Federal Tax Reform (Public Law 115-97) and SB 1529 (2018)
As a result of the passage of Public Law 115-97, enacted on December 22, 2017, IRC 965 is amended to require that taxpayers include the accumulated post-1986 deferred foreign income of foreign corporations in their federal taxable income for 2017 (deemed repatriation).
In response, the Oregon Legislature passed SB 1529 (2018). In relevant part, this legislation:
- Repeals the Oregon listed jurisdiction provisions at ORS 317.716 for tax years beginning on or after January 1, 2017.
- Requires an Oregon addition related to the IRC 965 inclusion for tax year 2017 – code 184.
- Allows an Oregon dividends received subtraction related to the IRC 965 inclusion for tax year 2017 – code 377.
- Creates a credit related to the IRC 965 inclusion for tax year 2017 – code 870.
Additionally, OAR 150-317-0652 allows a subtraction for listed jurisdiction amounts previously included in Oregon income (see below) – ASC code 399 (2017) and 380 (2018). Taxpayers may make an election between the OAR 150-317-0651 tax credit and the OAR 150-317-0652 subtraction.
Generally speaking, the repatriation receives no Oregon sales factor representation.
A. Repeal of listed jurisdiction provisions.
SB 1529 repeals ORS 317.716 for tax years beginning on or after January 1, 2017. Accordingly, don’t include the addition or subtraction required by ORS 317.716 on your tax year 2017 Oregon tax return. Taxpayers who paid Oregon tax because of the addition required by ORS 317.716 in tax years 2014, 2015, and/or 2016 may qualify for a tax credit. See more information below under Repatriation credit (due to IRC 965).
B. Repatriation addition (due to IRC 965)—addition code 184.
SB 1529 requires that the gross amount of the IRC 965 inclusion be included in Oregon taxable income. Compute this addition by adding to federal taxable income the amount included on Line 1 of your IRC 965 Transition Tax Statement. Include this addition on Schedule OR-ASC-CORP
, using code 184. Include a copy of your federal IRC 965 Transition Tax Statement with your Oregon return.
The IRS allows tax on the repatriated income to be paid over eight years; however, Oregon isn’t tied to this extension of time for paying the tax. The Oregon tax on the repatriated income is due by the due date of your return, excluding extensions. Information for individual filers can be found on the repatriated foreign income page
C. Repatriation subtraction (due to IRC 965)—subtraction code 377.
SB 1529 allows an Oregon dividend received deduction against the Oregon repatriation addition. This subtraction is not computed using Form OR-DRD. Instead, if the repatriation is derived from a 20 percent-owned corporation as described in ORS 317.267(2)(b), compute the subtraction by multiplying the repatriation addition by 80 percent. Otherwise, compute the subtraction by multiplying the amount of the repatriation addition by 70 percent. Include this subtraction on Schedule OR-ASC-CORP using code 377.
D. Repatriation credit (due to IRC 965)—credit code 870.
SB 1529 creates a tax year 2017 tax credit equal to the lesser of two amounts:
- The Oregon tax attributable to the IRC 965 inclusion for tax year 2017.
- The total Oregon tax attributable and imposed on the ORS 317.716 listed jurisdiction additions as filed or as adjusted for tax years 2014, 2015, and 2016.
The amount of the Oregon credit is computed using Oregon Form OR-REPAT-CR
, Repatriation Credit (due to IRC 965). Form OR-REPAT-CR must be included with your return to claim the credit. Claim this credit on Schedule OR-ASC-CORP, using code 870.
Listed jurisdiction amounts previously included in Oregon income – subtraction codes 399 and 380.
Additionally, OAR 150-317-0652 allows a subtraction for listed jurisdiction amounts previously included in Oregon income for 2014, 2015, or 2016. This subtraction is only allowed if taxpayer does not take the repatriation credit for 2017. The subtraction may be claimed on an original or amended tax return using Schedule OR-ASC-CORP and is available to Form OR-20 or Form OR-20-INC filers only. The subtraction code is 399 for tax year 2017 and 380 for tax year 2018.
Does the repatriation receive factor representation? Please see Oregon Revenue Bulletin 2018-01 for complete information.
Tie to federal tax law
In general, Oregon income tax law is based on federal income tax law. Oregon is tied to the federal definition of taxable income as of December 31, 2017; however, Oregon is still disconnected from:
- Federal subsidies for prescription drug plans (IRC 139A; ORS 317.401).
- Deferral of certain deductions for tax years beginning on or after January 1, 2009 and before January 1, 2011 may require subsequent Oregon modifications (IRC 108; IRC 168(k); and IRC 179; ORS 317.301).
A paper return filed by a corporation required to electronically file its Oregon corporation tax return may be rejected, unless a waiver request has been approved by us prior to the filing of the paper return.
