)
12 of the Internal Revenue Code, shall be allocated
13 to this state in the ratio of the original cost
14 of such partnership's tangible property in this
15 state to the original cost of such partnership's
16 tangible property everywhere, as determined at
17 the time of the sale; if more than fifty percent
18 (50%) of the value of the partnership's assets
19 consists of intangible assets, capital or
20 ordinary gains or losses from the sale of an
21 ownership interest in the partnership shall be
22 allocated to this state in accordance with the
23 sales factor of the partnership for its first
24 full tax period immediately preceding its tax
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1 period during which the ownership interest in the
2 partnership was sold; the provisions of this
3 division shall only apply if the capital or
4 ordinary gains or losses from the sale of an
5 ownership interest in a partnership do not
6 constitute qualifying gain receiving capital
7 treatment as defined in subparagraph a of
8 paragraph 2 of subsection F of this section,
9 (3) income from such property which is required to be
10 allocated pursuant to the provisions of paragraph
11 5 of this subsection shall be allocated as herein
12 provided;
13 c. Net income or loss from a business activity which is
14 not a part of business carried on within or without
15 the state of a unitary character shall be separately
16 allocated to the state in which such activity is
17 conducted;
18 d. In the case of a manufacturing or processing
19 enterprise the business of which in Oklahoma consists
20 solely of marketing its products by:
21 (1) sales having a situs without this state, shipped
22 directly to a point from without the state to a
23 purchaser within the state, commonly known as
24 interstate sales,
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1 (2) sales of the product stored in public warehouses
2 within the state pursuant to "in transit"
3 tariffs, as prescribed and allowed by the
4 Interstate Commerce Commission, to a purchaser
5 within the state,
6 (3) sales of the product stored in public warehouses
7 within the state where the shipment to such
8 warehouses is not covered by "in transit"
9 tariffs, as prescribed and allowed by the
10 Interstate Commerce Commission, to a purchaser
11 within or without the state,
12 the Oklahoma net income shall, at the option of the
13 taxpayer, be that portion of the total net income of
14 the taxpayer for federal income tax purposes derived
15 from the manufacture and/or processing and sales
16 everywhere as determined by the ratio of the sales
17 defined in this section made to the purchaser within
18 the state to the total sales everywhere. The term
19 "public warehouse" as used in this subparagraph means
20 a licensed public warehouse, the principal business of
21 which is warehousing merchandise for the public;
22 e. In the case of insurance companies, Oklahoma taxable
23 income shall be taxable income of the taxpayer for
24 federal tax purposes, as adjusted for the adjustments
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1 provided pursuant to the provisions of paragraphs 1
2 and 2 of this subsection, apportioned as follows:
3 (1) except as otherwise provided by division (2) of
4 this subparagraph, taxable income of an insurance
5 company for a taxable year shall be apportioned
6 to this state by multiplying such income by a
7 fraction, the numerator of which is the direct
8 premiums written for insurance on property or
9 risks in this state, and the denominator of which
10 is the direct premiums written for insurance on
11 property or risks everywhere. For purposes of
12 this subsection, the term "direct premiums
13 written" means the total amount of direct
14 premiums written, assessments and annuity
15 considerations as reported for the taxable year
16 on the annual statement filed by the company with
17 the Insurance Commissioner in the form approved
18 by the National Association of Insurance
19 Commissioners, or such other form as may be
20 prescribed in lieu thereof,
21 (2) if the principal source of premiums written by an
22 insurance company consists of premiums for
23 reinsurance accepted by it, the taxable income of
24 such company shall be apportioned to this state
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1 by multiplying such income by a fraction, the
2 numerator of which is the sum of (a) direct
3 premiums written for insurance on property or
4 risks in this state, plus (b) premiums written
5 for reinsurance accepted in respect of property
6 or risks in this state, and the denominator of
7 which is the sum of (c) direct premiums written
8 for insurance on property or risks everywhere,
9 plus (d) premiums written for reinsurance
10 accepted in respect of property or risks
11 everywhere. For purposes of this paragraph,
12 premiums written for reinsurance accepted in
13 respect of property or risks in this state,
14 whether or not otherwise determinable, may at the
15 election of the company be determined on the
16 basis of the proportion which premiums written
17 for insurance accepted from companies
18 commercially domiciled in Oklahoma bears to
19 premiums written for reinsurance accepted from
20 all sources, or alternatively in the proportion
21 which the sum of the direct premiums written for
22 insurance on property or risks in this state by
23 each ceding company from which reinsurance is
24 accepted bears to the sum of the total direct
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1 premiums written by each such ceding company for
2 the taxable year.
3 5. The net income or loss remaining after the separate
4 allocation in paragraph 4 of this subsection, being that which is
5 derived from a unitary business enterprise, shall be apportioned to
6 this state on the basis of the arithmetical average of three factors
7 consisting of property, payroll and sales or gross revenue
8 enumerated as subparagraphs a, b and c of this paragraph. Net
9 income or loss as used in this paragraph includes that derived from
10 patent or copyright royalties, purchase discounts, and interest on
11 accounts receivable relating to or arising from a business activity,
12 the income from which is apportioned pursuant to this subsection,
13 including the sale or other disposition of such property and any
14 other property used in the unitary enterprise. Deductions used in
15 computing such net income or loss shall not include taxes based on
16 or measured by income. Provided, for corporations whose property
17 for purposes of the tax imposed by Section 2355 of this title has an
18 initial investment cost equaling or exceeding Two Hundred Million
19 Dollars ($200,000,000.00) and such investment is made on or after
20 July 1, 1997, or for corporations which expand their property or
21 facilities in this state and such expansion has an investment cost
22 equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)
23 over a period not to exceed three (3) years, and such expansion is
24 commenced on or after January 1, 2000, the three factors shall be
Req. No. 14774 Page 10
1 apportioned with property and payroll, each comprising twenty-five
2 percent (25%) of the apportionment factor and sales comprising fifty
3 percent (50%) of the apportionment factor. The apportionment
4 factors shall be computed as follows:
5 a. The property factor is a fraction, the numerator of
6 which is the average value of the taxpayer's real and
7 tangible personal property owned or rented and used in
8 this state during the tax period and the denominator
9 of which is the average value of all the taxpayer's
10 real and tangible personal property everywhere owned
11 or rented and used during the tax period.
12 (1) Property, the income from which is separately
13 allocated in paragraph 4 of this subsection,
14 shall not be included in determining this
15 fraction. The numerator of the fraction shall
16 include a portion of the investment in
17 transportation and other equipment having no
18 fixed situs, such as rolling stock, buses, trucks
19 and trailers, including machinery and equipment
20 carried thereon, airplanes, salespersons'
21 automobiles and other similar equipment, in the
22 proportion that miles traveled in Oklahoma by
23 such equipment bears to total miles traveled,
24
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1 (2) Property owned by the taxpayer is valued at its
2 original cost. Property rented by the taxpayer
3 is valued at eight times the net annual rental
4 rate. Net annual rental rate is the annual
5 rental rate paid by the taxpayer, less any annual
6 rental rate received by the taxpayer from
7 subrentals,
8 (3) The average value of property shall be determined
9 by averaging the values at the beginning and
10 ending of the tax period but the Oklahoma Tax
11 Commission may require the averaging of monthly
12 values during the tax period if reasonably
13 required to reflect properly the average value of
14 the taxpayer's property;
15 b. The payroll factor is a fraction, the numerator of
16 which is the total compensation for services rendered
17 in the state during the tax period, and the
18 denominator of which is the total compensation for
19 services rendered everywhere during the tax period.
20 "Compensation", as used in this subsection means those
21 paid-for services to the extent related to the unitary
22 business but does not include officers' salaries,
23 wages and other compensation.
