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Oregon State Archives

Oregon Bulletin

February 1, 2011

Department of Revenue
Chapter 150

Rule Caption: Determining estimated tax payment; severance pay subtraction requirements; substantial income understatement penalty for part-year residents.

Adm. Order No.: REV 16-2010

Filed with Sec. of State: 12-17-2010

Certified to be Effective: 1-1-11

Notice Publication Date: 11-1-2010

Rules Adopted: 150-316.ORLAWS2010.CH66

Rules Amended: 150-314.402(1), 150-316.587(8)-(A)

Rules Repealed: 150-314.760

Subject: 150-314.402(1) is amended to clarify the calculation of the penalty imposed for substantial understatement of income. Specifically: (1) the provisions of ORS 316.117 apply to compute the penalty for nonresidents or part-year residents; and (2) withholding not previously reported will be taken into consideration when calculating the penalty.

150-316.587(8)-(A) relates to the requirements for individuals to make estimated tax payments. We are proposing an amendment to clarify examples and to clarify how an individual determines the required annual installment payment.

150-316.ORLAWS2010.Ch66 describes the procedures for claiming a severance pay subtraction in accordance with Chapter 66, Oregon Laws 2010 (House Bill 3627).

150-314.760 is repealed because the corresponding statute was repealed.

Rules Coordinator: Debra L. Buchanan—(503) 945-8653

150-314.402(1)

Computation of Penalty for Substantial Understatement of Taxable Income (SUI)

(1) The department will assess a penalty if a substantial understatement of taxable income exists for any taxable year. The penalty is equal to 20 percent of the amount of any underpayment of tax attributable to the understatement of taxable income. A substantial understatement exists only if incurred on the return of the individual, corporation, or reporting entity required to file a return and pay tax.

(2) Substantial Understatement. An understatement is substantial if the understatement exceeds $25,000 for corporations (other than S corporations or personal holding companies) or exceeds $15,000 for all other taxable entities.

Example 1: A partnership return is adjusted for a $50,000 increase in unreported income. The partnership is owned by Renton, Mark, and Paul. The partnership adjustment results in an increase in unreported income of $30,000 on Renton’s individual return, $15,000 on Mark’s individual return, and $10,000 on Paul’s individual return. The SUI penalty is only assessed on Renton’s tax due because only his return was adjusted for more than $15,000. The adjustment to Mark and Paul’s individual returns will not include the SUI penalty, although all three may be subject to other penalties as provided by law.

(3) Understatement Computation.

(a) For full-year residents, the understatement is the taxable income required to be shown on the return minus the taxable income shown on the return. For nonresidents and part-year residents the understatement is calculated the same as for full-year residents except that taxable income must be calculated as provided in ORS 316.117

(b) Taxable income required to be shown is the amount of taxable income determined for the taxable year without regard to:

(A) Any net operating loss carryback, capital loss carryback, or commodity futures carryback.

(B) Any net operating loss carryback applied to a prior year and the balance carried forward to the taxable year in which the penalty is applied.

(A) Items with substantial authority (as described in OAR 150-314.402(4)(b)) had such items received the proper tax treatment; and

(B) Items with adequate disclosure and reasonable basis (as described in OAR 150-314.402(4)(b)) had such items received the proper tax treatment.

(d) Items not included in the computation for taxable income shown are:

(A) Any net operating loss carryback, capital loss carryback, or commodity futures carryback.

(B) Any net operating loss carryback applied to a prior year and the balance carried forward to the taxable year in which the penalty is applied.

(C) Items without substantial authority or adequate disclosure and reasonable basis as described in OAR 150-314.402(4)(b).

(D) Items attributable to an abusive tax shelter as defined in ORS 314.402(4)(a).

(4) Penalty Computation.

(a) The penalty is equal to 20 percent of the amount of any underpayment of tax attributable to the understatement of taxable income. The underpayment of tax attributable to the understatement is computed by applying an allocation percentage to the total underpayment of tax. The percentage to apply is computed by dividing the understatement of taxable income by total adjustments made. The total underpayment of tax is the tax required to be shown on the return minus the tax shown on the return for the taxable year.

(b) Tax required to be shown is the net tax computed on the taxable income required to be shown, as determined in subsection (3)(b) of this rule, without regard to:

(A) Withholdings (unless the withholding payments were unreported by the taxpayer or were collected without assessment for the taxable year);

(B) Estimated tax paid by the taxpayer; or

(c) Tax shown on the return is the amount of net tax determined for the taxable year before the taxpayer was first notified by the department concerning their tax liability. If the return shows no net income tax, the amount of tax shown on the return is considered to be zero. In all cases, tax shown is computed without regard to:

(A) Withholdings;

(B) Estimated tax paid by the taxpayer; or

(5) A net operating loss carryover, tax credit carryover, or capital loss carryover shall be treated for the purposes of ORS 314.402 as a credit or deduction in the year in which the carryover is taken into account.

