Oregon Corporate Activities Tax — Notable Updates
Increases to Estimated Tax Payment Threshold Amid COVID-19
This week, Gov. Kate Brown and the Oregon Department of Revenue (DOR) adjusted the requirements for businesses making payments of the new Corporate Activity Tax in light of the COVID-19 pandemic.
The DOR has revised OAR 150-317-1300 to reflect a change in the threshold for making estimated tax payments from $5,000 of annual tax liability to $10,000 of annual tax liability for the first year of the tax. This means, effective immediately, businesses that will owe less than $10,000 are not required to make quarterly estimated tax payments this year.
In addition, the DOR won’t assess penalties for underestimated quarterly payments or for not making a quarterly payment, if businesses don’t have the financial ability to make the estimated payment. However, if a business knows it will owe more than $10,000 in annual Oregon CAT in 2020, and the business can pay, then it should make estimated quarterly payments and comply with the law to the fullest extent possible.
The DOR will honor a business taxpayer’s good faith efforts to comply and will not assess a penalty for well-documented efforts, including how the COVID-19 pandemic has impacted the business.
If you are uncertain about your economic future due to the COVID-19 crisis, or your business has been closed during this crisis and cannot determine what will be owed in taxes this year, you may not be penalized. We highly recommend that you keep documentation in your records that support your business’s current circumstances.
Calculating the Tax
The DOR has also published a calculation worksheet to help companies estimate their tax, which is available on their CAT page.
Updated Proposed Rule for Agency Exclusion
The Department of Revenue has also proposed changes to the temporary rules around the Agency Exclusion. The proposed permanent rule adds two examples related to the construction industry. The two examples demonstrate where an agency relationship would and would not exist. This clarification is expected to assist companies that pass-through subcontractor expenses to their customers. The text of the additional examples can be found here (this document was filed on April 26). The last day to offer comments to the Department is May 26, 2020, at 5:00 p.m. There will be a hearing on the first round of temporary rules on May 26, 2020, including this proposed change, via conference call from 9:00 to 11:00 a.m. The details for the call can be found in the text of the Notice.
In May 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 several 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. Read more details of the Oregon Corporate Activities Tax in our article here.
You can 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. Our advisors are here to help guide you through any changes in tax policy that may come into effect. Reach out to your Aldrich Advisor today to get the answers you need to stay informed. For more resources to help you navigate the developing impact of coronavirus on your business, visit our COVID-19 Resource Center.
Previous CAT Coverage
- Keeping Up With Oregon’s Corporate Activity Tax (February 2020)
- 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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