On July 16, 2020, the Portland Metro Council unanimously voted to send a $7 billion transportation plan to the November ballot. This tax will impose a payroll tax on employers for individuals who perform services in the Metro Area. The rate will not exceed 0.75% of wages paid by the employer, and employers with 25 or fewer total employees are exempt from paying the tax.
If the Metro area voters pass the payroll tax in the November election, it will commence at the beginning of 2022. The Metro Council amended the original proposal by exempting state and local governments from paying the tax due to the COVID-19 economic impact. The Metro Council still has not solidified its plan on how the payroll tax will be imposed on local businesses. In the initial draft plan, five of the seven council members advocated for an aggressive payroll tax approach, which would impose a 0.75% payroll tax on employers in the Portland metro area immediately. Other council members support a gradual increase in payroll tax with rates starting at 0.1% that would increase to 0.6% by 2028. In the coming months before the November election, the Portland Metro Council will release its more detailed plan.
Future Uncertainty and Implications
There is controversy surrounding the new payroll tax that will be imposed on Portland businesses. The Portland Business Alliance, along with other business groups in the metro area have expressed their concerns about the tax. Those groups have suggested that the Metro Council delay the referral measure to the ballot until a later date for businesses that are struggling due to the COVID-19 pandemic. Other areas in the Portland metro, like Clackamas County, do not benefit as much from the transportation plan, and the Clackamas County Commissioner has voiced his concerns about the measure. The new payroll tax also comes in the wake of the recently passed 1% tax on businesses to fund housing services for homeless people in the metro area that is slated to begin in 2021. This tax will cause further hardship to Portland businesses already facing multiple state and local taxes, including the Multnomah County Business Income Tax; Oregon Corporate Income/Excise Tax; Oregon CAT; City of Portland Business Income Tax; City of Portland Clean Energy Surcharge; and the City of Portland Pay Ratio Surcharge.
The State of Wayfair in 2020: State and Local Income Tax Implications Two Years After the Wayfair Decision
In 2018, the U.S. Supreme Court overturned the long-standing physical presence standard for sales-and-use tax nexus in South Dakota v. Wayfair (“Wayfair”). Since then, nearly all states that impose sales and use tax have adopted economic nexus standards. Several states have started extending the economic nexus standard beyond sales tax regimes, adopting economic nexus provisions for corporate income taxes. Many states have adopted the economic nexus standards through the legislative process. Other states have acted through their revenue departments, either promulgating regulations under existing statutes or issuing administrative pronouncements.
Before Wayfair, states had to rely on the Quill (Quill Corp. v. North Dakota) doctrine that required physical presence to subject a business to tax. In Wayfair, the Court replaced the previous physical presence standard established by Quill and found that simply having a certain amount of sales or transactions within the state was sufficient to create an obligation to collect sales tax. Most states have followed the precedent established by the Wayfair decision and have begun to require remote sellers to register and collect sales tax based on factor presence nexus standards, measured by the amount of sales or volume of transactions that a seller has in the state. Income tax filing requirements based on this standard are currently being considered in many states and some states have already enacted such standards in the wake of the Wayfair decision.
Pre-Wayfair State Income Tax
A few states had already adopted an economic nexus standard for their income tax or gross receipts tax regimes before Wayfair was decided in 2018. The previous economic presence nexus standards were often quite ambiguous, as economic presence may have been deemed to occur based on an arbitrary amount of economic activity in a state considered sufficient to impact a state’s economy. Prior to Wayfair, Alabama, Colorado, California, Connecticut, Michigan, New York, Ohio, Oklahoma, Tennessee, Washington, and Virginia all had implemented a form of economic presence nexus, similar to what was approved in the Wayfair case.
Factor presence nexus refers to the concept that nexus is created when factors exceed certain thresholds with respect to property, payroll, or sales. Of these factors, the property and payroll factors would generally represent physical presence and trigger nexus regardless. As such, the most important and most controversial factor is the sales factor, as a seller could exceed the sales factor threshold without any other physical presence in the state. This sales factor presence deviates from the physical presence standard to create nexus established by Quill. However, there was no historical standard or case law precedent to require physical presence to create nexus for business activity taxes such as an income tax, a franchise tax, or a gross receipts tax, though many states relied on the Quill standard to impose these taxes. For example, for those states not listed above, income tax regulations for economic presence had not been enacted prior to the Wayfair decision and those states took a position for income taxes that was analogous to the sales tax nexus requirement in the Quill case that required physical presence in the state.
Post-Wayfair State Income Tax
In the Wayfair case, the issue was whether South Dakota could require a company, without a physical presence inside the state, to collect sales tax. Its statute required companies with at least $100,000 in sales or 200 transactions within the state to collect and remit sales tax. Although the issue was about sales tax in Wayfair, the dicta indicate that its holding could be applied to other tax regimes.
After Wayfair, states have almost completely moved away from the physical presence requirement for income tax. Most states that have strayed from the physical presence requirement have chosen to either maintain a pre-Wayfair economic presence standard or implement the post Wayfair factor presence type of test as outlined above as part of the economic nexus standard. Both approaches have complications when applied to an individual business in an individual state, and without guidance, taxpayers are struggling to understand whether they are subject to income tax in each respective state.
Economic Presence Standard
For states that already had their economic presence income tax regimes in place before Wayfair, the decision is welcome because it supports the constitutionality of these taxes under the Commerce Clause. This standard, however, is ambiguous in many states. Some state statutes require companies that conduct any business in or derive income from the state to file an income tax in return. This standard is difficult to apply because it does not mention whether a company is making any income in the state, or if there is a de minimis exception. Several states are taking the approach that if a company is subject to collecting sales and use tax in the state, it is also subject to income tax, even though different standards are applied. Other statutes require a company that has a “substantial economic presence” in the state to file an income tax return, without any further guidance.
With no uniformity, it is increasingly difficult for taxpayers to adhere to each state’s income tax regime. For example, in Minnesota, a taxpayer has nexus in the state if it sells products or services received by customers in Minnesota, even if the services are performed outside the state. This could cause a lot of uncertainty for taxpayers, especially in the financial services industry. For example, determining who the “ultimate customer” is can be difficult for banks and other financial institutions that operate large funds with a myriad of investors. As the economic threshold becomes broader, companies can expect to have increased filing requirements. Additionally, states will inevitably have to ramp up their state tax audit procedures.
