The following credits have expired. The last year to claim these credits was tax year 2011. The unused portions for certain credits may be carried forward as indicated below.

• Water transit vessels (no carryforward) 
• Crop donations (3 year carryforward)
  
• Diesel truck engines 
• Diesel engine repower/retrofit expired on December 31, 2011 (3 year carryforward) 
• New Diesel engine credit expired on July 1, 2011 (HB 3170—4 year carryforward) 
• Energy conservation lenders (15 year carryforward)
  
• Biofuel consumer (no carryforward)
  
• Biodiesel used in home heating (no carryforward) 
• Reforestation (3 year carryforward) 
• Riparian Lands excluded from farm production (5 year carryforward)

Beginning tax year 2012, an Oregon Schedule K-1 was made available. The schedule is only a trial version for tax year 2012, so you are not required to use or submit this schedule with Oregon Form 65, Form 20-S or individual tax returns.

The schedule is designed to assist individual owners, particularly nonresident owners, in accurately reporting Oregon distributive share items on their Oregon income tax return. We're hoping that through trial use of the schedule, we can receive feedback from practitioners, PTEs, and individuals that use it to improve the schedule. Keep the schedule with the 2012 tax records.

For more information, see the instructions on the back of the schedule.

Did you or your client need to repay a portion of the PERS received between April of 2000 and April of 2004? If so, you may have an adjustment on the Oregon return. Follow the link for instructions on how to report an Oregon adjustment regarding PERS repayments.

For general information on the PERS repayments, visit the PERS website.

In 2012, the department administered three tax credit auctions—two for Oregon Film & Video and one for the Department of Energy:

• Oregon Film & Video had 12,000 increments at a minimum bid of $475 for a $500 credit.
• Department of Energy had 3,000 increments at a minimum bid of $475 for a $500 credit.

Oregon Film and Video auctions were held July 9–16 and September 17–19. The Department of Energy auction was held October 8–12.

The Oregon Film & Video auction brought in $5,867,837 for an average of $489 per credit increment. The Oregon Department of Energy auction brought in $1,496,951 for an average of $499 per credit increment.

Credits purchased through the auctions can't be transferred and have a carryforward of three years.

New auctions will be held in the fall of 2013 for both the Oregon Film & Video Office with $6 million in credits available and the Department of Energy with $1.5 million in credits available.

For the purposes of calculating the Credit for Taxes Paid to Another State, auction credits are not considered state taxes paid. Therefore, you need to subtract these credits from Oregon tax as all other credits in the credit calculation.

OAR 150-305.810—This rule will explain the different methods the department will accept for a taxpayer to verify that their return is true and accurate.

OAR 150-314.385(4)—This rule will give the department the ability to specify and allow alternative methods for filing a tax return as new processes or methods are developed, including direct filing with DOR.

OAR 150-314.415(7)—This rule change will clarify when a separate refund will be issued when a joint return has been filed.

OAR 150-314.HB2071(B)—This rule implements the mandatory e-file in 2012 and is renumbered to match the codification of the bill [OAR 150-314.364(A) and (B)] All practitioners are supposed to be filing returns electronically. If not, then they need to attach an explanation why they did not e-file. If you file a return by paper after e-file closes, you still need to attach the explanation form. You are not required to e-file amended returns, even though you can.

OAR 150-291.349—2011 legislation changed the surplus refund check into a refundable tax credit. The rule now provides examples on how to handle a situation with a filing status change or when a taxpayer dies. For more kicker information, see the kicker calculation method below.

OAR 150-305.265(14)—A clean up on the rule by removing duplication from the statute and renumbering the rule.

How is a kicker determined?

• The State Economist will make an "end of legislative session" revenue forecast for 2011-2013 biennium (August 26, 2011);
• That estimate is compared with the actual revenues for the 2011-2013 biennium and if they exceed the end of session forecast by 2% or more, a kicker will be triggered (late summer, 2013); A kicker percentage is determined based on 2012 tax year;
• The department will release information around October, 2013 so that taxpayers are able to plan by making smaller estimated payments or adjust withholding.

How will it work? Assume a kicker in the next biennium:

• 2013 return: The kicker will be a refundable credit equal to the kicker percentage X 2012 tax liability before all credits except credit for taxes paid to another state.
• Example: Sally has 2012 tax liability of $4,000 before credits. The kicker percentage is 10%. On her 2013 return, Sally will receive a refundable credit of $400.

What will happen if there is a filing status change?

• Example: Mark and Dianna file MFJ for tax year 2012. Their total AGI is $65,000. Their personal income tax liability is $5,000. Dianna's portion of the total AGI is $45,500 (70%). Mark's portion of the total AGI is $19,500 (30%). In 2013 Mark and Dianna divorce and neither remarries. After the end of the biennium in 2013, a surplus credit is determined with a percentage amount of 5%. When Mark and Dianna file their separate 2013 Oregon income tax returns, they will calculate separate surplus credits based on their 2012 AGI. Dianna will claim a surplus credit of $175 ($5,000 x 5% x 70%). Mark will claim a surplus credit of $75 ($5,000 x 5% x 30%).

