Legislative update

              Oklahoma Tax Commission
Legislative
Update
Prepared by the Communications Division
in conjunction with Tax Policy and Research
2011
This informational packet is not intended to be a complete listing of tax related laws or law changes.
This is an abbreviated listing that highlights those changes effecting a large number of taxpayers.
For further tax information including tax rules, please visit our web site at www.tax.ok.gov
or contact the Oklahoma Tax Commission at (405) 521-3160.
Assistance Guide
Oklahoma Tax Commission
Account Maintenance Division
Main Number.................................................................521-4271
Ad Valorem Division
Main Number.................................................................319-8200
Communications Division
Main Number.................................................................521-3637
Compliance Division
Audit - Main Number......................................................521-3251
Collections - Main Number............................................521-3281
Legal Division
Main Number.................................................................319-8550
Motor Vehicle Division
Main Number.................................................................521-3221
Tax Policy and Research
Tax Analysts...................................................................521-3133
Taxpayer Assistance
Taxpayer Resource Center............................................521-3160
Other Key Numbers:
Forms Request: Business Forms...............................521-4667
Toll Free (within Oklahoma only).................................. 1 (800) 522-8165
(To be connected to a division other than Taxpayer Assistance, please enter the last five
digits of the phone number of the division in which you wish to be connected)
Website: www.tax.ok.gov
E-mail address: otcmaster@tax.ok.gov
(all numbers are within the “405” area code)
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Changes to 2011 Income Tax From
Prior Years’ Legislative Sessions
Civil Service Retirement in Lieu of Social Security exclusion – The percentage of the taxable
portion of civil service retirement received in lieu of social security which may be excluded has
increased from 80% to 100%.
Military Pay exclusion – Effective July 1, 2010 the active duty military pay exclusion was
increased from $1,500 to 100%. For tax years 2011 through 2014, all of the resident’s military
wages, which are included in Federal Adjusted Gross Income, will be entered on Schedule 511-C
or 511NR-C, line 1 “Military Pay Exclusion”.
Nonrefundable Credits – Credits have been added to Form 511CR
Credit for Cancer Research Contribution - A credit is allowed to any taxpayer who makes a
donation to a qualified cancer research institute. The credit is 50% of the amount donated, but
may not exceed $1,000 ($2,000 for a married filing joint return). A “cancer research institute”
means an organization which is exempt from taxation under the Internal Revenue Code (IRC) or
a not-for-profit supporting organization, as defined by the IRC, affiliated with a tax-exempt
organization. The tax exempt organization must have raising the standard of cancer clinical care
in Oklahoma through peer-reviewed cancer research and education as its primary focus, be either
an independent research institute or a program that is part of a state university which is a member
of The Oklahoma State System of Higher Education, and receive at least $4 million in National
Cancer Institute funding each year. Any credit allowed but not used will have a four year
carryover provision. A copy of the canceled check or receipt must be provided as proof of the
donation. Title 68 O.S. § 2357.45 and Rule 710:50-15-113.
Oklahoma Capital Investment Board Tax Credit – This is not a new credit, it is just being added
to the Form 511CR. To claim the credit the taxpayer must enclose the Tax Credit Certificate
issued by the Oklahoma Capital Investment Board as provided for in the Oklahoma Capital
Formation Act. The Certificate will indicate the face amount of the Tax Credit and the State’s
fiscal year in which the credit may be claimed. No Tax Credit shall be exercisable after July 1,
2015. Note: This credit, upon election of the taxpayer, may be claimed as a payment or
prepayment of tax or as an estimated tax payment. If this election is made, the credit must still be
claimed on Form 511CR. Title 74 O.S. § 5085.7
Check-offs – There are two new check-offs:
Support Oklahoma Honor Flights – Corporate and individual taxpayers have the opportunity to
donate any amount of a tax refund to support Oklahoma Honor Flights. Oklahoma Honor Flights
is a 501(c)(3) non-for-profit organization that transports Oklahoma World War II veterans to
Washington, D.C. to visit the memorial dedicated to honor their service and sacrifice. 68 O.S. §
2368.20
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Eastern Red Cedar Revolving Fund - Individual taxpayer may help stimulate rural development,
improve public health and enhance wildlife habitat by donating to the Eastern Red Cedar
Revolving Fund. The Fund was established to promote the harvesting and utilization of eastern
red cedar trees and to promote the marketing, research and education efforts concerning the tree
and eastern red cedar products. Monies donated may be expended by the State Board of
Agriculture as directed by the Eastern Red Cedar Registry Board. A donation may be made
whether the taxpayer is receiving a refund or has a tax due. 2 O.S. § 18-408
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Summary of 2011 Tax Legislation
Income Tax
Miscellaneous
House Bill 1284 - Effective July 1, 2011
Involves reporting requirements for tax credits which are transferred or allocated. Taxpayers are
to report, on an annual basis, to the Tax Commission or Insurance Department the amount of
credit generated and the statutory basis for each credit. If the credit is transferable, the report
will include whether the credit will or may be transferred, and the name of the taxpayer to whom
the credit is transferred. The report shall also include whether the credit will or may be allocated
by a pass-through entity and the identity of the transferees. If a taxpayer fails to file the report as
required, the Tax Commission or Insurance Department shall disallow the tax credit; however,
upon filing of the report, the credit shall be allowed. 68 O.S. § 2357.1A-1 (new law).