Factor Presence Standard
As of right now, less than a dozen states have implemented some form of a factor presence standard. This standard was expressly approved in the Wayfair case for sales and use tax, and states are using this standard for their income tax regimes as well. Some states, like Alabama, are utilizing a multi-factor presence model. A company is subject to income tax in Alabama if its property, payroll, or sales exceeds any of the following thresholds during a tax period: (1) $50,000 of property; (2) $50,000 of payroll; (3) $500,000 of sales; or (4) 25% of total property, total payroll, or total sales. Other states, like Massachusetts, have a single-factor presence standard. Massachusetts requires businesses to file a state income tax return if its sales for the taxable year exceed $500,000. Although these bright-line rules can be easier to follow, they are not without complication, especially with transaction thresholds.
In Wayfair, the Court allowed South Dakota to require companies to collect and remit sales tax if it had more than 200 transactions or $100,000 in sales. Many states, like Hawaii, have adopted the same requirement for its income tax regime. Although this appears straightforward, it can be difficult to distinguish what one transaction is for certain businesses. For example, for a business that makes an installment sale, are the recurring collections each considered a separate transaction? States have offered little guidance on how to account for different types of reoccurring or subscription-like sales. Additionally, these transaction thresholds could violate the Commerce Clause. The Commerce Clause prohibits states from enacting statutes that are an “undue burden” on interstate commerce. For example, if a company has 200 one-dollar transactions, it would be subject to income tax in the state. The dicta in Wayfair indicates that this could create an undue burden on companies with minimal sales in the state and would, therefore, be unconstitutional under the Commerce Clause.
After the Wayfair decision, a number of states have decided to utilize the factor presence model instead of the more vague economic presence model. This factor presence model is easier to follow and adhere to because it gives taxpayers a bright-line requirement. Additionally, if states had already implemented a factor presence model for sales tax, implementing a similar model for income taxes eliminates any ambiguity caused by the economic presence standards. As states begin to implement and enforce their new income tax regimes relying on the Wayfair decision, companies should pay close attention to all economic activity that could trigger nexus in a state as well as any new legislation that adopts the factor presence model. Companies should also look for state guidance or authority that clarifies the ambiguity in the models. Although Wayfair to a large extent clarified most states’ sales and use tax regimes, there are still many unanswered questions for states regarding income tax in the fallout of the Wayfair decision.Read More
Even as regulatory guidance is still being issued by the U.S. Treasury, nearly 2-1/2 years after the enactment of sweeping changes to the international taxation of U.S.-based multinational enterprises (MNEs), the Organization for Economic Co-operation and Development (OECD) has been spearheading proposed changes to global taxation known as “BEPS 2.0” which would cause another seismic shift for MNEs. However, in a June 12 letter to his European counterparts, U.S. Treasury Secretary Mnuchin formalized the U.S. government’s concerns regarding a key provision of BEPS 2.0 and called for a “pause” in the negotiations.
Reaction was swift from the head of tax policy at the OECD and finance ministers in France, Spain, Italy and the UK who characterized the letter as a “provocation,” raising the specter that an impasse on U.S. participation in BEPS 2.0 would cause them and dozens of other countries to default to already enacted, pending, or proposed Digital Services Taxes (DSTs) imposed on the gross receipts of leading companies of the “digital economy.” They cite these taxes as a matter of tax equity and also a necessary expedient to address coffers emptied by COVID-19 stimulus and incentives. The U.S. has long complained that mandatory global conformity with aspects of BEPS 2.0 is just a “DST light” targeted at U.S. MNEs. It has also threatened retaliatory tariffs if the DSTs are not abandoned.
BEPS (Base Erosion and Profit Shifting) 2.0 is an outgrowth of the massive initiative that the OECD undertook beginning several years ago to address a variety of perceived international tax abuses. The first of the 15 BEPS “action items” was a proposal to create a separate system of taxation for “digital companies” or the “digital economy” based on the notion that existing taxing mechanisms are too antiquated to fairly tax its unique forms of valuation creation and delivery. The U.S. Treasury objected that this action item was a discriminatory effort targeted at Google, Microsoft, Apple, Amazon, Facebook, and other leading U.S. companies, and that you cannot ringfence one sector of the global economy and tax it differently than the rest if every sector is becoming digital in the “Internet of Everything.” As progress on this Action Item 1 stalled, many countries began to unilaterally enact or propose DSTs as an expedient means of taxing what they viewed as an exploitation of their markets and populace.
What is BEPS 2.0?
A so-called Inclusive Framework (IF), consisting of 137 participating jurisdictions, and sponsored by the OECD, has developed a Two-Pillar approach to address the taxation of digital services in the worldwide economy. Pillar One addresses new global standards for nexus and profit allocation. Pillar Two, also referred to as the “GloBE” proposal, seeks to develop a set of rules that allows jurisdictions to “tax back” income that has not been taxed by the primary taxing authority or is subject to low levels of taxation. In essence, it provides a minimum tax on global profits similar to the Global Intangible Low-Taxed Income (GILTI) provisions under the U.S Tax Cuts and Jobs Act of 2017.
Pillar One – Who Can Tax What?
Pillar One broadens the net of taxing nexus. For “automated digital services,” a minimum revenue threshold to be established based on the size of a market (with an absolute minimum threshold) will be the only factor necessary for nexus. This is an approach highly reminiscent of the “factor presence” standard for sales tax nexus in the U.S. after the Supreme Court’s 2018 Wayfair decision, essentially abandoning the need for physical presence. For other businesses, nexus will be more subjective, based on indicators of “significant and sustained” engagement with a market. These new nexus standards are exclusively applicable to the new taxing right described below as “Amount A.”
Pillar One attributes income to an identified nexus by distinguishing among three types of taxable profit which it identifies as Amount A, Amount B, and Amount C. Amount A is a share of the residual profits that is unique to digital businesses and attempts to capture the value created through the reach of the business into markets where the business has no physical presence, including the value of tracking the interactions with customers and among customers within the market. The IF admits that this concept is a departure from application of the traditional arm’s-length principle and even describes it as a “new taxing authority.” The allocation key could be a formulary approach similar to apportionment in U.S. state taxation which could produce results very different than those obtained under longstanding transfer pricing principles.
Amount B is a baseline measure of the routine returns on distribution or marketing functions that take place in the market. Amount C captures the value of any in-country functions that exceed the baseline activity compensated under Amount B. Amount A creates a new taxing right, but Amounts B and C do not create any new taxing rights and are based on existing nexus and transfer pricing profit allocation rules.
