By Peter Watts
Property sellers in Portland and Multnomah County may have recently become aware that the proceeds of real property sales may be subject to the Portland Business License Tax ("PBLT") and the Multnomah County Business Income Tax ("MCBIT").
The City of Portland began administering both taxes in 1993, and they are reported on the same form. There are anecdotal reports that unit holders of limited liability companies ("LLCs") have been targeted for enforcement and have been receiving enforcement letters at a higher rate than individual owners.
Although LLC holders seem to be targeted at a higher rate than individual owners, unless they meet one of the statutory exemptions, both owe the tax. Enforcement of the tax has been occurring for several years, but many property owners seem to be unaware they owe the tax on sale proceeds, unless the property sold meets one of the exemptions set forth in the ordinance.
This lack of knowledge is particularly true of owners that live outside of Multnomah County. The exemptions, which are found in PBLT Chapter 7.02.400, provide a number of exemptions to the general rule that all sales of real property are taxed. The exemption that is most applicable for sellers is 7.02.400(G)(1), which concerns the sale of a primary residence.
Why are LLCs being targeted? Probably because an LLC generally holds commercial or rental property while an individual is more likely to hold a primary residence. At any rate, having an LLC as the owning entity can trigger additional scrutiny. The entity type does not matter; the tax will be owed unless it is a primary residence or unless another exemption from the tax applies.
Property owners should consult with a qualified tax expert prior to selling properties to determine the amount of tax that will be owed to Multnomah County and the City of Portland.