Oklahoma Bar Journal
2019 Oklahoma Tax Legislation
By Sheppard F. Miers Jr.
The following is a summary of some of the changes in Oklahoma law on state taxation enacted by the Oklahoma Legislature in the 2019 session of the Legislature.
Pass-Through Entity Tax Equity Act of 2019
The Oklahoma income tax was amended by enactment of the Pass-Through Entity Tax Equity Act of 2019 to provide for computation and payment of pass-through entity tax. A pass-through entity eligible to elect to pay the tax at the entity level is defined as an entity required to file an Oklahoma partnership income tax return or file an Oklahoma S corporation income tax return. A pass-through entity may elect to pay pass-through entity income tax on the entity’s Oklahoma net entity income at the entity level, and Oklahoma income of an electing pass-through entity will not be passed through to members of the entity for Oklahoma income tax purposes. An election for tax year 2019 must be filed by the entity within 60 days of the April 29, 2019, date of enactment. Elections for subsequent years must be made during the preceding tax year or two months and 15 days after the beginning of the tax year. Elections and revocations of elections shall be made on forms and pursuant to procedures prescribed by the Oklahoma Tax Commission.1
Clean-Burning Motor Vehicle Fuel Credits
The tax credits for investment in certain qualified clean-burning motor vehicles and related fueling assets were modified and extended. The amount of the credit for investment in or conversion into a qualified clean-burning motor vehicle was modified and shall be based upon the weight of the vehicle. The rate of the credit for assets and equipment for fueling and recharging motor vehicles (e.g. fueling station equipment) was modified to be 45 percent of cost (previously 75 percent). A statewide annual limit of credits allowed of $20 million was enacted.2
Zero-Emission (Wind) Electricity Generation Facility Credit
The Oklahoma income tax credit for electricity generated from certain zero-emission facilities was amended to provide for a taxpayer to elect to carry forward credits for up to 10 years instead of receiving an 85 percent refundable credit upon claiming the credit for the tax year in which the credit is earned.3 The credit was also amended to provide that it shall be allowed against Oklahoma income tax for tax years ending not later than Dec. 31, 2021.4
Qualified Cybersecurity Employee Credit
An Oklahoma income tax credit was enacted for qualified software and cybersecurity employees who are employed by specified employers in qualifying industries. The credit is allowed for taxable years beginning on or after Jan. 1, 2020, and before Jan. 1, 2030. The credit may be claimed for a maximum of seven years in annual amounts of $2,200 for qualified employees with a bachelor’s or higher degree and $1,800 for qualified employees with an associate’s degree in an accredited program in cybersecurity, computer science and engineering or software engineering and related programs. Beginning Jan. 1, 2022, the credits allowed statewide are to be limited to $5 million annually.5
Oklahoma First-Time Home Buyer Saving Accounts
The Oklahoma First-Time Home Buyer Saving Account Act was enacted providing for individuals who reside in Oklahoma and have never purchased a single-family residence in Oklahoma to create a home buyer savings account. Contributions to the account shall be deductible for Oklahoma income tax purposes, not to exceed $5,000 for an individual and $10,000 for joint account holders who file a joint tax return. The earnings from the account shall be excluded from income. The deductions and exclusion allowed may be claimed for an aggregate amount not to exceed $50,000. The withdrawals from the account are not taxable if expended for eligible costs for the purchase of a single-family residence. Withdrawals for other purposes shall be included in the account holder’s taxable income and subject to a 10 percent penalty. Funds held in an account that are not expended on eligible costs within 15 years shall be included in the account holder’s taxable income.6
Affordable Housing Tax Credits
The Oklahoma affordable housing tax credit was modified by eliminating a restriction on availability of tax credits based upon a certain population limit and modifying the time period that a credit may be carried forward. Any credit claimed but not used in a taxable year may be carried forward two subsequent taxable years.7
