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Home News Finance
Franchise Tax

Oklahoma House bill to eliminate franchise tax passes committee

Hicham Raache by Hicham Raache
February 20, 2023
in Finance, News, Politics & Elections
Reading Time: 2 mins read
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OKLAHOMA CITY (OBV) – A bill to eliminate the state’s franchise tax passed an Oklahoma House of Representatives subcommittee.

Rep. Gerrid Kendrix
Rep. Gerrid Kendrix. Photo from Oklahoma House of Representatives website.

The A&B Finance Committee approved House Bill 2695, along with several other bills, on Monday.

Rep. Gerrid Kendrix, R-Altus, said the franchise tax, also referred to as the Capital Stock Tax, taxes business investments and is an added burden to companies that are struggling.

“If a business invests in more assets to grow, it will cause their tax liability to increase,” Kendrix said. “It’s a tax that’s paid whether a company makes a profit or not.”

The franchise tax is a tax on a corporation’s capital, taxing $1.25 for every $1,000 in capital, with the amount capped at $20,000, regardless of the corporation’s size or net worth.

Kendrix is a CPA who has had a wide range of corporate clients that vary in size and profit margin. He said smaller corporations pay as much as $1,000 in franchise taxes.

“A thousand dollar may be a larger burden to a closely-held farming or family company than $20,000 might be to a Walmart. The cost of compliance can be excessive in most cases,” Kendrix said.

The tax was implemented in the 1970s. A moratorium was placed on the franchise tax in 2010 and a “business activity tax” was enacted. However, the franchise tax was reinstated in 2014 with the $20,000 cap.

Oklahoma is one of only 14 states that has a franchise tax. Both California and Texas do not have a franchise tax. Mississippi and Connecticut are both phasing out their franchise tax.

The franchise tax will not exist beyond 2023 if Kendrix’s bill passes the House and Senate and is signed into law by Gov. Kevin Stitt.

Eliminating the franchise tax will be an additional enticement to companies looking to either begin in Oklahoma or expand into the state, according to Kendrix.

“Just the idea that it’s not another tax they have to deal with or another filing they have to deal with presents as a business-friendly state,” he said.

Tags: A&B Finance CommitteeFranchise TaxHouse of RepresentativesOklahoma
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