Senate Bill 123 - Effective August 26, 2011
Requires the Oklahoma Tax Commission to initiate a compliance program to increase the
assignment of audit staff to conduct audits of corporate and partnership income tax returns.
Effective for Tax Year 2011
Credits:
House Bill 1008
The Credit for Employees in the Aerospace Sector and the Credits for Employers in the
Aerospace Sector were amended.
􀂃 The tax credit moratorium has been modified. This measure changes the moratorium time
period for this credit to July 1, 2010 through June 30, 2011, thus shortening the moratorium
period by one full year.
􀂃 Establishes a sunset date, so that no credits may be established for tax years beginning on or
after January 1, 2015.
68 O.S. §§ 2357.302, 2357.303 and 2357.304
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Refunds:
Senate Bill 123
A card-based disbursement system may be used in lieu of checks for the purposes of issuing
refunds for overpayment of individual income taxes. The Tax Commission may enter into a
contract with, and release taxpayer information to, entities deemed to be qualified to implement
the card-based disbursement system. The full social security number of taxpayers will not be
released to such entities. 68 O.S. § 2385.16
Effective for Tax Year 2012
Income Tax Check-off:
House Bill 1852
Corporate and individual taxpayers will be provided the opportunity to donate for the benefit of
the Public School Classroom Support Revolving Fund. Monies from the fund may be expended
by the State Board of Educations for the purposes of providing grants to public school classroom
teachers. The State Board of Education shall award one or more grants annually to classroom
teachers for supplies, materials, or equipment. A donation may be made whether the taxpayer is
receiving a refund or has tax due. 70 O.S. § 1-122 (new law)
House Bill 1998
Corporate and individual taxpayers will be provided the opportunity to donate for the benefit of
domestic violence and sexual assault services in Oklahoma that have been certified by the
Attorney General. Donations may be used to provide grants to domestic violence and sexual
assault services providers for the purpose of providing domestic violence and sexual assault
services in Oklahoma. The term “services” include but are not limited to programs, shelters or a
combination thereof. 68 O.S. § 2368.22 (new law)
Corporate and individual taxpayers will be provided the opportunity to donate for the benefit of
volunteer fire departments in Oklahoma. Monies donated may be expended by the Office of the
State Fire Marshal for the purpose of providing grants to volunteer fire departments in this state
for the purchase of bunker gear, wildland gear and other protective clothing. 68 O.S. § 2368.23
(new law)
Corporate and individual taxpayers will be provided the opportunity to donate for the benefit of
the Oklahoma Lupus Revolving Fund. Monies donated may be used by the State Department of
Health to provide grants to the Oklahoma Medical Research Foundation for the purpose of
funding research into treating and curing Lupus in this state. 68 O.S. § 2368.24 (new law)
Amends two of the current income tax check-offs by removing the $25 limit on the amount that
can be donated to the Y.M.C.A. Youth and Government Program and to the Multiple Sclerosis
Society Fund. 68 O.S. §§ 2368.17 and 2368.21
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Senate Bill 949
Corporate and individual taxpayers will be provided the opportunity to donate for the benefit of
the Oklahoma Sports Eye Safety Program Revolving Fund. Monies donated will be expended by
the State Department of Health for the purposes of exploring opportunities to utilize nonprofit
organizations to provide sports eye safety equipment to children age 18 and under and
establishing a sports eye safety grant program for the purchase and distribution of sports eye
safety programs and materials to classrooms in this state and sports eye safety protective wear to
children age 18 and under. 68 O.S. § 2368.25 (new law)
Corporate and individual taxpayers will be provided the opportunity to donate for the purpose of