Vehicle Manufacturing Credit
The Oklahoma income tax credit allowed for employers and employees of vehicle manufacturing companies was amended to make the credit also apply to automotive parts manufacturing.8
Income Tax Checkoff Refund Charitable Contributions
The Oklahoma income tax checkoff refund charitable contribution provisions were amended. The provision for donations to the Oklahoma Silver Haired Legislature-Excellence in State Government Revolving Fund was amended to provide it need not meet a minimum threshold of refund contributions to be continued. The checkoff refund provision for contributions to regional food banks in the state was reauthorized effective Jan. 1, 2019.9
Foster Child Care Deduction
The Oklahoma $5,000 income tax deduction for expenses related to fostering children was amended. A minimum six-month time period under contract was established as a qualification requirement. A pro rata monthly share of the annual deduction amount was added for periods under contract of six months or less.10
Tax Credit Related Property Lease Restrictions
Oklahoma landlord and tenant law was amended to provide that for dwelling units, acquired or improved in connection with an allocation of income tax credits under Section 42 of the Internal Revenue Code, or 68 O.S. 2011, §2357.403, the owner shall have the right to impose conditions or decline to lease to a person based upon prior felony convictions.11
The Oklahoma Psychologists Licensing Act was amended to provide that the Oklahoma Tax Commission shall notify any psychologist who is not in compliance with the income tax laws of the state, and the notification shall include a statement that the Tax Commission shall proceed by garnishment to collect any delinquent tax and to collect penalty and interest due as a result of delinquency until the psychologist is deemed to be in compliance by the Tax Commission, the reasons for noncompliance, the amount of tax, penalties and interest due or years tax returns have not been filed, an explanation of rights of the psychologist and procedures to follow to come into compliance and other information deemed necessary by the Tax Commission.12
SALES AND USE TAX
Remote Internet Seller Sales Tax Collection Requirements Amendment
The Oklahoma Sales Tax Act provisions requiring a remote seller register and collect Oklahoma sales tax on sales of tangible personal property to customers in Oklahoma was amended. A remote seller over the Internet will be required to collect Oklahoma sales tax if its sales in Oklahoma are at least $100,000 annually. That threshold is consistent with another state’s sales tax law requiring remote sellers to collect the state’s sales tax, which was held to be constitutional under the Commerce Clause of the U.S. Constitution in the landmark decision of South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).13
Sale Tax Exemption for Sales to Community Providers of Manufacturing and Fabrication Tools
The Oklahoma Sales Tax Code was amended to provide exemption for sales to section 501(c)(3) nonprofits that provide community access to advanced manufacturing and digital fabrication tools for purposes of science, technology, engineering, art and math (STEAM) learning skills, developing inventions, creating and sustaining businesses and producing personalized products.14
Sales Tax Exemption for Medical Devices
The sales tax exemption for sales of prosthetic devices, durable medical equipment and mobility enhancing equipment was amended to apply to sales when administered, distributed or prescribed by a practitioner authorized by law to do so. The definition of “practitioner” was amended to include an allopathic physician and a clinical nurse specialist.15
Rolling Stock Sales Tax Exemption
The Oklahoma Sales Tax Code was amended by modifying the sales tax exemption for sale or lease of rolling stock as to the time period during which the exemption may be claimed.16
Sales Tax Exemption; Sales to American Legion
The Oklahoma Sales Tax Code was amended authorizing sales tax exemption for sales of tangible personal property and services to certain entities related to the American Legion.17
Unattended Food Establishments