Scope of Businesses Affected
Two categories of businesses are within the scope of Amount A’s new taxing authority. The first category is those businesses that provide “automated digital services” on a standardized basis to global customers. These are businesses that provide digital services remotely to customers without any local infrastructure. These types of companies benefit from the data and content that the users contribute to the service in a particular jurisdiction and they can profit from that information without any physical presence. The list of these business models that are expected to be included in the scope of Amount A include:
- online search engines;
- social media platforms;
- online intermediation platforms, including the operation of online marketplaces, irrespective of whether used by businesses or consumers;
- digital content streaming;
- online gaming;
- cloud computing services; and
- online advertising services.
The second category consists of businesses that generate revenue from selling goods or services, whether directly or indirectly, to consumers. This includes businesses that license rights for trademarked consumer products or license a consumer brand and commercial know-how. This category would include, but is not limited to:
- personal computing products (e.g. software, home appliances, mobile phones);
- clothes, toiletries, cosmetics, luxury goods;
- branded foods and refreshments;
- franchise models, such as licensing arrangements involving the restaurant and hotel sector; and
The new taxing authority has thresholds in place to limit the number of MNEs that are affected by the new tax. Preliminary discussions have set the gross revenue threshold at €750 million. This threshold would significantly limit the scope of businesses and avoid burdensome compliance costs for smaller businesses. Another threshold being discussed is based on the amount of in-scope revenue that would otherwise be subject to tax. Finally, a third carve-out is being considered for companies whose Amount A profits do not exceed certain de minimis amounts. The OECD IF is currently looking at indicators to determine the threshold of significant and sustained engagement in the jurisdiction that would trigger the tax.
U.S Call for a “Pause” in Negotiations
U.S. Treasury Secretary Steven Mnuchin’s June 17 letter stated that the U.S. was concerned about Pillar One unfairly targeting U.S. multinational entities, and it wanted to pause negotiations on Pillar One during the global pandemic. The Secretary stated that the U.S. government’s most pressing issue was the economic issues resulting from COVID-19 and wanted to resume negotiations in 2021. Regarding Pillar Two of the IF, the U.S. has stated that it is “much closer to an agreement,” and wants to bring the negotiations to a successful conclusion by the end of the year.
OECD’s Response and the Outlook for BEPS 2.0
In response to the initial report that the U.S. was withdrawing from negotiations, the head of the tax policy center at the OECD stated that it was “a very bad message.” Regarding the COVID-19 pandemic, he stated that digital companies have actually benefited from the crisis creating more, not less, urgency in a global response to fixing an inequitable tax system. With countries taking on increased debt due to the worldwide pandemic, a better taxing mechanism for digital MNEs profiting during the pandemic would help replenish the coffers of countries experiencing record deficits created by the downturn in the world economy. The European finance ministers agreed, noting that the pandemic has “accelerated a fundamental transformation in consumption habits and increased the use of digital services, translating to revenue for digital-based businesses at the expense of others.”
The OECD has pushed back its targeted decision-making meetings on BEPS 2.0 by the IF to later this fall around the G20 Finance Minister’s meetings. With the U.S.’s current position regarding Pillar One, it is less likely that an agreement will be reached by the end of the year, as first targeted.
Consensus on BEPS 2.0 is certainly proving much more elusive than the original BEPS initiative. The initial BEPS effort was to increase the tax pie for everyone (i.e., every governmental taxing jurisdiction) by preventing tax planning that created “stateless income” not taxed anywhere. The national interests of governments worldwide were generally aligned in making sure that tax planning by sophisticated MNEs, and their advisors, did not result in substantial value escaping the global tax net. However, the 2.0 version is going beyond that to decide who gets a bigger piece of the pie by addressing tax rate arbitrage among jurisdictions. The implications of the initiative go far beyond the digital economy and U.S. MNEs. The changes contemplated by the proposal could lead to fundamental changes in the global international tax system under which all MNEs operate and could have significant consequences in terms of both the overall tax liabilities of businesses and the tax revenues of countries. If it fails, the alternative could be a global outbreak of punitive DSTs followed by retaliatory U.S. tariffs.Read More
The question has arisen regarding how to account for loans received by companies under the Payroll Protection Program (“PPP”) of the CARES Act as there are no accounting standards specific to government assistance received in this form. In the absence of standards specific to a transaction, Accounting Standards Codification (“ASC”) 105-10-05 directs a company to look to accounting guidance for similar transactions, unless direct application or application by analogy to the transaction is specifically prohibited by that guidance.
Before determining which accounting guidance to apply to the PPP loan, a company should first assess whether they believe some or all of the loan will ultimately be forgiven. For calendar year-end financial statements, non-public companies may have the benefit of hindsight, as further clarifications are issued by the government, and companies begin applying for loan forgiveness.
If there is significant uncertainty as to whether the loan will be forgiven or not, the conservative position is to account for it as a traditional loan under ASC 470, as the initial form of the PPP loan is debt. Accounting for the loan as debt would result in a company recognizing the proceeds and gross debt obligation upon issuance, and an expense over the term of the loan for interest at the stated rate (there is no interest imputation where the government has set the rate). Accounting for the loan as debt results in a more delayed income statement impact if the loan is forgiven, as the company would recognize the resulting gain only upon the company’s actual release as the primary obligor on some or all of the loan balance. Further, consistent with debt accounting, the cash flows would be reflected in financing activities in the statement of cash flows. Similarly, a company could account for the PPP loan forgiveness as a gain contingency under ASC 450-30 with largely the same result.
Alternatively, a company can analogize to IFRS International Accounting Standard (“IAS”) 20 to account for the PPP loan. Under IAS 20, debt would only be recognized to the extent that the loan is not expected to be forgiven. Once there is reasonable assurance (similar in concept to probable under ASC 450) that the conditions for forgiveness will be met, including at loan issuance, it is effectively accounted for as grant income. As grant income, a company may record in the income statement either other income or a deduction (offset) to the related expense, in this case, the qualifying expenses incurred.
IAS 20 prescribes only that recognition of grant income should be on a systematic and rational basis over the period that the company incurs the related expenses related to the original loan. If the expenses have already been incurred, then the grant is recognized when the forgiveness is reasonably assured. Further, cash flow presentation for the PPP loan proceeds when analogizing to IAS 20 would be reflected in operating cash flows, based on the expenses to which they relate (payroll and other operating expenses).
