Income on bonds issued by a state or political subdivision exempt from Federal taxation but not exempt from taxation by the laws of the State of Oklahoma must be added to the Oklahoma return.
The following information is provided by the Oklahoma Instructions:
- Income from all notes, bonds or other obligations that are issued by the State of Oklahoma, the Oklahoma Municipal Power Authority, the Oklahoma Student Loan Authority, the Oklahoma Capital Improvement Authority and the Oklahoma Transportation Authority is exempt from Oklahoma income tax. The profit from the transaction of such note, bond or other obligation shall be free from taxation.
Income from local Oklahoma governmental obligations, issued after July 1, 2001, is exempt from Oklahoma income tax. The exceptions are those obligations issued for:
- The purpose of providing funding for projects in nonprofit corporations.
- Local governmental obligations shall include notes or bonds issued by, on behalf of, or for the benefit of Oklahoma educational institutions, cities, towns, counties or by public trusts of which any of the foregoing is a beneficiary.
- Income from Oklahoma Municipal Bonds, issued prior to July 2, 2001, is exempt from Oklahoma income tax only if so provided by the statute authorizing their issuance.
- Income on bonds issued by another state or political subdivision (non-Oklahoma), exempt from Federal taxation, is taxable for Oklahoma income tax.
Note: If the interest is exempt, the capital gain/loss from the sale of the bond may also be exempt. The gain/loss from the sale of a state or municipal bond, other than those provided, is exempt only if so provided by the statute authorizing its issuance.