Qualified business income reduced tax rate (QBIRTR)

If you have qualifying business income from a sole proprietorship, a partnership, or an S corporation, you may elect to calculate your Oregon income tax using a reduced tax rate for that income.

The tax rate on qualifying business income is:

7 percent of the first $500,000;
7.5 percent for amounts above $500,000 but not more than $1 million;
8 percent of the amount above $1 million but not more than $2.5 million; and
9 percent of the amount above $2.5 million but not more than $5 million. Qualifying business income that is more than $5 million is taxed at the maximum personal income tax rate of 9.9 percent.

Qualifications

Generally, to be eligible for the reduced tax rate, you must materially participate in the business, have at least the minimum number of qualifying Oregon employees, and meet any specific requirements for a sole proprietorship or for a partnership or S corporation.

Sole proprietorship

To be eligible for the reduced tax rate, a sole proprietor must:

Have qualifying business income from the sole proprietorship;
Materially participate in the business; and
Employ one or more employees in Oregon who meet the employee requirements explained in the instructions for Schedule OR-PTE.

Partnership or S corporation

To be eligible for the reduced tax rate, a partner or S corporation shareholder must:

Have qualifying business income from the partnership or S corporation;
Materially participate in the business;
Have ordinary business income that doesn't exceed $5 million;
Employ one or more employees in Oregon who meet the employee requirements described below; and
If ordinary business income is more than $250,000, comply with the employee-to-owner ratio requirement shown in the table in the instructions for Schedule OR-PTE or meet the income distribution requirement described in those instructions.

For more information, see the Schedule OR-PTE depending on your residency status. For full-year residents, see Schedule OR-PTE-FY. For part-year residents, see Schedule OR-PTE-PY. For Oregon nonresidents, see Schedule OR-PTE-NR.