If Oregon levies the Corporate Activity Tax, we project that Oregon will fall from 7 th to 12 th overall on the SBTCI, and from 30 th to 49 th in corporate taxes, just behind Delaware. This discussion explores a few considerations for taxpayers potentially subject to CAT. Review the Oregon Department of Revenue Regulations when they are issued to see if there are other strategies available. Contact the payer of your The next session of the Oregon Legislature is only scheduled to run from February 3, 202 0 through March 8, 2020. CLA’s state and local tax professionals offer analysis of your business to help you determine if your activities are subject to Oregon’s CAT. Gross receipts include the fair market value of property transfers from out of state, unless these transactions are not intended to evade the CAT. Oregon’s new corporate activity tax will affect companies with annual in-state revenues exceeding $1 million, and was created to raise $1 billion per year for the state’s schools. Unitary groups are made up of business entities under economic control. For corporations with a federal due date of April 15, 2020, the Oregon return filing and return payment due date for tax year 2019 is automatically extended from May 15, 2020 to July 15, 2020. Oregon Business and Industry October 2020 STATE TAX RESEARCH ... Business taxes included in this study are property taxes, corporate income taxes, gross receipts taxes, individual income taxes on pass-through business income, insurance taxes, excise taxes, payroll taxes, and license fees. The main subtraction in coming up with the tax base is 35% of the greater of cost of goods sold as calculated in arriving at federal taxable income, or total compensation (limited to $500,000 per employee). What if the product ends up pooled with other products and identity is lost? The corporate tax rate applies to your business’s taxable income, which is your revenue minus expenses. Oregon Corporate Activity Tax (CAT) Update. To put this in perspective, let’s say a subject business entity has $5.0 million in gross revenue and $3.0 million in cost of goods sold. For the 2020 tax year, if you expect a Corporate Activity Tax liability of $10,000 or more, then you are required to make estimated payments by April 30, July 31, October 31, and January 31 for the preceding calendar quarter​.​ Use the CAT estimated payments worksheetto help with calculations. Thus, quarterly estimated payments are due on April 30, July 31, October 31, and January 31 each year, with tax returns due on April 15 of the following year. Oregon State Corporate Income Tax 2020 1.0 - Oregon Corporate Income Tax Brackets Oregon collects a state corporate income tax at a maximum marginal tax rate of 7.600%, spread across two tax brackets. This minimum tax ranges from $150 for sales under $500,000 to … Oregon Corporate Activities Tax. Oregon’s business taxes stand to go up more than 40% in the next two years because of corporate tax hikes, according to a new study funded by the state’s top corporate lobbyist. Substantial nexus is present if a business owns or uses a part or all of its capital in the state; holds a certificate of existence or authorization issued by the Secretary of State to do business in Oregon, has physical presence (bright line presence concept), or otherwise has nexus to the fullest extent permitted under the US Constitution. Brown signed into law the new Oregon Corporate Activity Tax. Form OR-20-V, Oregon Corporation Tax Payment Voucher and Instructions: 150-102-172: General: Form: Form OR-24, Oregon Like-Kind Exchanges/Involuntary Conversions: 150-101-734: General: Form : Form OR-24, Oregon Like-Kind Exchanges/Involuntary Conversions Instructions: 150-101-734-1: General: Publication: Form OR-37, Underpayment of Oregon Corporation Estimated Tax: 150-102-037: 2020: … It appears that some kind of combined filing will be required. Signed on May 16, this new corporate activity tax (CAT) will be owed by companies with annual in-state revenues exceeding $1 million, and is anticipated to raise $1 billion per year for Oregon schools. Is there going to be a bright line test on this aspect of the legislation? The tax would be $250 plus 0.57% of the tax base, which equals $18,490. The CAT is effective for tax years beginning on or after Jan. 1, 2020 (H.B. It is widely expected that a number of bills regarding the Oregon CAT will be submitted for consideration during that short time. The North Carolina certificate number is 26858. 317. Commercial activity is sourced to Oregon using the rules found in Section 66 of HB 3427. There is a $100 per month penalty for not timely registering, which can be a maximum of $1,000 per year. CliftonLarsonAllen is a Minnesota LLP, with more than 120 locations across the United States. CliftonLarsonAllen Wealth Advisors, LLC disclaimers. An overview of the amendments follows. 