24
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1 (1) In the case of a transportation enterprise, the
2 numerator of the fraction shall include a portion
3 of such expenditure in connection with employees
4 operating equipment over a fixed route, such as
5 railroad employees, airline pilots, or bus
6 drivers, in this state only a part of the time,
7 in the proportion that mileage traveled in
8 Oklahoma bears to total mileage traveled by such
9 employees,
10 (2) In any case the numerator of the fraction shall
11 include a portion of such expenditures in
12 connection with itinerant employees, such as
13 traveling salespersons, in this state only a part
14 of the time, in the proportion that time spent in
15 Oklahoma bears to total time spent in furtherance
16 of the enterprise by such employees;
17 c. The sales factor is a fraction, the numerator of which
18 is the total sales or gross revenue of the taxpayer in
19 this state during the tax period, and the denominator
20 of which is the total sales or gross revenue of the
21 taxpayer everywhere during the tax period. "Sales",
22 as used in this subsection does not include sales or
23 gross revenue which are separately allocated in
24 paragraph 4 of this subsection.
Req. No. 14774 Page 13
1 (1) Sales of tangible personal property have a situs
2 in this state if the property is delivered or
3 shipped to a purchaser other than the United
4 States government, within this state regardless
5 of the FOB point or other conditions of the sale;
6 or the property is shipped from an office, store,
7 warehouse, factory or other place of storage in
8 this state and (a) the purchaser is the United
9 States government or (b) the taxpayer is not
10 doing business in the state of the destination of
11 the shipment.
12 (2) In the case of a railroad or interurban railway
13 enterprise, the numerator of the fraction shall
14 not be less than the allocation of revenues to
15 this state as shown in its annual report to the
16 Corporation Commission.
17 (3) In the case of an airline, truck or bus
18 enterprise or freight car, tank car, refrigerator
19 car or other railroad equipment enterprise, the
20 numerator of the fraction shall include a portion
21 of revenue from interstate transportation in the
22 proportion that interstate mileage traveled in
23 Oklahoma bears to total interstate mileage
24 traveled.
Req. No. 14774 Page 14
1 (4) In the case of an oil, gasoline or gas pipeline
2 enterprise, the numerator of the fraction shall
3 be either the total of traffic units of the
4 enterprise within Oklahoma or the revenue
5 allocated to Oklahoma based upon miles moved, at
6 the option of the taxpayer, and the denominator
7 of which shall be the total of traffic units of
8 the enterprise or the revenue of the enterprise
9 everywhere as appropriate to the numerator. A
10 "traffic unit" is hereby defined as the
11 transportation for a distance of one (1) mile of
12 one (1) barrel of oil, one (1) gallon of gasoline
13 or one thousand (1,000) cubic feet of natural or
14 casinghead gas, as the case may be.
15 (5) In the case of a telephone or telegraph or other
16 communication enterprise, the numerator of the
17 fraction shall include that portion of the
18 interstate revenue as is allocated pursuant to
19 the accounting procedures prescribed by the
20 Federal Communications Commission; provided that
21 in respect to each corporation or business entity
22 required by the Federal Communications Commission
23 to keep its books and records in accordance with
24 a uniform system of accounts prescribed by such
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1 Commission, the intrastate net income shall be
2 determined separately in the manner provided by
3 such uniform system of accounts and only the
4 interstate income shall be subject to allocation
5 pursuant to the provisions of this subsection.
6 Provided further, that the gross revenue factors
7 shall be those as are determined pursuant to the
8 accounting procedures prescribed by the Federal
9 Communications Commission.
10 In any case where the apportionment of the three factors
11 prescribed in this paragraph attributes to Oklahoma a portion of net
12 income of the enterprise out of all appropriate proportion to the
13 property owned and/or business transacted within this state, because
14 of the fact that one or more of the factors so prescribed are not
15 employed to any appreciable extent in furtherance of the enterprise;
16 or because one or more factors not so prescribed are employed to a
17 considerable extent in furtherance of the enterprise; or because of
18 other reasons, the Tax Commission is empowered to permit, after a
19 showing by taxpayer that an excessive portion of net income has been
20 attributed to Oklahoma, or require, when in its judgment an
21 insufficient portion of net income has been attributed to Oklahoma,
22 the elimination, substitution, or use of additional factors, or
23 reduction or increase in the weight of such prescribed factors.
24 Provided, however, that any such variance from such prescribed
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1 factors which has the effect of increasing the portion of net income
2 attributable to Oklahoma must not be inherently arbitrary, and
3 application of the recomputed final apportionment to the net income
4 of the enterprise must attribute to Oklahoma only a reasonable
5 portion thereof.
6 6. For calendar years 1997 and 1998, the owner of a new or
7 expanded agricultural commodity processing facility in this state
8 may exclude from Oklahoma taxable income, or in the case of an
9 individual, the Oklahoma adjusted gross income, fifteen percent
10 (15%) of the investment by the owner in the new or expanded
11 agricultural commodity processing facility. For calendar year 1999,
12 and all subsequent years, the percentage, not to exceed fifteen
13 percent (15%), available to the owner of a new or expanded
14 agricultural commodity processing facility in this state claiming
15 the exemption shall be adjusted annually so that the total estimated
16 reduction in tax liability does not exceed One Million Dollars
17 ($1,000,000.00) annually. The Tax Commission shall promulgate rules
18 for determining the percentage of the investment which each eligible
19 taxpayer may exclude. The exclusion provided by this paragraph
20 shall be taken in the taxable year when the investment is made. In
21 the event the total reduction in tax liability authorized by this
22 paragraph exceeds One Million Dollars ($1,000,000.00) in any
23 calendar year, the Tax Commission shall permit any excess over One
24 Million Dollars ($1,000,000.00) and shall factor such excess into
Req. No. 14774 Page 17
1 the percentage for subsequent years. Any amount of the exemption
2 permitted to be excluded pursuant to the provisions of this
3 paragraph but not used in any year may be carried forward as an
4 exemption from income pursuant to the provisions of this paragraph
5 for a period not exceeding six (6) years following the year in which
6 the investment was originally made.
7 For purposes of this paragraph:
8 a. "Agricultural commodity processing facility" means
9 building, structures, fixtures and improvements used
10 or operated primarily for the processing or production
11 of marketable products from agricultural commodities.
12 The term shall also mean a dairy operation that
13 requires a depreciable investment of at least Two
14 Hundred Fifty Thousand Dollars ($250,000.00) and which
15 produces milk from dairy cows. The term does not
16 include a facility that provides only, and nothing
17 more than, storage, cleaning, drying or transportation
18 of agricultural commodities, and
19 b. "Facility" means each part of the facility which is
20 used in a process primarily for:
21 (1) the processing of agricultural commodities,
22 including receiving or storing agricultural
23 commodities, or the production of milk at a dairy
24 operation,
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1 (2) transporting the agricultural commodities or
2 product before, during or after the processing,
3 or
4 (3) packaging or otherwise preparing the product for
5 sale or shipment.
6 7. Despite any provision to the contrary in paragraph 3 of this
7 subsection, for taxable years beginning after December 31, 1999, in
8 the case of a taxpayer which has a farming loss, such farming loss
9 shall be considered a net operating loss carryback in accordance
10 with and to the extent of the Internal Revenue Code, 26 U.S.C.,
11 Section 172(b)(G). However, the amount of the net operating loss
12 carryback shall not exceed the lesser of:
13 a. Sixty Thousand Dollars ($60,000.00), or
14 b. the loss properly shown on Schedule F of the Internal
15 Revenue Service Form 1040 reduced by one-half (1/2) of
16 the income from all other sources other than reflected
17 on Schedule F.
18 8. In taxable years beginning after December 31, 1995, all
19 qualified wages equal to the federal income tax credit set forth in
20 26 U.S.C.A., Section 45A, shall be deducted from taxable income.
21 The deduction allowed pursuant to this paragraph shall only be
22 permitted for the tax years in which the federal tax credit pursuant
23 to 26 U.S.C.A., Section 45A, is allowed. For purposes of this
24
Req. No. 14774 Page 19
1 paragraph, "qualified wages" means those wages used to calculate the
2 federal credit pursuant to 26 U.S.C.A., Section 45A.
3 9. In taxable years beginning after December 31, 2005, an
4 employer that is eligible for and utilizes the Safety Pays OSHA
5 Consultation Service provided by the Oklahoma Department of Labor
6 shall receive an exemption from taxable income in the amount of One
7 Thousand Dollars ($1,000.00) for the tax year that the service is
8 utilized.
