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1 STATE OF OKLAHOMA
1
2 1st Session of the 60th Legislature (2025)
2
3 SENATE BILL 48 By: Rader
3
4
4
5 AS INTRODUCED
5
6 An Act relating to income tax; amending 68 O.S. 2021,
6 Section 2358, as last amended by Section 155, Chapter
7 452, O.S.L. 2024 (68 O.S. Supp. 2024, Section 2358),
7 which relates to adjustments; limiting deduction for
8 qualifying gains receiving capital treatment to
8 certain tax years; updating statutory language;
9 updating statutory references; and providing an
9 effective date.
10
10
11
11
12 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
12
13 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358, as
13
14 last amended by Section 155, Chapter 452, O.S.L. 2024 (68 O.S. Supp.
14
15 2024, Section 2358), is amended to read as follows:
15
16 Section 2358. For all tax years beginning after December 31,
16
17 1981, taxable income and adjusted gross income shall be adjusted to
17
18 arrive at Oklahoma taxable income and Oklahoma adjusted gross income
18
19 as required by this section.
19
20 A. The taxable income of any taxpayer shall be adjusted to
20
21 arrive at Oklahoma taxable income for corporations and Oklahoma
21
22 adjusted gross income for individuals, as follows:
22
23 1. There shall be added interest income on obligations of any
23
24 state or political subdivision thereto which is not otherwise
24
Req. No. 617 Page 1
1 exempted pursuant to other laws of this state, to the extent that
1
2 such interest is not included in taxable income and adjusted gross
2
3 income.
3
4 2. There shall be deducted amounts included in such income that
4
5 the state is prohibited from taxing because of the provisions of the
5
6 Federal United States Constitution, the State Oklahoma Constitution,
6
7 federal laws or laws of Oklahoma.
7
8 3. The amount of any federal net operating loss deduction shall
8
9 be adjusted as follows:
9
10 a. For carryovers and carrybacks to taxable years
10
11 beginning before January 1, 1981, the amount of any
11
12 net operating loss deduction allowed to a taxpayer for
12
13 federal income tax purposes shall be reduced to an
13
14 amount which is the same portion thereof as the loss
14
15 from sources within this state, as determined pursuant
15
16 to this section and Section 2362 of this title, for
16
17 the taxable year in which such loss is sustained is of
17
18 the total loss for such year;
18
19 b. For carryovers and carrybacks to taxable years
19
20 beginning after December 31, 1980, the amount of any
20
21 net operating loss deduction allowed for the taxable
21
22 year shall be an amount equal to the aggregate of the
22
23 Oklahoma net operating loss carryovers and carrybacks
23
24 to such year. Oklahoma net operating losses shall be
24
Req. No. 617 Page 2
1 separately determined by reference to Section 172 of
1
2 the Internal Revenue Code of 1986, as amended, 26
2
3 U.S.C., Section 172, as modified by the Oklahoma
3
4 Income Tax Act, Section 2351 et seq. of this title,
4
5 and shall be allowed without regard to the existence
5
6 of a federal net operating loss. For tax years
6
7 beginning after December 31, 2000, and ending before
7
8 January 1, 2008, the years to which such losses may be
8
9 carried shall be determined solely by reference to
9
10 Section 172 of the Internal Revenue Code of 1986, as
10
11 amended, 26 U.S.C., Section 172, with the exception
11
12 that the terms "net operating loss" and "taxable
12
13 income" shall be replaced with "Oklahoma net operating
13
14 loss" and "Oklahoma taxable income". For tax years
14
15 beginning after December 31, 2007, and ending before
15
16 January 1, 2009, years to which such losses may be
16
17 carried back shall be limited to two (2) years. For
17
18 tax years beginning after December 31, 2008, the years
18
19 to which such losses may be carried back shall be
19
20 determined solely by reference to Section 172 of the
20
21 Internal Revenue Code of 1986, as amended, 26 U.S.C.,
21
22 Section 172, with the exception that the terms "net
22
23 operating loss" and "taxable income" shall be replaced
23
24
24
Req. No. 617 Page 3
1 with "Oklahoma net operating loss" and "Oklahoma
1
2 taxable income".
2
3 4. Items of the following nature shall be allocated as
3
4 indicated. Allowable deductions attributable to items separately
4
5 allocable in subparagraphs a, b and c of this paragraph, whether or
5
6 not such items of income were actually received, shall be allocated
6
7 on the same basis as those items:
7
8 a. Income from real and tangible personal property, such
8
9 as rents, oil and mining production or royalties, and
9
10 gains or losses from sales of such property, shall be
10
11 allocated in accordance with the situs of such
11
12 property;
12
13 b. Income from intangible personal property, such as
13
14 interest, dividends, patent or copyright royalties,
14
15 and gains or losses from sales of such property, shall
15
16 be allocated in accordance with the domiciliary situs
16
17 of the taxpayer, except that:
17
18 (1) where such property has acquired a nonunitary
18
19 business or commercial situs apart from the
19
20 domicile of the taxpayer such income shall be
20
21 allocated in accordance with such business or
21
22 commercial situs; interest income from
22
23 investments held to generate working capital for
23
24 a unitary business enterprise shall be included
24
Req. No. 617 Page 4
1 in apportionable income; a resident trust or
1
2 resident estate shall be treated as having a
2
3 separate commercial or business situs insofar as
3
4 undistributed income is concerned, but shall not
4
5 be treated as having a separate commercial or
5
6 business situs insofar as distributed income is
6
7 concerned,
7
8 (2) for taxable years beginning after December 31,
8
9 2003, capital or ordinary gains or losses from
9
10 the sale of an ownership interest in a publicly
10
11 traded partnership, as defined by Section 7704(b)
11
12 of the Internal Revenue Code of 1986, as amended,
12
13 shall be allocated to this state in the ratio of
13
14 the original cost of such partnership's tangible
14
15 property in this state to the original cost of
15
16 such partnership's tangible property everywhere,
16
17 as determined at the time of the sale; if more
17
18 than fifty percent (50%) of the value of the
18
19 partnership's assets consists of intangible
19
20 assets, capital or ordinary gains or losses from
20
21 the sale of an ownership interest in the
21
22 partnership shall be allocated to this state in
22
23 accordance with the sales factor of the
23
24 partnership for its first full tax period
24
Req. No. 617 Page 5
1 immediately preceding its tax period during which
1
2 the ownership interest in the partnership was
2
3 sold; the provisions of this division shall only
3
4 apply if the capital or ordinary gains or losses
4
5 from the sale of an ownership interest in a
5
6 partnership do not constitute qualifying gain
6
7 receiving capital treatment as defined in
7
8 subparagraph a of paragraph 2 of subsection F of
8
9 this section,
9
10 (3) income from such property which is required to be
10
11 allocated pursuant to the provisions of paragraph
11
12 5 of this subsection shall be allocated as herein
12
13 provided;
13
14 c. Net income or loss from a business activity which is
14
15 not a part of business carried on within or without
15
16 the state of a unitary character shall be separately
16
17 allocated to the state in which such activity is
17
18 conducted;
18
19 d. In the case of a manufacturing or processing
19
20 enterprise the business of which in Oklahoma this
20
21 state consists solely of marketing its products by:
21
22 (1) sales having a situs without this state, shipped
22
23 directly to a point from without the state to a
23
24
24
Req. No. 617 Page 6
1 purchaser within the state, commonly known as
1
2 interstate sales,
2
3 (2) sales of the product stored in public warehouses
3
4 within the state pursuant to "in transit"
4
5 tariffs, as prescribed and allowed by the
5
6 Interstate Commerce Commission, to a purchaser
6
7 within the state,
7
8 (3) sales of the product stored in public warehouses
8
9 within the state where the shipment to such
9
10 warehouses is not covered by "in transit"
10
11 tariffs, as prescribed and allowed by the
11
12 Interstate Commerce Commission, to a purchaser
12
13 within or without the state,
13
14 the Oklahoma net income shall, at the option of the
14
15 taxpayer, be that portion of the total net income of
15
16 the taxpayer for federal income tax purposes derived
16
17 from the manufacture and/or processing and sales
17
18 everywhere as determined by the ratio of the sales
18
19 defined in this section made to the purchaser within
19
20 the state to the total sales everywhere. The term
20
21 "public warehouse" as used in this subparagraph means
21
22 a licensed public warehouse, the principal business of
22
23 which is warehousing merchandise for the public;
23
24
24
Req. No. 617 Page 7
1 e. In the case of insurance companies, Oklahoma taxable
1
2 income shall be taxable income of the taxpayer for
2
3 federal tax purposes, as adjusted for the adjustments
3
4 provided pursuant to the provisions of paragraphs 1
4
5 and 2 of this subsection, apportioned as follows:
5
6 (1) except as otherwise provided by division (2) of
6
7 this subparagraph, taxable income of an insurance
7
8 company for a taxable year shall be apportioned
8
9 to this state by multiplying such income by a
9
10 fraction, the numerator of which is the direct
10
11 premiums written for insurance on property or
11
12 risks in this state, and the denominator of which
12
13 is the direct premiums written for insurance on
13
14 property or risks everywhere. For purposes of
14
15 this subsection, the term "direct premiums
15
16 written" means the total amount of direct
16
17 premiums written, assessments and annuity
17
18 considerations as reported for the taxable year
18
19 on the annual statement filed by the company with
19
20 the Insurance Commissioner in the form approved
20
21 by the National Association of Insurance
21
22 Commissioners, or such other form as may be
22
23 prescribed in lieu thereof,
23
24
24
Req. No. 617 Page 8
1 (2) if the principal source of premiums written by an
1
2 insurance company consists of premiums for
2
3 reinsurance accepted by it, the taxable income of
3
4 such company shall be apportioned to this state
4
5 by multiplying such income by a fraction, the
5
6 numerator of which is the sum of (a) direct
6
7 premiums written for insurance on property or
7
8 risks in this state, plus (b) premiums written
8
9 for reinsurance accepted in respect of property
9
10 or risks in this state, and the denominator of
10
11 which is the sum of (c) direct premiums written
11
12 for insurance on property or risks everywhere,
12
13 plus (d) premiums written for reinsurance
13
14 accepted in respect of property or risks
14
15 everywhere. For purposes of this paragraph,
15
16 premiums written for reinsurance accepted in
16
17 respect of property or risks in this state,
17
18 whether or not otherwise determinable, may at the
18
19 election of the company be determined on the
19
20 basis of the proportion which premiums written
20
21 for insurance accepted from companies
21
22 commercially domiciled in Oklahoma this state
22
23 bears to premiums written for reinsurance
23
24 accepted from all sources, or alternatively in
24
Req. No. 617 Page 9
1 the proportion which the sum of the direct
1
2 premiums written for insurance on property or
2
3 risks in this state by each ceding company from
3
4 which reinsurance is accepted bears to the sum of
4
5 the total direct premiums written by each such
5
6 ceding company for the taxable year.
