This bill amends Section 2355 of the Oklahoma income tax law, introducing new tax brackets and rates for individuals from 2024 to 2032, with a plan for the complete elimination of income tax for individuals by 2032. The new tax rates for single individuals will begin at 0.25% for the first $1,000 in 2024, increasing to 4.75% on the remainder, while married individuals filing jointly will have a similar structure with slightly higher thresholds. The bill also specifies that no deductions for federal income taxes paid will be allowed in calculating taxable income. Additionally, it updates statutory language and references, incorporating the Internal Revenue Code of 1986 and replacing previous references to sections 4 and 5 with new sections 2355.1F and 2355.1G, making tax rate adjustments contingent upon determinations by the State Board of Equalization.

Moreover, the bill proposes significant changes to the taxation of nonresident aliens and corporations in Oklahoma, establishing a new tax rate of eight percent (8%) for nonresident aliens on their Oklahoma taxable income, replacing the previous thirty percent (30%) rate. It also mandates that payers deduct and withhold this tax from payments made to nonresident aliens, with specific reporting requirements to the Oklahoma Tax Commission. For corporations, a new four percent (4%) tax on Oklahoma taxable income replaces the previous thirty percent (30%) rate, applicable to all taxable years beginning after December 31, 2021. The bill further introduces a four percent (4%) tax rate for foreign corporations on income derived from Oklahoma sources and clarifies that trusts and estates will be taxed at the same rates as single individuals, without allowing deductions for federal income tax paid. The act is set to take effect on November 1, 2025.

Statutes affected:
Introduced: 68-2355