9 10. For taxable years beginning on or after January 1, 2010,
10 there shall be added to Oklahoma taxable income an amount equal to
11 the amount of deferred income not included in such taxable income
12 pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
13 as amended by Section 1231 of the American Recovery and Reinvestment
14 Act of 2009 (P.L. No. 111-5). There shall be subtracted from
15 Oklahoma taxable income an amount equal to the amount of deferred
16 income included in such taxable income pursuant to Section 108(i)(1)
17 of the Internal Revenue Code by Section 1231 of the American
18 Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
19 11. For taxable years beginning on or after January 1, 2019,
20 there shall be subtracted from Oklahoma taxable income or adjusted
21 gross income any item of income or gain, and there shall be added to
22 Oklahoma taxable income or adjusted gross income any item of loss or
23 deduction that in the absence of an election pursuant to the
24 provisions of the Pass-Through Entity Tax Equity Act of 2019 would
Req. No. 14774 Page 20
1 be allocated to a member or to an indirect member of an electing
2 pass-through entity pursuant to Section 2351 et seq. of this title,
3 if (i) the electing pass-through entity has accounted for such item
4 in computing its Oklahoma net entity income or loss pursuant to the
5 provisions of the Pass-Through Entity Tax Equity Act of 2019, and
6 (ii) the total amount of tax attributable to any resulting Oklahoma
7 net entity income has been paid. The Oklahoma Tax Commission shall
8 promulgate rules for the reporting of such exclusion to direct and
9 indirect members of the electing pass-through entity. As used in
10 this paragraph, "electing pass-through entity", "indirect member",
11 and "member" shall be defined in the same manner as prescribed by
12 Section 2355.1P-2 of this title. Notwithstanding the application of
13 this paragraph, the adjusted tax basis of any ownership interest in
14 a pass-through entity for purposes of Section 2351 et seq. of this
15 title shall be equal to its adjusted tax basis for federal income
16 tax purposes.
17 B. 1. The taxable income of any corporation shall be further
18 adjusted to arrive at Oklahoma taxable income, except those
19 corporations electing treatment as provided in subchapter S of the
20 Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section
21 2365 of this title, deductions pursuant to the provisions of the
22 Accelerated Cost Recovery System as defined and allowed in the
23 Economic Recovery Tax Act of 1981, Public Law 97-34, 26 U.S.C.,
24 Section 168, for depreciation of assets placed into service after
Req. No. 14774 Page 21
1 December 31, 1981, shall not be allowed in calculating Oklahoma
2 taxable income. Such corporations shall be allowed a deduction for
3 depreciation of assets placed into service after December 31, 1981,
4 in accordance with provisions of the Internal Revenue Code, 26
5 U.S.C., Section 1 et seq., in effect immediately prior to the
6 enactment of the Accelerated Cost Recovery System. The Oklahoma tax
7 basis for all such assets placed into service after December 31,
8 1981, calculated in this section shall be retained and utilized for
9 all Oklahoma income tax purposes through the final disposition of
10 such assets.
11 Notwithstanding any other provisions of the Oklahoma Income Tax
12 Act, Section 2351 et seq. of this title, or of the Internal Revenue
13 Code to the contrary, this subsection shall control calculation of
14 depreciation of assets placed into service after December 31, 1981,
15 and before January 1, 1983.
16 For assets placed in service and held by a corporation in which
17 accelerated cost recovery system was previously disallowed, an
18 adjustment to taxable income is required in the first taxable year
19 beginning after December 31, 1982, to reconcile the basis of such
20 assets to the basis allowed in the Internal Revenue Code. The
21 purpose of this adjustment is to equalize the basis and allowance
22 for depreciation accounts between that reported to the Internal
23 Revenue Service and that reported to Oklahoma.
24
Req. No. 14774 Page 22
1 2. For tax years beginning on or after January 1, 2009, and
2 ending on or before December 31, 2009, there shall be added to
3 Oklahoma taxable income any amount in excess of One Hundred Seventy-
4 five Thousand Dollars ($175,000.00) which has been deducted as a
5 small business expense under Internal Revenue Code, Section 179 as
6 provided in the American Recovery and Reinvestment Act of 2009.
7 C. 1. For taxable years beginning after December 31, 1987, the
8 taxable income of any corporation shall be further adjusted to
9 arrive at Oklahoma taxable income for transfers of technology to
10 qualified small businesses located in Oklahoma. Such transferor
11 corporation shall be allowed an exemption from taxable income of an
12 amount equal to the amount of royalty payment received as a result
13 of such transfer; provided, however, such amount shall not exceed
14 ten percent (10%) of the amount of gross proceeds received by such
15 transferor corporation as a result of the technology transfer. Such
16 exemption shall be allowed for a period not to exceed ten (10) years
17 from the date of receipt of the first royalty payment accruing from
18 such transfer. No exemption may be claimed for transfers of
19 technology to qualified small businesses made prior to January 1,
20 1988.
21 2. For purposes of this subsection:
22 a. "Qualified small business" means an entity, whether
23 organized as a corporation, partnership, or
24 proprietorship, organized for profit with its
Req. No. 14774 Page 23
1 principal place of business located within this state
2 and which meets the following criteria:
3 (1) Capitalization of not more than Two Hundred Fifty
4 Thousand Dollars ($250,000.00),
5 (2) Having at least fifty percent (50%) of its
6 employees and assets located in Oklahoma at the
7 time of the transfer, and
8 (3) Not a subsidiary or affiliate of the transferor
9 corporation;
10 b. "Technology" means a proprietary process, formula,
11 pattern, device or compilation of scientific or
12 technical information which is not in the public
13 domain;
14 c. "Transferor corporation" means a corporation which is
15 the exclusive and undisputed owner of the technology
16 at the time the transfer is made; and
17 d. "Gross proceeds" means the total amount of
18 consideration for the transfer of technology, whether
19 the consideration is in money or otherwise.
20 D. 1. For taxable years beginning after December 31, 2005, the
21 taxable income of any corporation, estate or trust, shall be further
22 adjusted for qualifying gains receiving capital treatment. Such
23 corporations, estates or trusts shall be allowed a deduction from
24 Oklahoma taxable income for the amount of qualifying gains receiving
Req. No. 14774 Page 24
1 capital treatment earned by the corporation, estate or trust during
2 the taxable year and included in the federal taxable income of such
3 corporation, estate or trust.
4 2. As used in this subsection:
5 a. "qualifying gains receiving capital treatment" means
6 the amount of net capital gains, as defined in Section
7 1222(11) of the Internal Revenue Code, included in the
8 federal income tax return of the corporation, estate
9 or trust that result from:
10 (1) the sale of real property or tangible personal
11 property located within Oklahoma that has been
12 directly or indirectly owned by the corporation,
13 estate or trust for a holding period of at least
14 five (5) years prior to the date of the
15 transaction from which such net capital gains
16 arise,
17 (2) the sale of stock or on the sale of an ownership
18 interest in an Oklahoma company, limited
19 liability company, or partnership where such
20 stock or ownership interest has been directly or
21 indirectly owned by the corporation, estate or
22 trust for a holding period of at least three (3)
23 years prior to the date of the transaction from
24 which the net capital gains arise, or
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1 (3) the sale of real property, tangible personal
2 property or intangible personal property located
3 within Oklahoma as part of the sale of all or
4 substantially all of the assets of an Oklahoma
5 company, limited liability company, or
6 partnership where such property has been directly
7 or indirectly owned by such entity owned by the
8 owners of such entity, and used in or derived
9 from such entity for a period of at least three
10 (3) years prior to the date of the transaction
11 from which the net capital gains arise,
12 b. "holding period" means an uninterrupted period of
13 time. The holding period shall include any additional
14 period when the property was held by another
15 individual or entity, if such additional period is
16 included in the taxpayer's holding period for the
17 asset pursuant to the Internal Revenue Code,
18 c. "Oklahoma company", "limited liability company", or
19 "partnership" means an entity whose primary
20 headquarters have been located in Oklahoma for at
21 least three (3) uninterrupted years prior to the date
22 of the transaction from which the net capital gains
23 arise,
24
Req. No. 14774 Page 26
1 d. "direct" means the taxpayer directly owns the asset,
2 and
3 e. "indirect" means the taxpayer owns an interest in a
4 pass-through entity (or chain of pass-through
5 entities) that sells the asset that gives rise to the
6 qualifying gains receiving capital treatment.
