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1 STATE OF OKLAHOMA
1
2 1st Session of the 60th Legislature (2025)
2
3 SENATE BILL 43 By: Daniels
3
4
4
5
5
6
6
7 AS INTRODUCED
7
8 An Act relating to income tax; amending 68 O.S. 2021,
8 Section 2358, as last amended by Section 155, Chapter
9 452, O.S.L. 2024 (68 O.S. Supp. 2024, Section 2358),
9 which relates to adjustments; eliminating limitation
10 on itemization of wagering losses for certain tax
10 years; updating statutory language; updating
11 statutory references; and providing an effective
11 date.
12
12
13
13
14
14
15 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
15
16 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358, as
16
17 last amended by Section 155, Chapter 452, O.S.L. 2024 (68 O.S. Supp.
17
18 2024, Section 2358), is amended to read as follows:
18
19 Section 2358. For all tax years beginning after December 31,
19
20 1981, taxable income and adjusted gross income shall be adjusted to
20
21 arrive at Oklahoma taxable income and Oklahoma adjusted gross income
21
22 as required by this section.
22
23
23
24
24
Req. No. 1076 Page 1
1 A. The taxable income of any taxpayer shall be adjusted to
1
2 arrive at Oklahoma taxable income for corporations and Oklahoma
2
3 adjusted gross income for individuals, as follows:
3
4 1. There shall be added interest income on obligations of any
4
5 state or political subdivision thereto which is not otherwise
5
6 exempted pursuant to other laws of this state, to the extent that
6
7 such interest is not included in taxable income and adjusted gross
7
8 income.
8
9 2. There shall be deducted amounts included in such income that
9
10 the state is prohibited from taxing because of the provisions of the
10
11 Federal United States Constitution, the State Oklahoma Constitution,
11
12 federal laws or laws of Oklahoma.
12
13 3. The amount of any federal net operating loss deduction shall
13
14 be adjusted as follows:
14
15 a. For carryovers and carrybacks to taxable years
15
16 beginning before January 1, 1981, the amount of any
16
17 net operating loss deduction allowed to a taxpayer for
17
18 federal income tax purposes shall be reduced to an
18
19 amount which is the same portion thereof as the loss
19
20 from sources within this state, as determined pursuant
20
21 to this section and Section 2362 of this title, for
21
22 the taxable year in which such loss is sustained is of
22
23 the total loss for such year;
23
24
24
Req. No. 1076 Page 2
1 b. For carryovers and carrybacks to taxable years
1
2 beginning after December 31, 1980, the amount of any
2
3 net operating loss deduction allowed for the taxable
3
4 year shall be an amount equal to the aggregate of the
4
5 Oklahoma net operating loss carryovers and carrybacks
5
6 to such year. Oklahoma net operating losses shall be
6
7 separately determined by reference to Section 172 of
7
8 the Internal Revenue Code of 1986, as amended, 26
8
9 U.S.C., Section 172, as modified by the Oklahoma
9
10 Income Tax Act, Section 2351 et seq. of this title,
10
11 and shall be allowed without regard to the existence
11
12 of a federal net operating loss. For tax years
12
13 beginning after December 31, 2000, and ending before
13
14 January 1, 2008, the years to which such losses may be
14
15 carried shall be determined solely by reference to
15
16 Section 172 of the Internal Revenue Code of 1986, as
16
17 amended, 26 U.S.C., Section 172, with the exception
17
18 that the terms "net operating loss" and "taxable
18
19 income" shall be replaced with "Oklahoma net operating
19
20 loss" and "Oklahoma taxable income". For tax years
20
21 beginning after December 31, 2007, and ending before
21
22 January 1, 2009, years to which such losses may be
22
23 carried back shall be limited to two (2) years. For
23
24 tax years beginning after December 31, 2008, the years
24
Req. No. 1076 Page 3
1 to which such losses may be carried back shall be
1
2 determined solely by reference to Section 172 of the
2
3 Internal Revenue Code of 1986, as amended, 26 U.S.C.,
3
4 Section 172, with the exception that the terms "net
4
5 operating loss" and "taxable income" shall be replaced
5
6 with "Oklahoma net operating loss" and "Oklahoma
6
7 taxable income".
7
8 4. Items of the following nature shall be allocated as
8
9 indicated. Allowable deductions attributable to items separately
9
10 allocable in subparagraphs a, b and c of this paragraph, whether or
10
11 not such items of income were actually received, shall be allocated
11
12 on the same basis as those items:
12
13 a. Income from real and tangible personal property, such
13
14 as rents, oil and mining production or royalties, and
14
15 gains or losses from sales of such property, shall be
15
16 allocated in accordance with the situs of such
16
17 property;
17
18 b. Income from intangible personal property, such as
18
19 interest, dividends, patent or copyright royalties,
19
20 and gains or losses from sales of such property, shall
20
21 be allocated in accordance with the domiciliary situs
21
22 of the taxpayer, except that:
22
23 (1) where such property has acquired a nonunitary
23
24 business or commercial situs apart from the
24
Req. No. 1076 Page 4
1 domicile of the taxpayer such income shall be
1
2 allocated in accordance with such business or
2
3 commercial situs; interest income from
3
4 investments held to generate working capital for
4
5 a unitary business enterprise shall be included
5
6 in apportionable income; a resident trust or
6
7 resident estate shall be treated as having a
7
8 separate commercial or business situs insofar as
8
9 undistributed income is concerned, but shall not
9
10 be treated as having a separate commercial or
10
11 business situs insofar as distributed income is
11
12 concerned,
12
13 (2) for taxable years beginning after December 31,
13
14 2003, capital or ordinary gains or losses from
14
15 the sale of an ownership interest in a publicly
15
16 traded partnership, as defined by Section 7704(b)
16
17 of the Internal Revenue Code of 1986, as amended,
17
18 shall be allocated to this state in the ratio of
18
19 the original cost of such partnership's tangible
19
20 property in this state to the original cost of
20
21 such partnership's tangible property everywhere,
21
22 as determined at the time of the sale; if more
22
23 than fifty percent (50%) of the value of the
23
24 partnership's assets consists of intangible
24
Req. No. 1076 Page 5
1 assets, capital or ordinary gains or losses from
1
2 the sale of an ownership interest in the
2
3 partnership shall be allocated to this state in
3
4 accordance with the sales factor of the
4
5 partnership for its first full tax period
5
6 immediately preceding its tax period during which
6
7 the ownership interest in the partnership was
7
8 sold; the provisions of this division shall only
8
9 apply if the capital or ordinary gains or losses
9
10 from the sale of an ownership interest in a
10
11 partnership do not constitute qualifying gain
11
12 receiving capital treatment as defined in
12
13 subparagraph a of paragraph 2 of subsection F of
13
14 this section,
14
15 (3) income from such property which is required to be
15
16 allocated pursuant to the provisions of paragraph
16
17 5 of this subsection shall be allocated as herein
17
18 provided;
18
19 c. Net income or loss from a business activity which is
19
20 not a part of business carried on within or without
20
21 the state of a unitary character shall be separately
21
22 allocated to the state in which such activity is
22
23 conducted;
23
24
24
Req. No. 1076 Page 6
1 d. In the case of a manufacturing or processing
1
2 enterprise the business of which in Oklahoma this
2
3 state consists solely of marketing its products by:
3
4 (1) sales having a situs without this state, shipped
4
5 directly to a point from without the state to a
5
6 purchaser within the state, commonly known as
6
7 interstate sales,
7
8 (2) sales of the product stored in public warehouses
8
9 within the state pursuant to "in transit"
9
10 tariffs, as prescribed and allowed by the
10
11 Interstate Commerce Commission, to a purchaser
11
12 within the state,
12
13 (3) sales of the product stored in public warehouses
13
14 within the state where the shipment to such
14
15 warehouses is not covered by "in transit"
15
16 tariffs, as prescribed and allowed by the
16
17 Interstate Commerce Commission, to a purchaser
17
18 within or without the state,
18
19 the Oklahoma net income shall, at the option of the
19
20 taxpayer, be that portion of the total net income of
20
21 the taxpayer for federal income tax purposes derived
21
22 from the manufacture and/or processing and sales
22
23 everywhere as determined by the ratio of the sales
23
24 defined in this section made to the purchaser within
24
Req. No. 1076 Page 7
1 the state to the total sales everywhere. The term
1
2 "public warehouse" as used in this subparagraph means
2
3 a licensed public warehouse, the principal business of
3
4 which is warehousing merchandise for the public;
4
5 e. In the case of insurance companies, Oklahoma taxable
5
6 income shall be taxable income of the taxpayer for
6
7 federal tax purposes, as adjusted for the adjustments
7
8 provided pursuant to the provisions of paragraphs 1
8
9 and 2 of this subsection, apportioned as follows:
9
10 (1) except as otherwise provided by division (2) of
10
11 this subparagraph, taxable income of an insurance
11
12 company for a taxable year shall be apportioned
12
13 to this state by multiplying such income by a
13
14 fraction, the numerator of which is the direct
14
15 premiums written for insurance on property or
15
16 risks in this state, and the denominator of which
16
17 is the direct premiums written for insurance on
17
18 property or risks everywhere. For purposes of
18
19 this subsection, the term "direct premiums
19
20 written" means the total amount of direct
20
21 premiums written, assessments and annuity
21
22 considerations as reported for the taxable year
22
23 on the annual statement filed by the company with
23
24 the Insurance Commissioner in the form approved
24
Req. No. 1076 Page 8
1 by the National Association of Insurance
1
2 Commissioners, or such other form as may be
2
3 prescribed in lieu thereof,
3
4 (2) if the principal source of premiums written by an
4
5 insurance company consists of premiums for
5
6 reinsurance accepted by it, the taxable income of
6
7 such company shall be apportioned to this state
7
8 by multiplying such income by a fraction, the
8
9 numerator of which is the sum of (a) direct
9
10 premiums written for insurance on property or
10
11 risks in this state, plus (b) premiums written
11
12 for reinsurance accepted in respect of property
12
13 or risks in this state, and the denominator of
13
14 which is the sum of (c) direct premiums written
14
15 for insurance on property or risks everywhere,
15
16 plus (d) premiums written for reinsurance
16
17 accepted in respect of property or risks
17
18 everywhere. For purposes of this paragraph,
18
19 premiums written for reinsurance accepted in
19
20 respect of property or risks in this state,
20
21 whether or not otherwise determinable, may at the
21
22 election of the company be determined on the
22
23 basis of the proportion which premiums written
23
24 for insurance accepted from companies
24
Req. No. 1076 Page 9
1 commercially domiciled in Oklahoma this state
1
2 bears to premiums written for reinsurance
2
3 accepted from all sources, or alternatively in
3
4 the proportion which the sum of the direct
4
5 premiums written for insurance on property or
5
6 risks in this state by each ceding company from
6
7 which reinsurance is accepted bears to the sum of
7
8 the total direct premiums written by each such
8
9 ceding company for the taxable year.