Legislation was enacted providing rules governing the operation of unattended food establishments. An unattended food establishment shall obtain an Oklahoma sales tax permit prior to conducting any sales and shall collect and remit state sales tax as provided in the Oklahoma Sales Tax Code.18
Apportionment of Revenue
The Oklahoma Sales Tax Code was amended with respect apportionment of revenues derived pursuant to the provisions of thereof and to restore funds appropriated from the State Highway Construction and Maintenance Fund and the Oklahoma Railroad Maintenance Revolving Fund.19
AD VALOREM TAX
Protests, Informal Appeal Decisions and Appeals to Board of Equalization
The Oklahoma Ad Valorem Tax Code was amended with respect to valuation increase notices and appeals procedure by modifying computation of certain time periods. A taxpayer shall have 30 calendar days to file a protest of increased valuation by the county assessor. The county assessor must issue a written decision on an informal hearing within seven calendar days. The taxpayer may file an appeal from the county assessor decision with the county board of equalization within 15 calendar days. A taxpayer may file a protest of valuation that has not increased or decreased from the prior year if the protest is filed on or before the first Monday in April.20
Appeals From Board of Equalization to District Court
The Oklahoma Ad Valorem Tax Code was amended to modify the period of time for filing appeals from the county board of equalization to district court to within 30 calendar days from the date the board of equalization order was mailed, or in event the order was delivered, from the date of delivery.21
Confidentiality of Law Enforcement Officer Personal Information
The Ad Valorem Tax Code was amended to provide that law enforcement organizations shall be permitted to request that county assessors keep certain information about undercover or covert law enforcement officers confidential, including home address and telephone number pursuant to a court order issued pursuant to an affidavit of the officer seeking confidentiality of personal information be maintained by the county assessor.22
Five-Year New Manufacturing Facility Exemption Amendment
The five-year ad valorem tax exemption for new manufacturing facilities was amended to provide for an exemption of an establishment primarily engaged in distribution as defined under Industry Number 49311 of the North American Industry Classification System for which the initial capital investment was at least $180 million, if qualifying job creation and depreciable property investment occurred prior to calendar year 2017 but not earlier than calendar year 2013.23
GROSS PRODUCTION TAX
Apportionment of Gross Production Tax
Clerical Amendments; Amendment of Statute Text
The Oklahoma Gross Production Tax Code was modified with respect to certain references and dates stated in the law.25
MOTOR FUEL TAX
Remittance of Tax
MOTOR VEHICLE TAX
A statute was enacted providing for vintage vehicle registration and making such a vehicle subject to both the motor vehicle excise and sales taxes. A “vintage vehicle” is defined by the law based on it being a passenger automobile or truck, having no more than two axles and the history of the vehicle’s registration.27
Licensing of Retail Sales
The Oklahoma tax which relates to sale of fireworks was amended extending the time for licensed retailers’ sales.28
The Oklahoma Alcoholic Beverages Control Act was amended as to licensee record keeping to provide that if licensee has been previously audited by the Tax Commission with an audit finding that the licensee correctly reported and kept sufficient records for audit purposes, the next subsequent audit shall be limited to records kept for one year prior to the date of such audit, subject to changes in
the limitation for incorrect or insufficient records.29
TAX PROCEDURE AND ADMINISTRATION
Notice to Tax Commission of Settlements
The Uniform Tax Procedure Code was amended to provide for notice to the Oklahoma Tax Commission in any action affecting ownership or right to possession of intangible personal property, such as a settlement of a court judgment, for the purpose of determining the Tax Commission’s lien upon the property involved therein in cases where notice of the lien of the state has been filed and indexed.30
Limit on Participation in Voluntary Compliance Initiatives