(6) The department will not impose a penalty under ORS 314.402 unless a return has been filed. [Example not included. See ED. NOTE.]

[ED. NOTE: Examples referenced are available from the agency.]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.402

Hist.: RD 11-1988, f. 12-19-88, cert. ef. 12-31-88; REV 19-2008, f. 12-26-08, cert. ef. 1-1-09; REV 16-2010, f. 12-17-10, cert. ef. 1-1-11

150-316.587(8)-(A)

Required Installments for Estimated Tax

(1) Definitions.

(a) “Required annual payment” means the total amount of required installment payments for the tax year.

(b) “Required installment payment” means the amount of the payment that is due for each of the four payment periods during the tax year.

(2) There are two steps to determine estimated tax payments. The first step is to determine the required annual payment, and the second step is to determine the amount of the required installment payments.

(3) Determination of required annual payment amount.

(a) The required annual payment is the lesser of:

(A) Ninety percent of the tax shown on the return for the taxable year (or, if no return is filed, ninety percent of the tax for such year); or

(B) One hundred percent of the tax shown on the prior year’s return, if qualified. This is sometimes referred to as ‘safe harbor.’ To use the prior year’s tax to determine the required annual payment, the prior year’s return must have been a timely filed Oregon return, including extensions, and the prior tax year must consist of 12 months.

Example :1: Amanda’s adjusted gross income on her timely filed return in 2008 was $30,000 and her Oregon tax liability after credits was $2,000. Amanda’s 2009 Oregon tax liability after credits is $2,800. Ninety percent of the 2009 tax after credits is $2,520. She can use the prior year tax and pay 2009 estimated tax payments equal to 100 percent of her 2008 tax liability ($500 on each installment due date).

(b) A part-year resident may use the prior year tax unless disqualified for a reason described in this section.

Example 2: Michael moved to Oregon from California on July 1, 2008 and filed as a part-year resident. His 2008 Oregon tax after credits was $1,500. Even though his 2008 return shows 6 months of Oregon residency, his taxable year for 2008 was 12 full months. He qualifies to use safe harbor (prior year tax) to determine his required annual payment for 2009. This is less than 90 percent of his 2009 tax, so he will use that to determine his required annual payment. His required installment payments in 2009 are $375 for each period (25% of $1,500) ) for regular installment payments, or the applicable percentage if using the annualized income installment payments, in order to avoid interest on underpayment of estimated tax for 2009.

(c) Tax shown on the prior year’s return does not include any payment received as a state surplus refund of personal income tax determined under ORS 291.349.

Example 3: Roberta had tax after credits of $1,500 for 2006. She received a surplus refund check in November 2007 of $309 based on her 2006 tax before credits. That payment is not taken into account in determining the tax shown on her 2006 return (prior year) when figuring her required annual payment for 2007. Her 2007 tax after credits is $2,300, so she will use her prior year tax of $1,500 as her required annual payment because it is the lesser amount.

(d) Use the amounts from the original return to determine the payments unless an amended return was filed before the due date, including extensions. In that case, use the amounts from the amended return to determine the required annual payment. Returns filed after the due date cannot be used to determine the required annual payment.

Example 4: Aliyah’s original tax return showed a tax liability after all credits of $1,400. Aliyah did not file an extension. In July, the return was amended and the tax liability after credits was $1,200. Aliyah bases her required annual payment on the $1,400 tax shown on the original return.

Example 5: Shaylee’s original tax return was filed June 30, 2008 with an approved extension to October 15, 2008 showing a tax liability of $1,975. On October 09, 2008 the return was amended and the tax liability was reduced to $1,245. In 2009, if Shaylee chooses to use the prior year’s tax, the required annual payment is based on the $1,245 tax shown on the amended return filed within the extension period.

(e) Estimated tax payments are not required if the amount of the required annual payment minus Oregon tax withheld is less than $1,000. For information about additional exceptions, see ORS 316.563 through 316.588, and OAR 150-316.573 through 150-316.587(5)(d).

Example 6: Brandon and Michelle are married and have three children. Brandon is self-employed. Michelle works part-time. They want to know if they are required to make estimated tax payments. Their estimated 2009 adjusted gross income is $75,000, their estimated net itemized deductions are $13,500 and they expect to have $630 withheld from Michelle’s wages.