6
7 5. The net income or loss remaining after the separate
7
8 allocation in paragraph 4 of this subsection, being that which is
8
9 derived from a unitary business enterprise, shall be apportioned to
9
10 this state on the basis of the arithmetical average of three factors
10
11 consisting of property, payroll and sales or gross revenue
11
12 enumerated as subparagraphs a, b and c of this paragraph. Net
12
13 income or loss as used in this paragraph includes that derived from
13
14 patent or copyright royalties, purchase discounts, and interest on
14
15 accounts receivable relating to or arising from a business activity,
15
16 the income from which is apportioned pursuant to this subsection,
16
17 including the sale or other disposition of such property and any
17
18 other property used in the unitary enterprise. Deductions used in
18
19 computing such net income or loss shall not include taxes based on
19
20 or measured by income. Provided, for corporations whose property
20
21 for purposes of the tax imposed by Section 2355 of this title has an
21
22 initial investment cost equaling or exceeding Two Hundred Million
22
23 Dollars ($200,000,000.00) and such investment is made on or after
23
24 July 1, 1997, or for corporations which expand their property or
24
Req. No. 617 Page 10
1 facilities in this state and such expansion has an investment cost
1
2 equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)
2
3 over a period not to exceed three (3) years, and such expansion is
3
4 commenced on or after January 1, 2000, the three factors shall be
4
5 apportioned with property and payroll, each comprising twenty-five
5
6 percent (25%) of the apportionment factor and sales comprising fifty
6
7 percent (50%) of the apportionment factor. The apportionment
7
8 factors shall be computed as follows:
8
9 a. The property factor is a fraction, the numerator of
9
10 which is the average value of the taxpayer's real and
10
11 tangible personal property owned or rented and used in
11
12 this state during the tax period and the denominator
12
13 of which is the average value of all the taxpayer's
13
14 real and tangible personal property everywhere owned
14
15 or rented and used during the tax period.
15
16 (1) Property, the income from which is separately
16
17 allocated in paragraph 4 of this subsection,
17
18 shall not be included in determining this
18
19 fraction. The numerator of the fraction shall
19
20 include a portion of the investment in
20
21 transportation and other equipment having no
21
22 fixed situs, such as rolling stock, buses, trucks
22
23 and trailers, including machinery and equipment
23
24 carried thereon, airplanes, salespersons'
24
Req. No. 617 Page 11
1 automobiles and other similar equipment, in the
1
2 proportion that miles traveled in Oklahoma this
2
3 state by such equipment bears to total miles
3
4 traveled,
4
5 (2) Property owned by the taxpayer is valued at its
5
6 original cost. Property rented by the taxpayer
6
7 is valued at eight times the net annual rental
7
8 rate. Net annual rental rate is the annual
8
9 rental rate paid by the taxpayer, less any annual
9
10 rental rate received by the taxpayer from
10
11 subrentals,
11
12 (3) The average value of property shall be determined
12
13 by averaging the values at the beginning and
13
14 ending of the tax period but the Oklahoma Tax
14
15 Commission may require the averaging of monthly
15
16 values during the tax period if reasonably
16
17 required to reflect properly the average value of
17
18 the taxpayer's property;
18
19 b. The payroll factor is a fraction, the numerator of
19
20 which is the total compensation for services rendered
20
21 in the state during the tax period, and the
21
22 denominator of which is the total compensation for
22
23 services rendered everywhere during the tax period.
23
24 "Compensation", as used in this subsection, means
24
Req. No. 617 Page 12
1 those paid-for services to the extent related to the
1
2 unitary business but does not include officers'
2
3 salaries, wages and other compensation.
3
4 (1) In the case of a transportation enterprise, the
4
5 numerator of the fraction shall include a portion
5
6 of such expenditure in connection with employees
6
7 operating equipment over a fixed route, such as
7
8 railroad employees, airline pilots, or bus
8
9 drivers, in this state only a part of the time,
9
10 in the proportion that mileage traveled in
10
11 Oklahoma this state bears to total mileage
11
12 traveled by such employees,
12
13 (2) In any case the numerator of the fraction shall
13
14 include a portion of such expenditures in
14
15 connection with itinerant employees, such as
15
16 traveling salespersons, in this state only a part
16
17 of the time, in the proportion that time spent in
17
18 Oklahoma this state bears to total time spent in
18
19 furtherance of the enterprise by such employees;
19
20 c. The sales factor is a fraction, the numerator of which
20
21 is the total sales or gross revenue of the taxpayer in
21
22 this state during the tax period, and the denominator
22
23 of which is the total sales or gross revenue of the
23
24 taxpayer everywhere during the tax period. "Sales",
24
Req. No. 617 Page 13
1 as used in this subsection, does not include sales or
1
2 gross revenue which are separately allocated in
2
3 paragraph 4 of this subsection.
3
4 (1) Sales of tangible personal property have a situs
4
5 in this state if the property is delivered or
5
6 shipped to a purchaser other than the United
6
7 States government, within this state regardless
7
8 of the FOB Freight on Board (FOB) point or other
8
9 conditions of the sale; or the property is
9
10 shipped from an office, store, warehouse, factory
10
11 or other place of storage in this state and (a)
11
12 the purchaser is the United States government or
12
13 (b) the taxpayer is not doing business in the
13
14 state of the destination of the shipment.
14
15 (2) In the case of a railroad or interurban railway
15
16 enterprise, the numerator of the fraction shall
16
17 not be less than the allocation of revenues to
17
18 this state as shown in its annual report to the
18
19 Corporation Commission.
19
20 (3) In the case of an airline, truck or bus
20
21 enterprise or freight car, tank car, refrigerator
21
22 car or other railroad equipment enterprise, the
22
23 numerator of the fraction shall include a portion
23
24 of revenue from interstate transportation in the
24
Req. No. 617 Page 14
1 proportion that interstate mileage traveled in
1
2 Oklahoma this state bears to total interstate
2
3 mileage traveled.
3
4 (4) In the case of an oil, gasoline or gas pipeline
4
5 enterprise, the numerator of the fraction shall
5
6 be either the total of traffic units of the
6
7 enterprise within Oklahoma this state or the
7
8 revenue allocated to Oklahoma this state based
8
9 upon miles moved, at the option of the taxpayer,
9
10 and the denominator of which shall be the total
10
11 of traffic units of the enterprise or the revenue
11
12 of the enterprise everywhere as appropriate to
12
13 the numerator. A "traffic unit" is hereby
13
14 defined as the transportation for a distance of
14
15 one (1) mile of one (1) barrel of oil, one (1)
15
16 gallon of gasoline or one thousand (1,000) cubic
16
17 feet of natural or casinghead gas, as the case
17
18 may be.
18
19 (5) In the case of a telephone or telegraph or other
19
20 communication enterprise, the numerator of the
20
21 fraction shall include that portion of the
21
22 interstate revenue as is allocated pursuant to
22
23 the accounting procedures prescribed by the
23
24 Federal Communications Commission; provided that
24
Req. No. 617 Page 15
1 in respect to each corporation or business entity
1
2 required by the Federal Communications Commission
2
3 to keep its books and records in accordance with
3
4 a uniform system of accounts prescribed by such
4
5 Commission, the intrastate net income shall be
5
6 determined separately in the manner provided by
6
7 such uniform system of accounts and only the
7
8 interstate income shall be subject to allocation
8
9 pursuant to the provisions of this subsection.
9
10 Provided further, that the gross revenue factors
10
11 shall be those as are determined pursuant to the
11
12 accounting procedures prescribed by the Federal
12
13 Communications Commission.
13
14 In any case where the apportionment of the three factors
14
15 prescribed in this paragraph attributes to Oklahoma this state a
15
16 portion of net income of the enterprise out of all appropriate
16
17 proportion to the property owned and/or business transacted within
17
18 this state, because of the fact that one or more of the factors so
18
19 prescribed are not employed to any appreciable extent in furtherance
19
20 of the enterprise; or because one or more factors not so prescribed
20
21 are employed to a considerable extent in furtherance of the
21
22 enterprise; or because of other reasons, the Tax Commission is
22
23 empowered to permit, after a showing by taxpayer that an excessive
23
24 portion of net income has been attributed to Oklahoma this state, or
24
Req. No. 617 Page 16
1 require, when in its judgment an insufficient portion of net income
1
2 has been attributed to Oklahoma this state, the elimination,
2
3 substitution, or use of additional factors, or reduction or increase
3
4 in the weight of such prescribed factors. Provided, however, that
4
5 any such variance from such prescribed factors which has the effect
5
6 of increasing the portion of net income attributable to Oklahoma
6
7 this state must not be inherently arbitrary, and application of the
7
8 recomputed final apportionment to the net income of the enterprise
8
9 must attribute to Oklahoma this state only a reasonable portion
9
10 thereof.
