Bill Text For HB2041 - Engrossed

 1|ENGROSSED HOUSE                                                        |
  |BILL NO. 2041                        By: McCall, Wallace, Echols,      |
 2|                                         Lowe (Dick), Davis, Osburn,   |
  |                                         Marti, McDugle, Sneed,        |
 3|                                         Dempsey, Sims, O'Donnell,     |
  |                                         Bashore, Russ, Williams and   |
 4|                                         Hill of the House             |
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 5|                                         and                           |
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 6|                                         Daniels of the Senate         |
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 7|                                                                       |
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 8|                                                                       |
  |                                                                       |
 9|       An Act relating to revenue and taxation; providing              |
  |       income tax credit for individuals; prescribing method           |
10|       for computation of tax credit; prescribing method for           |
  |       computation of tax credit for part-year residents or            |
11|       nonresidents; prohibiting use of credit to reduce tax           |
  |       liability to less than designated amount; amending 68           |
12|       O.S. 2011, Section 2357.43, as amended by Section 1,            |
  |       Chapter 341, O.S.L. 2016 (68 O.S. Supp. 2020, Section           |
13|       2357.43), which relates to earned income tax credits;           |
  |       providing for refundability of tax credits; amending            |
14|       68 O.S. 2011, Section 2358, as last amended by                  |
  |       Section 5, Chapter 201, O.S.L. 2019 (68 O.S. Supp.              |
15|       2020, Section 2358), which relates to computations of           |
  |       taxable income; modifying personal exemptions;                  |
16|       providing for elimination of personal exemption based           |
  |       on filing status and federal adjusted gross income;             |
17|       providing for codification; and providing an                    |
  |       effective date.                                                 |
18|                                                                       |
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19|                                                                       |
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20|                                                                       |
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21|BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:                  |
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22|    SECTION 1.     NEW LAW     A new section of law to be codified     |
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23|in the Oklahoma Statutes as Section 2355.10 of Title 68, unless        |
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24|there is created a duplication in numbering, reads as follows:         |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 1
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 1|    A.  For tax years beginning on or after January 1, 2022, there     |
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 2|shall be allowed as a credit against the tax imposed pursuant to       |
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 3|Section 2355 of Title 68 of the Oklahoma Statutes as follows:          |
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 4|    1.  For persons having either single or married filing separate    |
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 5|return filing status, a credit amount to be computed as a base         |
  |                                                                       |
 6|credit amount of Eighteen Dollars ($18.00) plus an additional credit   |
  |                                                                       |
 7|to be computed by determining the amount of Oklahoma taxable income    |
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 8|in excess of Seven Thousand Two Hundred Dollars ($7,200.00), if any,   |
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 9|and multiplying such taxable income amount by twenty-five hundredths   |
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10|of one percent (0.0025) which resulting amount shall be added to       |
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11|Eighteen Dollars ($18.00) for the total credit amount; or              |
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12|    2.  For persons having a married filing joint return, head of      |
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13|household or qualifying widow or widower filing status, a credit       |
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14|amount to be computed as a base credit amount of Thirty Dollars and    |
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15|fifty cents ($30.50) plus an additional credit to be computed by       |
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16|determining the amount of Oklahoma taxable income in excess of         |
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17|Twelve Thousand Two Hundred Dollars ($12,200.00), if any, and          |
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18|multiplying such taxable income amount by twenty-five hundredths of    |
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19|one percent (0.0025) which resulting amount shall be added to Thirty   |
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20|Dollars and fifty cents ($30.50) for the total credit amount.          |
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21|    B.  For part-year residents and nonresidents, the amount of the    |
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22|tax credit authorized by this section shall be computed as a base      |
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23|credit amount based on filing status as prescribed by subsection A     |
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24|of this section and multiplying twenty-five hundredths of one          |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 2
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 1|percent (0.0025) by the amount of the taxable income for the           |
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 2|taxpayer or taxpayers as reflected on the Oklahoma income tax return   |
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 3|for the applicable tax year in excess of either Seven Thousand Two     |
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 4|Hundred Dollars ($7,200.00) or Twelve Thousand Two Hundred Dollars     |
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 5|($12,200.00) based on filing status in the same manner as prescribed   |
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 6|in subsection A of this section and adding the result of that          |
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 7|computation to the applicable base credit amount.  The maximum         |
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 8|credit allowable on the Oklahoma income tax return for part-year       |
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 9|residents or nonresidents shall be prorated on the ratio that          |
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10|Oklahoma adjusted gross income bears to the federal adjusted gross     |
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11|income.                                                                |
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12|    C.  The credit authorized by the provisions of this section        |
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13|shall not be used to reduce the income tax liability to less than      |
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14|zero (0).                                                              |
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15|    SECTION 2.     AMENDATORY     68 O.S. 2011, Section 2357.43, as    |
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16|amended by Section 1, Chapter 341, O.S.L. 2016 (68 O.S. Supp. 2020,    |
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17|Section 2357.43), is amended to read as follows:                       |
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18|    Section 2357.43  For tax years beginning after December 31,        |
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19|2001, there shall be allowed to a resident individual or a part-year   |
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20|resident individual as a credit against the tax imposed by Section     |
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21|2355 of this title five percent (5%) of the earned income tax credit   |
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22|allowed under Section 32 of the Internal Revenue Code of the United    |
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23|States, 26 U.S.C., Section 32.  However, this credit shall not be      |
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24|paid in advance pursuant to the provisions of Section 3507 of the      |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 3
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 1|Internal Revenue Code.  For tax years which begin before on or after   |
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 2|January 1, 2016 2022, if the credit exceeds the tax imposed by         |
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 3|Section 2355 of this title, the excess amount shall be refunded to     |
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 4|the taxpayer.  The maximum earned income tax credit allowable on the   |
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 5|Oklahoma income tax return shall be prorated on the ratio that         |
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 6|Oklahoma adjusted gross income bears to the federal adjusted gross     |
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 7|income.                                                                |
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 8|    SECTION 3.     AMENDATORY     68 O.S. 2011, Section 2358, as       |
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 9|last amended by Section 5, Chapter 201, O.S.L. 2019 (68 O.S. Supp.     |
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10|2020, Section 2358), is amended to read as follows:                    |
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11|    Section 2358.   For all tax years beginning after December 31,     |
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12|1981, taxable income and adjusted gross income shall be adjusted to    |
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13|arrive at Oklahoma taxable income and Oklahoma adjusted gross income   |
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14|as required by this section.                                           |
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15|    A.  The taxable income of any taxpayer shall be adjusted to        |
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16|arrive at Oklahoma taxable income for corporations and Oklahoma        |
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17|adjusted gross income for individuals, as follows:                     |
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18|    1.  There shall be added interest income on obligations of any     |
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19|state or political subdivision thereto which is not otherwise          |
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20|exempted pursuant to other laws of this state, to the extent that      |
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21|such interest is not included in taxable income and adjusted gross     |
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22|income.                                                                |
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23|    2.  There shall be deducted amounts included in such income that   |
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24|the state is prohibited from taxing because of the provisions of the   |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 4
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 1|Federal Constitution, the State Constitution, federal laws or laws     |
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 2|of Oklahoma.                                                           |
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 3|    3.  The amount of any federal net operating loss deduction shall   |
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 4|be adjusted as follows:                                                |
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 5|         a.    For carryovers and carrybacks to taxable years          |
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 6|              beginning before January 1, 1981, the amount of any      |
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 7|              net operating loss deduction allowed to a taxpayer for   |
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 8|              federal income tax purposes shall be reduced to an       |
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 9|              amount which is the same portion thereof as the loss     |
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10|              from sources within this state, as determined pursuant   |
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11|              to this section and Section 2362 of this title, for      |
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12|              the taxable year in which such loss is sustained is of   |
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13|              the total loss for such year;                            |
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14|         b.    For carryovers and carrybacks to taxable years          |
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15|              beginning after December 31, 1980, the amount of any     |
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16|              net operating loss deduction allowed for the taxable     |
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17|              year shall be an amount equal to the aggregate of the    |
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18|              Oklahoma net operating loss carryovers and carrybacks    |
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19|              to such year.  Oklahoma net operating losses shall be    |
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20|              separately determined by reference to Section 172 of     |
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21|              the Internal Revenue Code, 26 U.S.C., Section 172, as    |
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22|              modified by the Oklahoma Income Tax Act, Section 2351    |
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23|              et seq. of this title, and shall be allowed without      |
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24|              regard to the existence of a federal net operating       |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 5
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 1|              loss.  For tax years beginning after December 31,        |
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 2|              2000, and ending before January 1, 2008, the years to    |
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 3|              which such losses may be carried shall be determined     |
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 4|              solely by reference to Section 172 of the Internal       |
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 5|              Revenue Code, 26 U.S.C., Section 172, with the           |
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 6|              exception that the terms "net operating loss" and        |
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 7|              "taxable income" shall be replaced with "Oklahoma net    |
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 8|              operating loss" and "Oklahoma taxable income".  For      |
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 9|              tax years beginning after December 31, 2007, and         |
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10|              ending before January 1, 2009, years to which such       |
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11|              losses may be carried back shall be limited to two (2)   |
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12|              years.  For tax years beginning after December 31,       |
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13|              2008, the years to which such losses may be carried      |
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14|              back shall be determined solely by reference to          |
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15|              Section 172 of the Internal Revenue Code, 26 U.S.C.,     |
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16|              Section 172, with the exception that the terms "net      |
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17|              operating loss" and "taxable income" shall be replaced   |
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18|              with "Oklahoma net operating loss" and "Oklahoma         |
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19|              taxable income".                                         |
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20|    4.  Items of the following nature shall be allocated as            |
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21|indicated.  Allowable deductions attributable to items separately      |
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22|allocable in subparagraphs a, b and c of this paragraph, whether or    |
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23|not such items of income were actually received, shall be allocated    |
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24|on the same basis as those items:                                      |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 6
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 1|         a.    Income from real and tangible personal property, such   |
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 2|              as rents, oil and mining production or royalties, and    |
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 3|              gains or losses from sales of such property, shall be    |
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 4|              allocated in accordance with the situs of such           |
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 5|              property;                                                |
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 6|         b.    Income from intangible personal property, such as       |
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 7|              interest, dividends, patent or copyright royalties,      |
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 8|              and gains or losses from sales of such property, shall   |
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 9|              be allocated in accordance with the domiciliary situs    |
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10|              of the taxpayer, except that:                            |
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11|              (1)  where such property has acquired a nonunitary       |
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12|                   business or commercial situs apart from the         |
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13|                   domicile of the taxpayer such income shall be       |
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14|                   allocated in accordance with such business or       |
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15|                   commercial situs; interest income from              |
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16|                   investments held to generate working capital for    |
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17|                   a unitary business enterprise shall be included     |
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18|                   in apportionable income; a resident trust or        |
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19|                   resident estate shall be treated as having a        |
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20|                   separate commercial or business situs insofar as    |
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21|                   undistributed income is concerned, but shall not    |
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22|                   be treated as having a separate commercial or       |
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23|                   business situs insofar as distributed income is     |
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24|                   concerned,                                          |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 7
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 1|              (2)  for taxable years beginning after December 31,      |
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 2|                   2003, capital or ordinary gains or losses from      |
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 3|                   the sale of an ownership interest in a publicly     |
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 4|                   traded partnership, as defined by Section 7704(b)   |
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 5|                   of the Internal Revenue Code, shall be allocated    |
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 6|                   to this state in the ratio of the original cost     |
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 7|                   of such partnership's tangible property in this     |
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 8|                   state to the original cost of such partnership's    |
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 9|                   tangible property everywhere, as determined at      |
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10|                   the time of the sale; if more than fifty percent    |
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11|                   (50%) of the value of the partnership's assets      |
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12|                   consists of intangible assets, capital or           |
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13|                   ordinary gains or losses from the sale of an        |
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14|                   ownership interest in the partnership shall be      |
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15|                   allocated to this state in accordance with the      |
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16|                   sales factor of the partnership for its first       |
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17|                   full tax period immediately preceding its tax       |
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18|                   period during which the ownership interest in the   |
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19|                   partnership was sold; the provisions of this        |
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20|                   division shall only apply if the capital or         |
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21|                   ordinary gains or losses from the sale of an        |
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22|                   ownership interest in a partnership do not          |
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23|                   constitute qualifying gain receiving capital        |
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24|                                                                       |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 8
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 1|                   treatment as defined in subparagraph a of           |
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 2|                   paragraph 2 of subsection F of this section,        |
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 3|              (3)  income from such property which is required to be   |
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 4|                   allocated pursuant to the provisions of paragraph   |
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 5|                   5 of this subsection shall be allocated as herein   |
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 6|                   provided;                                           |
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 7|         c.    Net income or loss from a business activity which is    |
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 8|              not a part of business carried on within or without      |
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 9|              the state of a unitary character shall be separately     |
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10|              allocated to the state in which such activity is         |
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11|              conducted;                                               |
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12|         d.    In the case of a manufacturing or processing            |
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13|              enterprise the business of which in Oklahoma consists    |
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14|              solely of marketing its products by:                     |
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15|              (1)  sales having a situs without this state, shipped    |
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16|                   directly to a point from without the state to a     |
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17|                   purchaser within the state, commonly known as       |
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18|                   interstate sales,                                   |
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19|              (2)  sales of the product stored in public warehouses    |
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20|                   within the state pursuant to "in transit"           |
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21|                   tariffs, as prescribed and allowed by the           |
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22|                   Interstate Commerce Commission, to a purchaser      |
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23|                   within the state,                                   |
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24|                                                                       |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 9
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 1|              (3)  sales of the product stored in public warehouses    |
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 2|                   within the state where the shipment to such         |
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 3|                   warehouses is not covered by "in transit"           |
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 4|                   tariffs, as prescribed and allowed by the           |
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 5|                   Interstate Commerce Commission, to a purchaser      |
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 6|                   within or without the state,                        |
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 7|              the Oklahoma net income shall, at the option of the      |
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 8|              taxpayer, be that portion of the total net income of     |
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 9|              the taxpayer for federal income tax purposes derived     |
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10|              from the manufacture and/or processing and sales         |
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11|              everywhere as determined by the ratio of the sales       |
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12|              defined in this section made to the purchaser within     |
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13|              the state to the total sales everywhere.  The term       |
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14|              "public warehouse" as used in this subparagraph means    |
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15|              a licensed public warehouse, the principal business of   |
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16|              which is warehousing merchandise for the public;         |
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17|         e.    In the case of insurance companies, Oklahoma taxable    |
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18|              income shall be taxable income of the taxpayer for       |
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19|              federal tax purposes, as adjusted for the adjustments    |
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20|              provided pursuant to the provisions of paragraphs 1      |
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21|              and 2 of this subsection, apportioned as follows:        |
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22|              (1)  except as otherwise provided by division (2) of     |
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23|                   this subparagraph, taxable income of an insurance   |
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24|                   company for a taxable year shall be apportioned     |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 10
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 1|                   to this state by multiplying such income by a       |
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 2|                   fraction, the numerator of which is the direct      |
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 3|                   premiums written for insurance on property or       |
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 4|                   risks in this state, and the denominator of which   |
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 5|                   is the direct premiums written for insurance on     |
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 6|                   property or risks everywhere.  For purposes of      |
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 7|                   this subsection, the term "direct premiums          |
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 8|                   written" means the total amount of direct           |
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 9|                   premiums written, assessments and annuity           |
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10|                   considerations as reported for the taxable year     |
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11|                   on the annual statement filed by the company with   |
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12|                   the Insurance Commissioner in the form approved     |
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13|                   by the National Association of Insurance            |
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14|                   Commissioners, or such other form as may be         |
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15|                   prescribed in lieu thereof,                         |
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16|              (2)  if the principal source of premiums written by an   |
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17|                   insurance company consists of premiums for          |
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18|                   reinsurance accepted by it, the taxable income of   |
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19|                   such company shall be apportioned to this state     |
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20|                   by multiplying such income by a fraction, the       |
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21|                   numerator of which is the sum of (a) direct         |
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22|                   premiums written for insurance on property or       |
  |                                                                       |
23|                   risks in this state, plus (b) premiums written      |
  |                                                                       |
24|                   for reinsurance accepted in respect of property     |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 11
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 1|                   or risks in this state, and the denominator of      |
  |                                                                       |
 2|                   which is the sum of (c) direct premiums written     |
  |                                                                       |
 3|                   for insurance on property or risks everywhere,      |
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 4|                   plus (d) premiums written for reinsurance           |
  |                                                                       |
 5|                   accepted in respect of property or risks            |
  |                                                                       |
 6|                   everywhere.  For purposes of this paragraph,        |
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 7|                   premiums written for reinsurance accepted in        |
  |                                                                       |
 8|                   respect of property or risks in this state,         |
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 9|                   whether or not otherwise determinable, may at the   |
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10|                   election of the company be determined on the        |
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11|                   basis of the proportion which premiums written      |
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12|                   for insurance accepted from companies               |
  |                                                                       |
13|                   commercially domiciled in Oklahoma bears to         |
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14|                   premiums written for reinsurance accepted from      |
  |                                                                       |
15|                   all sources, or alternatively in the proportion     |
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16|                   which the sum of the direct premiums written for    |
  |                                                                       |
17|                   insurance on property or risks in this state by     |
  |                                                                       |
18|                   each ceding company from which reinsurance is       |
  |                                                                       |
19|                   accepted bears to the sum of the total direct       |
  |                                                                       |
20|                   premiums written by each such ceding company for    |
  |                                                                       |
21|                   the taxable year.                                   |
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22|    5.  The net income or loss remaining after the separate            |
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23|allocation in paragraph 4 of this subsection, being that which is      |
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24|derived from a unitary business enterprise, shall be apportioned to    |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 12
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 1|this state on the basis of the arithmetical average of three factors   |
  |                                                                       |
 2|consisting of property, payroll and sales or gross revenue             |
  |                                                                       |
 3|enumerated as subparagraphs a, b and c of this paragraph.  Net         |
  |                                                                       |
 4|income or loss as used in this paragraph includes that derived from    |
  |                                                                       |
 5|patent or copyright royalties, purchase discounts, and interest on     |
  |                                                                       |
 6|accounts receivable relating to or arising from a business activity,   |
  |                                                                       |
 7|the income from which is apportioned pursuant to this subsection,      |
  |                                                                       |
 8|including the sale or other disposition of such property and any       |
  |                                                                       |
 9|other property used in the unitary enterprise.  Deductions used in     |
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10|computing such net income or loss shall not include taxes based on     |
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11|or measured by income.  Provided, for corporations whose property      |
  |                                                                       |
12|for purposes of the tax imposed by Section 2355 of this title has an   |
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13|initial investment cost equaling or exceeding Two Hundred Million      |
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14|Dollars ($200,000,000.00) and such investment is made on or after      |
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15|July 1, 1997, or for corporations which expand their property or       |
  |                                                                       |
16|facilities in this state and such expansion has an investment cost     |
  |                                                                       |
17|equaling or exceeding Two Hundred Million Dollars ($200,000,000.00)    |
  |                                                                       |
18|over a period not to exceed three (3) years, and such expansion is     |
  |                                                                       |
19|commenced on or after January 1, 2000, the three factors shall be      |
  |                                                                       |
20|apportioned with property and payroll, each comprising twenty-five     |
  |                                                                       |
21|percent (25%) of the apportionment factor and sales comprising fifty   |
  |                                                                       |
22|percent (50%) of the apportionment factor.  The apportionment          |
  |                                                                       |
23|factors shall be computed as follows:                                  |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 13
___________________________________________________________________________