They need to calculate the amount of their required annual payment as follows: [Tables not included. See ED. NOTE.]

(4) Determination of the required installment payment amount.

(a) The required installment payment for each of the four tax periods is the lesser of the payment due under one of the following two methods for determining the amount of an installment payment:

(A) Regular Installment: The required installment payment for each period is 25 percent of the required annual payment.

(B) Annualized Income Installment: The required annualized income installment payment is the “applicable percentage” of the required annual payment for the taxable year minus the amount of any required installments paid for prior periods during the tax year. The applicable percentages are:

(i) 22.5% for the first period;

(ii) 45% for the first and second periods;

(iii) 67.5% for the first, second and third periods; and

(iv) 90 % for the first through fourth periods.

(b) If the taxpayer shows that the annualized income installment for a period (as determined from the annualized income worksheet) is less than the regular installment for that period, the amount of the required installment payment for that period is the annualized income installment.

(c) If the annualized income installment method is used to determine a required installment payment, the difference between that amount and the amount that would have been due if the regular installment method had been used must be added to the required installment payment for the next succeeding period.

(d) Generally, credits based on income or deductions are figured on the annualized income or deductions for each period.

(e) Credits computed as a percentage of income must be based upon the annualized income for the period.

(f) Credits that use income as a basis for determining an applicable percentage or for otherwise limiting the allowable credit must be based upon the total annualized income before allocation to the installment period.

Example 7: Richard and Terrie are married with no dependents. They had adjusted gross income of $14,000 for the period of January 1, 2006 to March 31, 2006. For the same period, they had itemized deductions of $2,810. For the period of January 1, 2006 to May 31, 2006, they had adjusted gross income of $27,000 and itemized deductions of $4,300. For the period of January 1, 2006 to August 31, 2006, they had adjusted gross income of $41,000 and itemized deductions of $6,300. For the period January 1, 2006 to December 31, 2006, they had adjusted gross income of $69,000 and itemized deductions of $14,100. Their 2005 timely filed return showed tax after credits of $3,155. For purposes of computing the required installment, the following computations are necessary: [Tables not included. See ED. NOTE.]

(g) Pass-through entity (PTE) income may be annualized following the methodology provided under Internal Revenue Code (IRC) section 6654, Treasury Regulation section 1.6654-2 and all other related regulations and rules, if annualizing more accurately reflects the fluctuations in income to the shareholder from the entity. Solely for purposes of annualizing, the shareholder or partner may recognize the distributable share of income or loss from the PTE for the months in the PTE’s taxable year ending within the taxable year of the shareholder or partner that precede the month in which the estimated tax installment is due.

Example 8: Ed’s Catering, Inc. (ECI) is a calendar year S corporation that is in the catering business. ECI has limited business outside of the busy holiday party season. The majority of its business occurs in October, November, and December. In 2009, ECI’s income was $30,000 from January 1 – March 31; $25,000 from April 1 – June 30; $20,000 from July 1 – September 30; and $450,000 October 1 to December 31. An ECI shareholder who receives most of his or her income during the last quarter in ECI’s tax year may choose to use the annualized income installment method for purposes of determining estimated tax payments.

Example 9: Wedding Planner’s, Inc. (WPI), an S corporation, has a fiscal year ending July 31st. The majority of its business occurs in May, June, and July. In fiscal year beginning 2008, WPI’s income was $30,000 from August 1, 2008 – October 31, 2008; $25,000 from November 1, 2008 – January 31, 2009; $20,000 from February 1, 2009 – April 30, 2009; and $450,000 May 1, 2009 to July 31, 2009. The shareholder must include the income attributable to WPI as follows when determining the required installment for the shareholder’s calendar year 2009 using the annual method:

The 1st required installment is based on PTE income/loss from August 1st of the prior year to March 31st. Date payment is due is April 15th. The 2nd required installment is based on PTE income/loss from August 1st of the prior year to May 31st. Date payment is due is June 15th. The 3rd required installment is based on PTE income/loss from August 1st of the prior year to July 31st. Date payment is due is September 15th. The 4th required installment would already include the entire amount from the PTE received in the tax year of the shareholder but should not increase the underpayment for the 4th quarter since it was fully included by the third payment.

