This bill amends Oklahoma's income tax laws by introducing a tiered structure for individual income tax rates, effective for taxable years beginning on or after January 1, 2024. The new rates start at 0.25% and increase based on income brackets, capping at 4.75% for higher income levels. Additionally, for taxable years starting January 1, 2025, the bill mandates a further reduction of these rates by dividing the current rates by ten, with the ultimate goal of eliminating the income tax altogether. For corporations, the bill reduces the corporate income tax rate from four percent to a lower percentage based on the same tiered structure, also effective January 1, 2025. It further reduces the tax rate for nonresident aliens from thirty percent to eight percent or a lower applicable rate.

The legislation also introduces a new framework for taxing electing pass-through entities, where the tax will be calculated based on the members' distributive shares of the entity's net income. Individual members will be subject to the highest Oklahoma marginal income tax rate, while corporations and other entities will be taxed at a flat rate of four percent. The bill allows for the aggregation of tax amounts from all members to determine the total tax due and outlines conditions for nonresident individuals to be exempt from filing if their income solely comes from compliant electing pass-through entities. The new tax rates will apply starting January 1, 2025, and will gradually reduce until reaching zero, eliminating income tax in subsequent years.

Statutes affected:
Introduced: 68-2355