Nonprofit organizations must register with and be certified by the Oregon Secretary of State. The Oregon Department of Justice (DOJ) regulates charitable activities in Oregon. Certain nonprofit organizations need to register with DOJ also. See the DOJ website for more details.
To start a nonprofit, you don't need to file articles of incorporation or other forms with us. Annually, if you file a federal Form 990 with the Internal Revenue Service (IRS), because your organization does not have any unrelated business income, then you don't need to file a return in Oregon. However, if you file a federal Form 990-T to report unrelated business income, you must file an Oregon Form OR-20.
You need to apply to
IRS for exempt status. If the IRS determines that you're an exempt organization, you're also exempt for Oregon. 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.
Homeowners associations (HOAs)
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 HOA 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 federal 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 HOAs.
A cooperative 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, only certain farmer co-ops can be exempt. All other co-ops are nonexempt. Oregon follows the federal requirements for these classifications.
These co-ops are exempt from federal income taxes under IRC Section 521. There are certain 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" (UBTI) as defined for federal purposes, this income is also considered taxable by Oregon if it's from an Oregon source. UBTI 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 UBTI 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 IRC subchapter T. They are taxed the same as general corporations and must file an Oregon Form OR-20 if they're doing business in Oregon. (ORS 317.070) If they're doing business in more than one state, they'll also complete a Schedule OR-AP. S corporations and partnerships cannot file as nonexempt co-ops.
Oregon follows the federal treatment of the patronage deduction and allows a subtraction from income. Patronage dividends or deductions aren't included in Oregon taxable income, but if the co-op does business in more than one state, 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, 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, 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.
Proxy tax on lobbying expenditures
A proxy tax is imposed on otherwise exempt organizations and is similar to that imposed under IRC Section 6033(e) relating to lobbying activities. 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 corporation tax rate set in ORS 317.061. (ORS 314.256)
We follow the federal definition of a political organization: "... a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function." [IRC Section 527(e)]
Income received from political activities isn't taxable. Expenses associated with the performance of exempt functions are not deductible. Examples of nontaxable income include:
- Contributions of money or other property
- Dues or fees from members of a political organization
- Money from political fund raising or entertainment
- Money from the sale of political campaign materials
However, these receipts must be separated for use only in the organization's exempt functions.
Income that isn't from an IRC Section 527(c)(3) exempt function is taxable. Examples include:
- Interest earned on deposits
- Dividends from contributed stock
- Rents or royalties
- Gains from the sale of contributed property
Exempt-function income that's taxable for federal purposes under IRC §527(i)(4) is also taxable by Oregon. Expenses accrued while earning this income are deductible. Some political organizations may operate as a dual-purpose organization or have dealings using “segregated funds" or “newsletter funds." We follow the federal Treasury regulation relating to IRC Section 527 in determining the tax status of these organizations and funds.
Exempt functions are the political function of influencing or trying to influence the selection, nomination, election, or appointment of a person to federal, state, or local public office, or to an office in a political organization. This includes the selection of presidential or vice-presidential electors.
unincorporated political organization with taxable income should file a personal income tax return under ORS Chapter 316 unless the organization has elected to be taxed as a corporation. [ORS 316.277(2)]
Political organizations that are
incorporated or have elected to be taxed as a corporation and are “doing business" within Oregon must file an Oregon Corporation Excise Tax Return, Form OR-20. [ORS 317.010(4)]
A minimum tax is required, even if the corporation has no taxable income. Only non-exempt income is included in Oregon sales when determining the minimum tax. Political organizations that are incorporated or that elect to be taxed as a corporation must file a Form OR-20-INC, Oregon Corporation Income Tax Return if they have Oregon-source taxable income.