[ED. NOTE: Tables referenced are available from the agency.]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 316.587

Hist.: RD 11-1988, f. 12-19-88, cert. ef. 12-31-88; RD 7-1989, f. 12-18-89, cert. ef. 12-31-89; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; RD 3-1995, f. 12-29-95, cert. ef. 12-31-95; REV 9-1999, f. 12-30-99, cert. ef. 12-31-99; REV 8-2001, f. & cert. ef. 12-31-01; REV 3-2006, f. & cert .ef. 7-31-06; REV 6-2008, f. 8-29-08, cert. ef. 8-31-08; REV 16-2010, f. 12-17-10, cert. ef. 1-1-11

150-316.ORLAWS2010.CH66

Subtraction for Qualified Investment of Severance Pay

(1) Definitions. For the purposes of Chapter 66, Oregon Laws 2010 (House Bill 3627) and this rule:

(a) “Invest” means to exchange cash for equity, debt, convertible debt, or management responsibilities, accompanied by terms that substantiate ownership or control of an interest in a business. “Invest” does not mean to make a loan to a business.

(b) “Material participation” means regular, continuous, and substantial participation in the small business. A taxpayer is considered to have materially participated in the small business if the taxpayer:

(A) Worked for the small business for more than 500 hours in each of the 12 month periods required under section 2(b) of this rule;

(B) Worked for the small business for more than 100 hours in each of the 12 month periods required under section 2(b) of this rule and at least as much as any other owner or employee; or

(c) “Severance pay” means compensation payable, other than back wages, vacation pay or sick pay, on voluntary termination or involuntary termination of employment based on length of service, a percentage of final salary, a contract between the employer and the employee, or some other reasonable method. “Severance pay” does not include retirement income as defined in ORS 316.127(9).

(d) “Small business” means a corporation, partnership, sole proprietorship or other legal entity formed for the purpose of making a profit, which is independently owned and operated from all other businesses and which has 50 or fewer employees.

(2) Qualifications. Severance pay that a taxpayer receives during the tax year and invests in a new or existing small business in Oregon may be subtracted from federal taxable income if:

(a) The investment occurs on or before the due date of the return, including extensions, for the first tax year in which the subtraction may be claimed;

(b) The investment continues for at least 24 consecutive calendar months following the termination of employment (for example - July 13, 2010 through July 12, 2012);

(c) The small business is not the employer that paid the severance pay and does not have any owner in common with the employer that paid the severance pay;

(d) No subtraction has previously been claimed under this section;

(e) The taxpayer completes a form provided by the department that is attached to the return of the taxpayer or is otherwise maintained or filed pursuant to form instructions; and

(f) The taxpayer materially participates in the small business for the period required under subsection (b) of this section.

(3) The taxpayer must demonstrate to the department’s satisfaction that the small business is carrying on an activity for profit. If requested, the taxpayer must provide documentation to that effect to the department. In making such a determination, the department may consider the following nonexclusive list of factors:

(a) Whether the small business keeps and maintains a detailed business plan that includes strategies or methods to make a profit or improve profitability;

(b) Whether separate books, records and bank account(s) are maintained for the small business;

(4) Severance pay received as an annuity. Only cash invested on or before the due date of the return, including extensions, qualifies for this subtraction. Any severance pay invested after the return is filed does not qualify for a subtraction under this section.

(5) Severance pay received as stock options. All stock options must be converted to cash before being invested to qualify for a subtraction under this section.

(6) The subtraction may not exceed the lesser of:

(a) The minimum balance of principal that remains invested by the taxpayer in the small business at the close of any month during the 24 consecutive calendar months following the termination of employment; or

(b) $500,000.

(7) Interest accrues as provided in ORS 305.220 on any unpaid tax attributable to any disallowance or withdrawal of principal.

Example 1: Maggie was terminated from employment on October 1, 2010, and received severance pay of $50,000 as a condition of her termination. On April 1, 2011, Maggie filed her personal income tax return, for which she had not requested an extension of time to file. On August 11, 2011, Maggie invested the severance pay in a qualifying small business. Maggie does not qualify for the subtraction because she did not invest the severance pay by the due date of the return.

Example 2: Joe was terminated from employment on July 1, 2010, and received severance pay of $20,000 as a condition of his termination. Joe invested the entire $20,000 in Company A, which qualifies as a small business, on September 1, 2010, and took a $20,000 subtraction on his 2010 return. On January 30, 2012, Joe withdrew the entire $20,000 he invested. Joe must file an amended return for tax year 2010 to remove the $20,000 subtraction (and pay any additional tax and interest that may be due) because he did not continue the investment for at least 24 consecutive months following the termination of employment.

Example 3: Alicia was terminated from employment on October 1, 2010, and received severance pay of $80,000 as a condition of her termination. Alicia invested the entire $80,000 in Company B, which qualifies as a small business, on December 1, 2010. Alicia took an $80,000 subtraction on her 2010 personal income tax return. On July 30, 2012, Alicia withdrew $20,000 of principal from her initial investment for personal use. Alicia must amend her 2010 return to remove $20,000 of the subtraction (and pay any additional tax and interest that may be due).

