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Oregon Bulletin

February 1, 2014

Department of Revenue, Chapter 150

Rule Caption: Verifying returns, alternative filing methods, separate refunds, credit auctions, eFile mandate, Oregon NOL

Adm. Order No.: REV 6-2013

Filed with Sec. of State: 12-26-2013

Certified to be Effective: 12-26-13

Notice Publication Date: 6-1-2012

Rules Amended: 150-305.810, 150-314.385(4), 150-314.415(7), 150-315.514

Rules Renumbered: 150-314.HB2071(B) to 150-314.364(B)

Rules Ren. & Amend: 150-316.014 to 150-316.028

Subject: 150-305.810 explains the different methods the department will accept for a taxpayer to verify their return is true and accurate. The update specifies that submitting a direct efile income tax return is the act of verifying as well as clarifying for other tax programs. This change informs taxpayers how efiled returns may be verified.

   150-314.385(4) specifies that the department may allow alternative methods for filing a tax return. This gives the department the ability to specify and allow alternative methods as new processes or methods are developed, including direct filing with DOR.

   150-314.415(7) clarifies when a separate refund will be issued when a joint return has been filed. The update is to correct a code cite and include examples.

   150-315.514 allows the Office of Film and Television to sell their tax credits through an auction. The rule spells out the parameters of the auction.

   150-314.HB2071(B) implemented mandatory efile in 2012. This change is to renumber to match codification of House Bill.

   150-316.014 discusses an Oregon Net Operating Loss. This change is to renumber to match statute number.

Rules Coordinator: Deanna Mack—(503) 947-2082

150-305.810

Verification of Returns, Statements, or Documents Filed Under Tax Law

(1) The declaration under ORS 314.385(2) that a return, statement, or document is made under penalties for false swearing and is true, complete, and correct must be verified by the taxpayer or by an authorized agent, and in the case of a joint personal income tax return, by each taxpayer or authorized agent for such taxpayer.

(2) Personal income tax returns for individuals are verified by:

(a) Signing the return.

(b) A signed statement, such as Oregon Form EF, submitted to the department if requested.

(c) Any verification method allowed by the IRS when electronically filing the federal return with the Oregon return, such as a federal personal identification number.

(d) Submission of an electronically filed return submitted without the use of a federal signature method (unlinked) by the taxpayer, tax preparer, or an authorized representative of the taxpayer.

(3) Corporate income and excise tax returns are verified by:

(a) Signing the return.

(b) For tax year 2011 and earlier forms:

(A) Any verification method allowed by the IRS when electronically filing the federal return with the Oregon return, such as a federal personal identification number.

(B) A signed and scanned Corporation E-file Signature Form included with the electronic return when electronically filing without the use of a federal signature method or when the Oregon filer is different than the federal filer.

(c) For tax year 2012 and later forms, submission of an electronically filed return by the taxpayer, tax preparer, or an authorized representative of the taxpayer.

(4) For Oregon Quarterly Payroll Tax reports, the declaration under ORS 314.385(2), must be verified by the taxpayer or an authorized agent by:

(a) Signing the return or similar statement.

(b) Transmitting a payroll tax return using the state’s online payroll reporting method. The return is considered signed when the return is transmitted to the state by an authorized person. An “authorized person” is any person certified by the employer and the Oregon Employment Department as allowed to file the return using the state’s reporting system.

(5) All other returns are verified by:

(a) Signing the return.

(b) Any verification method allowed by the IRS when electronically filing the federal return with the Oregon return, if applicable; otherwise only a signed return is accepted.

Stat. Auth.: ORS 305.100 & 305.810

Stats. Implemented: ORS 305.810

Hist.: REV 1-2005, f. 6-27-05, cert. ef. 6-30-05; REV 1-2012(Temp), f. 1-31-12, cert. ef. 2-1-12 thru 7-29-12; REV 6-2013, f. & cert. ef. 12-26-13

150-314.364(B)

Requirement to File Returns Electronically

(1) All paid tax preparers filing Oregon personal income tax returns in this state are required to file them by electronic means if the paid tax preparer is required to do so by federal law. See 26 USC § 6011 and Treasury Regulation §301.6011-7 for the federal mandate and relevant definitions.

(2) Waivers.

(a) A waiver granted by the Internal Revenue Service (IRS) pursuant to Treasury Regulation §301.6011-7(c)(1) or (2) will be accepted by the department as a waiver to the mandate under section (1). The paid preparer must notify the department in writing when such a waiver is granted in accordance with the department’s instructions.

(b) In addition to a waiver allowed under subsection (a), the department may grant a waiver of the mandate in section (1) if the following conditions are met:

(A) The paid preparer requests a waiver in advance of the preparation of personal income tax returns subject to the mandate in accordance with the department’s instructions; and

(B) The paid preparer’s facts and circumstances are such that complying with the mandate would cause the paid preparer an undue financial hardship. The paid preparer’s refusal to purchase or use the requisite software or computer equipment does not, in and of itself, satisfy the conditions for a waiver under this subsection.

(c) When circumstances warrant, the department may issue an administrative waiver of the mandate in section (1) to a paid preparer or group of paid preparers when the department determines it is necessary to promote the effective and efficient administration of the tax system.

(3) This rule is effective January 1, 2012 and applies to tax returns filed on or after that date.

NOTE: The publication(s) referred to or incorporated by reference in this rule is available from the Department of Revenue pursuant to ORS 183.360(2) and 183.355(1)(b).

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.364

Hist.: REV 4-2011, f. 12-30-11, cert. ef. 1-1-12; Renumbered from 150-314.HB2071(B) by REV 4-2012, f. 7-20-12, cert. ef. 8-1-12; REV 6-2013, f. & cert. ef. 12-26-13

150-314.385(4)

Alternative Filing Methods

(1) As used in this rule:

(a) “Alternatively filed return” means an Oregon return submitted using a department-approved alternative filing method under section (2) of this rule.

(b) “IRS date of receipt” means the electronic time stamp indicating the date and time of receipt of the Oregon return by the Internal Revenue Service (IRS).

(2) The department may provide for filing of returns using electronic or other methods as an alternative to paper returns.

(3) Alternatively filed returns are deemed filed and received on:

(a) The date the return is received by the department as indicated by the department’s date stamp; or

(b) In the case of an electronically filed return, the earlier of:

(A) The IRS date of receipt, or

(B) The date of successful transmission.

(4) Alternatively filed returns must be verified pursuant to the rules of the department adopted under ORS 305.810.(5) If an alternatively filed return cannot be processed, a paper return must be filed with the department. If the paper return is filed within 30 days of the date of the successful transmission of the alternatively filed return, the date of the successful transmission of the alternatively filed return is considered the filing date of the paper return.

[Publications: Publication(s) referred to or incorporated by reference in this rule is available from the Department of Revenue pursuant to ORS 183.360(2) and 183.355(1)(b).]

Stat. Auth.: ORS 305.100, 314.385

Stats. Implemented: ORS 314.385

Hist.: REV 12-2000, f. 12-29-00, cert. ef. 12-31-00; REV 4-2012, f. 7-20-12, cert. ef. 8-1-12; REV 6-2013, f. & cert. ef. 12-26-13

150-314.415(7)

Separate Refunds When a Joint Return Has Been Filed

(1) The department may, as a convenience to taxpayers, issue separate refunds when either spouse submits a signed request. To issue separate refunds when a joint refund check has already been issued, the check must be returned uncashed. If either spouse has an amount owing to the state of Oregon, any refund due that person will be applied to the liability and the balance, if any, issued in a separate refund check.

(2) For purposes of this rule, the separate adjusted gross income (AGI) of each spouse is equal to each spouse’s share of Oregon adjusted gross income.

Example 1: Ann and her husband Ian, both Idaho residents, filed a joint Oregon return claiming a $600. He owes a $500 debt to an Oregon city for unpaid parking tickets so the department withheld part of the joint $600 refund to pay the $500 debt and issued a $100 refund for the difference. Before they cashed the $100 refund, Ann sent it back requesting her share of the amount paid to the city in Oregon because she did not owe the debt. Ian reported $25,000 of wages of which he earned $10,000 in Oregon. Ann reported $15,000 of wages of which $5,000 she earned in Oregon. They had no other income to report. The department will apportion her refund based on her share of Oregon AGI as follows:

      Federal column    Oregon Column

Ian’s wages    $25,000       $10,000

Ann’s wages    $15,000       $5,000

Federal AGI    $40,000      $15,000 (Oregon AGI)

$5,000 ÷ $15,000 = 1/3

$600 x 1/3 = $200

The department will apportion the $600 refund and issue a $200 refund to Ann. Ian’s portion of the refund was $400 thus he still owes the City of Portland $100.

(3) For purposes of this rule, items of income and deduction, separate adjusted gross income, and any refund claimed are determined without regard to community property law.

Example 2: Ethan and his wife Ava, both Washington residents, filed a joint Oregon return claiming a $1,500 refund. She owes a $1,200 debt to an Oregon university so the department withheld part of the joint refund and sent a $300 check for the difference. Before they cashed the $300 refund, Ethan sent it back requesting his share of the joint refund because he did not owe the debt and he claimed he owned half of the refund because he lives in a community property state. Ethan reported $50,000 of wages all of which he earned in Washington. Ava reported $25,000 of wages all of which she earned in Oregon. They had no other income to report. The department will apportion his refund based on his share of Oregon AGI without regard to community property law as follows:

      Federal column    Oregon Column

Ethan’s wages    $50,000       $0

Ava’s wages    $25,000       $25,000

Federal AGI    $75,000       $25,000 (Oregon AGI)

Because Ethan does not have any share of the Oregon AGI and community property law is disregarded for this purpose, the entire refund belongs to Ava and the department will not apportion any of it to Ethan.

(4) If the refund is being held for application against an amount owed to an agency of the state of Oregon, the request for separate refunds must be mailed to the Department of Revenue within 30 days of the date of the Notice of Proposed Adjustment and/or Distribution. Separate refunds will not be made if the request is not received timely.

(5) Pursuant to ORS 18.665(2), the department cannot issue separate refunds when a garnishment or levy has been served on the department for one or both spouses.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.415

Hist.: 1-69; 11-71; 12-19-75; 1-1-77, Renumbered from 150-316.192(2)-(A); 12-31-85; RD 13-1987, f. 12-18-87, cert. ef. 12-31-87; RD 7-1991, f. 12-30-91, cert. ef. 12-31-91; RD 9-1992, f. 12-29-92, cert. ef. 12-31-92; REV 3-2002, f. 6-26-02, cert. ef. 6-30-02; REV 11-2004, f. 12-29-04, cert. ef. 12-31-04; Renumbered from 150-314.415(6), REV 3-2005, f. 12-30-05, cert. ef. 1-1-06; REV 11-2007, f. 12-28-07, cert. ef. 1-1-08; REV 4-2012, f. 7-20-12, cert. ef. 8-1-12; REV 6-2013, f. & cert. ef. 12-26-13

150-315.514

Oregon Production Investment Fund Tax Credit Auctions

(1) Definitions.

(a) “Tax Credit” means the credit authorized by ORS 315.514.

(b) “Qualified Bid” means a bid that is eligible for consideration in the tax credit auction because:

(A) It is submitted in a manner and time prescribed by the department’s instructions and this rule;

(B) It is submitted for no less than 95 percent of the tax credit value;

(C) An associated payment is received by the department in the time and manner prescribed in section (4).

(c) “Non-qualified Bid” means a bid that is not eligible to participate in the auction because it does not meet the requirements of subsection (b).

(d) “Invalid or Insufficient Payments” are payments that are:

(A) Not received by the department by 5:00 p.m. (PT) on the date for payment set by the department;

(B) In a form other than one listed in section (4) of this rule;

(C) Fraudulent or otherwise not able to be immediately banked by the department;

(D) Less than the full amount of the corresponding bid received by the department; or

(E) Not submitted in a manner consistent with department’s instructions (including attaching the required completed forms).

(e) “PT” means Pacific Time (Daylight or Standard as dictated by the time of year).

(2) Auction Bidding Period. The tax credits auction bidding period is no less than seven days, not to exceed 14 days; with specific dates as announced by the department.

(3) Tax Credit Certificates. The Oregon Film and Video Office will issue tax credit certificates for the prevailing qualified bids. A taxpayer to whom a certificate is issued may claim a credit in the amount shown on the certificate against Oregon personal income or corporate income or excise tax otherwise due for that tax year. The tax credit may not exceed the liability of the taxpayer in any one year. Any credit amount unused by the taxpayer may be carried forward to offset tax liabilities in the next three succeeding tax years. No transfer of the certificate (or the credit that it represents) is allowed.

(4) Determination of Qualifying Bids and Payments.

(a) Bids must be submitted on-line in a manner consistent with the department’s instructions and within the bidding period as outlined in section (2). Bids received before or after the bidding period will be considered a non-qualified bid. The department will determine the order of bids received by the electronic date and time stamp.

(b) A bidder may submit multiple separate bids.