10
11 6. For calendar years 1997 and 1998, the owner of a new or
11
12 expanded agricultural commodity processing facility in this state
12
13 may exclude from Oklahoma taxable income, or in the case of an
13
14 individual, the Oklahoma adjusted gross income, fifteen percent
14
15 (15%) of the investment by the owner in the new or expanded
15
16 agricultural commodity processing facility. For calendar year 1999,
16
17 and all subsequent years, the percentage, not to exceed fifteen
17
18 percent (15%), available to the owner of a new or expanded
18
19 agricultural commodity processing facility in this state claiming
19
20 the exemption shall be adjusted annually so that the total estimated
20
21 reduction in tax liability does not exceed One Million Dollars
21
22 ($1,000,000.00) annually. The Tax Commission shall promulgate rules
22
23 for determining the percentage of the investment which each eligible
23
24 taxpayer may exclude. The exclusion provided by this paragraph
24
Req. No. 617 Page 17
1 shall be taken in the taxable year when the investment is made. In
1
2 the event the total reduction in tax liability authorized by this
2
3 paragraph exceeds One Million Dollars ($1,000,000.00) in any
3
4 calendar year, the Tax Commission shall permit any excess over One
4
5 Million Dollars ($1,000,000.00) and shall factor such excess into
5
6 the percentage for subsequent years. Any amount of the exemption
6
7 permitted to be excluded pursuant to the provisions of this
7
8 paragraph but not used in any year may be carried forward as an
8
9 exemption from income pursuant to the provisions of this paragraph
9
10 for a period not exceeding six (6) years following the year in which
10
11 the investment was originally made.
11
12 For purposes of this paragraph:
12
13 a. "Agricultural commodity processing facility" means
13
14 building buildings, structures, fixtures and
14
15 improvements used or operated primarily for the
15
16 processing or production of marketable products from
16
17 agricultural commodities. The term shall also mean a
17
18 dairy operation that requires a depreciable investment
18
19 of at least Two Hundred Fifty Thousand Dollars
19
20 ($250,000.00) and which produces milk from dairy cows.
20
21 The term does not include a facility that provides
21
22 only, and nothing more than, storage, cleaning, drying
22
23 or transportation of agricultural commodities, and
23
24
24
Req. No. 617 Page 18
1 b. "Facility" means each part of the facility which is
1
2 used in a process primarily for:
2
3 (1) the processing of agricultural commodities,
3
4 including receiving or storing agricultural
4
5 commodities, or the production of milk at a dairy
5
6 operation,
6
7 (2) transporting the agricultural commodities or
7
8 product before, during or after the processing,
8
9 or
9
10 (3) packaging or otherwise preparing the product for
10
11 sale or shipment.
11
12 7. Despite any provision to the contrary in paragraph 3 of this
12
13 subsection, for taxable years beginning after December 31, 1999, in
13
14 the case of a taxpayer which has a farming loss, such farming loss
14
15 shall be considered a net operating loss carryback in accordance
15
16 with and to the extent of the Internal Revenue Code of 1986, as
16
17 amended, 26 U.S.C., Section 172(b)(G) 172(b)(1)(B). However, the
17
18 amount of the net operating loss carryback shall not exceed the
18
19 lesser of:
19
20 a. Sixty Thousand Dollars ($60,000.00), or
20
21 b. the loss properly shown on Schedule F of the Internal
21
22 Revenue Service Form 1040 reduced by one-half (1/2) of
22
23 the income from all other sources other than reflected
23
24 on Schedule F.
24
Req. No. 617 Page 19
1 8. In taxable years beginning after December 31, 1995, all
1
2 qualified wages equal to the federal income tax credit set forth in
2
3 26 U.S.C.A., Section 45A, shall be deducted from taxable income.
3
4 The deduction allowed pursuant to this paragraph shall only be
4
5 permitted for the tax years in which the federal tax credit pursuant
5
6 to 26 U.S.C.A., Section 45A, is allowed. For purposes of this
6
7 paragraph, "qualified wages" means those wages used to calculate the
7
8 federal credit pursuant to 26 U.S.C.A., Section 45A.
8
9 9. In taxable years beginning after December 31, 2005, an
9
10 employer that is eligible for and utilizes the Safety Pays OSHA
10
11 Consultation Service provided by the Oklahoma Department of Labor
11
12 shall receive an exemption from taxable income in the amount of One
12
13 Thousand Dollars ($1,000.00) for the tax year that the service is
13
14 utilized.
14
15 10. For taxable years beginning on or after January 1, 2010,
15
16 there shall be added to Oklahoma taxable income an amount equal to
16
17 the amount of deferred income not included in such taxable income
17
18 pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986
18
19 as amended by Section 1231 of the American Recovery and Reinvestment
19
20 Act of 2009 (P.L. No. 111-5). There shall be subtracted from
20
21 Oklahoma taxable income an amount equal to the amount of deferred
21
22 income included in such taxable income pursuant to Section 108(i)(1)
22
23 of the Internal Revenue Code of 1986 as amended by Section 1231 of
23
24 the American Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
24
Req. No. 617 Page 20
1 11. For taxable years beginning on or after January 1, 2019,
1
2 there shall be subtracted from Oklahoma taxable income or adjusted
2
3 gross income any item of income or gain, and there shall be added to
3
4 Oklahoma taxable income or adjusted gross income any item of loss or
4
5 deduction that in the absence of an election pursuant to the
5
6 provisions of the Pass-Through Entity Tax Equity Act of 2019 would
6
7 be allocated to a member or to an indirect member of an electing
7
8 pass-through entity pursuant to Section 2351 et seq. of this title,
8
9 if (i) the electing pass-through entity has accounted for such item
9
10 in computing its Oklahoma net entity income or loss pursuant to the
10
11 provisions of the Pass-Through Entity Tax Equity Act of 2019, and
11
12 (ii) the total amount of tax attributable to any resulting Oklahoma
12
13 net entity income has been paid. The Oklahoma Tax Commission shall
13
14 promulgate rules for the reporting of such exclusion to direct and
14
15 indirect members of the electing pass-through entity. As used in
15
16 this paragraph, "electing pass-through entity", "indirect member",
16
17 and "member" shall be defined in the same manner as prescribed by
17
18 Section 2355.1P-2 of this title. Notwithstanding the application of
18
19 this paragraph, the adjusted tax basis of any ownership interest in
19
20 a pass-through entity for purposes of Section 2351 et seq. of this
20
21 title shall be equal to its adjusted tax basis for federal income
21
22 tax purposes.
22
23 B. 1. The taxable income of any corporation shall be further
23
24 adjusted to arrive at Oklahoma taxable income, except those
24
Req. No. 617 Page 21
1 corporations electing treatment as provided in subchapter S of the
1
2 Internal Revenue Code of 1986, as amended, 26 U.S.C., Section 1361
2
3 et seq., and Section 2365 of this title, deductions pursuant to the
3
4 provisions of the Accelerated Cost Recovery System as defined
4
5 provided and allowed in the Economic Recovery Tax Act of 1981,
5
6 Public Law 97-34, 26 U.S.C., Section 168, for depreciation of assets
6
7 placed into service after December 31, 1981, shall not be allowed in
7
8 calculating Oklahoma taxable income. Such corporations shall be
8
9 allowed a deduction for depreciation of assets placed into service
9
10 after December 31, 1981, in accordance with provisions of the
10
11 Internal Revenue Code of 1986, as amended, 26 U.S.C., Section 1 et
11
12 seq., in effect immediately prior to the enactment of the
12
13 Accelerated Cost Recovery System. The Oklahoma tax basis for all
13
14 such assets placed into service after December 31, 1981, calculated
14
15 in this section shall be retained and utilized for all Oklahoma
15
16 income tax purposes through the final disposition of such assets.
16
17 Notwithstanding any other provisions of the Oklahoma Income Tax
17
18 Act, Section 2351 et seq. of this title, or of the Internal Revenue
18
19 Code of 1986, as amended, to the contrary, this subsection shall
19
20 control calculation of depreciation of assets placed into service
20
21 after December 31, 1981, and before January 1, 1983.
21
22 For assets placed in service and held by a corporation in which
22
23 accelerated cost recovery system the Accelerated Cost Recovery
23
24 System was previously disallowed, an adjustment to taxable income is
24
Req. No. 617 Page 22
1 required in the first taxable year beginning after December 31,
1
2 1982, to reconcile the basis of such assets to the basis allowed in
2
3 the Internal Revenue Code of 1986, as amended. The purpose of this
3
4 adjustment is to equalize the basis and allowance for depreciation
4
5 accounts between that reported to the Internal Revenue Service and
5
6 that reported to Oklahoma this state.
6
7 2. For tax years beginning on or after January 1, 2009, and
7
8 ending on or before December 31, 2009, there shall be added to
8
9 Oklahoma taxable income any amount in excess of One Hundred Seventy-
9
10 five Thousand Dollars ($175,000.00) which has been deducted as a
10
11 small business expense under Internal Revenue Code of 1986, as
11
12 amended, Section 179 as provided in the American Recovery and
12
13 Reinvestment Act of 2009.
13
14 C. 1. For taxable years beginning after December 31, 1987, the
14
15 taxable income of any corporation shall be further adjusted to
15
16 arrive at Oklahoma taxable income for transfers of technology to
16
17 qualified small businesses located in Oklahoma this state. Such
17
18 transferor corporation shall be allowed an exemption from taxable
18
19 income of an amount equal to the amount of royalty payment received
19
20 as a result of such transfer; provided, however, such amount shall
20
21 not exceed ten percent (10%) of the amount of gross proceeds
21
22 received by such transferor corporation as a result of the
22
23 technology transfer. Such exemption shall be allowed for a period
23
24 not to exceed ten (10) years from the date of receipt of the first
24
Req. No. 617 Page 23
1 royalty payment accruing from such transfer. No exemption may be
1
2 claimed for transfers of technology to qualified small businesses
2
3 made prior to January 1, 1988.