7 (1) With respect to sales of real property or
8 tangible personal property located within
9 Oklahoma, the deduction described in this
10 subsection shall not apply unless the pass-
11 through entity that makes the sale has held the
12 property for not less than five (5) uninterrupted
13 years prior to the date of the transaction that
14 created the capital gain, and each pass-through
15 entity included in the chain of ownership has
16 been a member, partner, or shareholder of the
17 pass-through entity in the tier immediately below
18 it for an uninterrupted period of not less than
19 five (5) years.
20 (2) With respect to sales of stock or ownership
21 interest in or sales of all or substantially all
22 of the assets of an Oklahoma company, limited
23 liability company, or partnership, the deduction
24 described in this subsection shall not apply
Req. No. 14774 Page 27
1 unless the pass-through entity that makes the
2 sale has held the stock or ownership interest or
3 the assets for not less than three (3)
4 uninterrupted years prior to the date of the
5 transaction that created the capital gain, and
6 each pass-through entity included in the chain of
7 ownership has been a member, partner or
8 shareholder of the pass-through entity in the
9 tier immediately below it for an uninterrupted
10 period of not less than three (3) years.
11 E. The Oklahoma adjusted gross income of any individual
12 taxpayer shall be further adjusted as follows to arrive at Oklahoma
13 taxable income:
14 1. a. In the case of individuals, there shall be added or
15 deducted, as the case may be, the difference necessary
16 to allow personal exemptions of One Thousand Dollars
17 ($1,000.00) in lieu of the personal exemptions allowed
18 by the Internal Revenue Code.
19 b. There shall be allowed an additional exemption of One
20 Thousand Dollars ($1,000.00) for each taxpayer or
21 spouse who is blind at the close of the tax year. For
22 purposes of this subparagraph, an individual is blind
23 only if the central visual acuity of the individual
24 does not exceed 20/200 in the better eye with
Req. No. 14774 Page 28
1 correcting lenses, or if the visual acuity of the
2 individual is greater than 20/200, but is accompanied
3 by a limitation in the fields of vision such that the
4 widest diameter of the visual field subtends an angle
5 no greater than twenty (20) degrees.
6 c. There shall be allowed an additional exemption of One
7 Thousand Dollars ($1,000.00) for each taxpayer or
8 spouse who is sixty-five (65) years of age or older at
9 the close of the tax year based upon the filing status
10 and federal adjusted gross income of the taxpayer.
11 Taxpayers with the following filing status may claim
12 this exemption if the federal adjusted gross income
13 does not exceed:
14 (1) Twenty-five Thousand Dollars ($25,000.00) if
15 married and filing jointly,
16 (2) Twelve Thousand Five Hundred Dollars ($12,500.00)
17 if married and filing separately,
18 (3) Fifteen Thousand Dollars ($15,000.00) if single,
19 and
20 (4) Nineteen Thousand Dollars ($19,000.00) if a
21 qualifying head of household.
22 Provided, for taxable years beginning after December
23 31, 1999, amounts included in the calculation of
24 federal adjusted gross income pursuant to the
Req. No. 14774 Page 29
1 conversion of a traditional individual retirement
2 account to a Roth individual retirement account shall
3 be excluded from federal adjusted gross income for
4 purposes of the income thresholds provided in this
5 subparagraph.
6 2. a. For taxable years beginning on or before December 31,
7 2005, in the case of individuals who use the standard
8 deduction in determining taxable income, there shall
9 be added or deducted, as the case may be, the
10 difference necessary to allow a standard deduction in
11 lieu of the standard deduction allowed by the Internal
12 Revenue Code, in an amount equal to the larger of
13 fifteen percent (15%) of the Oklahoma adjusted gross
14 income or One Thousand Dollars ($1,000.00), but not to
15 exceed Two Thousand Dollars ($2,000.00), except that
16 in the case of a married individual filing a separate
17 return such deduction shall be the larger of fifteen
18 percent (15%) of such Oklahoma adjusted gross income
19 or Five Hundred Dollars ($500.00), but not to exceed
20 the maximum amount of One Thousand Dollars
21 ($1,000.00).
22 b. For taxable years beginning on or after January 1,
23 2006, and before January 1, 2007, in the case of
24 individuals who use the standard deduction in
Req. No. 14774 Page 30
1 determining taxable income, there shall be added or
2 deducted, as the case may be, the difference necessary
3 to allow a standard deduction in lieu of the standard
4 deduction allowed by the Internal Revenue Code, in an
5 amount equal to:
6 (1) Three Thousand Dollars ($3,000.00), if the filing
7 status is married filing joint, head of household
8 or qualifying widow, or
9 (2) Two Thousand Dollars ($2,000.00), if the filing
10 status is single or married filing separate.
11 c. For the taxable year beginning on January 1, 2007, and
12 ending December 31, 2007, in the case of individuals
13 who use the standard deduction in determining taxable
14 income, there shall be added or deducted, as the case
15 may be, the difference necessary to allow a standard
16 deduction in lieu of the standard deduction allowed by
17 the Internal Revenue Code, in an amount equal to:
18 (1) Five Thousand Five Hundred Dollars ($5,500.00),
19 if the filing status is married filing joint or
20 qualifying widow, or
21 (2) Four Thousand One Hundred Twenty-five Dollars
22 ($4,125.00) for a head of household, or
23
24
Req. No. 14774 Page 31
1 (3) Two Thousand Seven Hundred Fifty Dollars
2 ($2,750.00), if the filing status is single or
3 married filing separate.
4 d. For the taxable year beginning on January 1, 2008, and
5 ending December 31, 2008, in the case of individuals
6 who use the standard deduction in determining taxable
7 income, there shall be added or deducted, as the case
8 may be, the difference necessary to allow a standard
9 deduction in lieu of the standard deduction allowed by
10 the Internal Revenue Code, in an amount equal to:
11 (1) Six Thousand Five Hundred Dollars ($6,500.00), if
12 the filing status is married filing joint or
13 qualifying widow,
14 (2) Four Thousand Eight Hundred Seventy-five Dollars
15 ($4,875.00) for a head of household, or
16 (3) Three Thousand Two Hundred Fifty Dollars
17 ($3,250.00), if the filing status is single or
18 married filing separate.
19 e. For the taxable year beginning on January 1, 2009, and
20 ending December 31, 2009, in the case of individuals
21 who use the standard deduction in determining taxable
22 income, there shall be added or deducted, as the case
23 may be, the difference necessary to allow a standard
24
Req. No. 14774 Page 32
1 deduction in lieu of the standard deduction allowed by
2 the Internal Revenue Code, in an amount equal to:
3 (1) Eight Thousand Five Hundred Dollars ($8,500.00),
4 if the filing status is married filing joint or
5 qualifying widow,
6 (2) Six Thousand Three Hundred Seventy-five Dollars
7 ($6,375.00) for a head of household, or
8 (3) Four Thousand Two Hundred Fifty Dollars
9 ($4,250.00), if the filing status is single or
10 married filing separate.
11 Oklahoma adjusted gross income shall be increased by
12 any amounts paid for motor vehicle excise taxes which
13 were deducted as allowed by the Internal Revenue Code.
14 f. For taxable years beginning on or after January 1,
15 2010, and ending on December 31, 2016, in the case of
16 individuals who use the standard deduction in
17 determining taxable income, there shall be added or
18 deducted, as the case may be, the difference necessary
19 to allow a standard deduction equal to the standard
20 deduction allowed by the Internal Revenue Code, based
21 upon the amount and filing status prescribed by such
22 Code for purposes of filing federal individual income
23 tax returns.
