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2008 federal changes to Form 990 do not affect Oregon tax-exempt corporations.
Nonprofit organizations must register with and be certified by the Oregon Secretary of State.
The Oregon Department of Justice regulates charitable activities in Oregon. You may also need to register with them.
Corporate Income and Excise Tax
If you are an exempt organization under Internal Revenue Code (IRC) Sections 501(c) through (f), 501(j), 501(n), 521, or 529, you are exempt from Oregon Corporation taxes [ORS 317.080 (1)–(8)]. Apply to the Internal Revenue Service for exempt status. You don’t have to apply to the Oregon Department of Revenue. Here are two exceptions:
- Nonprofit homes for the elderly. ORS 317.080(9)
- People’s utility districts established under Oregon Revised Statutes, chapter 261. ORS 317.080(10)
If you are exempt from Oregon tax and do not have unrelated business taxable income, an Oregon tax return is not required. Unrelated business taxable income is defined in IRC Section 512. If you do have unrelated business taxable income, file a Form 20 (Oregon Corporation Excise Tax Return). Attach a copy of your federal Form 990T. Some religious organizations that qualify under IRC Section 501(d) may file as partnerships.
If you are exempt from federal tax but not exempt for Oregon, you must file a Form 20. Attach a copy of your federal Form 990T.
Homeowner’s associations may elect to be treated as tax-exempt organizations (ORS 317.067). The association must make the election no later than the time prescribed by law for filing the return. A copy of the Form 1120-H filed with the Internal Revenue Service will constitute this election when filed with the Department of Revenue. Tax-exempt status will only exempt the association from tax on the exempt function income. If the association has any taxable income as defined by federal law, report it on Oregon Form 20.
Cooperatives A cooperative is a legal entity owned and controlled by its members who join together to carry on an economic enterprise. Cooperatives are either taxed as an exempt or non-exempt cooperative. Both types of cooperatives can have Oregon tax liabilities. Generally, exempt cooperatives are limited to only certain farmer cooperatives. All other cooperatives are considered non-exempt. Oregon law follows the federal requirements for these classifications.
Non-Exempt Cooperatives Non-exempt cooperatives are taxed under subchapter T of the IRS code. To qualify for subchapter T taxation, the business must be “operating on a cooperative basis”. Some general guidelines for “operating on a cooperative basis” are subordination of capital, democratic control by members, and the right to share in any profits based on patronage of the cooperative.
Non-exempt cooperatives are taxed the same as general corporations per ORS 317.070. Non-exempt cooperatives filing a federal form 1120C will file an Oregon form 20 if they are doing business in Oregon. If they are doing business in more than one state, they will complete a Schedule AP. To determine "Oregon sales" for Schedule AP, items that are reported on the federal return on lines 1c or 4 through 9 are considered. Generally, this means if an item of income is from taxpayer's primary business activity and it is from an Oregon source, it is included as part of "Oregon sales" for apportionment purposes. There is no provision in current law to reduce the numerator of the sales factor for patronage dividends.
Note: Oregon follows the federal treatment of the patronage deduction and allows the subtraction from taxable income. Patronage dividends or deductions are the equivalent of an expense. They are not included in Oregon taxable income but they must be included in the apportionment factor to accurately reflect location of business activities.
Exempt Cooperatives Exempt cooperatives are exempt from income taxes under Section 521 of the IRS code. There are a number of federal requirements that must be met to qualify as an exempt cooperative. Oregon follows the federal requirements and determination of exempt status.
If an exempt cooperative has “unrelated business taxable income” as defined for federal purposes, this income is also considered taxable by Oregon if it is from an Oregon source.
The term “unrelated business taxable income” generally means the gross income derived from any unrelated trade or business regularly carried on by the exempt organization, less the deductions directly connected with carrying on the trade or business. If an organization regularly carries on two or more unrelated business activities, its unrelated business taxable income is the total of gross income from all such activities less the total allowable deductions attributable to all the activities.
LLCs and Partnerships Oregon follows federal law regarding taxation of LLCs. If the cooperative files as a partnership for federal purposes, the cooperative would file as a partnership for Oregon.
Withholding
If you have Oregon employees, you are subject to payroll taxes and need to register your organization with the Secretary of State's Corporation Division.
Corporations classified under IRC Section 501(c)(3) may be exempt from TriMet and LTD taxes. You must send a copy of your federal determination letter with your request for exempt status to: Business Division, Oregon Department of Revenue, PO Box 14800, Salem, OR 97309-0920.
Sales/Use Taxes
Oregon doesn’t have sales or use taxes and doesn’t issue exemption certificates. If you need an exemption from paying sales tax in another state, contact the Secretary of State's Corporation Division.
Property Tax
An organization exempt from federal or state excise/income taxes may not be exempt from Oregon property taxes. Check with your local assessor to see if you qualify for exemptions, and if filing is required.
Proxy Tax
A “proxy tax” is imposed on otherwise exempt organizations similar to that imposed under IRC 6033(e). Under federal law, an exempt organization is required to report to its members the portion of their dues or other payments spent on lobbying activities. If the exempt organization does not comply, a federal return must be filed reporting and paying tax on those expenditures. In such cases, lobbying expenses are allocated or apportioned to Oregon and subject to Oregon tax at the corporate tax rate. ORS 314.256
E-mail: corp.help.dor@state.or.us
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