9
10 5. The net income or loss remaining after the separate
10
11 allocation in paragraph 4 of this subsection, being that which is
11
12 derived from a unitary business enterprise, shall be apportioned to
12
13 this state on the basis of the arithmetical average of three factors
13
14 consisting of property, payroll and sales or gross revenue
14
15 enumerated as subparagraphs a, b and c of this paragraph. Net
15
16 income or loss as used in this paragraph includes that derived from
16
17 patent or copyright royalties, purchase discounts, and interest on
17
18 accounts receivable relating to or arising from a business activity,
18
19 the income from which is apportioned pursuant to this subsection,
19
20 including the sale or other disposition of such property and any
20
21 other property used in the unitary enterprise. Deductions used in
21
22 computing such net income or loss shall not include taxes based on
22
23 or measured by income. Provided, for corporations whose property
23
24 for purposes of the tax imposed by Section 2355 of this title has an
24
Req. No. 1076 Page 10
1 initial investment cost equaling or exceeding Two Hundred Million
1
2 Dollars ($200,000,000.00) and such investment is made on or after
2
3 July 1, 1997, or for corporations which expand their property or
3
4 facilities in this state and such expansion has an investment cost
4
5 equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)
5
6 over a period not to exceed three (3) years, and such expansion is
6
7 commenced on or after January 1, 2000, the three factors shall be
7
8 apportioned with property and payroll, each comprising twenty-five
8
9 percent (25%) of the apportionment factor and sales comprising fifty
9
10 percent (50%) of the apportionment factor. The apportionment
10
11 factors shall be computed as follows:
11
12 a. The property factor is a fraction, the numerator of
12
13 which is the average value of the taxpayer's real and
13
14 tangible personal property owned or rented and used in
14
15 this state during the tax period and the denominator
15
16 of which is the average value of all the taxpayer's
16
17 real and tangible personal property everywhere owned
17
18 or rented and used during the tax period.
18
19 (1) Property, the income from which is separately
19
20 allocated in paragraph 4 of this subsection,
20
21 shall not be included in determining this
21
22 fraction. The numerator of the fraction shall
22
23 include a portion of the investment in
23
24 transportation and other equipment having no
24
Req. No. 1076 Page 11
1 fixed situs, such as rolling stock, buses, trucks
1
2 and trailers, including machinery and equipment
2
3 carried thereon, airplanes, salespersons'
3
4 automobiles and other similar equipment, in the
4
5 proportion that miles traveled in Oklahoma this
5
6 state by such equipment bears to total miles
6
7 traveled,
7
8 (2) Property owned by the taxpayer is valued at its
8
9 original cost. Property rented by the taxpayer
9
10 is valued at eight times the net annual rental
10
11 rate. Net annual rental rate is the annual
11
12 rental rate paid by the taxpayer, less any annual
12
13 rental rate received by the taxpayer from
13
14 subrentals,
14
15 (3) The average value of property shall be determined
15
16 by averaging the values at the beginning and
16
17 ending of the tax period but the Oklahoma Tax
17
18 Commission may require the averaging of monthly
18
19 values during the tax period if reasonably
19
20 required to reflect properly the average value of
20
21 the taxpayer's property;
21
22 b. The payroll factor is a fraction, the numerator of
22
23 which is the total compensation for services rendered
23
24 in the state during the tax period, and the
24
Req. No. 1076 Page 12
1 denominator of which is the total compensation for
1
2 services rendered everywhere during the tax period.
2
3 "Compensation", as used in this subsection, means
3
4 those paid-for services to the extent related to the
4
5 unitary business but does not include officers'
5
6 salaries, wages and other compensation.
6
7 (1) In the case of a transportation enterprise, the
7
8 numerator of the fraction shall include a portion
8
9 of such expenditure in connection with employees
9
10 operating equipment over a fixed route, such as
10
11 railroad employees, airline pilots, or bus
11
12 drivers, in this state only a part of the time,
12
13 in the proportion that mileage traveled in
13
14 Oklahoma this state bears to total mileage
14
15 traveled by such employees,
15
16 (2) In any case the numerator of the fraction shall
16
17 include a portion of such expenditures in
17
18 connection with itinerant employees, such as
18
19 traveling salespersons, in this state only a part
19
20 of the time, in the proportion that time spent in
20
21 Oklahoma this state bears to total time spent in
21
22 furtherance of the enterprise by such employees;
22
23 c. The sales factor is a fraction, the numerator of which
23
24 is the total sales or gross revenue of the taxpayer in
24
Req. No. 1076 Page 13
1 this state during the tax period, and the denominator
1
2 of which is the total sales or gross revenue of the
2
3 taxpayer everywhere during the tax period. "Sales",
3
4 as used in this subsection, does not include sales or
4
5 gross revenue which are separately allocated in
5
6 paragraph 4 of this subsection.
6
7 (1) Sales of tangible personal property have a situs
7
8 in this state if the property is delivered or
8
9 shipped to a purchaser other than the United
9
10 States government, within this state regardless
10
11 of the FOB Freight on Board (FOB) point or other
11
12 conditions of the sale; or the property is
12
13 shipped from an office, store, warehouse, factory
13
14 or other place of storage in this state and (a)
14
15 the purchaser is the United States government or
15
16 (b) the taxpayer is not doing business in the
16
17 state of the destination of the shipment.
17
18 (2) In the case of a railroad or interurban railway
18
19 enterprise, the numerator of the fraction shall
19
20 not be less than the allocation of revenues to
20
21 this state as shown in its annual report to the
21
22 Corporation Commission.
22
23 (3) In the case of an airline, truck or bus
23
24 enterprise or freight car, tank car, refrigerator
24
Req. No. 1076 Page 14
1 car or other railroad equipment enterprise, the
1
2 numerator of the fraction shall include a portion
2
3 of revenue from interstate transportation in the
3
4 proportion that interstate mileage traveled in
4
5 Oklahoma this state bears to total interstate
5
6 mileage traveled.
6
7 (4) In the case of an oil, gasoline or gas pipeline
7
8 enterprise, the numerator of the fraction shall
8
9 be either the total of traffic units of the
9
10 enterprise within Oklahoma this state or the
10
11 revenue allocated to Oklahoma this state based
11
12 upon miles moved, at the option of the taxpayer,
12
13 and the denominator of which shall be the total
13
14 of traffic units of the enterprise or the revenue
14
15 of the enterprise everywhere as appropriate to
15
16 the numerator. A "traffic unit" is hereby
16
17 defined as the transportation for a distance of
17
18 one (1) mile of one (1) barrel of oil, one (1)
18
19 gallon of gasoline or one thousand (1,000) cubic
19
20 feet of natural or casinghead gas, as the case
20
21 may be.
21
22 (5) In the case of a telephone or telegraph or other
22
23 communication enterprise, the numerator of the
23
24 fraction shall include that portion of the
24
Req. No. 1076 Page 15
1 interstate revenue as is allocated pursuant to
1
2 the accounting procedures prescribed by the
2
3 Federal Communications Commission; provided that
3
4 in respect to each corporation or business entity
4
5 required by the Federal Communications Commission
5
6 to keep its books and records in accordance with
6
7 a uniform system of accounts prescribed by such
7
8 Commission, the intrastate net income shall be
8
9 determined separately in the manner provided by
9
10 such uniform system of accounts and only the
10
11 interstate income shall be subject to allocation
11
12 pursuant to the provisions of this subsection.
12
13 Provided further, that the gross revenue factors
13
14 shall be those as are determined pursuant to the
14
15 accounting procedures prescribed by the Federal
15
16 Communications Commission.
16
17 In any case where the apportionment of the three factors
17
18 prescribed in this paragraph attributes to Oklahoma this state a
18
19 portion of net income of the enterprise out of all appropriate
19
20 proportion to the property owned and/or business transacted within
20
21 this state, because of the fact that one or more of the factors so
21
22 prescribed are not employed to any appreciable extent in furtherance
22
23 of the enterprise; or because one or more factors not so prescribed
23
24 are employed to a considerable extent in furtherance of the
24
Req. No. 1076 Page 16
1 enterprise; or because of other reasons, the Tax Commission is
1
2 empowered to permit, after a showing by taxpayer that an excessive
2
3 portion of net income has been attributed to Oklahoma this state, or
3
4 require, when in its judgment an insufficient portion of net income
4
5 has been attributed to Oklahoma this state, the elimination,
5
6 substitution, or use of additional factors, or reduction or increase
6
7 in the weight of such prescribed factors. Provided, however, that
7
8 any such variance from such prescribed factors which has the effect
8
9 of increasing the portion of net income attributable to Oklahoma
9
10 this state must not be inherently arbitrary, and application of the
10
11 recomputed final apportionment to the net income of the enterprise
11
12 must attribute to Oklahoma this state only a reasonable portion
12
13 thereof.