A company can also analogize to ASC 958-605, which is normally applicable to not-for-profit entities, and would also treat the loan forgiveness as if it was grant income; however, as compared to IAS 20, it has a higher threshold for recognition of the loan forgiveness. While IAS 20 allows for recognition when it is reasonably assured, ASC 958-605 only permits a company to record when the conditions for forgiveness are substantially met. This indicates a higher hurdle than probable, which could mean that recognition would be later than under IAS 20. Further, presentation is more restrictive under ASC 958-605, where the credit is required to be presented gross, likely as other income, rather than allowing for an offset against the related expense.
It is noteworthy that if the PPP loan is accounted for as a government grant under either IAS 20 or ASC 958-605, subsequent to loan issuance, a company will need to continually reassess whether it expects to meet the criteria for loan forgiveness and adjust the grant income as necessary. If a company no longer expects to meet the criteria, it will likely need to reverse the previously recognized grant income.
The Metro Council has recently outlined its plan to raise the necessary funds for the $7 billion “Get Moving 2020” transportation initiative that will be voted on this November. An overwhelming majority of council members support an increase in payroll taxes on employers in the metro area. Although the plan is not final, it is more than likely that Portland metro area businesses will face some form of payroll tax.
Payroll Tax Proposals
Five of the seven officials stated that they preferred an aggressive payroll tax approach. This approach would impose a 0.65% payroll tax on all employers in the Portland metro area which would allow projects to break ground immediately. Other council members support a more gradual increase in payroll tax with rates starting at 0.1% that would increase to 0.6% by 2028. The gradual increase in rates would likely be preferred by Portland metro businesses that are facing economic stress due to the pandemic. The current plan would also exempt businesses with twenty-five or fewer employees from the payroll tax, further helping smaller businesses that are facing financial stress.
Feasibility and Future Implications
The Metro is projecting that it needs $300 to $350 million to pay debt service on bonds for the projects. The Metro Council also wants to impose a $56 vehicle registration fee across the Portland metro area, but this alone will not be able to service the debt. That is why the aggressive approach is supported by the majority of council members. This approach is also more likely to give the Metro the immediate cash it needs to service the bonds instead of waiting a few years to begin the transportation initiative.
The payroll tax will be an additional challenge for Portland metro businesses that are facing financial stress from the pandemic. Also, the new payroll tax comes in the wake of the recently passed 1% tax on businesses to fund housing services for homeless people in the metro area that is slated to begin in 2021. The Metro Council is hosting a series of online listening sessions to hear public input on the potential funding measure. The first session is June 30 for residents who live in Clackamas County. Three more sessions will follow on July 6, 7, and 9 for residents of East Multnomah County, Central Multnomah County, and Washington County, respectively. All sessions will begin at 5:30 p.m. The Metro Council is planning a final vote on July 16 to finalize the funding plan.
Treasury Provides Welcome Grace Period and Transition Relief from Repeal of the “338 Approach” to Recognition of Built-in Gains (but the clock is ticking)
On January 14, 2020, the IRS and Treasury provided partial relief from their earlier announcement of the repeal of a highly favorable method of increasing the Section 382 limitation on the use of net operating losses and other tax attributes of a target by an acquiring company. Those rules have been a staple of the M&A tax toolkit for nearly 20 years. The new proposed regulations delay the applicability of the reversal and would provide transition relief to grandfather deals in certain circumstances.
As mergers & acquisition activities have come to a virtual standstill in the wake of the economic consequences of COVID-19, potential acquirers who expect to factor the value of tax attributes into their pricing once deal flow resumes must remember that the usual calculus will change dramatically unless certain steps are completed within 30 days after the final rules are published by the government.
Section 382 imposes a limitation on the ability of a “loss corporation” to offset taxable income with “pre-change losses” in periods after an “ownership change” takes place (i.e., after the “change date”). For purposes of section 382, an ownership change occurs if a loss corporation’s stock that is owned by its “five-percent shareholders” increases by more than fifty percentage points during a “testing period” which is generally the three years prior to the change date. If an ownership change occurs, section 382 limits the annual utilization of pre-change realized and net unrealized losses in an amount generally equal to the fair market value of the loss corporation’s stock immediately before the ownership change multiplied by the applicable long-term tax-exempt rate.
Special rules under section 382(h) apply for loss corporations that have net unrealized built-in gains (“NUBIG”) or losses (“NUBIL”) on the date of the ownership change which are recognized after the ownership change. For NUBIG companies that have “recognized built-in gains” (RBIGs), the IRS allows the loss corporation to increase its annual section 382 limitation during the five years following the ownership change date. Essentially, taxable income from built-in gains can be offset by pre-change losses without limitation. However, NUBIL companies that experience “recognized built-in losses” (RBILs) occurring during the recognition period are subjected to the section 382 limitation similar to existing net operating losses of the target as of the change date. The policy underlying these rules is that losses existing at the change date, whether realized or not, be permitted to offset unrealized gains existing at the change date without being subjected to the Section 382 limitation since such gains and losses both economically accrue prior to the ownership change.
The challenge for taxpayers desiring to maximize the benefit of pre-change losses is in identifying the recognition of a built-in gain during the recognition period. The actual sale of an appreciated plot of land is the easy academic example. But much more valuable assets are economically realized in much more subtle ways, especially for high technology or brand name companies. The intellectual property or goodwill of the target company is rarely recognized through sale. Rather, the “wasting” of such intangible assets is often the primary driver of post-acquisition operating profits. In this sense, a “slice” (and often an ample one) of these post change date profits is attributable to value that accrued prior to the acquisition and represents the recognition of a built-in gain.
For over a dozen years after Section 382 was promulgated in substantially its current form with the Tax Reform Act of 1986, taxpayers and the IRS were at odds over this concept of some component of post-change operating income being attributable to pre-change built-in gains that was eligible for offset by pre-change losses without restriction by the annual Section 382 limitation. Finally, in response, the IRS published Notice 2003-65 permitting taxpayers to rely on safe harbor approaches for applying the built-in gain or loss rules of Section 382(h) to an ownership change “prior to the effective date of temporary or final regulations.” That caveat proved to be an ominous one. Notice 2003-65 provided taxpayers with two alternative safe harbors, the 338 Approach and the 1374 Approach, for the identification of RBIGs and RBILs of the loss corporation.
