Constitutionality of Oklahoma capital gains deduction limitation challenged

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April 2019

Overview

In a December 19, 2018 petition for writ of certiorari (current petition), taxpayers asked the US Supreme Court to determine if the Oklahoma capital gains deduction violates the Commerce Clause of the US Constitution. Under Oklahoma statutes, taxpayers may deduct capital gain resulting from the sale of stock in an ‘Oklahoma company.’ The taxpayers assert that the limitation of this deduction to only gain from an ‘Oklahoma company’ violates the US Constitution. The Oklahoma Solicitor General’s response to the current petition must be filed by April 8, 2019.

The takeaway

After receipt of the Oklahoma Solicitor General’s response brief by April 8, the US Supreme Court will consider whether to review the constitutionality of the Oklahoma capital gains deduction. Potentially impacted Oklahoma individual and corporate income taxpayers should consider the appropriateness of proactive state refund claims, keeping in mind the Oklahoma refund claim statute of limitations continues to run on previously filed returns.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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