13
14 6. For calendar years 1997 and 1998, the owner of a new or
14
15 expanded agricultural commodity processing facility in this state
15
16 may exclude from Oklahoma taxable income, or in the case of an
16
17 individual, the Oklahoma adjusted gross income, fifteen percent
17
18 (15%) of the investment by the owner in the new or expanded
18
19 agricultural commodity processing facility. For calendar year 1999,
19
20 and all subsequent years, the percentage, not to exceed fifteen
20
21 percent (15%), available to the owner of a new or expanded
21
22 agricultural commodity processing facility in this state claiming
22
23 the exemption shall be adjusted annually so that the total estimated
23
24 reduction in tax liability does not exceed One Million Dollars
24
Req. No. 1076 Page 17
1 ($1,000,000.00) annually. The Tax Commission shall promulgate rules
1
2 for determining the percentage of the investment which each eligible
2
3 taxpayer may exclude. The exclusion provided by this paragraph
3
4 shall be taken in the taxable year when the investment is made. In
4
5 the event the total reduction in tax liability authorized by this
5
6 paragraph exceeds One Million Dollars ($1,000,000.00) in any
6
7 calendar year, the Tax Commission shall permit any excess over One
7
8 Million Dollars ($1,000,000.00) and shall factor such excess into
8
9 the percentage for subsequent years. Any amount of the exemption
9
10 permitted to be excluded pursuant to the provisions of this
10
11 paragraph but not used in any year may be carried forward as an
11
12 exemption from income pursuant to the provisions of this paragraph
12
13 for a period not exceeding six (6) years following the year in which
13
14 the investment was originally made.
14
15 For purposes of this paragraph:
15
16 a. "Agricultural commodity processing facility" means
16
17 building buildings, structures, fixtures and
17
18 improvements used or operated primarily for the
18
19 processing or production of marketable products from
19
20 agricultural commodities. The term shall also mean a
20
21 dairy operation that requires a depreciable investment
21
22 of at least Two Hundred Fifty Thousand Dollars
22
23 ($250,000.00) and which produces milk from dairy cows.
23
24 The term does not include a facility that provides
24
Req. No. 1076 Page 18
1 only, and nothing more than, storage, cleaning, drying
1
2 or transportation of agricultural commodities, and
2
3 b. "Facility" means each part of the facility which is
3
4 used in a process primarily for:
4
5 (1) the processing of agricultural commodities,
5
6 including receiving or storing agricultural
6
7 commodities, or the production of milk at a dairy
7
8 operation,
8
9 (2) transporting the agricultural commodities or
9
10 product before, during or after the processing,
10
11 or
11
12 (3) packaging or otherwise preparing the product for
12
13 sale or shipment.
13
14 7. Despite any provision to the contrary in paragraph 3 of this
14
15 subsection, for taxable years beginning after December 31, 1999, in
15
16 the case of a taxpayer which has a farming loss, such farming loss
16
17 shall be considered a net operating loss carryback in accordance
17
18 with and to the extent of the Internal Revenue Code of 1986, as
18
19 amended, 26 U.S.C., Section 172(b)(G) 172(b)(1)(B). However, the
19
20 amount of the net operating loss carryback shall not exceed the
20
21 lesser of:
21
22 a. Sixty Thousand Dollars ($60,000.00), or
22
23 b. the loss properly shown on Schedule F of the Internal
23
24 Revenue Service Form 1040 reduced by one-half (1/2) of
24
Req. No. 1076 Page 19
1 the income from all other sources other than reflected
1
2 on Schedule F.
2
3 8. In taxable years beginning after December 31, 1995, all
3
4 qualified wages equal to the federal income tax credit set forth in
4
5 26 U.S.C.A., Section 45A, shall be deducted from taxable income.
5
6 The deduction allowed pursuant to this paragraph shall only be
6
7 permitted for the tax years in which the federal tax credit pursuant
7
8 to 26 U.S.C.A., Section 45A, is allowed. For purposes of this
8
9 paragraph, "qualified wages" means those wages used to calculate the
9
10 federal credit pursuant to 26 U.S.C.A., Section 45A.
10
11 9. In taxable years beginning after December 31, 2005, an
11
12 employer that is eligible for and utilizes the Safety Pays OSHA
12
13 Consultation Service provided by the Oklahoma Department of Labor
13
14 shall receive an exemption from taxable income in the amount of One
14
15 Thousand Dollars ($1,000.00) for the tax year that the service is
15
16 utilized.
16
17 10. For taxable years beginning on or after January 1, 2010,
17
18 there shall be added to Oklahoma taxable income an amount equal to
18
19 the amount of deferred income not included in such taxable income
19
20 pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
20
21 as amended by Section 1231 of the American Recovery and Reinvestment
21
22 Act of 2009 (P.L. No. 111-5). There shall be subtracted from
22
23 Oklahoma taxable income an amount equal to the amount of deferred
23
24 income included in such taxable income pursuant to Section 108(i)(1)
24
Req. No. 1076 Page 20
1 of the Internal Revenue Code of 1986 as amended by Section 1231 of
1
2 the American Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
2
3 11. For taxable years beginning on or after January 1, 2019,
3
4 there shall be subtracted from Oklahoma taxable income or adjusted
4
5 gross income any item of income or gain, and there shall be added to
5
6 Oklahoma taxable income or adjusted gross income any item of loss or
6
7 deduction that in the absence of an election pursuant to the
7
8 provisions of the Pass-Through Entity Tax Equity Act of 2019 would
8
9 be allocated to a member or to an indirect member of an electing
9
10 pass-through entity pursuant to Section 2351 et seq. of this title,
10
11 if (i) the electing pass-through entity has accounted for such item
11
12 in computing its Oklahoma net entity income or loss pursuant to the
12
13 provisions of the Pass-Through Entity Tax Equity Act of 2019, and
13
14 (ii) the total amount of tax attributable to any resulting Oklahoma
14
15 net entity income has been paid. The Oklahoma Tax Commission shall
15
16 promulgate rules for the reporting of such exclusion to direct and
16
17 indirect members of the electing pass-through entity. As used in
17
18 this paragraph, "electing pass-through entity", "indirect member",
18
19 and "member" shall be defined in the same manner as prescribed by
19
20 Section 2355.1P-2 of this title. Notwithstanding the application of
20
21 this paragraph, the adjusted tax basis of any ownership interest in
21
22 a pass-through entity for purposes of Section 2351 et seq. of this
22
23 title shall be equal to its adjusted tax basis for federal income
23
24 tax purposes.
24
Req. No. 1076 Page 21
1 B. 1. The taxable income of any corporation shall be further
1
2 adjusted to arrive at Oklahoma taxable income, except those
2
3 corporations electing treatment as provided in subchapter S of the
3
4 Internal Revenue Code of 1986, as amended, 26 U.S.C., Section 1361
4
5 et seq., and Section 2365 of this title, deductions pursuant to the
5
6 provisions of the Accelerated Cost Recovery System as defined
6
7 provided and allowed in the Economic Recovery Tax Act of 1981,
7
8 Public Law 97-34, 26 U.S.C., Section 168, for depreciation of assets
8
9 placed into service after December 31, 1981, shall not be allowed in
9
10 calculating Oklahoma taxable income. Such corporations shall be
10
11 allowed a deduction for depreciation of assets placed into service
11
12 after December 31, 1981, in accordance with provisions of the
12
13 Internal Revenue Code of 1986, as amended, 26 U.S.C., Section 1 et
13
14 seq., in effect immediately prior to the enactment of the
14
15 Accelerated Cost Recovery System. The Oklahoma tax basis for all
15
16 such assets placed into service after December 31, 1981, calculated
16
17 in this section shall be retained and utilized for all Oklahoma
17
18 income tax purposes through the final disposition of such assets.
18
19 Notwithstanding any other provisions of the Oklahoma Income Tax
19
20 Act, Section 2351 et seq. of this title, or of the Internal Revenue
20
21 Code of 1986, as amended, to the contrary, this subsection shall
21
22 control calculation of depreciation of assets placed into service
22
23 after December 31, 1981, and before January 1, 1983.
23
24
24
Req. No. 1076 Page 22
1 For assets placed in service and held by a corporation in which
1
2 accelerated cost recovery system the Accelerated Cost Recovery
2
3 System was previously disallowed, an adjustment to taxable income is
3
4 required in the first taxable year beginning after December 31,
4
5 1982, to reconcile the basis of such assets to the basis allowed in
5
6 the Internal Revenue Code of 1986, as amended. The purpose of this
6
7 adjustment is to equalize the basis and allowance for depreciation
7
8 accounts between that reported to the Internal Revenue Service and
8
9 that reported to Oklahoma this state.
9
10 2. For tax years beginning on or after January 1, 2009, and
10
11 ending on or before December 31, 2009, there shall be added to
11
12 Oklahoma taxable income any amount in excess of One Hundred Seventy-
12
13 five Thousand Dollars ($175,000.00) which has been deducted as a
13
14 small business expense under Internal Revenue Code of 1986, as
14
15 amended, Section 179 as provided in the American Recovery and
15
16 Reinvestment Act of 2009.
16
17 C. 1. For taxable years beginning after December 31, 1987, the
17
18 taxable income of any corporation shall be further adjusted to
18
19 arrive at Oklahoma taxable income for transfers of technology to
19
20 qualified small businesses located in Oklahoma this state. Such
20
21 transferor corporation shall be allowed an exemption from taxable
21
22 income of an amount equal to the amount of royalty payment received
22
23 as a result of such transfer; provided, however, such amount shall
23
24 not exceed ten percent (10%) of the amount of gross proceeds
24
Req. No. 1076 Page 23
1 received by such transferor corporation as a result of the
1
2 technology transfer. Such exemption shall be allowed for a period
2
3 not to exceed ten (10) years from the date of receipt of the first
3
4 royalty payment accruing from such transfer. No exemption may be
4
5 claimed for transfers of technology to qualified small businesses
5
6 made prior to January 1, 1988.