The two approaches are similar in that both measure unrecognized built-in gains and losses at the change date based on deemed sales of all of the loss corporation’s assets. The 1374 Approach borrows the accrual method rules used to measure net recognized built-in gain for purposes of C corporations electing S status. The 338 Approach borrows similar rules which compare actual items of income, gain, deduction, and loss with those that would have resulted had a Section 338 election been made in a hypothetical purchase of all of the stock of the loss corporation on the change date.
The subtle but critical difference is the broader scope of built-in gain and income items under the 338 Approach which includes “forgone” depreciation and amortization deductions. In application, the Section 1374 Approach favors the deferral of NUBILs because it requires an actual discrete disposition event in order to apply. On the other hand, the 338 Approach is favorable for loss corporations in a NUBIG position because it accelerates RBIGs in the form of taxable income in amounts equal to the incremental amortization or depreciation that would have been available had a tax basis step-up to fair market value been provided at the change date.
In essence, such depreciation or amortization of the NUBIG under the applicable tax conventions for cost recovery is a surrogate for measuring the incremental income generated by the acquired assets. Prior to Notice 2003-65, taxpayers and the government had argued over more subjective economic analyses reminiscent of the litigation over the actual tax amortization of purchased goodwill that led to the enactment of Section 197 in 1993.
September Proposed Regulations
The proposed regulations eliminate the 338 Approach and make a modified version of the 1374 approach the lone safe harbor for RBIG and RBIL recognition. The headline effect is to eliminate the unlimited use of target company NOLs in an amount equal to one-third (i.e., 5 year recognition period relative to 15-year recovery period) of the appreciated value of the target company’s intangible assets unless an actual recognition event occurs. For an early stage high technology company such as a pre-commercial stage biotechnology enterprise, the regulations would result in an enormous discount on what would have been the value of their NOL and R&D tax credit attributes under the 338 Approach unless deals are structured differently than the typical stock acquisition.
The regulations make other modifications to the application of the 1374 Approach, particularly in the treatment of cancellation of indebtedness income and deductions for the payment of contingent liabilities. Those details are outside of the focus of this paper.
January Proposed Regulations
The proposed regulations issued in January, among other things, provide some relief for taxpayers against an abrupt change in rules just as a deal is closing. Prior to their issuance, a deal closing on the day after the regulations were issued and priced based on attributes available under the 338 Approach to harvesting tax attributes, would have suddenly been subjected to the harsher 1374 Approach. Instead, the January proposed regulations provide a grace period and a transition rule for deals in process when the September regulations go final.
The grace period is in the form of relief for ownership changes that occur up until the new final regulations are released plus an additional thirty days. In other words, once the regulations go final, taxpayers have 30 days to close the deal and avail themselves of the 338 Approach unless they qualify for the grandfathered scenarios provided below.
Under the grandfather rules afforded by the January proposed regulations, the final Section 382 regulations will not apply to an ownership change arising with an “owner shift” or “equity structure shift” that occurs:
- Pursuant to a binding agreement in effect on or before the delayed applicability date (i.e., the end of the 30-day grace period) and at all times thereafter;
- Pursuant to a specific transaction described in a public announcement made on or before the delayed applicability date;
- Pursuant to a specific transaction described in a filing with the Securities and Exchange Commission submitted on or before the delayed applicability date;
- By order of a court (or pursuant to a plan confirmed, or a sale approved, by order of a court) in a title 11 or similar case, provided that the taxpayer was a debtor in a case before such court on or before the delayed applicability date; or
- Pursuant to a transaction described in a private letter ruling request submitted to the IRS on or before the delayed applicability date.
Taxpayers can elect to apply the final regulations to ownership changes otherwise qualifying for this relief if they choose.
With the welcome transition relief granted by the January proposed regulations, acquirers are less susceptible to an abrupt change in the value of target attributes at the 11th hour of completing a transaction. Nonetheless, companies that are seeking to acquire loss corporations need to be agile, despite the currently bleak deal landscape, if they want to utilize the favorable 338 approach. Once the final regulations are issued, companies only have thirty days to take some action, if it has not already been taken, in order to apply Notice 2003-65. Although 30 days may not offer significant time to take an action sufficient to be grandfathered, these regulations seem to have taken a back seat to the TCJA regulations projects for the time being. Nonetheless, business development teams will want to monitor the Federal Register for the release of the final regulations and have plans to accelerate deal milestones to meet the transition relief.Read More
Treasury Releases Final Section 385 Regulations without Substantive Changes to the 2016 Proposed Regulations.
Internal Revenue Code (IRC) Section (§) 385(a) provides that the Secretary of the Treasury is authorized to prescribe regulations as may be necessary or appropriate to determine whether an interest in a corporation is to be treated as stock or indebtedness (or as in-part stock and in-part indebtedness). Prior to the issuance of Treasury guidance, the determination of whether an interest represented debt or equity was determined under common law debt versus equity factors.
Proposed regulations were issued in April 2016 under IRC § 385 (the 2016 Proposed Regulations). The 2016 Proposed Regulations were issued as part of a broader inversion package targeting the benefit of post-inversion tax avoidance by earnings stripping. The 2016 Proposed Regulations focused only on financial instruments issued with respect to related parties and not unrelated parties. Specifically, the 2016 Proposed Regulations applied the debt versus equity determination to instruments issued in transactions including (a) debt instruments distributed by corporations to their related corporate shareholders; (b) issuances of debt instruments by corporations in exchange for stock of an affiliate; (c) issuances of debt instruments as consideration as part of an internal asset reorganization (collectively the Distribution Regulations).
The 2016 Proposed Regulations also include rules that would authorize the Commissioner to treat a related-party interest in a corporation as indebtedness in part and as stock in part, consistent with its substance and establish documentation requirements that must be satisfied for certain related-party interests in a corporation to be treated as indebtedness for federal tax purposes. The documentation requirements were later removed in October 2019 after the Treasury and the IRS published T.D. 9880.
On October 21, 2016, final and temporary regulations were issued which retained the general framework of the 2016 Proposed Regulations but made several significant modifications that reduced the reach of the 2016 Proposed Regulations (2016 Temporary Regulations). The most significant modification in the 2016 Temporary Regulations was to exclude foreign issuers but the regulations did reserve on the application of the regulations to indebtedness issued by foreign corporations. Subsequent to the release of the 2016 Treasury Regulations, significant portions of the regulations were withdrawn on May 13, 2020 by Treasury Decision 9897.
