Okla. Stat. tit. 68, § 68-2358v3

Oklahoma adjusted gross income.

For all tax years beginning after December 31, 1981, taxable

income and adjusted gross income shall be adjusted to arrive at

Oklahoma taxable income and Oklahoma adjusted gross income as

required by this section.

A. The taxable income of any taxpayer shall be adjusted to

arrive at Oklahoma taxable income for corporations and Oklahoma

adjusted gross income for individuals, as follows:

1. There shall be added interest income on obligations of any

state or political subdivision thereto which is not otherwise

exempted pursuant to other laws of this state, to the extent that

such interest is not included in taxable income and adjusted gross

income.

2. There shall be deducted amounts included in such income that

the state is prohibited from taxing because of the provisions of the

Federal Constitution, the State Constitution, federal laws or laws

of Oklahoma.

3. The amount of any federal net operating loss deduction shall

be adjusted as follows:

a. For carryovers and carrybacks to taxable years

beginning before January 1, 1981, the amount of any

net operating loss deduction allowed to a taxpayer for

federal income tax purposes shall be reduced to an

amount which is the same portion thereof as the loss

from sources within this state, as determined pursuant

to this section and Section 2362 of this title, for

the taxable year in which such loss is sustained is of

the total loss for such year;

b. For carryovers and carrybacks to taxable years

beginning after December 31, 1980, the amount of any

net operating loss deduction allowed for the taxable

year shall be an amount equal to the aggregate of the

Oklahoma net operating loss carryovers and carrybacks

to such year. Oklahoma net operating losses shall be

separately determined by reference to Section 172 of

the Internal Revenue Code, 26 U.S.C., Section 172, as

modified by the Oklahoma Income Tax Act, Section 2351

et seq. of this title, and shall be allowed without

Oklahoma Statutes - Title 68. Revenue and Taxation Page 993

regard to the existence of a federal net operating

loss. For tax years beginning after December 31,

2000, and ending before January 1, 2008, the years to

which such losses may be carried shall be determined

solely by reference to Section 172 of the Internal

Revenue Code, 26 U.S.C., Section 172, with the

exception that the terms “net operating loss” and

“taxable income” shall be replaced with “Oklahoma net

operating loss” and “Oklahoma taxable income”. For

tax years beginning after December 31, 2007, and

ending before January 1, 2009, years to which such

losses may be carried back shall be limited to two (2)

years. For tax years beginning after December 31,

2008, the years to which such losses may be carried

back shall be determined solely by reference to

Section 172 of the Internal Revenue Code, 26 U.S.C.,

Section 172, with the exception that the terms “net

operating loss” and “taxable income” shall be replaced

with “Oklahoma net operating loss” and “Oklahoma

taxable income”.

4. Items of the following nature shall be allocated as

indicated. Allowable deductions attributable to items separately

allocable in subparagraphs a, b and c of this paragraph, whether or

not such items of income were actually received, shall be allocated

on the same basis as those items:

a. Income from real and tangible personal property, such

as rents, oil and mining production or royalties, and

gains or losses from sales of such property, shall be

allocated in accordance with the situs of such

property;

b. Income from intangible personal property, such as

interest, dividends, patent or copyright royalties,

and gains or losses from sales of such property, shall

be allocated in accordance with the domiciliary situs

of the taxpayer, except that:
d mining production or royalties, and

gains or losses from sales of such property, shall be

allocated in accordance with the situs of such

property;

b. Income from intangible personal property, such as

interest, dividends, patent or copyright royalties,

and gains or losses from sales of such property, shall

be allocated in accordance with the domiciliary situs

of the taxpayer, except that:

(1) where such property has acquired a nonunitary

business or commercial situs apart from the

domicile of the taxpayer such income shall be

allocated in accordance with such business or

commercial situs; interest income from

investments held to generate working capital for

a unitary business enterprise shall be included

in apportionable income; a resident trust or

resident estate shall be treated as having a

separate commercial or business situs insofar as

undistributed income is concerned, but shall not

be treated as having a separate commercial or

Oklahoma Statutes - Title 68. Revenue and Taxation Page 994

business situs insofar as distributed income is

concerned,

(2) for taxable years beginning after December 31,

2003, capital or ordinary gains or losses from

the sale of an ownership interest in a publicly

traded partnership, as defined by Section 7704(b)

of the Internal Revenue Code, shall be allocated

to this state in the ratio of the original cost

of such partnership’s tangible property in this

state to the original cost of such partnership’s

tangible property everywhere, as determined at

the time of the sale; if more than fifty percent

(50%) of the value of the partnership’s assets

consists of intangible assets, capital or

ordinary gains or losses from the sale of an

ownership interest in the partnership shall be

allocated to this state in accordance with the

sales factor of the partnership for its first

full tax period immediately preceding its tax

period during which the ownership interest in the

partnership was sold; the provisions of this

division shall only apply if the capital or

ordinary gains or losses from the sale of an

ownership interest in a partnership do not

constitute qualifying gain receiving capital

treatment as defined in subparagraph a of

paragraph 2 of subsection F of this section,

(3) income from such property which is required to be

allocated pursuant to the provisions of paragraph

5 of this subsection shall be allocated as herein

provided;

c. Net income or loss from a business activity which is

not a part of business carried on within or without

the state of a unitary character shall be separately

allocated to the state in which such activity is

conducted;

d. In the case of a manufacturing or processing

enterprise the business of which in Oklahoma consists

solely of marketing its products by:

(1) sales having a situs without this state, shipped

directly to a point from without the state to a

purchaser within the state, commonly known as

interstate sales,

(2) sales of the product stored in public warehouses

within the state pursuant to “in transit”

tariffs, as prescribed and allowed by the

Oklahoma Statutes - Title 68. Revenue and Taxation Page 995

Interstate Commerce Commission, to a purchaser

within the state,
is state, shipped

directly to a point from without the state to a

purchaser within the state, commonly known as

interstate sales,

(2) sales of the product stored in public warehouses

within the state pursuant to “in transit”

tariffs, as prescribed and allowed by the

Oklahoma Statutes - Title 68. Revenue and Taxation Page 995

Interstate Commerce Commission, to a purchaser

within the state,

(3) sales of the product stored in public warehouses

within the state where the shipment to such

warehouses is not covered by “in transit”

tariffs, as prescribed and allowed by the

Interstate Commerce Commission, to a purchaser

within or without the state,

the Oklahoma net income shall, at the option of the

taxpayer, be that portion of the total net income of

the taxpayer for federal income tax purposes derived

from the manufacture and/or processing and sales

everywhere as determined by the ratio of the sales

defined in this section made to the purchaser within

the state to the total sales everywhere. The term

“public warehouse” as used in this subparagraph means

a licensed public warehouse, the principal business of

which is warehousing merchandise for the public;

e. In the case of insurance companies, Oklahoma taxable

income shall be taxable income of the taxpayer for

federal tax purposes, as adjusted for the adjustments

provided pursuant to the provisions of paragraphs 1

and 2 of this subsection, apportioned as follows:

(1) except as otherwise provided by division (2) of

this subparagraph, taxable income of an insurance

company for a taxable year shall be apportioned

to this state by multiplying such income by a

fraction, the numerator of which is the direct

premiums written for insurance on property or

risks in this state, and the denominator of which

is the direct premiums written for insurance on

property or risks everywhere. For purposes of

this subsection, the term “direct premiums

written” means the total amount of direct

premiums written, assessments and annuity

considerations as reported for the taxable year

on the annual statement filed by the company with

the Insurance Commissioner in the form approved

by the National Association of Insurance

Commissioners, or such other form as may be

prescribed in lieu thereof,

(2) if the principal source of premiums written by an

insurance company consists of premiums for

reinsurance accepted by it, the taxable income of

such company shall be apportioned to this state

by multiplying such income by a fraction, the

numerator of which is the sum of (a) direct

Oklahoma Statutes - Title 68. Revenue and Taxation Page 996

premiums written for insurance on property or

risks in this state, plus (b) premiums written

for reinsurance accepted in respect of property

or risks in this state, and the denominator of

which is the sum of (c) direct premiums written

for insurance on property or risks everywhere,

plus (d) premiums written for reinsurance

accepted in respect of property or risks

everywhere. For purposes of this paragraph,

premiums written for reinsurance accepted in

respect of property or risks in this state,

whether or not otherwise determinable, may at the

election of the company be determined on the

basis of the proportion which premiums written

for insurance accepted from companies

commercially domiciled in Oklahoma bears to

premiums written for reinsurance accepted from

all sources, or alternatively in the proportion

which the sum of the direct premiums written for

insurance on property or risks in this state by

each ceding company from which reinsurance is

accepted bears to the sum of the total direct

premiums written by each such ceding company for

the taxable year.

