| 2009 Corporate Tax Law Changes |
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| New legislation |
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Below is a list of corporate tax House bills (HB) and Senate bills (SB) that the 2009 Oregon Legislature passed.
Measure 67
HB 3405—Marginal corporate tax rate and minimum tax increase The 2009 Oregon Legislature passed HB 3405 effective for tax years beginning on or after January 1, 2009. It increases the corporate tax rate from 6.6 percent to a new marginal tax rate. It also increases the corporate minimum tax from $10 to $150 – $100,000, depending on the taxpayer’s amount of Oregon sales.
These changes from HB 3405 will be voted on during a special election on January 26, 2010, as Measure 67.
If Measure 67 fails, the corporate tax rate will remain 6.6 percent and the corporate minimum tax will remain $10. For consolidated filers, the $10 minimum tax will remain applicable to each affiliate that is included in the consolidated return and that is also doing business in Oregon.
If Measure 67 passes, the corporate minimum tax and tax rate will change as follows:
- S corporations and partnerships doing business in Oregon will pay a $150 minimum tax.
- S corporations doing business in Oregon and subject to federal income tax will pay tax based on the greater of (a) or (b) in the table below.
- C corporations doing business in Oregon must pay the greater of (b) or (c) in the table below.
Note: Corporations and partnerships that are not doing business in Oregon are not subject to the minimum tax.
Tax Rates if Measure 67 Passes
| TABLE a
| | | Minimum tax
| | S Corporations, partnerships, LLCs, LLPs (regardless of sales level) | $150 | | | | TABLE b
| | Oregon taxable income | Tax rate
| $250,000 or less
| 6.6% | $250,001 or more
| $16,500 plus 7.9% of the amount over $250,000
| | | | | TABLE c | Oregon sales of filing group
(see definitions below)
| Minimum tax
| under $500,000
| $150 | $500,000 to $999,999
| 500 | $1,000,000 to $1,999,999
| 1,000 | $2,000,000 to $2,999,999
| 1,500 | $3,000,000 to $4,999,999
| 2,000 | $5,000,000 to $6,999,999
| 4,000 | $7,000,000 to $9,999,999
| 7,500 | $10,000,000 to $24,999,999
| 15,000 | $25,000,000 to $49,999,999
| 30,000 | $50,000,000 to $74,999,999
| 50,000 | $75,000,000 to $99,999,999
| 75,000 | $100,000,000 and above
| 100,000 |
The minimum tax for for C corporations doing business in Oregon is based on Oregon sales.
- For consolidated returns, the minimum tax is based on Oregon sales of the affiliated group of corporations filing an Oregon return.
- For consolidated filers, the increased minimum tax is applicable to the affiliated group filing the consolidated return, not to each individual affiliate that is included in the consolidated return and that is also doing business in Oregon as it was for tax year 2008.
- The minimum tax is not apportionable for a short tax year (except a change of accounting period).
- The minimum tax is payable in full for any part of the year during which a taxpayer is subject to tax.
- Oregon follows the federal entity classification regulations. If an entity is classified or taxed as a corporation for federal income tax purposes, it will be treated as a corporation for Oregon tax purposes.
Nonapportioned returns
C corporations doing business only within Oregon will calculate Oregon sales by adding:
- Gross receipts from sales of inventory (less returns and allowances), equipment, and other assets;
- Gross rent and lease payments received;
- Gross receipts from the performance of services; and
- Gross receipts from the sale or lease of intangible property if it's part of the corporation's primary business, or
- Net gains from the sale of intangible property if it's not part of the corporation's primary business.
Apportioned returns
C corporations and insurance companies doing business in more than one state that apportion business income for Oregon tax purposes, use the Oregon sales amount from Line 21(a) on Schedule AP.
Domestic insurance companies
Domestic insurance companies doing business only within Oregon can calculate Oregon sales by adding the following:
- Direct premiums
- Annuity considerations
- Finance and service charge
Note:
- 2009 corporate forms will be available in December 2009.
- Please wait to file your 2009 Oregon corporate returns until after January 26, 2010. We won't start processing corporate returns until the election results are known.
- If Measure 67 passes, charges for interest on the underpayment of estimated tax (UND) based on these changes will be eligible for waiver for tax years beginning on or after January 1, 2009, and before January 1, 2010.
We will post information here after election results are known.
HB 2414—Special election date
The special election date for HB 2414 is January 26, 2010. We will post information about how this vote affects Measure 67.
HB 2653—Waiver of penalty and interest
HB 2653 directs us to waive penalty or interest that would otherwise apply to taxes due if the penalty or interest is based on underpayment or underreporting that results solely from HB 3405. This applies only to tax years beginning on or after January 1, 2009, and before January 1, 2010.
HB 2157, HB 2078—Tie to federal tax law
HB 2157 established an Oregon reconnect date to federal law of December 31, 2008. The bill also removed the automatic reconnect portion of the statute.