On May 13, 2020, the IRS and the Treasury finalized the 2016 Proposed Regulations and withdrew the 2016 Temporary Regulations (2020 Final Regulations)
The Final Section 385 Regulations
The 2016 Proposed Regulations were adopted with no substantive changes in the 2020 Final Regulations. Accordingly, the 2020 Final Regulations make mandatory the following rules contained in the 2016 Proposed Regulations:
- Certain qualified short-term debt instruments are exempt from the Distribution Regulations. These instruments include short-term funding arrangements, ordinary course loans, interest-free loans, and deposits with a qualified cash pool header.
- Controlled partnerships do not recharacterize their debt instruments as stock. Instead, the debt instrument is treated as an exchange for stock of the controlled group partners. A controlled partnership, which is a partnership where at least 80% of the interests are held either directly or indirectly by its expanded group members, is generally treated as an aggregate of its partners.
- All members of a consolidated group that file a consolidated U.S. Federal income tax return will be treated as one corporation. Thus, when a member of a consolidated group issues a covered debt instrument that is not a consolidated group debt instrument, the consolidated group is treated as the issuer of the debt instrument.
The IRS announced in guidance in October and November 2019 that taxpayers could rely on the 2016 Proposed Regulations provided they were applied consistently in their entirety. The portions of the 2020 Final Regulations relating to qualified short-term debt instruments and the treatment of controlled partnerships apply to tax years ending after January 19, 2017 (and for debt instruments issued after April 4, 2016). The portions of the 2020 Final Regulations on consolidated groups apply solely to tax years for which a U.S. Federal income tax return is due, determined without regard to extensions, after May 14, 2020.
Tax Planning Implications
The 2020 Final Regulations primarily affect corporations, including those that are partners of controlled partnerships. Corporations that issue debt instruments to related corporations or partnerships should reevaluate the issuance date of the instruments to determine whether they will be treated as stock under the 2020 Final Regulations. Corporations should analyze their short-term debt instruments to determine if they are exempt from the Distribution Regulations. Since the 2020 Final Regulations are finalized without substantive changes to the 2016 Proposed Regulations, corporations that have consistently and entirely applied the 2016 Proposed Regulations will most likely not have to reevaluate their respective tax positions.
In its release of the 2020 Final Regulations, the Treasury stated that it intends to issue proposed regulations modifying the Distribution Regulations to make them more streamlined and targeted. It is also planning on withdrawing the ”per se” rule, though no timeline is indicated on the release of the new proposed regulations for comment.Read More
Companies Continue to Evaluate APB 23 Benefits After Tax Reform; Impact of COVID-19 Related Repatriations on the Indefinite Reinvestment Assertion
The general comprehensive rule for providing deferred taxes on book-tax basis differences under ASC 740-10 requires companies to record a deferred tax liability (DTL) for any GAAP outside basis in their foreign subsidiaries in excess of their tax basis. ASC 740-30-25-3 provides a rebuttable presumption that all offshore earnings contributing to the basis difference will be repatriated. For years, US multinationals have achieved significant effective tax rate benefits by avoiding an accrual of this DTL by invoking the exception to the presumption known as the indefinite reinvestment assertion as provided by ASC 740-30-25-18. The assertion requires companies to demonstrate their ability and intent through a documented plan for utilizing the excess earnings in the foreign jurisdictions while demonstrating those earning are not needed in the United States.
After the Tax Cuts and Jobs Act (TCJA), companies were subjected to a one-time transition tax under IRC Section 965 on all post-1986 undistributed foreign earnings and profits which had not already been subject to tax by the anti-deferral regime of Subpart F of the Internal Revenue Code (IRC) through one of two alternative dates at the end of 2017. This tax on all previously untaxed offshore earnings, coupled with other provisions of the TCJA which generally either subject all future offshore earnings to current taxation (e.g., “GILTI” under Section 951A) or permanently exempt them from taxation (e.g., IRC Section 245A), have required US-based multinationals to reevaluate their historic indefinite reinvestment assertion.
Why Continue to Assert Indefinite Reinvestment ?
On the surface, the indefinite reinvestment assertion might seem to be a relic of accounting history. Why seek a deferral of taxes on earnings that are either currently taxed or fully excluded from taxation? However, there are still consequences of not being permanently reinvested. Differences in outside basis still arise and the 100% dividend-received-deduction (DRD) under IRC Section 245A does not always allow them to be settled without tax consequences. For example, purchase accounting can create book-tax basis differences. Underlying differences between GAAP income and GILTI “net tested income” can also produce basis differences. The Section 245A DRD does not apply to capital gains such that basis differences not settled through a repatriation of earnings can have tax consequences. The states have not all conformed to the TCJA changes such that the settlement of basis differences could result in state taxes requiring a DTL.
Further, the TCJA does not change the potential need for DTLs on basis differences between non-U.S. entities in the organizational structure of a U.S.-based multinational enterprise. APB 23 must be evaluated for each legal entity whose operations are included within the group’s financial statements. Most U.S-headquartered multinationals have formed intermediate foreign holding companies. Taxpayers must examine what taxes are required in the jurisdiction distributing the cash (i.e., withholding taxes) and what income (i.e., dividends) is included in taxable income in the jurisdiction receiving the cash. If taxable by the receiving jurisdiction, there is a further need to analyze whether mitigation of any resulting double taxation is available through mechanisms such as foreign tax credits (FTCs). Maneuvering through relief afforded by participation exemption regimes and the further impact of each country’s tax treaty is complex.
Regardless of any book-tax basis differences at the various levels within a structure, there are other tax consequences of repatriating foreign earnings. For example, a U.S. company that revokes its indefinite investment assertion could also be subject to withholding taxes which would need to be accrued. In addition, foreign currency gains and losses on the withholding tax and any offsetting FTCs would have to be accrued and booked through the income statement since they constitute transaction gains and losses on a non-functional currency obligation of the U.S. shareholder. ASC 830 requires recognition of such gains and losses in earnings since the withholding tax is a foreign-currency denominated monetary obligation.
Further, IRC Section 986 imposes a tax on foreign exchange rate gains or losses on previously taxed earnings and profits (PTEP) which must be accrued in advance of an actual distribution. Since these are translation gains and losses, the tax accrual would be booked through the cumulative translation account.
