Nonprofit organizations must register with and be certified by the Oregon Secretary of State
.The Oregon Department of Justice
regulates charitable activities in Oregon. Certain nonprofit organizations need to register with them also. See their website for more details.
If the IRS has determined that you’re an exempt organization, you’re also exempt from Oregon corporation excise and income taxes. You need to apply for IRS exempt status. Only nonprofit homes for the elderly and people’s utility districts established under ORS Chapter 261
need to apply with us for exempt status in Oregon [ORS 317.080(9) and (10)
If you’re exempt from Oregon tax and don’t have unrelated business taxable income (UBTI) as defined in Internal Revenue Code (IRC) Section 512, an Oregon tax return isn’t required.
If you do have UBTI and are a corporation or have elected to be taxed as a corporation, file a Form OR-20
, Oregon Corporation Excise Tax Return
, and attach a copy of your federal Form 990-T. Organizations exempt from federal tax but not exempt in Oregon, must also file a Form OR-20 and attach a copy of federal Form 990-T (OAR 150-317-0680). Some religious organizations that qualify under IRC Section 501(d) may file as partnerships. Trusts with UBTI that don’t elect to be taxed as corporations should file Oregon Form OR-41
. See the specific form instructions for more information on filing as an exempt organization.
An exempt organization filing an Oregon Form OR-20 is subject to either the computed excise tax based on UBTI after the specific deduction, (generally $1,000*), or the Oregon minimum tax, whichever is greater. For minimum tax purposes, include only gross Oregon unrelated business income in your Oregon sales. Tax-exempt income is not included.
*A specific deduction of $1,000 is allowed, unless you’re computing the net operating loss and the net operating loss deduction under IRC Section 172. Also, only one specific deduction may be taken, regardless of the number of unrelated businesses conducted. Please see your federal form instructions regarding the specific deduction amount.
A homeowners association organized and operated under IRC Section 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. The association can make the election by including a copy of the Form 1120-H they filed with the IRS. Tax-exempt status will only exempt the association from tax on exempt function income, as defined by the IRS, such as membership dues, fees, and assessments from member-owners. Oregon follows the federal definition of nonexempt function income for homeowners associations.
File an Oregon Form OR-20
with a copy of federal Form 1120-H, if the association has taxable income after the specific deduction of $100. Taxable income for Oregon is generally the same as for federal purposes, except net capital gains are included.
An association filing Oregon Form OR-20 is subject to either computed excise tax or Oregon minimum tax, whichever is greater. For minimum tax purposes, include in "Oregon sales" only Oregon nonexempt function income.
If you don't have nonexempt function income, only file a copy of your federal Form 1120-H with us. You don’t need to file a Form OR-20.
A cooperative (co-op) is a legal entity owned and controlled by its members who join together to carry on an economic enterprise. Co-ops are either taxed as exempt or nonexempt. Both types of co-ops can have Oregon tax liabilities. Generally, exempt co-ops are limited to only certain farmer co-ops. All other co-ops are nonexempt. Oregon follows the federal requirements for these classifications.
For purposes of the corporate minimum tax, the Oregon sales of agricultural co-ops don’t include sales with or for co-op members. Agricultural co-ops should check the box for “Ag Co-op” at the top of their Oregon Form OR-20 and provide a schedule showing the calculation of Oregon gross sales, not including sales with or for co-op members.
These co-ops are exempt from federal income taxes (under IRC Section 521). There are a number of requirements that must be met to qualify. Oregon follows the federal requirements and determination of exempt status.
If an exempt co-op 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, minus the total allowable deductions attributable to all the activities.
Nonexempt co-ops 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 co-op.
Nonexempt co-ops are taxed the same as general corporations (ORS 317.070
). Nonexempt co-ops filing a federal Form 1120-C will file an Oregon Form OR-20 if they’re doing business in Oregon. If they’re doing business in more than one state, they’ll complete a Schedule OR-AP.
To determine your Oregon sales for Schedule OR-AP, include items reported on lines 1e and lines 4–10 on your federal return. Generally, if an item of income is from your primary business activity and it’s from an Oregon source, it’s included in your Oregon sales for apportionment purposes. There’s no provision in current law to reduce the numerator of the sales factor for patronage dividends.
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 aren't included in Oregon taxable income, but they must be included in the apportionment factor to accurately reflect the location of business activities.
If you have Oregon employees, you’re 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:
Oregon Department of Revenue
PO Box 14800
Salem OR 97309-0920
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.
An organization exempt from federal or state excise or income taxes may not be exempt from Oregon property taxes. Check with your local assessor to see if you qualify for exemptions, and if you’re required to file.
A proxy tax is imposed on otherwise exempt organizations, and is similar to that imposed under IRC Section 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 doesn’t comply, it must file a federal return reporting and paying tax on those expenditures. Lobbying expenses allocated or apportioned to Oregon are subject to taxation at the Oregon corporate tax rate (ORS 314.256