5. The net income or loss remaining after the separate

allocation in paragraph 4 of this subsection, being that which is

derived from a unitary business enterprise, shall be apportioned to
surance on property or risks in this state by

each ceding company from which reinsurance is

accepted bears to the sum of the total direct

premiums written by each such ceding company for

the taxable year.

5. The net income or loss remaining after the separate

allocation in paragraph 4 of this subsection, being that which is

derived from a unitary business enterprise, shall be apportioned to

this state on the basis of the arithmetical average of three factors

consisting of property, payroll and sales or gross revenue

enumerated as subparagraphs a, b and c of this paragraph. Net

income or loss as used in this paragraph includes that derived from

patent or copyright royalties, purchase discounts, and interest on

accounts receivable relating to or arising from a business activity,

the income from which is apportioned pursuant to this subsection,

including the sale or other disposition of such property and any

other property used in the unitary enterprise. Deductions used in

computing such net income or loss shall not include taxes based on

or measured by income. Provided, for corporations whose property

for purposes of the tax imposed by Section 2355 of this title has an

initial investment cost equaling or exceeding Two Hundred Million

Dollars ($200,000,000.00) and such investment is made on or after

July 1, 1997, or for corporations which expand their property or

facilities in this state and such expansion has an investment cost

equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)

over a period not to exceed three (3) years, and such expansion is

commenced on or after January 1, 2000, the three factors shall be

apportioned with property and payroll, each comprising twenty-five

Oklahoma Statutes - Title 68. Revenue and Taxation Page 997

percent (25%) of the apportionment factor and sales comprising fifty

percent (50%) of the apportionment factor. The apportionment

factors shall be computed as follows:

a. The property factor is a fraction, the numerator of

which is the average value of the taxpayer’s real and

tangible personal property owned or rented and used in

this state during the tax period and the denominator

of which is the average value of all the taxpayer’s

real and tangible personal property everywhere owned

or rented and used during the tax period.

(1) Property, the income from which is separately

allocated in paragraph 4 of this subsection,

shall not be included in determining this

fraction. The numerator of the fraction shall

include a portion of the investment in

transportation and other equipment having no

fixed situs, such as rolling stock, buses, trucks

and trailers, including machinery and equipment

carried thereon, airplanes, salespersons’

automobiles and other similar equipment, in the

proportion that miles traveled in Oklahoma by

such equipment bears to total miles traveled,

(2) Property owned by the taxpayer is valued at its

original cost. Property rented by the taxpayer

is valued at eight times the net annual rental

rate. Net annual rental rate is the annual

rental rate paid by the taxpayer, less any annual

rental rate received by the taxpayer from

subrentals,

(3) The average value of property shall be determined

by averaging the values at the beginning and

ending of the tax period but the Oklahoma Tax

Commission may require the averaging of monthly

values during the tax period if reasonably

required to reflect properly the average value of

the taxpayer’s property;

b. The payroll factor is a fraction, the numerator of

which is the total compensation for services rendered

in the state during the tax period, and the

denominator of which is the total compensation for

services rendered everywhere during the tax period.

“Compensation”, as used in this subsection means those

paid-for services to the extent related to the unitary

business but does not include officers’ salaries,

wages and other compensation.
f

which is the total compensation for services rendered

in the state during the tax period, and the

denominator of which is the total compensation for

services rendered everywhere during the tax period.

“Compensation”, as used in this subsection means those

paid-for services to the extent related to the unitary

business but does not include officers’ salaries,

wages and other compensation.

(1) In the case of a transportation enterprise, the

numerator of the fraction shall include a portion

Oklahoma Statutes - Title 68. Revenue and Taxation Page 998

of such expenditure in connection with employees

operating equipment over a fixed route, such as

railroad employees, airline pilots, or bus

drivers, in this state only a part of the time,

in the proportion that mileage traveled in

Oklahoma bears to total mileage traveled by such

employees,

(2) In any case the numerator of the fraction shall

include a portion of such expenditures in

connection with itinerant employees, such as

traveling salespersons, in this state only a part

of the time, in the proportion that time spent in

Oklahoma bears to total time spent in furtherance

of the enterprise by such employees;

c. The sales factor is a fraction, the numerator of which

is the total sales or gross revenue of the taxpayer in

this state during the tax period, and the denominator

of which is the total sales or gross revenue of the

taxpayer everywhere during the tax period. “Sales”,

as used in this subsection does not include sales or

gross revenue which are separately allocated in

paragraph 4 of this subsection.

(1) Sales of tangible personal property have a situs

in this state if the property is delivered or

shipped to a purchaser other than the United

States government, within this state regardless

of the FOB point or other conditions of the sale;

or the property is shipped from an office, store,

warehouse, factory or other place of storage in

this state and (a) the purchaser is the United

States government or (b) the taxpayer is not

doing business in the state of the destination of

the shipment.

(2) In the case of a railroad or interurban railway

enterprise, the numerator of the fraction shall

not be less than the allocation of revenues to

this state as shown in its annual report to the

Corporation Commission.

(3) In the case of an airline, truck or bus

enterprise or freight car, tank car, refrigerator

car or other railroad equipment enterprise, the

numerator of the fraction shall include a portion

of revenue from interstate transportation in the

proportion that interstate mileage traveled in

Oklahoma bears to total interstate mileage

traveled.

Oklahoma Statutes - Title 68. Revenue and Taxation Page 999

(4) In the case of an oil, gasoline or gas pipeline

enterprise, the numerator of the fraction shall

be either the total of traffic units of the

enterprise within Oklahoma or the revenue

allocated to Oklahoma based upon miles moved, at

the option of the taxpayer, and the denominator

of which shall be the total of traffic units of

the enterprise or the revenue of the enterprise

everywhere as appropriate to the numerator. A

“traffic unit” is hereby defined as the

transportation for a distance of one (1) mile of

one (1) barrel of oil, one (1) gallon of gasoline

or one thousand (1,000) cubic feet of natural or

casinghead gas, as the case may be.
payer, and the denominator

of which shall be the total of traffic units of

the enterprise or the revenue of the enterprise

everywhere as appropriate to the numerator. A

“traffic unit” is hereby defined as the

transportation for a distance of one (1) mile of

one (1) barrel of oil, one (1) gallon of gasoline

or one thousand (1,000) cubic feet of natural or

casinghead gas, as the case may be.

(5) In the case of a telephone or telegraph or other

communication enterprise, the numerator of the

fraction shall include that portion of the

interstate revenue as is allocated pursuant to

the accounting procedures prescribed by the

Federal Communications Commission; provided that

in respect to each corporation or business entity

required by the Federal Communications Commission

to keep its books and records in accordance with

a uniform system of accounts prescribed by such

Commission, the intrastate net income shall be

determined separately in the manner provided by

such uniform system of accounts and only the

interstate income shall be subject to allocation

pursuant to the provisions of this subsection.

Provided further, that the gross revenue factors

shall be those as are determined pursuant to the

accounting procedures prescribed by the Federal

Communications Commission.

In any case where the apportionment of the three factors

prescribed in this paragraph attributes to Oklahoma a portion of net

income of the enterprise out of all appropriate proportion to the

property owned and/or business transacted within this state, because

of the fact that one or more of the factors so prescribed are not

employed to any appreciable extent in furtherance of the enterprise;

or because one or more factors not so prescribed are employed to a

considerable extent in furtherance of the enterprise; or because of

other reasons, the Tax Commission is empowered to permit, after a

showing by taxpayer that an excessive portion of net income has been

attributed to Oklahoma, or require, when in its judgment an

insufficient portion of net income has been attributed to Oklahoma,

the elimination, substitution, or use of additional factors, or

reduction or increase in the weight of such prescribed factors.

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1000

Provided, however, that any such variance from such prescribed

factors which has the effect of increasing the portion of net income

attributable to Oklahoma must not be inherently arbitrary, and

application of the recomputed final apportionment to the net income

of the enterprise must attribute to Oklahoma only a reasonable

portion thereof.

