The House approved two bills repealing the franchise tax and updating the interest rate for delinquent taxes.

House Bill 3131 repeals the franchise tax and was authored by Rep. Gerrid Kendrix, R-Altus. Corporations pay a tax on retained capital, and the tax is assessed whether the corporation makes a profit or not. Currently, the franchise tax is levied at the rate of 1.25% for every $1,000 of capital allocated or employed in Oklahoma, up to $20,000 per entity per year.

Kendrix said LLCs do not pay the tax, which results in two companies selling the same product, but only one company being assessed the tax. Only 14 states assess the franchise tax, including Texas and Arkansas.

Kendrix also authored House Bill 3136, which modifies the interest rate assessed on delinquent taxes, tax deficiencies and underpayment of estimated tax payments.

The state’s current interest rate on underpayment of income tax is 15% annually, or 1.25% monthly, and the current interest rate on underpayment of estimated tax is 20% annually. The prime rate under this legislation would be 3.25% annually, which means the rate assessed would be 3.0%.

Kendrix said these rates haven’t fluctuated in more than 15 years, despite changes in the market rates. The Internal Revenue Service tie underpayment rates for federal taxes to the market and are currently 3% and 4%, depending on type of underpayment.

The modified interest rates would be applicable to new and existing delinquencies as of Nov. 1, 2022.