1 During its special legislative session, the Oregon legislature passed a H.B. Services are sourced to Oregon to the extent the services are delivered to Oregon, while intangibles are sourced to Oregon to the extent the property is, or can be, used in Oregon. The CAT is assessed in addition to the state's current corporate income tax. Oregon layered its tax on top of existing corporate taxes. Oregon business groups are lining up on both sides of an escalating debate about whether to delay implementation of a new commercial activities tax. It applies to all types of businesses rather than just corporate entities, with the exception of governmental entities and tax-exempt entities. The statutory definition of a person includes all persons, and is not restricted to domestic or U.S. persons. On May 16, 2019, Oregon Gov. Temporary regulations are currently being issued, with many already out and more to come in the first quarter of 2020. Oregon: The Department of Revenue announced that for purposes of Oregon corporate excise tax and income tax, the presence of teleworking employees of a corporation in Oregon between March 8, 2020, and November 1, 2020, would not be treated by the department as a relevant factor when making a nexus determination if the employee(s) in question are regularly based outside Oregon. The legislation directs tax collections to education, but there is no guarantee that current funding for education will not be redirected. House Bill 2164 House Bill 2164 was passed in the legislature on … The tax applies to businesses in every industry, including insurance companies and financial institutions, unless they are “excluded persons,” a term that covers governmental entities as well as certain nonprofits, hospitals, and long-term care facilities. Oregon’s tax is modeled on a similar tax in Ohio, but that tax was a replacement for other business taxes. Despite being called a corporate activity tax, the new gross receipts tax applies to virtually all forms of business, including C and S corporations, individuals, joint ventures, partnerships, trusts, estates, and any entity that is disregarded for federal income tax purposes, such as certain limited liability companies. Yet, House Bill 2164 says it was changed to $750,000. Contrary to what the name implies, all business entities, regardless of their business structure, are subject to this new tax. You can still make estimated tax payments even if you expect that your tax after all credits will be less than $1,000. Businesses with at least $750,000 in Oregon sales are expected to register with the Department of Revenue (DOR), but will not have a CAT liability until they reach $1 million in Oregon revenues. The Corporate Activity Tax is a new business tax in addition to the state’s corporate income tax. In a meeting with the Oregon Department of Revenue, a representative said they might define the place of sale as being where the product is delivered. Oregon Governor Kate Brown signed HB 4202 into law on June 30, 2020. The DOR is working on starting that process as well. The tax calculation is $250 plus 0.57% of taxable corporate activity that exceeds $750,000. Kate Brown signed House Bill 3427, which establishes the new Oregon corporate activity tax (CAT). The definition of property likely covers items such as machinery, equipment, and inventory. How can they issue a certificate to the seller at the time of sale? Who is right? Gross receipts from outside of Oregon are not subject to the tax and there will be an apportionment method available to make the multi-state allocation states. The Maryland permit number is 39235. With the passage of House Bill 3427 on May 16, 2019, Oregon is expected to implement a corporate gross receipts tax — or commercial activity tax (CAT) — that will apply to all individuals doing business in Oregon. Production agriculture generally does not calculate cost of goods sold for the 35% subtraction. The tax is expected to raise $1.4 billion per year. In most cases, taxes are allocated to business and households based on their initial incidence. These rules are similar to — but are not the same as — the income tax sourcing rules. 3427 and will begin on receipts starting January 1, 2020. Just what is this new tax? Stat. Oregon corporations that claim no net income or have net losses must still pay minimum taxes based on total sales. The … We have been told regulations will be coming during the first two or three months of 2020. 3427, §79). Once a company has nexus, it has 30 days to register with the DOR. The legislation requires substantial nexus with Oregon. 4202, which provides a number of technical amendments to the Oregon CAT statutes under Or. The bill established a 0.57% tax (corporate activity tax) on businesses that have more than a million dollars in Oregon sales and reduced personal income tax rates for the lowest three tax brackets by 0.25%. While the Oregon CAT appears to have primarily relied upon the Ohio Commercial Activity Tax, it also bears similarities to the Texas Franchise Tax (specifically, its use of subtractions for cost of goods sold or compensation) and to Washington’s Business and Occupation Tax. The New York permit number is 64508. A recent letter by the Oregon Department of Revenue indicated that the exemption is $1.0 million. We need better definitions of what this means and how it works. Some gross receipts are exempt from the CAT by statute, including sale or exchange of capital assets and Section 1231 assets; hedging transactions; loan