6. For calendar years 1997 and 1998, the owner of a new or

expanded agricultural commodity processing facility in this state

may exclude from Oklahoma taxable income, or in the case of an

individual, the Oklahoma adjusted gross income, fifteen percent

(15%) of the investment by the owner in the new or expanded

agricultural commodity processing facility. For calendar year 1999,

and all subsequent years, the percentage, not to exceed fifteen

percent (15%), available to the owner of a new or expanded

agricultural commodity processing facility in this state claiming

the exemption shall be adjusted annually so that the total estimated

reduction in tax liability does not exceed One Million Dollars

($1,000,000.00) annually. The Tax Commission shall promulgate rules

for determining the percentage of the investment which each eligible

taxpayer may exclude. The exclusion provided by this paragraph

shall be taken in the taxable year when the investment is made. In

the event the total reduction in tax liability authorized by this

paragraph exceeds One Million Dollars ($1,000,000.00) in any

calendar year, the Tax Commission shall permit any excess over One

Million Dollars ($1,000,000.00) and shall factor such excess into

the percentage for subsequent years. Any amount of the exemption
ph

shall be taken in the taxable year when the investment is made. In

the event the total reduction in tax liability authorized by this

paragraph exceeds One Million Dollars ($1,000,000.00) in any

calendar year, the Tax Commission shall permit any excess over One

Million Dollars ($1,000,000.00) and shall factor such excess into

the percentage for subsequent years. Any amount of the exemption

permitted to be excluded pursuant to the provisions of this

paragraph but not used in any year may be carried forward as an

exemption from income pursuant to the provisions of this paragraph

for a period not exceeding six (6) years following the year in which

the investment was originally made.

For purposes of this paragraph:

a. “Agricultural commodity processing facility” means

building, structures, fixtures and improvements used

or operated primarily for the processing or production

of marketable products from agricultural commodities.

The term shall also mean a dairy operation that

requires a depreciable investment of at least Two

Hundred Fifty Thousand Dollars ($250,000.00) and which

produces milk from dairy cows. The term does not

include a facility that provides only, and nothing

more than, storage, cleaning, drying or transportation

of agricultural commodities, and

b. “Facility” means each part of the facility which is

used in a process primarily for:

(1) the processing of agricultural commodities,

including receiving or storing agricultural

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1001

commodities, or the production of milk at a dairy

operation,

(2) transporting the agricultural commodities or

product before, during or after the processing,

or

(3) packaging or otherwise preparing the product for

sale or shipment.

7. Despite any provision to the contrary in paragraph 3 of this

subsection, for taxable years beginning after December 31, 1999, in

the case of a taxpayer which has a farming loss, such farming loss

shall be considered a net operating loss carryback in accordance

with and to the extent of the Internal Revenue Code, 26 U.S.C.,

Section 172(b)(G). However, the amount of the net operating loss

carryback shall not exceed the lesser of:

a. Sixty Thousand Dollars ($60,000.00), or

b. the loss properly shown on Schedule F of the Internal

Revenue Service Form 1040 reduced by one-half (1/2) of

the income from all other sources other than reflected

on Schedule F.

8. In taxable years beginning after December 31, 1995, all

qualified wages equal to the federal income tax credit set forth in

26 U.S.C.A., Section 45A, shall be deducted from taxable income.

The deduction allowed pursuant to this paragraph shall only be

permitted for the tax years in which the federal tax credit pursuant

to 26 U.S.C.A., Section 45A, is allowed. For purposes of this

paragraph, “qualified wages” means those wages used to calculate the

federal credit pursuant to 26 U.S.C.A., Section 45A.

9. In taxable years beginning after December 31, 2005, an

employer that is eligible for and utilizes the Safety Pays OSHA

Consultation Service provided by the Oklahoma Department of Labor

shall receive an exemption from taxable income in the amount of One

Thousand Dollars ($1,000.00) for the tax year that the service is

utilized.

10. For taxable years beginning on or after January 1, 2010,

there shall be added to Oklahoma taxable income an amount equal to

the amount of deferred income not included in such taxable income

pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986

as amended by Section 1231 of the American Recovery and Reinvestment

Act of 2009 (P.L. No. 111-5). There shall be subtracted from

Oklahoma taxable income an amount equal to the amount of deferred

income included in such taxable income pursuant to Section 108(i)(1)

of the Internal Revenue Code by Section 1231 of the American

Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
Code of 1986

as amended by Section 1231 of the American Recovery and Reinvestment

Act of 2009 (P.L. No. 111-5). There shall be subtracted from

Oklahoma taxable income an amount equal to the amount of deferred

income included in such taxable income pursuant to Section 108(i)(1)

of the Internal Revenue Code by Section 1231 of the American

Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).

11. For taxable years beginning on or after January 1, 2019,

there shall be subtracted from Oklahoma taxable income or adjusted

gross income any item of income or gain, and there shall be added to

Oklahoma taxable income or adjusted gross income any item of loss or

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1002

deduction that in the absence of an election pursuant to the

provisions of the Pass-Through Entity Tax Equity Act of 2019 would

be allocated to a member or to an indirect member of an electing

pass-through entity pursuant to Section 2351 et seq. of this title,

if (i) the electing pass-through entity has accounted for such item

in computing its Oklahoma net entity income or loss pursuant to the

provisions of the Pass-Through Entity Tax Equity Act of 2019, and

(ii) the total amount of tax attributable to any resulting Oklahoma

net entity income has been paid. The Oklahoma Tax Commission shall

promulgate rules for the reporting of such exclusion to direct and

indirect members of the electing pass-through entity. As used in

this paragraph, “electing pass-through entity”, “indirect member”,

and “member” shall be defined in the same manner as prescribed by

Section 2355.1P-2 of this title. Notwithstanding the application of

this paragraph, the adjusted tax basis of any ownership interest in

a pass-through entity for purposes of Section 2351 et seq. of this

title shall be equal to its adjusted tax basis for federal income

tax purposes.

B. 1. The taxable income of any corporation shall be further

adjusted to arrive at Oklahoma taxable income, except those

corporations electing treatment as provided in subchapter S of the

Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section

2365 of this title, deductions pursuant to the provisions of the

Accelerated Cost Recovery System as defined and allowed in the

Economic Recovery Tax Act of 1981, Public Law 97-34, 26 U.S.C.,

Section 168, for depreciation of assets placed into service after

December 31, 1981, shall not be allowed in calculating Oklahoma

taxable income. Such corporations shall be allowed a deduction for

depreciation of assets placed into service after December 31, 1981,

in accordance with provisions of the Internal Revenue Code, 26

U.S.C., Section 1 et seq., in effect immediately prior to the

enactment of the Accelerated Cost Recovery System. The Oklahoma tax

basis for all such assets placed into service after December 31,

1981, calculated in this section shall be retained and utilized for

all Oklahoma income tax purposes through the final disposition of

such assets.

Notwithstanding any other provisions of the Oklahoma Income Tax

Act, Section 2351 et seq. of this title, or of the Internal Revenue

Code to the contrary, this subsection shall control calculation of

depreciation of assets placed into service after December 31, 1981,

and before January 1, 1983.

For assets placed in service and held by a corporation in which

accelerated cost recovery system was previously disallowed, an

adjustment to taxable income is required in the first taxable year

beginning after December 31, 1982, to reconcile the basis of such

assets to the basis allowed in the Internal Revenue Code. The

purpose of this adjustment is to equalize the basis and allowance

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1003

for depreciation accounts between that reported to the Internal

Revenue Service and that reported to Oklahoma.

2. For tax years beginning on or after January 1, 2009, and
82, to reconcile the basis of such

assets to the basis allowed in the Internal Revenue Code. The

purpose of this adjustment is to equalize the basis and allowance

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1003

for depreciation accounts between that reported to the Internal

Revenue Service and that reported to Oklahoma.

2. For tax years beginning on or after January 1, 2009, and

ending on or before December 31, 2009, there shall be added to

Oklahoma taxable income any amount in excess of One Hundred Seventy-

five Thousand Dollars ($175,000.00) which has been deducted as a

small business expense under Internal Revenue Code, Section 179 as

provided in the American Recovery and Reinvestment Act of 2009.

C. 1. For taxable years beginning after December 31, 1987, the

taxable income of any corporation shall be further adjusted to

arrive at Oklahoma taxable income for transfers of technology to

qualified small businesses located in Oklahoma. Such transferor

corporation shall be allowed an exemption from taxable income of an

amount equal to the amount of royalty payment received as a result

of such transfer; provided, however, such amount shall not exceed

ten percent (10%) of the amount of gross proceeds received by such

transferor corporation as a result of the technology transfer. Such

exemption shall be allowed for a period not to exceed ten (10) years

from the date of receipt of the first royalty payment accruing from

such transfer. No exemption may be claimed for transfers of

technology to qualified small businesses made prior to January 1,

1988.

