OKLAHOMA CITY (OBV) – A bill that in part eliminates Oklahoma’s franchise tax is on its way to Gov. Kevin Stitt’s desk for final approval.
The anti-franchise tax measure passed as part of House Bill 1039x, part of the concurrent special session, succeeding in the the Oklahoma Senate with a 36-9 vote on Friday and in the Oklahoma House of Representatives with a 77-20 vote on Wednesday.
The state’s franchise tax is a direct tax levied on a company’s net worth, taxing $1.25 for every $1,000 in capital, with the amount capped at $20,000, regardless of the company’s size or net worth.
Rep. Gerrid Kendrix, R-Altus, and Sen. Dave Rader, R-Tulsa, wrote the original legislation when it was House Bill 2695. Kendrix previously spoke with Oklahoma Business Voice and said the tax deters businesses from starting in or expanding into Oklahoma.
“We’ve always been of the mindset that we want to encourage businesses to come to the state and grow their businesses here in the state. If you got a scenario where you punish them for investing, that just doesn’t make a lot of sense,” Kendrix said.
Kendrix described the franchise tax as an antiquated tax implemented in the 1970s during Gov. George Nigh’s administration.
“A lot of states used to use that [tax], now we’re down to about 14 or 15 states roughly [that still do],” Kendrix said. “I think it’s one of those we can do away with; it doesn’t have a large price to it. It’s another one of those we can take off the list, when we try to court businesses for the state of Oklahoma to say you don’t have a franchise filing responsibility.”
Fourteen states, including Oklahoma, have the franchise tax. Mississippi and Connecticut are both in the process of phasing out their franchise tax.
Out of the 400,000 plus businesses in the state, only around 70,000 businesses pay a franchise tax, according to information from The State Chamber Research Foundation.
Sen. Roger Thompson, R-Okemah, and Rep. Kevin Wallace, R-Wellston, were the authors of HB 1039. Rep. Mark Lepak, R-Claremore, Sen. Chuck Hall, R-Perry, Rep. Ryan Martinez, R-Edmond, and Sen. John Michael Montgomery, R-Lawton, all contributed to the bill’s development.