How are lease bonuses treated under Oklahoma Income Tax? Are they subject to depletion allowance? If so, what is the rate?
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Our CPA treats lease bonuses as ordinary income with the IRS./State. No depletion allowance.
Oklahoma has allowed 22% depletion on both royalty and lease bonus. I do not know if that has recently changed. You should be able to find income tax information on Oklahoma website.
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Looks like you’re right Tennis Daze.
From the OK. Tax Commission website:
“Oklahoma depletion on oil and gas well production, at the option of the taxpayer, may be computed at 22% of gross income derived from each Oklahoma property during the taxable year. Major oil companies, as de ned in Title 52 OS Sec. 288.2, when computing Oklahoma deple- tion, shall be limited to 50% of the net income (computed without the allowance for depletion) from each property. If Oklahoma options are exercised, the federal depletion not used due to 65% limit may not be carried over. Lease bonus received is considered income subject to depletion. If depletion is claimed on a lease bonus and no income is received as a result of non-producing properties, upon expiration of the lease, such depletion must be restored. A complete schedule by property must be furnished.”
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