Example 4: Ryan was terminated from employment on October 1, 2010. He received severance pay in the form of a $1,000 a month annuity over 5 years beginning in October of 2010. Ryan accumulated his severance payments for 6 months and invested the $6,000 in a small business. He claimed a subtraction of $6,000 on his return he filed on April 1, 2011. Ryan continues to accumulate his severance pay for the next year and invests another $12,000 in the small business on March 1, 2012. Ryan cannot claim a subtraction for the additional severance pay he invested because it was invested after the return was filed.

(8)(a) If the small business is doing business both in Oregon and some other place outside of Oregon, the amount of the subtraction allowed is generally determined by multiplying the total qualifying amount of severance pay invested by the sales factor determined under ORS 314.665 and associated administrative rules.

(b) The taxpayer may present an alternative method of calculating the amount of the qualified subtraction if the calculation under subsection (a) does not result in a reasonable reflection of the extent of the business activity in Oregon. To be considered reasonable, the method of calculation must take into account the business activity taking place within Oregon versus the activity taking place outside of Oregon. The method must be fully described in an attachment to the taxpayer’s return on which the subtraction is claimed.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 305.100, Ch. 66, OL 2010 (House Bill 3627)

Stats. Implemented: Ch. 66, OL 2010 (House Bill 3627)

Hist.: REV 12-2010(Temp), f. & cert. ef. 7-23-10 thru 12-31-10; REV 16-2010, f. 12-17-10, cert. ef. 1-1-11

Rule Caption: Determining FCC license values for property tax purposes; local ballot measure language; county expenditure estimates.

Adm. Order No.: REV 17-2010

Filed with Sec. of State: 12-17-2010

Certified to be Effective: 1-1-11

Notice Publication Date: 11-1-2010

Rules Adopted: 150-307.126

Rules Amended: 150-280.075, 150-294.175(2)-(B)

Rules Repealed: 150-311.160

Subject: 150-280.075 conforms the rule to legislative changes enacted by HB 3237 (2009). The rule describes the language that is to appear on a local ballot measure.

150-294.175(2)-(B) is amended to describe the process counties may use if, due to budget constraints, they wish to decrease an estimate of expenditures after May 1.

150-307.126 is adopted to describe how the value of a Federal Communications Company (FCC) license is determined in order to remove that value from the total system value of a communication company for purposes of property taxation.

150-311.160 is repealed as obsolete. The rule applies to appeals from years before 1997-98.

Rules Coordinator: Debra L. Buchanan—(503) 945-8653

150-280.075

Tax Election Ballot Measure Requirements

(1) All ballot titles are required to contain essentially the same language within the standard format as outlined in ORS 250.035.

(2) The caption is limited to not more than 10 words. The purpose is to identify the type of tax presented for voter approval. The name of the municipal corporation and dollar figures must not be included in the caption.

(3) The question is limited to 20 words that plainly state the purpose of the measure so that an affirmative response to the question corresponds to an affirmative vote on the measure. The question must contain the following:

(a) The name of the municipal corporation. The word “district” may be substituted for the full name of the municipal corporation if the full name appears in the ballot measure summary;

(b) The amount of property tax in dollars and cents, or the tax rate per $1,000 of assessed value;

(d) The first fiscal year the tax is to be imposed; and

(e) The length in years that the proposed tax is to be imposed.

(4)(a) Directly after the question for a proposed new local option tax, the following statement is required: “This measure may cause property taxes to increase more than three percent.”

(4)(b) In lieu of the statement required by subsection (a) of this section, for a question that is requesting the renewal of a current local option tax, the following statement is required: “This measure renews current local option taxes.” To qualify as a renewing measure, a measure must ask for the same tax rate or annual dollar amount as the current local option tax, or a lower rate or amount, and be for substantially the same purpose as the current local option tax.

(5) The summary is limited to 175 words and explains the purpose of the tax in plain language. It must not advocate a yes or no vote on the question. The summary must contain the following:

(a) As the first sentence, except for elections held in May or November of any year: “This measure may be passed only at an election with at least a 50 percent voter turnout.” This statement is not included in the 175-word limitation;

(b) For a dollar amount local option, the total amount of money to be raised by the measure, and;

(c) For a tax rate local option, an estimate of the amount of taxes to be raised in each year in which the tax will be imposed.