 1|         a.    The property factor is a fraction, the numerator of     |
  |                                                                       |
 2|              which is the average value of the taxpayer's real and    |
  |                                                                       |
 3|              tangible personal property owned or rented and used in   |
  |                                                                       |
 4|              this state during the tax period and the denominator     |
  |                                                                       |
 5|              of which is the average value of all the taxpayer's      |
  |                                                                       |
 6|              real and tangible personal property everywhere owned     |
  |                                                                       |
 7|              or rented and used during the tax period.                |
  |                                                                       |
 8|              (1)  Property, the income from which is separately       |
  |                                                                       |
 9|                   allocated in paragraph 4 of this subsection,        |
  |                                                                       |
10|                   shall not be included in determining this           |
  |                                                                       |
11|                   fraction.  The numerator of the fraction shall      |
  |                                                                       |
12|                   include a portion of the investment in              |
  |                                                                       |
13|                   transportation and other equipment having no        |
  |                                                                       |
14|                   fixed situs, such as rolling stock, buses, trucks   |
  |                                                                       |
15|                   and trailers, including machinery and equipment     |
  |                                                                       |
16|                   carried thereon, airplanes, salespersons'           |
  |                                                                       |
17|                   automobiles and other similar equipment, in the     |
  |                                                                       |
18|                   proportion that miles traveled in Oklahoma by       |
  |                                                                       |
19|                   such equipment bears to total miles traveled,       |
  |                                                                       |
20|              (2)  Property owned by the taxpayer is valued at its     |
  |                                                                       |
21|                   original cost.  Property rented by the taxpayer     |
  |                                                                       |
22|                   is valued at eight times the net annual rental      |
  |                                                                       |
23|                   rate.  Net annual rental rate is the annual         |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 14
___________________________________________________________________________

 1|                   rental rate paid by the taxpayer, less any annual   |
  |                                                                       |
 2|                   rental rate received by the taxpayer from           |
  |                                                                       |
 3|                   subrentals,                                         |
  |                                                                       |
 4|              (3)  The average value of property shall be determined   |
  |                                                                       |
 5|                   by averaging the values at the beginning and        |
  |                                                                       |
 6|                   ending of the tax period but the Oklahoma Tax       |
  |                                                                       |
 7|                   Commission may require the averaging of monthly     |
  |                                                                       |
 8|                   values during the tax period if reasonably          |
  |                                                                       |
 9|                   required to reflect properly the average value of   |
  |                                                                       |
10|                   the taxpayer's property;                            |
  |                                                                       |
11|         b.    The payroll factor is a fraction, the numerator of      |
  |                                                                       |
12|              which is the total compensation for services rendered    |
  |                                                                       |
13|              in the state during the tax period, and the              |
  |                                                                       |
14|              denominator of which is the total compensation for       |
  |                                                                       |
15|              services rendered everywhere during the tax period.      |
  |                                                                       |
16|              "Compensation", as used in this subsection means those   |
  |                                                                       |
17|              paid-for services to the extent related to the unitary   |
  |                                                                       |
18|              business but does not include officers' salaries,        |
  |                                                                       |
19|              wages and other compensation.                            |
  |                                                                       |
20|              (1)  In the case of a transportation enterprise, the     |
  |                                                                       |
21|                   numerator of the fraction shall include a portion   |
  |                                                                       |
22|                   of such expenditure in connection with employees    |
  |                                                                       |
23|                   operating equipment over a fixed route, such as     |
  |                                                                       |
24|                   railroad employees, airline pilots, or bus          |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 15
___________________________________________________________________________

 1|                   drivers, in this state only a part of the time,     |
  |                                                                       |
 2|                   in the proportion that mileage traveled in          |
  |                                                                       |
 3|                   Oklahoma bears to total mileage traveled by such    |
  |                                                                       |
 4|                   employees,                                          |
  |                                                                       |
 5|              (2)  In any case the numerator of the fraction shall     |
  |                                                                       |
 6|                   include a portion of such expenditures in           |
  |                                                                       |
 7|                   connection with itinerant employees, such as        |
  |                                                                       |
 8|                   traveling salespersons, in this state only a part   |
  |                                                                       |
 9|                   of the time, in the proportion that time spent in   |
  |                                                                       |
10|                   Oklahoma bears to total time spent in furtherance   |
  |                                                                       |
11|                   of the enterprise by such employees;                |
  |                                                                       |
12|         c.    The sales factor is a fraction, the numerator of        |
  |                                                                       |
13|              which is the total sales or gross revenue of the         |
  |                                                                       |
14|              taxpayer in this state during the tax period, and the    |
  |                                                                       |
15|              denominator of which is the total sales or gross         |
  |                                                                       |
16|              revenue of the taxpayer everywhere during the tax        |
  |                                                                       |
17|              period.  "Sales", as used in this subsection does not    |
  |                                                                       |
18|              include sales or gross revenue which are separately      |
  |                                                                       |
19|              allocated in paragraph 4 of this subsection.             |
  |                                                                       |
20|              (1)  Sales of tangible personal property have a situs    |
  |                                                                       |
21|                   in this state if the property is delivered or       |
  |                                                                       |
22|                   shipped to a purchaser other than the United        |
  |                                                                       |
23|                   States government, within this state regardless     |
  |                                                                       |
24|                   of the FOB point or other conditions of the sale;   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 16
___________________________________________________________________________

 1|                   or the property is shipped from an office, store,   |
  |                                                                       |
 2|                   warehouse, factory or other place of storage in     |
  |                                                                       |
 3|                   this state and (a) the purchaser is the United      |
  |                                                                       |
 4|                   States government or (b) the taxpayer is not        |
  |                                                                       |
 5|                   doing business in the state of the destination of   |
  |                                                                       |
 6|                   the shipment.                                       |
  |                                                                       |
 7|              (2)  In the case of a railroad or interurban railway     |
  |                                                                       |
 8|                   enterprise, the numerator of the fraction shall     |
  |                                                                       |
 9|                   not be less than the allocation of revenues to      |
  |                                                                       |
10|                   this state as shown in its annual report to the     |
  |                                                                       |
11|                   Corporation Commission.                             |
  |                                                                       |
12|              (3)  In the case of an airline, truck or bus             |
  |                                                                       |
13|                   enterprise or freight car, tank car, refrigerator   |
  |                                                                       |
14|                   car or other railroad equipment enterprise, the     |
  |                                                                       |
15|                   numerator of the fraction shall include a portion   |
  |                                                                       |
16|                   of revenue from interstate transportation in the    |
  |                                                                       |
17|                   proportion that interstate mileage traveled in      |
  |                                                                       |
18|                   Oklahoma bears to total interstate mileage          |
  |                                                                       |
19|                   traveled.                                           |
  |                                                                       |
20|              (4)  In the case of an oil, gasoline or gas pipeline     |
  |                                                                       |
21|                   enterprise, the numerator of the fraction shall     |
  |                                                                       |
22|                   be either the total of traffic units of the         |
  |                                                                       |
23|                   enterprise within Oklahoma or the revenue           |
  |                                                                       |
24|                   allocated to Oklahoma based upon miles moved, at    |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 17
___________________________________________________________________________

 1|                   the option of the taxpayer, and the denominator     |
  |                                                                       |
 2|                   of which shall be the total of traffic units of     |
  |                                                                       |
 3|                   the enterprise or the revenue of the enterprise     |
  |                                                                       |
 4|                   everywhere as appropriate to the numerator.  A      |
  |                                                                       |
 5|                   "traffic unit" is hereby defined as the             |
  |                                                                       |
 6|                   transportation for a distance of one (1) mile of    |
  |                                                                       |
 7|                   one (1) barrel of oil, one (1) gallon of gasoline   |
  |                                                                       |
 8|                   or one thousand (1,000) cubic feet of natural or    |
  |                                                                       |
 9|                   casinghead gas, as the case may be.                 |
  |                                                                       |
10|              (5)  In the case of a telephone or telegraph or other    |
  |                                                                       |
11|                   communication enterprise, the numerator of the      |
  |                                                                       |
12|                   fraction shall include that portion of the          |
  |                                                                       |
13|                   interstate revenue as is allocated pursuant to      |
  |                                                                       |
14|                   the accounting procedures prescribed by the         |
  |                                                                       |
15|                   Federal Communications Commission; provided that    |
  |                                                                       |
16|                   in respect to each corporation or business entity   |
  |                                                                       |
17|                   required by the Federal Communications Commission   |
  |                                                                       |
18|                   to keep its books and records in accordance with    |
  |                                                                       |
19|                   a uniform system of accounts prescribed by such     |
  |                                                                       |
20|                   Commission, the intrastate net income shall be      |
  |                                                                       |
21|                   determined separately in the manner provided by     |
  |                                                                       |
22|                   such uniform system of accounts and only the        |
  |                                                                       |
23|                   interstate income shall be subject to allocation    |
  |                                                                       |
24|                   pursuant to the provisions of this subsection.      |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 18
___________________________________________________________________________

 1|                   Provided further, that the gross revenue factors    |
  |                                                                       |
 2|                   shall be those as are determined pursuant to the    |
  |                                                                       |
 3|                   accounting procedures prescribed by the Federal     |
  |                                                                       |
 4|                   Communications Commission.                          |
  |                                                                       |
 5|    In any case where the apportionment of the three factors           |
  |                                                                       |
 6|prescribed in this paragraph attributes to Oklahoma a portion of net   |
  |                                                                       |
 7|income of the enterprise out of all appropriate proportion to the      |
  |                                                                       |
 8|property owned and/or business transacted within this state, because   |
  |                                                                       |
 9|of the fact that one or more of the factors so prescribed are not      |
  |                                                                       |
10|employed to any appreciable extent in furtherance of the enterprise;   |
  |                                                                       |
11|or because one or more factors not so prescribed are employed to a     |
  |                                                                       |
12|considerable extent in furtherance of the enterprise; or because of    |
  |                                                                       |
13|other reasons, the Tax Commission is empowered to permit, after a      |
  |                                                                       |
14|showing by taxpayer that an excessive portion of net income has been   |
  |                                                                       |
15|attributed to Oklahoma, or require, when in its judgment an            |
  |                                                                       |
16|insufficient portion of net income has been attributed to Oklahoma,    |
  |                                                                       |
17|the elimination, substitution, or use of additional factors, or        |
  |                                                                       |
18|reduction or increase in the weight of such prescribed factors.        |
  |                                                                       |
19|Provided, however, that any such variance from such prescribed         |
  |                                                                       |
20|factors which has the effect of increasing the portion of net income   |
  |                                                                       |
21|attributable to Oklahoma must not be inherently arbitrary, and         |
  |                                                                       |
22|application of the recomputed final apportionment to the net income    |
  |                                                                       |
23|of the enterprise must attribute to Oklahoma only a reasonable         |
  |                                                                       |
24|portion thereof.                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 19
___________________________________________________________________________