3
4 2. For purposes of this subsection:
4
5 a. "Qualified small business" means an entity, whether
5
6 organized as a corporation, partnership, or
6
7 proprietorship, organized for profit with its
7
8 principal place of business located within this state
8
9 and which meets the following criteria:
9
10 (1) Capitalization of not more than Two Hundred Fifty
10
11 Thousand Dollars ($250,000.00),
11
12 (2) Having at least fifty percent (50%) of its
12
13 employees and assets located in Oklahoma this
13
14 state at the time of the transfer, and
14
15 (3) Not a subsidiary or affiliate of the transferor
15
16 corporation;
16
17 b. "Technology" means a proprietary process, formula,
17
18 pattern, device or compilation of scientific or
18
19 technical information which is not in the public
19
20 domain;
20
21 c. "Transferor corporation" means a corporation which is
21
22 the exclusive and undisputed owner of the technology
22
23 at the time the transfer is made; and
23
24
24
Req. No. 617 Page 24
1 d. "Gross proceeds" means the total amount of
1
2 consideration for the transfer of technology, whether
2
3 the consideration is in money or otherwise.
3
4 D. 1. For taxable years beginning after December 31, 2005 tax
4
5 years 2006 through 2025, the taxable income of any corporation,
5
6 estate or trust, shall be further adjusted for qualifying gains
6
7 receiving capital treatment. Such corporations, estates or trusts
7
8 shall be allowed a deduction from Oklahoma taxable income for the
8
9 amount of qualifying gains receiving capital treatment earned by the
9
10 corporation, estate or trust during the taxable year and included in
10
11 the federal taxable income of such corporation, estate or trust.
11
12 2. As used in this subsection:
12
13 a. "qualifying gains receiving capital treatment" means
13
14 the amount of net capital gains, as defined in Section
14
15 1222(11) of the Internal Revenue Code of 1986, as
15
16 amended, included in the federal income tax return of
16
17 the corporation, estate or trust that result from:
17
18 (1) the sale of real property or tangible personal
18
19 property located within Oklahoma this state that
19
20 has been directly or indirectly owned by the
20
21 corporation, estate or trust for a holding period
21
22 of at least five (5) years prior to the date of
22
23 the transaction from which such net capital gains
23
24 arise,
24
Req. No. 617 Page 25
1 (2) the sale of stock or on the sale of an ownership
1
2 interest in an Oklahoma company, limited
2
3 liability company, or partnership where such
3
4 stock or ownership interest has been directly or
4
5 indirectly owned by the corporation, estate or
5
6 trust for a holding period of at least three (3)
6
7 years prior to the date of the transaction from
7
8 which the net capital gains arise, or
8
9 (3) the sale of real property, tangible personal
9
10 property or intangible personal property located
10
11 within Oklahoma this state as part of the sale of
11
12 all or substantially all of the assets of an
12
13 Oklahoma company, limited liability company, or
13
14 partnership where such property has been directly
14
15 or indirectly owned by such entity owned by the
15
16 owners of such entity, and used in or derived
16
17 from such entity for a period of at least three
17
18 (3) years prior to the date of the transaction
18
19 from which the net capital gains arise,
19
20 b. "holding period" means an uninterrupted period of
20
21 time. The holding period shall include any additional
21
22 period when the property was held by another
22
23 individual or entity, if such additional period is
23
24 included in the taxpayer's holding period for the
24
Req. No. 617 Page 26
1 asset pursuant to the Internal Revenue Code of 1986,
1
2 as amended,
2
3 c. "Oklahoma company", "limited liability company", or
3
4 "partnership" means an entity whose primary
4
5 headquarters have been located in Oklahoma this state
5
6 for at least three (3) uninterrupted years prior to
6
7 the date of the transaction from which the net capital
7
8 gains arise,
8
9 d. "direct" means the taxpayer directly owns the asset,
9
10 and
10
11 e. "indirect" means the taxpayer owns an interest in a
11
12 pass-through entity (or chain of pass-through
12
13 entities) that sells the asset that gives rise to the
13
14 qualifying gains receiving capital treatment.
14
15 (1) With respect to sales of real property or
15
16 tangible personal property located within
16
17 Oklahoma this state, the deduction described in
17
18 this subsection shall not apply unless the pass-
18
19 through entity that makes the sale has held the
19
20 property for not less than five (5) uninterrupted
20
21 years prior to the date of the transaction that
21
22 created the capital gain, and each pass-through
22
23 entity included in the chain of ownership has
23
24 been a member, partner, or shareholder of the
24
Req. No. 617 Page 27
1 pass-through entity in the tier immediately below
1
2 it for an uninterrupted period of not less than
2
3 five (5) years.
3
4 (2) With respect to sales of stock or ownership
4
5 interest in or sales of all or substantially all
5
6 of the assets of an Oklahoma company, limited
6
7 liability company, or partnership, the deduction
7
8 described in this subsection shall not apply
8
9 unless the pass-through entity that makes the
9
10 sale has held the stock or ownership interest or
10
11 the assets for not less than three (3)
11
12 uninterrupted years prior to the date of the
12
13 transaction that created the capital gain, and
13
14 each pass-through entity included in the chain of
14
15 ownership has been a member, partner or
15
16 shareholder of the pass-through entity in the
16
17 tier immediately below it for an uninterrupted
17
18 period of not less than three (3) years.
18
19 E. The Oklahoma adjusted gross income of any individual
19
20 taxpayer shall be further adjusted as follows to arrive at Oklahoma
20
21 taxable income:
21
22 1. a. In the case of individuals, there shall be added or
22
23 deducted, as the case may be, the difference necessary
23
24 to allow personal exemptions of One Thousand Dollars
24
Req. No. 617 Page 28
1 ($1,000.00) in lieu of the personal exemptions allowed
1
2 by the Internal Revenue Code of 1986, as amended.
2
3 b. There shall be allowed an additional exemption of One
3
4 Thousand Dollars ($1,000.00) for each taxpayer or
4
5 spouse who is blind at the close of the tax year. For
5
6 purposes of this subparagraph, an individual is blind
6
7 only if the central visual acuity of the individual
7
8 does not exceed 20/200 in the better eye with
8
9 correcting lenses, or if the visual acuity of the
9
10 individual is greater than 20/200, but is accompanied
10
11 by a limitation in the fields of vision such that the
11
12 widest diameter of the visual field subtends an angle
12
13 no greater than twenty (20) degrees.
13
14 c. There shall be allowed an additional exemption of One
14
15 Thousand Dollars ($1,000.00) for each taxpayer or
15
16 spouse who is sixty-five (65) years of age or older at
16
17 the close of the tax year based upon the filing status
17
18 and federal adjusted gross income of the taxpayer.
18
19 Taxpayers with the following filing status may claim
19
20 this exemption if the federal adjusted gross income
20
21 does not exceed:
21
22 (1) Twenty-five Thousand Dollars ($25,000.00) if
22
23 married and filing jointly,
23
24
24
Req. No. 617 Page 29
1 (2) Twelve Thousand Five Hundred Dollars ($12,500.00)
1
2 if married and filing separately,
2
3 (3) Fifteen Thousand Dollars ($15,000.00) if single,
3
4 and
4
5 (4) Nineteen Thousand Dollars ($19,000.00) if a
5
6 qualifying head of household.
6
7 Provided, for taxable years beginning after December
7
8 31, 1999, amounts included in the calculation of
8
9 federal adjusted gross income pursuant to the
9
10 conversion of a traditional individual retirement
10
11 account to a Roth individual retirement account shall
11
12 be excluded from federal adjusted gross income for
12
13 purposes of the income thresholds provided in this
13
14 subparagraph.
14
15 2. a. For taxable years beginning on or before December 31,
15
16 2005, in the case of individuals who use the standard
16
17 deduction in determining taxable income, there shall
17
18 be added or deducted, as the case may be, the
18
19 difference necessary to allow a standard deduction in
19
20 lieu of the standard deduction allowed by the Internal
20
21 Revenue Code of 1986, as amended, in an amount equal
21
22 to the larger of fifteen percent (15%) of the Oklahoma
22
23 adjusted gross income or One Thousand Dollars
23
24 ($1,000.00), but not to exceed Two Thousand Dollars
24
Req. No. 617 Page 30
1 ($2,000.00), except that in the case of a married
1
2 individual filing a separate return such deduction
2
3 shall be the larger of fifteen percent (15%) of such
3
4 Oklahoma adjusted gross income or Five Hundred Dollars
4
5 ($500.00), but not to exceed the maximum amount of One
5
6 Thousand Dollars ($1,000.00).
6
7 b. For taxable years beginning on or after January 1,
7
8 2006, and before January 1, 2007, in the case of
8
9 individuals who use the standard deduction in
9
10 determining taxable income, there shall be added or
10
11 deducted, as the case may be, the difference necessary
11
12 to allow a standard deduction in lieu of the standard
12
13 deduction allowed by the Internal Revenue Code of
13
14 1986, as amended, in an amount equal to:
14
15 (1) Three Thousand Dollars ($3,000.00), if the filing
15
16 status is married filing joint, head of household
16
17 or qualifying widow, or
17
18 (2) Two Thousand Dollars ($2,000.00), if the filing
18
19 status is single or married filing separate.
19
20 c. For the taxable year beginning on January 1, 2007, and
20
21 ending December 31, 2007, in the case of individuals
21
22 who use the standard deduction in determining taxable
22
23 income, there shall be added or deducted, as the case
23
24 may be, the difference necessary to allow a standard
24
Req. No. 617 Page 31
1 deduction in lieu of the standard deduction allowed by
1
2 the Internal Revenue Code of 1986, as amended, in an
2
3 amount equal to:
3
4 (1) Five Thousand Five Hundred Dollars ($5,500.00),
4
5 if the filing status is married filing joint or
5
6 qualifying widow, or
6
7 (2) Four Thousand One Hundred Twenty-five Dollars
7
8 ($4,125.00) for a head of household, or
8
9 (3) Two Thousand Seven Hundred Fifty Dollars
9
10 ($2,750.00), if the filing status is single or
10
11 married filing separate.
