(The Center Square) - Businesses in Oklahoma can permanently write off all business investments immediately, thanks to a new bill recently signed into law.
House Bill 3418 makes full expensing a permanent part of the state’s tax code. Eighteen states currently have this advantage for businesses as a part of the Tax Cuts and Jobs Act passed by Congress in December 2017. However, that provision is set to begin phasing down in 2023 and is set to fully expire by the end of 2026.
The bill signed by Gov. Kevin Stitt in May makes the tax benefit permanent in Oklahoma.
The Tax Foundation, an independent tax policy nonprofit, called the move a pro-growth action that will make the state more competitive than its peers.
“States with stingy expensing provisions are less attractive for in-state investment than those offering full expensing, all else being equal,” wrote Janelle Fritts with Tax Foundation.
The bill allows businesses to deduct 100% of qualified property the year those costs are incurred or the property is placed in service.
“The immediate deduction of all business investment is a key driver of future economic growth, and can have a larger pro-growth effect per dollar of revenue forgone than cutting tax rates,” said Fritts. “Full expensing boosts long-run productivity, economic output, and incomes, because investments that were not profitable under long-term depreciation rules become profitable under full expensing.”
In other cases when deductions for businesses are required to be spread out over a span of years, the tax benefit is somewhat diminished.
“Due to inflation and the time value of money, a dollar in the future is always worth less than a dollar today,” wrote Fritts. “Delaying deductions for the cost of business investments means that the real value of the deductions will always be less than the original cost.”
via Oklahoma's Center Square News