 1|    6.  For calendar years 1997 and 1998, the owner of a new or        |
  |                                                                       |
 2|expanded agricultural commodity processing facility in this state      |
  |                                                                       |
 3|may exclude from Oklahoma taxable income, or in the case of an         |
  |                                                                       |
 4|individual, the Oklahoma adjusted gross income, fifteen percent        |
  |                                                                       |
 5|(15%) of the investment by the owner in the new or expanded            |
  |                                                                       |
 6|agricultural commodity processing facility.  For calendar year 1999,   |
  |                                                                       |
 7|and all subsequent years, the percentage, not to exceed fifteen        |
  |                                                                       |
 8|percent (15%), available to the owner of a new or expanded             |
  |                                                                       |
 9|agricultural commodity processing facility in this state claiming      |
  |                                                                       |
10|the exemption shall be adjusted annually so that the total estimated   |
  |                                                                       |
11|reduction in tax liability does not exceed One Million Dollars         |
  |                                                                       |
12|($1,000,000.00) annually.  The Tax Commission shall promulgate rules   |
  |                                                                       |
13|for determining the percentage of the investment which each eligible   |
  |                                                                       |
14|taxpayer may exclude.  The exclusion provided by this paragraph        |
  |                                                                       |
15|shall be taken in the taxable year when the investment is made.  In    |
  |                                                                       |
16|the event the total reduction in tax liability authorized by this      |
  |                                                                       |
17|paragraph exceeds One Million Dollars ($1,000,000.00) in any           |
  |                                                                       |
18|calendar year, the Tax Commission shall permit any excess over One     |
  |                                                                       |
19|Million Dollars ($1,000,000.00) and shall factor such excess into      |
  |                                                                       |
20|the percentage for subsequent years.  Any amount of the exemption      |
  |                                                                       |
21|permitted to be excluded pursuant to the provisions of this            |
  |                                                                       |
22|paragraph but not used in any year may be carried forward as an        |
  |                                                                       |
23|exemption from income pursuant to the provisions of this paragraph     |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 20
___________________________________________________________________________

 1|for a period not exceeding six (6) years following the year in which   |
  |                                                                       |
 2|the investment was originally made.                                    |
  |                                                                       |
 3|    For purposes of this paragraph:                                    |
  |                                                                       |
 4|         a.    "Agricultural commodity processing facility" means      |
  |                                                                       |
 5|              building, structures, fixtures and improvements used     |
  |                                                                       |
 6|              or operated primarily for the processing or production   |
  |                                                                       |
 7|              of marketable products from agricultural commodities.    |
  |                                                                       |
 8|              The term shall also mean a dairy operation that          |
  |                                                                       |
 9|              requires a depreciable investment of at least Two        |
  |                                                                       |
10|              Hundred Fifty Thousand Dollars ($250,000.00) and which   |
  |                                                                       |
11|              produces milk from dairy cows.  The term does not        |
  |                                                                       |
12|              include a facility that provides only, and nothing       |
  |                                                                       |
13|              more than, storage, cleaning, drying or transportation   |
  |                                                                       |
14|              of agricultural commodities, and                         |
  |                                                                       |
15|         b.    "Facility" means each part of the facility which is     |
  |                                                                       |
16|              used in a process primarily for:                         |
  |                                                                       |
17|              (1)  the processing of agricultural commodities,         |
  |                                                                       |
18|                   including receiving or storing agricultural         |
  |                                                                       |
19|                   commodities, or the production of milk at a dairy   |
  |                                                                       |
20|                   operation,                                          |
  |                                                                       |
21|              (2)  transporting the agricultural commodities or        |
  |                                                                       |
22|                   product before, during or after the processing,     |
  |                                                                       |
23|                   or                                                  |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 21
___________________________________________________________________________

 1|              (3)  packaging or otherwise preparing the product for    |
  |                                                                       |
 2|                   sale or shipment.                                   |
  |                                                                       |
 3|    7.  Despite any provision to the contrary in paragraph 3 of this   |
  |                                                                       |
 4|subsection, for taxable years beginning after December 31, 1999, in    |
  |                                                                       |
 5|the case of a taxpayer which has a farming loss, such farming loss     |
  |                                                                       |
 6|shall be considered a net operating loss carryback in accordance       |
  |                                                                       |
 7|with and to the extent of the Internal Revenue Code, 26 U.S.C.,        |
  |                                                                       |
 8|Section 172(b)(G).  However, the amount of the net operating loss      |
  |                                                                       |
 9|carryback shall not exceed the lesser of:                              |
  |                                                                       |
10|         a.    Sixty Thousand Dollars ($60,000.00), or                 |
  |                                                                       |
11|         b.    the loss properly shown on Schedule F of the Internal   |
  |                                                                       |
12|              Revenue Service Form 1040 reduced by one-half (1/2) of   |
  |                                                                       |
13|              the income from all other sources other than reflected   |
  |                                                                       |
14|              on Schedule F.                                           |
  |                                                                       |
15|    8.  In taxable years beginning after December 31, 1995, all        |
  |                                                                       |
16|qualified wages equal to the federal income tax credit set forth in    |
  |                                                                       |
17|26 U.S.C.A., Section 45A, shall be deducted from taxable income.       |
  |                                                                       |
18|The deduction allowed pursuant to this paragraph shall only be         |
  |                                                                       |
19|permitted for the tax years in which the federal tax credit pursuant   |
  |                                                                       |
20|to 26 U.S.C.A., Section 45A, is allowed.  For purposes of this         |
  |                                                                       |
21|paragraph, "qualified wages" means those wages used to calculate the   |
  |                                                                       |
22|federal credit pursuant to 26 U.S.C.A., Section 45A.                   |
  |                                                                       |
23|    9.  In taxable years beginning after December 31, 2005, an         |
  |                                                                       |
24|employer that is eligible for and utilizes the Safety Pays OSHA        |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 22
___________________________________________________________________________

 1|Consultation Service provided by the Oklahoma Department of Labor      |
  |                                                                       |
 2|shall receive an exemption from taxable income in the amount of One    |
  |                                                                       |
 3|Thousand Dollars ($1,000.00) for the tax year that the service is      |
  |                                                                       |
 4|utilized.                                                              |
  |                                                                       |
 5|    10.  For taxable years beginning on or after January 1, 2010,      |
  |                                                                       |
 6|there shall be added to Oklahoma taxable income an amount equal to     |
  |                                                                       |
 7|the amount of deferred income not included in such taxable income      |
  |                                                                       |
 8|pursuant to Section 108(i)(1) of the Internal Revenue Code of 1986     |
  |                                                                       |
 9|as amended by Section 1231 of the American Recovery and Reinvestment   |
  |                                                                       |
10|Act of 2009 (P.L. No. 111-5).  There shall be subtracted from          |
  |                                                                       |
11|Oklahoma taxable income an amount equal to the amount of deferred      |
  |                                                                       |
12|income included in such taxable income pursuant to Section 108(i)(1)   |
  |                                                                       |
13|of the Internal Revenue Code by Section 1231 of the American           |
  |                                                                       |
14|Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).                |
  |                                                                       |
15|    11.  For taxable years beginning on or after January 1, 2019,      |
  |                                                                       |
16|there shall be subtracted from Oklahoma taxable income or adjusted     |
  |                                                                       |
17|gross income any item of income or gain, and there shall be added to   |
  |                                                                       |
18|Oklahoma taxable income or adjusted gross income any item of loss or   |
  |                                                                       |
19|deduction that in the absence of an election pursuant to the           |
  |                                                                       |
20|provisions of the Pass-Through Entity Tax Equity Act of 2019 would     |
  |                                                                       |
21|be allocated to a member or to an indirect member of an electing       |
  |                                                                       |
22|pass-through entity pursuant to Section 2351 et seq. of this title,    |
  |                                                                       |
23|if (i) the electing pass-through entity has accounted for such item    |
  |                                                                       |
24|in computing its Oklahoma net entity income or loss pursuant to the    |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 23
___________________________________________________________________________

 1|provisions of the Pass-Through Entity Tax Equity Act of 2019, and      |
  |                                                                       |
 2|(ii) the total amount of tax attributable to any resulting Oklahoma    |
  |                                                                       |
 3|net entity income has been paid.  The Oklahoma Tax Commission shall    |
  |                                                                       |
 4|promulgate rules for the reporting of such exclusion to direct and     |
  |                                                                       |
 5|indirect members of the electing pass-through entity.  As used in      |
  |                                                                       |
 6|this paragraph, "electing pass-through entity", "indirect member",     |
  |                                                                       |
 7|and "member" shall be defined in the same manner as prescribed by      |
  |                                                                       |
 8|Section 2 2355.1P-2 of this act title.  Notwithstanding the            |
  |                                                                       |
 9|application of this paragraph, the adjusted tax basis of any           |
  |                                                                       |
10|ownership interest in a pass-through entity for purposes of Section    |
  |                                                                       |
11|2351 et seq. of this title shall be equal to its adjusted tax basis    |
  |                                                                       |
12|for federal income tax purposes.                                       |
  |                                                                       |
13|    B.  1.  The taxable income of any corporation shall be further     |
  |                                                                       |
14|adjusted to arrive at Oklahoma taxable income, except those            |
  |                                                                       |
15|corporations electing treatment as provided in subchapter S of the     |
  |                                                                       |
16|Internal Revenue Code, 26 U.S.C., Section 1361 et seq., and Section    |
  |                                                                       |
17|2365 of this title, deductions pursuant to the provisions of the       |
  |                                                                       |
18|Accelerated Cost Recovery System as defined and allowed in the         |
  |                                                                       |
19|Economic Recovery Tax Act of 1981, Public Law 97-34, 26 U.S.C.,        |
  |                                                                       |
20|Section 168, for depreciation of assets placed into service after      |
  |                                                                       |
21|December 31, 1981, shall not be allowed in calculating Oklahoma        |
  |                                                                       |
22|taxable income.  Such corporations shall be allowed a deduction for    |
  |                                                                       |
23|depreciation of assets placed into service after December 31, 1981,    |
  |                                                                       |
24|in accordance with provisions of the Internal Revenue Code, 26         |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 24
___________________________________________________________________________

 1|U.S.C., Section 1 et seq., in effect immediately prior to the          |
  |                                                                       |
 2|enactment of the Accelerated Cost Recovery System.  The Oklahoma tax   |
  |                                                                       |
 3|basis for all such assets placed into service after December 31,       |
  |                                                                       |
 4|1981, calculated in this section shall be retained and utilized for    |
  |                                                                       |
 5|all Oklahoma income tax purposes through the final disposition of      |
  |                                                                       |
 6|such assets.                                                           |
  |                                                                       |
 7|    Notwithstanding any other provisions of the Oklahoma Income Tax    |
  |                                                                       |
 8|Act, Section 2351 et seq. of this title, or of the Internal Revenue    |
  |                                                                       |
 9|Code to the contrary, this subsection shall control calculation of     |
  |                                                                       |
10|depreciation of assets placed into service after December 31, 1981,    |
  |                                                                       |
11|and before January 1, 1983.                                            |
  |                                                                       |
12|    For assets placed in service and held by a corporation in which    |
  |                                                                       |
13|accelerated cost recovery system was previously disallowed, an         |
  |                                                                       |
14|adjustment to taxable income is required in the first taxable year     |
  |                                                                       |
15|beginning after December 31, 1982, to reconcile the basis of such      |
  |                                                                       |
16|assets to the basis allowed in the Internal Revenue Code.  The         |
  |                                                                       |
17|purpose of this adjustment is to equalize the basis and allowance      |
  |                                                                       |
18|for depreciation accounts between that reported to the Internal        |
  |                                                                       |
19|Revenue Service and that reported to Oklahoma.                         |
  |                                                                       |
20|    2.  For tax years beginning on or after January 1, 2009, and       |
  |                                                                       |
21|ending on or before December 31, 2009, there shall be added to         |
  |                                                                       |
22|Oklahoma taxable income any amount in excess of One Hundred            |
  |                                                                       |
23|Seventy-five Thousand Dollars ($175,000.00) which has been deducted    |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 25
___________________________________________________________________________

 1|as a small business expense under Internal Revenue Code, Section 179   |
  |                                                                       |
 2|as provided in the American Recovery and Reinvestment Act of 2009.     |
  |                                                                       |
 3|    C.  1.  For taxable years beginning after December 31, 1987, the   |
  |                                                                       |
 4|taxable income of any corporation shall be further adjusted to         |
  |                                                                       |
 5|arrive at Oklahoma taxable income for transfers of technology to       |
  |                                                                       |
 6|qualified small businesses located in Oklahoma.  Such transferor       |
  |                                                                       |
 7|corporation shall be allowed an exemption from taxable income of an    |
  |                                                                       |
 8|amount equal to the amount of royalty payment received as a result     |
  |                                                                       |
 9|of such transfer; provided, however, such amount shall not exceed      |
  |                                                                       |
10|ten percent (10%) of the amount of gross proceeds received by such     |
  |                                                                       |
11|transferor corporation as a result of the technology transfer.  Such   |
  |                                                                       |
12|exemption shall be allowed for a period not to exceed ten (10) years   |
  |                                                                       |
13|from the date of receipt of the first royalty payment accruing from    |
  |                                                                       |
14|such transfer.  No exemption may be claimed for transfers of           |
  |                                                                       |
15|technology to qualified small businesses made prior to January 1,      |
  |                                                                       |
16|1988.                                                                  |
  |                                                                       |
17|    2.  For purposes of this subsection:                               |
  |                                                                       |
18|         a.    "Qualified small business" means an entity, whether     |
  |                                                                       |
19|              organized as a corporation, partnership, or              |
  |                                                                       |
20|              proprietorship, organized for profit with its            |
  |                                                                       |
21|              principal place of business located within this state    |
  |                                                                       |
22|              and which meets the following criteria:                  |
  |                                                                       |
23|              (1)  Capitalization of not more than Two Hundred Fifty   |
  |                                                                       |
24|                   Thousand Dollars ($250,000.00),                     |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 26
___________________________________________________________________________

