On May 16, 2019, Oregon Governor Kate Brown signed House Bill 3427A, creating a new Oregon Corporate Activity Tax. The bill was later modified by House Bill 2164, which included clarifications, technical corrections and a number of other changes. The tax is expected to raise more than $2 billion per biennium for Oregon schools and applies to Oregon sales for companies with revenue greater than $1,000,000.
There is new legislation proposed under House Bill 4009 to the Corporate Activity Tax.
Most notably, the changes include:
Apportionment for Subtraction
Section three of the bill calls for the 35 percent subtraction to be based on a ratio where the numerator is commercial activity in Oregon and the denominator is commercial activity in the US.
A proposed amendment to the bill would allow the taxpayer to have the option to use the above ratio or the sales factor from the taxpayer’s corporate excise tax return.
Another proposed amendment provides fiscal year taxpayers guidance for the apportionment they can use.
Section four allows for a one-time registration, rather than an annual registration, unless the taxpayer undergoes a merger or other reorganization.
Section five states that the underpayment penalty is to be 20% of the underpayment amount, for any quarter that the taxpayer has not paid at least 80% of the balance due. This language assumes that 2020 filings will be completed on time.
From 2021 onward, penalty for underpayment will be 20% of the underpayment amount for any quarter that the taxpayer has not paid 90% of the balance due.
A proposed amendment would change the underpayment penalty to 5%.
As the DoR publishes draft rules, they are posted on their website. At the beginning of the month after introduction they are moved to the administrative rule notices page as temporary rules. Below are some of the more notable temporary rules.
Provides a definition of “store” and excludable receipts from retail sales, factors indicating home consumption and examples. You can find the rule in its entirety here.
Includes definitions of “processing”, “store” and “wholesale sales” and other significant guidance.
Other topics covered include:
- Excludable receipts from wholesale sales
- Required documentation for verification
- Safe harbor for wholesale sales to stores authorized as retail food stores or qualifying as retail food stores for SNAP purposes
- Examples for clarity
Other draft rules that have been posted to the administrative rule notices can be found here.
The list of draft rules includes highlights such as:
- Sourcing Commercial Activity from Sales of Tangible Personal Property
- Sourcing Commercial Activity Other than Sales of Tangible Personal Property
- Unitary Group Factors and Filing Requirements
- Property Brought Into Oregon
- Motor Vehicle Resale Certificate – Documentation Required
Staying Ahead of the Changes
The DoR is soliciting feedback on these temporary rules before they go final this spring. Feedback can be emailed to Catrules.email@example.com and taxpayers are invited to get involved by attending the DoR’s Education Tour. You can also keep up-to-date with FAQ’s, rules, and changes to the CAT by subscribing to the DoR’s CAT mailing list here.
You can also download our corporate activity tax calculator to help estimate the amount of corporate activity tax owed.
As more changes and updates unfurl, we know it can be tough to stay ahead of the curve. Recovery of the CAT remains a key concern for many taxpayer. Reach out to your Aldrich Advisor today to get the answers you need to stay ahead of the changes.
Previous CAT Coverage
- Corporate Activities Tax in Oregon: HB 3427 & 2164 Summary (August 2019)
- Oregon Corporate Activity Tax Update (October 2019)
Meet the Author
Diana Strassmaier, CPA, CCIFP®
Aldrich CPAs + Advisors LLP
Diana joined the firm in 2018 with almost two decades of experience serving members of various industries including construction, engineering and architecture, manufacturing and distribution, and government contracting. An expert on conducting overhead audits, Diana works closely with government contracting industry clients to offer clarity on how overhead rates work and help them maximize compensation.... Read more Diana Strassmaier, CPA, CCIFP®
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