If a taxpayer passes away during the base tax year, a return can be filed on their behalf to claim the refundable credit in the immediately succeeding tax year. If one of the two taxpayer's on a joint return filed during the base tax year dies in that year, the surviving TP may claim the full surplus credit and doesn't have to split according to the normal change in filing status provisions.

A taxpayer can elect to contribute all or a portion of a refund of personal income tax to an Oregon 529 College Savings Plan account by direct deposit beginning tax year 2012.

OAR 150-305.796 prescribes that a taxpayer can contribute at least $25 per account to a maximum of four accounts.

How does it work?

• A taxpayer must already have an account set up. 
• The election to contribute may not be changed or revoked.
  
• Make the election on the back of the Schedule OR-ASC or Schedule OR-ASC N/P.

If the refund is used to pay a debt or the amount elected to deposit exceeds the available refund, the deposit will be cancelled. Any remaining refund will be refunded by paper check or direct deposit.

Beginning January 1, 2013 OAR 150-314.781 changes the process for a PTE to submit nonresident withholding payments.

Old process: The PTE sent the Department quarterly payments in a separate voucher and/or list of each nonresident owner and the estimated payment amount for that individual. The payments were due quarterly based on each owner's tax year (calendar or fiscal). The payments were applied quarterly to the appropriate owners.

New process: The PTE sends the Department quarterly payments for all the nonresident owners (one check with one voucher in the PTE's name). The payments are due based on the PTE's tax year (with one exception*). The payments are applied quarterly to the PTE account. The last day of the second month following the close of the entity's tax year (February 28 for calendar year filers) an annual report is due. When the annual report is filed, the quarterly payments are transferred to the nonresident owner's accounts.

* The exception: If all owner's are individuals and they are all calendar year filers than the PTE can send the payments in quarterly based on the individuals tax year.

The Form OR-19 is now called Pass-Through Entity Owner Payments.

The Oregon estate tax is no longer based on the repealed federal state death tax credit from 2000. Estates valued at $1 million and above are required to file the estate transfer tax return.

Tax rates are now between 10% and 16%. Built into the new tax rate chart, the first $1 million of taxable estate is exempt from tax.

Are appraisals required when determining the date of death fair market value of an estate's property?

• All assets reported on the estate tax return must be determined as of the date of death or six months following the date of death if the alternate valuation is elected. All values must be substantiated. [OAR 150-118.100(6)]
• The executor is required to explain how the value was determined. All values must be substantiated.
• County property tax statements generally do not reflect the value as of date of death. If the property value is determined based on a county property tax statement, additional evidence is needed to support the value.

Extension of time to file estate return:

• Use Federal Form 4768. Automatic six-month extension to file is available if application is received on or before the due date of the return.

Extension of time to pay:

• Part III of Form 4768 must be filled out and a written explanation must be included with the extension application.

Read more about the new 2012 estate transfer tax.

Estate transfer tax questions: estate.help.dor@state.or.us.

LC 535—Allows the department to give notices by other than regular mail, where notice by regular mail is required, if department enters into agreement with person entitled to notice. The agreement must state that the taxpayer can cancel or change the agreement and how to do that.

LC 536—Removes the requirement to send Notices of Garnishment by certified mail. However, a notice will always be sent by certified mail if no response is received before issuing the penalty.

LC 537—Removes the requirement for hand signatures (wet signatures) and attaching a warrant to the Notices of Garnishments. The warrant is multiple pages so this will change the mailing rate and save the state a lot of money.

LC 541—Eliminates the elderly rental assistance program from the Department of Revenue. Proposes the Housing and Community Services Department develop a program to provide funds to elderly and disabled persons of very low income for rental housing assistance.

A new credit is available if livestock is killed during the year by a wolf. Livestock is defined for the purposes of this credit in ORS 610.150. Individuals may claim a refundable tax credit and corporations a non-refundable tax credit.

The credit is equal to the current market value of the livestock that is killed and the credit must be reduced by any amount that is received as compensation. In order to qualify for the credit, evidence must be provided to the OR Dept. of Fish & Wildlife. If substantiated, the Dept. of Fish & Wildlife will issue a certification indicating the amount of the credit. The total amount of credits is limited to $37,500 per tax year.

Who is required to submit information electronically to the department using iWire?

• All employers are required to submit W2 information. No matter how many W2's are issued (1 or 100) they need to use iWire. This is different than the federal requirement which is 250 or fewer employees do not need to submit them electronically.
• Anyone who issues at least 100 - 1099's and/or W2-G's.

Oregon is not part of the federal "combined payroll reporting system" so if you submitted electronically using that program, you are still required to submit the information separately for state purposes using iWire. Information is due March 31, 2013.

Businesses do not need to register to obtain a special "PIN" number; use the BIN, FEIN, SSN or PTIN number.

For more information, visit the department's iWire website or contact the hotline at 503-945-8127 or email us at iWire.DOR@state.or.us.

The 2012 Taxpayer Relief Act extended certain individual tax breaks. As this applies to an Oregon return:

• Oregon has a rolling tie to the federal definition of taxable income and allows the deductions extended by the Act; 
• These tax breaks include:
• Tuition and fees deduction; 
• Educator expenses deduction; and
  
• Sales tax deduction.