(c) After a bid is submitted, a bidder must send, and the department must receive, a payment for the total amount bid. Invalid or insufficient payments will be returned to the bidder and the associated bid considered non-qualified. All bid payments must be received by the department no later than 5:00 p.m. (PT) on the payment date. The department will date stamp payments when they are received. The department will not consider postmarks when determining if the payment has been timely received. It is the bidder’s responsibility to ensure that the department receives the payment by the deadline. The method of payment is limited to the following:

(A) Bank-issued certified check;

(B) Bank-issued cashier’s check; or

(C) Money Order.

(d) All payments will be held until the outcome of the auction is determined. As soon as practicable, the department will return payments received to bidders that do not prevail at the auction. No interest will be paid on payments.

(e) A bid, once submitted, is not revocable and may not be changed. A payment will only be returned if a bid does not result in the issuance of a tax credit certificate.

(5) Determination of the Prevailing Bid(s). After the payment deadline has passed, the department will determine the prevailing bids by placing the qualifying bids in order from highest bid amount to lowest bid amount. The department will allot tax credit certificates to the highest qualifying bids. In the event that two or more qualifying bids have identical bid amounts for the last tax credit increment (or increments) available, the prevailing qualifying bid will be the one the department received first as determined under section (4).

Example: Four bidders (A, B, C and D) make qualifying bids on $10,000 worth of tax credits (sold in twenty increments of $500). Bidder A bids $475 for each of eight increments on October 24. Bidder B bids $480 for each of eight increments on October 26. Bidder C bids $485 for each of six increments and $480 for each of four increments on November 1. Bidder D bids $495 for each of ten increments on November 4.

The results of the auction are as follows:

10 of the 20 increments go to D.

6 of the 20 increments go to C (for the $490 bid).

4 of the 20 increments go to B (for the $480 bid).

NOTE 1: B only received four of the eight increments he bid on because no more increments were available. The department will return the payment to B for the amount of the four non-prevailing bids.

NOTE 2: The bid C placed at $480 did not prevail because it tied with the bid B submitted. B’s bid will prevail over C’s bid in the event of a tie because it was received before C’s bid. C’s payment for the $480 bid will be returned.

NOTE 3: A’s bid was not high enough to prevail. A’s bid payment will be returned.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 315.514

Hist.: REV 3-2006, f. & cert .ef. 7-31-06; REV 3-2012(Temp), f. 5-17-12, cert. ef. 6-1-12 thru 7-31-12; REV 4-2012, f. 7-20-12, cert. ef. 8-1-12; REV 6-2013, f. & cert. ef. 12-26-13

150-316.028

Oregon Net Operating Losses — Treatment After 1984

(1) Applicability of this Rule.

(a) This rule applies to the computation of net operating losses occurring in loss years beginning after December 31, 1984; and net operating loss deductions allowed or allowable in tax years beginning after December 31, 1984.

(b) For the computation and application of Oregon net operating losses for loss years beginning before January 1, 1985; net operating loss deductions with regard to loss years beginning before January 1, 1985; and net operating loss carrybacks and net operating loss carryovers applied in tax years beginning before January 1, 1985 that also originated in tax years beginning before January 1, 1985, see OAR 150-316.007.

(2) Definitions for Purposes of this rule.

(a) Prohibited amounts. “Prohibited amounts” means those amounts that the state of Oregon is prohibited from taxing, such as all stocks, bonds, Treasury notes, and other obligations of the United States as provided in 31 United States Code Section 3124. Prohibited amounts do not include such items as federally taxable social security benefits since Oregon is not prohibited from indirectly taxing such types of income.

(b) Oregon Adjusted Gross Income (Oregon AGI). For a full-year resident, Oregon AGI is generally the same as federal AGI. For a nonresident, “Oregon AGI” means the items included in federal adjusted gross income as defined in IRC Section 62 that relate to Oregon sources without modifications.

(c) Modified Oregon Taxable Income. “Modified Oregon taxable income” means Oregon AGI reduced by the sum of the following:

(A) Oregon itemized deductions. For a resident, Oregon itemized deductions are generally the same amount as federal. For part-year and nonresident taxpayers, Oregon itemized deductions are the Oregon percentage of federal itemized deductions; or

(B) Oregon standard deduction. For part-year and nonresident taxpayers, only the Oregon percentage of the standard deductions can be used;

(C) Federal personal exemption(s); and

(D) Prohibited amounts included in Oregon AGI.

(3) Computation of an NOL for a Resident.

(a) For Oregon purposes, a resident’s net operating loss is computed in the same manner as for federal purposes without Oregon modifications. Generally, the Oregon NOL is the same as the federal NOL. The only modification necessary is to subtract prohibited amounts.

(b) The computation of the Oregon NOL begins with the Oregon adjusted gross income (AGI) to arrive at modified Oregon taxable income. Then the modified Oregon taxable income is adjusted as required by IRC Section 172(d).

Example 1. Susan and Joe filed joint 2009 federal and Oregon tax returns. On their federal return, they reported wages of $26,000, a business loss of $50,000, a gain on the sale of stock of $400, and interest income of $800 from a bank. They also reported total itemized deductions of $12,800 which were all nonbusiness and claimed personal exemptions of $7,300. On their Oregon return, Susan and Joe also reported $500 municipal bond interest from California that was exempt from federal income tax. Their allowable Oregon NOL is computed as follows: [Formula not included. See ED. NOTE.]

Note: Except for prohibited amounts, the Oregon NOL is computed based on the federal NOL method and definitions without Oregon modifications.

Example 2. The facts are the same as in Example 1, except that the interest of $800 is from U.S. government securities (prohibited amounts). The Oregon NOL for Susan and Joe is ($24,800) computed as follows: [Formula not included. See ED. NOTE.]

Note: The U.S. government interest (prohibited amounts) is not used in computing Oregon NOL.

(4) Computation of an NOL for a Part-year Resident and a Nonresident

(a) A nonresident is allowed an Oregon NOL for any loss year when the NOL is attributable to Oregon sources. A taxpayer is not allowed an NOL or carryover on the Oregon return if the loss was incurred while the taxpayer was a nonresident and the loss was not attributable to Oregon. The computation of the allowable net operating loss for Oregon purposes begins with Oregon adjusted gross income as defined in this rule. Any modifications provided in IRC Section 172(d) apply to all items of income and deduction as they apply to modified Oregon taxable income with the exception of prohibited amounts.

(b) The IRC Section 172(d) modifications attributable to Oregon sources are the following:

(A) Oregon NOL deduction from prior years included in Oregon income after adjustments.

(B) Net Oregon capital loss deduction.

(C) Federal personal exemption amount.

(D) Excess of nonbusiness deductions over nonbusiness income included in modified Oregon taxable income.

Example 3. Herb and Sallie are married nonresidents and file a joint 2009 return. On their federal return, they have itemized deductions of $14,000 (all nonbusiness) and claimed exemptions of $10,950. They also had a business loss of $25,000 from Oregon sources and $1,000 non-Oregon source corporate bond interest. On their Oregon nonresident return, the Oregon percentage is zero (0). They compute their Oregon NOL as follows: [Formula not included. See ED. NOTE.]

Note: The Schedule A itemized deductions are -0- for Oregon purposes because their Oregon percentage is zero.

(5) Application of an NOL.

(a) General rule. An Oregon net operating loss for any loss years is applied in the same manner as the federal net operating loss as provided in IRC Section 172(b). If the loss was not attributable to Oregon sources and was incurred while the taxpayer was a nonresident, there is no Oregon NOL to carry over even if the taxpayer later becomes an Oregon resident. In such cases, the amount of the NOL carryover that is not attributable to Oregon sources is added back on the Oregon resident tax return. If a taxpayer carries back a federal NOL, the taxpayer is treated as carrying the loss back for Oregon purposes as well. If a taxpayer makes an election to carry over the federal NOL, the taxpayer is treated as making the same irrevocable election for Oregon purposes as well.

(b) Exceptions.

(A) If a taxpayer has an Oregon NOL but does not have a federal NOL, the taxpayer may elect to carry the Oregon NOL over to the next succeeding year, if the taxpayer makes an irrevocable election on the timely filed Oregon loss year return (including extensions). If no such election is made, then the taxpayer may only carry the Oregon loss back in the same manner as provided in IRC Section 172(b).

(B) If a taxpayer is not required to file an Oregon return for all years to which the federal NOL deduction (NOLD) is applied, the Oregon NOL is carried back to the year in which the loss may be first applied.

(C) The total number of years to which an NOL may be carried back or forward is the same for Oregon and federal, and is generally determined as follows:

(i) For net operating losses incurred in tax years beginning on or after January 1, 2003, the carry back period is two years with a twenty year carryover period. Oregon follows any exceptions allowed under federal law for these tax years.

(ii) For net operating losses incurred in tax years beginning on or after January 1, 2001 and before January 1, 2003, the carryback period is five years with a twenty year carryover period.

(iii) For net operating losses incurred in tax years beginning on or after August 5, 1997 and before January 1, 2001, the carryback period is two years with a twenty year carry over period.

(iv) For net operating losses incurred in tax years beginning prior to August 6, 1997, the carryback period is three years with a fifteen year carryover period. See IRC 172 and the related regulations for exceptions to the general carryback periods for net operating losses attributable to certain casualty losses, disaster areas and farming losses.

Example 4. Joe has a net operating loss for federal and Oregon for tax year 2009. For federal purposes, Joe carried his federal NOL back to 2007. Since he carried back his loss for federal purposes, he must carry back the loss for Oregon purposes to his 2007 Oregon tax return. If he is not required to file an Oregon tax return for 2007, he may carry his Oregon NOL to his 2008 Oregon tax return.

Example 5. Assume the same facts as in Example 4. However, Joe was not required to file an Oregon tax return prior to tax year 2009. Joe may carry his Oregon NOL over to his 2010 Oregon tax return even if the loss was carried back for federal purposes.

Example 6. As the result of a stimulus bill passed by Congress in 2009, Kerry, an Oregon resident and small business owner, is eligible to carry back her loss up to five years (instead of the normal two years). Kerry chose to carry her loss back five years on her federal return, so she must use the same five year carry back for purposes of her Oregon return.

Example 7. Devin, a Washington resident, incurs a $25,000 NOL in 2009 from his Washington area business and elects to carry the loss forward. Devin moves to Oregon on January 1, 2010. Since the loss was incurred while Devin was a nonresident of Oregon and the loss is not from an Oregon source, there is no Oregon NOL and Devin must make an addition on his 2010 Oregon return to add back the $25,000 NOL included in federal adjusted gross income.

(6) A Net Operating Loss Deduction, Carryback and Carryover Amount.

(a) A taxpayer’s net operating loss deduction (NOLD), carryback and carryover amount is computed in the same manner as for federal purposes. The method to compute the carryback and carryover amount is not modified for Oregon purposes.

(b) For a full-year resident, generally an NOLD, carryback and carryover amount is the same as for federal purposes except that prohibited amounts as defined in section (2)(a) of this rule are not taken into consideration.

Example 8. John and Joyce incurred losses in 2009 from partnerships and S corporations. They compute an NOL of $12,000 and elect to carry the loss back. The 2007 return shows negative taxable income, so the 2009 NOL is first applied to 2008 where the loss is completely absorbed. John and Joyce have a federal AGI in 2008 of $50,000. The fully absorbed 2009 NOL is applied as follows: [Formula not included. See ED. NOTE.]

Example 9. Assume the same facts in Example 8, except that John and Joyce elect to carry forward the 2009 NOL for federal and Oregon purposes. In 2010, John and Joyce have federal AGI of $15,000 and have reported additions of $8,000 and subtractions of $3,000. John and Joyce will apply the NOL to 2010 and compute the amount carried over to 2011 as follows: [Formula not included. See ED. NOTE.]

(c) A part-year resident and a nonresident use the federal method without modifications, except that prohibited amounts are not taken into consideration, and the NOLD, carryback and carryover are based only upon amounts attributable to Oregon sources.

Example 10. In 2008, while residents of California, Ron and Valerie incurred losses from an Oregon partnership creating an Oregon only NOL in the amount of $85,000. Prior to 2008, neither Ron nor Valerie needed to file Oregon returns. In 2009, Ron and Valerie moved to Oregon and filed a part-year Oregon return. They reported federal income after adjustments of $385,000, Oregon income after adjustments of $235,000, and itemized deductions of $10,000. Ron and Valerie calculate their 2009 Oregon taxable income as follows: [Formula not included. See ED. NOTE.]

Example 11. Scott and Jill live in Vancouver, Washington and Scott operates a business in Oregon. In 2008, Scott and Jill filed a nonresident Oregon return reporting an Oregon only NOL of $6,000. Scott and Jill elected to carry the NOL forward. In 2009, Scott and Jill reported Oregon income after adjustments of $1,600, federal income after adjustments of $32,000, and federal itemized deductions of $9,200. Their Oregon itemized deductions are $460 [($1,600/$32,000) x $9,200]. Scott and Jill calculate their net operating loss deduction for 2009 and the carryover to 2010 as follows: [Formula not included. See ED. NOTE.]

