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2009 Corporate tax law changes

New legislation

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

Ballot measure 67 has passed and taxes will increase retroactively for tax years beginning on or after January 1, 2009. 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.
 
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.

Also, exempt organizations under Internal Revenue Code (IRC) Sections 501(c) through (f), 501(j), 501(n), 521, or 529, that do not have unrelated business taxable income are exempt from Oregon corporation taxes including the minimum tax imposed under ORS 317.090.

The minimum tax is based on taxable Oregon sales. For exempt organizations with unrelated business taxable income, only the unrelated business taxable income apportioned or allocated to Oregon is considered Oregon sales when determining the minimum tax. The tax exempt Oregon income is not included.
 

New tax rates

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  (C corporations only)

 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 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;
  • Gross receipts from the sale, exchange, redemption, or holding of intangible assets derived from the taxpayer’s primary business activity and included in the taxpayer’s business income; and
  • Net gain from the sale, exchange, or redemption of intangible assets not derived from the taxpayer’s primary business activity but included in the taxpayer’s business income.
Generally, for purposes of determining minimum tax, the calculation for Oregon sales includes business income amounts from federal Form 1120, lines 1c, and 5 through 10. Include positive numbers only.
 
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 are available on our website.
  • 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.
  • For tax years 2010 and forward, there is no waiver for the UND charges based on the increased corporate tax, including the corporate minimum tax. Corporations expecting to owe tax (including the corporate minimum tax) of $500 or more are required to make estimated payments.
 


HB 2157, HB 2078—Tie to federal tax law
 
Oregon is currently tied to the federal definition of taxable income as of May 1, 2009, with the following exceptions:
 
Any additional deduction allowed as a result of the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) with regard to the following provisions of the Internal Revenue Code:
 
Tax years beginning on or after January 1, 2009 (calendar and fiscal year filers):
  • Bonus depreciation-Section 168(k) additional 50 percent first-year depreciation is not available for Oregon purposes for "qualified property" placed in service during calendar year 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 $133,000 for Oregon purposes, and the phase-out amount is $530,000. This creates a modification for Oregon purposes.
 
Tax years beginning in 2008 (calendar and fiscal year filers):  
  • 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 for "qualified property" acquired and placed in service after December 31, 2007 and before January 1, 2009. For fiscal year filers, any additional federal deduction allowed for "qualified property" acquired and placed in service after December 31, 2008 must be added back 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 tax returns, the Section 179 expense is limited to $250,000 for Oregon purposes. The phase-out amount will be $800,000. The limits apply for calendar and fiscal year filers with tax years beginning after December 31, 2007, and before January 1, 2009. There is no modification to federal taxable income on the Oregon return.
Note: Use the Oregon Depreciation Schedule (150-101-025) to determine your modifications for Oregon purposes. Amounts added to federal taxable income for Oregon tax purposes due to the above provisions may be subtracted from federal taxable income for Oregon tax purposes in later years.  The subtraction will equal the difference between what would have been allowed had Congress not passed the American Recovery and Reinvestment Act of 2009 less the deduction actually allowed on the federal income tax return for the year in question.
 
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

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.
 

Questions?
For specific questions relating to taxes imposed under Measure 67, please e-mail minimumtax.help@state.or.us. We will answer most inquiries within two business days.
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