2. For purposes of this subsection:

a. “Qualified small business” means an entity, whether

organized as a corporation, partnership, or

proprietorship, organized for profit with its

principal place of business located within this state

and which meets the following criteria:

(1) Capitalization of not more than Two Hundred Fifty

Thousand Dollars ($250,000.00),

(2) Having at least fifty percent (50%) of its

employees and assets located in Oklahoma at the

time of the transfer, and

(3) Not a subsidiary or affiliate of the transferor

corporation;

b. “Technology” means a proprietary process, formula,

pattern, device or compilation of scientific or

technical information which is not in the public

domain;

c. “Transferor corporation” means a corporation which is

the exclusive and undisputed owner of the technology

at the time the transfer is made; and

d. “Gross proceeds” means the total amount of

consideration for the transfer of technology, whether

the consideration is in money or otherwise.

D. 1. For taxable years beginning after December 31, 2005, the

taxable income of any corporation, estate or trust, shall be further

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1004

adjusted for qualifying gains receiving capital treatment. Such

corporations, estates or trusts shall be allowed a deduction from

Oklahoma taxable income for the amount of qualifying gains receiving

capital treatment earned by the corporation, estate or trust during

the taxable year and included in the federal taxable income of such

corporation, estate or trust.

2. As used in this subsection:

a. “qualifying gains receiving capital treatment” means

the amount of net capital gains, as defined in Section

1222(11) of the Internal Revenue Code, included in the

federal income tax return of the corporation, estate

or trust that result from:

(1) the sale of real property or tangible personal

property located within Oklahoma that has been

directly or indirectly owned by the corporation,

estate or trust for a holding period of at least

five (5) years prior to the date of the

transaction from which such net capital gains

arise,
Code, included in the

federal income tax return of the corporation, estate

or trust that result from:

(1) the sale of real property or tangible personal

property located within Oklahoma that has been

directly or indirectly owned by the corporation,

estate or trust for a holding period of at least

five (5) years prior to the date of the

transaction from which such net capital gains

arise,

(2) the sale of stock or on the sale of an ownership

interest in an Oklahoma company, limited

liability company, or partnership where such

stock or ownership interest has been directly or

indirectly owned by the corporation, estate or

trust for a holding period of at least three (3)

years prior to the date of the transaction from

which the net capital gains arise, or

(3) the sale of real property, tangible personal

property or intangible personal property located

within Oklahoma as part of the sale of all or

substantially all of the assets of an Oklahoma

company, limited liability company, or

partnership where such property has been directly

or indirectly owned by such entity owned by the

owners of such entity, and used in or derived

from such entity for a period of at least three

(3) years prior to the date of the transaction

from which the net capital gains arise,

b. “holding period” means an uninterrupted period of

time. The holding period shall include any additional

period when the property was held by another

individual or entity, if such additional period is

included in the taxpayer’s holding period for the

asset pursuant to the Internal Revenue Code,

c. “Oklahoma company”, “limited liability company”, or

“partnership” means an entity whose primary

headquarters have been located in Oklahoma for at

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1005

least three (3) uninterrupted years prior to the date

of the transaction from which the net capital gains

arise,

d. “direct” means the taxpayer directly owns the asset,

and

e. “indirect” means the taxpayer owns an interest in a

pass-through entity (or chain of pass-through

entities) that sells the asset that gives rise to the

qualifying gains receiving capital treatment.

(1) With respect to sales of real property or

tangible personal property located within

Oklahoma, the deduction described in this

subsection shall not apply unless the pass-

through entity that makes the sale has held the

property for not less than five (5) uninterrupted

years prior to the date of the transaction that

created the capital gain, and each pass-through

entity included in the chain of ownership has

been a member, partner, or shareholder of the

pass-through entity in the tier immediately below

it for an uninterrupted period of not less than

five (5) years.

(2) With respect to sales of stock or ownership

interest in or sales of all or substantially all

of the assets of an Oklahoma company, limited

liability company, or partnership, the deduction

described in this subsection shall not apply

unless the pass-through entity that makes the

sale has held the stock or ownership interest or

the assets for not less than three (3)

uninterrupted years prior to the date of the

transaction that created the capital gain, and

each pass-through entity included in the chain of

ownership has been a member, partner or

shareholder of the pass-through entity in the

tier immediately below it for an uninterrupted

period of not less than three (3) years.

E. The Oklahoma adjusted gross income of any individual

taxpayer shall be further adjusted as follows to arrive at Oklahoma

taxable income:

1. a. In the case of individuals, there shall be added or

deducted, as the case may be, the difference necessary

to allow personal exemptions of One Thousand Dollars

($1,000.00) in lieu of the personal exemptions allowed

by the Internal Revenue Code.

b. There shall be allowed an additional exemption of One

Thousand Dollars ($1,000.00) for each taxpayer or
arrive at Oklahoma

taxable income:

1. a. In the case of individuals, there shall be added or

deducted, as the case may be, the difference necessary

to allow personal exemptions of One Thousand Dollars

($1,000.00) in lieu of the personal exemptions allowed

by the Internal Revenue Code.

b. There shall be allowed an additional exemption of One

Thousand Dollars ($1,000.00) for each taxpayer or

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1006

spouse who is blind at the close of the tax year. For

purposes of this subparagraph, an individual is blind

only if the central visual acuity of the individual

does not exceed 20/200 in the better eye with

correcting lenses, or if the visual acuity of the

individual is greater than 20/200, but is accompanied

by a limitation in the fields of vision such that the

widest diameter of the visual field subtends an angle

no greater than twenty (20) degrees.

c. There shall be allowed an additional exemption of One

Thousand Dollars ($1,000.00) for each taxpayer or

spouse who is sixty-five (65) years of age or older at

the close of the tax year based upon the filing status

and federal adjusted gross income of the taxpayer.

Taxpayers with the following filing status may claim

this exemption if the federal adjusted gross income

does not exceed:

(1) Twenty-five Thousand Dollars ($25,000.00) if

married and filing jointly,

(2) Twelve Thousand Five Hundred Dollars ($12,500.00)

if married and filing separately,

(3) Fifteen Thousand Dollars ($15,000.00) if single,

and

(4) Nineteen Thousand Dollars ($19,000.00) if a

qualifying head of household.

Provided, for taxable years beginning after December

31, 1999, amounts included in the calculation of

federal adjusted gross income pursuant to the

conversion of a traditional individual retirement

account to a Roth individual retirement account shall

be excluded from federal adjusted gross income for

purposes of the income thresholds provided in this

subparagraph.

2. a. For taxable years beginning on or before December 31,

2005, in the case of individuals who use the standard

deduction in determining taxable income, there shall

be added or deducted, as the case may be, the

difference necessary to allow a standard deduction in

lieu of the standard deduction allowed by the Internal

Revenue Code, in an amount equal to the larger of

fifteen percent (15%) of the Oklahoma adjusted gross

income or One Thousand Dollars ($1,000.00), but not to

exceed Two Thousand Dollars ($2,000.00), except that

in the case of a married individual filing a separate

return such deduction shall be the larger of fifteen

percent (15%) of such Oklahoma adjusted gross income

or Five Hundred Dollars ($500.00), but not to exceed

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1007

the maximum amount of One Thousand Dollars

($1,000.00).

b. For taxable years beginning on or after January 1,

2006, and before January 1, 2007, in the case of

individuals who use the standard deduction in

determining taxable income, there shall be added or

deducted, as the case may be, the difference necessary

to allow a standard deduction in lieu of the standard

deduction allowed by the Internal Revenue Code, in an

amount equal to:

(1) Three Thousand Dollars ($3,000.00), if the filing

status is married filing joint, head of household

or qualifying widow, or

(2) Two Thousand Dollars ($2,000.00), if the filing

status is single or married filing separate.

c. For the taxable year beginning on January 1, 2007, and

ending December 31, 2007, in the case of individuals

who use the standard deduction in determining taxable

income, there shall be added or deducted, as the case

may be, the difference necessary to allow a standard

deduction in lieu of the standard deduction allowed by

the Internal Revenue Code, in an amount equal to:
filing separate.

c. For the taxable year beginning on January 1, 2007, and

ending December 31, 2007, in the case of individuals

who use the standard deduction in determining taxable

income, there shall be added or deducted, as the case

may be, the difference necessary to allow a standard

deduction in lieu of the standard deduction allowed by

the Internal Revenue Code, in an amount equal to:

(1) Five Thousand Five Hundred Dollars ($5,500.00),

if the filing status is married filing joint or

qualifying widow, or

(2) Four Thousand One Hundred Twenty-five Dollars

($4,125.00) for a head of household, or

(3) Two Thousand Seven Hundred Fifty Dollars

($2,750.00), if the filing status is single or

married filing separate.