The Uniform Tax Procedure Code was amended to provide that no taxpayer shall be allowed to participate in a statutory voluntary compliance initiative, enacted after the effective date of the act, entitling taxpayers to a waiver of penalty, interest and/or other collection fees due on unpaid taxes if the taxpayer has previously participated in a similar initiative except that such limitation shall not preclude a taxpayer from seeking relief under the provisions of 68 O. S. §§219.1 or 220 or when the Tax Commission, in its judgment, authorizes a waiver from the limitation.31
The Legislature enacted legislation creating the Oklahoma Medical Marijuana and Patient Protection Act (MPPA) and enacting statutory provisions governing medical marijuana licenses subject to requirements with respect filing and payment of taxes related to a medical marijuana business.32
OKLAHOMA UNEMPLOYMENT INSURANCE TAX
An Empower Independent Contractors Act of 2019 was enacted to amend provisions of the Employment Security Act of 1980 with respect to the definition of the term “employment.” Services performed by an individual for wages shall be deemed to be employment subject to the Employment Security Act of 1980 if the services are performed by the individual in an employer-employee relationship with the employer using the 20-factor test used by the Internal Revenue Service in Revenue Ruling 87-41, 1987-1 C.B. 296. The Oklahoma Employment Security Commission shall have the exclusive authority to make a determination of whether an individual is an independent contractor or employee.33
The Employment Security Act of 1980 was amended with respect to the definition of the term “wages,” to provide that if the Internal Revenue Code provides that a payment made by an employer to an employee is considered to be wages, that payment shall also be considered wages by the Oklahoma Employment Security Commission for the purposes of the act.34
Oklahoma Quick Action Closing Fund; High Impact Film Productions
The Legislature enacted changes to the Oklahoma Quick Action Closing Fund and enacted changes with respect to payments for high impact film productions; exempting specified production from certain limits on payments; establishing a mechanism for payments under specified circumstances; and extending termination date for specified funding.35
Small Employer Quality Jobs Incentive Act Requirements for Incentives
The Small Employer Quality Jobs Incentive Act was modified with respect to qualification requirements for incentives under the act.36
Oklahoma Tourism Development Act
The Oklahoma Tourism Development Act was amended to make provisions of the act define and apply to an entertainment district as a tourism attraction and modify the act with respect to inducements, applications, approvals and agreements.37
Incentive Payments Transfer
The Small Employer Quality Jobs Incentive Act was amended to provide that for any contract executed by an establishment on or after Aug. 2, 2018, 5 percent of the quarterly incentive payment amount shall be transferred by the Oklahoma Tax Commission to the Oklahoma Quick Action Closing Fund.38
Repeal of Multiple Versions
The Small Employer Quality Jobs Incentive Act, 68 O. S. 2011, §3904, as last amended by Sec. 3, C. 144, O. S. L. 2018, (68 O. S. Supp. 2018, §3904), was repealed to eliminate multiple versions of the law.39
Small Business Incubators Incentive Act Amendment
The provisions of the Small Business Incubators Incentives Act were amended to provide that the Oklahoma income tax exemption for a sponsor is allowed for tax years ending before Jan.1, 2020. The exemption allowed for tenants of an incubator was modified.40
1. HB 2665; adding 68 O.S. Supp. 2019, §§2355.1P-1 through 2355.1P-4; amending 68 O.S. Supp. 2018, §2358, 68 O.S. 2011, §2365, 68 O.S. Supp. 2018, §2368, 68 O.S. 2011, §§2370.2, and 2372; effective April 29, 2019.
2. HB 2095; amending 68 O.S. Supp. 2018, §2357.22; effective Jan. 1, 2020.
3. HB 1263; amending 68 O.S. Supp. 2018, §2357.32A; effective July 1, 2019.
4. SB 475; amending 68 O.S. Supp. 2018, §2357.32A; effective Nov. 1, 2019.
5. HB 2759; adding 68 O.S. Supp. 2019, §2357.405; effective Nov. 1, 2019.
6. SB 961; adding 46 O.S. Supp. 2019, §§311-318, effective Jan. 1, 2020.
7. HB 1411; amending 68 O.S. Supp. 2018, §2357.403; effective Nov. 1, 2019.
8. HB 1884; amending 68 O.S. Supp. 2018, §2357.404; effective Nov. 1, 2019.
9. HB 2671; amending 68 O.S. Supp. 2018, §2368.2, 68 O.S. 2011, §2368.4, and 68 O.S. Supp. 2018, §2368.16; effective Nov. 1, 2019.
