Oklahoma Depletion allows taxpayers to claim a depletion deduction on oil and gas well production in the state of Oklahoma. The deduction is calculated at 22% of the gross income derived from each Oklahoma property during the taxable year. The allowable depletion deduction is the amount computed at 22% minus any federal depletion claimed for the same property.
Key Rules for Oklahoma Depletion
- Option to Claim: Taxpayers may choose to claim Oklahoma depletion at 22% of gross income from each Oklahoma property.
- Reduction for Federal Depletion: The Oklahoma depletion deduction is reduced by the amount of federal depletion claimed for the same property.
- No Carryover of Unused Federal Depletion: If Oklahoma options are exercised, any federal depletion not used due to the 65% limitation cannot be carried over for Oklahoma purposes.
- Reporting Requirement: A complete detailed schedule by property must be furnished with the return.
- Limitation for Major Oil Companies: As defined in 52 OS Sec. 288.2, major oil companies are limited to 50% of net income (computed without depletion) from each property when calculating Oklahoma depletion.
- Lease Bonus Income: Lease bonus payments received for Oklahoma oil and gas properties may be considered income related to the property for depletion purposes when determining the allowable Oklahoma depletion deduction. The treatment depends on the specific facts and circumstances and must follow Oklahoma depletion rules.
- Depletion Deduction Limitation: A depletion deduction must be supported by qualifying Oklahoma property income and applicable depletion calculations. A depletion deduction is not generally allowed solely because a lease bonus was received if there is no qualifying income or property basis to support the deduction.
Source:
Form 511 - Oklahoma Individual Income Tax Return
Disclaimer: Always verify details with the official Oklahoma Department of Revenue forms and instructions, as tax rules may change and individual circumstances vary. For complex situations, consult a CPA or tax attorney.