6
7 2. For purposes of this subsection:
7
8 a. "Qualified small business" means an entity, whether
8
9 organized as a corporation, partnership, or
9
10 proprietorship, organized for profit with its
10
11 principal place of business located within this state
11
12 and which meets the following criteria:
12
13 (1) Capitalization of not more than Two Hundred Fifty
13
14 Thousand Dollars ($250,000.00),
14
15 (2) Having at least fifty percent (50%) of its
15
16 employees and assets located in Oklahoma this
16
17 state at the time of the transfer, and
17
18 (3) Not a subsidiary or affiliate of the transferor
18
19 corporation;
19
20 b. "Technology" means a proprietary process, formula,
20
21 pattern, device or compilation of scientific or
21
22 technical information which is not in the public
22
23 domain;
23
24
24
Req. No. 1076 Page 24
1 c. "Transferor corporation" means a corporation which is
1
2 the exclusive and undisputed owner of the technology
2
3 at the time the transfer is made; and
3
4 d. "Gross proceeds" means the total amount of
4
5 consideration for the transfer of technology, whether
5
6 the consideration is in money or otherwise.
6
7 D. 1. For taxable years beginning after December 31, 2005, the
7
8 taxable income of any corporation, estate or trust, shall be further
8
9 adjusted for qualifying gains receiving capital treatment. Such
9
10 corporations, estates or trusts shall be allowed a deduction from
10
11 Oklahoma taxable income for the amount of qualifying gains receiving
11
12 capital treatment earned by the corporation, estate or trust during
12
13 the taxable year and included in the federal taxable income of such
13
14 corporation, estate or trust.
14
15 2. As used in this subsection:
15
16 a. "qualifying gains receiving capital treatment" means
16
17 the amount of net capital gains, as defined in Section
17
18 1222(11) of the Internal Revenue Code of 1986, as
18
19 amended, included in the federal income tax return of
19
20 the corporation, estate or trust that result from:
20
21 (1) the sale of real property or tangible personal
21
22 property located within Oklahoma this state that
22
23 has been directly or indirectly owned by the
23
24 corporation, estate or trust for a holding period
24
Req. No. 1076 Page 25
1 of at least five (5) years prior to the date of
1
2 the transaction from which such net capital gains
2
3 arise,
3
4 (2) the sale of stock or on the sale of an ownership
4
5 interest in an Oklahoma company, limited
5
6 liability company, or partnership where such
6
7 stock or ownership interest has been directly or
7
8 indirectly owned by the corporation, estate or
8
9 trust for a holding period of at least three (3)
9
10 years prior to the date of the transaction from
10
11 which the net capital gains arise, or
11
12 (3) the sale of real property, tangible personal
12
13 property or intangible personal property located
13
14 within Oklahoma this state as part of the sale of
14
15 all or substantially all of the assets of an
15
16 Oklahoma company, limited liability company, or
16
17 partnership where such property has been directly
17
18 or indirectly owned by such entity owned by the
18
19 owners of such entity, and used in or derived
19
20 from such entity for a period of at least three
20
21 (3) years prior to the date of the transaction
21
22 from which the net capital gains arise,
22
23 b. "holding period" means an uninterrupted period of
23
24 time. The holding period shall include any additional
24
Req. No. 1076 Page 26
1 period when the property was held by another
1
2 individual or entity, if such additional period is
2
3 included in the taxpayer's holding period for the
3
4 asset pursuant to the Internal Revenue Code of 1986,
4
5 as amended,
5
6 c. "Oklahoma company", "limited liability company", or
6
7 "partnership" means an entity whose primary
7
8 headquarters have been located in Oklahoma this state
8
9 for at least three (3) uninterrupted years prior to
9
10 the date of the transaction from which the net capital
10
11 gains arise,
11
12 d. "direct" means the taxpayer directly owns the asset,
12
13 and
13
14 e. "indirect" means the taxpayer owns an interest in a
14
15 pass-through entity (or chain of pass-through
15
16 entities) that sells the asset that gives rise to the
16
17 qualifying gains receiving capital treatment.
17
18 (1) With respect to sales of real property or
18
19 tangible personal property located within
19
20 Oklahoma this state, the deduction described in
20
21 this subsection shall not apply unless the pass-
21
22 through entity that makes the sale has held the
22
23 property for not less than five (5) uninterrupted
23
24 years prior to the date of the transaction that
24
Req. No. 1076 Page 27
1 created the capital gain, and each pass-through
1
2 entity included in the chain of ownership has
2
3 been a member, partner, or shareholder of the
3
4 pass-through entity in the tier immediately below
4
5 it for an uninterrupted period of not less than
5
6 five (5) years.
6
7 (2) With respect to sales of stock or ownership
7
8 interest in or sales of all or substantially all
8
9 of the assets of an Oklahoma company, limited
9
10 liability company, or partnership, the deduction
10
11 described in this subsection shall not apply
11
12 unless the pass-through entity that makes the
12
13 sale has held the stock or ownership interest or
13
14 the assets for not less than three (3)
14
15 uninterrupted years prior to the date of the
15
16 transaction that created the capital gain, and
16
17 each pass-through entity included in the chain of
17
18 ownership has been a member, partner or
18
19 shareholder of the pass-through entity in the
19
20 tier immediately below it for an uninterrupted
20
21 period of not less than three (3) years.
21
22 E. The Oklahoma adjusted gross income of any individual
22
23 taxpayer shall be further adjusted as follows to arrive at Oklahoma
23
24 taxable income:
24
Req. No. 1076 Page 28
1 1. a. In the case of individuals, there shall be added or
1
2 deducted, as the case may be, the difference necessary
2
3 to allow personal exemptions of One Thousand Dollars
3
4 ($1,000.00) in lieu of the personal exemptions allowed
4
5 by the Internal Revenue Code of 1986, as amended.
5
6 b. There shall be allowed an additional exemption of One
6
7 Thousand Dollars ($1,000.00) for each taxpayer or
7
8 spouse who is blind at the close of the tax year. For
8
9 purposes of this subparagraph, an individual is blind
9
10 only if the central visual acuity of the individual
10
11 does not exceed 20/200 in the better eye with
11
12 correcting lenses, or if the visual acuity of the
12
13 individual is greater than 20/200, but is accompanied
13
14 by a limitation in the fields of vision such that the
14
15 widest diameter of the visual field subtends an angle
15
16 no greater than twenty (20) degrees.
16
17 c. There shall be allowed an additional exemption of One
17
18 Thousand Dollars ($1,000.00) for each taxpayer or
18
19 spouse who is sixty-five (65) years of age or older at
19
20 the close of the tax year based upon the filing status
20
21 and federal adjusted gross income of the taxpayer.
21
22 Taxpayers with the following filing status may claim
22
23 this exemption if the federal adjusted gross income
23
24 does not exceed:
24
Req. No. 1076 Page 29
1 (1) Twenty-five Thousand Dollars ($25,000.00) if
1
2 married and filing jointly,
2
3 (2) Twelve Thousand Five Hundred Dollars ($12,500.00)
3
4 if married and filing separately,
4
5 (3) Fifteen Thousand Dollars ($15,000.00) if single,
5
6 and
6
7 (4) Nineteen Thousand Dollars ($19,000.00) if a
7
8 qualifying head of household.
8
9 Provided, for taxable years beginning after December
9
10 31, 1999, amounts included in the calculation of
10
11 federal adjusted gross income pursuant to the
11
12 conversion of a traditional individual retirement
12
13 account to a Roth individual retirement account shall
13
14 be excluded from federal adjusted gross income for
14
15 purposes of the income thresholds provided in this
15
16 subparagraph.
16
17 2. a. For taxable years beginning on or before December 31,
17
18 2005, in the case of individuals who use the standard
18
19 deduction in determining taxable income, there shall
19
20 be added or deducted, as the case may be, the
20
21 difference necessary to allow a standard deduction in
21
22 lieu of the standard deduction allowed by the Internal
22
23 Revenue Code of 1986, as amended, in an amount equal
23
24 to the larger of fifteen percent (15%) of the Oklahoma
24
Req. No. 1076 Page 30
1 adjusted gross income or One Thousand Dollars
1
2 ($1,000.00), but not to exceed Two Thousand Dollars
2
3 ($2,000.00), except that in the case of a married
3
4 individual filing a separate return such deduction
4
5 shall be the larger of fifteen percent (15%) of such
5
6 Oklahoma adjusted gross income or Five Hundred Dollars
6
7 ($500.00), but not to exceed the maximum amount of One
7
8 Thousand Dollars ($1,000.00).
8
9 b. For taxable years beginning on or after January 1,
9
10 2006, and before January 1, 2007, in the case of
10
11 individuals who use the standard deduction in
11
12 determining taxable income, there shall be added or
12
13 deducted, as the case may be, the difference necessary
13
14 to allow a standard deduction in lieu of the standard
14
15 deduction allowed by the Internal Revenue Code of
15
16 1986, as amended, in an amount equal to:
16
17 (1) Three Thousand Dollars ($3,000.00), if the filing
17
18 status is married filing joint, head of household
18
19 or qualifying widow, or
19
20 (2) Two Thousand Dollars ($2,000.00), if the filing
20
21 status is single or married filing separate.
21
22 c. For the taxable year beginning on January 1, 2007, and
22
23 ending December 31, 2007, in the case of individuals
23
24 who use the standard deduction in determining taxable
24
Req. No. 1076 Page 31
1 income, there shall be added or deducted, as the case
1
2 may be, the difference necessary to allow a standard
2
3 deduction in lieu of the standard deduction allowed by
3
4 the Internal Revenue Code of 1986, as amended, in an
4
5 amount equal to:
5
6 (1) Five Thousand Five Hundred Dollars ($5,500.00),
6
7 if the filing status is married filing joint or
7
8 qualifying widow, or
8
9 (2) Four Thousand One Hundred Twenty-five Dollars
9
10 ($4,125.00) for a head of household, or
10
11 (3) Two Thousand Seven Hundred Fifty Dollars
11
12 ($2,750.00), if the filing status is single or
12
13 married filing separate.
