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Indian Tax Incentives

Special Federal Tax Incentives for Oklahoma Businesses

Your Business May Be Eligible
Federal legislation clarifies the location of special American Indian lands in Oklahoma that qualify for related tax credits benefiting new and established businesses in Oklahoma. Your business may be eligible for these significant income tax incentives. The Oklahoma department of commerce is distributing this important information to businesses throughout Oklahoma. The department recommends you contact your tax expert to discuss this new legislation.

The Taxpayer Relief Act of 1997 includes an amendment which clarifies qualifying areas of the state that constitute former Indian reservation land in Oklahoma as determined by the Secretary of Interior. Over two-thirds of the land in Oklahoma meet this definition and qualify for an accelerated depreciation. Indian ownership is not required.

Oklahoma has the largest American Indian population in the country. The Federal employment tax credit is applicable to businesses located in the qualifying areas that employ enrolled American Indians and their spouses.

(subject to affirmation by Secretary of Interior)

Employee Credit
Businesses located on qualified areas of former Indian reservations are eligible for a tax credit based on the increase in qualifying annual wages paid to enrolled Indian tribal members or their spouses from 1994-2009 as compared to year 1993. The credit equals 20% of the increased wages, including health insurance costs up to total wages of $20,000 annually, of a qualified employee who earns less than $30,000, indexed after 1993. IRS Form 8845 is used for computing and claiming the credit.

Example: Company A has a qualified employee to whom the company pays $15,000 in total wages and health insurance in 1993. In 1994, the company pays the same person $20,000. The credit is computed as follows:

1994 Wage/Health Insurance $20,000
1993 Wage/Health Insurance $15,000
(Increase) $5,000
Rate of Credit x 20%
Indian Employment Credit $1,000

Depreciation Incentive
The depreciation incentive provides a shorter recovery period of approximately 40% for most non-residential depreciable property. The property must be placed in service during calendar years 1994-2005 and must be used in an active trade or business which includes the rental of real property for such purposes.

This Federal tax deferral can substantially increase the after-tax income of businesses. Since Oklahoma taxable income is based on Federal taxable income, the depreciation benefit will automatically apply for Oklahoma tax purposes.

In the case of: Applicable Recovery Period Is:
3-year property 2 years
5-year property 3 years
7-year property 4 years
10-year property 6 years
15-year property 9 years
20-year property 12 years
Non-res. real property(39 yrs) 22 years