d. For the taxable year beginning on January 1, 2008, and

ending December 31, 2008, in the case of individuals

who use the standard deduction in determining taxable

income, there shall be added or deducted, as the case

may be, the difference necessary to allow a standard

deduction in lieu of the standard deduction allowed by

the Internal Revenue Code, in an amount equal to:

(1) Six Thousand Five Hundred Dollars ($6,500.00), if

the filing status is married filing joint or

qualifying widow,

(2) Four Thousand Eight Hundred Seventy-five Dollars

($4,875.00) for a head of household, or

(3) Three Thousand Two Hundred Fifty Dollars

($3,250.00), if the filing status is single or

married filing separate.

e. For the taxable year beginning on January 1, 2009, and

ending December 31, 2009, in the case of individuals

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1008

who use the standard deduction in determining taxable

income, there shall be added or deducted, as the case

may be, the difference necessary to allow a standard

deduction in lieu of the standard deduction allowed by

the Internal Revenue Code, in an amount equal to:

(1) Eight Thousand Five Hundred Dollars ($8,500.00),

if the filing status is married filing joint or

qualifying widow,

(2) Six Thousand Three Hundred Seventy-five Dollars

($6,375.00) for a head of household, or

(3) Four Thousand Two Hundred Fifty Dollars

($4,250.00), if the filing status is single or

married filing separate.

Oklahoma adjusted gross income shall be increased by

any amounts paid for motor vehicle excise taxes which

were deducted as allowed by the Internal Revenue Code.

f. For taxable years beginning on or after January 1,

2010, and ending on December 31, 2016, in the case of

individuals who use the standard deduction in

determining taxable income, there shall be added or

deducted, as the case may be, the difference necessary

to allow a standard deduction equal to the standard

deduction allowed by the Internal Revenue Code, based

upon the amount and filing status prescribed by such

Code for purposes of filing federal individual income

tax returns.

g. For taxable years beginning on or after January 1,

2017, in the case of individuals who use the standard

deduction in determining taxable income, there shall

be added or deducted, as the case may be, the

difference necessary to allow a standard deduction in

lieu of the standard deduction allowed by the Internal

Revenue Code, as follows:

(1) Six Thousand Three Hundred Fifty Dollars

($6,350.00) for single or married filing

separately,

(2) Twelve Thousand Seven Hundred Dollars

($12,700.00) for married filing jointly or

qualifying widower with dependent child, and
ted, as the case may be, the

difference necessary to allow a standard deduction in

lieu of the standard deduction allowed by the Internal

Revenue Code, as follows:

(1) Six Thousand Three Hundred Fifty Dollars

($6,350.00) for single or married filing

separately,

(2) Twelve Thousand Seven Hundred Dollars

($12,700.00) for married filing jointly or

qualifying widower with dependent child, and

(3) Nine Thousand Three Hundred Fifty Dollars

($9,350.00) for head of household.

3. a. In the case of resident and part-year resident

individuals having adjusted gross income from sources

both within and without the state, the itemized or

standard deductions and personal exemptions shall be

reduced to an amount which is the same portion of the

total thereof as Oklahoma adjusted gross income is of

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1009

adjusted gross income. To the extent itemized

deductions include allowable moving expense, proration

of moving expense shall not be required or permitted

but allowable moving expense shall be fully deductible

for those taxpayers moving within or into Oklahoma and

no part of moving expense shall be deductible for

those taxpayers moving without or out of Oklahoma.

All other itemized or standard deductions and personal

exemptions shall be subject to proration as provided

by law.

b. For taxable years beginning on or after January 1,

2018, the net amount of itemized deductions allowable

on an Oklahoma income tax return, subject to the

provisions of paragraph 24 of this subsection, shall

not exceed Seventeen Thousand Dollars ($17,000.00).

For purposes of this subparagraph, charitable

contributions and medical expenses deductible for

federal income tax purposes shall be excluded from the

amount of Seventeen Thousand Dollars ($17,000.00) as

specified by this subparagraph.

4. A resident individual with a physical disability

constituting a substantial handicap to employment may deduct from

Oklahoma adjusted gross income such expenditures to modify a motor

vehicle, home or workplace as are necessary to compensate for his or

her handicap. A veteran certified by the Department of Veterans

Affairs of the federal government as having a service-connected

disability shall be conclusively presumed to be an individual with a

physical disability constituting a substantial handicap to

employment. The Tax Commission shall promulgate rules containing a

list of combinations of common disabilities and modifications which

may be presumed to qualify for this deduction. The Tax Commission

shall prescribe necessary requirements for verification.

5. a. Before July 1, 2010, the first One Thousand Five

Hundred Dollars ($1,500.00) received by any person

from the United States as salary or compensation in

any form, other than retirement benefits, as a member

of any component of the Armed Forces of the United

States shall be deducted from taxable income.

b. On or after July 1, 2010, one hundred percent (100%)

of the income received by any person from the United

States as salary or compensation in any form, other

than retirement benefits, as a member of any component

of the Armed Forces of the United States shall be

deducted from taxable income.

c. Whenever the filing of a timely income tax return by a

member of the Armed Forces of the United States is

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1010

made impracticable or impossible of accomplishment by

reason of:

(1) absence from the United States, which term

includes only the states and the District of

Columbia,

(2) absence from the State of Oklahoma while on

active duty, or
er the filing of a timely income tax return by a

member of the Armed Forces of the United States is

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1010

made impracticable or impossible of accomplishment by

reason of:

(1) absence from the United States, which term

includes only the states and the District of

Columbia,

(2) absence from the State of Oklahoma while on

active duty, or

(3) confinement in a hospital within the United

States for treatment of wounds, injuries or

disease,

the time for filing a return and paying an income tax

shall be and is hereby extended without incurring

liability for interest or penalties, to the fifteenth

day of the third month following the month in which:

(a) Such individual shall return to the United

States if the extension is granted pursuant

to subparagraph a of this paragraph, return

to the State of Oklahoma if the extension is

granted pursuant to subparagraph b of this

paragraph or be discharged from such

hospital if the extension is granted

pursuant to subparagraph c of this

paragraph, or

(b) An executor, administrator, or conservator

of the estate of the taxpayer is appointed,

whichever event occurs the earliest.

Provided, that the Tax Commission may, in its discretion, grant

any member of the Armed Forces of the United States an extension of

time for filing of income tax returns and payment of income tax

without incurring liabilities for interest or penalties. Such

extension may be granted only when in the judgment of the Tax

Commission a good cause exists therefor and may be for a period in

excess of six (6) months. A record of every such extension granted,

and the reason therefor, shall be kept.

6. Before July 1, 2010, the salary or any other form of

compensation, received from the United States by a member of any

component of the Armed Forces of the United States, shall be

deducted from taxable income during the time in which the person is

detained by the enemy in a conflict, is a prisoner of war or is

missing in action and not deceased; provided, after July 1, 2010,

all such salary or compensation shall be subject to the deduction as

provided pursuant to paragraph 5 of this subsection.

7. a. An individual taxpayer, whether resident or

nonresident, may deduct an amount equal to the federal

income taxes paid by the taxpayer during the taxable

year.

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1011

b. Federal taxes as described in subparagraph a of this

paragraph shall be deductible by any individual

taxpayer, whether resident or nonresident, only to the

extent they relate to income subject to taxation

pursuant to the provisions of the Oklahoma Income Tax

Act. The maximum amount allowable in the preceding

paragraph shall be prorated on the ratio of the

Oklahoma adjusted gross income to federal adjusted

gross income.

c. For the purpose of this paragraph, “federal income

taxes paid” shall mean federal income taxes, surtaxes

imposed on incomes or excess profits taxes, as though

the taxpayer was on the accrual basis. In determining

the amount of deduction for federal income taxes for

tax year 2001, the amount of the deduction shall not

be adjusted by the amount of any accelerated ten

percent (10%) tax rate bracket credit or advanced

refund of the credit received during the tax year

provided pursuant to the federal Economic Growth and

Tax Relief Reconciliation Act of 2001, P.L. No. 107-

16, and the advanced refund of such credit shall not

be subject to taxation.

d. The provisions of this paragraph shall apply to all

taxable years ending after December 31, 1978, and

beginning before January 1, 2006.

8. Retirement benefits not to exceed Five Thousand Five Hundred

Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five

Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand

Dollars ($10,000.00) for the 2006 tax year and all subsequent tax
he provisions of this paragraph shall apply to all

taxable years ending after December 31, 1978, and

beginning before January 1, 2006.