24
Req. No. 14774 Page 33
1 g. For taxable years beginning on or after January 1,
2 2017, in the case of individuals who use the standard
3 deduction in determining taxable income, there shall
4 be added or deducted, as the case may be, the
5 difference necessary to allow a standard deduction in
6 lieu of the standard deduction allowed by the Internal
7 Revenue Code, as follows:
8 (1) Six Thousand Three Hundred Fifty Dollars
9 ($6,350.00) for single or married filing
10 separately,
11 (2) Twelve Thousand Seven Hundred Dollars
12 ($12,700.00) for married filing jointly or
13 qualifying widower with dependent child, and
14 (3) Nine Thousand Three Hundred Fifty Dollars
15 ($9,350.00) for head of household.
16 3. a. In the case of resident and part-year resident
17 individuals having adjusted gross income from sources
18 both within and without the state, the itemized or
19 standard deductions and personal exemptions shall be
20 reduced to an amount which is the same portion of the
21 total thereof as Oklahoma adjusted gross income is of
22 adjusted gross income. To the extent itemized
23 deductions include allowable moving expense, proration
24 of moving expense shall not be required or permitted
Req. No. 14774 Page 34
1 but allowable moving expense shall be fully deductible
2 for those taxpayers moving within or into Oklahoma and
3 no part of moving expense shall be deductible for
4 those taxpayers moving without or out of Oklahoma.
5 All other itemized or standard deductions and personal
6 exemptions shall be subject to proration as provided
7 by law.
8 b. For taxable years beginning on or after January 1,
9 2018, the net amount of itemized deductions allowable
10 on an Oklahoma income tax return, subject to the
11 provisions of paragraph 24 of this subsection, shall
12 not exceed Seventeen Thousand Dollars ($17,000.00).
13 For purposes of this subparagraph, charitable
14 contributions and medical expenses deductible for
15 federal income tax purposes shall be excluded from the
16 amount of Seventeen Thousand Dollars ($17,000.00) as
17 specified by this subparagraph.
18 4. A resident individual with a physical disability
19 constituting a substantial handicap to employment may deduct from
20 Oklahoma adjusted gross income such expenditures to modify a motor
21 vehicle, home or workplace as are necessary to compensate for his or
22 her handicap. A veteran certified by the Department of Veterans
23 Affairs of the federal government as having a service-connected
24 disability shall be conclusively presumed to be an individual with a
Req. No. 14774 Page 35
1 physical disability constituting a substantial handicap to
2 employment. The Tax Commission shall promulgate rules containing a
3 list of combinations of common disabilities and modifications which
4 may be presumed to qualify for this deduction. The Tax Commission
5 shall prescribe necessary requirements for verification.
6 5. a. Before July 1, 2010, the first One Thousand Five
7 Hundred Dollars ($1,500.00) received by any person
8 from the United States as salary or compensation in
9 any form, other than retirement benefits, as a member
10 of any component of the Armed Forces of the United
11 States shall be deducted from taxable income.
12 b. On or after July 1, 2010, one hundred percent (100%)
13 of the income received by any person from the United
14 States as salary or compensation in any form, other
15 than retirement benefits, as a member of any component
16 of the Armed Forces of the United States shall be
17 deducted from taxable income.
18 c. Whenever the filing of a timely income tax return by a
19 member of the Armed Forces of the United States is
20 made impracticable or impossible of accomplishment by
21 reason of:
22 (1) absence from the United States, which term
23 includes only the states and the District of
24 Columbia,
Req. No. 14774 Page 36
1 (2) absence from the State of Oklahoma while on
2 active duty, or
3 (3) confinement in a hospital within the United
4 States for treatment of wounds, injuries or
5 disease,
6 the time for filing a return and paying an income tax
7 shall be and is hereby extended without incurring
8 liability for interest or penalties, to the fifteenth
9 day of the third month following the month in which:
10 (a) Such individual shall return to the United
11 States if the extension is granted pursuant
12 to subparagraph a of this paragraph, return
13 to the State of Oklahoma if the extension is
14 granted pursuant to subparagraph b of this
15 paragraph or be discharged from such
16 hospital if the extension is granted
17 pursuant to subparagraph c of this
18 paragraph, or
19 (b) An executor, administrator, or conservator
20 of the estate of the taxpayer is appointed,
21 whichever event occurs the earliest.
22 Provided, that the Tax Commission may, in its discretion, grant
23 any member of the Armed Forces of the United States an extension of
24 time for filing of income tax returns and payment of income tax
Req. No. 14774 Page 37
1 without incurring liabilities for interest or penalties. Such
2 extension may be granted only when in the judgment of the Tax
3 Commission a good cause exists therefor and may be for a period in
4 excess of six (6) months. A record of every such extension granted,
5 and the reason therefor, shall be kept.
6 6. Before July 1, 2010, the salary or any other form of
7 compensation, received from the United States by a member of any
8 component of the Armed Forces of the United States, shall be
9 deducted from taxable income during the time in which the person is
10 detained by the enemy in a conflict, is a prisoner of war or is
11 missing in action and not deceased; provided, after July 1, 2010,
12 all such salary or compensation shall be subject to the deduction as
13 provided pursuant to paragraph 5 of this subsection.
14 7. a. An individual taxpayer, whether resident or
15 nonresident, may deduct an amount equal to the federal
16 income taxes paid by the taxpayer during the taxable
17 year.
18 b. Federal taxes as described in subparagraph a of this
19 paragraph shall be deductible by any individual
20 taxpayer, whether resident or nonresident, only to the
21 extent they relate to income subject to taxation
22 pursuant to the provisions of the Oklahoma Income Tax
23 Act. The maximum amount allowable in the preceding
24 paragraph shall be prorated on the ratio of the
Req. No. 14774 Page 38
1 Oklahoma adjusted gross income to federal adjusted
2 gross income.
3 c. For the purpose of this paragraph, "federal income
4 taxes paid" shall mean federal income taxes, surtaxes
5 imposed on incomes or excess profits taxes, as though
6 the taxpayer was on the accrual basis. In determining
7 the amount of deduction for federal income taxes for
8 tax year 2001, the amount of the deduction shall not
9 be adjusted by the amount of any accelerated ten
10 percent (10%) tax rate bracket credit or advanced
11 refund of the credit received during the tax year
12 provided pursuant to the federal Economic Growth and
13 Tax Relief Reconciliation Act of 2001, P.L. No. 107-
14 16, and the advanced refund of such credit shall not
15 be subject to taxation.
16 d. The provisions of this paragraph shall apply to all
17 taxable years ending after December 31, 1978, and
18 beginning before January 1, 2006.
19 8. Retirement benefits not to exceed Five Thousand Five Hundred
20 Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five
21 Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand
22 Dollars ($10,000.00) for the 2006 tax year and all subsequent tax
23 years, which are received by an individual from the civil service of
24 the United States, the Oklahoma Public Employees Retirement System,
Req. No. 14774 Page 39
1 the Teachers' Retirement System of Oklahoma, the Oklahoma Law
2 Enforcement Retirement System, the Oklahoma Firefighters Pension and
3 Retirement System, the Oklahoma Police Pension and Retirement
4 System, the employee retirement systems created by counties pursuant
5 to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the
6 Uniform Retirement System for Justices and Judges, the Oklahoma
7 Wildlife Conservation Department Retirement Fund, the Oklahoma
8 Employment Security Commission Retirement Plan, or the employee
9 retirement systems created by municipalities pursuant to Section 48-
10 101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
11 from taxable income.
12 9. In taxable years beginning after December 3l, 1984, Social
13 Security benefits received by an individual shall be exempt from
14 taxable income, to the extent such benefits are included in the
15 federal adjusted gross income pursuant to the provisions of Section
16 86 of the Internal Revenue Code, 26 U.S.C., Section 86.
17 10. For taxable years beginning after December 31, 1994, lump-
18 sum distributions from employer plans of deferred compensation,
19 which are not qualified plans within the meaning of Section 401(a)
20 of the Internal Revenue Code, 26 U.S.C., Section 401(a), and which
21 are deposited in and accounted for within a separate bank account or
22 brokerage account in a financial institution within this state,
23 shall be excluded from taxable income in the same manner as a
24 qualifying rollover contribution to an individual retirement account
Req. No. 14774 Page 40
1 within the meaning of Section 408 of the Internal Revenue Code, 26
2 U.S.C., Section 408. Amounts withdrawn from such bank or brokerage
3 account, including any earnings thereon, shall be included in
4 taxable income when withdrawn in the same manner as withdrawals from
5 individual retirement accounts within the meaning of Section 408 of
6 the Internal Revenue Code.