(7) Net Operating Loss Carrybacks to Amnesty Years A net operating loss deduction (NOLD) carried back to an amnesty return (as that term is defined in OAR 150-305.100-(C)) may not result in a refund of any tax reported and paid pursuant to the amnesty program. However, if a NOLD is carried back to a year in which a taxpayer participated in amnesty, a refund that is otherwise allowed may be granted to the extent that the taxpayer has adequate income reported outside the amnesty program to absorb the loss (or portion thereof). A NOLD resulting in a denied refund due to participation in the amnesty program does not change the net operating loss deduction calculation or the amount that can be carried to another tax year.

Example 12. Ed, an Oregon resident, qualified for amnesty in November 2009 and received penalty and interest relief for tax year 2005 under the program. Ed’s original 2005 return (which was filed timely on April 17, 2006) showed a tax liability of $20,000, which Ed paid when he filed his original 2005 return. The amended return for 2005 filed under amnesty increased his tax by an additional $15,000 for a total of $35,000 in Oregon tax liability. In tax year 2009 his business experienced a loss that created a net operating loss for tax year 2009. Ed elects to carry the loss back to tax year 2005 and amends his 2005 federal return. On June 1, 2010, he amends his 2005 Oregon return to claim the net operating loss deduction (NOLD). After applying the NOLD, Ed claims an Oregon refund of $30,000 for 2005. (Ed’s 2005 net tax liability has been decreased to $5,000.) The department agrees with Ed’s calculations but only allows a refund of $20,000 because that is the amount of tax Ed paid for 2005 before the amnesty program. The refund is limited because the law prohibits refunds of tax paid under amnesty. Ed’s carryover of the NOLD is not changed because of the amnesty refund denial. Even though the refund was partially denied, the NOLD has been absorbed and there is no carryforward to tax year 2006.

[ED. NOTE: Formulas referenced are not included in rule text.]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 316.028

Hist.: RD 4-1986(Temp), f. & cert. ef. 7-29-86; RD 7-1986, f. & cert. ef. 12-31-86; RD 7-1991, f. 12-30-91, cert. ef. 12-31-91; RD 9-1992, f. 12-29-92, cert. ef. 12-31-92; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; REV 9-1999, f. 12-30-99, cert. ef. 12-31-99; REV 11-2004, f. 12-29-04, cert. ef. 12-31-04; REV 10-2010, f. 7-23-10, cert. ef. 7-31-10; Renumbered from 150-316.014 by REV 4-2012, f. 7-20-12, cert. ef. 8-1-12; REV 6-2013, f. & cert. ef. 12-26-13


Rule Caption: Clarification of distributions from the Criminal Fine Account

Adm. Order No.: REV 7-2013

Filed with Sec. of State: 12-26-2013

Certified to be Effective: 12-26-13

Notice Publication Date: 6-1-2012

Rules Ren. & Amend: 150-137.300(3) to 150-137.300

Subject: Clarifies the distributions from the Criminal Fine Account are done monthly.

Rules Coordinator: Deanna Mack—(503) 947-2082

150-137.300

Criminal Fine Account Distribution

(1) Monthly, the department will distribute moneys available in the Criminal Fine Account after final deposits into the account for the calendar month have been made by the Oregon Department of Revenue and Oregon Judicial Department.

(2) The department will distribute to the General Fund all moneys remaining in the Criminal Fine Account after distributing the monthly allocations to funds and programs referenced in Oregon Laws 2011, Chapter 597, Section 53.

Stat. Auth.: ORS 305.100; 137.300

Stats. Implemented: ORS 137.300

Hist: REV 6-2004, f. 7-30-04, cert. ef. 7-31-04; REV 3-2005, f. 12-30-05, cert. ef. 1-1-06; Renumbered from 150-137.300(3), REV 5-2012, f. 7-20-12, cert. ef. 8-1-12; REV 7-2013, f. & cert. ef. 12-26-13


Rule Caption: Amending and renumbering Estate Tax rules due to change in law.

Adm. Order No.: REV 8-2013

Filed with Sec. of State: 12-26-2013

Certified to be Effective: 12-26-13

Notice Publication Date: 6-1-2012

Rules Adopted: 150-118.005, 150-118.010, 150-118.010(8), 150-118.100(6), 150-118.160, 150-118.260, 150-118.265

Rules Amended: 150-118.010(1), 150-118.010(2), 150-118.010(3), 150-118.010(4)(b), 150-118.010(7), 150-118.100(1), 150-118.140, 150-118.160-(B), 150-118.171, 150-118.225, 150-118.260(6), 150-118.300

Rules Ren. & Amend: 150-118.250(1) to 150-118.250

Subject: HB 2541 (2011) replaced the inheritance tax with an estate tax as of 1-1-2012 and revised ORS Chapter 118 to disconnect from the outdated 2000 Internal Revenue Code. These policy areas need clarification by rule:

   The taxability of qualified terminal interest property (QTIP) and Oregon special marital property (OSMP) for the estates of surviving spouse that are nonresident decedents.

   Extensions of time to file estate tax returns.

   The department’s position on whether appraisals are required when determining the date of death fair market value of an estate’s property.

   Definitions related to the estate tax credit for natural resource property.

   The general tie provided by ORS 118.171 to the administrative provisions of chapter 305, including penalty waivers.

   Extensions of time to pay estate tax and timeline for submitting collateral.

   Estate tax penalty waivers (clarify only one 5 percent penalty will be imposed and that the one-time waiver does not apply to the estate tax).

Rules Coordinator: Deanna Mack—(503) 947-2082

150-118.005

Definitions

The term “intangible personal property” includes but is not limited to stocks, bonds, notes, currency, bank deposits, accounts receivable, patents, trademarks, copyrights, royalties, goodwill, partnership interests, limited liability interests, life insurance policies, annuity contracts, brokerage accounts, and other choices in action.

Stat. Auth: ORS 305.100

Stats. Implemented: ORS 118.010–118.300 & 314.364

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010

Deductions Allowed in Determining Estate Tax or Fiduciary Income Tax

This rule applies to estates of decedents who die on or after January 1, 2012.

(1) An estate may claim deductions allowable under sections 2053 or 2054 of the Internal Revenue Code (IRC) for either estate tax purposes or fiduciary income tax purposes, but not both. The executor of an estate may make different elections for federal and Oregon purposes.

(2) If deductions are claimed against fiduciary income, the executor must include with the return a statement that the deductions are not being claimed for estate tax purposes.

Example 1: The executor of Estate A elects to deduct $19,500 of expenses in determining the estate’s federal income tax. For Oregon, the executor elects to claim the deduction in determining estate tax. The amount deducted for federal purposes is not allowed for Oregon fiduciary income tax purposes.

Example 2: The executor of Estate B elects to deduct $10,000 of expenses in determining the estate’s federal income tax. The executor elects to claim these deductions in determining Oregon’s fiduciary income tax. No modification to income is required for Oregon. A deduction may not be made on the Oregon estate tax return.

Example 3: The executor of Estate C elects to claim a deduction of $15,000 for federal estate tax purposes. For Oregon, the executor elects to claim the deduction for fiduciary income tax purposes. The deduction may not also be made on the Oregon estate tax return if the election is made by deducting the $15,000 on the Oregon fiduciary income tax return.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010 – 118.300 & 314.364

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010(1)

Imposition of Tax

This rule applies to estates of decedents who die before January 1, 2012.A tax equal to the state death tax credit allowable for federal estate tax purposes is imposed. The tax is due in every case even though the credit may not be claimed on the federal estate tax return, Form 706.

(1) Property within the jurisdiction of the state includes the following:

(a) Resident Decedent.

(A) Real property situated in Oregon.

(B) Tangible personal property situated in Oregon.

(C) Intangible personal property wheresoever situated.

(b) Nonresident Decedent.

(A) Real property situated in Oregon.

(B) Tangible personal property situated in Oregon.

(C) Intangible personal property situated in Oregon.

NOTE: See ORS 118.010(4)(b) which provides an exemption as to intangible personal property of nonresident decedents.

(2) The phrase “within the jurisdiction of the state” connotes extent of power and has a broader meaning than the phrase “within the state” which denotes locality. Property may be within the jurisdiction of the state but not physically situated in the state, for example:

(a) Stock of an Oregon corporation is within the jurisdiction of this state although the certificate may not be within this state.

(b) A savings account, checking account, and certificate of deposit in an Oregon bank are within the jurisdiction of this state although the passbook or certificate may not be within this state.

(c) A promissory note given by a resident of Oregon is within the jurisdiction of this state although the note may not be within this state.

(3) The term “intangible personal property” includes stocks, bonds, notes, currency, bank deposits, accounts receivable, patents, trademarks, copyrights, royalties, goodwill, partnership interests, life insurance policies, and other choices in action.

(4) The doctrine of equitable conversion is recognized in the administration of the Oregon inheritance tax law.

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010

Hist.: 9-71; 11-73; 9-74; 12-31-77; RD 4-1997, f. 9-12-97 cert. ef. 12-31-97, REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010(2)

Deductions Allowed on Either the Inheritance Tax Return or the Fiduciary Income Tax Return

This rule applies to estates of decedents who die before January 1, 2012. Deductions allowed under sections 2053 or 2054 of the Internal Revenue Code (IRC) may be claimed on either the Oregon inheritance tax return (Form IT-1) or the Oregon fiduciary income tax return (Form 41), but not both. The personal representative of an estate may make different elections for federal and Oregon returns. If the deductions are claimed on the Oregon Form 41, attach a statement that the deductions are not being claimed on the Oregon Form IT-1. For federal purposes, those deductions may be taken on either the federal estate tax return (Form 706) or the federal estate income tax return (Form 1041) under IRC 642(g).

Example 1: Peter dies in 2004 with a gross estate of $900,000. The personal representative of the estate elects to deduct $19,500 of expenses on the federal Form 1041. For Oregon, the personal representative elects to take the deduction on the Oregon Form IT-1. The amount deducted on the federal Form 1041 must be added back to income on the Oregon Form 41.

Example 2: Sally dies in 2004 with a gross estate of $950,000. The personal representative of the estate elects to deduct $10,000 of expenses on the federal Form 1041. The personal representative does not claim these deductions on the Oregon Form IT-1. The deductions claimed on the federal Form 1041 flow through to the Oregon Form 41. No modification to income is required.

Example 3: Mildred dies in 2004 with a gross estate of $2,000,000. The personal representative of the estate elects to claim a deduction of $15,000 on the federal Form 706. For Oregon, the personal representative elects to claim the deduction on the Oregon Form 41. The election is made by subtracting the deduction from the Oregon return. The deduction is not allowed on the Oregon Form IT-1 if it was claimed on the Oregon Form 41. The personal representative must reduce the deductions by $15,000 on the Oregon Form IT-1.

[ED. NOTE: Forms referenced are available from the Agency.]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010

Hist.: REV 2-2004(Temp), f. 4-30-04 cert. ef. 5-1-04 thru 9-30-04; REV 6-2004, f. 7-30-04, cert. ef. 7-31-04; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010(3)

Apportionment of Tax

This rule applies to estates of decedents who die before January 1, 2012.

(1) Where property is left in two or more states by a decedent, the maximum state tax credit allowed against the federal estate tax is apportioned. The numerator of the apportionment formula is the value for federal estate tax purposes of the property within the jurisdiction of this state notwithstanding that some of such property for Oregon inheritance tax purposes may be exempt, deductible, appraised at different values or considered in computing a credit. The denominator of the apportionment formula is the value of the gross estate for federal estate tax purposes.

(2) The executor shall, upon demand, file a copy of the federal estate tax return and such other information deemed necessary by the department in the computation of the additional tax. In case of failure to file such returns as these rules provide, the department shall compute the tax upon the basis of the best information available.

(3) If the amount of federal estate tax is increased or decreased subsequently, the pick-up tax imposed upon such estate shall be changed accordingly. In such case it is the duty of the executor to notify the department of the changes.

(4) Example of apportionment of federal credit where decedent leaves property in three states that impose death taxes: [Example not included. See ED. NOTE.]

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010

Hist.: 9-71; 12-19-75, Renumbered; 1-1-77, 12-31-77, Renumbered; TC 19-1979, f. 12-20-79, cert. ef. 12-31-79; TC 8-1980, f. 11-28-80, cert. ef. 12-31-80; Repealed by RD 4-1997, f. 9-12-97 cert. ef. 12-31-97, Renumbered from 150-118.100(2); REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010(4)(b)

Reciprocal Exemption of Intangible Personal Property of Nonresident Decedent

This rule applies to estates of decedents who die before January 1, 2012. Intangible personal property within the jurisdiction of the state of Oregon and owned by a nonresident of this state is exempt from inheritance tax if a like exemption is made by the laws of the state or country of decedent’s residence in favor of residents of this state. There is no such exemption allowed as to property owned by a deceased resident of a state which does not impose a death tax. However, if a state has a death tax law which does not impose a tax on intangible personal property owned by a nonresident of that state, the “like exemption” requirement of ORS 118.010(4)(b) is satisfied, and Oregon would exempt intangible personal property owned by a deceased resident of that state. A nonresident is one who at the time of death had a permanent dwelling place and an official or legal residence outside the State of Oregon. To have a change of domicile there must be:

(1) Residence in a new place;

(2) Intent to abandon the old domicile; and

(3) Intent to acquire a new domicile (196 Or 256).

