BY D. ADAM ANDERSONThis article originally appeared in the December 5, 2017 edition of the Portland Business Tribune.
With all the media focus on a possible federal tax code overhaul, it can be easy to overlook tax code amendments happening here at home. While the Oregon legislature has not made any sweeping changes this year to the state’s tax code, the end of the year nevertheless presents a good time to highlight changes relevant to business tax compliance and planning. Below is a summary about some of this year’s changes and additions to Oregon’s excise taxes, tax expenditures, and income sourcing rules. Unless otherwise noted, all changes discussed herein are effective January 1, 2018.
Oregon’s new 10-year, $5.3 billion omnibus transportation funding bill (HB 2017), meant to address congestion, upgrade existing infrastructure, and increase alternative transportation options, has brought with it a variety of new excise taxes. Among them is a new tax of 0.1%, imposed starting July 1, 2018, on the gross wages of Oregon residents and nonresidents performing work in the state. While there is no employer-paid component of this new tax, the amount is to be withheld from employee wages, with financial penalties imposed on employers who knowingly fail to deduct and withhold.
HB 2017 also imposes a 0.5% tax on sales by Oregon vehicle dealers of cars, pickup trucks, campers, electric assisted bicycles, and motorcycles, measured by the retail sales price, and collectible by the seller from the purchaser. In addition, a flat $15 excise tax has been imposed on the sale of new non-motorized bicycles priced at $200 or more and with wheels of at least 26 inches in diameter. Again, these taxes are to be collected and remitted by the seller. Though these taxes are characterized as “use” and “privilege” taxes, they have the clear markings of a sales tax. Coming on the heels of a 17% percent sales tax passed in 2015 on marijuana and cannabis products, one can wonder if a general sales tax might be in Oregon’s future.
Tax Credits and Incentives
HB 2066 now permanently prohibits the application of tax credits by corporate taxpayers against Oregon’s corporate minimum tax. This is the end point of a long battle between taxpayers and state taxing authorities, which initially resulted in a pro-taxpayer Oregon Supreme Court decision in 2013 (Con-way, Inc. v. Department of Revenue). That decision was legislatively overturned in 2015, restricting the application of credits against the minimum tax until 2021. HB 2066 now removes the sunset provision, making this a permanent feature of the Oregon tax code.
Other notable changes in this area include: (1) an extension through 2024 of the Greenlight Oregon Rebate Labor Fund (HB 2244), a program providing tax incentives to qualifying Oregon film productions that was originally set to expire in 2018; and (2) a requirement that all employers include with their employee’s Form W-2s a notice alerting them to the existence of federal and state-earned income credits (SB 398; effective October 6, 2017).
Income Sourcing Rules
Multistate businesses operating in Oregon should be well acquainted with the Multistate Tax Compact (MTC) and the Uniform Division of Income for Tax Purposes Act (UDITPA), both relating to how to source and allocate total enterprise income for tax purposes among the various states in which they operate. Recent technical changes to the apportionment definitions and calculation methods of the MTC and UDITPA have necessitated parallel Oregon amendments (HB 2273 and HB 2275). These amendments alter how Oregon-sourced and allocated income is to be calculated by all multistate companies operating in Oregon in the future, and affected companies are urged to consult accordingly with their tax and accounting professionals.
Finally, to aid with business tax compliance in Oregon, HB 2156 establishes a new C and S Corporation hotline at the Department of Revenue to provide expedited guidance and issue resolution for corporate income and excise tax questions. All notices sent by the Department to a corporate taxpayer must clearly list the number.
As always, federal and state tax laws present new and ever-changing compliance requirements and planning opportunities. Let us at Jordan Ramis help you navigate them.