 1|              (2)  Having at least fifty percent (50%) of its          |
  |                                                                       |
 2|                   employees and assets located in Oklahoma at the     |
  |                                                                       |
 3|                   time of the transfer, and                           |
  |                                                                       |
 4|              (3)  Not a subsidiary or affiliate of the transferor     |
  |                                                                       |
 5|                   corporation;                                        |
  |                                                                       |
 6|         b.    "Technology" means a proprietary process, formula,      |
  |                                                                       |
 7|              pattern, device or compilation of scientific or          |
  |                                                                       |
 8|              technical information which is not in the public         |
  |                                                                       |
 9|              domain;                                                  |
  |                                                                       |
10|         c.    "Transferor corporation" means a corporation which is   |
  |                                                                       |
11|              the exclusive and undisputed owner of the technology     |
  |                                                                       |
12|              at the time the transfer is made; and                    |
  |                                                                       |
13|         d.    "Gross proceeds" means the total amount of              |
  |                                                                       |
14|              consideration for the transfer of technology, whether    |
  |                                                                       |
15|              the consideration is in money or otherwise.              |
  |                                                                       |
16|    D.  1.  For taxable years beginning after December 31, 2005, the   |
  |                                                                       |
17|taxable income of any corporation, estate or trust, shall be further   |
  |                                                                       |
18|adjusted for qualifying gains receiving capital treatment.  Such       |
  |                                                                       |
19|corporations, estates or trusts shall be allowed a deduction from      |
  |                                                                       |
20|Oklahoma taxable income for the amount of qualifying gains receiving   |
  |                                                                       |
21|capital treatment earned by the corporation, estate or trust during    |
  |                                                                       |
22|the taxable year and included in the federal taxable income of such    |
  |                                                                       |
23|corporation, estate or trust.                                          |
  |                                                                       |
24|    2.  As used in this subsection:                                    |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 27
___________________________________________________________________________

 1|         a.    "qualifying gains receiving capital treatment" means    |
  |                                                                       |
 2|              the amount of net capital gains, as defined in Section   |
  |                                                                       |
 3|              1222(11) of the Internal Revenue Code, included in the   |
  |                                                                       |
 4|              federal income tax return of the corporation, estate     |
  |                                                                       |
 5|              or trust that result from:                               |
  |                                                                       |
 6|              (1)   the sale of real property or tangible personal     |
  |                                                                       |
 7|                   property located within Oklahoma that has been      |
  |                                                                       |
 8|                   directly or indirectly owned by the corporation,    |
  |                                                                       |
 9|                   estate or trust for a holding period of at least    |
  |                                                                       |
10|                   five (5) years prior to the date of the             |
  |                                                                       |
11|                   transaction from which such net capital gains       |
  |                                                                       |
12|                   arise,                                              |
  |                                                                       |
13|              (2)   the sale of stock or on the sale of an ownership   |
  |                                                                       |
14|                   interest in an Oklahoma company, limited            |
  |                                                                       |
15|                   liability company, or partnership where such        |
  |                                                                       |
16|                   stock or ownership interest has been directly or    |
  |                                                                       |
17|                   indirectly owned by the corporation, estate or      |
  |                                                                       |
18|                   trust for a holding period of at least three (3)    |
  |                                                                       |
19|                   years prior to the date of the transaction from     |
  |                                                                       |
20|                   which the net capital gains arise, or               |
  |                                                                       |
21|              (3)   the sale of real property, tangible personal       |
  |                                                                       |
22|                   property or intangible personal property located    |
  |                                                                       |
23|                   within Oklahoma as part of the sale of all or       |
  |                                                                       |
24|                   substantially all of the assets of an Oklahoma      |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 28
___________________________________________________________________________

 1|                   company, limited liability company, or              |
  |                                                                       |
 2|                   partnership where such property has been directly   |
  |                                                                       |
 3|                   or indirectly owned by such entity owned by the     |
  |                                                                       |
 4|                   owners of such entity, and used in or derived       |
  |                                                                       |
 5|                   from such entity for a period of at least three     |
  |                                                                       |
 6|                   (3) years prior to the date of the transaction      |
  |                                                                       |
 7|                   from which the net capital gains arise,             |
  |                                                                       |
 8|         b.    "holding period" means an uninterrupted period of       |
  |                                                                       |
 9|              time.  The holding period shall include any additional   |
  |                                                                       |
10|              period when the property was held by another             |
  |                                                                       |
11|              individual or entity, if such additional period is       |
  |                                                                       |
12|              included in the taxpayer's holding period for the        |
  |                                                                       |
13|              asset pursuant to the Internal Revenue Code,             |
  |                                                                       |
14|         c.    "Oklahoma company", "limited liability company", or     |
  |                                                                       |
15|              "partnership" means an entity whose primary              |
  |                                                                       |
16|              headquarters have been located in Oklahoma for at        |
  |                                                                       |
17|              least three (3) uninterrupted years prior to the date    |
  |                                                                       |
18|              of the transaction from which the net capital gains      |
  |                                                                       |
19|              arise,                                                   |
  |                                                                       |
20|         d.    "direct" means the taxpayer directly owns the asset,    |
  |                                                                       |
21|              and                                                      |
  |                                                                       |
22|         e.    "indirect" means the taxpayer owns an interest in a     |
  |                                                                       |
23|              pass-through entity (or chain of pass-through            |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 29
___________________________________________________________________________

 1|              entities) that sells the asset that gives rise to the    |
  |                                                                       |
 2|              qualifying gains receiving capital treatment.            |
  |                                                                       |
 3|              (1)   With respect to sales of real property or          |
  |                                                                       |
 4|                   tangible personal property located within           |
  |                                                                       |
 5|                   Oklahoma, the deduction described in this           |
  |                                                                       |
 6|                   subsection shall not apply unless the               |
  |                                                                       |
 7|                   pass-through entity that makes the sale has held    |
  |                                                                       |
 8|                   the property for not less than five (5)             |
  |                                                                       |
 9|                   uninterrupted years prior to the date of the        |
  |                                                                       |
10|                   transaction that created the capital gain, and      |
  |                                                                       |
11|                   each pass-through entity included in the chain of   |
  |                                                                       |
12|                   ownership has been a member, partner, or            |
  |                                                                       |
13|                   shareholder of the pass-through entity in the       |
  |                                                                       |
14|                   tier immediately below it for an uninterrupted      |
  |                                                                       |
15|                   period of not less than five (5) years.             |
  |                                                                       |
16|              (2)   With respect to sales of stock or ownership        |
  |                                                                       |
17|                   interest in or sales of all or substantially all    |
  |                                                                       |
18|                   of the assets of an Oklahoma company, limited       |
  |                                                                       |
19|                   liability company, or partnership, the deduction    |
  |                                                                       |
20|                   described in this subsection shall not apply        |
  |                                                                       |
21|                   unless the pass-through entity that makes the       |
  |                                                                       |
22|                   sale has held the stock or ownership interest or    |
  |                                                                       |
23|                   the assets for not less than three (3)              |
  |                                                                       |
24|                   uninterrupted years prior to the date of the        |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 30
___________________________________________________________________________

 1|                   transaction that created the capital gain, and      |
  |                                                                       |
 2|                   each pass-through entity included in the chain of   |
  |                                                                       |
 3|                   ownership has been a member, partner or             |
  |                                                                       |
 4|                   shareholder of the pass-through entity in the       |
  |                                                                       |
 5|                   tier immediately below it for an uninterrupted      |
  |                                                                       |
 6|                   period of not less than three (3) years.            |
  |                                                                       |
 7|    E.  The Oklahoma adjusted gross income of any individual           |
  |                                                                       |
 8|taxpayer shall be further adjusted as follows to arrive at Oklahoma    |
  |                                                                       |
 9|taxable income:                                                        |
  |                                                                       |
10|    1.   a.    In Except as otherwise provided by this subparagraph,   |
  |                                                                       |
11|              in the case of individuals, there shall be added or      |
  |                                                                       |
12|              deducted, as the case may be, the difference necessary   |
  |                                                                       |
13|              to allow personal exemptions of One Thousand Dollars     |
  |                                                                       |
14|              ($1,000.00) in lieu of the personal exemptions allowed   |
  |                                                                       |
15|              by the Internal Revenue Code.  For the tax year          |
  |                                                                       |
16|              beginning January 1, 2022, and for each tax year         |
  |                                                                       |
17|              thereafter, if a taxpayer has federal adjusted gross     |
  |                                                                       |
18|              income of Fifty Thousand Dollars ($50,000.00) or more    |
  |                                                                       |
19|              and has single or married filing separate return         |
  |                                                                       |
20|              filing status, the personal exemption amount otherwise   |
  |                                                                       |
21|              allowed by this subparagraph shall be zero (0).  For     |
  |                                                                       |
22|              the tax year beginning January 1, 2022, and for each     |
  |                                                                       |
23|              tax year thereafter, if a taxpayer has federal           |
  |                                                                       |
24|              adjusted gross income of One Hundred Thousand Dollars    |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 31
___________________________________________________________________________

 1|              ($100,000.00) or more and has married filing joint       |
  |                                                                       |
 2|              return, head of household or qualifying widow or         |
  |                                                                       |
 3|              widower filing status, the personal exemption amount     |
  |                                                                       |
 4|              otherwise allowed by this subparagraph shall be zero     |
  |                                                                       |
 5|              (0).                                                     |
  |                                                                       |
 6|         b.    There shall be allowed an additional exemption of One   |
  |                                                                       |
 7|              Thousand Dollars ($1,000.00) for each taxpayer or        |
  |                                                                       |
 8|              spouse who is blind at the close of the tax year.  For   |
  |                                                                       |
 9|              purposes of this subparagraph, an individual is blind    |
  |                                                                       |
10|              only if the central visual acuity of the individual      |
  |                                                                       |
11|              does not exceed 20/200 in the better eye with            |
  |                                                                       |
12|              correcting lenses, or if the visual acuity of the        |
  |                                                                       |
13|              individual is greater than 20/200, but is accompanied    |
  |                                                                       |
14|              by a limitation in the fields of vision such that the    |
  |                                                                       |
15|              widest diameter of the visual field subtends an angle    |
  |                                                                       |
16|              no greater than twenty (20) degrees.                     |
  |                                                                       |
17|       c. There shall be allowed an additional exemption of One        |
  |                                                                       |
18|              Thousand Dollars ($1,000.00) for each taxpayer or        |
  |                                                                       |
19|              spouse who is sixty-five (65) years of age or older at   |
  |                                                                       |
20|              the close of the tax year based upon the filing status   |
  |                                                                       |
21|              and federal adjusted gross income of the taxpayer.       |
  |                                                                       |
22|              Taxpayers with the following filing status may claim     |
  |                                                                       |
23|              this exemption if the federal adjusted gross income      |
  |                                                                       |
24|              does not exceed:                                         |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 32
___________________________________________________________________________

 1|              (1)  Twenty-five Thousand Dollars ($25,000.00) if        |
  |                                                                       |
 2|                   married and filing jointly;                         |
  |                                                                       |
 3|              (2)  Twelve Thousand Five Hundred Dollars ($12,500.00)   |
  |                                                                       |
 4|                   if married and filing separately;                   |
  |                                                                       |
 5|              (3)  Fifteen Thousand Dollars ($15,000.00) if single;    |
  |                                                                       |
 6|                   and                                                 |
  |                                                                       |
 7|              (4)  Nineteen Thousand Dollars ($19,000.00) if a         |
  |                                                                       |
 8|                   qualifying head of household.                       |
  |                                                                       |
 9|              Provided, for taxable years beginning after December     |
  |                                                                       |
10|              31, 1999, amounts included in the calculation of         |
  |                                                                       |
11|              federal adjusted gross income pursuant to the            |
  |                                                                       |
12|              conversion of a traditional individual retirement        |
  |                                                                       |
13|              account to a Roth individual retirement account shall    |
  |                                                                       |
14|              be excluded from federal adjusted gross income for       |
  |                                                                       |
15|              purposes of the income thresholds provided in this       |
  |                                                                       |
16|              subparagraph.                                            |
  |                                                                       |
17|    2.   a.   For taxable years beginning on or before December 31,    |
  |                                                                       |
18|              2005, in the case of individuals who use the standard    |
  |                                                                       |
19|              deduction in determining taxable income, there shall     |
  |                                                                       |
20|              be added or deducted, as the case may be, the            |
  |                                                                       |
21|              difference necessary to allow a standard deduction in    |
  |                                                                       |
22|              lieu of the standard deduction allowed by the Internal   |
  |                                                                       |
23|              Revenue Code, in an amount equal to the larger of        |
  |                                                                       |
24|              fifteen percent (15%) of the Oklahoma adjusted gross     |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 33
___________________________________________________________________________

 1|              income or One Thousand Dollars ($1,000.00), but not to   |
  |                                                                       |
 2|              exceed Two Thousand Dollars ($2,000.00), except that     |
  |                                                                       |
 3|              in the case of a married individual filing a separate    |
  |                                                                       |
 4|              return such deduction shall be the larger of fifteen     |
  |                                                                       |
 5|              percent (15%) of such Oklahoma adjusted gross income     |
  |                                                                       |
 6|              or Five Hundred Dollars ($500.00), but not to exceed     |
  |                                                                       |
 7|              the maximum amount of One Thousand Dollars               |
  |                                                                       |
 8|              ($1,000.00).                                             |
  |                                                                       |
 9|         b.    For taxable years beginning on or after January 1,      |
  |                                                                       |
10|              2006, and before January 1, 2007, in the case of         |
  |                                                                       |
11|              individuals who use the standard deduction in            |
  |                                                                       |
12|              determining taxable income, there shall be added or      |
  |                                                                       |
13|              deducted, as the case may be, the difference necessary   |
  |                                                                       |
14|              to allow a standard deduction in lieu of the standard    |
  |                                                                       |
15|              deduction allowed by the Internal Revenue Code, in an    |
  |                                                                       |
16|              amount equal to:                                         |
  |                                                                       |
17|              (1)   Three Thousand Dollars ($3,000.00), if the         |
  |                                                                       |
18|                   filing status is married filing joint, head of      |
  |                                                                       |
19|                   household or qualifying widow; or                   |
  |                                                                       |
20|              (2)   Two Thousand Dollars ($2,000.00), if the filing    |
  |                                                                       |
21|                   status is single or married filing separate.        |
  |                                                                       |
22|         c.    For the taxable year beginning on January 1, 2007,      |
  |                                                                       |
23|              and ending December 31, 2007, in the case of             |
  |                                                                       |
24|              individuals who use the standard deduction in            |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 34
___________________________________________________________________________