supporting music festivals held in the Historic Greenwood District. Monies donated will be
expended by the Oklahoma Historical Society for the purpose of promoting and supporting
music festivals in the Historic Greenwood District. 68 O.S. § 2368.26 (new law)
Effective for Tax Year 2013
Credits:
Senate Bill 969
Enacts the Oklahoma Equal Opportunity Education Scholarship Act under which two credits are
created; a credit for contributions to an eligible scholarship-granting organization and a credit for
contributions to an eligible educational improvement grant organization. Each credit will be 50%
of the total amount contributed but not to exceed $1,000 for a single individual, $2,000 for
married individuals filing jointly or $100,000 a legal business entity. However each credit has an
overall cap* and if the total credits eligible to be claimed for a particular credit exceed its
specified cap, the credit allowed will be reduced to the taxpayer’s proportionate share of the cap.
For any taxpayer who makes a contribution to an eligible educational improvement grant
organization, and makes a written commitment to contribute the same amount for the next two
years, the credit will be 75% of the total amount of the contribution made in the first year. Any
credits earned during the time period beginning August 26, 2011 through December 31, 2012,
may not be claimed until tax year 2013. Any credit allowed but not used will have a three-year
carryover provision.
A “scholarship-granting organization” means a nonprofit organization which distributes
scholarships so an eligible student, or an eligible special needs student, can attend an elementary
and secondary private school. An eligible student is one whose household income does not
exceed 300% of the income standard for free or reduced school lunch and who attended, or was
eligible to attend, a public school identified for school improvement under the No Child Left
Behind Act of 2001. Once a student has received an educational scholarship, the student and any
siblings who are members of the same household will remain eligible until they graduate from
high school or reach age 21, whichever occurs first. An eligible special needs student is a school
age special needs student who attended an Oklahoma public school with an individualized
education program for students with disabilities.
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An “educational improvement grant organization” means a nonprofit organization which
contributes at least 90% of its annual receipts as grants to eligible public schools for innovative
educational programs. An innovative educational program is an advanced academic or academic
improvement program that is not part of the regular coursework of a public school but that
enhances the curriculum or academic program of the school or provides early childhood
education programs to students.
* The total credit claimed by all individual taxpayers, and the total credit claimed by all business
entities, for contributions made to eligible scholarship-granting organizations are each separately
capped at $1.75 million annually. The total credit claimed by all individual and business entities
for contributions made to eligible educational improvement grant organizations is capped at $1.5
million annually. Each organization will provide the Tax Commission with information on each
contribution accepted during the year and will notify each contributor that Oklahoma law
provides for a total statewide cap on the amount of income tax credits allowed annually. The Tax
Commission will publish the percentage of the contribution which may be claimed for the most
recently completed calendar year on its website no later than February 15th and each organization
will notify contributors of that amount.
68 O.S. § 2357.206 (new law)
Ad Valorem Tax
House Joint Resolution 1002 - Effective upon approval of voters - Operative January 1, 2013
Amends Article 10, Section 8B of the Oklahoma Constitution modifying the maximum
allowable increase in any taxable year for locally assessed homestead and agricultural property
from 5% to 3%.