NOTE: For definition of the term “intangible personal property,” see OAR 150-118.010(1).

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010

Hist.: 9-74; 12-19-75; RD 4-1997, f. 9-12-97, cert. ef. 12-31-97, Renumbered from 150-118.060; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010(7)

Separate Oregon Elections

This rule applies to estates of decedents who die before January 1, 2012.

(1) For deaths after December 31, 2001, and before January 1, 2012, the Oregon inheritance tax is computed using the Internal Revenue Code (IRC) in effect on December 31, 2000. Federal changes enacted after this date, including the “Economic Growth and Tax Relief Reconciliation Act of 2001”, do not affect the computation of Oregon tax. Oregon allows separate elections, including but not limited to elections provided by IRC Sections 2031(c), 2032, 2032A, 2033A, 2056 and 2056A that would have been allowed under federal law in effect as of December 31, 2000, whether or not a federal estate tax return is filed. The Oregon elections are irrevocable. If a federal estate tax return is not required with respect to the decedent’s death, the Oregon elections must be made in the same manner as required under the IRC on a return filed with the Oregon Department of Revenue.

Example 1: The personal representative may not make a qualified terminal interest property (QTIP) election on the 2004 Oregon Inheritance Tax Return under the following circumstances. Harold dies in 2004 with an estate valued at $950,000. He is survived by his wife, Wanda. They had provided for a credit shelter trust funded by an amount equal to the unused federal exclusion amount. The trust is set up to distribute or accumulate income to someone other than the spouse and allows for discretionary distribution of income to the surviving spouse. The trust does not qualify for a QTIP election under IRC 2056(b)(7), as in effect as of December 31, 2000.

Example 2: The personal representative may make a QTIP election on the 2004 Oregon Inheritance Tax Return under the following circumstances. Winifred dies in 2004 with an estate valued at $1,500,000. She is survived by her husband, Harvey. They had provided for a credit shelter trust funded by an amount equal to the unused federal exclusion amount. The trust provides for all income to be distributed to the surviving spouse and otherwise qualifies for the federal QTIP election. The personal representative files a 2004 federal estate tax return without claiming a QTIP election. The personal representative may file the 2004 Oregon return claiming a QTIP election because that election would have been allowed under federal law effective on December 31, 2000.

(2) If a QTIP election is taken when the first spouse dies, the estate of the surviving spouse must include the value of any property included in the QTIP election provided in IRC 2044. The Oregon and federal gross estate amount will be different for the surviving spouse’s estate when a separate election is taken for Oregon only.

Example 3: Same situation as example 2. The personal representative claimed an Oregon only QTIP election on Winifred’s Oregon IT-1 return. Harvey dies in 2005. Harvey’s estate for Oregon will include the value of the Oregon only QTIP taken for Winifred per IRC 2044 “Certain property for which a marital deduction was previously allowed”. Harvey’s gross estate for Oregon and for federal will be different because of the Oregon only QTIP election taken on Winifred’s Oregon IT-1 return.

(3) For purposes of the Oregon tax, the obligations of electing parties, agreements required of persons benefiting from elections, and the inclusion of property in the gross estate of a surviving beneficiary are the same as under the IRC.

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010

Hist.: REV 2-2004(Temp), f. 4-30-04 cert. ef. 5-1-04 thru 9-30-04; REV 6-2004, f. 7-30-04, cert. ef. 7-31-04; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.010(8)

Elections

This rule applies to estates of decedents who die on or after January 1, 2012.

(1) An estate may elect a larger or smaller amount, percentage or fraction of the qualified terminal interest property (QTIP) for Oregon tax purposes than was elected for federal estate tax purposes in order to reduce the Oregon estate tax liability while making full use of the federal unified credit. In addition to or in lieu of a QTIP the estate may elect to claim Oregon Special Marital Property (OSMP) to reduce the estate tax liability.

(2) The Oregon and federal taxable estate amount will be different for the surviving spouse’s estate when a separate QTIP or OSMP election was taken for Oregon. In addition to the value of property for which a federal QTIP election was made, the value of property for which an Oregon QTIP or OSMP election was made is includible as part of the Oregon taxable estate to the extent that the property is subject to Oregon estate tax.

(3) The executor must identify the assets by schedule, item number, and the fixed amount, percentage or fractional interest that are included as part of the Oregon QTIP or OSMP election, either on the return or, if those assets have not been determined when the estate tax return is filed, on a statement to that effect, prepared when the assets are definitively identified.

Example 1: W dies in 2012 with a gross estate of $7,000,000. The decedent established a federal QTIP trust for the benefit of W’s surviving spouse H, an Oregon resident, in an amount to result in no federal estate tax. For Oregon, the executor may elect a larger fixed amount, percentage or fractional interest QTIP or an OSMP. To achieve zero Oregon estate tax, the Oregon QTIP or OSMP election will be the difference between the federal exemption amount and the Oregon exemption amount. H was an Oregon resident at the time of H’s death. Upon H’s death, the assets remaining in the Oregon QTIP or OSMP trust must be included in H’s gross estate.

(4) The amount to be included in the estate on the death of a surviving spouse is limited to trust property that is subject to Oregon estate tax. If a QTIP or OSMP election was taken when the first spouse dies, the property that is required to be included in the estate of the surviving spouse is dependent upon the residency status of the surviving spouse. If a resident decedent, the gross estate of a surviving spouse must include the value of any property included in the QTIP or OSMP election. If a nonresident decedent, the gross estate of a surviving spouse must include the value of any property included in the QTIP or OSMP election to the extent that the property consists of real property located in Oregon or tangible personal property located in Oregon.

Example 2: Same facts as Example 1, except H was not an Oregon resident at the time of H’s death. The Oregon estate must include the value of any real property located in Oregon and any tangible personal property located in Oregon remaining in the trust; intangible property is excluded from the estate.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.010–118.300 & 314.364

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.100(1)

Due Dates and Extensions of Time to File

This rule applies to estates of decedents who die on or after January 1, 2012.

(1) An estate return shall be filed and the tax shall be paid to the Department of Revenue on the date the federal estate tax is payable or, if no federal estate tax return is required, no later than nine months following the date of death of the decedent. An estate tax return is due the day of the ninth calendar month after the decedent’s death numerically corresponding to the day of the calendar month on which death occurred, except that, if there is no numerically corresponding day in such ninth month, the last day of the ninth month is the due date. For example, if the decedent dies on July 31, the estate tax return and tax payment must be made on or before April 30 of the next year.

(2) When the due date falls on a Saturday, Sunday, or a legal holiday, the due date for filing the return is the next succeeding day that is not Saturday, Sunday or a legal holiday. For this purpose, “legal holiday” means a holiday recognized statewide in Oregon or a holiday recognized in the District of Columbia.

(3) The department may grant an extension of time to file an estate tax return, generally not to exceed six months. If an estate has been granted an extension of time to file a federal estate tax return, the department will accept that as an approved extension to file the Oregon estate tax return. The executor must submit a copy of the federal extension request with the Oregon return when filed. If the estate does not need a federal extension, the executor may request an extension for Oregon only by submitting a federal extension form to the department on or before the due date of the Oregon estate tax return and writing “Oregon Only” on the top of the federal form.

(4) If the Internal Revenue Service denies the extension request, but grants a period of time from the date of denial in which to file the federal return without imposition of delinquency charges, the department will not impose penalties for late filing if the Oregon return is received by the department within one month from the Internal Revenue Service’s date by which the federal return must be filed with no imposition of delinquency charges. The executor must submit a copy of the federal extension request denial with the Oregon return when filed.

(5) An extension of time to file, without an approved extension of time to pay, does not relieve the estate from the five percent penalty for failure to pay the tax on or before the original due date and interest accrues during the extension period. See OAR 150-118.260 for information regarding interest and penalty. [Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.100

Hist.: 12-19-75; 12-31-77, Renumbered; TC 9-1978, f. 12-5-78, cert. ef. 12-31-78; RD 4-1997, f. 9-12-97 cert. ef. 12-31-97, Renumbered from 150-118.110(3); REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.100(6)

Property Values and Appraisals

This rule applies to estates of decedents who die on or after January 1, 2012.

(1) The fair market value of an estate’s property must be determined as of the date of death or six months following the date of death if the alternate valuation method is elected. The property value reported on the estate tax return must be substantiated. The executor is required to explain how the value was determined and must attach copies of any appraisals used to value property included on the return. If there was no appraisal, the executor must attach a statement to the return explaining how the value was determined. If the determination of value is based on a county property tax statement, the determination of value must be supported by other evidence of value.

(2) A fee appraisal represents both common and best practice for determination of the value for most real and personal property but may not always be necessary. For example, where an Oregon Special Marital Property election has been made, the value of the asset(s) included within the election may not have an impact upon the estate tax.

Stat. Auth.: ORS 305.100 & 118.140

Stats. Implemented: ORS 118.140

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.140

Estate Tax Credit for Natural Resource Property

Part I of this rule applies to estates of decedents who die on or after January 1, 2012. For the user’s convenience, Part II of the rule contains provisions applicable to estates of decedents who die before January 1, 2012.

Part I (applies to estates of decedents who die on or after January 1, 2012)

(1) Definitions. The following definitions apply for purposes of ORS 118.140 and Part I of this rule:

(a) “Active Management” is defined by Internal Revenue Code (IRC) Section 2032A(e)(12) to mean the making of the management decisions of a business (other than the daily operating decisions).

(b) “Ancestor” means a person from whom the decedent is directly descended, such as a parent, grandparent, or great-grandparent. The term does not include aunts, uncles, or cousins.

(c) “Cash equivalents” means accounts receivable, inventory, marketable securities, capital or sinking funds, prepaid expenses and other assets that are spent, maintained, used or available for use, in the operation of a farm business, forestry business, or fishing business.

(d) “Disposition” means to sell, exchange, transfer, convey, or otherwise dispose of natural resource property that was used to compute the natural resource property credit, if such disposition results in the property no longer qualifying for the credit.

(e) “Domestic partner” means an individual who has entered into a domestic partnership as defined in ORS 106.310. Per the general applicability provision of ORS 106.340 “spouse” as used in these rules includes domestic partner.

(f) “Family member” means a member of the family as defined in IRC section 2032A, and for purposes of ORS 118.140 includes:

(A) An ancestor of the decedent;

(B) The spouse of the decedent;

(C) A lineal descendant of the decedent or of the decedent’s spouse;

(D) A lineal descendant of a parent of the decedent; or

(E) The spouse of any lineal descendant described in paragraph (C) or (D). For purposes of the preceding sentence, a legally adopted child of an individual is a lineal descendant of the adoptive parent(s).

(g) “Lineal descendant” means a person in a direct line of descent from the decedent, such as a child, grandchild or great-grandchild.

(h) “Lineal descendant of a parent of the decedent” means a decedent’s siblings, children and grandchildren of those siblings, and any other person in a direct line of descent from the decedent’s siblings.

(2) Material participation by a Family Member. In order to qualify under ORS 118.140(8), at least one family member must materially participate in the business after the transfer.

(a) Material participation is a factual determination, and the types of activities which will support such a finding will vary. No single factor is determinative.

(b) Actual employment of the family member on a substantially full-time basis (35 hours a week or more) or to any lesser extent necessary personally to manage fully the farm or business in which the real property to be valued under section 2032A is used constitutes material participation.

(c) Payment of self-employment tax for employment with respect to the farm business, forestry business or fishing business is not conclusive as to the presence of material participation, and the requirement can be met even though no self-employment tax is payable by the family member with respect to income derived from the business.

(d) As provided by section 2032A of the Internal Revenue Code, active management shall be treated as material participation.

(e) The rules for determining material participation are illustrated by the examples found in CFR 20.2032A-3(g).

(f) Examples of active management decisions that can be used to demonstrate material participation include the following: inspecting growing crops, animals, forests, or equipment; reviewing and approving annual crop plans in advance of planting; making a substantial number of the management decisions of the business operation; approving expenditures for other than nominal operating expenses in advance of the time the amounts are expended; deciding what crops to plant or how many cattle to raise; determining what fields to leave fallow; determining where and when to market crops and other business products; determining how to finance business operations; and determining what capital expenditures the trade or business should make.