13
14 d. For the taxable year beginning on January 1, 2008, and
14
15 ending December 31, 2008, in the case of individuals
15
16 who use the standard deduction in determining taxable
16
17 income, there shall be added or deducted, as the case
17
18 may be, the difference necessary to allow a standard
18
19 deduction in lieu of the standard deduction allowed by
19
20 the Internal Revenue Code of 1986, as amended, in an
20
21 amount equal to:
21
22 (1) Six Thousand Five Hundred Dollars ($6,500.00), if
22
23 the filing status is married filing joint or
23
24 qualifying widow,
24
Req. No. 1076 Page 32
1 (2) Four Thousand Eight Hundred Seventy-five Dollars
1
2 ($4,875.00) for a head of household, or
2
3 (3) Three Thousand Two Hundred Fifty Dollars
3
4 ($3,250.00), if the filing status is single or
4
5 married filing separate.
5
6 e. For the taxable year beginning on January 1, 2009, and
6
7 ending December 31, 2009, in the case of individuals
7
8 who use the standard deduction in determining taxable
8
9 income, there shall be added or deducted, as the case
9
10 may be, the difference necessary to allow a standard
10
11 deduction in lieu of the standard deduction allowed by
11
12 the Internal Revenue Code of 1986, as amended, in an
12
13 amount equal to:
13
14 (1) Eight Thousand Five Hundred Dollars ($8,500.00),
14
15 if the filing status is married filing joint or
15
16 qualifying widow,
16
17 (2) Six Thousand Three Hundred Seventy-five Dollars
17
18 ($6,375.00) for a head of household, or
18
19 (3) Four Thousand Two Hundred Fifty Dollars
19
20 ($4,250.00), if the filing status is single or
20
21 married filing separate.
21
22 Oklahoma adjusted gross income shall be increased by
22
23 any amounts paid for motor vehicle excise taxes which
23
24
24
Req. No. 1076 Page 33
1 were deducted as allowed by the Internal Revenue Code
1
2 of 1986, as amended.
2
3 f. For taxable years beginning on or after January 1,
3
4 2010, and ending on December 31, 2016, in the case of
4
5 individuals who use the standard deduction in
5
6 determining taxable income, there shall be added or
6
7 deducted, as the case may be, the difference necessary
7
8 to allow a standard deduction equal to the standard
8
9 deduction allowed by the Internal Revenue Code of
9
10 1986, as amended, based upon the amount and filing
10
11 status prescribed by such Code for purposes of filing
11
12 federal individual income tax returns.
12
13 g. For taxable years beginning on or after January 1,
13
14 2017, in the case of individuals who use the standard
14
15 deduction in determining taxable income, there shall
15
16 be added or deducted, as the case may be, the
16
17 difference necessary to allow a standard deduction in
17
18 lieu of the standard deduction allowed by the Internal
18
19 Revenue Code of 1986, as amended, as follows:
19
20 (1) Six Thousand Three Hundred Fifty Dollars
20
21 ($6,350.00) for single or married filing
21
22 separately,
22
23
23
24
24
Req. No. 1076 Page 34
1 (2) Twelve Thousand Seven Hundred Dollars
1
2 ($12,700.00) for married filing jointly or
2
3 qualifying widower with dependent child, and
3
4 (3) Nine Thousand Three Hundred Fifty Dollars
4
5 ($9,350.00) for head of household.
5
6 3. a. In the case of resident and part-year resident
6
7 individuals having adjusted gross income from sources
7
8 both within and without the state, the itemized or
8
9 standard deductions and personal exemptions shall be
9
10 reduced to an amount which is the same portion of the
10
11 total thereof as Oklahoma adjusted gross income is of
11
12 adjusted gross income. To the extent itemized
12
13 deductions include allowable moving expense, proration
13
14 of moving expense shall not be required or permitted
14
15 but allowable moving expense shall be fully deductible
15
16 for those taxpayers moving within or into Oklahoma
16
17 this state and no part of moving expense shall be
17
18 deductible for those taxpayers moving without or out
18
19 of Oklahoma this state. All other itemized or
19
20 standard deductions and personal exemptions shall be
20
21 subject to proration as provided by law.
21
22 b. For taxable years beginning on or after January 1,
22
23 2018, the net amount of itemized deductions allowable
23
24 on an Oklahoma income tax return, subject to the
24
Req. No. 1076 Page 35
1 provisions of paragraph 24 of this subsection, shall
1
2 not exceed Seventeen Thousand Dollars ($17,000.00).
2
3 For purposes of this subparagraph, charitable
3
4 contributions and medical expenses deductible for
4
5 federal income tax purposes shall be excluded from the
5
6 amount of Seventeen Thousand Dollars ($17,000.00) as
6
7 specified by this subparagraph. Provided further, for
7
8 tax year 2020 and subsequent tax years, wagering
8
9 losses which are deductible pursuant to the provisions
9
10 of 26 U.S.C., Section 165(d) shall be excluded from
10
11 the amount of Seventeen Thousand Dollars ($17,000.00)
11
12 as specified by this subparagraph.
12
13 4. A resident individual with a physical disability
13
14 constituting a substantial handicap to employment may deduct from
14
15 Oklahoma adjusted gross income such expenditures to modify a motor
15
16 vehicle, home or workplace as are necessary to compensate for his or
16
17 her handicap. A veteran certified by the United States Department
17
18 of Veterans Affairs of the federal government as having a service-
18
19 connected disability shall be conclusively presumed to be an
19
20 individual with a physical disability constituting a substantial
20
21 handicap to employment. The Tax Commission shall promulgate rules
21
22 containing a list of combinations of common disabilities and
22
23 modifications which may be presumed to qualify for this deduction.
23
24
24
Req. No. 1076 Page 36
1 The Tax Commission shall prescribe necessary requirements for
1
2 verification.
2
3 5. a. Before July 1, 2010, the first One Thousand Five
3
4 Hundred Dollars ($1,500.00) received by any person
4
5 from the United States as salary or compensation in
5
6 any form, other than retirement benefits, as a member
6
7 of any component of the Armed Forces of the United
7
8 States shall be deducted from taxable income.
8
9 b. On or after July 1, 2010, one hundred percent (100%)
9
10 of the income received by any person from the United
10
11 States as salary or compensation in any form, other
11
12 than retirement benefits, as a member of any component
12
13 of the Armed Forces of the United States shall be
13
14 deducted from taxable income.
14
15 c. Whenever the filing of a timely income tax return by a
15
16 member of the Armed Forces of the United States is
16
17 made impracticable or impossible of accomplishment by
17
18 reason of:
18
19 (1) absence from the United States, which term
19
20 includes only the states and the District of
20
21 Columbia,
21
22 (2) absence from the State of Oklahoma this state
22
23 while on active duty, or
23
24
24
Req. No. 1076 Page 37
1 (3) confinement in a hospital within the United
1
2 States for treatment of wounds, injuries or
2
3 disease,
3
4 the time for filing a return and paying an income tax
4
5 shall be and is hereby extended without incurring
5
6 liability for interest or penalties, to the fifteenth
6
7 day of the third month following the month in which:
7
8 (a) Such individual shall return to the United
8
9 States if the extension is granted pursuant
9
10 to subparagraph a division 1 of this
10
11 paragraph subparagraph, return to the State
11
12 of Oklahoma this state if the extension is
12
13 granted pursuant to subparagraph b division
13
14 2 of this paragraph subparagraph or be
14
15 discharged from such hospital if the
15
16 extension is granted pursuant to
16
17 subparagraph c division 3 of this paragraph
17
18 subparagraph, or
18
19 (b) An executor, administrator, or conservator
19
20 of the estate of the taxpayer is appointed,
20
21 whichever event occurs the earliest.
21
22 Provided, that the Tax Commission may, in its discretion, grant
22
23 any member of the Armed Forces of the United States an extension of
23
24 time for filing of income tax returns and payment of income tax
24
Req. No. 1076 Page 38
1 without incurring liabilities for interest or penalties. Such
1
2 extension may be granted only when in the judgment of the Tax
2
3 Commission a good cause exists therefor and may be for a period in
3
4 excess of six (6) months. A record of every such extension granted,
4
5 and the reason therefor, shall be kept.
5
6 6. Before July 1, 2010, the salary or any other form of
6
7 compensation, received from the United States by a member of any
7
8 component of the Armed Forces of the United States, shall be
8
9 deducted from taxable income during the time in which the person is
9
10 detained by the enemy in a conflict, is a prisoner of war or is
10
11 missing in action and not deceased; provided, after July 1, 2010,
11
12 all such salary or compensation shall be subject to the deduction as
12
13 provided pursuant to paragraph 5 of this subsection.
13
14 7. a. An individual taxpayer, whether resident or
14
15 nonresident, may deduct an amount equal to the federal
15
16 income taxes paid by the taxpayer during the taxable
16
17 year.
17
18 b. Federal taxes as described in subparagraph a of this
18
19 paragraph shall be deductible by any individual
19
20 taxpayer, whether resident or nonresident, only to the
20
21 extent they relate to income subject to taxation
21
22 pursuant to the provisions of the Oklahoma Income Tax
22
23 Act. The maximum amount allowable in the preceding
23
24 paragraph 5 of this subsection shall be prorated on
24
Req. No. 1076 Page 39
1 the ratio of the Oklahoma adjusted gross income to
1
2 federal adjusted gross income.
2
3 c. For the purpose of this paragraph, "federal income
3
4 taxes paid" shall mean federal income taxes, surtaxes
4
5 imposed on incomes or excess profits taxes, as though
5
6 the taxpayer was on the accrual basis. In determining
6
7 the amount of deduction for federal income taxes for
7
8 tax year 2001, the amount of the deduction shall not
8
9 be adjusted by the amount of any accelerated ten
9
10 percent (10%) tax rate bracket credit or advanced
10
11 refund of the credit received during the tax year
11
12 provided pursuant to the federal Economic Growth and
12
13 Tax Relief Reconciliation Act of 2001, P.L. No. 107-
13
14 16, and the advanced refund of such credit shall not
14
15 be subject to taxation.
15
16 d. The provisions of this paragraph shall apply to all
16
17 taxable years ending after December 31, 1978, and
17
18 beginning before January 1, 2006.