The amounts involved may not be material but the administrative burden of keeping track of all of this alone could be sufficient to convince companies to make no change to their current assertion in the aftermath of the change in tax law. Others may decide to make a partial reinvestment assertion, which is expressly permitted, and repatriate some earnings due to the diminished financial accounting consequences of doing so. Some companies will revoke their indefinite reinvestment assertion entirely because the flexibility in the movement of global cash outweighs the administrative burdens described above. A scan of the tax footnotes of 10-Ks issued by public companies since the passage of the TCJA does not reveal a consistent pattern of the legislation’s impact on the assertion of indefinite reinvestment other than to observe that gone are the days when conventional wisdom dictated that most companies made it.
APB 23 Indefinite Reversal Assertion and Coronavirus Cash Needs
As is the case with many aspects of income tax accounting, consistency is the key to the indefinite reinvestment assertion under ASC 740-30. The appropriate facts and circumstances can justify a departure whereby offshore earnings are repatriated. An infrequent distribution of foreign earnings caused by an unforeseen event should not per se belie a company’s past and future assertion regarding its intent and ability to reinvest its foreign earnings.
In order to justify a continuing indefinite reinvestment assertion after such a departure, a company should consider the change in conditions that resulted in the repatriation, and the likelihood that this change could occur again. A pattern of “one-time” exceptions to permanent reinvestment will clearly call the assertion into question since the exception has become the rule and the normative presumption of repatriation much harder to rebut.
The global economic downturn caused by the COVID-19 pandemic has created a liquidity need for many U.S. companies that is often disproportionately concentrated in their domestic operations. When senior management addresses the overriding imperative of these liquidity needs by accessing foreign cash, financial management must evaluate whether these actions are an exception justified by what are clearly unprecedented circumstances or if there is a “new normal” that undermines further permanent investment assertions.
Once the economic consequences of the pandemic subside, companies who wish to maintain the indefinite reinvestment assertion going forward, notwithstanding having accessed foreign cash during the crisis, will need to consider:
- Reestablishing the baseline of cash needs and uses by jurisdiction in the new normal that emerges, including how the pandemic is impacting their business lines by geography, and where it is causing the most significant cash shortages.
- Critically challenging prior assumptions that were key to a particular company’s assertion such as the balance between domestic and foreign acquisition pipelines which may have been altered by the differential economic impact of the pandemic on likely targets.
- Permanent supply chain disruptions and the potential for onshoring operations to mitigate the risk of foreign supply chain dependencies.
- Evaluating the impact of the downturn on previous CapEx plans by jurisdiction.
- Establishing contingency plans should a “second wave” or more onsets of the virus ensue and evaluating their funding implications.
- Evaluating whether debt covenants and interest rates have been modified as a result of the economic downturn, impacting the relative cost of borrowing and altering ready access to that source of funding by region.
- Identifying any new US or foreign regulations that were enacted in the aftermath of the pandemic and evaluating whether they change relative trade volumes through such measures as tariffs or restrict intercompany cash transactions through tighter restrictions such as exchange controls.
- Reassessing their transfer pricing policies regarding which costs should be borne by which entities.
- Reviewing tax holiday agreements which require specific investments in capital improvements or headcount to maintain the holiday
- Facing the prospect of whether it is time to simply acknowledge that the economic calculus of accessing foreign cash instead of traditional domestic sources has been permanently altered by the TCJA.
Despite a generally unsettled state, what is becoming clear is that the unprecedented economic impact of the COVID-19 pandemic, coming on the heels of a once-in-a-generation U.S. tax law change, presents an environment where longstanding bedrocks of income tax accounting such as APB 23 must undergo a comprehensive re-evaluation. The underlying accounting standards have not changed, but the environment in which they must be applied is radically altered from what it was just three years ago.Read More
Proposed Regulations Deny the Deductibility of Certain Fines, Penalties, and Other Amounts Under Section 162(f), and Impose Reporting Requirements
The IRS and Treasury released proposed regulations that offer guidance concerning the recent expansion of the limitations on deducting certain fines, penalties, and other amounts under Section 162(f) of the Internal Revenue Code (IRC). The proposed regulations will affect taxpayers that have fines, penalties, or other amounts paid to or at the direction of governments, governmental entities, or certain nongovernmental entities. The proposed regulations also provide exceptions that taxpayers may meet to deduct certain payments under Section 162(f)(2). A companion set of proposed regulations address reporting requirements under IRC Section 6050X for governmental entities receiving such payments.
The Tax Cuts and Jobs Act (TCJA) substantially broadened the scope of IRC Section 162(f), which previously disallowed a deduction for fines and penalties paid to a government entity. The TCJA now limits the deductibility of certain amounts paid to or at the direction of a more broadly defined universe of governmental entities for not only a violation of the law, but also a potential violation, or an inquiry by a governmental entity into a potential violation of the law. However, certain exceptions are provided under Section 162(f)(2) that allow a taxpayer to nonetheless deduct certain fines, penalties, or other amounts for payments made as “restitution, remediation, or to come into compliance with the law.” Amounts arising from certain private party suits in which a government is not a party and for certain taxes due are also excepted.
The TCJA also added IRC Section 6050X, which requires certain governmental entities to report the total fines and penalties paid with a separate identification of the portion of such payments which constitute an amount that was paid for restitution, remediation, or to comply with a violated law.
Explanation of the Section 162(f) Proposed Regulations
The proposed regulations broaden the universe of nondeductible payments to include not only those made for a violation but also an investigation or inquiry into the potential violation of any civil or criminal law. Furthermore, this scope includes payments reimbursing the government for its legal or investigation costs. Comments are solicited by Treasury as to how far this scope extends. For example, does it include the costs of routine governmental audits, inspections, or reviews conducted in the ordinary course of business?
Also, the scope of potentially nondeductible payments is broadened to payments made to six categories of entities, including certain nongovernmental entities with certain self-regulatory powers. The scope extends even further to payments made to nongovernmental entities at the direction of a governmental entity and applies regardless of whether the taxpayer admits guilt or liability or merely pays a settlement to avoid the expense or uncertain outcome of an investigation or litigation.
The proposed regulations also potentially limit a portion of the interest expense that can be deducted with respect to taxes due. If a governmental entity assesses fines or penalties on taxes, the interest owed on such fines and penalties would not be deductible. Interest assessed on the taxes due, however, would still be deductible.