 1|              determining taxable income, there shall be added or      |
  |                                                                       |
 2|              deducted, as the case may be, the difference necessary   |
  |                                                                       |
 3|              to allow a standard deduction in lieu of the standard    |
  |                                                                       |
 4|              deduction allowed by the Internal Revenue Code, in an    |
  |                                                                       |
 5|              amount equal to:                                         |
  |                                                                       |
 6|              (1)   Five Thousand Five Hundred Dollars ($5,500.00),    |
  |                                                                       |
 7|                   if the filing status is married filing joint or     |
  |                                                                       |
 8|                   qualifying widow; or                                |
  |                                                                       |
 9|              (2)   Four Thousand One Hundred Twenty-five Dollars      |
  |                                                                       |
10|                   ($4,125.00) for a head of household; or             |
  |                                                                       |
11|              (3)   Two Thousand Seven Hundred Fifty Dollars           |
  |                                                                       |
12|                   ($2,750.00), if the filing status is single or      |
  |                                                                       |
13|                   married filing separate.                            |
  |                                                                       |
14|         d.    For the taxable year beginning on January 1, 2008,      |
  |                                                                       |
15|              and ending December 31, 2008, in the case of             |
  |                                                                       |
16|              individuals who use the standard deduction in            |
  |                                                                       |
17|              determining taxable income, there shall be added or      |
  |                                                                       |
18|              deducted, as the case may be, the difference necessary   |
  |                                                                       |
19|              to allow a standard deduction in lieu of the standard    |
  |                                                                       |
20|              deduction allowed by the Internal Revenue Code, in an    |
  |                                                                       |
21|              amount equal to:                                         |
  |                                                                       |
22|              (1)   Six Thousand Five Hundred Dollars ($6,500.00),     |
  |                                                                       |
23|                   if the filing status is married filing joint or     |
  |                                                                       |
24|                   qualifying widow, or                                |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 35
___________________________________________________________________________

 1|              (2)   Four Thousand Eight Hundred Seventy-five Dollars   |
  |                                                                       |
 2|                   ($4,875.00) for a head of household, or             |
  |                                                                       |
 3|              (3)   Three Thousand Two Hundred Fifty Dollars           |
  |                                                                       |
 4|                   ($3,250.00), if the filing status is single or      |
  |                                                                       |
 5|                   married filing separate.                            |
  |                                                                       |
 6|         e.    For the taxable year beginning on January 1, 2009,      |
  |                                                                       |
 7|              and ending December 31, 2009, in the case of             |
  |                                                                       |
 8|              individuals who use the standard deduction in            |
  |                                                                       |
 9|              determining taxable income, there shall be added or      |
  |                                                                       |
10|              deducted, as the case may be, the difference necessary   |
  |                                                                       |
11|              to allow a standard deduction in lieu of the standard    |
  |                                                                       |
12|              deduction allowed by the Internal Revenue Code, in an    |
  |                                                                       |
13|              amount equal to:                                         |
  |                                                                       |
14|              (1)   Eight Thousand Five Hundred Dollars ($8,500.00),   |
  |                                                                       |
15|                   if the filing status is married filing joint or     |
  |                                                                       |
16|                   qualifying widow, or                                |
  |                                                                       |
17|              (2)   Six Thousand Three Hundred Seventy-five Dollars    |
  |                                                                       |
18|                   ($6,375.00) for a head of household, or             |
  |                                                                       |
19|              (3)   Four Thousand Two Hundred Fifty Dollars            |
  |                                                                       |
20|                   ($4,250.00), if the filing status is single or      |
  |                                                                       |
21|                   married filing separate.                            |
  |                                                                       |
22|              Oklahoma adjusted gross income shall be increased by     |
  |                                                                       |
23|              any amounts paid for motor vehicle excise taxes which    |
  |                                                                       |
24|              were deducted as allowed by the Internal Revenue Code.   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 36
___________________________________________________________________________

 1|         f.    For taxable years beginning on or after January 1,      |
  |                                                                       |
 2|              2010, and ending on December 31, 2016, in the case of    |
  |                                                                       |
 3|              individuals who use the standard deduction in            |
  |                                                                       |
 4|              determining taxable income, there shall be added or      |
  |                                                                       |
 5|              deducted, as the case may be, the difference necessary   |
  |                                                                       |
 6|              to allow a standard deduction equal to the standard      |
  |                                                                       |
 7|              deduction allowed by the Internal Revenue Code, based    |
  |                                                                       |
 8|              upon the amount and filing status prescribed by such     |
  |                                                                       |
 9|              Code for purposes of filing federal individual income    |
  |                                                                       |
10|              tax returns.                                             |
  |                                                                       |
11|         g.    For taxable years beginning on or after January 1,      |
  |                                                                       |
12|              2017, in the case of individuals who use the standard    |
  |                                                                       |
13|              deduction in determining taxable income, there shall     |
  |                                                                       |
14|              be added or deducted, as the case may be, the            |
  |                                                                       |
15|              difference necessary to allow a standard deduction in    |
  |                                                                       |
16|              lieu of the standard deduction allowed by the Internal   |
  |                                                                       |
17|              Revenue Code, as follows:                                |
  |                                                                       |
18|              (1)   Six Thousand Three Hundred Fifty Dollars           |
  |                                                                       |
19|                   ($6,350.00) for single or married filing            |
  |                                                                       |
20|                   separately,                                         |
  |                                                                       |
21|              (2)   Twelve Thousand Seven Hundred Dollars              |
  |                                                                       |
22|                   ($12,700.00) for married filing jointly or          |
  |                                                                       |
23|                   qualifying widower with dependent child, and        |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 37
___________________________________________________________________________

 1|              (3)   Nine Thousand Three Hundred Fifty Dollars          |
  |                                                                       |
 2|                   ($9,350.00) for head of household.                  |
  |                                                                       |
 3|    3.   a.    In the case of resident and part-year resident          |
  |                                                                       |
 4|              individuals having adjusted gross income from sources    |
  |                                                                       |
 5|              both within and without the state, the itemized or       |
  |                                                                       |
 6|              standard deductions and personal exemptions shall be     |
  |                                                                       |
 7|              reduced to an amount which is the same portion of the    |
  |                                                                       |
 8|              total thereof as Oklahoma adjusted gross income is of    |
  |                                                                       |
 9|              adjusted gross income.  To the extent itemized           |
  |                                                                       |
10|              deductions include allowable moving expense, proration   |
  |                                                                       |
11|              of moving expense shall not be required or permitted     |
  |                                                                       |
12|              but allowable moving expense shall be fully deductible   |
  |                                                                       |
13|              for those taxpayers moving within or into Oklahoma and   |
  |                                                                       |
14|              no part of moving expense shall be deductible for        |
  |                                                                       |
15|              those taxpayers moving without or out of Oklahoma.       |
  |                                                                       |
16|              All other itemized or standard deductions and personal   |
  |                                                                       |
17|              exemptions shall be subject to proration as provided     |
  |                                                                       |
18|              by law.                                                  |
  |                                                                       |
19|         b.    For taxable years beginning on or after January 1,      |
  |                                                                       |
20|              2018, the net amount of itemized deductions allowable    |
  |                                                                       |
21|              on an Oklahoma income tax return, subject to the         |
  |                                                                       |
22|              provisions of paragraph 24 of this subsection, shall     |
  |                                                                       |
23|              not exceed Seventeen Thousand Dollars ($17,000.00).      |
  |                                                                       |
24|              For purposes of this subparagraph, charitable            |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 38
___________________________________________________________________________

 1|              contributions and medical expenses deductible for        |
  |                                                                       |
 2|              federal income tax purposes shall be excluded from the   |
  |                                                                       |
 3|              amount of Seventeen Thousand Dollars ($17,000.00) as     |
  |                                                                       |
 4|              specified by this subparagraph.                          |
  |                                                                       |
 5|    4.  A resident individual with a physical disability               |
  |                                                                       |
 6|constituting a substantial handicap to employment may deduct from      |
  |                                                                       |
 7|Oklahoma adjusted gross income such expenditures to modify a motor     |
  |                                                                       |
 8|vehicle, home or workplace as are necessary to compensate for his or   |
  |                                                                       |
 9|her handicap.  A veteran certified by the Department of Veterans       |
  |                                                                       |
10|Affairs of the federal government as having a service-connected        |
  |                                                                       |
11|disability shall be conclusively presumed to be an individual with a   |
  |                                                                       |
12|physical disability constituting a substantial handicap to             |
  |                                                                       |
13|employment.  The Tax Commission shall promulgate rules containing a    |
  |                                                                       |
14|list of combinations of common disabilities and modifications which    |
  |                                                                       |
15|may be presumed to qualify for this deduction.  The Tax Commission     |
  |                                                                       |
16|shall prescribe necessary requirements for verification.               |
  |                                                                       |
17|    5.   a.   Before July 1, 2010, the first One Thousand Five         |
  |                                                                       |
18|              Hundred Dollars ($1,500.00) received by any person       |
  |                                                                       |
19|              from the United States as salary or compensation in      |
  |                                                                       |
20|              any form, other than retirement benefits, as a member    |
  |                                                                       |
21|              of any component of the Armed Forces of the United       |
  |                                                                       |
22|              States shall be deducted from taxable income.            |
  |                                                                       |
23|         b.   On or after July 1, 2010, one hundred percent (100%)     |
  |                                                                       |
24|              of the income received by any person from the United     |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 39
___________________________________________________________________________

 1|              States as salary or compensation in any form, other      |
  |                                                                       |
 2|              than retirement benefits, as a member of any component   |
  |                                                                       |
 3|              of the Armed Forces of the United States shall be        |
  |                                                                       |
 4|              deducted from taxable income.                            |
  |                                                                       |
 5|         c.   Whenever the filing of a timely income tax return by a   |
  |                                                                       |
 6|              member of the Armed Forces of the United States is       |
  |                                                                       |
 7|              made impracticable or impossible of accomplishment by    |
  |                                                                       |
 8|              reason of:                                               |
  |                                                                       |
 9|              (1)  absence from the United States, which term          |
  |                                                                       |
10|                   includes only the states and the District of        |
  |                                                                       |
11|                   Columbia;                                           |
  |                                                                       |
12|              (2)  absence from the State of Oklahoma while on         |
  |                                                                       |
13|                   active duty; or                                     |
  |                                                                       |
14|              (3)  confinement in a hospital within the United         |
  |                                                                       |
15|                   States for treatment of wounds, injuries or         |
  |                                                                       |
16|                   disease,                                            |
  |                                                                       |
17|              the time for filing a return and paying an income tax    |
  |                                                                       |
18|              shall be and is hereby extended without incurring        |
  |                                                                       |
19|              liability for interest or penalties, to the fifteenth    |
  |                                                                       |
20|              day of the third month following the month in which:     |
  |                                                                       |
21|                   (a)  Such individual shall return to the United     |
  |                                                                       |
22|                        States if the extension is granted pursuant    |
  |                                                                       |
23|                        to subparagraph a division (1) of this         |
  |                                                                       |
24|                        paragraph subparagraph, return to the State    |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 40
___________________________________________________________________________

 1|                        of Oklahoma if the extension is granted        |
  |                                                                       |
 2|                        pursuant to subparagraph b division (2) of     |
  |                                                                       |
 3|                        this paragraph subparagraph or be discharged   |
  |                                                                       |
 4|                        from such hospital if the extension is         |
  |                                                                       |
 5|                        granted pursuant to subparagraph c division    |
  |                                                                       |
 6|                        (3) of this paragraph subparagraph; or         |
  |                                                                       |
 7|                   (b)  An executor, administrator, or conservator     |
  |                                                                       |
 8|                        of the estate of the taxpayer is appointed,    |
  |                                                                       |
 9|                        whichever event occurs the earliest.           |
  |                                                                       |
10|    Provided, that the Tax Commission may, in its discretion, grant    |
  |                                                                       |
11|any member of the Armed Forces of the United States an extension of    |
  |                                                                       |
12|time for filing of income tax returns and payment of income tax        |
  |                                                                       |
13|without incurring liabilities for interest or penalties.  Such         |
  |                                                                       |
14|extension may be granted only when in the judgment of the Tax          |
  |                                                                       |
15|Commission a good cause exists therefor and may be for a period in     |
  |                                                                       |
16|excess of six (6) months.  A record of every such extension granted,   |
  |                                                                       |
17|and the reason therefor, shall be kept.                                |
  |                                                                       |
18|    6.  Before July 1, 2010, the salary or any other form of           |
  |                                                                       |
19|compensation, received from the United States by a member of any       |
  |                                                                       |
20|component of the Armed Forces of the United States, shall be           |
  |                                                                       |
21|deducted from taxable income during the time in which the person is    |
  |                                                                       |
22|detained by the enemy in a conflict, is a prisoner of war or is        |
  |                                                                       |
23|missing in action and not deceased; provided, after July 1, 2010,      |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 41
___________________________________________________________________________

 1|all such salary or compensation shall be subject to the deduction as   |
  |                                                                       |
 2|provided pursuant to paragraph 5 of this subsection.                   |
  |                                                                       |
 3|    7.   a.    An individual taxpayer, whether resident or             |
  |                                                                       |
 4|              nonresident, may deduct an amount equal to the federal   |
  |                                                                       |
 5|              income taxes paid by the taxpayer during the taxable     |
  |                                                                       |
 6|              year.                                                    |
  |                                                                       |
 7|         b.    Federal taxes as described in subparagraph a of this    |
  |                                                                       |
 8|              paragraph shall be deductible by any individual          |
  |                                                                       |
 9|              taxpayer, whether resident or nonresident, only to the   |
  |                                                                       |
10|              extent they relate to income subject to taxation         |
  |                                                                       |
11|              pursuant to the provisions of the Oklahoma Income Tax    |
  |                                                                       |
12|              Act.  The maximum amount allowable in the preceding      |
  |                                                                       |
13|              paragraph shall be prorated on the ratio of the          |
  |                                                                       |
14|              Oklahoma adjusted gross income to federal adjusted       |
  |                                                                       |
15|              gross income.                                            |
  |                                                                       |
16|         c.    For the purpose of this paragraph, "federal income      |
  |                                                                       |
17|              taxes paid" shall mean federal income taxes, surtaxes    |
  |                                                                       |
18|              imposed on incomes or excess profits taxes, as though    |
  |                                                                       |
19|              the taxpayer was on the accrual basis.  In determining   |
  |                                                                       |
20|              the amount of deduction for federal income taxes for     |
  |                                                                       |
21|              tax year 2001, the amount of the deduction shall not     |
  |                                                                       |
22|              be adjusted by the amount of any accelerated ten         |
  |                                                                       |
23|              percent (10%) tax rate bracket credit or advanced        |
  |                                                                       |
24|              refund of the credit received during the tax year        |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 42
___________________________________________________________________________

