Key Takeaways

  • The Oklahoma franchise tax applied to corporations doing business in or organized under Oklahoma law until its repeal effective January 1, 2024.
  • Corporations were required to file an annual Franchise Tax Return (Form FRX-200) and pay $1.25 per $1,000 of capital invested or used in Oklahoma.
  • The maximum annual franchise tax liability was capped at $20,000.
  • LLCs, partnerships, and sole proprietorships were generally exempt from franchise tax but still needed to meet other state tax requirements.
  • Corporations must ensure compliance for tax years prior to 2024 to avoid penalties or charter revocation.
  • The repeal simplifies tax obligations for Oklahoma corporations, but businesses should review their corporate income tax obligations and any ongoing Secretary of State annual filing requirements.

The Oklahoma franchise tax is mandatory for all for-profit corporations, including S-corporations, partnerships, and limited liability companies, organized and maintained in Oklahoma. Reinstatement of the franchise tax in 2014, followed a moratorium and enactment of a “business activity tax” in 2010. The new franchise tax rule limits taxpayers' annual obligation to a maximum of $20,000 each year.

Who Must Pay the Franchise Tax?

When the Oklahoma business activity tax was still active, it applied to both corporate and non-corporate business entities. The reinstituted Oklahoma franchise tax, on the other hand, only applies to corporations that were formed or do business in the state.

Some entities that were once subject to the business activity tax are exempt from the franchise tax. Exempt entities include limited partnerships and limited liability companies (LLC). Corporations that were converted to LLCs before June 30, 2014, are also exempt from this tax.

Foreign corporations, or businesses that were not formed in Oklahoma but operate in the state, must pay a $100 registered agent fee.

2024 Oklahoma Franchise Tax Repeal and Transition

Effective January 1, 2024, the Oklahoma franchise tax was repealed, meaning corporations are no longer required to file Form FRX-200 or pay annual franchise tax to the Oklahoma Tax Commission. The repeal applies to tax years beginning on or after January 1, 2024, while entities with prior franchise tax liabilities must still file and pay taxes owed for tax years through 2023.

Before its repeal, the franchise tax was a requirement for all for-profit corporations doing business in Oklahoma, whether domestic or foreign. The repeal was intended to reduce administrative burden and enhance Oklahoma’s business competitiveness. However, corporations must continue to meet corporate income tax filing and registration requirements with the Oklahoma Secretary of State and Tax Commission.

Businesses that were subject to the franchise tax should:

  • File final franchise tax returns for tax years prior to 2024.
  • Confirm no outstanding balances exist with the Oklahoma Tax Commission.
  • Maintain good standing by keeping annual reports and registered agent information current.

Entities that were formerly exempt, such as LLCs and partnerships, continue to operate under their standard state tax and registration requirements.

Differences Between the Old and New Taxes

The new Oklahoma franchise tax, which was instituted in 2014, is very similar to the old pre-moratorium franchise tax. For example, both the old and new franchise tax included a maximum annual payment of $200,000.

Because the two taxes were so similar, business entities formed before the moratorium was put in place will likely understand how to correctly file the new tax. On the other hand, businesses formed after the moratorium may have been taken by surprise by the reinstatement of the franchise tax and should be very careful about filing and paying this tax.

Liability for Filing Return

In order for a business to be registered in Oklahoma, it must report its income to the state's tax commission and the IRS. Corporations and other for-profit businesses organized in the state are subject to the rules of taxation. While the type of business structure elected makes a difference in reporting and filing requirements at the federal level, all business entities are subject to a single franchise tax rule in the state.

If a business has filed its articles of incorporation or articles of organization and has been registered with the Secretary of State, it is subject to taxation. Sole proprietorships are the exception to this rule, as they are subject to the same rules of individual tax filers with a home business. The Oklahoma Secretary of State website offers information about business registration and licensing.

Business entities, like joint-stock companies, trusts, and associations, that are registered in another state, district, territory, or foreign country are responsible for filing state franchise tax if operating in Oklahoma unless they are exempt by statute. Visit the Oklahoma State Legislature website for more information about the state's tax laws.