For tax years beginning on or after January 1, 2018, the current term “business income” becomes “apportionable income” and “nonbusiness income” becomes “nonapportionable income.” See ORS 314.610.
Two issues have been clarified for cooperative federal Form 1120C filers:
- The Oregon Form OR-20 begins with line 25 from the federal return; and
- Patronage dividends that are included in Oregon taxable income may be subtracted using subtraction code 379 (ORS 317.010).
For tax years beginning on or after January 1, 2018, Oregon corporate excise taxpayers must apportion their income from sales of services and intangible property according to market-based sourcing principles rather than cost of performance. See ORS 314.665, ORS 314.666, and OAR 150-314-0435.
Opportunity Grant Fund addition
Any federal deduction for contributions for which an Opportunity Grant Fund tax credit certification is made must be added to federal taxable income (OR Laws 2018, Chapter 108, Section 2). Use addition code 185 on Form OR-ASC-CORP.
Sales factor computation
For tax years beginning on or after January 1, 2018, Oregon corporate excise taxpayers must exclude functional type income from the computation of their Oregon sales factor. The term “sales” excludes receipts from hedging transactions, and from the maturity, redemption, sale, exchange, loan, or other disposition of cash or securities. Also, taxpayers must exclude amounts held in trust or certain amounts received by an agent or fiduciary from the computation of their Oregon sales factor. See ORS 314.610(7) and 314.665.
For tax years beginning on or after January 1, 2018, any facts related to any affiliated corporation may be used to determine whether a domestic US corporation is part of a unitary consolidated group. Previously, Oregon law prevented any facts related to foreign corporations from being used to determine if a domestic US corporation is part of a unitary consolidated group unless tax avoidance or evasion is at issue. See ORS 317.705(3)(c).
Taxes paid to a foreign country
You may subtract from federal taxable income the taxes paid to a foreign country upon the payment of interest or royalties arising from sources within such foreign country, if such taxes are not deductible in arriving at federal taxable income and if the interest or royalties are included in arriving at Oregon taxable income [ORS 317.314.(3)]. This is not a new subtraction but it has a new subtraction code number 378.
Bovine manure tax credit
The bovine manure tax credit is a new tax credit that equals $3.50 for each wet ton of bovine manure and may only be claimed once for each wet ton of bovine manure. The credit is certified by the Oregon Department of Agriculture and applies to tax years beginning on or after January 1, 2018. It’s scheduled to sunset for tax years beginning on or after January 1, 2022 (ORS 315.176).
Opportunity Grant Fund (auction) credit
The Opportunity Grant Fund contributions credit is a new tax credit for certified contributions to the Opportunity Grant Fund. The amount of the credit claimed in a tax year may not exceed the taxpayer’s Oregon tax liability in that tax year. The credit is certified by the Oregon Higher Education Coordinating Commission and applies to tax years beginning on or after January 1, 2018. It’s scheduled to sunset for tax years beginning on or after January 1, 2024. See OR Laws 2018, Chapter 108, Section 2 for more details.
Tax credit sunsets
Beginning January 1, 2018, the following tax credits are no longer available, except for applicable carryforward purposes:
- Biomass production/collection (ORS 315.141).
- Electronic commerce zone investment (ORS 315.507).
- Energy conservation projects (ORS 315.331).
- Fire insurance gross premiums tax (ORS 317.122).
- Long-term rural enterprise zone facilities (June 30, 2018) (ORS 317.124).*
- Qualified research activities and Alternative qualified research activities (ORS 317.152 and 317.154).
- Renewable energy development contributions (ORS 315.326).
- Transportation projects (ORS 315.336).
*The credit for long-term rural enterprise zone facilities must have been certified on or before June 30, 2018.
- All IC-DISCs must check the IC-DISC checkbox in the header of Form OR-20, regardless of the corporation’s formation date.
- If you’re including a payment with your return, do not include Form OR-20-V. This form is only used for payments made separate from filing your return.
- The checkbox in the header of the OR-20, OR-20-INC, OR-20-INS, and OR-20-S for inclusion of federal Form 5471 has been deleted.
- Check the box in the header if you have Global Intangible Low-taxed Income (GILTI) included on your federal return.
- Schedule OR-ASC-CORP code changes not mentioned previously:
Addition codes deleted:
- QPAI deductions, code 102.
- Qualified research activities credit, code 167.
- Renewable energy development contributions (auction), code 175.
Form OR-20-INC only
Income filers have a new checkbox in the header: Question L, Limited partner income only. Check this box if your corporation is filing a Form OR-20-INC and has no other connection to Oregon outside of the ownership interest as a limited partner in a partnership that is doing business in Oregon.
Do not check this box if you are a general partner. A corporate general partner of a partnership that is doing business in Oregon is subject to the greater of calculated excise tax or minimum tax imposed under Chapter 317 and must file Form OR-20.