8. Retirement benefits not to exceed Five Thousand Five Hundred

Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five

Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand

Dollars ($10,000.00) for the 2006 tax year and all subsequent tax

years, which are received by an individual from the civil service of

the United States, the Oklahoma Public Employees Retirement System,

the Teachers’ Retirement System of Oklahoma, the Oklahoma Law

Enforcement Retirement System, the Oklahoma Firefighters Pension and

Retirement System, the Oklahoma Police Pension and Retirement

System, the employee retirement systems created by counties pursuant

to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the

Uniform Retirement System for Justices and Judges, the Oklahoma

Wildlife Conservation Department Retirement Fund, the Oklahoma

Employment Security Commission Retirement Plan, or the employee

retirement systems created by municipalities pursuant to Section 48-

101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt

from taxable income.

9. In taxable years beginning after December 3l, 1984, Social

Security benefits received by an individual shall be exempt from

taxable income, to the extent such benefits are included in the

federal adjusted gross income pursuant to the provisions of Section

86 of the Internal Revenue Code, 26 U.S.C., Section 86.

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1012

10. For taxable years beginning after December 31, 1994, lump-

sum distributions from employer plans of deferred compensation,

which are not qualified plans within the meaning of Section 401(a)

of the Internal Revenue Code, 26 U.S.C., Section 401(a), and which

are deposited in and accounted for within a separate bank account or

brokerage account in a financial institution within this state,

shall be excluded from taxable income in the same manner as a

qualifying rollover contribution to an individual retirement account

within the meaning of Section 408 of the Internal Revenue Code, 26

U.S.C., Section 408. Amounts withdrawn from such bank or brokerage

account, including any earnings thereon, shall be included in

taxable income when withdrawn in the same manner as withdrawals from

individual retirement accounts within the meaning of Section 408 of

the Internal Revenue Code.

11. In taxable years beginning after December 31, 1995,

contributions made to and interest received from a medical savings

account established pursuant to Sections 2621 through 2623 of Title

63 of the Oklahoma Statutes shall be exempt from taxable income.

12. For taxable years beginning after December 31, 1996, the

Oklahoma adjusted gross income of any individual taxpayer who is a

swine or poultry producer may be further adjusted for the deduction

for depreciation allowed for new construction or expansion costs

which may be computed using the same depreciation method elected for

federal income tax purposes except that the useful life shall be

seven (7) years for purposes of this paragraph. If depreciation is

allowed as a deduction in determining the adjusted gross income of

an individual, any depreciation calculated and claimed pursuant to

this section shall in no event be a duplication of any depreciation

allowed or permitted on the federal income tax return of the

individual.

13. a. In taxable years beginning before January 1, 2005,

retirement benefits not to exceed the amounts

specified in this paragraph, which are received by an

individual sixty-five (65) years of age or older and

whose Oklahoma adjusted gross income is Twenty-five

Thousand Dollars ($25,000.00) or less if the filing

status is single, head of household, or married filing

separate, or Fifty Thousand Dollars ($50,000.00) or

less if the filing status is married filing joint or
to exceed the amounts

specified in this paragraph, which are received by an

individual sixty-five (65) years of age or older and

whose Oklahoma adjusted gross income is Twenty-five

Thousand Dollars ($25,000.00) or less if the filing

status is single, head of household, or married filing

separate, or Fifty Thousand Dollars ($50,000.00) or

less if the filing status is married filing joint or

qualifying widow, shall be exempt from taxable income.

In taxable years beginning after December 31, 2004,

retirement benefits not to exceed the amounts

specified in this paragraph, which are received by an

individual whose Oklahoma adjusted gross income is

less than the qualifying amount specified in this

paragraph, shall be exempt from taxable income.

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1013

b. For purposes of this paragraph, the qualifying amount

shall be as follows:

(1) in taxable years beginning after December 31,

2004, and prior to January 1, 2007, the

qualifying amount shall be Thirty-seven Thousand

Five Hundred Dollars ($37,500.00) or less if the

filing status is single, head of household, or

married filing separate, or Seventy-five Thousand

Dollars ($75,000.00) or less if the filing status

is married filing jointly or qualifying widow,

(2) in the taxable year beginning January 1, 2007,

the qualifying amount shall be Fifty Thousand

Dollars ($50,000.00) or less if the filing status

is single, head of household, or married filing

separate, or One Hundred Thousand Dollars

($100,000.00) or less if the filing status is

married filing jointly or qualifying widow,

(3) in the taxable year beginning January 1, 2008,

the qualifying amount shall be Sixty-two Thousand

Five Hundred Dollars ($62,500.00) or less if the

filing status is single, head of household, or

married filing separate, or One Hundred Twenty-

five Thousand Dollars ($125,000.00) or less if

the filing status is married filing jointly or

qualifying widow,

(4) in the taxable year beginning January 1, 2009,

the qualifying amount shall be One Hundred

Thousand Dollars ($100,000.00) or less if the

filing status is single, head of household, or

married filing separate, or Two Hundred Thousand

Dollars ($200,000.00) or less if the filing

status is married filing jointly or qualifying

widow, and

(5) in the taxable year beginning January 1, 2010,

and subsequent taxable years, there shall be no

limitation upon the qualifying amount.

c. For purposes of this paragraph, “retirement benefits”

means the total distributions or withdrawals from the

following:

(1) an employee pension benefit plan which satisfies

the requirements of Section 401 of the Internal

Revenue Code, 26 U.S.C., Section 401,

(2) an eligible deferred compensation plan that

satisfies the requirements of Section 457 of the

Internal Revenue Code, 26 U.S.C., Section 457,

(3) an individual retirement account, annuity or

trust or simplified employee pension that

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1014

satisfies the requirements of Section 408 of the

Internal Revenue Code, 26 U.S.C., Section 408,

(4) an employee annuity subject to the provisions of

Section 403(a) or (b) of the Internal Revenue

Code, 26 U.S.C., Section 403(a) or (b),

(5) United States Retirement Bonds which satisfy the

requirements of Section 86 of the Internal

Revenue Code, 26 U.S.C., Section 86, or
nd Taxation Page 1014

satisfies the requirements of Section 408 of the

Internal Revenue Code, 26 U.S.C., Section 408,

(4) an employee annuity subject to the provisions of

Section 403(a) or (b) of the Internal Revenue

Code, 26 U.S.C., Section 403(a) or (b),

(5) United States Retirement Bonds which satisfy the

requirements of Section 86 of the Internal

Revenue Code, 26 U.S.C., Section 86, or

(6) lump-sum distributions from a retirement plan

which satisfies the requirements of Section

402(e) of the Internal Revenue Code, 26 U.S.C.,

Section 402(e).

d. The amount of the exemption provided by this paragraph

shall be limited to Five Thousand Five Hundred Dollars

($5,500.00) for the 2004 tax year, Seven Thousand Five

Hundred Dollars ($7,500.00) for the 2005 tax year and

Ten Thousand Dollars ($10,000.00) for the tax year

2006 and for all subsequent tax years. Any individual

who claims the exemption provided for in paragraph 8

of this subsection shall not be permitted to claim a

combined total exemption pursuant to this paragraph

and paragraph 8 of this subsection in an amount

exceeding Five Thousand Five Hundred Dollars

($5,500.00) for the 2004 tax year, Seven Thousand Five

Hundred Dollars ($7,500.00) for the 2005 tax year and

Ten Thousand Dollars ($10,000.00) for the 2006 tax

year and all subsequent tax years.

14. In taxable years beginning after December 31, 1999, for an

individual engaged in production agriculture who has filed a

Schedule F form with the taxpayer’s federal income tax return for

such taxable year, there shall be excluded from taxable income any

amount which was included as federal taxable income or federal

adjusted gross income and which consists of the discharge of an

obligation by a creditor of the taxpayer incurred to finance the

production of agricultural products.

15. In taxable years beginning December 31, 2000, an amount

equal to one hundred percent (100%) of the amount of any scholarship

or stipend received from participation in the Oklahoma Police Corps

Program, as established in Section 2-140.3 of Title 47 of the

Oklahoma Statutes shall be exempt from taxable income.