House Bill 1903 - Effective November 1, 2011
The postmark date of a return, claim, statement or other document or payment required to be
filed with a county assessor is deemed to be the date of delivery or the date of payment. The
measure outlines the specific conditions under which the postmark provisions apply and states
that these provisions do not apply to documents or payments required to be delivered by any
method other than by mailing. Further, the measure states that registration of a claim, statement,
or other document or payment sent by United States registered mail, shall be prima facie
evidence that the return, claim, statement, or other document or payment was delivered to the
applicable county assessor and the registration date deemed the postmark date. Also, the
measure provides that if the prescribed filing or payment period ends on or the filing or payment
date is a legal holiday as defined by 25 O.S. § 82.1 or any other day when the office of the
county assessor does not remain open for the regularly scheduled time then the prescribed period
or prescribed date shall be extended until the end of the next day upon which the office of the
county assessor is open for public business until the regularly scheduled closing time. 68 O.S. §
2802.2 (new law)
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Senate Bill 104 - Effective August 26, 2011
Allows county treasurers the option in lieu of regular mailing to instead send the tax statement
outlining the ad valorem taxes assessed against the taxpayer’s real and personal property for the
current year and all delinquent taxes for previous years by electronic mail provided the taxpayer
has submitted a written request to receive the statement electronically. 68 O.S. § 2915
Senate Bill 105 - Effective November 1, 2011
The measure mandates that the State Board of Equalization (Board) set a fee or schedule of fees
each year at its December 1 meeting to be used by county assessors for the search, production
and copying in electronic and/or digital format of property data, administration files, sketches
and pictures for the real property maintained within the county assessors’ computer systems for
commercial purposes. 68 O.S. § 2864
Senate Bill 935 - Effective January 1, 2012
The measure provides that an entity which has been granted a five-year manufacturing
exemption for a period which included calendar year 2009 but did not meet the base-line payroll
requirements during calendar year 2009 shall be allowed an exemption, to begin on January 1,
2013, for the number of years including calendar year 2009 remaining in the entity's five-year
exemption period, provided such entity attains or increases payroll at or above the base-line
payroll established for the exemption which was in force during calendar year 2009. 68 O.S. §
2902.
Cigarettes & Tobacco Products
Senate Bill 179 - Effective August 26, 2011
Clarifies that the sale of cigars packaged by the manufacturer in containers or tubes made of
glass to facilitate the sale of the item and not other prohibited purposes is not disallowed by the
provisions of this section of the Uniform Controlled Dangerous Substances Act. 63 O.S. § 2-
101.2
Gross Production & Petroleum Excise Taxes
House Bill 1488 – Effective January 1, 2012
Removes gold and silver from the levy of gross production tax as well as extends the sunset date
for certain gross production tax incentives from July 1, 2012, to July 1, 2014, for secondary and
tertiary projects, reestablished production, production enhancements, certain deep wells, new
discovery and 3-D seismic wells. 68 O.S. § 1001
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Senate Bill 587 - Effective August 26, 2011
Extends the sunset date for the tax rate on petroleum excise tax from July 1, 2011 to July 1, 2016
for both oil and natural gas to be levied at .095 of 1% of the taxable value realized from the first
sale of the product. 68 O.S. §§ 1101, 1102 and 1103
Senate Bill 885 - Effective August 26, 2011
Clarifies provisions that were previously amended under House Bill 2432 during the 2010
legislative session relating to certain horizontal and deep wells that qualify for a reduction of the
gross production tax rate. The previous amendment inadvertently excluded qualifying wells
which exist prior to July 1, 2011. 68 O.S. § 1001
Miscellaneous
Coin Operated Vending Device Fees
House Bill 1634 - Effective July 1, 2011
Decreases the annual fee for each coin operated music device, coin operated amusement device
and any coin operated vending device requiring a coin or thing valued at $0.25 cents or more
from $150 to $75. 68 O.S. § 1503.
Fireworks Licensing
House Bill 1475 - Effective August 26, 2011
Provides that every retail sale of fireworks by a wholesaler, distributor, manufacturer or retailer
shall be subject to sales tax. Further, the section requires that all retail fireworks locations must
possess a current sales tax permit which is to be conspicuously posted and immediately available
for examination. Also, the Section provides that vendors failing to collect sales tax shall be
subject to the penalties provided in Section 1361 of Title 68. 68 O.S. § 1634.
