1 STATE OF OKLAHOMA
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2 2nd Session of the 59th Legislature (2024)
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3 HOUSE BILL 3559 By: Kendrix
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6 AS INTRODUCED
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7 An Act relating to revenue and taxation; amending 68
7 O.S. 2021, Section 2355.1P-4, which relates to
8 computation of the pass-through entity tax and
8 elections; modifying permissible methods for making
9 election; authorizing election pursuant to timely
9 filed income tax return; and providing an effective
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14 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
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15 SECTION 1. AMENDATORY 68 O.S. 2021, Section 2355.1P-4,
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16 is amended to read as follows:
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17 Section 2355.1 A. For tax years beginning on or after January
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18 1, 2022, there is hereby levied on each electing pass-through entity
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19 the pass-through entity tax which shall be calculated as follows:
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20 1. With regard to each member of an electing pass-through
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21 entity, the electing pass-through entity shall multiply such
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22 member's Oklahoma distributive share of the electing pass-through
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23 entity's Oklahoma net entity income for the tax year by:
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 1 a. the highest Oklahoma marginal income tax rate levied
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2 on the taxable income of natural persons pursuant to
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3 Section 2355 of this title if the member is an
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4 individual, trust, or estate,
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5 b. four percent (4%) if the member is classified as a
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6 corporation pursuant to the Internal Revenue Code, and
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7 is not classified as an S corporation,
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8 c. four percent (4%) if the member is a pass-through
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9 entity,
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10 d. four percent (4%) if the member is a financial
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11 institution subject to tax imposed pursuant to the
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12 provisions of Section 2370 of this title, and
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13 e. the highest Oklahoma marginal income tax rate that
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14 would be applicable to any item of the electing pass-
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15 through entity's income or gain without the election
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16 made pursuant to subsection F of this section, if the
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17 member is an organization described in Section 2359 of
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18 this title; and
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19 2. The electing pass-through entity shall aggregate the amounts
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20 determined with respect to all members pursuant to paragraph 1 of
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21 this subsection and the pass-through entity tax for the applicable
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22 tax year shall be equal to such aggregated tax amount for the tax
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23 year with respect to which the election has been made.
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 1 B. Sections 2385.29, 2385.30 and 2385.31 of this title shall
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2 not be applicable to an electing pass-through entity.
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3 C. The pass-through entity tax shall be due and payable on the
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4 same date as provided for the filing of the electing pass-through
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5 entity's Oklahoma income tax return, and for tax years beginning on
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6 or after January 1, 2020, estimated tax payments shall be required
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7 as provided in Section 2385.9 of this title.
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8 D. If the pass-through entity election results in a net entity
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9 loss for Oklahoma income tax purposes in any tax year, the net
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10 entity loss may be carried back and carried forward by the electing
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11 pass-through entity for Oklahoma income tax purposes as set forth in
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12 subparagraph b of paragraph 3 of subsection A of Section 2358 of
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13 this title.
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14 E. Notwithstanding paragraph 2 of subsection C of Section 2368
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15 of this title, a nonresident individual who is a member of an
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16 electing pass-through entity is not required to file an Oklahoma
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17 income tax return, if, for the taxable year, the only source of
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18 income allocable or apportionable to this state for the member, or,
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19 if a joint income tax return is filed, the member and his or her
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20 spouse, is from one or more electing pass-through entities, and each
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21 electing pass-through entity files and pays the taxes due under this
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22 section.
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23 F. Any entity required to file an Oklahoma partnership income
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24 tax return or an Oklahoma S corporation income tax return may elect
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 1 to become an electing pass-through entity. The election shall be
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2 made on such form and in such manner as the Oklahoma Tax Commission
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3 may prescribe, and any election under this subsection shall have
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4 priority over and revoke any election to file a composite Oklahoma
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5 partnership return or requirement of a Subchapter S corporation to
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6 report and pay tax on behalf of a nonresident shareholder for the
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7 same tax year. An election may also be made by filing an income tax
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8 return prior to but not later than the due date of the applicable
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9 income tax return, including any extension.
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10 G. Pursuant to procedures prescribed by the Tax Commission, if
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11 the amount of tax required to be paid by a pass-through entity
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12 pursuant to the provisions of this section is not paid when due, the
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13 Oklahoma Tax Commission may revoke the pass-through entity's
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14 election under subsection F of this section effective for the first
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15 year for which the tax is not paid.
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16 H. The election authorized by the provisions of this section
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17 shall be made pursuant to procedures prescribed by the Tax
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18 Commission and shall be filed (i) within sixty (60) days of
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19 enactment and pursuant to procedures prescribed by the Oklahoma Tax
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20 Commission for any income tax year beginning on or after January 1,
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21 2019, and prior to January 1, 2020, or (ii) for any income tax year
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22 beginning on or after January 1, 2020, at any time during the
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23 preceding tax year or two (2) months and fifteen (15) days after the
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24 beginning of the tax year or by filing a timely income tax return as
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 1 authorized pursuant to subsection F of this section. Any such
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2 election shall be binding until revoked pursuant to procedures
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3 prescribed by the Tax Commission. The effective date of a
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4 revocation (i) made within two (2) months and fifteen (15) days of
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5 the electing pass-through entity's taxable year shall be the first
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6 day of such taxable year and (ii) made during the electing pass-
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7 through entity's taxable year but after such fifteenth day shall be
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8 effective on the first day of the following taxable year. No
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9 election made by a pass-through entity with respect to income tax to
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10 be paid by such entity using the calculations prescribed by this
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11 section shall be binding on any other pass-through entity, and each
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12 pass-through entity shall be able to make an election under the
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13 provisions of this act independently.
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14 SECTION 2. This act shall become effective November 1, 2024.
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16 59-2-8980 MAH 01/07/24
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