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:

• Section 108** (discharge of indebtedness from the reacquisition of an applicable debt instrument after December 31, 2008)
• Section 179** (increase in the amount of expensing from $133,000 to $250,000 for property that is placed in service during tax year 2009)
• Section 179** (increase in the total amount of qualifying 2009 property a taxpayer may purchase before 179 expensing limits begins to be reduced -- the American Recovery and Reinvestment Act increases these limits from $530,000 to $800,000)
• Section 168(k)** (allowance of 50% special depreciation for "qualified property" acquired and placed in service during tax year 2009)
• Section 168(k)** (allowance of $8,000 in the first-year depreciation dollar limit for a passenger auto that is "qualified property")
• Section 85 (exclusion of the first $2,400 of unemployment compensation from gross income) Note: Any amount excluded under this provision must be added back to Oregon taxable income only if Ballot Measure 66 (relating to an increase in the personal income tax) fails at the polls on January 26, 2010. 
  
  

Example 1: Seven-year asset with a cost of $100,000. Federal: Claiming 50 percent bonus depreciation and depreciating asset using half-year convention and 150% declining balance. Oregon: Depreciating asset using half-year convention and 150% declining balance.

Example 2:  Ten-year asset with a cost of $200,000. Federal: Claiming maximum Section 179 deduction ($200,000). Oregon: Claiming maximum Section 179 deduction for Oregon ($133,000) and depreciating asset using half-year convention and 150 percent declining balance.

Federal Tax Subtraction—there are several issues relating to the federal tax subtraction. 

• Federal first-time homebuyer tax credit

• Credit for a home purchase in 2008—this credit (maximum $7,600) is required to be repaid, and therefore is considered a loan and consequently does not reduce federal tax liability.  Do not reduce your federal tax subtraction if you received this 2008 credit. 
• Credit for a home purchase in 2009 - this credit (maximum $8,000) was not required to be repaid, and therefore is considered a reduction in your federal tax liability.  You must reduce your federal tax subtraction by this credit (but not below $0).  If you elected to amend your 2008 federal return to receive this credit early and that is the only change to your federal return, do not amend your Oregon return.  Instead, reduce your 2009 federal tax subtraction by the amount you received as a credit (but not below $0). 

• Making Work Pay Credit—this credit will reduce your federal tax liability and must be taken into account when figuring the federal tax subtraction.
• Social Security $250 Benefit—this is a one-time benefit that does not affect your income taxes and does not reduce your federal tax subtraction (it will, however, reduce your Making Work Pay Credit if you are eligible for both). 
• Special $250 Credit for Federal or State Government Employees—this is a reduction of income tax and does reduce the federal tax subtraction.
• American Opportunity Tax Credit (expansion of the HOPE Credit)—just like the HOPE credit, this tax credit will reduce your federal tax subtraction.
• Phase-out for high-income taxpayers—HB 2649 includes a phase-out of the federal tax subtraction for high income earners. Note: HB 2649 (Ballot Measure #66) has been referred to a vote of the people. The election is January 26, 2010. If Ballot Measure #66 fails, this phase-out will not become law. The phase out is as follows: (AGI = Adjusted Gross Income)

• AGI of $125,000 to $129,999 (or $250,000 to $259,999 for joint filers): Subtraction is limited to $4,650.
• AGI of $130,000 to $134,999 (or $260,000 to $269,999 for joint filers): Subtraction is limited to $3,500.
• AGI of $135,000 to $139,999 (or $270,000 to $279,999 for joint filers): Subtraction is limited to $2,300.
• AGI of $140,000 to $144,999 (or $280,000 to $289,999 for joint filers): Subtraction is limited to $1,150.
• AGI of $145,000 or more ($290,000 or more for joint filers): Federal Tax Subtraction is not allowed.
• Head of Household or a surviving spouse/RDP (Qualifying widower/RDP) are treated as joint filers for this purpose.

The 2009 legislature passed HB 2649, which has subsequently been referred to a vote of the people. The election will take place January 26, 2010. These increases will (or will not) become law depending on the results of that election. The department strongly recommends not filing until February 1, 2010, to ensure you file correctly under the law. 