(6) If an estimated tax rate is included in the summary of a measure requesting an annual dollar amount levy, it must also contain the following statement: “The estimated tax cost for this measure is an ESTIMATE ONLY based on the best information available from the county assessor at the time of estimate.” This statement is not included in the 175-word limitation. EXAMPLE ONE-YEAR LOCAL OPTION (RATE) (May or November election):

Caption: One-year Local Option Tax

Question: Should Sample City impose $.40 per $1,000 of assessed value for operating purposes for one year beginning 2008–2009? This measure may cause property taxes to increase more than three percent.

Summary: The purpose of this measure is to provide funds for the general operations of Sample City. It will enable the city to maintain operations at their current level. It is estimated that the requested rate will raise $100,000 in fiscal year 2008-2009.

EXAMPLE MULTIPLE-YEAR LOCAL OPTION (UNIFORM DOLLAR AMOUNT) (March or September election):

Caption: Nine-year Capital Project Local Option Tax

Question: Should the district impose $20,000 each year for nine years to purchase two vehicles and a maintenance shed beginning 2008–2009? This measure may cause property taxes to increase more than three percent.

Summary: This measure may be passed only at an election with at least a 50 percent voter turnout. The taxes to be raised in nine years total $180,000, to be imposed in equal amounts of $20,000 each year. The taxes will be used to purchase two new city vehicles to replace existing vehicles. The tax revenue will also be used to acquire a maintenance shed to house the city’s park maintenance equipment. The city currently has no maintenance shed. It is estimated that the proposed tax will result in a rate of approximately $.10 per $1,000 of assessed value in the first year. The estimated tax cost for this measure is an ESTIMATE ONLY based on the best information available from the county assessor at the time of estimate.

EXAMPLE MULTIPLE-YEAR LOCAL OPTION (RATE) (RENEWAL) (March or September election):

Caption: Three-year Operating Local Option Tax

Question: Should Sample County impose $.76 per $1,000 of assessed value for operations for three years beginning 2008–2009? This measure renews current local option taxes.

Summary: This measure may be passed only at an election with at least a 50 percent voter turnout. This measure will continue a current local option tax that, without renewal, will expire in 2008. If renewed, the tax revenue will continue to be used to operate the county at its current levels of service. It is estimated the proposed rate will raise $152,000 in 2008-2009, $156,560 in 2009-2010, and $161,260 in 2010-2011 for a total of $469,820.

EXAMPLE PERMANENT RATE LIMIT (May or November election):

Caption: Permanent Rate Limitation

Question: Should District be authorized to impose $3.50 per $1000 of assessed value as a permanent rate limit beginning 2008-2009?

Summary: The measure will establish a permanent tax rate limit for the new Sample Service District. In the first year of imposition it is estimated that the proposed rate will raise $42,000 for the new district. The taxes will be used to pay for the general operations of the district.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 280.060

Hist.: REV 8-1998, f. 11-13-98, cert. ef. 12-31-98; REV 8-2000, f. & cert. ef. 8-3-00; REV 5-2009, f. & cert. ef. 7-31-09; REV 17-2010, f. 12-17-10, cert. ef. 1-1-11

150-294.175(2)-(B)

Estimates of Expenditures for Assessment and Taxation

(1) On or before May 1 of each year, each county must file with the Department of Revenue an estimate of expenditures for assessment and taxation as required by ORS 294.175 in order to participate in the grant program provided under ORS 294.178 for the tax year beginning on July 1.

(2) The county must file an amended estimate of expenditures no later than June 1 if it determines there is a need to increase or decrease its estimated expenditures.

(3) The amended filing must be filed in the same manner as the original application.

(4) The department will review the amended filing using the review standards and criteria for determining adequacy of resources that were applicable to the original filing.

Stat. Auth.: ORS 305.100 & 294.175

Stats. Implemented: ORS 294.175

Hist.: REV 6-2003, f. & cert. ef. 12-31-03; REV 3-2010(Temp), f. & cert. ef. 3-9-10 thru 8-31-10; Administrative correction 9-22-10; REV 17-2010, f. 12-17-10, cert. ef. 1-1-11

150-307.126

Removal of Value of Federal Communication Commission (FCC) Licenses from the Unit Value of Centrally Assessed Property

(1) ORS 308.655 provides that the Department of Revenue has the authority to prescribe rules and regulations regarding property assessed under ORS 308.505 to 308.665. These statutes require the department to assess all property, real and personal, tangible or intangible, used or held for future use by a company as owner, occupant, lessee, or otherwise, for or in use in performing or maintaining a communications business.

(2) ORS 308.555 states the department may use unitary valuation to value all property of the company.