(3) If a transferee disposes of property resulting in additional tax as described in ORS 118.140(9)(a), the transferee must file a report with the department and pay the additional tax. The report may be made by filing a copy of the form described in ORS 118.140(10), identifying the asset or assets that no longer qualify for the credit, and including a calculation of the additional tax as described in ORS 118.140(9)(e). The report and payment of the tax are due within six months of the disposition. Interest and penalties under ORS 118.260 apply if the report is not filed and tax is not paid on or before the due date prescribed in ORS 118.140(9)(e).

Part II (applies to estates of decedents who die before January 1, 2012)

Inheritance Tax Credit for Natural Resource or Commercial Fishing Property

(4) Definitions. The following definitions apply for purposes of ORS 118.140 and this rule:

(a) “Active Management” is defined by Internal Revenue Code (IRC) Section 2032A(e)(12) and means the making of the management decisions of a business (other than the daily operating decisions). Treasury Regulations 20.2032A-3(e) through (g) provide additional examples of active management.

(b) “Adjusted gross estate” means the value of the gross estate reduced by the sum of the amounts allowable as a deduction under either IRC sections 2053 or 2054, or both. The amount is determined on the basis of the facts and circumstances in existence on the date (including extensions) for filing the return of tax imposed by chapter 118 (or, if earlier, the date on which the return is filed).

(c) “Cessation of qualified use” means the natural resource property or fishing business property use has changed and the property no longer qualifies as natural resource property or fishing business property.

(d) “Current assets” means the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses and other assets of the qualified natural resource business that can be converted to cash within one year. Current assets do not include assets not used in the qualified natural resource business, long-term assets such as capital or sinking funds, or personal assets.

(e) “Current liabilities” means the sum of all money owed to the qualified natural resource business that is required to be paid within one year.

(f) “Disposition of property” means to sell, exchange, or otherwise dispose of natural resource property or fishing business property that was used to compute the natural resource credit, if such disposition results in the property no longer qualifying for the credit.

(g) “Domestic partner” means an individual who has entered into a domestic partnership as defined in the Oregon Family Fairness Act, ORS 106.300 to 106.340.

(h) “Member of family” means, with respect to a decedent:

(A) An ancestor of the decedent;

(B) The spouse or domestic partner of the decedent;

(C) A lineal descendant of the decedent, of the decedent’s spouse or domestic partner, or of a parent of the decedent, or

(D) The spouse or domestic partner of any lineal descendant described in paragraph (C). For purposes of the preceding sentence, a legally adopted child of an individual is treated as the child of such individual by blood.

(i) “Working capital” means current assets less current liabilities.

(j) “Working capital of a farm, natural resource-based business or fishing business” means working capital in an amount that represents the funds needed to operate the business annually.

(5) Federal Elections Binding for Oregon. Because ORS 118.007 ties Oregon inheritance tax law to the Internal Revenue Code (IRC) as it existed on December 31, 2000, elections that were available on December 31, 2000, and that are made for federal estate tax purposes are binding for Oregon inheritance tax purposes unless specifically provided otherwise by statute or rule. Property that is excluded from the estate due to claiming a marital deduction under IRC ?2056 cannot be included in the Oregon estate in order to claim a tax credit under this section.

Example 1: Edwina passed away on July 1, 2007; her husband survives her. The value of her gross estate is $8,000,000, made up entirely of natural resource property. For federal estate tax purposes, the estate elects a marital deduction of $6,000,000. The unified credit offsets tax otherwise due on the balance of the estate, $2,000,000, and there is no federal tax due. For Oregon purposes, the $6,000,000 marital deduction election applies. In addition, the estate may elect to establish a Special Oregon Marital property trust as provided in ORS 118.016 to shelter $1,000,000 of the value of the estate (the difference between the $1,000,000 Oregon taxable estate and the $2,000,000 federal taxable estate). Alternatively, the estate may use any portion of the $2,000,000 in value to claim a natural resource credit against tax imposed on the estate.

(6) Active Management by a Member of Family. If natural resource property or a commercial fishing business is owned indirectly by the decedent or a member of the family, the following requirements must be met to qualify for a credit under ORS 118.140:

(a) At least one member of the family must engage in active management of the natural resource property or commercial fishing business after the transfer.

(A) The determination of whether active management occurs is factual, and the requirement can be met even though no self-employment tax is payable by the member of the family with respect to income derived from the farm or other trade or business operation.

(B) Among the farming activities, various combinations of which constitute active management, are inspecting growing crops, reviewing and approving annual crop plans in advance of planting, making a substantial number of the management decisions of the business operation, and approving expenditures for other than nominal operating expenses in advance of the time the amounts are expended.

(C) Examples of active management decisions are what crops to plant or how many cattle to raise, what fields to leave fallow, where and when to market crops and other business products, how to finance business operations, and what capital expenditures the trade or business should make.

(b) An otherwise qualifying natural resource property or commercial fishing business qualifies for the credit without active management if it is the subject of a net cash lease or percentage lease from the decedent or a member of the decedent’s family.

(c) The property also qualifies for the credit if it is held in trust for a member of the family or if the property is transferred directly to a member of the family.

(d) If an indirect interest is held in trust for a member of the family, it qualifies as long as a member of the family is engaged in the active management of the business.

(e) The trustee does not have to be engaged in active management if these requirements are met.

(7) Prior Use Requirement.

(a) An estate that otherwise qualifies for the commercial fishing business property credit is not required to meet the aggregate use period of five out of eight years ending on the date of the decedent’s death.

(b) Active management of the natural resource property is not a requirement prior to death.

Example 2: Kelly died on April 3, 2007. Kelly owned and operated Kelly’s Fishing Boat business starting in February 2005. The estate files the tax return with the department on June 17, 2008, claiming the commercial fishing business credit, and pays the inheritance tax due. The estate may claim the commercial fishing business credit providing all other requirements to qualify for the credit are met.

(8) Future Use Requirement. In order for the estate to meet the requirements of ORS 118.140(7)(a) the following apply.

(a) Cash and like cash assets that are included in the credit calculation as working capital must be spent on the operation of the business either during the year of death or any of the eight calendar years following the decedent’s death. Current assets remaining unspent on January 1 of the ninth calendar year following the decedent’s death are subject to recapture of tax under ORS 118.140(7)(a).

(b) Payment of federal estate taxes or state inheritance taxes is not considered to be an expense incurred in operation of the natural resource business. Thus, use of cash or other assets to pay those taxes results in recapture of the credit to the extent the cash or asset was used as the basis for the credit.

Example 3: The Smith estate claimed a credit in 2007 based on farming assets worth $1,000,000. In 2009, the estate sold a combine for $100,000 to pay additional federal estate tax resulting from an audit. Sale of the combine results in recapture of the tax credit because the combine was not used in the farming business for 5 of the 8 years following the decedent’s death.

(9) Claiming a Partial Credit. In determining whether the value of the credit property is at least 50 percent of the total estate, all of the eligible property must be considered, regardless of an election to claim only a partial credit under ORS 118.140(2)(b)(C).

(10) Working Capital. The determination of whether an amount qualifies as “working capital of a farm, natural resource-based business or fishing business” is based on the facts and circumstances existing at the decedent’s death. However, the department will presume that working capital that does not exceed the highest amount of working capital present at any time during the five years prior to the year of the date of death qualifies as “working capital of a farm, natural resource-based business or fishing business.” This presumption may be overcome by the facts in a particular case, including, but not limited to, the growth rate of the business, the length of the business cycle or the proximity of the date of death to the harvest date.

(11) Interest and Penalty. The department will not charge penalty or interest if an estate claims a natural resource property or commercial fishing business property credit or if the estate is directly affected by the changes made to ORS 118.140 by chapter 28, Oregon Laws 2008 and the return is filed and tax is paid before September 1, 2008. This provision applies to estates of decedents dying on or after January 1, 2007, and before December 1, 2007.

Example 4: John died on June 23, 2007. The regular due date of the inheritance tax return is March 23, 2008. The estate files the return with the department on August 29, 2008, claiming the natural resource credit, and pays the inheritance tax due. Because the return is filed and the tax is paid before September 1, 2008, the interest and penalty which would otherwise result from late filing and late payment is cancelled.

(12) Disposition or Disqualified Property. Upon the disposition or cessation of use of natural resource property or fishing business property for which the estate claimed a natural resource credit, additional inheritance tax becomes due. The additional inheritance tax is due and payable within six months after the date of the disposition or cessation of use occurs and must be reported on a form prescribed by the department.

(13) Interest and penalties under ORS 118.260 apply for a failure to file the return or failure to pay the tax on or before the due date prescribed in section (9).

Stat. Auth.: ORS 305.100 & 118.140

Stats. Implemented: ORS 118.140

Hist.: REV 4-2008(Temp), f. & cert. ef. 5-23-08 thru 11-17-08; REV 13-2008, f. & cert. ef. 11-3-08; REV 8-2010, f. 7-23-10, cert. ef. 7-31-10; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.160

Filing Requirements for Estate Tax Returns

(1) If the estate is required to file a federal estate tax return, the executor must include a complete copy of the federal return, schedules, and supporting documents with the Oregon estate tax return.

(2) If the estate is not required to file a federal estate tax return, the executor must prepare and include with the Oregon estate tax return the federal schedules and supporting documents that would have been required to be filed if the estate had been required to file a federal estate tax return.

Stat. Auth.: ORS 305.100 & 118.140

Stats. Implemented: ORS 118.140

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.160-(B)

Inheritance Tax Return; Extension of Time to File

(1) This rule applies to estates of decedents who die on or after January 1, 2003 and before January 1, 2012.

(2) The executor shall, not more than nine months after the date of the decedent’s death, file with the department an inheritance tax return, Form IT-1. A complete copy of the federal estate tax return and schedules must be filed with the Oregon Form IT-1. If the estate is not required to file a federal estate tax return, the executor must prepare a federal estate tax return and schedules reflecting federal estate tax law in effect December 31, 2000 and file that return and schedules with the Oregon inheritance tax return.

(3) If the executor cannot file a return within nine months, the department may allow additional time, usually not to exceed six months, to file the return. A copy of the federal extension request must be attached to the front of the Oregon return when filed and will serve as evidence of a granted extension by the department.

(4) If the Internal Revenue Service denies the extension request, but grants a period of time from the date of denial in which to file the federal return without imposition of delinquency charges, the department will not impose delinquency charges if the Oregon return is received by the department within one month from the last date on which the Internal Revenue Service would accept the federal return without imposition of delinquency charges. A copy of the denied extension request must be attached to the front of the Oregon return at the time of filing.

(5) An extension of time to file does not relieve the estate from the five percent penalty for failure to pay the tax on or before the original due date. Interest accrues during the extension period.

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.160

Hist.: TC 9-1978, f. 12-5-78, cert. ef. 12-31-78, Renumbered from 150-188.160(2); RD 15-1987, f. 12-10-87 cert. ef. 12-31-87; RD 4-1997, f. 9-12-97, cert. ef. 12-31-97; REV 1-2010(Temp), f. & cert. ef. 2-19-10 thru 7-31-10; REV 8-2010, f. 7-23-10, cert. ef. 7-31-10; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.171

Procedure for Determination

(1) The following sections of ORS Chapter 305 relate to determination of taxes and appeals under Chapter 118, except where the context requires otherwise.

(a) Penalty and interest waivers, 305.145

(b) Audit of returns, 305.265;

(c) Determination of deficiencies, 305.265;

(d) Assessments, 305.265;

(e) Claims for refund, 305.270;

(f) Conferences, 305.265 and 305.270;

(g) Appeals to Director, 305.275 and 305.280;

(h) Appeals to Tax Court, 305.515 and 305.560.

(2) A claim for refund shall be by letter or an amended return; however, the department may require an amended return. A tax paid before the due date is considered as having been paid on the due date for purposes of determining whether the claim for refund was filed within three years from the payment of the tax.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.171

Hist.: 12-31-77; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.225

Extension of Time to Pay Tax

(1) An executor may request an extension of time to pay the estate tax. The extension request must be in writing and submitted to the department by the date the estate return is due, including extensions of time to file, or 30 days from the date shown on a notice of deficiency. Collateral determined acceptable by the department must be secured for payment of the estate tax. An extension to pay tax does not eliminate penalties for late filing of a return, and interest continues to accrue on unpaid tax at the rate provided in OAR 150-305.220(1). See OAR 150-118.260.

(a) If a federal extension of time to pay has been obtained and acceptable collateral is secured for payment of the Oregon estate tax, the department will grant an extension to pay the Oregon estate tax for the same period of time as an approved federal extension. The executor must submit the Oregon extension request in writing and the estate must secure acceptable collateral for payment of the Oregon estate tax. A copy of the accepted federal extension must be submitted with the Oregon return.

(b) If reasonable cause exists and acceptable collateral is provided to the department, the department may grant an extension of time for payment of estate tax for up to 14 years, or, in the case of an estate tax deficiency, for a period of up to four years. If a federal extension of time to pay federal estate tax has been granted, the department may extend additional time for the payment of Oregon estate tax for up to 14 years if reasonable cause exists and collateral acceptable to the department is provided.