 1|              provided pursuant to the federal Economic Growth and     |
  |                                                                       |
 2|              Tax Relief Reconciliation Act of 2001, P.L. No.          |
  |                                                                       |
 3|              107-16, and the advanced refund of such credit shall     |
  |                                                                       |
 4|              not be subject to taxation.                              |
  |                                                                       |
 5|         d.    The provisions of this paragraph shall apply to all     |
  |                                                                       |
 6|              taxable years ending after December 31, 1978, and        |
  |                                                                       |
 7|              beginning before January 1, 2006.                        |
  |                                                                       |
 8|    8.  Retirement benefits not to exceed Five Thousand Five Hundred   |
  |                                                                       |
 9|Dollars ($5,500.00) for the 2004 tax year, Seven Thousand Five         |
  |                                                                       |
10|Hundred Dollars ($7,500.00) for the 2005 tax year and Ten Thousand     |
  |                                                                       |
11|Dollars ($10,000.00) for the 2006 tax year and all subsequent tax      |
  |                                                                       |
12|years, which are received by an individual from the civil service of   |
  |                                                                       |
13|the United States, the Oklahoma Public Employees Retirement System,    |
  |                                                                       |
14|the Teachers' Retirement System of Oklahoma, the Oklahoma Law          |
  |                                                                       |
15|Enforcement Retirement System, the Oklahoma Firefighters Pension and   |
  |                                                                       |
16|Retirement System, the Oklahoma Police Pension and Retirement          |
  |                                                                       |
17|System, the employee retirement systems created by counties pursuant   |
  |                                                                       |
18|to Section 951 et seq. of Title 19 of the Oklahoma Statutes, the       |
  |                                                                       |
19|Uniform Retirement System for Justices and Judges, the Oklahoma        |
  |                                                                       |
20|Wildlife Conservation Department Retirement Fund, the Oklahoma         |
  |                                                                       |
21|Employment Security Commission Retirement Plan, or the employee        |
  |                                                                       |
22|retirement systems created by municipalities pursuant to Section       |
  |                                                                       |
23|48-101 et seq. of Title 11 of the Oklahoma Statutes shall be exempt    |
  |                                                                       |
24|from taxable income.                                                   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 43
___________________________________________________________________________

 1|    9.  In taxable years beginning after December 3l, 1984, Social     |
  |                                                                       |
 2|Security benefits received by an individual shall be exempt from       |
  |                                                                       |
 3|taxable income, to the extent such benefits are included in the        |
  |                                                                       |
 4|federal adjusted gross income pursuant to the provisions of Section    |
  |                                                                       |
 5|86 of the Internal Revenue Code, 26 U.S.C., Section 86.                |
  |                                                                       |
 6|    10.  For taxable years beginning after December 31, 1994,          |
  |                                                                       |
 7|lump-sum distributions from employer plans of deferred compensation,   |
  |                                                                       |
 8|which are not qualified plans within the meaning of Section 401(a)     |
  |                                                                       |
 9|of the Internal Revenue Code, 26 U.S.C., Section 401(a), and which     |
  |                                                                       |
10|are deposited in and accounted for within a separate bank account or   |
  |                                                                       |
11|brokerage account in a financial institution within this state,        |
  |                                                                       |
12|shall be excluded from taxable income in the same manner as a          |
  |                                                                       |
13|qualifying rollover contribution to an individual retirement account   |
  |                                                                       |
14|within the meaning of Section 408 of the Internal Revenue Code, 26     |
  |                                                                       |
15|U.S.C., Section 408.  Amounts withdrawn from such bank or brokerage    |
  |                                                                       |
16|account, including any earnings thereon, shall be included in          |
  |                                                                       |
17|taxable income when withdrawn in the same manner as withdrawals from   |
  |                                                                       |
18|individual retirement accounts within the meaning of Section 408 of    |
  |                                                                       |
19|the Internal Revenue Code.                                             |
  |                                                                       |
20|    11.  In taxable years beginning after December 31, 1995,           |
  |                                                                       |
21|contributions made to and interest received from a medical savings     |
  |                                                                       |
22|account established pursuant to Sections 2621 through 2623 of Title    |
  |                                                                       |
23|63 of the Oklahoma Statutes shall be exempt from taxable income.       |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 44
___________________________________________________________________________

 1|    12.  For taxable years beginning after December 31, 1996, the      |
  |                                                                       |
 2|Oklahoma adjusted gross income of any individual taxpayer who is a     |
  |                                                                       |
 3|swine or poultry producer may be further adjusted for the deduction    |
  |                                                                       |
 4|for depreciation allowed for new construction or expansion costs       |
  |                                                                       |
 5|which may be computed using the same depreciation method elected for   |
  |                                                                       |
 6|federal income tax purposes except that the useful life shall be       |
  |                                                                       |
 7|seven (7) years for purposes of this paragraph.  If depreciation is    |
  |                                                                       |
 8|allowed as a deduction in determining the adjusted gross income of     |
  |                                                                       |
 9|an individual, any depreciation calculated and claimed pursuant to     |
  |                                                                       |
10|this section shall in no event be a duplication of any depreciation    |
  |                                                                       |
11|allowed or permitted on the federal income tax return of the           |
  |                                                                       |
12|individual.                                                            |
  |                                                                       |
13|    13.  a.    In taxable years beginning after December 31, 2002,     |
  |                                                                       |
14|              nonrecurring adoption expenses paid by a resident        |
  |                                                                       |
15|              individual taxpayer in connection with:                  |
  |                                                                       |
16|              (1)  the adoption of a minor, or                         |
  |                                                                       |
17|              (2)  a proposed adoption of a minor which did not        |
  |                                                                       |
18|                   result in a decreed adoption,                       |
  |                                                                       |
19|              may be deducted from the Oklahoma adjusted gross         |
  |                                                                       |
20|              income.                                                  |
  |                                                                       |
21|         b.    The deductions for adoptions and proposed adoptions     |
  |                                                                       |
22|              authorized by this paragraph shall not exceed Twenty     |
  |                                                                       |
23|              Thousand Dollars ($20,000.00) per calendar year.         |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 45
___________________________________________________________________________

 1|         c.    The Tax Commission shall promulgate rules to            |
  |                                                                       |
 2|              implement the provisions of this paragraph which shall   |
  |                                                                       |
 3|              contain a specific list of nonrecurring adoption         |
  |                                                                       |
 4|              expenses which may be presumed to qualify for the        |
  |                                                                       |
 5|              deduction.  The Tax Commission shall prescribe           |
  |                                                                       |
 6|              necessary requirements for verification.                 |
  |                                                                       |
 7|         d.    "Nonrecurring adoption expenses" means adoption fees,   |
  |                                                                       |
 8|              court costs, medical expenses, attorney fees and         |
  |                                                                       |
 9|              expenses which are directly related to the legal         |
  |                                                                       |
10|              process of adoption of a child including, but not        |
  |                                                                       |
11|              limited to, costs relating to the adoption study,        |
  |                                                                       |
12|              health and psychological examinations, transportation    |
  |                                                                       |
13|              and reasonable costs of lodging and food for the child   |
  |                                                                       |
14|              or adoptive parents which are incurred to complete the   |
  |                                                                       |
15|              adoption process and are not reimbursed by other         |
  |                                                                       |
16|              sources.  The term "nonrecurring adoption expenses"      |
  |                                                                       |
17|              shall not include attorney fees incurred for the         |
  |                                                                       |
18|              purpose of litigating a contested adoption, from and     |
  |                                                                       |
19|              after the point of the initiation of the contest,        |
  |                                                                       |
20|              costs associated with physical remodeling, renovation    |
  |                                                                       |
21|              and alteration of the adoptive parents' home or          |
  |                                                                       |
22|              property, except for a special needs child as            |
  |                                                                       |
23|              authorized by the court.                                 |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 46
___________________________________________________________________________

 1|    14.  a.   In taxable years beginning before January 1, 2005,       |
  |                                                                       |
 2|              retirement benefits not to exceed the amounts            |
  |                                                                       |
 3|              specified in this paragraph, which are received by an    |
  |                                                                       |
 4|              individual sixty-five (65) years of age or older and     |
  |                                                                       |
 5|              whose Oklahoma adjusted gross income is Twenty-five      |
  |                                                                       |
 6|              Thousand Dollars ($25,000.00) or less if the filing      |
  |                                                                       |
 7|              status is single, head of household, or married filing   |
  |                                                                       |
 8|              separate, or Fifty Thousand Dollars ($50,000.00) or      |
  |                                                                       |
 9|              less if the filing status is married filing joint or     |
  |                                                                       |
10|              qualifying widow, shall be exempt from taxable income.   |
  |                                                                       |
11|               In taxable years beginning after December 31, 2004,     |
  |                                                                       |
12|              retirement benefits not to exceed the amounts            |
  |                                                                       |
13|              specified in this paragraph, which are received by an    |
  |                                                                       |
14|              individual whose Oklahoma adjusted gross income is       |
  |                                                                       |
15|              less than the qualifying amount specified in this        |
  |                                                                       |
16|              paragraph, shall be exempt from taxable income.          |
  |                                                                       |
17|         b.   For purposes of this paragraph, the qualifying amount    |
  |                                                                       |
18|              shall be as follows:                                     |
  |                                                                       |
19|              (1)  in taxable years beginning after December 31,       |
  |                                                                       |
20|                   2004, and prior to January 1, 2007, the             |
  |                                                                       |
21|                   qualifying amount shall be Thirty-seven Thousand    |
  |                                                                       |
22|                   Five Hundred Dollars ($37,500.00) or less if the    |
  |                                                                       |
23|                   filing status is single, head of household, or      |
  |                                                                       |
24|                   married filing separate, or Seventy-five Thousand   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 47
___________________________________________________________________________

 1|                   Dollars ($75,000.00) or less if the filing status   |
  |                                                                       |
 2|                   is married filing jointly or qualifying widow,      |
  |                                                                       |
 3|              (2)  in the taxable year beginning January 1, 2007,      |
  |                                                                       |
 4|                   the qualifying amount shall be Fifty Thousand       |
  |                                                                       |
 5|                   Dollars ($50,000.00) or less if the filing status   |
  |                                                                       |
 6|                   is single, head of household, or married filing     |
  |                                                                       |
 7|                   separate, or One Hundred Thousand Dollars           |
  |                                                                       |
 8|                   ($100,000.00) or less if the filing status is       |
  |                                                                       |
 9|                   married filing jointly or qualifying widow,         |
  |                                                                       |
10|              (3)  in the taxable year beginning January 1, 2008,      |
  |                                                                       |
11|                   the qualifying amount shall be Sixty-two Thousand   |
  |                                                                       |
12|                   Five Hundred Dollars ($62,500.00) or less if the    |
  |                                                                       |
13|                   filing status is single, head of household, or      |
  |                                                                       |
14|                   married filing separate, or One Hundred             |
  |                                                                       |
15|                   Twenty-five Thousand Dollars ($125,000.00) or       |
  |                                                                       |
16|                   less if the filing status is married filing         |
  |                                                                       |
17|                   jointly or qualifying widow,                        |
  |                                                                       |
18|              (4)  in the taxable year beginning January 1, 2009,      |
  |                                                                       |
19|                   the qualifying amount shall be One Hundred          |
  |                                                                       |
20|                   Thousand Dollars ($100,000.00) or less if the       |
  |                                                                       |
21|                   filing status is single, head of household, or      |
  |                                                                       |
22|                   married filing separate, or Two Hundred Thousand    |
  |                                                                       |
23|                   Dollars ($200,000.00) or less if the filing         |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 48
___________________________________________________________________________

 1|                   status is married filing jointly or qualifying      |
  |                                                                       |
 2|                   widow, and                                          |
  |                                                                       |
 3|              (5)  in the taxable year beginning January 1, 2010,      |
  |                                                                       |
 4|                   and subsequent taxable years, there shall be no     |
  |                                                                       |
 5|                   limitation upon the qualifying amount.              |
  |                                                                       |
 6|         c.   For purposes of this paragraph, "retirement benefits"    |
  |                                                                       |
 7|              means the total distributions or withdrawals from the    |
  |                                                                       |
 8|              following:                                               |
  |                                                                       |
 9|              (1)  an employee pension benefit plan which satisfies    |
  |                                                                       |
10|                   the requirements of Section 401 of the Internal     |
  |                                                                       |
11|                   Revenue Code, 26 U.S.C., Section 401,               |
  |                                                                       |
12|              (2)  an eligible deferred compensation plan that         |
  |                                                                       |
13|                   satisfies the requirements of Section 457 of the    |
  |                                                                       |
14|                   Internal Revenue Code, 26 U.S.C., Section 457,      |
  |                                                                       |
15|              (3)  an individual retirement account, annuity or        |
  |                                                                       |
16|                   trust or simplified employee pension that           |
  |                                                                       |
17|                   satisfies the requirements of Section 408 of the    |
  |                                                                       |
18|                   Internal Revenue Code, 26 U.S.C., Section 408,      |
  |                                                                       |
19|              (4)  an employee annuity subject to the provisions of    |
  |                                                                       |
20|                   Section 403(a) or (b) of the Internal Revenue       |
  |                                                                       |
21|                   Code, 26 U.S.C., Section 403(a) or (b),             |
  |                                                                       |
22|              (5)  United States Retirement Bonds which satisfy the    |
  |                                                                       |
23|                   requirements of Section 86 of the Internal          |
  |                                                                       |
24|                   Revenue Code, 26 U.S.C., Section 86, or             |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 49
___________________________________________________________________________

 1|              (6)  lump-sum distributions from a retirement plan       |
  |                                                                       |
 2|                   which satisfies the requirements of Section         |
  |                                                                       |
 3|                   402(e) of the Internal Revenue Code, 26 U.S.C.,     |
  |                                                                       |
 4|                   Section 402(e).                                     |
  |                                                                       |
 5|         d.   The amount of the exemption provided by this paragraph   |
  |                                                                       |
 6|              shall be limited to Five Thousand Five Hundred Dollars   |
  |                                                                       |
 7|              ($5,500.00) for the 2004 tax year, Seven Thousand Five   |
  |                                                                       |
 8|              Hundred Dollars ($7,500.00) for the 2005 tax year and    |
  |                                                                       |
 9|              Ten Thousand Dollars ($10,000.00) for the tax year       |
  |                                                                       |
10|              2006 and for all subsequent tax years.  Any individual   |
  |                                                                       |
11|              who claims the exemption provided for in paragraph 8     |
  |                                                                       |
12|              of this subsection shall not be permitted to claim a     |
  |                                                                       |
13|              combined total exemption pursuant to this paragraph      |
  |                                                                       |
14|              and paragraph 8 of this subsection in an amount          |
  |                                                                       |
15|              exceeding Five Thousand Five Hundred Dollars             |
  |                                                                       |
16|              ($5,500.00) for the 2004 tax year, Seven Thousand Five   |
  |                                                                       |
17|              Hundred Dollars ($7,500.00) for the 2005 tax year and    |
  |                                                                       |
18|              Ten Thousand Dollars ($10,000.00) for the 2006 tax       |
  |                                                                       |
19|              year and all subsequent tax years.                       |
  |                                                                       |
20|    15.  In taxable years beginning after December 31, 1999, for an    |
  |                                                                       |
21|individual engaged in production agriculture who has filed a           |
  |                                                                       |
22|Schedule F form with the taxpayer's federal income tax return for      |
  |                                                                       |
23|such taxable year, there shall be excluded from taxable income any     |
  |                                                                       |
24|amount which was included as federal taxable income or federal         |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 50
___________________________________________________________________________

