§ 68-1225. Definitions - Consolidated groups - Combined groups.

A.  The provisions of this section shall apply to tax years beginning on or after January 1, 2014.

B.  As used in this section:

1.  "Affiliated group" means a group of one or more entities in which a controlling interest is owned by a common owner or owners, either corporate or noncorporate, or by one or more of the member entities;

2.  "Combined group" means entities that are part of an affiliated group engaged in a unitary business and that are required to file a group report under this section;

3.  "Consolidated group" means a group of two or more corporations treated as a single person for purposes of the Oklahoma Business Activity Tax Code under the provisions of subsection C of this section;

4.  "Controlling interest" means:

a.for a corporation, either more than fifty percent (50%), owned directly or indirectly, of the total combined voting power of all classes of stock of the corporation, or more than fifty percent (50%), owned directly or indirectly, of the beneficial ownership interest in the voting stock of the corporation,

b.for a partnership, association, trust, or other entity other than a limited liability company, more than fifty percent (50%), owned directly or indirectly, of the capital, profits, or beneficial interest in the partnership, association, trust, or other entity, and

c.for a limited liability company, either more than fifty percent (50%), owned directly or indirectly, of the total membership interest of the limited liability company or more than fifty percent (50%), owned directly or indirectly, of the beneficial ownership interest in the membership interest of the limited liability company;

5.  "Reporting person" means a person in a consolidated group or combined group that is designated by that group to legally bind the group for all filings and tax liabilities and to receive all legal notices with respect to matters under the Oklahoma Business Activity Tax Code; and

6.  "Unitary business" means a single economic enterprise that is made up either of separate parts of a single business entity, of multiple business entities that are related under Section 267 or 1563 of the Internal Revenue Code, or of a commonly controlled group of business entities that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts.  Two or more business entities are presumed to be a unitary business if the businesses have unity of ownership, operation, and use as indicated by a centralized management or a centralized executive force; centralized purchasing, advertising, or accounting; inter-entity sales or leases; inter-entity services, including administrative, employee benefits, human resources, legal, financial, and cash management services; inter-entity debts; inter-entity use of proprietary materials; interlocking directorates; or interlocking inter-entity officers.  In no event and under no circumstances shall the preceding sentence be construed as exclusive of any and all other factors indicative of a unitary business.  For purposes of this section, the term "unitary business" shall be broadly construed, to the extent permitted by the U.S. Constitution.

Any business conducted by a pass-through entity that is owned directly or indirectly by an entity shall be treated as conducted by the entity, to the extent of the entity's distributive share of the pass-through entity's income, regardless of the percentage of the entity's ownership interest.  A business conducted directly or indirectly by one entity is unitary with that portion of a business conducted by another entity through its direct or indirect interest in a pass-through entity if there is a synergy and exchange and flow of value between the two parts of the business and the two entities are members of the same commonly controlled group.

C.  1.  If two or more corporations file federal income tax returns on a consolidated basis such corporations shall be required to file consolidated returns for purposes of determining their Oklahoma business activity tax liability.

2.  Corporations, or any portion thereof, in such consolidated group which are also included in a combined group as part of a unitary business shall determine the combined group's total revenue and net revenue which shall be separately stated as an entity in the consolidated group's returns for purposes of determining their Oklahoma business activity tax liability.

3.  Corporations, or any portion thereof, in such consolidated group which are not included in a combined group shall determine such corporation's total revenue and net revenue on a component member by component member basis in accordance with the provisions of the Oklahoma Business Activity Tax Code.

4.  The net revenue for business done in this state to determine the Oklahoma business activity tax liability for the consolidated group shall be the sum of each of the component member's and combined group's net revenue or net loss, if any, properly apportioned to this state.

D.  1.  Except for entities that are a member of a consolidated group under subsection C of this section, all entities that are part of an affiliated group engaged in a unitary business shall file a combined group report in lieu of individual reports based on the combined group's business.  The combined group may not include an entity that conducts business outside the United States if eighty percent (80%) or more of the entity's property and payroll, as determined by factors under Section 2358 of this title, are assigned to locations outside the United States.  The combined group may not include an entity that conducts business outside the United States and has no property or payroll if eighty percent (80%) or more of the entity's total revenue is assigned to locations outside the United States.

2.  The combined group is a single entity for purposes of the application of the tax levied under the Oklahoma Business Activity Tax Code.

3.  For purposes of the Oklahoma Business Activity Tax Code, a combined group shall determine its total revenue by:

a.determining the total revenue of each of its members as if the member were a separate entity;

b.adding the total revenues of the members determined under subparagraph a of this paragraph together; and

c.subtracting, to the extent included under subparagraph a of this paragraph, items of total revenue received from another member of the combined group.

4.  For purposes of the Oklahoma Business Activity Tax Code, a combined group shall determine its deduction for ordinary trade or business expenses to arrive at net revenue by:

a.determining the ordinary trade or business expenses other than interest, taxes, depreciation and amortization for each of its members as if the member were a separate entity;

b.adding the amounts of ordinary trade or business expenses determined under subparagraph a of this paragraph together; and

c.subtracting from the amount determined under subparagraph b of this paragraph any ordinary trade or business expenses paid from one member of the combined group to another member of the combined group, but only to the extent the corresponding item of total revenue was subtracted under subparagraph c of paragraph 3 of this subsection.

5.  Each entity that is part of a combined group report shall, for purposes of determining net revenue and apportionment, include its activities for the same period used by the combined group.

6.  The members of a combined group shall be jointly and severally liable for the tax of the combined group.  The members of a combined group shall be jointly and severally liable for the interest, penalties, and costs associated with the combined report.

Added by Laws 2010, S.J.R. No. 61, § 12.  Amended by Laws 2012, c. 332, § 4, eff. Nov. 1, 2012.