Senate Bill 844 - Effective May 1, 2012
Removes the language which allowed for a period of 60 days after the passage of Senate Bill
2253 [2010]1 for any licensed manufacturer, distributor, and wholesaler permitted to sell
fireworks at wholesale or retail2 to apply for a license and transfers the fireworks licensing and
fee collection responsibility from the Oklahoma Tax Commission to the State Fire Marshal’s
Office. The measure also provides that any person engaged in more than one of the licensed
1 Effective June 8, 2010.
2 In accordance with Section 1623 of Title 68 of the Oklahoma Statutes.
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activities−manufacturer, distributor or retailer−shall only pay one license fee based on the
classification requiring the higher fee. 68 O.S. § 1625
Waste Tire Recycling Fee
House Bill 1939 - Effective July 1, 2011
The measure renames the Waste Tire Recycling Act the Used Tire Recycling Act and increases
the $1.00 recycling fee for all tires with rim diameters of seventeen and one half inches or less to
$2.50. 27A O.S. §§ 2-11-401 and 2-11-403
Motor Fuels
House Bill 1815 - Effective January 1, 2012
Extracts compressed natural gas from the definition of special fuels, eliminates the special fuel
fee currently imposed on users of CNG and removes the requirement for issuance of the special
fuel decal for vehicles using CNG. In lieu of the special fuel fee, the measure levies a tax on the
sale of CNG in the amount of five cents ($0.05) per gasoline gallon equivalent (gge). 68 O.S. §§
500.4, 701, and 723
Motor Vehicle
Senate Bill 38 – Effective November 1, 2011
This bill modifies the Oklahoma Vehicle License and Registration Act, adding a definition of
"rebodied vehicle" to mean a vehicle that has been assembled using a new original manufacturer
licensed body or major component and is not a salvage, rebuilt or junked vehicle. It adds
“rebodied title” as an additional type of certificate of title that may be issued by the Oklahoma
Tax Commission. A “rebodied vehicle” will retain the replicated Yr/Make/Model notation, but
display an Oklahoma Assigned Number (OAN), instead of original VIN. 47 O.S. §§ 1102 and
1105
Senate Bill 902 - Effective January 1, 2012
Creates the Recreational Vehicle Franchise Act. The substance of this measure addresses the
dealer licensing requirements and the business relationship between licensed dealers and
manufacturers. The bill creates a new class of vehicle (recreational vehicle) for which new
dealer licenses and regulatory administration would be performed by the Oklahoma Motor
Vehicle Commission. The definitions for recreational vehicle and travel trailer differ somewhat
from the current definitions set forth in the Oklahoma Vehicle License and Registration Act,
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which also provides a definition for new and used travel trailer dealers. 47 §§ 596 - 596.16 (new
laws), 562, and 564.1
Sales & Use Tax
House Bill 1231 - Effective August 26, 2011
Removes the condition that the no file sales tax returns must be for consecutive periods before
referral to debt collection agency. 68 O.S. § 255
House Bill 1954 - Effective August 26, 2011
The measure provides that sales made to any person making purchases pursuant to a contractual
relationship for the construction and improvement of manufacturing goods, wares, merchandise,
property, machinery and equipment for use in a manufacturing operation shall be considered
sales to a manufacturer which is classified in the North American Classification System
(NAICS) Manual under Industry Group No. 324110 [Petroleum Refinery]. 68 O.S. § 1359(1).
Senate Bill 13 - Effective August 26, 2011
Amends the definition of “increment” to provide that regardless of taxable location or recipient
local public taxing entity increment includes local taxes or fees collected each year reasonably
determined by a formula approved by the governing body to be generated by the project which
may be apportioned for specific project costs or as a specific revenue source for other public
entities in the area in which the project costs take place. 62 O.S. § 853
Strikes contiguous from the description of a district3 that a city, town, or county may by
agreement jointly create with another entity and allows the governing body of a district to defer
creation of the district up to ten years after the approval date of the project plan. 62 O.S. § 856
Senate Bill 123 - Effective August 26, 2011
Provides for ten additional sales and use tax audit / enforcement personnel and authorizes
hearings under 68 O.S. § 212 to be conducted in at least two locations in the state to increase
sales and use tax collections. 68 O.S. § 1364.3 (new law)
Senate Bill 750 - Effective September 1, 2011
Authorizes municipalities under the stated conditions to engage in compliance activities either
directly or through contract with private persons or entities to augment the collection of
municipal tax by the Tax Commission. 68 O.S. § 2702(E).
