A trio of bills — HB 2960, HB 2962 and HB 2963 — signed by Oklahoma Governor Kevin Stitt on May 21, 2021, reduces the income tax rates for corporations, individuals and pass-through entities, respectively. Another bill, HB 2961, signed by the governor on May 24, 2021, reduces the rate of the bank privilege tax.

Effective for tax years beginning on or after January 1, 2022:

• The income tax rate imposed on corporations and foreign corporations is reduced to 4% (from 6%)
• The bank privilege tax rate is reduced to 4% (from 6%)
• The pass-through entity tax imposed on non-individual members is reduced to 4% (from 6%)
• The pass-through entity tax imposed on individual members is reduced to 4.75% (from 5%) (i.e., the highest marginal income tax rate imposed on natural persons)

Effective for tax years beginning on or after January 1, 2022, each of the individual income tax rates is reduced as follows:

Implications

Given that the income tax rate reduction bills were signed into law on May 21, 2021, and May 24, 2021, relevant changes will be considered a second-quarter event for financial statement purposes for Oklahoma calendar-year taxpayers.

Further, starting in 2022, Oklahoma taxpayers will need to take these rate reductions into consideration when calculating their estimated tax payments and income tax withholding for their employees.

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