11
12 d. For the taxable year beginning on January 1, 2008, and
12
13 ending December 31, 2008, in the case of individuals
13
14 who use the standard deduction in determining taxable
14
15 income, there shall be added or deducted, as the case
15
16 may be, the difference necessary to allow a standard
16
17 deduction in lieu of the standard deduction allowed by
17
18 the Internal Revenue Code of 1986, as amended, in an
18
19 amount equal to:
19
20 (1) Six Thousand Five Hundred Dollars ($6,500.00), if
20
21 the filing status is married filing joint or
21
22 qualifying widow,
22
23 (2) Four Thousand Eight Hundred Seventy-five Dollars
23
24 ($4,875.00) for a head of household, or
24
Req. No. 617 Page 32
1 (3) Three Thousand Two Hundred Fifty Dollars
1
2 ($3,250.00), if the filing status is single or
2
3 married filing separate.
3
4 e. For the taxable year beginning on January 1, 2009, and
4
5 ending December 31, 2009, in the case of individuals
5
6 who use the standard deduction in determining taxable
6
7 income, there shall be added or deducted, as the case
7
8 may be, the difference necessary to allow a standard
8
9 deduction in lieu of the standard deduction allowed by
9
10 the Internal Revenue Code of 1986, as amended, in an
10
11 amount equal to:
11
12 (1) Eight Thousand Five Hundred Dollars ($8,500.00),
12
13 if the filing status is married filing joint or
13
14 qualifying widow,
14
15 (2) Six Thousand Three Hundred Seventy-five Dollars
15
16 ($6,375.00) for a head of household, or
16
17 (3) Four Thousand Two Hundred Fifty Dollars
17
18 ($4,250.00), if the filing status is single or
18
19 married filing separate.
19
20 Oklahoma adjusted gross income shall be increased by
20
21 any amounts paid for motor vehicle excise taxes which
21
22 were deducted as allowed by the Internal Revenue Code
22
23 of 1986, as amended.
23
24
24
Req. No. 617 Page 33
1 f. For taxable years beginning on or after January 1,
1
2 2010, and ending on December 31, 2016, in the case of
2
3 individuals who use the standard deduction in
3
4 determining taxable income, there shall be added or
4
5 deducted, as the case may be, the difference necessary
5
6 to allow a standard deduction equal to the standard
6
7 deduction allowed by the Internal Revenue Code of
7
8 1986, as amended, based upon the amount and filing
8
9 status prescribed by such Code for purposes of filing
9
10 federal individual income tax returns.
10
11 g. For taxable years beginning on or after January 1,
11
12 2017, in the case of individuals who use the standard
12
13 deduction in determining taxable income, there shall
13
14 be added or deducted, as the case may be, the
14
15 difference necessary to allow a standard deduction in
15
16 lieu of the standard deduction allowed by the Internal
16
17 Revenue Code of 1986, as amended, as follows:
17
18 (1) Six Thousand Three Hundred Fifty Dollars
18
19 ($6,350.00) for single or married filing
19
20 separately,
20
21 (2) Twelve Thousand Seven Hundred Dollars
21
22 ($12,700.00) for married filing jointly or
22
23 qualifying widower with dependent child, and
23
24
24
Req. No. 617 Page 34
1 (3) Nine Thousand Three Hundred Fifty Dollars
1
2 ($9,350.00) for head of household.
2
3 3. a. In the case of resident and part-year resident
3
4 individuals having adjusted gross income from sources
4
5 both within and without the state, the itemized or
5
6 standard deductions and personal exemptions shall be
6
7 reduced to an amount which is the same portion of the
7
8 total thereof as Oklahoma adjusted gross income is of
8
9 adjusted gross income. To the extent itemized
9
10 deductions include allowable moving expense, proration
10
11 of moving expense shall not be required or permitted
11
12 but allowable moving expense shall be fully deductible
12
13 for those taxpayers moving within or into Oklahoma
13
14 this state and no part of moving expense shall be
14
15 deductible for those taxpayers moving without or out
15
16 of Oklahoma this state. All other itemized or
16
17 standard deductions and personal exemptions shall be
17
18 subject to proration as provided by law.
18
19 b. For taxable years beginning on or after January 1,
19
20 2018, the net amount of itemized deductions allowable
20
21 on an Oklahoma income tax return, subject to the
21
22 provisions of paragraph 24 of this subsection, shall
22
23 not exceed Seventeen Thousand Dollars ($17,000.00).
23
24 For purposes of this subparagraph, charitable
24
Req. No. 617 Page 35
1 contributions and medical expenses deductible for
1
2 federal income tax purposes shall be excluded from the
2
3 amount of Seventeen Thousand Dollars ($17,000.00) as
3
4 specified by this subparagraph.
4
5 4. A resident individual with a physical disability
5
6 constituting a substantial handicap to employment may deduct from
6
7 Oklahoma adjusted gross income such expenditures to modify a motor
7
8 vehicle, home or workplace as are necessary to compensate for his or
8
9 her handicap. A veteran certified by the United States Department
9
10 of Veterans Affairs of the federal government as having a service-
10
11 connected disability shall be conclusively presumed to be an
11
12 individual with a physical disability constituting a substantial
12
13 handicap to employment. The Tax Commission shall promulgate rules
13
14 containing a list of combinations of common disabilities and
14
15 modifications which may be presumed to qualify for this deduction.
15
16 The Tax Commission shall prescribe necessary requirements for
16
17 verification.
17
18 5. a. Before July 1, 2010, the first One Thousand Five
18
19 Hundred Dollars ($1,500.00) received by any person
19
20 from the United States as salary or compensation in
20
21 any form, other than retirement benefits, as a member
21
22 of any component of the Armed Forces of the United
22
23 States shall be deducted from taxable income.
23
24
24
Req. No. 617 Page 36
1 b. On or after July 1, 2010, one hundred percent (100%)
1
2 of the income received by any person from the United
2
3 States as salary or compensation in any form, other
3
4 than retirement benefits, as a member of any component
4
5 of the Armed Forces of the United States shall be
5
6 deducted from taxable income.
6
7 c. Whenever the filing of a timely income tax return by a
7
8 member of the Armed Forces of the United States is
8
9 made impracticable or impossible of accomplishment by
9
10 reason of:
10
11 (1) absence from the United States, which term
11
12 includes only the states and the District of
12
13 Columbia,
13
14 (2) absence from the State of Oklahoma this state
14
15 while on active duty, or
15
16 (3) confinement in a hospital within the United
16
17 States for treatment of wounds, injuries or
17
18 disease,
18
19 the time for filing a return and paying an income tax
19
20 shall be and is hereby extended without incurring
20
21 liability for interest or penalties, to the fifteenth
21
22 day of the third month following the month in which:
22
23 (a) Such individual shall return to the United
23
24 States if the extension is granted pursuant
24
Req. No. 617 Page 37
1 to subparagraph a division 1 of this
1
2 paragraph subparagraph, return to the State
2
3 of Oklahoma this state if the extension is
3
4 granted pursuant to subparagraph b division
4
5 2 of this paragraph subparagraph or be
5
6 discharged from such hospital if the
6
7 extension is granted pursuant to
7
8 subparagraph c division 3 of this paragraph
8
9 subparagraph, or
9
10 (b) An executor, administrator, or conservator
10
11 of the estate of the taxpayer is appointed,
11
12 whichever event occurs the earliest.
12
13 Provided, that the Tax Commission may, in its discretion, grant
13
14 any member of the Armed Forces of the United States an extension of
14
15 time for filing of income tax returns and payment of income tax
15
16 without incurring liabilities for interest or penalties. Such
16
17 extension may be granted only when in the judgment of the Tax
17
18 Commission a good cause exists therefor and may be for a period in
18
19 excess of six (6) months. A record of every such extension granted,
19
20 and the reason therefor, shall be kept.
20
21 6. Before July 1, 2010, the salary or any other form of
21
22 compensation, received from the United States by a member of any
22
23 component of the Armed Forces of the United States, shall be
23
24 deducted from taxable income during the time in which the person is
24
Req. No. 617 Page 38
1 detained by the enemy in a conflict, is a prisoner of war or is
1
2 missing in action and not deceased; provided, after July 1, 2010,
2
3 all such salary or compensation shall be subject to the deduction as
3
4 provided pursuant to paragraph 5 of this subsection.
4
5 7. a. An individual taxpayer, whether resident or
5
6 nonresident, may deduct an amount equal to the federal
6
7 income taxes paid by the taxpayer during the taxable
7
8 year.
8
9 b. Federal taxes as described in subparagraph a of this
9
10 paragraph shall be deductible by any individual
10
11 taxpayer, whether resident or nonresident, only to the
11
12 extent they relate to income subject to taxation
12
13 pursuant to the provisions of the Oklahoma Income Tax
13
14 Act. The maximum amount allowable in the preceding
14
15 paragraph 5 of this subsection shall be prorated on
15
16 the ratio of the Oklahoma adjusted gross income to
16
17 federal adjusted gross income.
17
18 c. For the purpose of this paragraph, "federal income
18
19 taxes paid" shall mean federal income taxes, surtaxes
19
20 imposed on incomes or excess profits taxes, as though
20
21 the taxpayer was on the accrual basis. In determining
21
22 the amount of deduction for federal income taxes for
22
23 tax year 2001, the amount of the deduction shall not
23
24 be adjusted by the amount of any accelerated ten
24
Req. No. 617 Page 39
1 percent (10%) tax rate bracket credit or advanced
1
2 refund of the credit received during the tax year
2
3 provided pursuant to the federal Economic Growth and
3
4 Tax Relief Reconciliation Act of 2001, P.L. No. 107-
4
5 16, and the advanced refund of such credit shall not
5
6 be subject to taxation.
6
7 d. The provisions of this paragraph shall apply to all
7
8 taxable years ending after December 31, 1978, and
8
9 beginning before January 1, 2006.