(2) In general, reasonable cause exists if:

(a) The estate can pay the tax only by disposing of property for less than market value or by borrowing money at a rate in excess of the mortgage money market (on terms that would inflict loss on the estate), or

(b) The gross taxable estate includes a beneficial interest in one or more closely held businesses whose value exceeds either 35 percent of the gross taxable estate or 50 percent of the net taxable estate. For purposes of this rule:

(A) “Interest in a closely held business” means, as determined immediately before the decedent’s death, an interest that was:

(i) An interest as a proprietor in a trade or business carried on as a proprietorship;

(ii) An interest as a partner in a partnership carrying on a trade or business, if the gross taxable estate includes 20 percent or more of the total capital interest in that partnership, or the partnership had 15 or fewer partners;

(iii) Stock in a corporation carrying on a trade or business, if 20 percent or more of the voting stock of such corporation is included in the gross taxable estate, or such corporation had 15 or fewer shareholders. Stock, or a partnership interest, that is held by a husband and wife as community property or as joint tenants, tenants by the entirety, or tenants in common, is treated as owned by one shareholder or one partner, whichever is applicable.

(B) “Trade or business” does not include an investment or holding company;

(C) An extension only applies to the portion of tax attributable to the closely held business. To determine the portion of tax attributable to the closely held business, divide the value of the interest in the closely held business by the taxable estate amount, and multiply that ratio by the computed net tax.

Example 1: A’s estate assets included a retail store valued at $900,000 that had been operated by the decedent. Listed securities, cash, a family residence and miscellaneous personal effects made up the balance. The taxable estate was $1,300,000. The department may grant an extension for the payment of tax on the portion attributable to the value of the store; i.e. $900,000 divided by $1,300,000 multiplied by tax owed.

Example 2: B’s taxable estate of $1,400,000 included $950,000 of stock in a closely held corporation. The balance of the property was listed securities and personal effects. The corporation was a holding company with the majority of corporate assets invested in real estate. The estate could not show that money could only be borrowed on terms that would inflict loss upon the estate. The department will not grant an extension of time to pay the tax.

Example 3: C’s taxable estate of $2,100,000 included farm land valued at $1,050,000. The balance of the estate was real property, listed securities, cash and personal effects. The estate leased the farm land for cash rent, which is considered an investment in real property and not a trade or business; the department will not grant an extension for payment of tax.

Example 4: D’s taxable estate of $1,200,000 included a tree farm valued at $800,000. The farm consisted of all pre-merchantable timber. The estate demonstrated that the farm could only be sold at a sacrifice price in a depressed market and that money could only be borrowed on terms that would inflict loss upon the estate. The department may grant an extension for payment of the tax that is attributable to the tree farm’s value of $800,000.

(3) The department generally will accept the following as collateral for purposes of extending the date for payment of tax:

(a) A first mortgage or trust deed on real property with a value at least double the amount of the tax paid on extension;

(b) A surety bond executed by a corporation licensed to do business in the State of Oregon. The bond must be at least double the amount of the tax paid on extension and must be renewed every five years.

(4) Collateral must be received within 60 days from the date the estate return is due, including extensions of time to file, or within 60 days from the date the estate return is filed, whichever is earlier.

(5) The executor must make payments in at least equal annual installments for the tax paid on extension, plus accrued interest. The department may cancel an extension of time to pay and collect the tax plus interest if any installment is not paid on or before its due date.

(6) The department may cancel an extension of time to pay and collect the tax plus interest if the value of the interest in a closely held business is reduced by one-third or more through sale, exchange or other disposition, or through aggregate withdrawals of money or other property.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.225

Hist.: 12-31-77; TC 9-1978, f. 12-5-78, cert. ef. 12-31-78; TC 19-1979, f. 12-20-79, cert. ef. 12-31-79; RD 4-1997, f. 9-12-97, cert. ef. 12-31-97; REV 10-2009, f. 12-21-09, cert. ef. 1-1-10; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.250

Estate Tax Receipt

A receipt issued by the department as required by ORS 118.250 to an executor, trustee or other payor is not a final determination of the estate tax liability; the department may determine that an estate owes additional tax under ORS 118.010.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.250

Hist.: 9-74; 12-31-77; RD 15-1987, f. 12-10-87, cert. ef. 12-31-87; RD 4-1997, f. 9-12-97, cert. ef. 12-31-97; Renumbered from 150-118.250(1) by REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.260

Penalties and Interest

(1) Penalties

(a) For purposes of determining the five percent penalty under ORS 118.260(1) or the 20 percent penalty under ORS 118.260(2), the tax required to be shown on the return is reduced by the amount of any tax that is paid on or before the due date of the return, excluding extensions.

(b) If an estate fails to file a return by the due date, including extensions, and also fails to pay the tax by the due date, only one five percent delinquency penalty will be added.

(c) ORS 305.145 and the rules implementing that statute apply to penalties imposed under ORS 118.260 and requests for waiver of penalty. The one-time penalty waiver provision provided by OAR 150-305.145(4) does not apply to penalties imposed under chapter 118.

(2) Interest on Refunds and Deficiencies

(a) A refund of an overpayment of estate tax accrues interest at the rates provided in OAR 150-305.220(2).

(b) A deficiency in tax accrues interest at the rates provided in OAR 150-305.220(1).

(c) For the estates of decedents who die on or after January 1, 2012, if an estate has been granted an extension to pay tax under ORS 118.225, or if a beneficiary has elected to defer payment of tax under ORS 118.300, interest accrues at the rates provided in OAR 150-305.220(1).

(d) Except as provided in (2)(c), if the estate tax is not paid within 60 days of assessment, the annual interest rates provided in OAR 150-305.220(1) are increased by four percentage points pursuant to ORS 305.222.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.250

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.260(6)

Refund of Excess Payment

This rule applies to estates of decedents who die before January 1, 2012. Where payment exceeds the amount of tax shown by the return or as determined by audit of the return, the excess shall be refunded without application from the taxpayer. The department does not have authority to pay interest on the refund for interest periods beginning prior to May 31, 1982.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.260(6)

Hist.: TC 10-1978, f. 12-5-78, cert. ef. 12-31-78; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.265

Application for Determination of Estate Tax and Discharge from Personal Liability

(1) The executor may apply to the department for a determination of tax due and discharge from personal liability of estate tax.

(2) The written application must include the following information:

(a) The name and date of death of the decedent;

(b) The decedent’s Social Security Number;

(c) If the executor applies before filing the estate tax return, a copy of the decedent’s will, the decedent’s trust, or other document indicating the person is authorized to act on behalf of the estate.

(3) The discharge does not apply to tax liability resulting from assets of the decedent’s estate that are still in the possession or control of the executor.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.260(6)

Hist.: REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13

150-118.300

Bond for Deferment of Tax

(1) A beneficiary electing to defer payment of the tax under ORS 118.300 must, within nine months of the decedent’s death, file with the Director a signed statement indicating that the person has not come into actual possession or enjoyment of the property.

(a) A beneficiary of real property, as defined in ORS 111.005(28), is not required to provide a bond.

(b) A beneficiary of personal property, as defined in ORS 111.005(25), must give a bond to the State of Oregon in double the amount of the tax, with such sureties as the Director may approve, conditioned for the payment of the tax and accrued interest at such time and period as the beneficiary comes into actual possession or enjoyment of the property.

(2) The department will accept a bond:

(a) In a form approved by the Director and executed by a company licensed to issue surety insurance by the Oregon Department of Consumer and Business Services, Insurance Division;

(b) Executed by a corporate surety, other than a surety company, provided such corporate surety establishes that it is within its corporate powers to act as surety for another individual, partnership, association, or corporation; or

(c) Executed by two or more individual sureties meeting the requirements of subsection (2)(d) that is secured by a:

(A) A mortgage on real or personal property;

(B) A certified, cashier’s or treasurer’s check drawn on any bank authorized by the State Division of Finance and Corporate Securities to do business in the State of Oregon;

(C) A United States postal, bank, or express money order;

(D) Corporate bonds or stocks, or by bonds issued by the State of Oregon, or by a political subdivision of this state; or

(E) Any other collateral acceptable to the Director.

(d) Each surety that executes a bond under subsection (2)(c) must:

(A) Have property, including Oregon real property, that is subject to execution and with a current market value net of all encumbrances that is at least equal to the penalty of the bond;

(B) Agree to not encumber the secured property while the bond continues in effect;

(C) Annually file an affidavit with the department as to the adequacy of the security.

(3) A beneficiary must file a return with the Director within six months of the date the person comes into actual possession or enjoyment of the property in question.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 118.300

Hist.: Eff. 9/71, Amended 12/19/75, 12/31/77; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13


Rule Caption: Property tax: roll correction, BOPTA orders/petitions, ORMAP/OLIS advisory committee, urban renewal, appraiser continuing education, deferral

Adm. Order No.: REV 9-2013

Filed with Sec. of State: 12-26-2013

Certified to be Effective: 1-1-14

Notice Publication Date: 11-1-2013

Rules Amended: 150-305.285, 150-306.135, 150-308.010, 150-309.100(3)-(B), 150-309.110(1)-(A), 150-311.223(4), 150-457.440(9)

Rules Repealed: 150-308A.724, 150-311.674, 150-311.689

Subject: 150-306.135 ORMAP/OLIS Advisory committees

   150-308.010 Appraiser continuing education

   150-309.100(3)-(B) BOPTA defective and amended petitions

   150-309.110(1)-(A) BOPTA orders

   150-311.223(4) Roll correction

   150-457.440(9) Urban renewal

   150-308A.724 repeals a special assessment program that is no longer in effect

   150-311.674 and 150-311.689 relate to the Senior Property Tax Deferral program changes from 2013 HB 2489 and HB 2510.

Rules Coordinator: Deanna Mack—(503) 947-2082

150-305.285

Relief for Subsequent Tax Years

(1) ORS 305.285 provides an additional procedural remedy for a taxpayer. It precludes the need for filing a protective petition during the pendency of petition for a previous year. While ORS 305.285 extends the period for filing petition it does not automatically entitle the taxpayer to the substantive relief requested.

(2) The taxpayer shall make his or her request for relief in a subsequent year to the department on or before December 15 of the year in which the final determination was made, or within six months of the mailing date of the final determination, whichever is later. Subsequent year is defined as any tax year following the tax year that is the subject of the final determination.

(3) The request shall state the name of the taxpayer, the property’s account number and the county in which it is located, the year or years for which relief is requested, and the mailing date of the final determination. For purposes of this section, a final determination includes only those cases where there has been a decision on the merits (including stipulations). A copy of this final determination shall be attached to the request.

Stat. Auth.: 305.100

Stat. Implemented: 305.285

Hist.: RD 9-1985, f. 12-26-85, cert. ef. 12-31-85; RD 5-1986, f. & cert. ef. 12-31-86; RD 10-1990, f. 12-20-90, cert. ef. 12-31-90; RD 6-1991, f. 12-30-91, cert. ef. 12-31-91; RD 1-1997(Temp), f. 6-13-97, cert. ef. 7-4-97 thru 12-31-97; RD 5-1997, f. 12-12-97, cert. ef. 12-31-97; REV 4-1999, f. 12-1-99, cert. ef. 12-31-99, Renumbered from 150-305.285; REV 1-2003, f. & cert. ef. 7-31-03, Renumbered from 150-306.115-(B); REV 9-2013, f. 12-26-13, cert. ef. 1-1-14

150-306.135

Statewide Base Map System and the Oregon Land Information System Advisory Committee Role, Membership and Meetings

(1) The department is responsible to establish and deliver the Oregon Map (ORMAP) project pursuant to ORS 306.132 and 306.135. The ORMAP project creates an accessible statewide base map system to assist with and improve the administration of Oregon’s property tax system.

(2) The role of the Oregon Land Information System (OLIS) Advisory Committee is to provide advice and support to the department in the development and implementation of ORMAP’s administrative and technical needs. The committee has the authority to submit recommendations to the department concerning ORMAP and related project proposals. The advice and support that the committee provides to the department includes, but is not limited to:

(a) Assisting the department in developing the statewide goals and priorities for ORMAP.

(b) Assisting and providing advice to the department in setting statewide mapping and Geographical Information System (GIS) standards for ORMAP.

(c) Providing review of the Oregon Land Information System Fund and giving assistance in the development of fair and equitable fund distribution processes and policies for ORMAP projects.

(d) Support by communicating ORMAP information and goals to citizens and interested groups within the state and local communities.

(3) The Advisory Committee is composed of not more than 15 individuals appointed by the department’s director. Members of the committee include ORMAP stakeholders from private industry, and federal, state, or local government leaders with an interest in the success of the project.

(a) Committee members serve at the pleasure of the director. Each Advisory Committee member serves a two-year term with an opportunity to continue for multiple terms. Committee member terms are staggered to allow for sufficient committee membership coverage; terms begin July 1 and end June 30.

(b) In the event of a vacancy, the director appoints another member to serve the duration of the term.

