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 (UBTI) as defined in IRC §512, an Oregon tax return is not required.
If you do have UBTI, file a Form 20 Oregon Corporation Excise Tax Return and attach a copy of your federal Form 990-T. Organizations exempt from federal tax but not exempt for Oregon must also file a Form 20 and attach a copy of federal Form 990-T. Some religious organizations that qualify under IRC §501(d) may file as partnerships.
An exempt organization filing an Oregon Form 20 is subject to the greater of computed excise tax based on UBTI or Oregon minimum tax. For minimum tax purposes, include in "Oregon sales" only gross Oregon unrelated business income. Tax-exempt income is not included.
A homeowners association organized and operated under IRC §528(c) may elect to be treated as a tax-exempt organization (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 IRS will constitute this election when filed with us. Tax-exempt status will only exempt the association from tax on the exempt function income, such as membership dues, fees, and assessments from member-owners of residential units in the particular condominium or subdivision involved. Oregon follows the federal definition of nonexempt function income.
If you don't have nonexempt function income, for Oregon tax purposes, only file a copy of your federal Form 1120-H with us; don't file a Form 20.
File an Oregon Form 20, with a copy of federal Form 1120-H, if the association has taxable income. Homeowners association taxable income for Oregon is generally the same as for federal purposes. It is gross nonexempt income less directly-related deductions, less the specific $100 deduction. However, net capital gains are included in the computation and receive no special treatment.
An association filing Oregon Form 20 is subject to the greater of computed excise tax or Oregon minimum tax. For minimum tax purposes, include in "Oregon sales" only Oregon nonexempt function income.
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.
Starting in tax year 2011, for purposes of the corporate minimum tax, the “Oregon sales” of agricultural cooperatives does not include sales representing business done with or for members of the agricultural cooperative. Agricultural cooperative should write “Ag Co-op” at the top of their Oregon Form 20 and provide a schedule showing the calculation of Oregon gross sales. Include only Oregon gross sales not done with or for members of the co-op.
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.
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 1e and 4 through 10 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.
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.
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.
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