 1|adjusted gross income and which consists of the discharge of an        |
  |                                                                       |
 2|obligation by a creditor of the taxpayer incurred to finance the       |
  |                                                                       |
 3|production of agricultural products.                                   |
  |                                                                       |
 4|    16.  In taxable years beginning December 31, 2000, an amount       |
  |                                                                       |
 5|equal to one hundred percent (100%) of the amount of any scholarship   |
  |                                                                       |
 6|or stipend received from participation in the Oklahoma Police Corps    |
  |                                                                       |
 7|Program, as established in Section 2-140.3 of Title 47 of the          |
  |                                                                       |
 8|Oklahoma Statutes shall be exempt from taxable income.                 |
  |                                                                       |
 9|    17.  a.   In taxable years beginning after December 31, 2001,      |
  |                                                                       |
10|              and before January 1, 2005, there shall be allowed a     |
  |                                                                       |
11|              deduction in the amount of contributions to accounts     |
  |                                                                       |
12|              established pursuant to the Oklahoma College Savings     |
  |                                                                       |
13|              Plan Act.  The deduction shall equal the amount of       |
  |                                                                       |
14|              contributions to accounts, but in no event shall the     |
  |                                                                       |
15|              deduction for each contributor exceed Two Thousand       |
  |                                                                       |
16|              Five Hundred Dollars ($2,500.00) each taxable year for   |
  |                                                                       |
17|              each account.                                            |
  |                                                                       |
18|         b.   In taxable years beginning after December 31, 2004,      |
  |                                                                       |
19|              each taxpayer shall be allowed a deduction for           |
  |                                                                       |
20|              contributions to accounts established pursuant to the    |
  |                                                                       |
21|              Oklahoma College Savings Plan Act.  The maximum annual   |
  |                                                                       |
22|              deduction shall equal the amount of contributions to     |
  |                                                                       |
23|              all such accounts plus any contributions to such         |
  |                                                                       |
24|              accounts by the taxpayer for prior taxable years after   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 51
___________________________________________________________________________

 1|              December 31, 2004, which were not deducted, but in no    |
  |                                                                       |
 2|              event shall the deduction for each tax year exceed Ten   |
  |                                                                       |
 3|              Thousand Dollars ($10,000.00) for each individual        |
  |                                                                       |
 4|              taxpayer or Twenty Thousand Dollars ($20,000.00) for     |
  |                                                                       |
 5|              taxpayers filing a joint return.  Any amount of a        |
  |                                                                       |
 6|              contribution that is not deducted by the taxpayer in     |
  |                                                                       |
 7|              the year for which the contribution is made may be       |
  |                                                                       |
 8|              carried forward as a deduction from income for the       |
  |                                                                       |
 9|              succeeding five (5) years.  For taxable years            |
  |                                                                       |
10|              beginning after December 31, 2005, deductions may be     |
  |                                                                       |
11|              taken for contributions and rollovers made during a      |
  |                                                                       |
12|              taxable year and up to April 15 of the succeeding        |
  |                                                                       |
13|              year, or the due date of a taxpayer's state income tax   |
  |                                                                       |
14|              return, excluding extensions, whichever is later.        |
  |                                                                       |
15|              Provided, a deduction for the same contribution may      |
  |                                                                       |
16|              not be taken for two (2) different taxable years.        |
  |                                                                       |
17|         c.   In taxable years beginning after December 31, 2006,      |
  |                                                                       |
18|              deductions for contributions made pursuant to            |
  |                                                                       |
19|              subparagraph b of this paragraph shall be limited as     |
  |                                                                       |
20|              follows:                                                 |
  |                                                                       |
21|              (1)  for a taxpayer who qualified for the five-year      |
  |                                                                       |
22|                   carryforward election and who takes a rollover or   |
  |                                                                       |
23|                   nonqualified withdrawal during that period, the     |
  |                                                                       |
24|                   tax deduction otherwise available pursuant to       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 52
___________________________________________________________________________

 1|                   subparagraph b of this paragraph shall be reduced   |
  |                                                                       |
 2|                   by the amount which is equal to the rollover or     |
  |                                                                       |
 3|                   nonqualified withdrawal, and                        |
  |                                                                       |
 4|              (2)  for a taxpayer who elects to take a rollover or     |
  |                                                                       |
 5|                   nonqualified withdrawal within the same tax year    |
  |                                                                       |
 6|                   in which a contribution was made to the             |
  |                                                                       |
 7|                   taxpayer's account, the tax deduction otherwise     |
  |                                                                       |
 8|                   available pursuant to subparagraph b of this        |
  |                                                                       |
 9|                   paragraph shall be reduced by the amount of the     |
  |                                                                       |
10|                   contribution which is equal to the rollover or      |
  |                                                                       |
11|                   nonqualified withdrawal.                            |
  |                                                                       |
12|         d.   If a taxpayer elects to take a rollover on a             |
  |                                                                       |
13|              contribution for which a deduction has been taken        |
  |                                                                       |
14|              pursuant to subparagraph b of this paragraph within      |
  |                                                                       |
15|              one (1) year of the date of contribution, the amount     |
  |                                                                       |
16|              of such rollover shall be included in the adjusted       |
  |                                                                       |
17|              gross income of the taxpayer in the taxable year of      |
  |                                                                       |
18|              the rollover.                                            |
  |                                                                       |
19|         e.   If a taxpayer makes a nonqualified withdrawal of         |
  |                                                                       |
20|              contributions for which a deduction was taken pursuant   |
  |                                                                       |
21|              to subparagraph b of this paragraph, such nonqualified   |
  |                                                                       |
22|              withdrawal and any earnings thereon shall be included    |
  |                                                                       |
23|              in the adjusted gross income of the taxpayer in the      |
  |                                                                       |
24|              taxable year of the nonqualified withdrawal.             |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 53
___________________________________________________________________________

 1|         f.   As used in this paragraph:                               |
  |                                                                       |
 2|              (1)  "non-qualified withdrawal" means a withdrawal       |
  |                                                                       |
 3|                   from an Oklahoma College Savings Plan account       |
  |                                                                       |
 4|                   other than one of the following:                    |
  |                                                                       |
 5|                   (a)  a qualified withdrawal,                        |
  |                                                                       |
 6|                   (b)  a withdrawal made as a result of the death     |
  |                                                                       |
 7|                        or disability of the designated beneficiary    |
  |                                                                       |
 8|                        of an account,                                 |
  |                                                                       |
 9|                   (c)  a withdrawal that is made on the account of    |
  |                                                                       |
10|                        a scholarship or the allowance or payment      |
  |                                                                       |
11|                        described in Section 135(d)(1)(B) or (C) or    |
  |                                                                       |
12|                        by the Internal Revenue Code, received by      |
  |                                                                       |
13|                        the designated beneficiary to the extent the   |
  |                                                                       |
14|                        amount of the refund does not exceed the       |
  |                                                                       |
15|                        amount of the scholarship, allowance, or       |
  |                                                                       |
16|                        payment, or                                    |
  |                                                                       |
17|                   (d)  a rollover or change of designated             |
  |                                                                       |
18|                        beneficiary as permitted by subsection F of    |
  |                                                                       |
19|                        Section 3970.7 of Title 70 of Oklahoma         |
  |                                                                       |
20|                        Statutes, and                                  |
  |                                                                       |
21|              (2)  "rollover" means the transfer of funds from the     |
  |                                                                       |
22|                   Oklahoma College Savings Plan to any other plan     |
  |                                                                       |
23|                   under Section 529 of the Internal Revenue Code.     |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 54
___________________________________________________________________________

 1|    18.  For taxable years beginning after December 31, 2005,          |
  |                                                                       |
 2|retirement benefits received by an individual from any component of    |
  |                                                                       |
 3|the Armed Forces of the United States in an amount not to exceed the   |
  |                                                                       |
 4|greater of seventy-five percent (75%) of such benefits or Ten          |
  |                                                                       |
 5|Thousand Dollars ($10,000.00) shall be exempt from taxable income      |
  |                                                                       |
 6|but in no case less than the amount of the exemption provided by       |
  |                                                                       |
 7|paragraph 14 of this subsection.                                       |
  |                                                                       |
 8|    19.  For taxable years beginning after December 31, 2006,          |
  |                                                                       |
 9|retirement benefits received by federal civil service retirees,        |
  |                                                                       |
10|including survivor annuities, paid in lieu of Social Security          |
  |                                                                       |
11|benefits shall be exempt from taxable income to the extent such        |
  |                                                                       |
12|benefits are included in the federal adjusted gross income pursuant    |
  |                                                                       |
13|to the provisions of Section 86 of the Internal Revenue Code, 26       |
  |                                                                       |
14|U.S.C., Section 86, according to the following schedule:               |
  |                                                                       |
15|         a.   in the taxable year beginning January 1, 2007, twenty    |
  |                                                                       |
16|              percent (20%) of such benefits shall be exempt,          |
  |                                                                       |
17|         b.   in the taxable year beginning January 1, 2008, forty     |
  |                                                                       |
18|              percent (40%) of such benefits shall be exempt,          |
  |                                                                       |
19|         c.   in the taxable year beginning January 1, 2009, sixty     |
  |                                                                       |
20|              percent (60%) of such benefits shall be exempt,          |
  |                                                                       |
21|         d.   in the taxable year beginning January 1, 2010, eighty    |
  |                                                                       |
22|              percent (80%) of such benefits shall be exempt, and      |
  |                                                                       |
23|                                                                       |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 55
___________________________________________________________________________

 1|         e.   in the taxable year beginning January 1, 2011, and       |
  |                                                                       |
 2|              subsequent taxable years, one hundred percent (100%)     |
  |                                                                       |
 3|              of such benefits shall be exempt.                        |
  |                                                                       |
 4|    20.  a.   For taxable years beginning after December 31, 2007, a   |
  |                                                                       |
 5|              resident individual may deduct up to Ten Thousand        |
  |                                                                       |
 6|              Dollars ($10,000.00) from Oklahoma adjusted gross        |
  |                                                                       |
 7|              income if the individual, or the dependent of the        |
  |                                                                       |
 8|              individual, while living, donates one or more human      |
  |                                                                       |
 9|              organs of the individual to another human being for      |
  |                                                                       |
10|              human organ transplantation.  As used in this            |
  |                                                                       |
11|              paragraph, "human organ" means all or part of a liver,   |
  |                                                                       |
12|              pancreas, kidney, intestine, lung, or bone marrow.  A    |
  |                                                                       |
13|              deduction that is claimed under this paragraph may be    |
  |                                                                       |
14|              claimed in the taxable year in which the human organ     |
  |                                                                       |
15|              transplantation occurs.                                  |
  |                                                                       |
16|         b.    An individual may claim this deduction only once, and   |
  |                                                                       |
17|              the deduction may be claimed only for unreimbursed       |
  |                                                                       |
18|              expenses that are incurred by the individual and         |
  |                                                                       |
19|              related to the organ donation of the individual.         |
  |                                                                       |
20|         c.   The Oklahoma Tax Commission shall promulgate rules to    |
  |                                                                       |
21|              implement the provisions of this paragraph which shall   |
  |                                                                       |
22|              contain a specific list of expenses which may be         |
  |                                                                       |
23|              presumed to qualify for the deduction.  The Tax          |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 56
___________________________________________________________________________

 1|              Commission shall prescribe necessary requirements for    |
  |                                                                       |
 2|              verification.                                            |
  |                                                                       |
 3|    21.  For taxable years beginning after December 31, 2009, there    |
  |                                                                       |
 4|shall be exempt from taxable income any amount received by the         |
  |                                                                       |
 5|beneficiary of the death benefit for an emergency medical technician   |
  |                                                                       |
 6|or a registered emergency medical responder provided by Section        |
  |                                                                       |
 7|1-2505.1 of Title 63 of the Oklahoma Statutes.                         |
  |                                                                       |
 8|    22.  For taxable years beginning after December 31, 2008,          |
  |                                                                       |
 9|taxable income shall be increased by any unemployment compensation     |
  |                                                                       |
10|exempted under Section 85(c) of the Internal Revenue Code, 26          |
  |                                                                       |
11|U.S.C., Section 85(c)(2009).                                           |
  |                                                                       |
12|    23.  For taxable years beginning after December 31, 2008, there    |
  |                                                                       |
13|shall be exempt from taxable income any payment in an amount less      |
  |                                                                       |
14|than Six Hundred Dollars ($600.00) received by a person as an award    |
  |                                                                       |
15|for participation in a competitive livestock show event.  For          |
  |                                                                       |
16|purposes of this paragraph, the payment shall be treated as a          |
  |                                                                       |
17|scholarship amount paid by the entity sponsoring the event and the     |
  |                                                                       |
18|sponsoring entity shall cause the payment to be categorized as a       |
  |                                                                       |
19|scholarship in its books and records.                                  |
  |                                                                       |
20|    24.  For taxable years beginning on or after January 1, 2016,      |
  |                                                                       |
21|taxable income shall be increased by any amount of state and local     |
  |                                                                       |
22|sales or income taxes deducted under 26 U.S.C., Section 164 of the     |
  |                                                                       |
23|Internal Revenue Code.  If the amount of state and local taxes         |
  |                                                                       |
24|deducted on the federal return is limited, taxable income on the       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 57
___________________________________________________________________________

 1|state return shall be increased only by the amount actually deducted   |
  |                                                                       |
 2|after any such limitations are applied.                                |
  |                                                                       |
 3|    F.  1.  For taxable years beginning after December 31, 2004, a     |
  |                                                                       |
 4|deduction from the Oklahoma adjusted gross income of any individual    |
  |                                                                       |
 5|taxpayer shall be allowed for qualifying gains receiving capital       |
  |                                                                       |
 6|treatment that are included in the federal adjusted gross income of    |
  |                                                                       |
 7|such individual taxpayer during the taxable year.                      |
  |                                                                       |
 8|    2.  As used in this subsection:                                    |
  |                                                                       |
 9|         a.    "qualifying gains receiving capital treatment" means    |
  |                                                                       |
10|              the amount of net capital gains, as defined in Section   |
  |                                                                       |
11|              1222(11) of the Internal Revenue Code, included in an    |
  |                                                                       |
12|              individual taxpayer's federal income tax return that     |
  |                                                                       |
13|              result from:                                             |
  |                                                                       |
14|              (1)   the sale of real property or tangible personal     |
  |                                                                       |
15|                   property located within Oklahoma that has been      |
  |                                                                       |
16|                   directly or indirectly owned by the individual      |
  |                                                                       |
17|                   taxpayer for a holding period of at least five      |
  |                                                                       |
18|                   (5) years prior to the date of the transaction      |
  |                                                                       |
19|                   from which such net capital gains arise,            |
  |                                                                       |
20|              (2)   the sale of stock or the sale of a direct or       |
  |                                                                       |
21|                   indirect ownership interest in an Oklahoma          |
  |                                                                       |
22|                   company, limited liability company, or              |
  |                                                                       |
23|                   partnership where such stock or ownership           |
  |                                                                       |
24|                   interest has been directly or indirectly owned by   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 58
___________________________________________________________________________