10. SB 893; amending 68 O.S. Supp. 2018, Section 2358.5-1; effective Nov. 1, 2019.
11. HB 2399; adding 41 O.S. Supp. 2019, §201; effective April 29, 2019.
12. HB 2195; amending 59 O.S. 2011, §1368; effective Nov. 1, 2019.
13. SB 513; amending 68 O.S. Supp. 2018, §§1392-1396; effective Nov. 1, 2019.
14. HB 2530; amending 68 O.S. Supp. 2018, §1356; effective Nov. 1, 2019.
15. HB 1262; amending 68 O.S. 2011, §1357.6; effective July 1, 2019.
16. SB 18; amending 68 O.S. Supp. 2018, §1357, effective July 1, 2019.
17. HB 1003; amending 68 O.S. Supp. 2018, §1356; effective July 1, 2019.
18. HB 1055, adding 63 O.S. Supp. 2019, §1-1118.1; effective April 25, 2019.
19. HB 2766; amending 68 O.S. Supp. 2018, §1353; effective May 24, 2019.
20. HB 1962; amending 68 O.S. Supp.2018, §2876; effective Nov. 1, 2019.
21. HB 1962; amending 68 O.S. Supp.2018, §2880.1; effective Nov. 1, 2019.
22. SB 679; adding 68 O.S. Supp. 2019, §2899.1; effective April 29, 2019.
23. SB 695; amending 68 O.S. Supp. 2018, §2902; effective Nov. 1, 2019.
24. HB 1852; amending 68 O.S. Supp. 2018, §1004; effective July 1, 2019.
25. SB 427; amending 68 O.S. Supp. 2018, §§1001.1 and 1004; effective Nov. 1, 2019.
26. SB 429; amending 68 O.S. 2011, §§500.18 and 500.20; effective Nov. 1, 2019.
27. HB 2664; adding 47 O.S. Supp. 2019, §1112.1A; effective Nov. 1, 2019.
28. SB 635; amending 68 O.S. Supp. 2018, §1623; effective July 1, 2019.
29. HB 1315; amending 37A O.S. Supp. 2018, §5-126; effective May 23, 2019.
30. HB 2734; amending 68 O.S. 2011, §234; effective July 1, 2019.
31. SB 402; adding 68 O.S. Supp. 2019, 216.5; effective Nov. 1, 2019.
32. HB 2612; adding 63 O.S. Supp. 2018, §§427.1-427.23, amending 40 O.S. Supp. 2018, §552, effective May 24, 2019; SB 1030; amending 63 O.S. Supp. 2018, 420, 425; adding 63 O.S. Supp. 2019, §427, amending sections 7 and 14 of HB 2612; effective Aug. 27, 2019.
33. HB 1095; amending 40 O.S. Supp. 2018, §1-210; effective Jan. 1, 2020.
34. SB 335; amending 40 O.S. Supp. 2018, §1-218, effective July 1, 2019.
35. SB 200; amending 62 O.S. Supp. 2018, §48.2, 68 O.S. 2011, §3623, 68 O.S. Supp. 2018, §§3624, 3625,3626; effective July 1, 2019.
36. HB 2536; amending 68 O.S. 2011, §3904; effective July 1, 2019.
37. HB 2748; amending 68 O.S. Supp. 2018, §§2393-2397; effective Nov. 1, 2019.
38. SB 1041; amending 68 O.S. Supp. 2018, §3904, as last amended by Sec. 1, C. 191 O. S. L. 2018; effective April 4, 2019.
39. SB 1041; repealing multiple versions of 68 O.S. Supp. 2018, §3904; effective April 4, 2019.
40. SB 485; amending 74 O. S. 2011, §§5072, 5075, 5078, and 68 O.S. 2011, §2359; repealing 74 O.S. 2011, §5062.8a; effective Aug. 5, 2019.