3 Incentive District authorized by Section 860 of Title 62 or Increment District authorized by Section 861 of Title 62.
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Quality Jobs
Senate Bill 154 - Effective November 1, 2011
Changes the eligibility requirements for establishments to receive incentive payments pursuant to
the 21st Century Quality Jobs Incentive Act. Under current law if an establishment fails to meet
eligibility requirements in 4 consecutive quarters during a 39 quarter time period, that
establishment is ineligible for further incentive payments. This measure makes establishments
ineligible for further incentive payments if eligibility requirements are not met for 4 consecutive
quarters during the 28 quarter time period provided the establishment has met the eligibility
requirements within 12 quarters after their initial application. 68 O.S. § 3915
Senate Bill 731 - Effective November 1, 2011
Amends the Oklahoma Quality Jobs Program Act, specifically as it relates to qualified federal
contracts.
The measure 1) modifies the definition of a qualified federal contract, 2) allows the federal
contract verifier and the Department of Commerce to analyze work performed and work items
that would qualify as a basic industry, rather than the NAICS code of federal contractor for
eligibility, and 3) sets a priority for claiming the Quality Jobs incentive payments if neither the
subcontractor nor the federal contractor elects to defer the incentive payments.
68 O.S. §§ 3603 and 3604.1
Withholding
House Bill 1231 - Effective August 26, 2011
Provides authorization for the Tax Commission to refer to collection agencies withholding tax
accounts with two or more delinquent no file returns conditioned upon prior notification to the
taxpayer.
Administrative
House Bill 1044 - Effective November 1, 2011
Requires an agency filing rules under the Administrative Procedures Act to provide the citation
to any federal or state law, court ruling or any other authority requiring a new rule or amended
rule. It also requires any rule which establishes or increases fees, or any rule by an agency,
board, or commission created by Title 59 of the Oklahoma Statutes, to be approved by the
Legislature by joint resolution. If the Legislature fails to approve the rule on or before the last
day of session, the rule is deemed disapproved. 75 O.S. §§ 303.1 and 308.
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House Bill 1086 - Section 2 effective July 1, 2012; remaining Sections effective August 26, 2011
Creates the Transparency, Accountability and Innovation in Oklahoma State Government 2.0
Act of 2011; provides that payments disbursed from the State Treasury shall be issued through
electronic payments only (effective July 1, 2012); creates a website to provide public access to
electronic documents, publications and forms; requires state agencies to enter into a shared-services
arrangement with the Office of State Finance for the provision of payroll processing
services; creates a website to publish data on all state expenditures and state revolving funds; and
provides for an electronic receipt for reimbursement of registration fees and travel
reimbursement claims. 62 O.S. §§ 34.64, 34.11.1.1 (new law), 34.11.2, 34.11.3 (new law),
34.11.4 (new law), 34.11.5 (new law), 34.11.6 (new law), 34.11.7 (new law) and 34.11.8 (new
law); 74 O.S. §§ 20, 85.7e (new law), 500.13 and 500.15.
House Bill 1285 - Effective July 1, 2011
Creates the Task Force for the Study of State Tax Credits and Economic Incentives. The ten
member task force shall hold their first meeting no later than September 30, 2011 and submit a
final written report of its findings and recommendations regarding transferable tax credits no
later than December 31, 2011. 68 O.S. § 2357.1A-1 (new law).
House Bill 1489 - Effective January 1, 2012
Requires specific data on road funding to be placed on the “Open Books” website. The
information must include historical and current revenue collections and apportionment data on
fuel tax collections, gross production tax collections, motor vehicle collections and motor vehicle
excise tax collections.
Removes the date-specific directive to the Tax Commission to prepare and maintain a list of all
taxpayers who claimed any tax credit beginning in tax year 2011. The removal would result in
the directive to the Commission to be effective upon the effective date of the bill, or January 1,
2012. 68 O.S. § 205.6
Senate Bill 541 - Effective August 26, 2011
Creates the Oklahoma Innovation, Efficiency and Accountability Act of 2011.
Authorizes state agencies to accept an electronic signature in the application process for any
license or permit excluding driver license renewal applications; provided, the use of an electronic
signature does not create a significant risk to the integrity of the license or permit. 62 O.S. §
41.5p-1 (Recodified as 62 O.S. § 34.24.1)
Senate Bill 772 - Effective August 26, 2011
Creates the Business and Professional License Facilitation Task Force to evaluate the feasibility
of establishing a central contact point or agency for the facilitation of business and professional
licenses and applications in Oklahoma by studying existing governmental models in other states.
The task force will make a report of its findings and recommendations no later than December 1,
2011.