 1|                   the individual taxpayer for a holding period of     |
  |                                                                       |
 2|                   at least two (2) years prior to the date of the     |
  |                                                                       |
 3|                   transaction from which the net capital gains        |
  |                                                                       |
 4|                   arise, or                                           |
  |                                                                       |
 5|              (3)   the sale of real property, tangible personal       |
  |                                                                       |
 6|                   property or intangible personal property located    |
  |                                                                       |
 7|                   within Oklahoma as part of the sale of all or       |
  |                                                                       |
 8|                   substantially all of the assets of an Oklahoma      |
  |                                                                       |
 9|                   company, limited liability company, or              |
  |                                                                       |
10|                   partnership or an Oklahoma proprietorship           |
  |                                                                       |
11|                   business enterprise where such property has been    |
  |                                                                       |
12|                   directly or indirectly owned by such entity or      |
  |                                                                       |
13|                   business enterprise or owned by the owners of       |
  |                                                                       |
14|                   such entity or business enterprise for a period     |
  |                                                                       |
15|                   of at least two (2) years prior to the date of      |
  |                                                                       |
16|                   the transaction from which the net capital gains    |
  |                                                                       |
17|                   arise,                                              |
  |                                                                       |
18|         b.    "holding period" means an uninterrupted period of       |
  |                                                                       |
19|              time.  The holding period shall include any additional   |
  |                                                                       |
20|              period when the property was held by another             |
  |                                                                       |
21|              individual or entity, if such additional period is       |
  |                                                                       |
22|              included in the taxpayer's holding period for the        |
  |                                                                       |
23|              asset pursuant to the Internal Revenue Code,             |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 59
___________________________________________________________________________

 1|         c.    "Oklahoma company," "limited liability company," or     |
  |                                                                       |
 2|              "partnership" means an entity whose primary              |
  |                                                                       |
 3|              headquarters have been located in Oklahoma for at        |
  |                                                                       |
 4|              least three (3) uninterrupted years prior to the date    |
  |                                                                       |
 5|              of the transaction from which the net capital gains      |
  |                                                                       |
 6|              arise,                                                   |
  |                                                                       |
 7|         d.    "direct" means the individual taxpayer directly owns    |
  |                                                                       |
 8|              the asset,                                               |
  |                                                                       |
 9|         e.    "indirect" means the individual taxpayer owns an        |
  |                                                                       |
10|              interest in a pass-through entity (or chain of           |
  |                                                                       |
11|              pass-through entities) that sells the asset that gives   |
  |                                                                       |
12|              rise to the qualifying gains receiving capital           |
  |                                                                       |
13|              treatment.                                               |
  |                                                                       |
14|              (1)   With respect to sales of real property or          |
  |                                                                       |
15|                   tangible personal property located within           |
  |                                                                       |
16|                   Oklahoma, the deduction described in this           |
  |                                                                       |
17|                   subsection shall not apply unless the               |
  |                                                                       |
18|                   pass-through entity that makes the sale has held    |
  |                                                                       |
19|                   the property for not less than five (5)             |
  |                                                                       |
20|                   uninterrupted years prior to the date of the        |
  |                                                                       |
21|                   transaction that created the capital gain, and      |
  |                                                                       |
22|                   each pass-through entity included in the chain of   |
  |                                                                       |
23|                   ownership has been a member, partner, or            |
  |                                                                       |
24|                   shareholder of the pass-through entity in the       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 60
___________________________________________________________________________

 1|                   tier immediately below it for an uninterrupted      |
  |                                                                       |
 2|                   period of not less than five (5) years.             |
  |                                                                       |
 3|              (2)   With respect to sales of stock or ownership        |
  |                                                                       |
 4|                   interest in or sales of all or substantially all    |
  |                                                                       |
 5|                   of the assets of an Oklahoma company, limited       |
  |                                                                       |
 6|                   liability company, partnership or Oklahoma          |
  |                                                                       |
 7|                   proprietorship business enterprise, the deduction   |
  |                                                                       |
 8|                   described in this subsection shall not apply        |
  |                                                                       |
 9|                   unless the pass-through entity that makes the       |
  |                                                                       |
10|                   sale has held the stock or ownership interest for   |
  |                                                                       |
11|                   not less than two (2) uninterrupted years prior     |
  |                                                                       |
12|                   to the date of the transaction that created the     |
  |                                                                       |
13|                   capital gain, and each pass-through entity          |
  |                                                                       |
14|                   included in the chain of ownership has been a       |
  |                                                                       |
15|                   member, partner or shareholder of the               |
  |                                                                       |
16|                   pass-through entity in the tier immediately below   |
  |                                                                       |
17|                   it for an uninterrupted period of not less than     |
  |                                                                       |
18|                   two (2) years.  For purposes of this division,      |
  |                                                                       |
19|                   uninterrupted ownership prior to July 1, 2007,      |
  |                                                                       |
20|                   shall be included in the determination of the       |
  |                                                                       |
21|                   required holding period prescribed by this          |
  |                                                                       |
22|                   division, and                                       |
  |                                                                       |
23|         f.    "Oklahoma proprietorship business enterprise" means a   |
  |                                                                       |
24|              business enterprise whose income and expenses have       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 61
___________________________________________________________________________

 1|              been reported on Schedule C or F of an individual        |
  |                                                                       |
 2|              taxpayer's federal income tax return, or any similar     |
  |                                                                       |
 3|              successor schedule published by the Internal Revenue     |
  |                                                                       |
 4|              Service and whose primary headquarters have been         |
  |                                                                       |
 5|              located in Oklahoma for at least three (3)               |
  |                                                                       |
 6|              uninterrupted years prior to the date of the             |
  |                                                                       |
 7|              transaction from which the net capital gains arise.      |
  |                                                                       |
 8|    G.  1.  For purposes of computing its Oklahoma taxable income      |
  |                                                                       |
 9|under this section, the dividends-paid deduction otherwise allowed     |
  |                                                                       |
10|by federal law in computing net income of a real estate investment     |
  |                                                                       |
11|trust that is subject to federal income tax shall be added back in     |
  |                                                                       |
12|computing the tax imposed by this state under this title if the real   |
  |                                                                       |
13|estate investment trust is a captive real estate investment trust.     |
  |                                                                       |
14|    2.  For purposes of computing its Oklahoma taxable income under    |
  |                                                                       |
15|this section, a taxpayer shall add back otherwise deductible rents     |
  |                                                                       |
16|and interest expenses paid to a captive real estate investment trust   |
  |                                                                       |
17|that is not subject to the provisions of paragraph 1 of this           |
  |                                                                       |
18|subsection.  As used in this subsection:                               |
  |                                                                       |
19|         a.   the term "real estate investment trust" or "REIT"        |
  |                                                                       |
20|              means the meaning ascribed to such term in Section 856   |
  |                                                                       |
21|              of the Internal Revenue Code,                            |
  |                                                                       |
22|         b.   the term "captive real estate investment trust" means    |
  |                                                                       |
23|              a real estate investment trust, the shares or            |
  |                                                                       |
24|              beneficial interests of which are not regularly traded   |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 62
___________________________________________________________________________

 1|              on an established securities market and more than        |
  |                                                                       |
 2|              fifty percent (50%) of the voting power or value of      |
  |                                                                       |
 3|              the beneficial interests or shares of which are owned    |
  |                                                                       |
 4|              or controlled, directly or indirectly, or                |
  |                                                                       |
 5|              constructively, by a single entity that is:              |
  |                                                                       |
 6|              (1)  treated as an association taxable as a              |
  |                                                                       |
 7|                   corporation under the Internal Revenue Code, and    |
  |                                                                       |
 8|              (2)  not exempt from federal income tax pursuant to      |
  |                                                                       |
 9|                   the provisions of Section 501(a) of the Internal    |
  |                                                                       |
10|                   Revenue Code.                                       |
  |                                                                       |
11|              The term shall not include a real estate investment      |
  |                                                                       |
12|              trust that is intended to be regularly traded on an      |
  |                                                                       |
13|              established securities market, and that satisfies the    |
  |                                                                       |
14|              requirements of Section 856(a)(5) and (6) of the U.S.    |
  |                                                                       |
15|              Internal Revenue Code by reason of Section 856(h)(2)     |
  |                                                                       |
16|              of the Internal Revenue Code,                            |
  |                                                                       |
17|         c.   the term "association taxable as a corporation" shall    |
  |                                                                       |
18|              not include the following entities:                      |
  |                                                                       |
19|              (1)  any real estate investment trust as defined in      |
  |                                                                       |
20|                   paragraph subparagraph a of this subsection         |
  |                                                                       |
21|                   paragraph other than a "captive real estate         |
  |                                                                       |
22|                   investment trust", or                               |
  |                                                                       |
23|              (2)  any qualified real estate investment trust          |
  |                                                                       |
24|                   subsidiary under Section 856(i) of the Internal     |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 63
___________________________________________________________________________

 1|                   Revenue Code, other than a qualified REIT           |
  |                                                                       |
 2|                   subsidiary of a "captive real estate investment     |
  |                                                                       |
 3|                   trust", or                                          |
  |                                                                       |
 4|              (3)  any Listed Australian Property Trust (meaning an    |
  |                                                                       |
 5|                   Australian unit trust registered as a "Managed      |
  |                                                                       |
 6|                   Investment Scheme" under the Australian             |
  |                                                                       |
 7|                   Corporations Act in which the principal class of    |
  |                                                                       |
 8|                   units is listed on a recognized stock exchange in   |
  |                                                                       |
 9|                   Australia and is regularly traded on an             |
  |                                                                       |
10|                   established securities market), or an entity        |
  |                                                                       |
11|                   organized as a trust, provided that a Listed        |
  |                                                                       |
12|                   Australian Property Trust owns or controls,         |
  |                                                                       |
13|                   directly or indirectly, seventy-five percent        |
  |                                                                       |
14|                   (75%) or more of the voting power or value of the   |
  |                                                                       |
15|                   beneficial interests or shares of such trust, or    |
  |                                                                       |
16|              (4)  any Qualified Foreign Entity, meaning a             |
  |                                                                       |
17|                   corporation, trust, association or partnership      |
  |                                                                       |
18|                   organized outside the laws of the United States     |
  |                                                                       |
19|                   and which satisfies the following criteria:         |
  |                                                                       |
20|                   (a)  at least seventy-five percent (75%) of the     |
  |                                                                       |
21|                        entity's total asset value at the close of     |
  |                                                                       |
22|                        its taxable year is represented by real        |
  |                                                                       |
23|                        estate assets, as defined in Section           |
  |                                                                       |
24|                        856(c)(5)(B) of the Internal Revenue Code,     |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 64
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 1|                        thereby including shares or certificates of    |
  |                                                                       |
 2|                        beneficial interest in any real estate         |
  |                                                                       |
 3|                        investment trust, cash and cash equivalents,   |
  |                                                                       |
 4|                        and U.S. Government securities,                |
  |                                                                       |
 5|                   (b)  the entity receives a dividend-paid            |
  |                                                                       |
 6|                        deduction comparable to Section 561 of the     |
  |                                                                       |
 7|                        Internal Revenue Code, or is exempt from       |
  |                                                                       |
 8|                        entity level tax,                              |
  |                                                                       |
 9|                   (c)  the entity is required to distribute at        |
  |                                                                       |
10|                        least eighty-five percent (85%) of its         |
  |                                                                       |
11|                        taxable income, as computed in the             |
  |                                                                       |
12|                        jurisdiction in which it is organized, to      |
  |                                                                       |
13|                        the holders of its shares or certificates of   |
  |                                                                       |
14|                        beneficial interest on an annual basis,        |
  |                                                                       |
15|                   (d)  not more than ten percent (10%) of the         |
  |                                                                       |
16|                        voting power or value in such entity is held   |
  |                                                                       |
17|                        directly or indirectly or constructively by    |
  |                                                                       |
18|                        a single entity or individual, or the shares   |
  |                                                                       |
19|                        or beneficial interests of such entity are     |
  |                                                                       |
20|                        regularly traded on an established             |
  |                                                                       |
21|                        securities market, and                         |
  |                                                                       |
22|                   (e)  the entity is organized in a country which     |
  |                                                                       |
23|                        has a tax treaty with the United States.       |
  |                                                                       |
24|                                                                       |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 65
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 1|    3.  For purposes of this subsection, the constructive ownership    |
  |                                                                       |
 2|rules of Section 318(a) of the Internal Revenue Code, as modified by   |
  |                                                                       |
 3|Section 856(d)(5) of the Internal Revenue Code, shall apply in         |
  |                                                                       |
 4|determining the ownership of stock, assets, or net profits of any      |
  |                                                                       |
 5|person.                                                                |
  |                                                                       |
 6|    4.  A real estate investment trust that does not become            |
  |                                                                       |
 7|regularly traded on an established securities market within one (1)    |
  |                                                                       |
 8|year of the date on which it first becomes a real estate investment    |
  |                                                                       |
 9|trust shall be deemed not to have been regularly traded on an          |
  |                                                                       |
10|established securities market, retroactive to the date it first        |
  |                                                                       |
11|became a real estate investment trust, and shall file an amended       |
  |                                                                       |
12|return reflecting such retroactive designation for any tax year or     |
  |                                                                       |
13|part year occurring during its initial year of status as a real        |
  |                                                                       |
14|estate investment trust.  For purposes of this subsection, a real      |
  |                                                                       |
15|estate investment trust becomes a real estate investment trust on      |
  |                                                                       |
16|the first day it has both met the requirements of Section 856 of the   |
  |                                                                       |
17|Internal Revenue Code and has elected to be treated as a real estate   |
  |                                                                       |
18|investment trust pursuant to Section 856(c)(1) of the Internal         |
  |                                                                       |
19|Revenue Code.                                                          |
  |                                                                       |
20|    SECTION 4.  This act shall become effective January 1, 2022.       |
  |                                                                       |
21|    Passed the House of Representatives the 11th day of March, 2021.   |
  |                                                                       |
22|                                                                       |
  |                                                                       |
23|                                                                       |
  |                                     Presiding Officer of the House    |
24|                                                 of Representatives    |
  |                                                                       |
arsid3871068 ENGR. H. B. NO. 2041                                  Page 66
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 1|                                                                       |
  |    Passed the Senate the ___ day of __________, 2021.                 |
 2|                                                                       |
  |                                                                       |
 3|                                                                       |
  |                                                                       |
 4|                                    Presiding Officer of the Senate    |
  |                                                                       |
 5|                                                                       |
  |                                                                       |
 6|                                                                       |
  |                                                                       |
 7|                                                                       |
  |                                                                       |
 8|                                                                       |
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 9|                                                                       |
  |                                                                       |
10|                                                                       |
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11|                                                                       |
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12|                                                                       |
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13|                                                                       |
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14|                                                                       |
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15|                                                                       |
  |                                                                       |
16|                                                                       |
  |                                                                       |
17|                                                                       |
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18|                                                                       |
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19|                                                                       |
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20|                                                                       |
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21|                                                                       |
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22|                                                                       |
  |                                                                       |
23|                                                                       |
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24|                                                                       |
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arsid3871068 ENGR. H. B. NO. 2041                                  Page 67
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