18
19 8. Retirement benefits not to exceed Five Thousand Five Hundred
19
20 Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five
20
21 Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand
21
22 Dollars ($10,000.00) for the 2006 tax year and all subsequent tax
22
23 years, which are received by an individual from the civil service of
23
24 the United States, the Oklahoma Public Employees Retirement System,
24
Req. No. 1076 Page 40
1 the Teachers' Retirement System of Oklahoma, the Oklahoma Law
1
2 Enforcement Retirement System, the Oklahoma Firefighters Pension and
2
3 Retirement System, the Oklahoma Police Pension and Retirement
3
4 System, the employee retirement systems created by counties pursuant
4
5 to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the The
5
6 Uniform Retirement System for Justices and Judges, the Oklahoma
6
7 Wildlife Conservation Department Retirement Fund, the Oklahoma
7
8 Employment Security Commission Retirement Plan, or the employee
8
9 retirement systems created by municipalities pursuant to Section 48-
9
10 101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
10
11 from taxable income.
11
12 9. In taxable years beginning after December 3l, 1984, Social
12
13 Security benefits received by an individual shall be exempt from
13
14 taxable income, to the extent such benefits are included in the
14
15 federal adjusted gross income pursuant to the provisions of Section
15
16 86 of the Internal Revenue Code of 1986, as amended, 26 U.S.C.,
16
17 Section 86.
17
18 10. For taxable years beginning after December 31, 1994, lump-
18
19 sum distributions from employer plans of deferred compensation,
19
20 which are not qualified plans within the meaning of Section 401(a)
20
21 of the Internal Revenue Code of 1986, as amended, 26 U.S.C., Section
21
22 401(a), and which are deposited in and accounted for within a
22
23 separate bank account or brokerage account in a financial
23
24 institution within this state, shall be excluded from taxable income
24
Req. No. 1076 Page 41
1 in the same manner as a qualifying rollover contribution to an
1
2 individual retirement account within the meaning of Section 408 of
2
3 the Internal Revenue Code of 1986, as amended, 26 U.S.C., Section
3
4 408. Amounts withdrawn from such bank or brokerage account,
4
5 including any earnings thereon, shall be included in taxable income
5
6 when withdrawn in the same manner as withdrawals from individual
6
7 retirement accounts within the meaning of Section 408 of the
7
8 Internal Revenue Code of 1986, as amended.
8
9 11. In taxable years beginning after December 31, 1995,
9
10 contributions made to and interest received from a medical savings
10
11 account established pursuant to Sections 2621 through 2623 of Title
11
12 63 of the Oklahoma Statutes shall be exempt from taxable income.
12
13 12. For taxable years beginning after December 31, 1996, the
13
14 Oklahoma adjusted gross income of any individual taxpayer who is a
14
15 swine or poultry producer may be further adjusted for the deduction
15
16 for depreciation allowed for new construction or expansion costs
16
17 which may be computed using the same depreciation method elected for
17
18 federal income tax purposes except that the useful life shall be
18
19 seven (7) years for purposes of this paragraph. If depreciation is
19
20 allowed as a deduction in determining the adjusted gross income of
20
21 an individual, any depreciation calculated and claimed pursuant to
21
22 this section shall in no event be a duplication of any depreciation
22
23 allowed or permitted on the federal income tax return of the
23
24 individual.
24
Req. No. 1076 Page 42
1 13. a. In taxable years beginning before January 1, 2005,
1
2 retirement benefits not to exceed the amounts
2
3 specified in this paragraph, which are received by an
3
4 individual sixty-five (65) years of age or older and
4
5 whose Oklahoma adjusted gross income is Twenty-five
5
6 Thousand Dollars ($25,000.00) or less if the filing
6
7 status is single, head of household, or married filing
7
8 separate, or Fifty Thousand Dollars ($50,000.00) or
8
9 less if the filing status is married filing joint or
9
10 qualifying widow, shall be exempt from taxable income.
10
11 In taxable years beginning after December 31, 2004,
11
12 retirement benefits not to exceed the amounts
12
13 specified in this paragraph, which are received by an
13
14 individual whose Oklahoma adjusted gross income is
14
15 less than the qualifying amount specified in this
15
16 paragraph, shall be exempt from taxable income.
16
17 b. For purposes of this paragraph, the qualifying amount
17
18 shall be as follows:
18
19 (1) in taxable years beginning after December 31,
19
20 2004, and prior to January 1, 2007, the
20
21 qualifying amount shall be Thirty-seven Thousand
21
22 Five Hundred Dollars ($37,500.00) or less if the
22
23 filing status is single, head of household, or
23
24 married filing separate, or Seventy-five Thousand
24
Req. No. 1076 Page 43
1 Dollars ($75,000.00) or less if the filing status
1
2 is married filing jointly or qualifying widow,
2
3 (2) in the taxable year beginning January 1, 2007,
3
4 the qualifying amount shall be Fifty Thousand
4
5 Dollars ($50,000.00) or less if the filing status
5
6 is single, head of household, or married filing
6
7 separate, or One Hundred Thousand Dollars
7
8 ($100,000.00) or less if the filing status is
8
9 married filing jointly or qualifying widow,
9
10 (3) in the taxable year beginning January 1, 2008,
10
11 the qualifying amount shall be Sixty-two Thousand
11
12 Five Hundred Dollars ($62,500.00) or less if the
12
13 filing status is single, head of household, or
13
14 married filing separate, or One Hundred Twenty-
14
15 five Thousand Dollars ($125,000.00) or less if
15
16 the filing status is married filing jointly or
16
17 qualifying widow,
17
18 (4) in the taxable year beginning January 1, 2009,
18
19 the qualifying amount shall be One Hundred
19
20 Thousand Dollars ($100,000.00) or less if the
20
21 filing status is single, head of household, or
21
22 married filing separate, or Two Hundred Thousand
22
23 Dollars ($200,000.00) or less if the filing
23
24
24
Req. No. 1076 Page 44
1 status is married filing jointly or qualifying
1
2 widow, and
2
3 (5) in the taxable year beginning January 1, 2010,
3
4 and subsequent taxable years, there shall be no
4
5 limitation upon the qualifying amount.
5
6 c. For purposes of this paragraph, "retirement benefits"
6
7 means the total distributions or withdrawals from the
7
8 following:
8
9 (1) an employee pension benefit plan which satisfies
9
10 the requirements of Section 401 of the Internal
10
11 Revenue Code of 1986, as amended, 26 U.S.C.,
11
12 Section 401,
12
13 (2) an eligible deferred compensation plan that
13
14 satisfies the requirements of Section 457 of the
14
15 Internal Revenue Code of 1986, as amended, 26
15
16 U.S.C., Section 457,
16
17 (3) an individual retirement account, annuity or
17
18 trust or simplified employee pension that
18
19 satisfies the requirements of Section 408 of the
19
20 Internal Revenue Code of 1986, as amended, 26
20
21 U.S.C., Section 408,
21
22 (4) an employee annuity subject to the provisions of
22
23 Section 403(a) or (b) of the Internal Revenue
23
24
24
Req. No. 1076 Page 45
1 Code of 1986, as amended, 26 U.S.C., Section
1
2 403(a) or (b),
2
3 (5) United States Retirement Bonds which satisfy the
3
4 requirements of Section 86 of the Internal
4
5 Revenue Code of 1986, as amended, 26 U.S.C.,
5
6 Section 86, or
6
7 (6) lump-sum distributions from a retirement plan
7
8 which satisfies the requirements of Section
8
9 402(e) of the Internal Revenue Code of 1986, as
9
10 amended, 26 U.S.C., Section 402(e).
10
11 d. The amount of the exemption provided by this paragraph
11
12 shall be limited to Five Thousand Five Hundred Dollars
12
13 ($5,500.00) for the 2004 tax year, Seven Thousand Five
13
14 Hundred Dollars ($7,500.00) for the 2005 tax year and
14
15 Ten Thousand Dollars ($10,000.00) for the tax year
15
16 2006 and for all subsequent tax years. Any individual
16
17 who claims the exemption provided for in paragraph 8
17
18 of this subsection shall not be permitted to claim a
18
19 combined total exemption pursuant to this paragraph
19
20 and paragraph 8 of this subsection in an amount
20
21 exceeding Five Thousand Five Hundred Dollars
21
22 ($5,500.00) for the 2004 tax year, Seven Thousand Five
22
23 Hundred Dollars ($7,500.00) for the 2005 tax year and
23
24
24
Req. No. 1076 Page 46
1 Ten Thousand Dollars ($10,000.00) for the 2006 tax
1
2 year and all subsequent tax years.
2
3 14. In taxable years beginning after December 31, 1999, for an
3
4 individual engaged in production agriculture who has filed a
4
5 Schedule F form with the taxpayer's federal income tax return for
5
6 such taxable year, there shall be excluded from taxable income any
6
7 amount which was included as federal taxable income or federal
7
8 adjusted gross income and which consists of the discharge of an
8
9 obligation by a creditor of the taxpayer incurred to finance the
9
10 production of agricultural products.
10
11 15. In taxable years beginning December 31, 2000, an amount
11
12 equal to one hundred percent (100%) of the amount of any scholarship
12
13 or stipend received from participation in the Oklahoma Police Corps
13
14 Program, as established in Section 2-140.3 of Title 47 of the
14
15 Oklahoma Statutes shall be exempt from taxable income.
15
16 16. a. In taxable years beginning after December 31, 2001,
16
17 and before January 1, 2005, there shall be allowed a
17
18 deduction in the amount of contributions to accounts
18
19 established pursuant to the Oklahoma College Savings
19
20 Plan Act. The deduction shall equal the amount of
20
21 contributions to accounts, but in no event shall the
21
22 deduction for each contributor exceed Two Thousand
22
23 Five Hundred Dollars ($2,500.00) each taxable year for
23
24 each account.