(c) Upon expiration of a term, a committee member may serve until the appointment of a successor. Members reaching the end of their two-year term may remain on the committee, if they request and receive approval from the director.

(d) Advisory Committee members serve without compensation for travel or per diem.

(4) The Advisory Committee meetings must adhere to the Oregon Public Meetings Laws, ORS 192.610–192.690.

(a) The Advisory Committee meets at the request of the department to review ORMAP policies, proposals, funding, and practices.

(b) A department employee designated by the director, presides as the Advisory Committee chair at all meetings.

(c) Advisory Committee members and any other organization or person who expresses interest in Advisory Committee meetings will receive agendas and study notes prepared by the department’s ORMAP staff before the meeting date.

(d) Advisory Committee members or other interested parties with additional agenda items must request an agenda revision from the ORMAP staff to add the item and receive meeting time in which to present the item.

(e) Decisions are made by a consensus of the committee members.

(5) After each funding cycle, the department will post project update information to the publicly-accessible ORMAP website.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 306.135

Hist.: REV 7-2005, f. 12-30-05, cert. ef. 1-1-06; REV 9-2013, f. 12-26-13, cert. ef. 1-1-14

150-308.010

Continuing Education Requirements for Registered Appraisers, Waiver of those Requirements, and Revocation of Registrations

(1) Registered appraisers in Oregon must participate in a continuing education program related to technical competency. To maintain their registration, appraisers must meet the continuing education requirements outlined in this rule. The requirements of this rule apply to any person who wishes to maintain registration, without regard to the person’s place of employment.

(2) Definitions:

(a) For the purposes of this rule, a “registered appraiser” is a person who has satisfied the requirements of ORS 308.010 relating to employment or has successfully completed an appraiser skills examination.

(b) “Continuing education credits” are units of training that are approved by the department in subjects related to assessment and taxation. Credits are equal to the number of hours in a course or presentation the department approves for continuing education.

(A) Technical credits are awarded for training in assessment and taxation subjects. Topics eligible for technical credit include, but are not limited to: mass appraisal, tax rate calculation, ratio studies, personal property, farm or forest uses, board of property tax appeals, property tax exemptions and special assessments and computer applications.

(B) Instructor credits are awarded for course development and presentation. The course instructor will receive instructor credits for the first training session equal to the number of hours the department approved for continuing education for that training session. For each subsequent training session on the same subject, the course trainer will receive one-half hour of instructor credit for each hour of department approved continuing education credit.

(3) Required Credit Hours

(a) Registered appraisers must accumulate 30 credit hours of continuing education every two calendar years following registration. Registered appraisers with less than three years appraisal experience with either the Department of Revenue or an Oregon county assessor’s office or a combination of the two must accumulate 60 credit hours of continuing education credits within the first two calendar years following their registration.

(b) In the case of registered appraisers employed by the county, the assessor annually will certify on forms provided by the Department of Revenue a list of those registered appraisers who have met the continuing education requirements. In the case of registered appraisers employed by the State of Oregon, the direct supervisor of those employees annually will certify on forms provided by the Department of Revenue a list of those registered appraisers who have met the continuing education requirements. In the case of registered appraisers not employed by the county assessor or the State of Oregon, individuals annually will self-certify on a form provided by the Department of Revenue as to the satisfactory completion of continuing education requirements.

(c) The Department of Revenue will maintain a database of training it provides to registered appraisers. That database may be supplemented by records provided by the registered appraiser as to qualifying appraisal training received from sources other than the Department of Revenue.

(d) The department will provide sufficient training programs to allow registered appraisers to meet continuing education credit requirements. Credit hours are approved for appraisal-related courses offered by the following organizations:

(A) Department of Revenue;

(B) International Association of Assessing Officials (IAAO);

(C) American Society of Appraisers (ASA);

(D) The Appraisal Institute.

(e) The department will approve credit hours provided through training given by other entities, individuals or by the county if it determines that the content of the training meets the definition for technical credits provided in this rule.

(4) Waiver of Requirement for Continuing Education Credits

(a) Prior to March 31 of the first year of any registered appraiser’s current certification period, either the registered appraiser or the appraiser’s employer on behalf of the appraiser may submit a request to the Department of Revenue for waiver of the continuing education requirements to be certified for the current two-year certification period. A request for waiver must be in writing and signed by the requestor. If it is a waiver for a registered appraiser employed by the county, the assessor must approve it. For registered appraisers employed by the Department of Revenue, the appraiser’s immediate supervisor must approve the request for waiver.

(b) The following are conditions for which the department may grant a waiver:

(A) Military service that prevents the completion of continuing education requirements.

(B) Disability or illness that prevents the completion of continuing education requirements.

(C) Accident or other uncontrollable events that prevent the completion of continuing education requirements.

(D) Limited duration assignments within the Department of Revenue but outside the Property Tax Division for Department of Revenue appraisers.

(E) Formal retirement from regular employment, whether or not the appraiser is working on a temporary or part-time basis in an appraisal capacity.

(F) Absence from the state that prevents completion of continuing education requirements.

(c) Waivers under this subsection for the conditions in subparagraphs (A) through (C) of paragraph (b) above may be allowed indefinitely as long as the condition continues. However waivers under subparagraphs (A) through (C) above will not be granted for more than a single two-year certification period if the appraiser is also practicing in an appraisal capacity, either independently or under the employ of an individual, entity, or public employer.

(d) Waivers under this subsection may be granted for no more than a single two-year certification period for the conditions in subparagraphs (D) through (F) above.

(5) Validation of Accumulated Credits

(a) Prior to January 1 each year registered appraisers must provide the department with a statement that they have met their education requirement. The statement must be made on a form provided by the department.

(b) Prior to February 1 of each year the department will notify the Human Resource Services Division of the Department of Administrative Services of:

(A) Those individuals who have met the continuing education requirements of ORS 308.010 and this rule or

(B) Have been granted a waiver of the requirements.

(6) Revocation of Appraiser Registration The Human Resource Services Division of the Department of Administrative Services:

(a) May revoke appraiser registration under ORS 308.010(1) for fraud or deceit in appraising or in the securing of a certificate or for incompetence.

(b) Will revoke appraiser registration under ORS 308.010(4)(d) for failing to submit satisfactory evidence to the department that the registered appraiser has met the continuing education requirement.

Stat. Auth.: ORS 305.100 & 308.010

Stats. Implemented: ORS 308.010

Hist.: RD 3-1989, f. 12-18-89, cert.ef. 12-31-89, Renumbered from 150-308.010; 11-1990, f. 12-20-90, cert. ef. 12-31-90; RD 8-1991, f. 12-30-91, cert. ef. 12-31-91; RD 8-1992, f. 12-29-92, cert. ef. 12-31-92; RD 6-1993, f. 12-30-93, cert. ef. 12-31-93; RD 6-1994, f. 12-15-94, cert. ef. 12-30-94

150-308.010; Renumbered from 150-308.010-(A), REV 12-2004, f. 12-29-04, cert. ef. 12-31-04; REV 9-2013, f. 12-26-13, cert. ef. 1-1-14

150-309.100(3)-(B)

Board of Property Tax Appeals (BOPTA) Defective and Amended Petition Process

For purposes of this rule, “petitioner” is used as defined in OAR 150-309.100(3)-(C).

(1) The clerk of BOPTA will review the filed petitions for compliance with OAR 150-309.100(3)-(A).

(2) If the petition is defective, the clerk will provide written notice to the petitioner unless a representative is named on the petition. If a representative is named on the petition, the clerk will provide written notice to the petitioner’s representative. The notice may be personally delivered or mailed to the mailing address on the petition. If the petitioner’s representative has not provided a mailing address and the notice cannot be personally delivered, the clerk will provide notice of the defective petition to the petitioner.

(3) The notice must include the following information:

(a) The nature of the defect,

(b) The time allowed by section (4) or section (6) of this rule to correct the defect, and

(c) A statement that failure to correct the defect within the time allowed will result in dismissal of the appeal without further notice.

(4) If the board clerk provides notice of a defective petition by mailing or personal delivery more than 20 days before the last day of the board session described in ORS 309.026, the petitioner or petitioner’s representative has 20 days from the date the notice of defective petition was mailed or personally delivered, or until the last day for filing a petition with BOPTA, whichever is later, to correct the defect. Time is computed from the first day following the date the written notice was mailed or personally delivered and includes the last day unless the last day falls on a legal holiday, Saturday, or Sunday. The time is then extended to the next working day. Corrected petitions may be faxed to the county clerk and will be considered timely filed under the guidelines listed in Section (4) of OAR 150-309.100(2)-(A).

(5) If the board clerk provides notice of a defective petition by mailing or personal delivery within 20 days of the last day of the board session described in ORS 309.026, the board clerk may give the notice described in section (3) of this rule by any practical means such as telephone, fax, or letter. In this circumstance, the petitioner or petitioner’s representative has until 3:00 p.m. of the last day of the board session to file an amended petition correcting the defect. However, if the petitioner or petitioner’s representative appears at the hearing, all corrections must be made at that time.

(6) The board must dismiss the petition as defective if the petitioner or petitioner’s representative does not correct the petition within the time periods prescribed in Sections (4) and (6) of this rule.

(7) In addition to amending a petition to comply with OAR 150-309.100(3)-(A) under (4) above, any petition may be amended up to and including the time of the hearing for the following reasons:

(a) To add or delete land or improvements that are components of the account originally appealed.

(b) To add a separate account that together with the original account appealed creates a “parcel” within the meaning of OAR 150-308A.256(1)(a). A petition may not be amended to include a separate account that is not part of an identified parcel.

(c) To add a manufactured structure account that is sited on the original account under appeal.

(d) To designate or change an authorized representative.

(e) To change the value requested.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 309.100

Hist.: RD 6-1993, f. 12-30-93, cert. ef. 12-31-93; RD 9-1997, f. & cert. ef. 12-31-97; Renumbered from 150-309.100(1)-(A), REV 10-2002, f. & cert. ef. 12-31-02; REV 6-2003, f. & cert. ef. 12-31-03; REV 12-2004, f. 12-29-04, cert. ef. 12-31-04; REV 9-2013, f. 12-26-13, cert. ef. 1-1-14

150-309.110(1)-(A)

Mailing of Board Orders

(1) The clerk of the board will keep the order containing the original or facsimile signatures as the official record of the action of the board.

(2) The clerk of the board must mail a copy of the original order to the mailing address shown on the petition unless the order is personally delivered at the hearing.

(3) If a person listed under ORS 309.100(4)(a) is authorized to represent a petitioner at a board of property tax appeals hearing, the clerk of the board must mail or deliver a copy of the original order of the board to the representative. In such a case, the clerk of the board is not required to mail or deliver a copy of the order to the petitioner. If the representative has not provided a mailing address and the order cannot be personally delivered, the clerk will mail the order to the petitioner.

(4) Copies of orders mailed to petitioners or petitioners’ representatives must be mailed within five days of the date issued and no later than five days after the board has adjourned.

(5) Copies of orders must be delivered to the officer in charge of the roll and the assessor on the same day they are mailed or delivered to the petitioner or the petitioner’s representative.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 309.110

Hist.: RD 6-1986, f. & cert. ef. 12-31-86; RD 9-1989, f. 12-18-89, cert. ef. 12-31-89; RD 9-1997, f. & cert. ef. 12-31-97; REV 6-2003, f. & cert. ef. 12-31-03; REV 12-2004, f. 12-29-04, cert. ef. 12-31-04; REV 9-2013, f. 12-26-13, cert. ef. 1-1-14

150-311.223(4)

Date Roll Corrected

For purposes of ORS 311.223(4) and 311.229 the “roll is corrected” on the date the assessor sends the notice to the taxpayer’s last known address by first class mail as required in 311.223(2).

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 311.223

Hist.: REV 3-2001, f. 7-31-01, cert. ef. 8-1-01; REV 9-2013, f. 12-26-13, cert. ef. 1-1-14

150-457.440(9)

Urban Renewal Certification, Calculation and Distribution

(1) Definitions: For purposes of this rule:

(a) “Consolidated billing tax rate” means:

(A) For reduced rate plans, the total of all taxing district billing tax rates used to extend taxes, after any adjustments to reflect tax offsets, but does not include:

(i) Any urban renewal special levy rate;

(ii) Any local option tax rate if the tax was approved by the voters after October 6, 2001;

(iii) Any exempt bonded indebtedness tax rate (except for Portland Police and Fire Pension and Disability bonds, if so issued) approved by the voters after October 6, 2001; or

(iv) The portion of Portland Public School District’s permanent rate levy described in OAR 150-457.440(2) section (13) that the district notifies the assessor to exempt from division of tax.

(B)(i) For standard rate plans, the total of all taxing district billing tax rates used to extend taxes, after any adjustments to reflect tax offsets, but does not include any urban renewal special levy rate or rates of new local option taxes.

(ii) Notwithstanding paragraph (1)(a)(B)(i), if an urban renewal agency filed an impairment certificate under ORS 457.445 with respect to a standard rate plan, the rates of new local option taxes that were identified in the impairment certificate must be included in the total.

