1 STATE OF OKLAHOMA
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2 1st Session of the 59th Legislature (2023)
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3 SENATE BILL 378 By: Hall
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6 AS INTRODUCED
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7 An Act relating to income tax; amending 68 O.S. 2021,
7 Section 2358.110, which relates to deduction for
8 qualified equity investments; modifying definition;
8 updating statutory language; and providing an
9 effective date.
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12 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
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13 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2358.110, is
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14 amended to read as follows:
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15 Section 2358.110. A. As used in this section:
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16 1. “Accredited investor” means a person or entity as defined
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17 pursuant to Section 230.501 of Title 17 of the Code of Federal
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18 Regulations;
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19 2. “Eligible Oklahoma business venture” means a lawful business
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20 entity that is determined by the Oklahoma Department of Commerce for
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21 receipt of an equity investment by an eligible Oklahoma venture
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22 capital company. In determining whether an investment is a
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23 qualified equity investment, the Department shall consider the
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 1 potential impact the investment would have on the local and state
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2 economy and shall consider the following factors:
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3 a. the primary location of the entity,
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4 b. the number of employees located or to be located in
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5 this state,
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6 c. state and local revenues generated from the
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7 investment,
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8 d. the economic benefits to the state,
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9 e. the type and amount of the investment,
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10 f. the current capitalization level and strategy, and
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11 g. the industry classification of the entity;
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12 3. “Eligible Oklahoma venture capital company” means a lawfully
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13 recognized business entity the primary business purpose of which is
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14 to accumulate funds for making investments in lawful for profit
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15 business entities and which is organized in any of the following
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16 forms:
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17 a. general partnership,
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18 b. limited partnership,
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19 c. limited liability partnership,
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20 d. limited liability company,
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21 e. corporation, or
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22 f. other lawfully recognized business entity;
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23 4. “Lawful business entity” means the following:
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24 a. a person,
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 1 b. a general partnership,
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2 c. a limited partnership,
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3 d. a limited liability partnership,
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4 e. a limited liability company, or
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5 f. a corporation; and
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6 5. “Qualified equity investment” means a transfer of cash or
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7 its equivalent by an accredited investor to an eligible Oklahoma
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8 venture capital company that is invested with an eligible Oklahoma
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9 business venture and for purposes of the deduction authorized by
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10 this section in an amount not in excess of Twenty-five Million
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11 Dollars ($25,000,000.00) by an accredited investor during a taxable
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12 year.
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13 B. For tax years 2022 through 2026, there shall be allowed a
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14 deduction from Oklahoma taxable income or Oklahoma adjusted gross
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15 income as determined pursuant to Section 2358 of Title 68 of the
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16 Oklahoma Statutes equal to the amount of qualified equity investment
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17 in an eligible Oklahoma venture capital entity made by an accredited
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18 investor.
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19 C. The maximum amount of qualified equity investment made by an
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20 accredited investor for purposes of the deduction authorized by this
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21 section shall not exceed Twenty-five Million Dollars
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22 ($25,000,000.00) for any taxable year of the investor.
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23 D. Any qualified equity investment made for purposes of the
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24 deduction authorized by this section shall be documented by the
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 1 issuance of shares of stock, membership interest or other evidence
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2 of the equity interest acquired by the accredited investor. Such
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3 evidence may take the form of physical shares or the electronic
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4 equivalent of physical shares.
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5 E. Records of the equity interest acquired by an accredited
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6 investor shall be maintained by the accredited investor and the
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7 eligible Oklahoma venture capital company for a period of at least
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8 five (5) years from the date the equity investment is made by an
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9 accredited investor.
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10 F. A qualified equity investment made by an accredited investor
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11 for purposes of the deduction authorized by this section shall not
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12 be returned by the eligible Oklahoma venture capital company to the
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13 accredited investor, if the accredited investor is a natural person,
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14 or to any person related to such natural person within the third
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15 degree of consanguinity or affinity, for a period of three (3) years
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16 from the date of the qualified equity investment unless the return
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17 is in the form of a dividend or other payment agreed to prior to or
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18 simultaneously with the equity investment transfer from the
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19 accredited investor to the eligible Oklahoma venture capital company
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20 and only if the return of some part of the qualified equity
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21 investment is based on the financial performance of either the
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22 eligible Oklahoma venture capital company or the financial
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23 performance of one or more for profit business entities in which the
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24 accumulated equity funds of the eligible Oklahoma venture capital
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 1 company are further invested or both such measures of financial
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2 performance.
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3 G. A qualified equity investment made by an accredited investor
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4 for purposes of the deduction authorized by this section shall not
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5 be returned by the eligible Oklahoma venture capital company to the
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6 accredited investor if the accredited investor is a lawful business
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7 entity, or to any entity which owns fifty one fifty-one percent
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8 (51%) or more of the voting equity interest of the accredited
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9 investor or to any lawful business entity with respect to which the
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10 accredited investor owns fifty one fifty-one percent (51%) or more
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11 of the voting equity interest, within a period of five (5) years
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12 from the date of the equity investment unless the return is in the
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13 form of a dividend or other payment agreed to prior to or
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14 simultaneously with the equity investment transfer from the
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15 accredited investor to the eligible Oklahoma venture capital company
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16 and only if the return of some part of the qualified equity
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17 investment is based on the financial performance of either the
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18 eligible Oklahoma venture capital company or the financial
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19 performance of one or more for profit business entities in which the
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20 accumulated equity funds of the eligible Oklahoma venture capital
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21 company are further invested or both such measures of financial
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22 performance.
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23 H. The deduction authorized by the provisions of this section
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24 shall not be used to reduce the Oklahoma taxable income amount or
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 1 the Oklahoma adjusted gross income amount to less than zero (0).
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2 There shall not be any carryover with respect to a deduction
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3 authorized by the provisions of this section.
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4 I. If the Oklahoma Tax Commission determines, either from
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5 information accompanying any applicable income tax return or
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6 schedule, form or supporting documentation filed in order to claim
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7 the deduction authorized by this section, that the requirements of
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8 this section were not fulfilled, the Oklahoma Tax Commission shall
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9 notify the taxpayer claiming the deduction that the deduction has
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10 been disallowed and the income tax lability for the taxpayer shall
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11 be recalculated. The taxpayer shall retain all rights authorized
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12 pursuant to the provisions of the Uniform Tax Procedure Code and the
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13 Oklahoma Income Tax Code in order to contest the disallowance of
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14 part or all of such deductions.
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15 J. The Department may promulgate rules to enforce the
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16 provisions of this act. The Department shall annually publish a
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17 report on the program created in this section.
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18 SECTION 2. This act shall become effective November 1, 2023.
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20 59-1-1227 QD 1/15/2023 5:46:20 PM
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