9
10 8. Retirement benefits not to exceed Five Thousand Five Hundred
10
11 Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five
11
12 Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand
12
13 Dollars ($10,000.00) for the 2006 tax year and all subsequent tax
13
14 years, which are received by an individual from the civil service of
14
15 the United States, the Oklahoma Public Employees Retirement System,
15
16 the Teachers' Retirement System of Oklahoma, the Oklahoma Law
16
17 Enforcement Retirement System, the Oklahoma Firefighters Pension and
17
18 Retirement System, the Oklahoma Police Pension and Retirement
18
19 System, the employee retirement systems created by counties pursuant
19
20 to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the The
20
21 Uniform Retirement System for Justices and Judges, the Oklahoma
21
22 Wildlife Conservation Department Retirement Fund, the Oklahoma
22
23 Employment Security Commission Retirement Plan, or the employee
23
24 retirement systems created by municipalities pursuant to Section 48-
24
Req. No. 617 Page 40
1 101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt
1
2 from taxable income.
2
3 9. In taxable years beginning after December 3l, 1984, Social
3
4 Security benefits received by an individual shall be exempt from
4
5 taxable income, to the extent such benefits are included in the
5
6 federal adjusted gross income pursuant to the provisions of Section
6
7 86 of the Internal Revenue Code of 1986, as amended, 26 U.S.C.,
7
8 Section 86.
8
9 10. For taxable years beginning after December 31, 1994, lump-
9
10 sum distributions from employer plans of deferred compensation,
10
11 which are not qualified plans within the meaning of Section 401(a)
11
12 of the Internal Revenue Code of 1986, as amended, 26 U.S.C., Section
12
13 401(a), and which are deposited in and accounted for within a
13
14 separate bank account or brokerage account in a financial
14
15 institution within this state, shall be excluded from taxable income
15
16 in the same manner as a qualifying rollover contribution to an
16
17 individual retirement account within the meaning of Section 408 of
17
18 the Internal Revenue Code of 1986, as amended, 26 U.S.C., Section
18
19 408. Amounts withdrawn from such bank or brokerage account,
19
20 including any earnings thereon, shall be included in taxable income
20
21 when withdrawn in the same manner as withdrawals from individual
21
22 retirement accounts within the meaning of Section 408 of the
22
23 Internal Revenue Code of 1986, as amended.
23
24
24
Req. No. 617 Page 41
1 11. In taxable years beginning after December 31, 1995,
1
2 contributions made to and interest received from a medical savings
2
3 account established pursuant to Sections 2621 through 2623 of Title
3
4 63 of the Oklahoma Statutes shall be exempt from taxable income.
4
5 12. For taxable years beginning after December 31, 1996, the
5
6 Oklahoma adjusted gross income of any individual taxpayer who is a
6
7 swine or poultry producer may be further adjusted for the deduction
7
8 for depreciation allowed for new construction or expansion costs
8
9 which may be computed using the same depreciation method elected for
9
10 federal income tax purposes except that the useful life shall be
10
11 seven (7) years for purposes of this paragraph. If depreciation is
11
12 allowed as a deduction in determining the adjusted gross income of
12
13 an individual, any depreciation calculated and claimed pursuant to
13
14 this section shall in no event be a duplication of any depreciation
14
15 allowed or permitted on the federal income tax return of the
15
16 individual.
16
17 13. a. In taxable years beginning before January 1, 2005,
17
18 retirement benefits not to exceed the amounts
18
19 specified in this paragraph, which are received by an
19
20 individual sixty-five (65) years of age or older and
20
21 whose Oklahoma adjusted gross income is Twenty-five
21
22 Thousand Dollars ($25,000.00) or less if the filing
22
23 status is single, head of household, or married filing
23
24 separate, or Fifty Thousand Dollars ($50,000.00) or
24
Req. No. 617 Page 42
1 less if the filing status is married filing joint or
1
2 qualifying widow, shall be exempt from taxable income.
2
3 In taxable years beginning after December 31, 2004,
3
4 retirement benefits not to exceed the amounts
4
5 specified in this paragraph, which are received by an
5
6 individual whose Oklahoma adjusted gross income is
6
7 less than the qualifying amount specified in this
7
8 paragraph, shall be exempt from taxable income.
8
9 b. For purposes of this paragraph, the qualifying amount
9
10 shall be as follows:
10
11 (1) in taxable years beginning after December 31,
11
12 2004, and prior to January 1, 2007, the
12
13 qualifying amount shall be Thirty-seven Thousand
13
14 Five Hundred Dollars ($37,500.00) or less if the
14
15 filing status is single, head of household, or
15
16 married filing separate, or Seventy-five Thousand
16
17 Dollars ($75,000.00) or less if the filing status
17
18 is married filing jointly or qualifying widow,
18
19 (2) in the taxable year beginning January 1, 2007,
19
20 the qualifying amount shall be Fifty Thousand
20
21 Dollars ($50,000.00) or less if the filing status
21
22 is single, head of household, or married filing
22
23 separate, or One Hundred Thousand Dollars
23
24
24
Req. No. 617 Page 43
1 ($100,000.00) or less if the filing status is
1
2 married filing jointly or qualifying widow,
2
3 (3) in the taxable year beginning January 1, 2008,
3
4 the qualifying amount shall be Sixty-two Thousand
4
5 Five Hundred Dollars ($62,500.00) or less if the
5
6 filing status is single, head of household, or
6
7 married filing separate, or One Hundred Twenty-
7
8 five Thousand Dollars ($125,000.00) or less if
8
9 the filing status is married filing jointly or
9
10 qualifying widow,
10
11 (4) in the taxable year beginning January 1, 2009,
11
12 the qualifying amount shall be One Hundred
12
13 Thousand Dollars ($100,000.00) or less if the
13
14 filing status is single, head of household, or
14
15 married filing separate, or Two Hundred Thousand
15
16 Dollars ($200,000.00) or less if the filing
16
17 status is married filing jointly or qualifying
17
18 widow, and
18
19 (5) in the taxable year beginning January 1, 2010,
19
20 and subsequent taxable years, there shall be no
20
21 limitation upon the qualifying amount.
21
22 c. For purposes of this paragraph, "retirement benefits"
22
23 means the total distributions or withdrawals from the
23
24 following:
24
Req. No. 617 Page 44
1 (1) an employee pension benefit plan which satisfies
1
2 the requirements of Section 401 of the Internal
2
3 Revenue Code of 1986, as amended, 26 U.S.C.,
3
4 Section 401,
4
5 (2) an eligible deferred compensation plan that
5
6 satisfies the requirements of Section 457 of the
6
7 Internal Revenue Code of 1986, as amended, 26
7
8 U.S.C., Section 457,
8
9 (3) an individual retirement account, annuity or
9
10 trust or simplified employee pension that
10
11 satisfies the requirements of Section 408 of the
11
12 Internal Revenue Code of 1986, as amended, 26
12
13 U.S.C., Section 408,
13
14 (4) an employee annuity subject to the provisions of
14
15 Section 403(a) or (b) of the Internal Revenue
15
16 Code of 1986, as amended, 26 U.S.C., Section
16
17 403(a) or (b),
17
18 (5) United States Retirement Bonds which satisfy the
18
19 requirements of Section 86 of the Internal
19
20 Revenue Code of 1986, as amended, 26 U.S.C.,
20
21 Section 86, or
21
22 (6) lump-sum distributions from a retirement plan
22
23 which satisfies the requirements of Section
23
24
24
Req. No. 617 Page 45
1 402(e) of the Internal Revenue Code of 1986, as
1
2 amended, 26 U.S.C., Section 402(e).
2
3 d. The amount of the exemption provided by this paragraph
3
4 shall be limited to Five Thousand Five Hundred Dollars
4
5 ($5,500.00) for the 2004 tax year, Seven Thousand Five
5
6 Hundred Dollars ($7,500.00) for the 2005 tax year and
6
7 Ten Thousand Dollars ($10,000.00) for the tax year
7
8 2006 and for all subsequent tax years. Any individual
8
9 who claims the exemption provided for in paragraph 8
9
10 of this subsection shall not be permitted to claim a
10
11 combined total exemption pursuant to this paragraph
11
12 and paragraph 8 of this subsection in an amount
12
13 exceeding Five Thousand Five Hundred Dollars
13
14 ($5,500.00) for the 2004 tax year, Seven Thousand Five
14
15 Hundred Dollars ($7,500.00) for the 2005 tax year and
15
16 Ten Thousand Dollars ($10,000.00) for the 2006 tax
16
17 year and all subsequent tax years.
17
18 14. In taxable years beginning after December 31, 1999, for an
18
19 individual engaged in production agriculture who has filed a
19
20 Schedule F form with the taxpayer's federal income tax return for
20
21 such taxable year, there shall be excluded from taxable income any
21
22 amount which was included as federal taxable income or federal
22
23 adjusted gross income and which consists of the discharge of an
23
24
24
Req. No. 617 Page 46
1 obligation by a creditor of the taxpayer incurred to finance the
1
2 production of agricultural products.
2
3 15. In taxable years beginning December 31, 2000, an amount
3
4 equal to one hundred percent (100%) of the amount of any scholarship
4
5 or stipend received from participation in the Oklahoma Police Corps
5
6 Program, as established in Section 2-140.3 of Title 47 of the
6
7 Oklahoma Statutes shall be exempt from taxable income.
7
8 16. a. In taxable years beginning after December 31, 2001,
8
9 and before January 1, 2005, there shall be allowed a
9
10 deduction in the amount of contributions to accounts
10
11 established pursuant to the Oklahoma College Savings
11
12 Plan Act. The deduction shall equal the amount of
12
13 contributions to accounts, but in no event shall the
13
14 deduction for each contributor exceed Two Thousand
14
15 Five Hundred Dollars ($2,500.00) each taxable year for
15
16 each account.