(3) For purposes of this rule, unitary valuation means valuing an integrated group of assets functioning as an economic unit as “one thing,” without reference to the independent value of the component parts. The value of a component part in a communication company lies not in the fact that the component part has an independent market value separate and apart from the unit, but that the component part is a part of a thoroughly complete and integrated communications company and has been valued as such. To determine the unitary value, one or more approaches to value are reconciled to arrive at a correlated system value, otherwise known as a unitary value.

(4) FCC licenses are exempt from ad valorem property taxation under ORS 307.126.

(5) A unitary valuation is used in developing the value of the total property centrally assessed under ORS 308.505 to 308.665. The contributory value of FCC licenses will be removed from the final correlated system value.

(6) The contributory value of the FCC licenses will be removed by applying a market-to-book ratio to the original cost of the FCC license. The market-to-book ratio is calculated by dividing the correlated system value by the net book value of the system’s taxable property (including the net book value of the FCC license value). The resulting ratio is then multiplied by the company’s reported FCC license cost to determine the estimated contributory license value to be subtracted from the correlated system value.

(7) For businesses that have been given FCC licenses and have no booked cost for the FCC license(s), the department will estimate a cost for the FCC licenses. The department will estimate the cost by considering various FCC license characteristics including but not limited to: frequency, geographical area, population served and date of acquisition.

Stat. Auth.: ORS 305.100, 308.205(2), 308.655

Stats. Implemented: ORS 307.126

Hist.: REV 17-2010, f. 12-17-10, cert. ef. 1-1-11

Rule Caption: Defining ‘moist snuff’; defining petroleum products subject to load fee; required electronic funds transfer payments.

Adm. Order No.: REV 18-2010

Filed with Sec. of State: 12-17-2010

Certified to be Effective: 1-1-11

Notice Publication Date: 11-1-2010

Rules Adopted: 150-465.101(5)-(B)

Rules Amended: 150-293.525(1)(b), 150-323.500(9)

Rules Repealed: 150-465.101(5)-(B) (T), 150-323.500(9) (T)

Subject: 150-293.525(1)(b) is amended to delete an outdated reference to Treasury Regulation 31.6302-1. The rule currently provides the reference is to the regulation as in effect on December 31, 2004. However, the legislature has updated Oregon’s connection to federal tax laws to those in effect on December 31, 2009.

150-323.500(9) relates to the tobacco tax program. We are proposing an amendment to clarify the types of products included in the definition of “moist snuff” for purposes of the “other tobacco products tax.”

150-465.101(5)-(B) is adopted to clarify that for purposes of determining the petroleum load fee under ORS 465.104, “petroleum products” includes products blended with biodiesel or alcohol products.

150-323.500(9) TEMP is proposed for repeal due to the adoption of a permanent rule.

150-465.101(5)-(B) TEMP is proposed for repeal due to the adoption of a permanent rule.

Rules Coordinator: Debra L. Buchanan—(503) 945-8653

150-293.525(1)(b)

Notification of Requirement to Make Payments by Electronic Funds Transfer; Penalty for Noncompliance; Exceptions

(1) Any person, required by federal law to make federal corporation estimated tax payments or federal payroll tax payments by means of electronic funds transfer (EFT), is also required to make such payments by EFT for Oregon corporation estimated tax (ORS 314.518) and Oregon combined quarterly payroll taxes and assessments (ORS 316.198).

(2) The department will notify a person, in writing, of the requirement to make payments by EFT. The notice will provide the person with information as to how to register and begin making EFT payments, and will inform the person of the penalty for failure to comply.

(3) If a person does not begin making payments by EFT within 90 days after notification, as described in section (2), a penalty may be assessed equal to five percent of the payments made by means other than EFT received after the 90 days has expired.

(4) A penalty will not be assessed against payments made by means other than EFT if at the time payment is due:

(a) The person is not required to make such payments by EFT for federal purposes;

(b) Payment by electronic funds transfer is not possible because of the registration waiting period;

(d) The department has granted the person an exemption from the requirement to make payment by EFT; or

(e) Any other circumstance occurs which, in the judgment of the department, reasonably prevented the person from paying by EFT.

Stat. Auth.: ORS 305.100 & 293.525.

Stats. Implemented: ORS 293.525

Hist: REV 11-2004, f. 12-29-04, cert. ef. 12-31-04; REV 18-2010, 12-17-10, cert. ef. 1-1-11

150-323.500(9)

Definition of Moist Snuff

(1) The provisions of this rule apply to distributions of tobacco products that occur after June 30, 2010.