24
Req. No. 1076 Page 47
1 b. In taxable years beginning after December 31, 2004,
1
2 each taxpayer shall be allowed a deduction for
2
3 contributions to accounts established pursuant to the
3
4 Oklahoma College Savings Plan Act. The maximum annual
4
5 deduction shall equal the amount of contributions to
5
6 all such accounts plus any contributions to such
6
7 accounts by the taxpayer for prior taxable years after
7
8 December 31, 2004, which were not deducted, but in no
8
9 event shall the deduction for each tax year exceed Ten
9
10 Thousand Dollars ($10,000.00) for each individual
10
11 taxpayer or Twenty Thousand Dollars ($20,000.00) for
11
12 taxpayers filing a joint return. Any amount of a
12
13 contribution that is not deducted by the taxpayer in
13
14 the year for which the contribution is made may be
14
15 carried forward as a deduction from income for the
15
16 succeeding five (5) years. For taxable years
16
17 beginning after December 31, 2005, deductions may be
17
18 taken for contributions and rollovers made during a
18
19 taxable year and up to April 15 of the succeeding
19
20 year, or the due date of a taxpayer's state income tax
20
21 return, excluding extensions, whichever is later.
21
22 Provided, a deduction for the same contribution may
22
23 not be taken for two (2) different taxable years.
23
24
24
Req. No. 1076 Page 48
1 c. In taxable years beginning after December 31, 2006,
1
2 deductions for contributions made pursuant to
2
3 subparagraph b of this paragraph shall be limited as
3
4 follows:
4
5 (1) for a taxpayer who qualified for the five-year
5
6 carryforward election and who takes a rollover or
6
7 nonqualified withdrawal during that period, the
7
8 tax deduction otherwise available pursuant to
8
9 subparagraph b of this paragraph shall be reduced
9
10 by the amount which is equal to the rollover or
10
11 nonqualified withdrawal, and
11
12 (2) for a taxpayer who elects to take a rollover or
12
13 nonqualified withdrawal within the same tax year
13
14 in which a contribution was made to the
14
15 taxpayer's account, the tax deduction otherwise
15
16 available pursuant to subparagraph b of this
16
17 paragraph shall be reduced by the amount of the
17
18 contribution which is equal to the rollover or
18
19 nonqualified withdrawal.
19
20 d. If a taxpayer elects to take a rollover on a
20
21 contribution for which a deduction has been taken
21
22 pursuant to subparagraph b of this paragraph within
22
23 one (1) year of the date of contribution, the amount
23
24 of such rollover shall be included in the adjusted
24
Req. No. 1076 Page 49
1 gross income of the taxpayer in the taxable year of
1
2 the rollover.
2
3 e. If a taxpayer makes a nonqualified withdrawal of
3
4 contributions for which a deduction was taken pursuant
4
5 to subparagraph b of this paragraph, such nonqualified
5
6 withdrawal and any earnings thereon shall be included
6
7 in the adjusted gross income of the taxpayer in the
7
8 taxable year of the nonqualified withdrawal.
8
9 f. As used in this paragraph:
9
10 (1) "non-qualified withdrawal" means a withdrawal
10
11 from an Oklahoma College Savings Plan account
11
12 other than one of the following:
12
13 (a) a qualified withdrawal,
13
14 (b) a withdrawal made as a result of the death
14
15 or disability of the designated beneficiary
15
16 of an account,
16
17 (c) a withdrawal that is made on the account of
17
18 a scholarship or the allowance or payment
18
19 described in Section 135(d)(1)(B) or (C) or
19
20 by the Internal Revenue Code of 1986, as
20
21 amended, received by the designated
21
22 beneficiary to the extent the amount of the
22
23 refund does not exceed the amount of the
23
24 scholarship, allowance, or payment, or
24
Req. No. 1076 Page 50
1 (d) a rollover or change of designated
1
2 beneficiary as permitted by subsection F of
2
3 Section 3970.7 of Title 70 of the Oklahoma
3
4 Statutes, and
4
5 (2) "rollover" means the transfer of funds from the
5
6 Oklahoma College Savings Plan to any other plan
6
7 under Section 529 of the Internal Revenue Code of
7
8 1986, as amended.
8
9 17. For tax years 2006 through 2021, retirement benefits
9
10 received by an individual from any component of the Armed Forces of
10
11 the United States in an amount not to exceed the greater of seventy-
11
12 five percent (75%) of such benefits or Ten Thousand Dollars
12
13 ($10,000.00) shall be exempt from taxable income but in no case less
13
14 than the amount of the exemption provided by paragraph 13 of this
14
15 subsection. For tax year 2022 and subsequent tax years, retirement
15
16 benefits received by an individual from any component of the Armed
16
17 Forces of the United States shall be exempt from taxable income.
17
18 18. For taxable years beginning after December 31, 2006,
18
19 retirement benefits received by federal civil service retirees,
19
20 including survivor annuities, paid in lieu of Social Security
20
21 benefits shall be exempt from taxable income to the extent such
21
22 benefits are included in the federal adjusted gross income pursuant
22
23 to the provisions of Section 86 of the Internal Revenue Code of
23
24
24
Req. No. 1076 Page 51
1 1986, as amended, 26 U.S.C., Section 86, according to the following
1
2 schedule:
2
3 a. in the taxable year beginning January 1, 2007, twenty
3
4 percent (20%) of such benefits shall be exempt,
4
5 b. in the taxable year beginning January 1, 2008, forty
5
6 percent (40%) of such benefits shall be exempt,
6
7 c. in the taxable year beginning January 1, 2009, sixty
7
8 percent (60%) of such benefits shall be exempt,
8
9 d. in the taxable year beginning January 1, 2010, eighty
9
10 percent (80%) of such benefits shall be exempt, and
10
11 e. in the taxable year beginning January 1, 2011, and
11
12 subsequent taxable years, one hundred percent (100%)
12
13 of such benefits shall be exempt.
13
14 19. a. For taxable years beginning after December 31, 2007, a
14
15 resident individual may deduct up to Ten Thousand
15
16 Dollars ($10,000.00) from Oklahoma adjusted gross
16
17 income if the individual, or the dependent of the
17
18 individual, while living, donates one or more human
18
19 organs of the individual to another human being for
19
20 human organ transplantation. As used in this
20
21 paragraph, "human organ" means all or part of a liver,
21
22 pancreas, kidney, intestine, lung, or bone marrow. A
22
23 deduction that is claimed under this paragraph may be
23
24
24
Req. No. 1076 Page 52
1 claimed in the taxable year in which the human organ
1
2 transplantation occurs.
2
3 b. An individual may claim this deduction only once, and
3
4 the deduction may be claimed only for unreimbursed
4
5 expenses that are incurred by the individual and
5
6 related to the organ donation of the individual.
6
7 c. The Oklahoma Tax Commission shall promulgate rules to
7
8 implement the provisions of this paragraph which shall
8
9 contain a specific list of expenses which may be
9
10 presumed to qualify for the deduction. The Tax
10
11 Commission shall prescribe necessary requirements for
11
12 verification.
12
13 20. For taxable years beginning after December 31, 2009, there
13
14 shall be exempt from taxable income any amount received by the
14
15 beneficiary of the death benefit for an emergency medical technician
15
16 or a registered emergency medical responder provided by Section 1-
16
17 2505.1 of Title 63 of the Oklahoma Statutes.
17
18 21. For taxable years beginning after December 31, 2008,
18
19 taxable income shall be increased by any unemployment compensation
19
20 exempted under Section 85(c) of the Internal Revenue Code of 1986,
20
21 as amended, 26 U.S.C., Section 85(c)(2009).
21
22 22. For taxable years beginning after December 31, 2008, there
22
23 shall be exempt from taxable income any payment in an amount less
23
24 than Six Hundred Dollars ($600.00) received by a person as an award
24
Req. No. 1076 Page 53
1 for participation in a competitive livestock show event. For
1
2 purposes of this paragraph, the payment shall be treated as a
2
3 scholarship amount paid by the entity sponsoring the event and the
3
4 sponsoring entity shall cause the payment to be categorized as a
4
5 scholarship in its books and records.
5
6 23. For taxable years beginning on or after January 1, 2016,
6
7 taxable income shall be increased by any amount of state and local
7
8 sales or income taxes deducted under 26 U.S.C., Section 164 of the
8
9 Internal Revenue Code of 1986, as amended. If the amount of state
9
10 and local taxes deducted on the federal return is limited, taxable
10
11 income on the state return shall be increased only by the amount
11
12 actually deducted after any such limitations are applied.
12
13 24. For taxable years beginning after December 31, 2020, each
13
14 taxpayer shall be allowed a deduction for contributions to accounts
14
15 established pursuant to the Achieving a Better Life Experience
15
16 (ABLE) Program program as established in Section 4001.1 et seq. of
16
17 Title 56 of the Oklahoma Statutes. For any tax year, the deduction
17
18 provided for in this paragraph shall not exceed Ten Thousand Dollars
18
19 ($10,000.00) for an individual taxpayer or Twenty Thousand Dollars
19
20 ($20,000.00) for taxpayers filing a joint return. Any amount of
20
21 contribution not deducted by the taxpayer in the tax year for which
21
22 the contribution is made may be carried forward as a deduction from
22
23 income for up to five (5) tax years. Deductions may be taken for
23
24 contributions made during the tax year and through April 15 of the
24
Req. No. 1076 Page 54
1 succeeding tax year, or through the due date of a taxpayer's state
1
2 income tax return excluding extensions, whichever is later.
2
3 Provided, a deduction for the same contribution may not be taken in
3
4 more than one (1) tax year.
4
5 F. 1. For taxable years beginning after December 31, 2004, a
5
6 deduction from the Oklahoma adjusted gross income of any individual
6
7 taxpayer shall be allowed for qualifying gains receiving capital
7
8 treatment that are included in the federal adjusted gross income of
8
9 such individual taxpayer during the taxable year.