16
17 b. In taxable years beginning after December 31, 2004,
17
18 each taxpayer shall be allowed a deduction for
18
19 contributions to accounts established pursuant to the
19
20 Oklahoma College Savings Plan Act. The maximum annual
20
21 deduction shall equal the amount of contributions to
21
22 all such accounts plus any contributions to such
22
23 accounts by the taxpayer for prior taxable years after
23
24 December 31, 2004, which were not deducted, but in no
24
Req. No. 617 Page 47
1 event shall the deduction for each tax year exceed Ten
1
2 Thousand Dollars ($10,000.00) for each individual
2
3 taxpayer or Twenty Thousand Dollars ($20,000.00) for
3
4 taxpayers filing a joint return. Any amount of a
4
5 contribution that is not deducted by the taxpayer in
5
6 the year for which the contribution is made may be
6
7 carried forward as a deduction from income for the
7
8 succeeding five (5) years. For taxable years
8
9 beginning after December 31, 2005, deductions may be
9
10 taken for contributions and rollovers made during a
10
11 taxable year and up to April 15 of the succeeding
11
12 year, or the due date of a taxpayer's state income tax
12
13 return, excluding extensions, whichever is later.
13
14 Provided, a deduction for the same contribution may
14
15 not be taken for two (2) different taxable years.
15
16 c. In taxable years beginning after December 31, 2006,
16
17 deductions for contributions made pursuant to
17
18 subparagraph b of this paragraph shall be limited as
18
19 follows:
19
20 (1) for a taxpayer who qualified for the five-year
20
21 carryforward election and who takes a rollover or
21
22 nonqualified withdrawal during that period, the
22
23 tax deduction otherwise available pursuant to
23
24 subparagraph b of this paragraph shall be reduced
24
Req. No. 617 Page 48
1 by the amount which is equal to the rollover or
1
2 nonqualified withdrawal, and
2
3 (2) for a taxpayer who elects to take a rollover or
3
4 nonqualified withdrawal within the same tax year
4
5 in which a contribution was made to the
5
6 taxpayer's account, the tax deduction otherwise
6
7 available pursuant to subparagraph b of this
7
8 paragraph shall be reduced by the amount of the
8
9 contribution which is equal to the rollover or
9
10 nonqualified withdrawal.
10
11 d. If a taxpayer elects to take a rollover on a
11
12 contribution for which a deduction has been taken
12
13 pursuant to subparagraph b of this paragraph within
13
14 one (1) year of the date of contribution, the amount
14
15 of such rollover shall be included in the adjusted
15
16 gross income of the taxpayer in the taxable year of
16
17 the rollover.
17
18 e. If a taxpayer makes a nonqualified withdrawal of
18
19 contributions for which a deduction was taken pursuant
19
20 to subparagraph b of this paragraph, such nonqualified
20
21 withdrawal and any earnings thereon shall be included
21
22 in the adjusted gross income of the taxpayer in the
22
23 taxable year of the nonqualified withdrawal.
23
24 f. As used in this paragraph:
24
Req. No. 617 Page 49
1 (1) "non-qualified withdrawal" means a withdrawal
1
2 from an Oklahoma College Savings Plan account
2
3 other than one of the following:
3
4 (a) a qualified withdrawal,
4
5 (b) a withdrawal made as a result of the death
5
6 or disability of the designated beneficiary
6
7 of an account,
7
8 (c) a withdrawal that is made on the account of
8
9 a scholarship or the allowance or payment
9
10 described in Section 135(d)(1)(B) or (C) or
10
11 by the Internal Revenue Code of 1986, as
11
12 amended, received by the designated
12
13 beneficiary to the extent the amount of the
13
14 refund does not exceed the amount of the
14
15 scholarship, allowance, or payment, or
15
16 (d) a rollover or change of designated
16
17 beneficiary as permitted by subsection F of
17
18 Section 3970.7 of Title 70 of the Oklahoma
18
19 Statutes, and
19
20 (2) "rollover" means the transfer of funds from the
20
21 Oklahoma College Savings Plan to any other plan
21
22 under Section 529 of the Internal Revenue Code of
22
23 1986, as amended.
23
24
24
Req. No. 617 Page 50
1 17. For tax years 2006 through 2021, retirement benefits
1
2 received by an individual from any component of the Armed Forces of
2
3 the United States in an amount not to exceed the greater of seventy-
3
4 five percent (75%) of such benefits or Ten Thousand Dollars
4
5 ($10,000.00) shall be exempt from taxable income but in no case less
5
6 than the amount of the exemption provided by paragraph 13 of this
6
7 subsection. For tax year 2022 and subsequent tax years, retirement
7
8 benefits received by an individual from any component of the Armed
8
9 Forces of the United States shall be exempt from taxable income.
9
10 18. For taxable years beginning after December 31, 2006,
10
11 retirement benefits received by federal civil service retirees,
11
12 including survivor annuities, paid in lieu of Social Security
12
13 benefits shall be exempt from taxable income to the extent such
13
14 benefits are included in the federal adjusted gross income pursuant
14
15 to the provisions of Section 86 of the Internal Revenue Code of
15
16 1986, as amended, 26 U.S.C., Section 86, according to the following
16
17 schedule:
17
18 a. in the taxable year beginning January 1, 2007, twenty
18
19 percent (20%) of such benefits shall be exempt,
19
20 b. in the taxable year beginning January 1, 2008, forty
20
21 percent (40%) of such benefits shall be exempt,
21
22 c. in the taxable year beginning January 1, 2009, sixty
22
23 percent (60%) of such benefits shall be exempt,
23
24
24
Req. No. 617 Page 51
1 d. in the taxable year beginning January 1, 2010, eighty
1
2 percent (80%) of such benefits shall be exempt, and
2
3 e. in the taxable year beginning January 1, 2011, and
3
4 subsequent taxable years, one hundred percent (100%)
4
5 of such benefits shall be exempt.
5
6 19. a. For taxable years beginning after December 31, 2007, a
6
7 resident individual may deduct up to Ten Thousand
7
8 Dollars ($10,000.00) from Oklahoma adjusted gross
8
9 income if the individual, or the dependent of the
9
10 individual, while living, donates one or more human
10
11 organs of the individual to another human being for
11
12 human organ transplantation. As used in this
12
13 paragraph, "human organ" means all or part of a liver,
13
14 pancreas, kidney, intestine, lung, or bone marrow. A
14
15 deduction that is claimed under this paragraph may be
15
16 claimed in the taxable year in which the human organ
16
17 transplantation occurs.
17
18 b. An individual may claim this deduction only once, and
18
19 the deduction may be claimed only for unreimbursed
19
20 expenses that are incurred by the individual and
20
21 related to the organ donation of the individual.
21
22 c. The Oklahoma Tax Commission shall promulgate rules to
22
23 implement the provisions of this paragraph which shall
23
24 contain a specific list of expenses which may be
24
Req. No. 617 Page 52
1 presumed to qualify for the deduction. The Tax
1
2 Commission shall prescribe necessary requirements for
2
3 verification.
3
4 20. For taxable years beginning after December 31, 2009, there
4
5 shall be exempt from taxable income any amount received by the
5
6 beneficiary of the death benefit for an emergency medical technician
6
7 or a registered emergency medical responder provided by Section 1-
7
8 2505.1 of Title 63 of the Oklahoma Statutes.
8
9 21. For taxable years beginning after December 31, 2008,
9
10 taxable income shall be increased by any unemployment compensation
10
11 exempted under Section 85(c) of the Internal Revenue Code of 1986,
11
12 as amended, 26 U.S.C., Section 85(c)(2009).
12
13 22. For taxable years beginning after December 31, 2008, there
13
14 shall be exempt from taxable income any payment in an amount less
14
15 than Six Hundred Dollars ($600.00) received by a person as an award
15
16 for participation in a competitive livestock show event. For
16
17 purposes of this paragraph, the payment shall be treated as a
17
18 scholarship amount paid by the entity sponsoring the event and the
18
19 sponsoring entity shall cause the payment to be categorized as a
19
20 scholarship in its books and records.
20
21 23. For taxable years beginning on or after January 1, 2016,
21
22 taxable income shall be increased by any amount of state and local
22
23 sales or income taxes deducted under 26 U.S.C., Section 164 of the
23
24 Internal Revenue Code of 1986, as amended. If the amount of state
24
Req. No. 617 Page 53
1 and local taxes deducted on the federal return is limited, taxable
1
2 income on the state return shall be increased only by the amount
2
3 actually deducted after any such limitations are applied.
3
4 24. For taxable years beginning after December 31, 2020, each
4
5 taxpayer shall be allowed a deduction for contributions to accounts
5
6 established pursuant to the Achieving a Better Life Experience
6
7 (ABLE) Program program as established in Section 4001.1 et seq. of
7
8 Title 56 of the Oklahoma Statutes. For any tax year, the deduction
8
9 provided for in this paragraph shall not exceed Ten Thousand Dollars
9
10 ($10,000.00) for an individual taxpayer or Twenty Thousand Dollars
10
11 ($20,000.00) for taxpayers filing a joint return. Any amount of
11
12 contribution not deducted by the taxpayer in the tax year for which
12
13 the contribution is made may be carried forward as a deduction from
13
14 income for up to five (5) tax years. Deductions may be taken for
14
15 contributions made during the tax year and through April 15 of the
15
16 succeeding tax year, or through the due date of a taxpayer's state
16
17 income tax return excluding extensions, whichever is later.
17
18 Provided, a deduction for the same contribution may not be taken in
18
19 more than one (1) tax year.
19
20 F. 1. For taxable years beginning after December 31, 2004 tax
20
21 years 2005 through 2025, a deduction from the Oklahoma adjusted
21
22 gross income of any individual taxpayer shall be allowed for
22
23 qualifying gains receiving capital treatment that are included in
23
24
24
Req. No. 617 Page 54
1 the federal adjusted gross income of such individual taxpayer during
1
2 the taxable year.