16. a. In taxable years beginning after December 31, 2001,

and before January 1, 2005, there shall be allowed a

deduction in the amount of contributions to accounts

established pursuant to the Oklahoma College Savings

Plan Act. The deduction shall equal the amount of

contributions to accounts, but in no event shall the

deduction for each contributor exceed Two Thousand

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1015

Five Hundred Dollars ($2,500.00) each taxable year for

each account.

b. In taxable years beginning after December 31, 2004,

each taxpayer shall be allowed a deduction for

contributions to accounts established pursuant to the

Oklahoma College Savings Plan Act. The maximum annual

deduction shall equal the amount of contributions to

all such accounts plus any contributions to such

accounts by the taxpayer for prior taxable years after

December 31, 2004, which were not deducted, but in no

event shall the deduction for each tax year exceed Ten

Thousand Dollars ($10,000.00) for each individual

taxpayer or Twenty Thousand Dollars ($20,000.00) for

taxpayers filing a joint return. Any amount of a

contribution that is not deducted by the taxpayer in

the year for which the contribution is made may be

carried forward as a deduction from income for the

succeeding five (5) years. For taxable years

beginning after December 31, 2005, deductions may be

taken for contributions and rollovers made during a

taxable year and up to April 15 of the succeeding

year, or the due date of a taxpayer’s state income tax

return, excluding extensions, whichever is later.

Provided, a deduction for the same contribution may

not be taken for two (2) different taxable years.

c. In taxable years beginning after December 31, 2006,

deductions for contributions made pursuant to
butions and rollovers made during a

taxable year and up to April 15 of the succeeding

year, or the due date of a taxpayer’s state income tax

return, excluding extensions, whichever is later.

Provided, a deduction for the same contribution may

not be taken for two (2) different taxable years.

c. In taxable years beginning after December 31, 2006,

deductions for contributions made pursuant to

subparagraph b of this paragraph shall be limited as

follows:

(1) for a taxpayer who qualified for the five-year

carryforward election and who takes a rollover or

nonqualified withdrawal during that period, the

tax deduction otherwise available pursuant to

subparagraph b of this paragraph shall be reduced

by the amount which is equal to the rollover or

nonqualified withdrawal, and

(2) for a taxpayer who elects to take a rollover or

nonqualified withdrawal within the same tax year

in which a contribution was made to the

taxpayer’s account, the tax deduction otherwise

available pursuant to subparagraph b of this

paragraph shall be reduced by the amount of the

contribution which is equal to the rollover or

nonqualified withdrawal.

d. If a taxpayer elects to take a rollover on a

contribution for which a deduction has been taken

pursuant to subparagraph b of this paragraph within

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1016

one (1) year of the date of contribution, the amount

of such rollover shall be included in the adjusted

gross income of the taxpayer in the taxable year of

the rollover.

e. If a taxpayer makes a nonqualified withdrawal of

contributions for which a deduction was taken pursuant

to subparagraph b of this paragraph, such nonqualified

withdrawal and any earnings thereon shall be included

in the adjusted gross income of the taxpayer in the

taxable year of the nonqualified withdrawal.

f. As used in this paragraph:

(1) “non-qualified withdrawal” means a withdrawal

from an Oklahoma College Savings Plan account

other than one of the following:

(a) a qualified withdrawal,

(b) a withdrawal made as a result of the death

or disability of the designated beneficiary

of an account,

(c) a withdrawal that is made on the account of

a scholarship or the allowance or payment

described in Section 135(d)(1)(B) or (C) or

by the Internal Revenue Code, received by

the designated beneficiary to the extent the

amount of the refund does not exceed the

amount of the scholarship, allowance, or

payment, or

(d) a rollover or change of designated

beneficiary as permitted by subsection F of

Section 3970.7 of Title 70 of Oklahoma

Statutes, and

(2) “rollover” means the transfer of funds from the

Oklahoma College Savings Plan to any other plan

under Section 529 of the Internal Revenue Code.

17. For tax years 2006 through 2021, retirement benefits

received by an individual from any component of the Armed Forces of

the United States in an amount not to exceed the greater of seventy-

five percent (75%) of such benefits or Ten Thousand Dollars

($10,000.00) shall be exempt from taxable income but in no case less

than the amount of the exemption provided by paragraph 13 of this

subsection. For tax year 2022 and subsequent tax years, retirement

benefits received by an individual from any component of the Armed

Forces of the United States shall be exempt from taxable income.

18. For taxable years beginning after December 31, 2006,

retirement benefits received by federal civil service retirees,

including survivor annuities, paid in lieu of Social Security

benefits shall be exempt from taxable income to the extent such

benefits are included in the federal adjusted gross income pursuant

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1017

to the provisions of Section 86 of the Internal Revenue Code, 26

U.S.C., Section 86, according to the following schedule:

a. in the taxable year beginning January 1, 2007, twenty

percent (20%) of such benefits shall be exempt,
from taxable income to the extent such

benefits are included in the federal adjusted gross income pursuant

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1017

to the provisions of Section 86 of the Internal Revenue Code, 26

U.S.C., Section 86, according to the following schedule:

a. in the taxable year beginning January 1, 2007, twenty

percent (20%) of such benefits shall be exempt,

b. in the taxable year beginning January 1, 2008, forty

percent (40%) of such benefits shall be exempt,

c. in the taxable year beginning January 1, 2009, sixty

percent (60%) of such benefits shall be exempt,

d. in the taxable year beginning January 1, 2010, eighty

percent (80%) of such benefits shall be exempt, and

e. in the taxable year beginning January 1, 2011, and

subsequent taxable years, one hundred percent (100%)

of such benefits shall be exempt.

19. a. For taxable years beginning after December 31, 2007, a

resident individual may deduct up to Ten Thousand

Dollars ($10,000.00) from Oklahoma adjusted gross

income if the individual, or the dependent of the

individual, while living, donates one or more human

organs of the individual to another human being for

human organ transplantation. As used in this

paragraph, “human organ” means all or part of a liver,

pancreas, kidney, intestine, lung, or bone marrow. A

deduction that is claimed under this paragraph may be

claimed in the taxable year in which the human organ

transplantation occurs.

b. An individual may claim this deduction only once, and

the deduction may be claimed only for unreimbursed

expenses that are incurred by the individual and

related to the organ donation of the individual.

c. The Oklahoma Tax Commission shall promulgate rules to

implement the provisions of this paragraph which shall

contain a specific list of expenses which may be

presumed to qualify for the deduction. The Tax

Commission shall prescribe necessary requirements for

verification.

20. For taxable years beginning after December 31, 2009, there

shall be exempt from taxable income any amount received by the

beneficiary of the death benefit for an emergency medical technician

or a registered emergency medical responder provided by Section 1-

2505.1 of Title 63 of the Oklahoma Statutes.

21. For taxable years beginning after December 31, 2008,

taxable income shall be increased by any unemployment compensation

exempted under Section 85(c) of the Internal Revenue Code, 26

U.S.C., Section 85(c)(2009).

22. For taxable years beginning after December 31, 2008, there

shall be exempt from taxable income any payment in an amount less

than Six Hundred Dollars ($600.00) received by a person as an award

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1018

for participation in a competitive livestock show event. For

purposes of this paragraph, the payment shall be treated as a

scholarship amount paid by the entity sponsoring the event and the

sponsoring entity shall cause the payment to be categorized as a

scholarship in its books and records.

23. For taxable years beginning on or after January 1, 2016,

taxable income shall be increased by any amount of state and local

sales or income taxes deducted under 26 U.S.C., Section 164 of the

Internal Revenue Code. If the amount of state and local taxes

deducted on the federal return is limited, taxable income on the

state return shall be increased only by the amount actually deducted

after any such limitations are applied.

24. For taxable years beginning after December 31, 2020, each

taxpayer shall be allowed a deduction for contributions to accounts

established pursuant to the Achieving a Better Life Experience

(ABLE) Program as established in Section 4001.1 et seq. of Title 56

of the Oklahoma Statutes. For any tax year, the deduction provided

for in this paragraph shall not exceed Ten Thousand Dollars

($10,000.00) for an individual taxpayer or Twenty Thousand Dollars
h

taxpayer shall be allowed a deduction for contributions to accounts

established pursuant to the Achieving a Better Life Experience

(ABLE) Program as established in Section 4001.1 et seq. of Title 56

of the Oklahoma Statutes. For any tax year, the deduction provided

for in this paragraph shall not exceed Ten Thousand Dollars

($10,000.00) for an individual taxpayer or Twenty Thousand Dollars

($20,000.00) for taxpayers filing a joint return. Any amount of

contribution not deducted by the taxpayer in the tax year for which

the contribution is made may be carried forward as a deduction from

income for up to five (5) tax years. Deductions may be taken for

contributions made during the tax year and through April 15 of the

succeeding tax year, or through the due date of a taxpayer’s state

income tax return excluding extensions, whichever is later.

Provided, a deduction for the same contribution may not be taken in

more than one (1) tax year.

F. 1. For taxable years beginning after December 31, 2004, a

deduction from the Oklahoma adjusted gross income of any individual

taxpayer shall be allowed for qualifying gains receiving capital

treatment that are included in the federal adjusted gross income of

such individual taxpayer during the taxable year.

