Current through Vol. 42, No. 1, September 16, 2024
(a)
General provisions. Certain
exemptions for the levy of Oklahoma income tax may be allowed for income earned
by qualifying sponsors and tenants pursuant to the provisions of the Small
Business Incubators Incentive Act (74 O.S. §5071 et seq.)
(b)
Definitions. The following
words and terms, when used in this Section, shall have the following meaning,
unless the context clearly indicates otherwise:
(1)
"Act" means the Small
Business Incubators Incentives Act (74 O.S. §5071 et seq.).
(2)
"Arm's-length basis" means
that standard under which unrelated parties, each acting in his or her own best
interest, would carry out a particular transaction.
(c)
Exemption for sponsors. For
tax years ending before January 1, 2020, income earned by a sponsor from rental
fees, service fees or any other form of payment for services provided to a
tenant as an operator of an incubator, or for providing funding for such a
facility, shall be exempt from state income tax for a period not to exceed ten
(10) years from the date of the tenant's occupancy in an incubator. Procedures
applicable to sponsors under the Act are as follows:
(1) An approved copy of the Small Business
Incubator Incentives Program application must be submitted with the Oklahoma
Income Tax Return when it is filed with the Oklahoma Tax Commission.
(2) The amount of exemption will be limited
to the net income. If the sponsor is involved in other operations, allocations
of overhead applicable to the income must be made on an arm's-length basis.
(3) An audit may be made to verify
the income received and expenses relating to the business.
(4) An allowable Oklahoma NOL carryback or
carryover shall not include any income or loss attributable to this Section.
(5) Income exempt from income tax
is limited to that listed in the Act.
(d)
Exemption for tenants.
Procedures applicable to tenants under the Act are as follows:
(1) The amount of exemption will be limited
to the net income. If the tenant is involved in other operations, allocations
of overhead applicable to the income must be made on an arm's-length basis.
(2) An audit may be made to verify
the income received and expenses relating to the business. If the tenant is
organized as either a Subchapter S Corporation or a partnership, the exemption
may flow through to the shareholder or partner, as applicable.
(3) An allowable Oklahoma NOL carryback or
carryover shall not include any income or loss attributable to this Section
which is the result of such operation. [See: 74 O.S.
§§5075(B), 5078(B)]
(4)
The period of income exemption for income earned as a result of activities
conducted as an occupant, for tenants of incubators is ten (10) years from the
date of occupancy in the incubator. The tenant is not required to be an
occupant of the incubator for the full ten (10) years to receive the exemption,
however, the exemption period cannot exceed a total of ten (10) years for any
tenant.
(5) For tax years ending
before January 1, 2020, the exemption is applicable in years six (6) through
ten (10) only if the tenant makes at least seventy-five percent (75%) of its
gross sales to buyers located outside of Oklahoma, to buyers whose principal
business activity is located outside of Oklahoma, to the federal government, or
to buyers in this state if the product or service is resold to an out-of-state
customer or buyer for ultimate use. In years six (6) through ten (10), failure
of a tenant to achieve the qualifying percentage for the exemption in any
single year will not result in disqualification for subsequent years.
[See: 74 O.S. § 5078]
Added at 10 Ok Reg
3837, eff 7-12-93; Amended at 15 Ok Reg 2811, eff 6-25-98; Amended at 19 Ok Reg
2433, eff 6-27-02; Amended at 20 Ok Reg 2165, eff
6-26-03