2
3 2. As used in this subsection:
3
4 a. "qualifying gains receiving capital treatment" means
4
5 the amount of net capital gains, as defined in Section
5
6 1222(11) of the Internal Revenue Code of 1986, as
6
7 amended, included in an individual taxpayer's federal
7
8 income tax return that result from:
8
9 (1) the sale of real property or tangible personal
9
10 property located within Oklahoma this state that
10
11 has been directly or indirectly owned by the
11
12 individual taxpayer for a holding period of at
12
13 least five (5) years prior to the date of the
13
14 transaction from which such net capital gains
14
15 arise,
15
16 (2) the sale of stock or the sale of a direct or
16
17 indirect ownership interest in an Oklahoma
17
18 company, limited liability company, or
18
19 partnership where such stock or ownership
19
20 interest has been directly or indirectly owned by
20
21 the individual taxpayer for a holding period of
21
22 at least two (2) years prior to the date of the
22
23 transaction from which the net capital gains
23
24 arise, or
24
Req. No. 617 Page 55
1 (3) the sale of real property, tangible personal
1
2 property or intangible personal property located
2
3 within Oklahoma this state as part of the sale of
3
4 all or substantially all of the assets of an
4
5 Oklahoma company, limited liability company, or
5
6 partnership or an Oklahoma proprietorship
6
7 business enterprise where such property has been
7
8 directly or indirectly owned by such entity or
8
9 business enterprise or owned by the owners of
9
10 such entity or business enterprise for a period
10
11 of at least two (2) years prior to the date of
11
12 the transaction from which the net capital gains
12
13 arise,
13
14 b. "holding period" means an uninterrupted period of
14
15 time. The holding period shall include any additional
15
16 period when the property was held by another
16
17 individual or entity, if such additional period is
17
18 included in the taxpayer's holding period for the
18
19 asset pursuant to the Internal Revenue Code of 1986,
19
20 as amended,
20
21 c. "Oklahoma company," "limited liability company," or
21
22 "partnership" means an entity whose primary
22
23 headquarters have been located in Oklahoma this state
23
24 for at least three (3) uninterrupted years prior to
24
Req. No. 617 Page 56
1 the date of the transaction from which the net capital
1
2 gains arise,
2
3 d. "direct" means the individual taxpayer directly owns
3
4 the asset,
4
5 e. "indirect" means the individual taxpayer owns an
5
6 interest in a pass-through entity (or chain of pass-
6
7 through entities) that sells the asset that gives rise
7
8 to the qualifying gains receiving capital treatment.
8
9 (1) With respect to sales of real property or
9
10 tangible personal property located within
10
11 Oklahoma this state, the deduction described in
11
12 this subsection shall not apply unless the pass-
12
13 through entity that makes the sale has held the
13
14 property for not less than five (5) uninterrupted
14
15 years prior to the date of the transaction that
15
16 created the capital gain, and each pass-through
16
17 entity included in the chain of ownership has
17
18 been a member, partner, or shareholder of the
18
19 pass-through entity in the tier immediately below
19
20 it for an uninterrupted period of not less than
20
21 five (5) years.
21
22 (2) With respect to sales of stock or ownership
22
23 interest in or sales of all or substantially all
23
24 of the assets of an Oklahoma company, limited
24
Req. No. 617 Page 57
1 liability company, partnership or Oklahoma
1
2 proprietorship business enterprise, the deduction
2
3 described in this subsection shall not apply
3
4 unless the pass-through entity that makes the
4
5 sale has held the stock or ownership interest for
5
6 not less than two (2) uninterrupted years prior
6
7 to the date of the transaction that created the
7
8 capital gain, and each pass-through entity
8
9 included in the chain of ownership has been a
9
10 member, partner or shareholder of the pass-
10
11 through entity in the tier immediately below it
11
12 for an uninterrupted period of not less than two
12
13 (2) years. For purposes of this division,
13
14 uninterrupted ownership prior to July 1, 2007,
14
15 shall be included in the determination of the
15
16 required holding period prescribed by this
16
17 division, and
17
18 f. "Oklahoma proprietorship business enterprise" means a
18
19 business enterprise whose income and expenses have
19
20 been reported on Schedule C or F of an individual
20
21 taxpayer's federal income tax return, or any similar
21
22 successor schedule published by the Internal Revenue
22
23 Service and whose primary headquarters have been
23
24 located in Oklahoma this state for at least three (3)
24
Req. No. 617 Page 58
1 uninterrupted years prior to the date of the
1
2 transaction from which the net capital gains arise.
2
3 G. 1. For purposes of computing its Oklahoma taxable income
3
4 under this section, the dividends-paid deduction otherwise allowed
4
5 by federal law in computing net income of a real estate investment
5
6 trust that is subject to federal income tax shall be added back in
6
7 computing the tax imposed by this state under this title if the real
7
8 estate investment trust is a captive real estate investment trust.
8
9 2. For purposes of computing its Oklahoma taxable income under
9
10 this section, a taxpayer shall add back otherwise deductible rents
10
11 and interest expenses paid to a captive real estate investment trust
11
12 that is not subject to the provisions of paragraph 1 of this
12
13 subsection. As used in this subsection:
13
14 a. the term "real estate investment trust" or "REIT"
14
15 means the meaning ascribed to such term in Section 856
15
16 of the Internal Revenue Code of 1986, as amended,
16
17 b. the term "captive real estate investment trust" means
17
18 a real estate investment trust, the shares or
18
19 beneficial interests of which are not regularly traded
19
20 on an established securities market and more than
20
21 fifty percent (50%) of the voting power or value of
21
22 the beneficial interests or shares of which are owned
22
23 or controlled, directly or indirectly, or
23
24 constructively, by a single entity that is:
24
Req. No. 617 Page 59
1 (1) treated as an association taxable as a
1
2 corporation under the Internal Revenue Code of
2
3 1986, as amended, and
3
4 (2) not exempt from federal income tax pursuant to
4
5 the provisions of Section 501(a) of the Internal
5
6 Revenue Code of 1986, as amended.
6
7 The term shall not include a real estate investment
7
8 trust that is intended to be regularly traded on an
8
9 established securities market, and that satisfies the
9
10 requirements of Section 856(a)(5) and (6) of the U.S.
10
11 Internal Revenue Code of 1986, as amended, by reason
11
12 of Section 856(h)(2) of the Internal Revenue Code of
12
13 1986, as amended,
13
14 c. the term "association taxable as a corporation" shall
14
15 not include the following entities:
15
16 (1) any real estate investment trust as defined in
16
17 paragraph a of this subsection other than a
17
18 "captive real estate investment trust" captive
18
19 real estate investment trust,
19
20 (2) any qualified real estate investment trust
20
21 subsidiary under Section 856(i) of the Internal
21
22 Revenue Code of 1986, as amended, other than a
22
23 qualified REIT subsidiary of a "captive real
23
24
24
Req. No. 617 Page 60
1 estate investment trust" captive real estate
1
2 investment trust,
2
3 (3) any Listed Australian Property Trust listed
3
4 Australian property trust (meaning an Australian
4
5 unit trust registered as a "Managed Investment
5
6 Scheme" "managed investment scheme" under the
6
7 Australian Corporations Act 2001 in which the
7
8 principal class of units is listed on a
8
9 recognized stock exchange in Australia and is
9
10 regularly traded on an established securities
10
11 market), or an entity organized as a trust,
11
12 provided that a Listed Australian Property Trust
12
13 listed Australian property trust owns or
13
14 controls, directly or indirectly, seventy-five
14
15 percent (75%) or more of the voting power or
15
16 value of the beneficial interests or shares of
16
17 such trust, or
17
18 (4) any Qualified Foreign Entity qualified foreign
18
19 entity, meaning a corporation, trust, association
19
20 or partnership organized outside the laws of the
20
21 United States and which satisfies the following
21
22 criteria:
22
23 (a) at least seventy-five percent (75%) of the
23
24 entity's total asset value at the close of
24
Req. No. 617 Page 61
1 its taxable year is represented by real
1 estate assets, as defined in Section
2 856(c)(5)(B) of the Internal Revenue Code of
2 1986, as amended, thereby including shares
3 or certificates of beneficial interest in
3 any real estate investment trust, cash and
4 cash equivalents, and U.S. Government
4 securities,
5 (b) the entity receives a dividend-paid
5 deduction comparable to Section 561 of the
6 Internal Revenue Code of 1986, as amended,
6 or is exempt from entity level tax,
7 (c) the entity is required to distribute at
7 least eighty-five percent (85%) of its
8 taxable income, as computed in the
8 jurisdiction in which it is organized, to
9 the holders of its shares or certificates of
9 beneficial interest on an annual basis,
10 (d) not more than ten percent (10%) of the
10 voting power or value in such entity is held
11 directly or indirectly or constructively by
11 a single entity or individual, or the shares
12 or beneficial interests of such entity are
12
13 Page 62
13
14
14
15
15
16
16
17
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
Req. No. 617
1 regularly traded on an established
1
2 securities market, and
2
3 (e) the entity is organized in a country which
3
4 has a tax treaty with the United States.
4
5 3. For purposes of this subsection, the constructive ownership
5
6 rules of Section 318(a) of the Internal Revenue Code, as modified by
6
7 Section 856(d)(5) of the Internal Revenue Code of 1986, as amended,
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8 shall apply in determining the ownership of stock, assets, or net
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9 profits of any person.
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10 4. A real estate investment trust that does not become
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11 regularly traded on an established securities market within one (1)
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12 year of the date on which it first becomes a real estate investment
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13 trust shall be deemed not to have been regularly traded on an
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14 established securities market, retroactive to the date it first
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15 became a real estate investment trust, and shall file an amended
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16 return reflecting such retroactive designation for any tax year or
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17 part year occurring during its initial year of status as a real
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18 estate investment trust. For purposes of this subsection, a real
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19 estate investment trust becomes a real estate investment trust on
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20 the first day it has both met the requirements of Section 856 of the
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21 Internal Revenue Code of 1986, as amended, and has elected to be
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22 treated as a real estate investment trust pursuant to Section
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23 856(c)(1) of the Internal Revenue Code of 1986, as amended.
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24 SECTION 2. This act shall become effective November 1, 2025.
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Req. No. 617 Page 64Every fact on this page links to its source, starting with the official bill record.