Oregon State Tax Updates

Here are the latest news and updates on Oregon state and local tax.

 

New Pass-Through Business Alternative Income Tax

Signed by Oregon Governor in July of 2021, S.B 727 establishes an elective pass-through entity (PTE) business alternative income tax based on the PTE’s distributive proceeds.  The newly established alternative PTE income tax, which is applicable to tax years beginning on or after January 1, 2022 and before January 1, 2024, imposes a 9 percent tax on the first $250,000 of distributive proceeds and a 9.9 percent tax on any amount exceeding $250,000.  If the alternative PTE income tax is elected by an eligible PTE, each individual would receive a corresponding refundable tax credit equal to the alternative PTE tax paid by the individual on the distributive share.

In order to qualify for the alternative PTE income tax election, all PTE members must be either individuals subject to the individual income tax or pass-through entities entirely owned by individuals subject to the individual income tax.  Consent to the election must be given by all members of the electing PTE or by any officer, manager, or member of the electing PTE who is authorized to make the election on behalf of all members of the electing PTE.  The election shall be made annually on or before the due date, including extensions, of the pass-through entity’s return, in the form and manner prescribed by the Department of Revenue.

 

Senate Bill 727 – Enacted July 19, 2021

 

Reduced Income Limits Eligible for Elective Reduced Personal Tax Rate

Also signed in July of 2021, S.B. 139 lowered the elective reduced personal income tax rate allowed for certain-pass through income to 7 percent (from 7.2 percent) for tax years beginning on or after January 1, 2021.  However, this reduced rate is only imposed on the pass-through income exceeding $250,000 but not exceeding $500,000.  S.B. 139 modifies the tax brackets for income exceeding $500,000 but not exceeding $1,000,000. S.B.139 also clarifies the types of pass-through entities whose income is eligible for this election and imposes additional eligibility requirements.

 

Senate Bill 139 – Enacted July 19, 2021

 

Corporate Activity Tax for Unitary Groups

The Oregon Department of Revenue provided specific guidance directed towards taxpayers that meet the inclusion criteria for more than one unitary group for purposes of the Commercial Activity Tax (CAT).  The Department clarified that taxpayers are required to file with the unitary group that reports the greatest amount of commercial activity in the state (after exclusions).

The guidance also clarifies information relating to the exclusion of intercompany receipts.  Stating that the receipts between unitary groups members are only excluded if the members are part of the same unitary filing group.

 

Amended Oregon Administrative Order Section 150-317-1020

 

Federal Tax Year for Corporate Activity Tax

S.B. 164 enacted several modifying provisions to the state’s Corporate Activity Tax (CAT).  The most noteworthy provision allows fiscal year taxpayers to use their federal tax year for CAT purposes.  Previous to this enactment, all filers were required to use the calendar year for CAT purposes.

S.B. 164 modifies several other provisions relating to insurance companies, exemptions, and other definitions.

 

Senate Bill 164 – Enacted July 19, 2021