7 11. In taxable years beginning after December 31, 1995,
8 contributions made to and interest received from a medical savings
9 account established pursuant to Sections 2621 through 2623 of Title
10 63 of the Oklahoma Statutes shall be exempt from taxable income.
11 12. For taxable years beginning after December 31, 1996, the
12 Oklahoma adjusted gross income of any individual taxpayer who is a
13 swine or poultry producer may be further adjusted for the deduction
14 for depreciation allowed for new construction or expansion costs
15 which may be computed using the same depreciation method elected for
16 federal income tax purposes except that the useful life shall be
17 seven (7) years for purposes of this paragraph. If depreciation is
18 allowed as a deduction in determining the adjusted gross income of
19 an individual, any depreciation calculated and claimed pursuant to
20 this section shall in no event be a duplication of any depreciation
21 allowed or permitted on the federal income tax return of the
22 individual.
23 13. a. In taxable years beginning before January 1, 2005,
24 retirement benefits not to exceed the amounts
Req. No. 14774 Page 41
1 specified in this paragraph, which are received by an
2 individual sixty-five (65) years of age or older and
3 whose Oklahoma adjusted gross income is Twenty-five
4 Thousand Dollars ($25,000.00) or less if the filing
5 status is single, head of household, or married filing
6 separate, or Fifty Thousand Dollars ($50,000.00) or
7 less if the filing status is married filing joint or
8 qualifying widow, shall be exempt from taxable income.
9 In taxable years beginning after December 31, 2004,
10 retirement benefits not to exceed the amounts
11 specified in this paragraph, which are received by an
12 individual whose Oklahoma adjusted gross income is
13 less than the qualifying amount specified in this
14 paragraph, shall be exempt from taxable income.
15 b. For purposes of this paragraph, the qualifying amount
16 shall be as follows:
17 (1) in taxable years beginning after December 31,
18 2004, and prior to January 1, 2007, the
19 qualifying amount shall be Thirty-seven Thousand
20 Five Hundred Dollars ($37,500.00) or less if the
21 filing status is single, head of household, or
22 married filing separate, or Seventy-five Thousand
23 Dollars ($75,000.00) or less if the filing status
24 is married filing jointly or qualifying widow,
Req. No. 14774 Page 42
1 (2) in the taxable year beginning January 1, 2007,
2 the qualifying amount shall be Fifty Thousand
3 Dollars ($50,000.00) or less if the filing status
4 is single, head of household, or married filing
5 separate, or One Hundred Thousand Dollars
6 ($100,000.00) or less if the filing status is
7 married filing jointly or qualifying widow,
8 (3) in the taxable year beginning January 1, 2008,
9 the qualifying amount shall be Sixty-two Thousand
10 Five Hundred Dollars ($62,500.00) or less if the
11 filing status is single, head of household, or
12 married filing separate, or One Hundred Twenty-
13 five Thousand Dollars ($125,000.00) or less if
14 the filing status is married filing jointly or
15 qualifying widow,
16 (4) in the taxable year beginning January 1, 2009,
17 the qualifying amount shall be One Hundred
18 Thousand Dollars ($100,000.00) or less if the
19 filing status is single, head of household, or
20 married filing separate, or Two Hundred Thousand
21 Dollars ($200,000.00) or less if the filing
22 status is married filing jointly or qualifying
23 widow, and
24
Req. No. 14774 Page 43
1 (5) in the taxable year beginning January 1, 2010,
2 and subsequent taxable years, there shall be no
3 limitation upon the qualifying amount.
4 c. For purposes of this paragraph, "retirement benefits"
5 means the total distributions or withdrawals from the
6 following:
7 (1) an employee pension benefit plan which satisfies
8 the requirements of Section 401 of the Internal
9 Revenue Code, 26 U.S.C., Section 401,
10 (2) an eligible deferred compensation plan that
11 satisfies the requirements of Section 457 of the
12 Internal Revenue Code, 26 U.S.C., Section 457,
13 (3) an individual retirement account, annuity or
14 trust or simplified employee pension that
15 satisfies the requirements of Section 408 of the
16 Internal Revenue Code, 26 U.S.C., Section 408,
17 (4) an employee annuity subject to the provisions of
18 Section 403(a) or (b) of the Internal Revenue
19 Code, 26 U.S.C., Section 403(a) or (b),
20 (5) United States Retirement Bonds which satisfy the
21 requirements of Section 86 of the Internal
22 Revenue Code, 26 U.S.C., Section 86, or
23 (6) lump-sum distributions from a retirement plan
24 which satisfies the requirements of Section
Req. No. 14774 Page 44
1 402(e) of the Internal Revenue Code, 26 U.S.C.,
2 Section 402(e).
3 d. The amount of the exemption provided by this paragraph
4 shall be limited to Five Thousand Five Hundred Dollars
5 ($5,500.00) for the 2004 tax year, Seven Thousand Five
6 Hundred Dollars ($7,500.00) for the 2005 tax year and
7 Ten Thousand Dollars ($10,000.00) for the tax year
8 2006 and for all subsequent tax years. Any individual
9 who claims the exemption provided for in paragraph 8
10 of this subsection shall not be permitted to claim a
11 combined total exemption pursuant to this paragraph
12 and paragraph 8 of this subsection in an amount
13 exceeding Five Thousand Five Hundred Dollars
14 ($5,500.00) for the 2004 tax year, Seven Thousand Five
15 Hundred Dollars ($7,500.00) for the 2005 tax year and
16 Ten Thousand Dollars ($10,000.00) for the 2006 tax
17 year and all subsequent tax years.
18 14. In taxable years beginning after December 31, 1999, for an
19 individual engaged in production agriculture who has filed a
20 Schedule F form with the taxpayer's federal income tax return for
21 such taxable year, there shall be excluded from taxable income any
22 amount which was included as federal taxable income or federal
23 adjusted gross income and which consists of the discharge of an
24
Req. No. 14774 Page 45
1 obligation by a creditor of the taxpayer incurred to finance the
2 production of agricultural products.
3 15. In taxable years beginning December 31, 2000, an amount
4 equal to one hundred percent (100%) of the amount of any scholarship
5 or stipend received from participation in the Oklahoma Police Corps
6 Program, as established in Section 2-140.3 of Title 47 of the
7 Oklahoma Statutes shall be exempt from taxable income.
8 16. a. In taxable years beginning after December 31, 2001,
9 and before January 1, 2005, there shall be allowed a
10 deduction in the amount of contributions to accounts
11 established pursuant to the Oklahoma College Savings
12 Plan Act. The deduction shall equal the amount of
13 contributions to accounts, but in no event shall the
14 deduction for each contributor exceed Two Thousand
15 Five Hundred Dollars ($2,500.00) each taxable year for
16 each account.
17 b. In taxable years beginning after December 31, 2004,
18 each taxpayer shall be allowed a deduction for
19 contributions to accounts established pursuant to the
20 Oklahoma College Savings Plan Act. The maximum annual
21 deduction shall equal the amount of contributions to
22 all such accounts plus any contributions to such
23 accounts by the taxpayer for prior taxable years after
24 December 31, 2004, which were not deducted, but in no
Req. No. 14774 Page 46
1 event shall the deduction for each tax year exceed Ten
2 Thousand Dollars ($10,000.00) for each individual
3 taxpayer or Twenty Thousand Dollars ($20,000.00) for
4 taxpayers filing a joint return. Any amount of a
5 contribution that is not deducted by the taxpayer in
6 the year for which the contribution is made may be
7 carried forward as a deduction from income for the
8 succeeding five (5) years. For taxable years
9 beginning after December 31, 2005, deductions may be
10 taken for contributions and rollovers made during a
11 taxable year and up to April 15 of the succeeding
12 year, or the due date of a taxpayer's state income tax
13 return, excluding extensions, whichever is later.
14 Provided, a deduction for the same contribution may
15 not be taken for two (2) different taxable years.