HB 2078 restored the rolling reconnect for tax years beginning on or after January 1, 2009, with some exceptions. An ongoing reconnect to the federal definition of taxable income will occur for tax years beginning on or after January 1, 2011, except for specific exclusions in the law.
Tax years beginning on or after January 1, 2009 (calendar and fiscal year filers):
Oregon follows federal tax laws that were in effect on May 1, 2009, with the following exceptions. These were excepted from the reconnect bill but are still tied to the federal tax rules that were in effect on December 31, 2008.
- Bonus depreciation-Section 168(k) additional 50 percent first-year depreciation is not available for Oregon purposes in 2009. This creates a modification for Oregon purposes.
- Discharge of indebtedness-The election to include Section 108 cancellation of debt income over a 5-year period is not available for Oregon taxpayers. This creates a modification for Oregon purposes.
- Section 179 expense-For tax years beginning on or after January 1, 2009, the Section 179 expense is limited to $125,000 for Oregon purposes, and the phase-out amount is $500,000. This creates a modification for Oregon purposes.
If you deducted these amounts under these sections for federal purposes in 2009, you must add them back to Oregon taxable income. You may subtract these amounts from federal taxable income on Oregon returns in future years, based on laws in effect in 2008.
Tax years beginning before January 1, 2009 (calendar and fiscal year filers):
Oregon is connected to federal tax law in effect December 31, 2008. Oregon is disconnected from new federal tax laws, including federal legislation passed in February 2009. None of the federal 2009 changes apply to tax years beginning before January 1, 2009, including fiscal year returns.
Oregon and federal law, for tax years beginning in 2008:
- Bonus depreciation-Section 168(k) provides an additional 50-percent first-year depreciation for Oregon purposes for tax year 2008. There is no modification to federal taxable income on the Oregon return.
- Discharge of indebtedness-The election to include Section 108 cancellation of debt income over a 5-year period is available for Oregon taxpayers. There is no modification to federal taxable income on the Oregon return.
- Section 179 expense-For 2008, the Section 179 expense is limited to $250,000 for Oregon purposes. The phase-out amount will be $800,000. There is no modification to federal taxable income on the Oregon return.
Prior exceptions to reconnect
In prior legislative sessions the Oregon Legislature had disconnected from two other federal provisions:
- The deduction for income from domestic production activities (QPAI).
- The exclusion of certain subsidy payments made by the federal government related to Part D of the Medicare Prescription Drug Insurance program.
SB 182—Financial institution definition
SB 182 changes Oregon's definition of financial institution to the definition recommended by the Multistate Tax Commission (MTC) model regulation for financial institution apportionment.
HB 2472—Business energy tax credit
Governor Kulongoski vetoed HB 2472 on August 7, 2009.
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| Looking forward |
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SB 180—REITs and RICs
SB 180 requires that a real estate investment trust (REIT) or regulated investment company (RIC) that otherwise meets the definition of a federal affiliate be included in the consolidated Oregon return. This will be an Oregon modification (addition or subtraction) to federal taxable income. For apportioning taxpayers, factors from the REIT or RIC will be included in the apportionment calculation (Effective for tax years beginning on or after January 1, 2010).
SB 181—Intangible and interest expense add-back and credit
SB 181 provides that intangible and interest expenses must be added back to federal taxable income for Oregon purposes when a related member that is not included in the same tax return receives them and they are paid in connection with a direct or indirect transaction with a related member. If the related member paid tax on the income in this state or another tax jurisdiction, a credit will be allowed on the taxpayer's return. This bill was based on Multistate Tax Commission (MTC) model statute and is effective for tax years beginning on or after January 1, 2010.
HB 2068—Transferable credits
HB 2068 clarifies that transferable credits may not be transferred (sold), for tax purposes, to an entity treated as a partnership for tax purposes. The bill also clarifies that credits may only be transferred once.
HB 2078—Biomass credit
HB 2078 provides that the Department of Energy will certify the biomass collector or producer credit.
HB 2255, HB 2261—Lender's credit
HB 2255 allows a qualified borrower, for purposes of the credit, to be a nonprofit corporation, nonprofit cooperative, state governmental entity, or local unit of government on a loan to finance a manufactured dwelling park. HB 2261 provides that the Housing and Community Services Department will certify the lender's credit. The bill also provides new definitions and qualification standards.
SB 621—Film and video contribution credit
SB 621 increases total amount of certified credits allowable each fiscal year from $5 million to $7.5 million.
SB 726—Reservation enterprise zone credit
SB 726 authorizes certain Indian tribes to request that land be designated as reservation enterprise zone. The bill clarifies that exemptions and tax credits available in connection with an enterprise zone are also available for a reservation enterprise zone.
HB 2653—Forest products apportionment
HB 2653 removes the forest products double-weighted apportionment option for certain forest products companies. The bill is effective for tax years beginning on or after January 1, 2010.
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