• New marginal tax rates (tax years 2009, 2010, and 2011)
• Taxable income above $125,000 ($250,000 joint) but not more than $250,000 ($500,000 joint) will be taxed at 10.8 percent
• Taxable income above $250,000 ($500,000 joint) will be taxed at 11 percent
  
• New marginal rates (tax years 2012 and on)
• Taxable income above $125,000 ($250,000 joint) will be taxed at 9.9 percent
• For 2009 only: Interest on Underpayment of Estimated Tax directly due to the tax increase will be waived
• It is extremely important that these taxpayers file Form 10 to ensure that they are charged the correct amount of interest on any underpayment.

• HB 2068 limits how certain transferable credits may be transferred.  The specific credits affected by these limitations are:
• Biomass Producer and Collector Credit (ORS 315.141)
• Business Energy Tax Credit (ORS 315.354)
• Film Production Development Credit (ORS 315.514)
• Diesel Engine Repower or Retrofit Credit (Section 47, chapter 843, Oregon Laws 2007 or Section 12, chapter 855, Oregon Laws 2007)
• These credits may only be transferred to a:
• C Corporation;
• S Corporation; or
• A personal income taxpayer.
• Transferable credits may only be transferred one time.

• Biomass Producer and Collector Credit (ORS 315.141) (HB 2078, Sections 49-50) [Note: All changes effective beginning in 2010]

• Biomass collectors and agricultural producers can claim the credit if they are also a biofuel producer
• Clarifies that the production of biomass or collection of biomass must take place in Oregon
• The Department of Energy may certify the credit
• The Department of Energy may charge a fee to reimburse costs
• The Department of Energy will provide the Department of Revenue a list of all the taxpayers who were certified
• The tax credit must be transferred before the transferor's return is due (including extensions) [usually October 15 with extension]
• The Department of Energy may establish a minimum discounted value of the tax credit

• Sunset of Credits (HB 2067)—Most income tax credits are now on a six year review cycle. The first set (Set I) of credits expire (sunset) on January 1, 2012; Set II expires on January 1, 2014; and Set III expires on January 1, 2016. In the year prior to the expiration the legislature will review the credit's effectiveness and extend it if it finds that the credit is still serving its purpose. Credits that will remain without an expiration date are the exemption credit, credit for income taxes paid to another state, credit for mutually taxed gain on the sale of residential property, and claim of right credit. Here are the personal income tax credits in each set:

• Tax Amnesty (SB 880)—The legislature passed a tax amnesty program that is in effect from October 1, 2009, to November 19, 2009. Materials and information can be found at www.oregontaxamnesty.com. An additional 25% penalty is imposed on filings or adjustments made after the amnesty period is over that could have been filed as part of the amnesty program. Amnesty only applies to tax years prior to 2008. It only applies to Personal Income Tax, Corporate Income and Excise Tax, Inheritance Tax, Transit Self-Employment Tax, and Trust/Estate Tax. 
• Compliance check pilot (HB 3082)—The legislature authorized the department to conduct a pilot program with up to three other state agencies. The program would require those seeking occupational licenses or renewals to get a "compliance check" with the Department of Revenue to ensure they are up to date on their taxes. The details of the program are still in development.
• Compliance reform—SB 690 contained elements of the department's tax compliance report released earlier this year. The bill makes the following changes:
• Allows disclosure of tax returns to local law enforcement in the investigation or prosecution of violations.
• Allows disclosure of tax returns to either the Board of Accountancy or the Board of Tax Practitioners when it  has grounds to believe the person preparing the return or report prepared it in violation of the board's statutes.
• Clarifies that the tax court may impose a penalty of $5,000 when the taxpayer takes a frivolous or groundless position.
• Allows the department to report tax debt to consumer reporting agencies (after notice is given to the taxpayer).
• Political Contribution Checkoff—HB 2004 creates a check-off box on the Form 40 which will allow taxpayers with refund returns to donate $3 ($6 on a joint return) to a registered political party in Oregon. The contribution will reduce the taxpayer's refund.