principal received; capital contributions; insurance proceeds; dividends and interest; distributions from pass-thru entities; sales to a wholesaler in Oregon where seller receives certification at time of sale that the wholesaler will resell the property outside of Oregon; sales of groceries (defined as food vs. crops raised by farmers); sales to a farmer cooperative, transactions between members of a unitary group, and certain pass-through taxes (but not the CAT). In May 2019, Oregon imposed a new 0.57% tax on Oregon gross receipts above $1 million that is set to go into effect for 2020. On May 16, 2019, H.B. © 2020 CliftonLarsonAllen. Cross-Border Tax Issues for Inbound Companies, Your Business and Individual Tax Rates for 2021, Urgent Update on Work Opportunity Tax Credit Transition Relief, IRS Issues Guidance on SALT Cap Workarounds, Privacy policy, terms of use, and disclaimers The tax is applied to all levels of the business cycle of goods and services thus it has a pyramiding nature to it. If applicable, the tax is due even if a business has a loss for the year. With the enactment of HB 3427, Oregon has joined a growing list of states that impose a gross receipts tax, such as Washington and New Mexico, who have revamped their state tax code in the wake of the Supreme Court’s South Dakota v. Wayfair ruling. Any taxpayer who takes delivery of property outside of Oregon, and within one year brings that property into Oregon for the taxpayer’s own business use, must report the value of that property as an Oregon-sourced receipt subject to the CAT. Start a Busines s Video Series Step-by-step guide for starting a business. Call us at 503-399-7306 if you have questions. Let’s say you have annual revenues of $250,000 and expenses of $55,000.You want to figure out how much you owe in federal taxes. The body of these instructions has NOT been $195,000 = Taxable Income. Commercial activity is the total amount of gross receipts from activity in the regular course of business. The new Oregon Corporate Activities Tax becomes effective January 1, 2020. Nexia International Limited does not accept any responsibility for the commission of any act, or omission to act by, or the liabilities of, any of its members. There are unanswered questions to be solved by the Oregon Department of Revenue, and perhaps by the Legislature itself. 3427), legislation that creates the “Corporate Activity Tax” (Oregon CAT). Be sure all allowable costs are reported in the cost of goods sold section of your tax return in order to maximize the 35% subtraction. There are a large number of exempt receipts — as noted below — however, this definition includes a large number of transactions subject to tax. Retirees If you’re retired or will retire in 2020, you may need to make estimated tax payments or have Oregon income tax withheld from your retirement income. "CliftonLarsonAllen" and "CLA" refer to CliftonLarsonAllen LLP. Examples of excludible gross receipts for most industries include: There are special exclusions for many specific industries such as gas and fuel sellers, grocery stores, utilities, telecommunications service providers, heavy equipment providers, vehicle dealers, agricultural cooperatives, and many others. Businesses are exempt from the CAT (including the $250) on their first $1 million of taxable commercial activity. Last year Oregon Governor Kate Brown signed House Bill (HB) 3427, imposing a new gross receipts tax effective for tax years beginning on or after January 1, 2020. The California license number is 7083. Effective for tax years beginning on or after January 1, 2020, the CAT is imposed on each person with taxable commercial activity for the privilege of doing business in Oregon. This apportionment factor may be different from the sourcing of commercial activity noted above, due to industry-specific rules, throwback, and other nuances in the income tax rules that are not in the CAT statutes. Businesses with nexus in Oregon are subject to a tax of $250 plus 0.57% of their “taxable commercial activity” (defined as their Oregon-sourced gross receipts), less a subtraction for 35% of the greater of their “cost inputs” or “labor costs” apportioned to Oregon. The Oregon CAT is a calendar basis tax no matter the accounting year of the taxpayer. The Oregon Corporate Activity Tax (Oregon CAT) is applicable for years beginning on or after January 1, 2020. The Oregon Department of Revenue announced late Wednesday, March 25, 2020, that the state of Oregon will officially extend the deadline for certain tax payments until July 15, 2020. The DOR is looking to provide a six-month extension, and will clarify this through regulations. Several states implemented corporate income tax rate changes over the past year, among other revisions and reforms. Visit www.oregon.gov/dor for updated information. Example . Under this “bright line presence” standard, companies have nexus under the CAT if they have at least $50,000 in Oregon payroll or property, $750,000 in Oregon sales, or 25% of their total payroll, property, or sales in the state. How will general contractors know what the labor component is if the subcontractors are not willing to share this information.