2. As used in this subsection:

a. “qualifying gains receiving capital treatment” means

the amount of net capital gains, as defined in Section

1222(11) of the Internal Revenue Code, included in an

individual taxpayer’s federal income tax return that

result from:

(1) the sale of real property or tangible personal

property located within Oklahoma that has been

directly or indirectly owned by the individual

taxpayer for a holding period of at least five

(5) years prior to the date of the transaction

from which such net capital gains arise,

(2) the sale of stock or the sale of a direct or

indirect ownership interest in an Oklahoma

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1019

company, limited liability company, or

partnership where such stock or ownership

interest has been directly or indirectly owned by

the individual taxpayer for a holding period of

at least two (2) years prior to the date of the

transaction from which the net capital gains

arise, or

(3) the sale of real property, tangible personal

property or intangible personal property located

within Oklahoma as part of the sale of all or

substantially all of the assets of an Oklahoma

company, limited liability company, or

partnership or an Oklahoma proprietorship

business enterprise where such property has been

directly or indirectly owned by such entity or

business enterprise or owned by the owners of

such entity or business enterprise for a period

of at least two (2) years prior to the date of

the transaction from which the net capital gains

arise,

b. “holding period” means an uninterrupted period of

time. The holding period shall include any additional

period when the property was held by another

individual or entity, if such additional period is

included in the taxpayer’s holding period for the

asset pursuant to the Internal Revenue Code,

c. “Oklahoma company,” “limited liability company,” or

“partnership” means an entity whose primary

headquarters have been located in Oklahoma for at

least three (3) uninterrupted years prior to the date

of the transaction from which the net capital gains

arise,

d. “direct” means the individual taxpayer directly owns

the asset,

e. “indirect” means the individual taxpayer owns an

interest in a pass-through entity (or chain of pass-

through entities) that sells the asset that gives rise

to the qualifying gains receiving capital treatment.
least three (3) uninterrupted years prior to the date

of the transaction from which the net capital gains

arise,

d. “direct” means the individual taxpayer directly owns

the asset,

e. “indirect” means the individual taxpayer owns an

interest in a pass-through entity (or chain of pass-

through entities) that sells the asset that gives rise

to the qualifying gains receiving capital treatment.

(1) With respect to sales of real property or

tangible personal property located within

Oklahoma, the deduction described in this

subsection shall not apply unless the pass-

through entity that makes the sale has held the

property for not less than five (5) uninterrupted

years prior to the date of the transaction that

created the capital gain, and each pass-through

entity included in the chain of ownership has

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1020

been a member, partner, or shareholder of the

pass-through entity in the tier immediately below

it for an uninterrupted period of not less than

five (5) years.

(2) With respect to sales of stock or ownership

interest in or sales of all or substantially all

of the assets of an Oklahoma company, limited

liability company, partnership or Oklahoma

proprietorship business enterprise, the deduction

described in this subsection shall not apply

unless the pass-through entity that makes the

sale has held the stock or ownership interest for

not less than two (2) uninterrupted years prior

to the date of the transaction that created the

capital gain, and each pass-through entity

included in the chain of ownership has been a

member, partner or shareholder of the pass-

through entity in the tier immediately below it

for an uninterrupted period of not less than two

(2) years. For purposes of this division,

uninterrupted ownership prior to July 1, 2007,

shall be included in the determination of the

required holding period prescribed by this

division, and

f. “Oklahoma proprietorship business enterprise” means a

business enterprise whose income and expenses have

been reported on Schedule C or F of an individual

taxpayer’s federal income tax return, or any similar

successor schedule published by the Internal Revenue

Service and whose primary headquarters have been

located in Oklahoma for at least three (3)

uninterrupted years prior to the date of the

transaction from which the net capital gains arise.

G. 1. For purposes of computing its Oklahoma taxable income

under this section, the dividends-paid deduction otherwise allowed

by federal law in computing net income of a real estate investment

trust that is subject to federal income tax shall be added back in

computing the tax imposed by this state under this title if the real

estate investment trust is a captive real estate investment trust.

2. For purposes of computing its Oklahoma taxable income under

this section, a taxpayer shall add back otherwise deductible rents

and interest expenses paid to a captive real estate investment trust

that is not subject to the provisions of paragraph 1 of this

subsection. As used in this subsection:

a. the term “real estate investment trust” or “REIT”

means the meaning ascribed to such term in Section 856

of the Internal Revenue Code,

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1021

b. the term “captive real estate investment trust” means

a real estate investment trust, the shares or

beneficial interests of which are not regularly traded

on an established securities market and more than

fifty percent (50%) of the voting power or value of

the beneficial interests or shares of which are owned

or controlled, directly or indirectly, or

constructively, by a single entity that is:

(1) treated as an association taxable as a

corporation under the Internal Revenue Code, and
or

beneficial interests of which are not regularly traded

on an established securities market and more than

fifty percent (50%) of the voting power or value of

the beneficial interests or shares of which are owned

or controlled, directly or indirectly, or

constructively, by a single entity that is:

(1) treated as an association taxable as a

corporation under the Internal Revenue Code, and

(2) not exempt from federal income tax pursuant to

the provisions of Section 501(a) of the Internal

Revenue Code.

The term shall not include a real estate investment

trust that is intended to be regularly traded on an

established securities market, and that satisfies the

requirements of Section 856(a)(5) and (6) of the U.S.

Internal Revenue Code by reason of Section 856(h)(2)

of the Internal Revenue Code,

c. the term “association taxable as a corporation” shall

not include the following entities:

(1) any real estate investment trust as defined in

paragraph a of this subsection other than a

“captive real estate investment trust”,

(2) any qualified real estate investment trust

subsidiary under Section 856(i) of the Internal

Revenue Code, other than a qualified REIT

subsidiary of a “captive real estate investment

trust”,

(3) any Listed Australian Property Trust (meaning an

Australian unit trust registered as a “Managed

Investment Scheme” under the Australian

Corporations Act in which the principal class of

units is listed on a recognized stock exchange in

Australia and is regularly traded on an

established securities market), or an entity

organized as a trust, provided that a Listed

Australian Property Trust owns or controls,

directly or indirectly, seventy-five percent

(75%) or more of the voting power or value of the

beneficial interests or shares of such trust, or

(4) any Qualified Foreign Entity, meaning a

corporation, trust, association or partnership

organized outside the laws of the United States

and which satisfies the following criteria:

(a) at least seventy-five percent (75%) of the

entity’s total asset value at the close of

Oklahoma Statutes - Title 68. Revenue and Taxation Page 1022

its taxable year is represented by real

estate assets, as defined in Section

856(c)(5)(B) of the Internal Revenue Code,

thereby including shares or certificates of

beneficial interest in any real estate

investment trust, cash and cash equivalents,

and U.S. Government securities,

(b) the entity receives a dividend-paid

deduction comparable to Section 561 of the

Internal Revenue Code, or is exempt from

entity level tax,

(c) the entity is required to distribute at

least eighty-five percent (85%) of its

taxable income, as computed in the

jurisdiction in which it is organized, to

the holders of its shares or certificates of

beneficial interest on an annual basis,

(d) not more than ten percent (10%) of the

voting power or value in such entity is held

directly or indirectly or constructively by

a single entity or individual, or the shares

or beneficial interests of such entity are

regularly traded on an established

securities market, and
in which it is organized, to

the holders of its shares or certificates of

beneficial interest on an annual basis,

(d) not more than ten percent (10%) of the

voting power or value in such entity is held

directly or indirectly or constructively by

a single entity or individual, or the shares

or beneficial interests of such entity are

regularly traded on an established

securities market, and

(e) the entity is organized in a country which

has a tax treaty with the United States.

3. For purposes of this subsection, the constructive ownership

rules of Section 318(a) of the Internal Revenue Code, as modified by

Section 856(d)(5) of the Internal Revenue Code, shall apply in

determining the ownership of stock, assets, or net profits of any

person.

4. A real estate investment trust that does not become

regularly traded on an established securities market within one (1)

year of the date on which it first becomes a real estate investment

trust shall be deemed not to have been regularly traded on an

established securities market, retroactive to the date it first

became a real estate investment trust, and shall file an amended

return reflecting such retroactive designation for any tax year or

part year occurring during its initial year of status as a real

estate investment trust. For purposes of this subsection, a real

estate investment trust becomes a real estate investment trust on

the first day it has both met the requirements of Section 856 of the

Internal Revenue Code and has elected to be treated as a real estate

investment trust pursuant to Section 856(c)(1) of the Internal

Revenue Code.