Revenue and taxation; certain income tax deduction; taxable years for which deductible allowable; effective date.

Oklahoma investors get deductions with withdrawal limits

The law takes effect January 1, 2027, and covers tax years 2022 through 2031. Investors who meet federal accredited-investor standards can deduct qualifying investments from Oklahoma taxable income or adjusted gross income. Investments must be cash or its equivalent, exchanged for equity in an eligible Oklahoma venture capital company. That company must primarily raise money to invest in for-profit businesses, including eligible Oklahoma business ventures. The deduction equals the qualifying investment, up to $25 million per investor each tax year. It cannot reduce the applicable income below zero, and unused amounts cannot carry forward. Individuals cannot get their investment back through redemption or repurchase within three years; business investors face a five-year restriction. These restrictions also cover related entities, including entities owning at least 51% of a business investor’s voting equity. Allowed payments must be agreed upon before or when the investment is made and depend on specified financial performance. Investors and venture capital companies must keep equity records for at least five years; deduction stacking and other ways around the rules are prohibited. The Oklahoma Center for the Advancement of Science and Technology oversees eligibility, can issue enforcement rules, and must publish annual reports. Its review considers Oklahoma location, jobs, public revenue, economic benefits, investment type and size, capitalization plans, and industry. The Oklahoma Tax Commission must notify investors when it disallows a deduction and recalculate their taxes; investors retain appeal rights.