Oklahoma Supreme Court - Capital gains deduction is constitutional

April 2014


UPDATE: In February 2015, the parties settled their dispute days before the taxpayer's deadline to appeal to the US Supreme Court, which renders final the Oklahoma Supreme Court's decision.
UPDATE: On November 24, 2014 CDR's Petition for Rehearing was denied.
UPDATE: On May 12, 2014, CDR filed a motion for rehearing before the Oklahoma Supreme Court.

In a 5-4 decision, the Oklahoma Supreme Court held that the Oklahoma capital gains deduction was constitutional. The capital gains deduction is generally available for gains resulting from the sale of certain property held for at least three years by an Oklahoma headquartered company or held for at least five years by a non-Oklahoma headquartered company. The sale of stock, held for more than three years, of an Oklahoma headquartered company would also qualify for the deduction.

The court found that Commerce Clause concerns were not implicated because the deduction did not target a specific common market or industry. Additionally, the court generally viewed the deduction as a tax incentive to promote Oklahoma businesses. Even if the Commerce Clause applied, without a disincentive for out-of-state activities, the court found that no discrimination existed.

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