Harrison & Mecklenburg, Inc. Full-Service Law Firm Serving Kingfisher, Stillwater & Watonga

Pass-Through Entity Tax Equity Act of 2019

Governor Stitt signed House Bill 2665 on April 29, 2019, allowing Oklahoma pass-through entities to pay Oklahoma income tax at the entity level. This is known as the Pass-Through Entity Tax Act of 2019. This new law allows Oklahoma income tax to escape the federal deduction limitation for state and local tax payments on individual tax returns. In essence, the pass-through entity would elect to pay the tax at the entity level, which would make the income from the entity non-taxable at the owner level for Oklahoma income tax. This reduces the Oklahoma income tax at the individual level and thereby avoids the federal limitation deduction on state and local tax payments.

A “pass-through entity” means a general partnership, a limited partnership, a limited liability partnership, a limited liability company, or a corporation.

We know this is confusing, but it is something that every pass-through entity should consider doing. For 2019, the election must be made by June 28, 2019.

This law is very new and there are several unanswered questions, but it is something that needs to be acted on quickly for the tax year 2019. The Oklahoma Tax Commission is to write rules to implement this law. If you would like to discuss this, please contact this firm.