16 c. In taxable years beginning after December 31, 2006,
17 deductions for contributions made pursuant to
18 subparagraph b of this paragraph shall be limited as
19 follows:
20 (1) for a taxpayer who qualified for the five-year
21 carryforward election and who takes a rollover or
22 nonqualified withdrawal during that period, the
23 tax deduction otherwise available pursuant to
24 subparagraph b of this paragraph shall be reduced
Req. No. 14774 Page 47
1 by the amount which is equal to the rollover or
2 nonqualified withdrawal, and
3 (2) for a taxpayer who elects to take a rollover or
4 nonqualified withdrawal within the same tax year
5 in which a contribution was made to the
6 taxpayer's account, the tax deduction otherwise
7 available pursuant to subparagraph b of this
8 paragraph shall be reduced by the amount of the
9 contribution which is equal to the rollover or
10 nonqualified withdrawal.
11 d. If a taxpayer elects to take a rollover on a
12 contribution for which a deduction has been taken
13 pursuant to subparagraph b of this paragraph within
14 one (1) year of the date of contribution, the amount
15 of such rollover shall be included in the adjusted
16 gross income of the taxpayer in the taxable year of
17 the rollover.
18 e. If a taxpayer makes a nonqualified withdrawal of
19 contributions for which a deduction was taken pursuant
20 to subparagraph b of this paragraph, such nonqualified
21 withdrawal and any earnings thereon shall be included
22 in the adjusted gross income of the taxpayer in the
23 taxable year of the nonqualified withdrawal.
24 f. As used in this paragraph:
Req. No. 14774 Page 48
1 (1) "non-qualified withdrawal" means a withdrawal
2 from an Oklahoma College Savings Plan account
3 other than one of the following:
4 (a) a qualified withdrawal,
5 (b) a withdrawal made as a result of the death
6 or disability of the designated beneficiary
7 of an account,
8 (c) a withdrawal that is made on the account of
9 a scholarship or the allowance or payment
10 described in Section 135(d)(1)(B) or (C) or
11 by the Internal Revenue Code, received by
12 the designated beneficiary to the extent the
13 amount of the refund does not exceed the
14 amount of the scholarship, allowance, or
15 payment, or
16 (d) a rollover or change of designated
17 beneficiary as permitted by subsection F of
18 Section 3970.7 of Title 70 of Oklahoma
19 Statutes, and
20 (2) "rollover" means the transfer of funds from the
21 Oklahoma College Savings Plan to any other plan
22 under Section 529 of the Internal Revenue Code.
23 17. For tax years 2006 through 2021, retirement benefits
24 received by an individual from any component of the Armed Forces of
Req. No. 14774 Page 49
1 the United States in an amount not to exceed the greater of seventy-
2 five percent (75%) of such benefits or Ten Thousand Dollars
3 ($10,000.00) shall be exempt from taxable income but in no case less
4 than the amount of the exemption provided by paragraph 13 of this
5 subsection. For tax year 2022 and subsequent tax years, retirement
6 benefits received by an individual from any component of the Armed
7 Forces of the United States shall be exempt from taxable income.
8 18. For taxable years beginning after December 31, 2006,
9 retirement benefits received by federal civil service retirees,
10 including survivor annuities, paid in lieu of Social Security
11 benefits shall be exempt from taxable income to the extent such
12 benefits are included in the federal adjusted gross income pursuant
13 to the provisions of Section 86 of the Internal Revenue Code, 26
14 U.S.C., Section 86, according to the following schedule:
15 a. in the taxable year beginning January 1, 2007, twenty
16 percent (20%) of such benefits shall be exempt,
17 b. in the taxable year beginning January 1, 2008, forty
18 percent (40%) of such benefits shall be exempt,
19 c. in the taxable year beginning January 1, 2009, sixty
20 percent (60%) of such benefits shall be exempt,
21 d. in the taxable year beginning January 1, 2010, eighty
22 percent (80%) of such benefits shall be exempt, and
23
24
Req. No. 14774 Page 50
1 e. in the taxable year beginning January 1, 2011, and
2 subsequent taxable years, one hundred percent (100%)
3 of such benefits shall be exempt.
4 19. a. For taxable years beginning after December 31, 2007, a
5 resident individual may deduct up to Ten Thousand
6 Dollars ($10,000.00) from Oklahoma adjusted gross
7 income if the individual, or the dependent of the
8 individual, while living, donates one or more human
9 organs of the individual to another human being for
10 human organ transplantation. As used in this
11 paragraph, "human organ" means all or part of a liver,
12 pancreas, kidney, intestine, lung, or bone marrow. A
13 deduction that is claimed under this paragraph may be
14 claimed in the taxable year in which the human organ
15 transplantation occurs.
16 b. An individual may claim this deduction only once, and
17 the deduction may be claimed only for unreimbursed
18 expenses that are incurred by the individual and
19 related to the organ donation of the individual.
20 c. The Oklahoma Tax Commission shall promulgate rules to
21 implement the provisions of this paragraph which shall
22 contain a specific list of expenses which may be
23 presumed to qualify for the deduction. The Tax
24
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1 Commission shall prescribe necessary requirements for
2 verification.
3 20. For taxable years beginning after December 31, 2009, there
4 shall be exempt from taxable income any amount received by the
5 beneficiary of the death benefit for an emergency medical technician
6 or a registered emergency medical responder provided by Section 1-
7 2505.1 of Title 63 of the Oklahoma Statutes.
8 21. For taxable years beginning after December 31, 2008,
9 taxable income shall be increased by any unemployment compensation
10 exempted under Section 85(c) of the Internal Revenue Code, 26
11 U.S.C., Section 85(c)(2009).
12 22. For taxable years beginning after December 31, 2008, there
13 shall be exempt from taxable income any payment in an amount less
14 than Six Hundred Dollars ($600.00) received by a person as an award
15 for participation in a competitive livestock show event. For
16 purposes of this paragraph, the payment shall be treated as a
17 scholarship amount paid by the entity sponsoring the event and the
18 sponsoring entity shall cause the payment to be categorized as a
19 scholarship in its books and records.
20 23. For taxable years beginning on or after January 1, 2016,
21 taxable income shall be increased by any amount of state and local
22 sales or income taxes deducted under 26 U.S.C., Section 164 of the
23 Internal Revenue Code. If the amount of state and local taxes
24 deducted on the federal return is limited, taxable income on the
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1 state return shall be increased only by the amount actually deducted
2 after any such limitations are applied.
3 24. For taxable years beginning after December 31, 2020, each
4 taxpayer shall be allowed a deduction for contributions to accounts
5 established pursuant to the Achieving a Better Life Experience
6 (ABLE) Program as established in Section 4001.1 et seq. of Title 56
7 of the Oklahoma Statutes. For any tax year, the deduction provided
8 for in this paragraph shall not exceed Ten Thousand Dollars
9 ($10,000.00) for an individual taxpayer or Twenty Thousand Dollars
10 ($20,000.00) for taxpayers filing a joint return. Any amount of
11 contribution not deducted by the taxpayer in the tax year for which
12 the contribution is made may be carried forward as a deduction from
13 income for up to five (5) tax years. Deductions may be taken for
14 contributions made during the tax year and through April 15 of the
15 succeeding tax year, or through the due date of a taxpayer's state
16 income tax return excluding extensions, whichever is later.
17 Provided, a deduction for the same contribution may not be taken in
18 more than one (1) tax year.
19 F. 1. For taxable years beginning after December 31, 2004, a
20 deduction from the Oklahoma adjusted gross income of any individual
21 taxpayer shall be allowed for qualifying gains receiving capital
22 treatment that are included in the federal adjusted gross income of
23 such individual taxpayer during the taxable year.