The exceptions allow a taxpayer to deduct amounts that were paid for restitution or remediation. Payments qualify for these exceptions if they restore, either in full or in part, the governmental entity or person that is harmed by the violation of the law. Restitution and remediation do not include disgorgement or forfeiture nor amounts paid or incurred as reimbursement to government entities for investigation or litigation costs. Amounts paid to compensate an injured party may be deductible as distinguished from payments to punish or deter the taxpayer from engaging in future violations which are not deductible.
Payments made to achieve a specific corrective action or to provide property in order to come into compliance with the law are also excepted from disallowance by Section 162(f)(2). However, the taxpayer must still determine if a deduction is delayed by the separate capitalization requirements of the IRC or as a payment obligation under the economic performance rules of Section 461(h).
Even if the payments meet the definitions for the provided exceptions, the deduction can be denied unless the taxpayer meets both an identification and an establishment test. Identification is generally met through an order or agreement entered into by the taxpayer which stipulates that a specific amount is for restitution, remediation, or an amount paid to come into compliance with the law. However, the IRS may rebut the presumption that such identification qualifies the payment for the exceptions by providing evidence that the payment was not actually made for the purpose identified in the order or agreement.
To overcome such a challenge from the IRS, the taxpayer must further meet the establishment requirement which is done by providing documentary evidence that it was legally obligated to make a payment for the qualifying purposes of restitution, remediation, or an amount paid to come into compliance with the law. Supporting documents could include correspondence between the taxpayer and the governmental entity evidencing the alleged intent and purpose of the settlement, as well as legal or regulatory provisions related to the underlying violation of the law. In other words, qualification of the payments must be established by evidence which is both legally persuasive and supported by a substantiation of the facts that is consistent with the legal arguments.
Explanation of the Section 6050X Regulations
The proposed regulations under new Section 6050X, provide that if the amount paid in fines and penalties by a taxpayer exceeds $50,000, then the appropriate governmental entity named in the agreement would be required to file an information return on Form 1098-F with the IRS. The information return must include the aggregate amount the payor is required to pay; the separate amounts required to be paid as restitution, remediation, or to come into compliance with the law; and any other information required by the form’s instructions. This information must also be provided to the taxpayer.
The proposed regulations require the governmental entity to file the 1098-F with the IRS on or before January 31 of the year following the year in which the agreement or the order becomes binding under law. These reports must be filed even if there are pending appeals on the order.
A state’s environmental enforcement agency enters into an agreement with Company A for violating the state’s environmental law. Under the agreement, Company A must pay $40,000 in civil penalties, $80,000 in restitution for environmental harm, $50,000 for remediation for contaminating sites, and $60,000 to upgrade its operations to come into compliance with the law. As long as the identification and establishment criteria are met, Company A will be able to deduct $190,000 ($80,000 in restitution + $50,000 for remediation + $60,000 to come into compliance with the law). The $40,000 civil penalties are not deductible.
The proposed regulations substantially increase the technical and procedural hurdles for a taxpayer to deduct certain fines, penalties, and other payments than what was possible under Section 162(f) prior to the TCJA. Under the proposed regulations, the taxpayer must not only secure agreement from their counterparties to mutually identify negotiated payments as restitution, remediation, or made in order to come into compliance with laws, but must also establish, through documentation, that the compensation is actually paid for those reasons. The documentary record, as well as the language of the actual settlement agreement, must establish that the intent, nature, and purpose of payment is consistent with the purported exceptions. The evidence must demonstrate that the payment compensates the injured party for the harm suffered and restores it to its position before the violation of the law. If the record at any point in the controversy and the related negotiations indicates that the payment was made as a punishment or to deter the taxpayer, then it is not deductible.
To meet this new threshold, taxpayers would benefit from evaluating their document retention policies to ensure that all documentation in the legal process are retained to support both the identification and the establishment requirements. Any ambiguities in the documentation (such as the advancing of alternative arguments for a desired outcome) will inevitably result in controversies between the IRS and the taxpayer. In the event of an audit, the retained documents can be used as evidence of the true nature of the payment.
The proposed regulations could also stall settlement agreements between taxpayers and governmental entities or officials. Since there is a greater burden on the taxpayer to establish that the payments were made as restitution, remediation, or to come into compliance with the law, taxpayers will be increasingly cautious about the communications leading up to and the specific language ultimately used in settlement agreements.
The additional reporting requirements for government officials under Section 6050X are not probative of the deductibility of payments. Taxpayers may not rely alone on the classification made by the government official in the filed Form 1098-F. The identification and establishment requirements are met only if the underlying facts merit such classification.
Taxpayers may choose to rely on the proposed regulations under Section 162(f) if applied consistently and in their entirety. Otherwise, they are effective for tax years beginning on or after the date on which they are published as final. Amounts payable under an order or agreement entered into before December 22, 2017 are grandfathered unless a “material change” is made to the order on or after the applicability date of the final regulations. However, the proposed regulations under Section 6050X only apply to orders and agreements that are binding on or after January 1, 2022.Read More
Washington, Clackamas, and Multnomah Counties Pass 1% Tax on High-Wealth Individuals and Large Businesses to Fund Housing to Reduce Homelessness
On May 19, 2020, voters in Washington, Clackamas, and Multnomah counties approved Measure 26-210, which funds services, including health care, case management, job training, and rent assistance, for people experiencing or facing homelessness. These services will be funded by a marginal 1% tax on households (both residents and nonresidents earning income within the district) with taxable income over $200,000 ($125,000 for individual tax filers). Businesses with gross receipts in excess of $5 million will also be subject to a 1% tax on business profits.
The tax will begin with the 2021 tax year and is set to expire on December 31, 2030. An extension beyond 2030 will require voter approval.
The Metro Council will release implementation guidelines including forms and documents on which to file; due dates; penalties and interest for not filing; refunds and deficiencies; overpayments; estimated tax payments; exemptions; and other procedural provisions. The Council will also evaluate individual income tax residency determinations and business profits tax determinations, including an issue with double taxation for partners and shareholders of pass-through entities. The Council intends to use an Oregon tax agency to facilitate the collection of the tax.
This 1% tax comes in the wake of other recent taxes on businesses like the Oregon Corporate Activity Tax (CAT). Now, certain businesses and individuals in the Oregon metro area are subject to Multnomah County Business Income Tax; Oregon Corporate Income/Excise Tax; Oregon CAT; City of Portland Business Income Tax; City of Portland Clean Energy Surcharge; City of Portland Pay Ratio Surcharge; and now the Oregon Metro Area Homeless Housing Tax.Read More