Rev. Rul. 72-490

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, that portion of G.C.M. 18828, C.B. 1937-2, 87, that is currently applicable in regard to State income tax.

The question presented is whether the income tax imposed by the State of Oklahoma accrues, for Federal income tax purposes, as of the end of the calendar year or fiscal year, whichever is the basis of the return filed under State law.

The taxpayer, a domestic corporation operating a business in Oklahoma, computes its income under an accrual method of accounting and files its Federal and State income tax returns on a calendar year basis.

Section 2355 of Chapter 1, Title 68 of the Oklahoma Statutes Annotated, as amended, provides for a tax on Oklahoma taxable income. Section 10A of the Oklahoma Income Tax Code of 1971, provides that the taxpayer's taxable year under this act shall be the same as his taxable year for Federal income tax purposes.

Section 7701(a)(23) of the Internal Revenue Code of 1954 defines the term "taxable year" to mean the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A of the Code. Section 7701(a)(24) of the Code defines the term "fiscal year" to mean an accounting period of 12 months ending on the last day of any month other than December.

Section 1.461-1(a)(2) of the Income Tax Regulations provides that under an accrual method of accounting, an expense is deductible for the taxable year in which all the events have occurred which determine the fact of the liability and the amount thereof can be determined with reasonable accuracy.

When a taxable year is closed, the taxpayer can compute its taxable income as required by the statute as well as ascertain with reasonable accuracy the amount of income tax which will be payable to the State of Oklahoma. The end of the taxable year is, therefore, considered the "event" which determines the liability and fixes the amount of the tax.

Accordingly, for Federal income tax purposes, the income tax imposed by the State of Oklahoma accrues as of the end of the taxable year, calendar or fiscal, whichever is the basis of the return filed under State law. In the instant case, the taxpayer would accrue such taxes at the end of its calendar year.

For accrual date of Oklahoma real property and personal property taxes, see Revenue Ruling 72-402, page 97.

G.C.M. 18828 is hereby superseded, since the position stated therein is restated under the current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67.6, C.B. 1967-1, 576.