Oklahoma § 68-2354 - Optional transitional deduction

§ 68-2354. Optional transitional deduction

A. If a taxpayer (including a partnership) shall have been

required to report his taxable income to the State of Oklahoma for

years prior to the effective date of this act, in a manner different

than he has been required to report his federal income for the same

period of time, and, as a consequence of the differences in

reporting income during that period of time, has a different basis

of assets for gain or loss through the taking of different amounts

for depletion, depreciation or amortization, or shall have a

different amount of some prepaid income or deferred expense or other

similar balance sheet item, such taxpayer shall be entitled, at his

option, to a transitional deduction. The determination of the

amount of the deduction shall be made as though an application to

change accounting method had been granted and shall include all

items subject to adjustment, whether resulting in an increase or

decrease in the transitional deduction. Items subject to adjustment

shall be only those which:

1. Have been treated differently in determining amounts subject

to tax under Oklahoma and federal income tax laws which were

applicable in a prior period;

2. Have been an element in determining Oklahoma income subject

to tax in periods with respect to which Oklahoma income tax was

paid; and

3. Except for the required change in reporting income, would

have produced in a subsequent taxable period an adjustment to income

subject to tax on account of the differences in federal and Oklahoma

tax reporting.

Items subject to adjustment may consist of deductions taken or

not taken in prior years, or amounts of income required to be

included or excluded in such years, but such items shall be

disregarded to the extent it can be shown that the prior treatment

of such items had no actual effect on the amount of Oklahoma income

tax paid; in making such showing, no items other than the items

subject to this transitional adjustment shall be considered.

Oklahoma Statutes - Title 68. Revenue and Taxation

No net addition to Oklahoma taxable income shall be required by

reason of this section, but, at the election of the taxpayer, a

deduction in the amount of such net adjustment shall be available as

provided below.

B. An affirmative election to use the optional transitional

deduction shall be made on the income tax return filed for the first

taxable period in which a deduction under this section is allowable,

on or before the due date of the return including any extension of

time granted in which to file said return or on an amended return.

Failure to claim such deduction within three (3) years shall be

deemed an election not to claim the optional transitional deduction.

C. The net deduction allowable under this section shall be

deductible only in equal amounts of one-third (1/3) each over the

first three taxable periods ending after the effective date of this

act except that if such net deduction is less than Twenty-five

Thousand Dollars ($25,000.00) the deduction shall be allowable in

full in the first taxable period after the effective date hereof to

the extent of the taxpayer's taxable income and to the second and

third taxable period thereafter to the extent not previously taken

in the earliest successive taxable year. In no event shall the

deduction allowed under this section be carried back or applied

against income for years prior to the effective date of this act or

carried forward to any taxable year subsequent to the third full

taxable year following the effective date hereof.

Added by Laws 1971, c. 137, § 4. Amended by Laws 1971, p. 1042,

H.J.R. No. 1026, § 2A2, emerg. eff. June 22, 1971.