9
10 2. As used in this subsection:
10
11 a. "qualifying gains receiving capital treatment" means
11
12 the amount of net capital gains, as defined in Section
12
13 1222(11) of the Internal Revenue Code of 1986, as
13
14 amended, included in an individual taxpayer's federal
14
15 income tax return that result from:
15
16 (1) the sale of real property or tangible personal
16
17 property located within Oklahoma this state that
17
18 has been directly or indirectly owned by the
18
19 individual taxpayer for a holding period of at
19
20 least five (5) years prior to the date of the
20
21 transaction from which such net capital gains
21
22 arise,
22
23 (2) the sale of stock or the sale of a direct or
23
24 indirect ownership interest in an Oklahoma
24
Req. No. 1076 Page 55
1 company, limited liability company, or
1
2 partnership where such stock or ownership
2
3 interest has been directly or indirectly owned by
3
4 the individual taxpayer for a holding period of
4
5 at least two (2) years prior to the date of the
5
6 transaction from which the net capital gains
6
7 arise, or
7
8 (3) the sale of real property, tangible personal
8
9 property or intangible personal property located
9
10 within Oklahoma this state as part of the sale of
10
11 all or substantially all of the assets of an
11
12 Oklahoma company, limited liability company, or
12
13 partnership or an Oklahoma proprietorship
13
14 business enterprise where such property has been
14
15 directly or indirectly owned by such entity or
15
16 business enterprise or owned by the owners of
16
17 such entity or business enterprise for a period
17
18 of at least two (2) years prior to the date of
18
19 the transaction from which the net capital gains
19
20 arise,
20
21 b. "holding period" means an uninterrupted period of
21
22 time. The holding period shall include any additional
22
23 period when the property was held by another
23
24 individual or entity, if such additional period is
24
Req. No. 1076 Page 56
1 included in the taxpayer's holding period for the
1
2 asset pursuant to the Internal Revenue Code of 1986,
2
3 as amended,
3
4 c. "Oklahoma company," "limited liability company," or
4
5 "partnership" means an entity whose primary
5
6 headquarters have been located in Oklahoma this state
6
7 for at least three (3) uninterrupted years prior to
7
8 the date of the transaction from which the net capital
8
9 gains arise,
9
10 d. "direct" means the individual taxpayer directly owns
10
11 the asset,
11
12 e. "indirect" means the individual taxpayer owns an
12
13 interest in a pass-through entity (or chain of pass-
13
14 through entities) that sells the asset that gives rise
14
15 to the qualifying gains receiving capital treatment.
15
16 (1) With respect to sales of real property or
16
17 tangible personal property located within
17
18 Oklahoma this state, the deduction described in
18
19 this subsection shall not apply unless the pass-
19
20 through entity that makes the sale has held the
20
21 property for not less than five (5) uninterrupted
21
22 years prior to the date of the transaction that
22
23 created the capital gain, and each pass-through
23
24 entity included in the chain of ownership has
24
Req. No. 1076 Page 57
1 been a member, partner, or shareholder of the
1
2 pass-through entity in the tier immediately below
2
3 it for an uninterrupted period of not less than
3
4 five (5) years.
4
5 (2) With respect to sales of stock or ownership
5
6 interest in or sales of all or substantially all
6
7 of the assets of an Oklahoma company, limited
7
8 liability company, partnership or Oklahoma
8
9 proprietorship business enterprise, the deduction
9
10 described in this subsection shall not apply
10
11 unless the pass-through entity that makes the
11
12 sale has held the stock or ownership interest for
12
13 not less than two (2) uninterrupted years prior
13
14 to the date of the transaction that created the
14
15 capital gain, and each pass-through entity
15
16 included in the chain of ownership has been a
16
17 member, partner or shareholder of the pass-
17
18 through entity in the tier immediately below it
18
19 for an uninterrupted period of not less than two
19
20 (2) years. For purposes of this division,
20
21 uninterrupted ownership prior to July 1, 2007,
21
22 shall be included in the determination of the
22
23 required holding period prescribed by this
23
24 division, and
24
Req. No. 1076 Page 58
1 f. "Oklahoma proprietorship business enterprise" means a
1
2 business enterprise whose income and expenses have
2
3 been reported on Schedule C or F of an individual
3
4 taxpayer's federal income tax return, or any similar
4
5 successor schedule published by the Internal Revenue
5
6 Service and whose primary headquarters have been
6
7 located in Oklahoma this state for at least three (3)
7
8 uninterrupted years prior to the date of the
8
9 transaction from which the net capital gains arise.
9
10 G. 1. For purposes of computing its Oklahoma taxable income
10
11 under this section, the dividends-paid deduction otherwise allowed
11
12 by federal law in computing net income of a real estate investment
12
13 trust that is subject to federal income tax shall be added back in
13
14 computing the tax imposed by this state under this title if the real
14
15 estate investment trust is a captive real estate investment trust.
15
16 2. For purposes of computing its Oklahoma taxable income under
16
17 this section, a taxpayer shall add back otherwise deductible rents
17
18 and interest expenses paid to a captive real estate investment trust
18
19 that is not subject to the provisions of paragraph 1 of this
19
20 subsection. As used in this subsection:
20
21 a. the term "real estate investment trust" or "REIT"
21
22 means the meaning ascribed to such term in Section 856
22
23 of the Internal Revenue Code of 1986, as amended,
23
24
24
Req. No. 1076 Page 59
1 b. the term "captive real estate investment trust" means
1
2 a real estate investment trust, the shares or
2
3 beneficial interests of which are not regularly traded
3
4 on an established securities market and more than
4
5 fifty percent (50%) of the voting power or value of
5
6 the beneficial interests or shares of which are owned
6
7 or controlled, directly or indirectly, or
7
8 constructively, by a single entity that is:
8
9 (1) treated as an association taxable as a
9
10 corporation under the Internal Revenue Code of
10
11 1986, as amended, and
11
12 (2) not exempt from federal income tax pursuant to
12
13 the provisions of Section 501(a) of the Internal
13
14 Revenue Code of 1986, as amended.
14
15 The term shall not include a real estate investment
15
16 trust that is intended to be regularly traded on an
16
17 established securities market, and that satisfies the
17
18 requirements of Section 856(a)(5) and (6) of the U.S.
18
19 Internal Revenue Code of 1986, as amended, by reason
19
20 of Section 856(h)(2) of the Internal Revenue Code of
20
21 1986, as amended,
21
22 c. the term "association taxable as a corporation" shall
22
23 not include the following entities:
23
24
24
Req. No. 1076 Page 60
1 (1) any real estate investment trust as defined in
1
2 paragraph a of this subsection other than a
2
3 "captive real estate investment trust" captive
3
4 real estate investment trust,
4
5 (2) any qualified real estate investment trust
5
6 subsidiary under Section 856(i) of the Internal
6
7 Revenue Code of 1986, as amended, other than a
7
8 qualified REIT subsidiary of a "captive real
8
9 estate investment trust" captive real estate
9
10 investment trust,
10
11 (3) any Listed Australian Property Trust listed
11
12 Australian property trust (meaning an Australian
12
13 unit trust registered as a "Managed Investment
13
14 Scheme" "managed investment scheme" under the
14
15 Australian Corporations Act 2001 in which the
15
16 principal class of units is listed on a
16
17 recognized stock exchange in Australia and is
17
18 regularly traded on an established securities
18
19 market), or an entity organized as a trust,
19
20 provided that a Listed Australian Property Trust
20
21 listed Australian property trust owns or
21
22 controls, directly or indirectly, seventy-five
22
23 percent (75%) or more of the voting power or
23
24
24
Req. No. 1076 Page 61
1 value of the beneficial interests or shares of
1
2 such trust, or
2
3 (4) any Qualified Foreign Entity qualified foreign
3
4 entity, meaning a corporation, trust, association
4
5 or partnership organized outside the laws of the
5
6 United States and which satisfies the following
6
7 criteria:
7
8 (a) at least seventy-five percent (75%) of the
8
9 entity's total asset value at the close of
9
10 its taxable year is represented by real
10
11 estate assets, as defined in Section
11
12 856(c)(5)(B) of the Internal Revenue Code of
12
13 1986, as amended, thereby including shares
13
14 or certificates of beneficial interest in
14
15 any real estate investment trust, cash and
15
16 cash equivalents, and U.S. Government
16
17 securities,
17
18 (b) the entity receives a dividend-paid
18
19 deduction comparable to Section 561 of the
19
20 Internal Revenue Code of 1986, as amended,
20
21 or is exempt from entity level tax,
21
22 (c) the entity is required to distribute at
22
23 least eighty-five percent (85%) of its
23
24 taxable income, as computed in the
24
Req. No. 1076 Page 62
1 jurisdiction in which it is organized, to
1
2 the holders of its shares or certificates of
2
3 beneficial interest on an annual basis,
3
4 (d) not more than ten percent (10%) of the
4
5 voting power or value in such entity is held
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6 directly or indirectly or constructively by
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7 a single entity or individual, or the shares
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8 or beneficial interests of such entity are
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9 regularly traded on an established
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10 securities market, and
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11 (e) the entity is organized in a country which
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12 has a tax treaty with the United States.
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13 3. For purposes of this subsection, the constructive ownership
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14 rules of Section 318(a) of the Internal Revenue Code, as modified by
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15 Section 856(d)(5) of the Internal Revenue Code of 1986, as amended,
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16 shall apply in determining the ownership of stock, assets, or net
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17 profits of any person.
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18 4. A real estate investment trust that does not become
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19 regularly traded on an established securities market within one (1)
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20 year of the date on which it first becomes a real estate investment
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21 trust shall be deemed not to have been regularly traded on an
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22 established securities market, retroactive to the date it first
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23 became a real estate investment trust, and shall file an amended
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24 return reflecting such retroactive designation for any tax year or
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1 part year occurring during its initial year of status as a real
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2 estate investment trust. For purposes of this subsection, a real
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3 estate investment trust becomes a real estate investment trust on
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4 the first day it has both met the requirements of Section 856 of the
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5 Internal Revenue Code of 1986, as amended, and has elected to be
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6 treated as a real estate investment trust pursuant to Section
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7 856(c)(1) of the Internal Revenue Code of 1986, as amended.
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8 SECTION 2. This act shall become effective November 1, 2025.
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10 60-1-1076 QD 12/18/2024 10:46:55 AM
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Req. No. 1076 Page 64Every fact on this page links to its source, starting with the official bill record.