A reduction in the rate of Oklahoma income tax has passed both chambers and is now on the way to the governor and the Oklahoma Supreme Court upholds the state capital gains tax deduction. A good day by any standard for taxpayers.
President Pro Tempore Brian Bingman is principal author of the income tax cut legislation, which now goes to Gov. Mary Fallin for her consideration.
“This plan represents a fiscally responsible way to lower Oklahoma’s income tax rate, fulfilling a commitment we made to our citizens last year. It’s going to bolster our ongoing efforts to help Oklahoma better compete for high pay jobs that will help our citizens, communities and state prosper. With the House giving its final approval, we look forward to Governor Fallin signing this tax relief measure into law,” said Pres. Pro Tem Brian Bingman, R-Sapulpa.
Senate Finance Chair Mike Mazzei co-authored SB 1246 and presented the measure on the floor of the Senate earlier this session.
SB 1246 will reduce the state’s income tax rate from 5.25 percent to 5 percent beginning with tax year 2016, if certified revenues for FY 2016 at least equal the certification level for FY 2014. The legislation would further reduce the state’s top income tax rate no sooner than two years later to 4.85 percent if there is sufficient revenue growth to fund the reduction.
Sen. Mazzei also commented on Oklahoma Supreme Court ruling in CDR Systems vs. Oklahoma Tax Commission which upheld the state capital gains tax deduction. Oklahoma law requires that a company’s primary headquarters must be in Oklahoma to claim a specific type of capital gains deduction on its Oklahoma return. If the Court had ruled Oklahoma’s entire capital gains statute unconstitutional, the state could have potentially been exposed to as much as $400 million in income tax refunds.
Sen. Mazzei said, “This is an important decision for our state. Given the budget challenges we’re facing, the Supreme Court ruling is extremely good news for Oklahoma. We can now move forward confidently on important decisions for funding core services and providing Oklahomans with tax relief.
“This is also great news for Oklahoma business owners, farmers, ranchers and companies who invest in our state. Had the decision gone the other way, we would have been faced with the very unpleasant prospect of having to eliminate the deduction. It would have been a huge blow to many Oklahomans,” Mazzei added.
CDR, a company headquartered in Florida with holdings in Oklahoma, sold its Oklahoma assets in 2008 and claimed a capital gains deduction on its Oklahoma return. The Tax Commission denied the claim based on statutory criteria which include a requirement that the company’s primary headquarters be in Oklahoma. The Court of Civil Appeals reversed the Commission’s decision, finding that the requirement violated the interstate commerce clause of the U. S. Constitution. In Tuesday’s decision, the Supreme Court reversed the decision of the lower court, finding that, “there is no discrimination against interstate commerce” and that the Commission, “properly denied the capital gains deduction to CDR.”