Time for Filing and Payment Information

The Oklahoma franchise tax is due by July 1st each year. Registrants can change their entity's tax filing date to the same schedule of filing as their corporate income and franchise taxes. Income reports and tax payment must be received by the fifteenth (15) day of the third month from the end of the corporation's income tax year. Payments made after the scheduled deadline will be subject to a ten percent penalty and 1.25 percent interest per month until full payment is made.

If a company's charter or other structural instrument is suspended, the state imposes a reinstatement fee of $15.00. Extensions are granted based on tentative tax returns and remittance of the estimated tax due. The Oklahoma Tax Commission does not waive penalties or interest on remittances made post-deadline. All franchise tax return documents must be legible for microfilming record.

Steps to Franchise Tax Return Filing

The steps to filing an Oklahoma Franchise Tax Return involve a line-item reporting of the business's annual return, and balance sheet income. These are the steps business owners must take in order to file their franchise tax return:

  1. Prepare and file your balance sheet and Schedules B, C & D of your annual return. You must also disclose the value of the business's life insurance, intellectual property assets (i.e. copyrights, patents, trademarks), and franchises (note: franchise value can be amortized over a lifetime).
  2. Prepare and file your Oklahoma Annual Franchise Tax Return and provide the business's FEIN.
  3. Fill out and file Schedule A, which provides the name and contact information for the business's officers.
  4. File return, payment, balance sheet and schedules with the business's FEIN or EIN. You might also file your return with your social security number instead if you own a multi-owner LLC partnership and the members are filing individual income tax returns with IRS Form 1040 and Form 1065.

How Is Franchise Tax Calculated?

The franchise tax is calculated at a rate of $1.25 per $1,000 of capital employed in or apportioned to the business's outpost in Oklahoma. The franchise tax applies solely to corporations with capital of $201,000 or more. Eligible entities are required to annually remit the franchise tax. In Oklahoma, the maximum amount of franchise tax a corporation can pay is $20,000. Corporations reporting zero franchise tax liability must still file an annual return.

Foreign corporations are not obliged to pay the Oklahoma franchise tax but are still liable for the $100 registered agent fee. Franchise tax returns are due on July 1st and are recorded on the previous income tax year's balance sheet, regardless of whether an entity is a calendar-year or fiscal-year filer. A corporation that files its franchise tax return the same day as its income tax return should use the annual report from the previous year.

Oklahoma Franchise Tax Example and Exemptions

Under the prior law, the Oklahoma franchise tax rate was $1.25 for every $1,000 of capital employed in the state, including paid-in capital, retained earnings, and long-term debt attributable to Oklahoma operations.

Example:If an Oklahoma corporation had $800,000 in capital, its franchise tax would have been calculated as follows:$800,000 ÷ $1,000 × $1.25 = $1,000 tax liability.

The franchise tax was capped at $20,000 per year, regardless of corporate size.

Exempt entities included:

  • Limited liability companies (LLCs)
  • Limited partnerships (LPs)
  • Sole proprietorships
  • Nonprofits registered under Section 501(c)(3)

Foreign corporations that operated in Oklahoma were not subject to the franchise tax itself but were required to pay a $100 registered agent fee annually to maintain compliance with the Secretary of State’s office.

When Do Franchise Tax Returns Become Delinquent?

Franchise tax returns and payment filed after September 1st are considered delinquent unless the elected filing date of a corporation coincides with a fiscal-year schedule. In this case, payments are considered delinquent if no payment is received by the 15th day of the third month following the close of the corporate year.

What Are the Penalties For Paying Franchise Tax Late?

Late franchise tax payments are subject to penalties of 10 percent of the tax owed and interest accrued at the rate of 1.25 percent monthly thereafter.

Oklahoma Franchise Tax Reinstatement and Compliance Implications

Historically, corporations that failed to file or pay the franchise tax risked having their corporate charter suspended or revoked by the Secretary of State. This meant the business could not legally operate in Oklahoma and its corporate veil protection could be lost, making owners personally liable for debts or legal actions.