(2) For purposes of ORS 323.500 through 323.645, “moist snuff” means:

(a) Any finely cut, ground, milled or powdered tobacco product that is not intended to be smoked or placed in the nasal cavity. It may or may not be contained within small, tea-bag like pouches. Words such as long cut, mid cut, fine cut and snus only describe minor differences of product that fit within this tobacco category.

(b) Any other products containing tobacco that are not intended to be consumed by combustion. Examples include, but are not limited to:

(A) Dissolvable tobacco, which consists of finely-processed tobacco developed in such a way as to allow the substance to dissolve on the tongue or in the mouth and includes strips, sticks, orbs, and compressed tobacco lozenges.

(B) Other chewing tobacco and other leaf tobacco products to which artificial or natural substances have been added during processing. Such substances may include but are not limited to: sweeteners, sugars, molasses, licorice, mint, eucalyptus, tobacco leaf extract, betel nut, catchu, lime, saffron, thickeners, humectants, emulsifiers, colorants, texturizers, preservatives, taste enhancers, firming agents, adhesives, and punk ash. Examples include, but are not limited to:

(i) Shredded tobacco leaves, such as those sweetened and packaged loosely in aluminum lined pouches;

(ii) Plug tobacco, such as enriched tobacco leaves flavored and sweetened with licorice and formed into bricks or flat blocks; and

(iii) Twist tobacco, such as tobacco that is spun and rolled into rope-like strands and to which tobacco leaf extract has been added.

Stat. Auth.: ORS 305.100 & 323.575

Stats. Implemented: ORS 323.500

Hist.: REV 7-2009(Temp), f. & cert. ef. 10-7-09 thru 3-31-10; REV 10-2009, f. 12-21-09, cert. ef. 1-1-10; REV 7-2010(Temp), f. 5-27-10, cert. ef. 6-30-10 thru 12-27-10; REV 18-2010, 12-17-10, cert. ef. 1-1-11

150-465.101(5)-(B)

Definition of “Petroleum Product”

As used in ORS 465.101 through 465.131, “petroleum product” includes blends of petroleum products mandated by ORS 646.905 through 646.963, such as diesel that contains a percentage of biodiesel, or gasoline that contains a percentage of ethanol.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 465.101

Hist.: REV 13-2010(Temp), f. & cert. ef. 8-19-10 thru 2-14-11; REV 18-2010, 12-17-10, cert. ef. 1-1-11

Rule Caption: Defining “obtained the credit” for taxpayers that purchase a business energy tax credit.

Adm. Order No.: REV 19-2010(Temp)

Filed with Sec. of State: 12-17-2010

Certified to be Effective: 12-17-10 thru 5-31-11

Notice Publication Date:

Rules Amended: 150-315.354

Subject: The rule is amended to provide immediate guidance through a temporary rule for the meaning of “obtained the credit” as used in ORS 315.354(5)(d) and as amended by HB 3680 from the 2010 legislative session. To update the information in subsection (2) and remove subsections (1), (3) and (4) as that information is outdated. To clarify that a taxpayer must receive a tax credit certificate prior to claiming the credit.

Rules Coordinator: Debra L. Buchanan—(503) 945-8653

150-315.354

Business Energy Tax Credit: Eligibility

(1) The energy conservation facility tax credit authorized by ORS 315.354 may be claimed by eligible applicants, as determined under ORS 469.185 to 469.225, 315.354 to 315.357 and related administrative rules. See Chapter 330, Division 90 of the Oregon Administrative Rules (e.g., OAR 330-90-0105) for additional information.

(2) Under ORS 315.354(5)(d), a transferee of an energy conservation facility tax credit may not claim the credit for a tax year prior to the tax year in which the transferee obtains the credit from a facility owner. The transferee may obtain the credit only after written authorization is provided by the Department of Energy to the transferee confirming that the energy facility is complete and approved for final certification. The transferee is considered to have “obtained the credit” for purposes of ORS 315.354(5)(d) at the point in time that the facility owner receives from the transferee the required cash payment in an amount equal to the present value of the credit, as determined by the Department of Energy.

(3) A taxpayer must receive a tax credit certificate from the Department of Energy under ORS 469.215 prior to claiming the credit.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 315.354

Hist.: 12-31-81; 12-31-88; 12-31-89; 12-31-90; 12-31-91; 12-31-92, Renumbered from 150-317.104; 12-31-93; RD 3-1995, f. 12-29-95, cert. ef. 12-31-95; REV 8-2001, f. & cert. ef. 12-31-01; REV 19-2010(Temp), f. & cert. ef. 12-17-10 thru 5-31-11

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2010.