24 2. As used in this subsection:
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1 a. "qualifying gains receiving capital treatment" means
2 the amount of net capital gains, as defined in Section
3 1222(11) of the Internal Revenue Code, included in an
4 individual taxpayer's federal income tax return that
5 result from:
6 (1) the sale of real property or tangible personal
7 property located within Oklahoma that has been
8 directly or indirectly owned by the individual
9 taxpayer for a holding period of at least five
10 (5) years prior to the date of the transaction
11 from which such net capital gains arise,
12 (2) the sale of stock or the sale of a direct or
13 indirect ownership interest in an Oklahoma
14 company, limited liability company, or
15 partnership where such stock or ownership
16 interest has been directly or indirectly owned by
17 the individual taxpayer for a holding period of
18 at least two (2) years prior to the date of the
19 transaction from which the net capital gains
20 arise, or
21 (3) the sale of real property, tangible personal
22 property or intangible personal property located
23 within Oklahoma as part of the sale of all or
24 substantially all of the assets of an Oklahoma
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1 company, limited liability company, or
2 partnership or an Oklahoma proprietorship
3 business enterprise where such property has been
4 directly or indirectly owned by such entity or
5 business enterprise or owned by the owners of
6 such entity or business enterprise for a period
7 of at least two (2) years prior to the date of
8 the transaction from which the net capital gains
9 arise,
10 b. "holding period" means an uninterrupted period of
11 time. The holding period shall include any additional
12 period when the property was held by another
13 individual or entity, if such additional period is
14 included in the taxpayer's holding period for the
15 asset pursuant to the Internal Revenue Code,
16 c. "Oklahoma company," "limited liability company," or
17 "partnership" means an entity whose primary
18 headquarters have been located in Oklahoma for at
19 least three (3) uninterrupted years prior to the date
20 of the transaction from which the net capital gains
21 arise,
22 d. "direct" means the individual taxpayer directly owns
23 the asset,
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1 e. "indirect" means the individual taxpayer owns an
2 interest in a pass-through entity (or chain of pass-
3 through entities) that sells the asset that gives rise
4 to the qualifying gains receiving capital treatment.
5 (1) With respect to sales of real property or
6 tangible personal property located within
7 Oklahoma, the deduction described in this
8 subsection shall not apply unless the pass-
9 through entity that makes the sale has held the
10 property for not less than five (5) uninterrupted
11 years prior to the date of the transaction that
12 created the capital gain, and each pass-through
13 entity included in the chain of ownership has
14 been a member, partner, or shareholder of the
15 pass-through entity in the tier immediately below
16 it for an uninterrupted period of not less than
17 five (5) years.
18 (2) With respect to sales of stock or ownership
19 interest in or sales of all or substantially all
20 of the assets of an Oklahoma company, limited
21 liability company, partnership or Oklahoma
22 proprietorship business enterprise, the deduction
23 described in this subsection shall not apply
24 unless the pass-through entity that makes the
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1 sale has held the stock or ownership interest for
2 not less than two (2) uninterrupted years prior
3 to the date of the transaction that created the
4 capital gain, and each pass-through entity
5 included in the chain of ownership has been a
6 member, partner or shareholder of the pass-
7 through entity in the tier immediately below it
8 for an uninterrupted period of not less than two
9 (2) years. For purposes of this division,
10 uninterrupted ownership prior to July 1, 2007,
11 shall be included in the determination of the
12 required holding period prescribed by this
13 division, and
14 f. "Oklahoma proprietorship business enterprise" means a
15 business enterprise whose income and expenses have
16 been reported on Schedule C or F of an individual
17 taxpayer's federal income tax return, or any similar
18 successor schedule published by the Internal Revenue
19 Service and whose primary headquarters have been
20 located in Oklahoma for at least three (3)
21 uninterrupted years prior to the date of the
22 transaction from which the net capital gains arise.
23 G. 1. For purposes of computing its Oklahoma taxable income
24 under this section, the dividends-paid deduction otherwise allowed
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1 by federal law in computing net income of a real estate investment
2 trust that is subject to federal income tax shall be added back in
3 computing the tax imposed by this state under this title if the real
4 estate investment trust is a captive real estate investment trust.
5 2. For purposes of computing its Oklahoma taxable income under
6 this section, a taxpayer shall add back otherwise deductible rents
7 and interest expenses paid to a captive real estate investment trust
8 that is not subject to the provisions of paragraph 1 of this
9 subsection. As used in this subsection:
10 a. the term "real estate investment trust" or "REIT"
11 means the meaning ascribed to such term in Section 856
12 of the Internal Revenue Code,
13 b. the term "captive real estate investment trust" means
14 a real estate investment trust, the shares or
15 beneficial interests of which are not regularly traded
16 on an established securities market and more than
17 fifty percent (50%) of the voting power or value of
18 the beneficial interests or shares of which are owned
19 or controlled, directly or indirectly, or
20 constructively, by a single entity that is:
21 (1) treated as an association taxable as a
22 corporation under the Internal Revenue Code, and
23
24
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1 (2) not exempt from federal income tax pursuant to
2 the provisions of Section 501(a) of the Internal
3 Revenue Code.
4 The term shall not include a real estate investment
5 trust that is intended to be regularly traded on an
6 established securities market, and that satisfies the
7 requirements of Section 856(a)(5) and (6) of the U.S.
8 Internal Revenue Code by reason of Section 856(h)(2)
9 of the Internal Revenue Code,
10 c. the term "association taxable as a corporation" shall
11 not include the following entities:
12 (1) any real estate investment trust as defined in
13 paragraph a of this subsection other than a
14 "captive real estate investment trust",
15 (2) any qualified real estate investment trust
16 subsidiary under Section 856(i) of the Internal
17 Revenue Code, other than a qualified REIT
18 subsidiary of a "captive real estate investment
19 trust",
20 (3) any Listed Australian Property Trust (meaning an
21 Australian unit trust registered as a "Managed
22 Investment Scheme" under the Australian
23 Corporations Act in which the principal class of
24 units is listed on a recognized stock exchange in
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1 Australia and is regularly traded on an
2 established securities market), or an entity
3 organized as a trust, provided that a Listed
4 Australian Property Trust owns or controls,
5 directly or indirectly, seventy-five percent
6 (75%) or more of the voting power or value of the
7 beneficial interests or shares of such trust, or
8 (4) any Qualified Foreign Entity, meaning a
9 corporation, trust, association or partnership
10 organized outside the laws of the United States
11 and which satisfies the following criteria:
12 (a) at least seventy-five percent (75%) of the
13 entity's total asset value at the close of
14 its taxable year is represented by real
15 estate assets, as defined in Section
16 856(c)(5)(B) of the Internal Revenue Code,
17 thereby including shares or certificates of
18 beneficial interest in any real estate
19 investment trust, cash and cash equivalents,
20 and U.S. Government securities,
21 (b) the entity receives a dividend-paid
22 deduction comparable to Section 561 of the
23 Internal Revenue Code, or is exempt from
24 entity level tax,
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1 (c) the entity is required to distribute at
2 least eighty-five percent (85%) of its
3 taxable income, as computed in the
4 jurisdiction in which it is organized, to
5 the holders of its shares or certificates of
6 beneficial interest on an annual basis,
7 (d) not more than ten percent (10%) of the
8 voting power or value in such entity is held
9 directly or indirectly or constructively by
10 a single entity or individual, or the shares
11 or beneficial interests of such entity are
12 regularly traded on an established
13 securities market, and
14 (e) the entity is organized in a country which
15 has a tax treaty with the United States.
16 3. For purposes of this subsection, the constructive ownership
17 rules of Section 318(a) of the Internal Revenue Code, as modified by
18 Section 856(d)(5) of the Internal Revenue Code, shall apply in
19 determining the ownership of stock, assets, or net profits of any
20 person.
21 4. A real estate investment trust that does not become
22 regularly traded on an established securities market within one (1)
23 year of the date on which it first becomes a real estate investment
24 trust shall be deemed not to have been regularly traded on an
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1 established securities market, retroactive to the date it first
2 became a real estate investment trust, and shall file an amended
3 return reflecting such retroactive designation for any tax year or
4 part year occurring during its initial year of status as a real
5 estate investment trust. For purposes of this subsection, a real
6 estate investment trust becomes a real estate investment trust on
7 the first day it has both met the requirements of Section 856 of the
8 Internal Revenue Code and has elected to be treated as a real estate
9 investment trust pursuant to Section 856(c)(1) of the Internal
10 Revenue Code.
11 SECTION 2. This act shall become effective January 1, 2027.
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Req. No. 14774 Page 62Every fact on this page links to its source, starting with the official bill record.