State Court of Appeals Upholds Nonresident Income Tax Law

Article excerpt

Despite former Gov. David Walters' veto of a state tax law and his subsequent lawsuit against the State Tax Commission, the Oklahoma Court of Appeals upheld the statute in question this week.

The law involves a changed method of calculation for state income tax for nonresidents and part-year residents.

The statute requires nonresidents and part-year residents to apply the Oklahoma tax rate to their adjusted gross income from all sources of income, not just income earned in Oklahoma.

After determining the tax rate using Oklahoma rates, taxpayers must then prorate from the total adjusted gross income the amount attributable to the income earned from Oklahoma sources.

Previous to the bill's passage, nonresidents or part-time residents applied the Oklahoma rates to income solely derived from property or business in Oklahoma but excluded from the calculation income earned in other states.

Walters argued that lawmakers intended to raise revenue with the bill in violation of the U.S. Constitution.

Specifically, the former governor alleged the bill imposed an indirect tax on income derived outside of the state.

Under the privileges and immunity clause of the U.S. …


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