House Bill No. 2740, introduced by Kendrix, seeks to amend Oklahoma's income tax laws by implementing a flat tax rate of 4.75% on all taxable income for individuals, replacing previous tax rates set to take effect in 2024. The bill also modifies Section 2358 of the Oklahoma Statutes to clarify the calculation of taxable income and adjusted gross income, explicitly stating that no deductions for federal income taxes paid will be allowed. Additionally, it introduces new provisions for the apportionment of taxable income for manufacturing, processing enterprises, and insurance companies, as well as a tax exemption for owners of new or expanded agricultural commodity processing facilities.

Moreover, the bill addresses various deductions and exemptions, including those related to military service, retirement benefits, and adoption expenses. It establishes that retirement benefits from the Armed Forces will be fully exempt from taxable income starting in tax year 2022 and introduces a deduction for individuals who donate human organs. The bill also modifies the treatment of capital gains and clarifies definitions for real estate investment trusts (REITs). Overall, the bill aims to streamline the tax code, provide tax relief to specific groups, and ensure compliance with federal tax standards, with an effective date for certain provisions set for January 1, 2026.

Statutes affected:
House Committee Substitute: 68-2355, 68-2358
Floor (House): 68-2355, 68-2358
Sub Committee OR Policy Committee Recommendations (House) Sub Committee Recommendation: 68-2355, 68-2358