With the repeal of the franchise tax, these specific suspension risks tied to the franchise tax have been removed for tax years beginning in 2024 and beyond. However, corporations must still:

  • File their Oklahoma corporate income tax return annually.
  • Maintain active registration and reporting compliance with the Secretary of State.
  • Pay any outstanding franchise tax balances for years prior to 2024, as penalties may still apply for unpaid obligations.

For corporations reinstating their status due to past franchise tax delinquencies, payment of prior taxes, penalties, and a $15 reinstatement fee remains required.

Changing Your Filing Date

If you wish, you may change the franchise tax filing date for your corporation. You can change your filing date by filing Form 200-F (Request to Change Franchise Tax Filing Period) by mail or online using OkTAP, Oklahoma's online filing system, by July 1st.

After you have filed the request to change your filing period, you will not need to file this form again. The only reason you would need to file Form 200-F a second time is if you decide to change your filing period again.

Oklahoma Franchise Tax Forms and Online Filing

Prior to the repeal, corporations filed the Oklahoma Annual Franchise Tax Return (Form FRX-200) each year with the Oklahoma Tax Commission. The form required businesses to report their total capital employed, including retained earnings, paid-in capital, and debt used in Oklahoma operations.

Businesses could file online through the Oklahoma Taxpayer Access Point (OkTAP) system, allowing electronic submission of tax returns and payments. OkTAP continues to serve as the primary platform for corporate income tax, sales tax, and other business filings in the state.

Although the franchise tax is repealed, OkTAP remains vital for compliance tasks such as:

  • Amending prior-year filings (for 2023 and earlier).
  • Verifying tax payment history.
  • Filing other required state business tax forms.

Corporations transitioning after the repeal should maintain historical records of Form FRX-200 filings for audit and reference purposes.

Consequences of Corporate Charter Revocation

If a corporation fails to pay the Oklahoma franchise tax or comply with filing requirements, its corporate charter may be revoked by the Secretary of State. Once revoked, the corporation loses its legal authority to conduct business in Oklahoma. Additionally, the owners and officers may become personally liable for any debts, obligations, or lawsuits filed against the business since the entity no longer enjoys limited liability protection.

Reducing or Avoiding Franchise Tax

With proper planning, corporations may be able to reduce or eliminate their franchise tax liability. For example, entrepreneurs forming new businesses might consider organizing as a limited liability company (LLC), since LLCs are generally exempt from Oklahoma’s franchise tax. Strategic tax planning and consulting with a qualified business attorney or accountant can help identify additional methods to minimize tax obligations while maintaining compliance.

Avoiding Taxes by Converting a Corporation

In some cases, a corporation can lower its tax burden by converting to an LLC. In Oklahoma, this process involves filing Articles of Conversion with the Secretary of State. However, conversions must be approached carefully—improper filings or timing can lead to significant federal and state tax consequences. For flexibility, some businesses use a “check-the-box” election to have their LLC taxed as a corporation for federal purposes without changing their state entity structure.

Is an LLC Always the Best Option?

While an LLC offers simplicity and potential tax advantages, it is not the ideal structure for every business. Certain industries or ownership arrangements may require a corporation to meet regulatory, investment, or compliance needs. Business owners should carefully evaluate their operational goals, tax situation, and liability concerns before deciding whether to form or convert to an LLC.

Frequently Asked Questions

1. Has the Oklahoma franchise tax been repealed? Yes. The Oklahoma franchise tax was officially repealed effective January 1, 2024, and is no longer required for tax years beginning after 2023.

2. Do corporations still need to file Form FRX-200? No, Form FRX-200 is not required for 2024 and beyond. Corporations must still file it for prior years if they had taxable capital before the repeal.

3. What happens if my corporation still owes past franchise taxes? Corporations remain liable for any unpaid franchise taxes, penalties, and interest from tax years before 2024 until all obligations are cleared.

4. Does this repeal affect LLCs or nonprofits? No. These entities were already exempt from the Oklahoma franchise tax, and the repeal does not change their tax status.

5. How should corporations maintain compliance post-repeal? Even without franchise tax, businesses must continue to file corporate income tax returns, keep annual registrations current, and ensure their Secretary of State filings are up to date.

If you need help with the Oklahoma franchise tax or other taxes, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.