Oklahoma tax lien certificate

Multiple taxes: Amendments affect credits, pass-throughs, e-filing

Numerous changes are made to Oklahoma corporate income, personal income, property, sales and use, inheritance, and motor fuels taxes, the insurance premiums tax, and administrative provisions.

Biomedical research institute credit: Effective for tax years beginning after 2004, unless suspended by the State Board of Equalization, a credit is available against corporate income and personal income taxes for a donation to an independent biomedical research institute. The credit is equal to 50% of the amount donated up to a credit of $1,000, per taxpayer, for calendar years 2005 and 2006. After 2006, the credit percentage is adjusted so that the total estimate of credits does not exceed $2 million annually. Unused credits may be carried over for four years following the year of qualification. The credit is suspended if the revenue projection certified by the State Board of Equalization is less than the appropriations limit for the current fiscal year.

Pass-through entities: A taxpayer's distributive share of a limited liability company's (LLC's) income, gains, losses, or deductions is included for purposes of computing Oklahoma adjusted gross income.

In addition, pass-through entities are required to withhold 5% of the Oklahoma share of income the entity distributed to each nonresident member unless the entity is exempt under IRC [sec]501(c)(3) or 68 O.S. 2359. A penalty of 10% is imposed if the pass-through entity fails to file a return or pay the money withheld to the Tax Commission. Finally definitions of "member," "nonresident," and "pass-through entity," are added for purposes of pass-through entity withholding requirements.

S&U tax: Effective October 1, 2003, all sellers or vendors participating in the Tax Commission's electronic funds transfer (EFT) and electronic data interchange program are allowed a collection discount of 2.25% of the tax due as compensation for keeping sales tax records, filing reports, and remitting the tax when due. All other sellers or vendors are allowed a collection discount of 1.25% of the tax due. The Tax Commission may allow a nonparticipating vendor the 2.25% collection discount if the Tax Commission determines that the vendor cannot participate in the EFT and electronic data interchange program.

The promoters or organizers of a special event must submit an application, along with a $50 fee, to the Tax Commission, at least 20 days prior to the special event, under a new law regarding such events, effective July 1, 2003. Daily reports, payment to the Tax Commission, and a completed sales tax report must be filed within 15 days after the event ends.

The definitions of "manufacturing" and "manufacturing operation" are amended. The definition of "manufacturing" does not include oil and gas field processes, such as natural pressure reduction, mechanical separation, heating, cooling, dehydration, and compression. Extractive activities and field processes, even when performed by a person otherwise engaged in manufacturing, are not included in the definition of "manufacturing operation." Also, tangible personal property, including machinery and equipment used in extractive industrial activities, is not eligible for the manufacturing exemption even if the activity or process in which it is used is performed in conjunction with or is integrated into a manufacturing operation. Finally, sales of tangible personal property or services to the Broken Bow Economic Development Authority are exempt from sales and use tax.

Interest on certain overpayments: For tax years beginning after 2003, interest is due on overpayments of Oklahoma personal income and corporate income taxes if the refund is not paid within 30 days after a return is due or is filed electronically and all required documents are filed with the return, or within 150 days after all other returns are filed. The interest is paid at the same rate for interest on delinquent tax payments.

Set-off procedure revised: The procedure by which a state agency or a district court that holds a final judgment for $50 or more may recover the amount owed from a debtor's tax refund is revised. The agency or court now must file a request with the Oklahoma Tax Commission electronically to have the amount of the debt or judgment withheld from the debtor's state income tax refund. A taxpayer has 60 days (previously, 30 days), from the date of receipt of notice of the claim to dispute the claim and request a hearing by sending a written request to the state agency or district court. Notice of the claim is mailed by the Tax Commission to the taxpayer's last-known address. A taxpayer forfeits his or her right to dispute the claim if a claim is not filed within the 60-day period. The set-off provisions do not apply to tax relief for the elderly and disabled or to sales tax relief.

E-filing: Provisions concerning electronic filing are amended and added. The Tax Commission may file releases of property from the lien of a warrant, certificate, judgment or levy electronically. Previously, all releases were delivered to the taxpayer and filed with the appropriate county clerk. Also, a tax return preparer who prepared more than 50 Oklahoma tax returns for the prior year must file all current tax year returns electronically. Finally, effective October 1, 2003, every employer owing an average of $5,000 or more per month in personal income tax withholding in the previous fiscal year must file returns using the Tax Commission's electronic data interchange program.

Use of computer server: The Tax Commission is authorized to enter into a contract with any entity it deems qualified for the use of a computer server to identify taxpayers who have not registered with the Tax Commission, taxpayers who have not filed returns, and taxpayers who are under-reporting their income or revenue. Previously, the Tax Commission was only authorized to enter into a contract with Cameron University for similar services.

Gift of life insurance policy and inheritance tax: For Oklahoma inheritance tax purposes, a gift of a life insurance policy is assumed to have been made in contemplation of death if it takes place within three years prior to death, even when it is properly excluded from the decedent's federal taxable gifts or is treated as a taxable federal gift because the decedent agreed to have a gift made by his or her spouse treated as made one-half by the decedent.

Motor fuels taxes: When reporting a payment for motor fuels taxes, previously deemed uncollectible, all payments are applied first to the fuel sold and tax on that fuel, and then to interest and all other charges. Also, temporary motor fuel/diesel permits may be issued by facsimile or any other way the Tax Commission decides is appropriate. (H.B. 1356, Laws 2003, effective July 1, 2003, and as noted above.)