(b) “Division of tax” means:

(A) For purposes of determining the amount of division of tax to use in tax calculation, the amount calculated by multiplying the tax rate for each taxing district levy in a code area by the increment value used in that code area and summing the product for all code areas in the plan area. Only those taxing district tax rates that are part of the consolidated billing tax rate for that plan are used for this calculation.

(B) For purposes of computing the estimate of the division of tax portion of the maximum authority for existing plans, the amount calculated by multiplying the consolidated billing tax rate for the code area by the increment value used in the code area and summing the product for all code areas in the plan. Only those taxing district tax rates that are part of the consolidated billing tax rate are used for this calculation.

(c) “Division of tax rate” means the rate determined for each taxing district levy within the consolidated billing tax rate for an urban renewal plan. This rate is calculated by dividing the division of tax amount by the taxable assessed value of any shared property for that district. This is the rate that is multiplied by the taxable assessed value of any shared property of the district to determine the amount of division of tax extended before compression on that property from that levy for that plan.

(d) “Existing plan” means an urban renewal plan that provides for a division of ad valorem property taxes as described under ORS 457.420 to 457.460, adopted by ordinance before December 6, 1996, that meets the conditions of 457.010(4).

(e) “Frozen value” means:

(A) The assessed value of the property in an urban renewal plan area at the plan’s inception, as certified by the assessor under ORS 457.430 and OAR 150-457.430; or

(B) The value stated by the agency in the notice to the assessor pursuant to ORS 457.455(2).

(f) “Increment value” means the positive value obtained by subtracting the frozen value in a plan area from the total assessed value in a plan area, calculated code area by code area. Negative results are disregarded, resulting in the code area having zero increment value.

(g) “Increment value used” means:

(A) For an Option Three existing plan, that portion of the increment value in the plan area necessary to raise the amount of division of tax stated in the ordinance selecting Option Three that was adopted by the urban renewal agency under ORS 457.435, or a lesser amount of increment value specified by the agency under paragraph (B) of this subsection.

(B) For plans for which the urban renewal agency specifies, pursuant to ORS 457.455(1) or 457.470, an amount of assessed value less than the full increment amount that is available, the amount of increment value specified. The assessor must apportion to the code areas in the plan area the amount of increment specified by the agency.

(C) For all other plans “increment value used” means “increment value.”

(h) “Maximum authority” means the limitation on the amount of revenue to be raised for the year for an existing plan area, as described in ORS 457.435(3). Only plans that are existing plans have a maximum authority amount. The maximum authority is adjusted each year to reflect growth in assessed value within the plan area as provided in ORS 457.435(3)(b).

(i) “New local option tax” means a local option tax described in ORS 457.445(5) that is approved by taxing district electors after January 1, 2013.

(j) “Rate computation value” means the total assessed value in an ad valorem taxing district, plus the value of Fish and Wildlife properties and of Non-Profit Housing properties, minus urban renewal increment value used.

(k) “Reduced rate plan” means any urban renewal plan that is:

(A) Adopted before December 6, 1996, designated as an existing plan, and also designated as an Option One plan;

(B) Adopted before December 6, 1996, was an existing plan designated as an Option One plan on October 6, 2001, and was substantially amended as described in ORS 457.085(2)(i)(A) or (B) on or after October 6, 2001;

(C) Adopted on or after October 6, 2001; or

(D) Adopted before December 5, 1996, and the governing body of the city or county that adopted the plan irrevocably elects to change the plan from being a standard rate plan to a reduced rate plan, pursuant to ORS 457.445(4), and provides the assessor by July 15 of the first tax year it is effective, a copy of the resolution or ordinance making the election.

(l) “Shared property” is property that is both within a taxing district that overlaps an urban renewal plan area, and within the boundaries of a municipality that activated an urban renewal agency. It also includes any area of a plan that extends beyond the boundaries of the activating municipality for that plan.

(m) “Standard rate plan” means an urban renewal plan that is not a reduced rate plan.

(2) Urban renewal agencies making use of tax increment financing must certify their tax increment financing request to the county assessor under ORS 310.060 and pursuant to OAR 150-457.440(2) by July 15 using Department of Revenue Form UR-50 Notice to Assessor for the current tax year. The assessor may, for cause, grant an extension of this date up to October 1.

(3) The assessor must separately calculate the estimated revenue to be raised from each plan area within the territory of a taxing district. To make this calculation the assessor must:

(a) Determine whether the plan is a standard rate plan or a reduced rate plan. Calculate the consolidated billing tax rate accordingly;

(b) Determine the maximum authority of an existing plan by multiplying last year’s maximum authority by the percentage growth in plan increment value this year as provided in ORS 457.435(3);

(c) Determine the estimated amount to be raised by the division of tax for the plan. For each code area within the plan area, multiply the consolidated billing tax rate by the increment value used in the code area. Add the amounts of all code areas within a plan; and

(d) Determine the maximum amount of the special levy, if any, for each existing urban renewal plan by subtracting the estimated amount to be raised by the division of tax from the maximum authority of the plan. The maximum special levy cannot be less than zero.

(4) If the plan is an Option One plan:

(a) The assessor must calculate the maximum amount of urban renewal taxes to be raised through the division of tax as provided in section (3) of this rule, or a lesser amount of division of tax using the increment value used that is specified by the agency, according to the agency’s certification on Form UR-50.

(b) If the agency requests one hundred percent of the division of tax and a special levy amount on Form UR-50, the assessor must calculate and extend a special levy for the amount certified, provided the total amount of the special levy plus the estimated division of tax amount is equal to or less than the maximum authority of the plan as determined under subsection (3)(b) of this rule.

(c) If the total of the special levy certified for the plan area plus the estimated division of tax amount computed for the plan by the assessor exceeds the maximum authority of the plan, the assessor must reduce the amount of the special levy until the total of the special levy and the estimated division of tax amount equals the maximum authority for the plan.

(d) If, instead of requesting one hundred percent of division of tax, an agency certifies on Form UR-50 an amount of increment value used, the assessor must not calculate a special levy for that plan.

(5) If the plan is an Option Three plan:

(a) The agency must certify on Form UR-50 the amount stated in the ordinance selecting Option Three as the amount to be collected through the division of taxes, or the amount of increment value that the agency estimates will raise some lesser amount of division of tax.

(b) If the agency certifies the amount of division of tax stated in the ordinance selecting Option Three, the assessor must calculate the amount of increment value necessary to raise the division of tax amount stated in the ordinance. The amount calculated by the assessor is the increment value used.

(c) If the agency certifies the amount of increment value that the agency estimates will raise some lesser amount of division of tax, the amount specified is the increment value used.

(d) If the agency certifies a special levy and certifies the amount of division of tax stated in the ordinance selecting Option Three, and the total special levy plus the estimated division of tax amount computed for the plan by the assessor exceeds the maximum authority of the plan, the assessor must reduce the special levy until the total of the two equals the maximum authority.

(e) If the agency certifies a special levy and certifies an amount of increment value used that the agency estimates will raise an amount of division of tax that is less than the amount stated in the ordinance selecting Option Three, and the total of the special levy plus the estimated division of tax amount computed by the assessor using that amount of increment value exceeds the total that would have been available under the plan’s maximum authority had the agency certified the amount of division of tax stated in the ordinance selecting Option Three, the assessor must reduce the special levy amount so that the total of the special levy and the estimated division of tax equals the total that would have been available under the plan’s maximum authority, had the agency certified the amount of division of tax stated in the ordinance selecting Option Three.

(6) If the plan is not an existing plan, the agency must certify on Form UR-50:

(a) One hundred percent of the amount of division of tax; or

(b) The amount of increment value used that the agency estimates will raise some lesser amount of division of tax, pursuant to ORS 457.455(1) or 457.470.

(7) The assessor must:

(a) Apportion the increment value used to the code areas in the plan area in the same proportions as the increment value is distributed among those code areas.

(b) If the full increment value in a code area is less than the amount of increment value used that is apportioned to the code area under subsection (7)(a) of this rule, the assessor must calculate the division of tax using the full increment value. No increment value is then used in calculating the taxes of the ad valorem taxing districts for the year.

(c) If the full increment value exceeds the amount of the increment value used, the assessor must use the remaining increment value in calculating the taxes of the ad valorem taxing districts for the current year.

(8) The assessor must:

(a) Use the rate computation value in calculating taxes for a taxing district that has an urban renewal plan area within its boundaries and whose rate is part of the consolidated billing tax rate for the plan.

(b) Calculate the urban renewal special levy tax rate for each plan area using the current year taxable value of all taxable property in the municipality that adopted the plan and any portion of the urban renewal plan area outside of the municipality. Current year taxable value includes the value of Non-profit Housing properties, Fish and Wildlife properties and urban renewal increment value.

(c) Calculate urban renewal special levy tax rates on a plan area by plan area basis. If one plan area of an agency extends beyond the boundary limits of the activating municipality, only the special levy rate for that plan area is extended beyond the boundaries of the municipality.

(d) Unless otherwise specifically provided by law, no tax offset applies to the special levy rate.

(9) The assessor must determine the tax rate for each code area for each tax levy that an ad valorem district certifies as follows:

(a) Determine the rate certified by the district for tax rate levies or calculate a tax rate for dollar amount levies;

(b) Subtract any offsets as applicable; and

(c) Subtract any division of tax rate for that district applicable to that code area from the result of subsection (9)(b) of this rule.

(10) The assessor must calculate a total division of tax rate for each code area. This is the total of the division of tax rates from all of the levies from all taxing districts with shared property in that code area, if such rates are in the consolidated billing tax rate.

(11) The division of tax rate may have two components. One is the total of rates derived from any local option tax levies. The other component is the total of rates derived from any other levies. The assessor must treat the amount of taxes derived from each of the two total rates separately for purposes of determining compliance with the limitations of section 11(b) Article XI of the Oregon Constitution.

(12) The assessor must calculate the amount of tax on each account that is distributed to each urban renewal agency as follows:

(a) For each property within a shared property area the assessor must calculate the division of tax amount extended by multiplying the taxable assessed value of the account by the division of tax rate for each plan area.

(b) For each property within a shared property area that has an urban renewal special levy, the assessor must calculate the amount extended for the special levy by multiplying the taxable assessed value of the account by the rate calculated for each urban renewal special levy.

(c) If taxes exceed the limitations in either category of section 11(b) Article XI of the Oregon Constitution, the assessor must reduce the taxes to the category limit. The division of tax portion derived from local option levies must be reduced proportionately with all other similarly categorized local option levies before any other taxes in the category are reduced.

(13) The special levy and the division of tax must be imposed on all taxable property in the municipality that activated the urban renewal agency and any portion of the urban renewal plan area outside of the municipality that is shared property for that plan.

(14) The tax statement must display at a minimum for each agency, under the applicable limitation category, the total combined dollar amount imposed for the urban renewal special levy and the division of tax for that account.

(15) In preparing the percentage distribution schedule under ORS 311.390, the tax collector must use the dollar amount generated for urban renewal division of tax and the dollar amount imposed for urban renewal special levy for each urban renewal agency.

[ED. NOTE: Forms and Publications referenced are available from the agency.]

Stat. Auth.: ORS 305.100 & 457.470

Stats. Implemented: ORS 457.440, 457.445 & 457.470

Hist.: REV 13-1999, f. 12-30-99, cert. ef. 12-31-99; REV 1-2002, f. & cert. ef. 5-23-02; REV 7-2008, f. 8-29-08, cert. ef. 8-31-08; REV 11-2010, f. 7-23-10, cert. ef. 7-31-10; REV 5-2013(Temp), f. 7-1-13, cert. ef. 7-15-13 thru 1-1-14; REV 9-2013, f. 12-26-13, cert. ef. 1-1-14


Rule Caption: PIT: various credits and subtractions; adjustments; appeals; waivers; representation; composite returns; waterway workers, military, seniors

Adm. Order No.: REV 10-2013

Filed with Sec. of State: 12-26-2013

Certified to be Effective: 1-1-14

Notice Publication Date: 11-1-2013

Rules Adopted: 150-316.693, 150-316.792

Rules Amended: 150-305.145(3), 150-305.230, 150-314.380(2)-(B), 150-314.775, 150-314.778, 150-315.068, 150-315.204-(A), 150-316.102, 150-316.127(10), 150-316.368

Rules Repealed: 150-316.680(1)(c)-(A), 150-316.680(1)(c)-(B), 150-316.789, 150-316.791

Subject: 150-316.792 provides for instructions for all military pay subtractions in conformance with 2013 HB 2230.

   150-316.693 provides guidance for calculating the senior medical subtraction based on 2013 HB 3601.

   150-315.204-(A) updates name of agency and removes applicability language for dependent care credits for employers.

   150-316.102 updates process with Secretary of State Elections Division for PAC filings for the political contribution credit.

   150-316.368 clarifies that a taxpayer who requests a joint liability be split can appeal to the Magistrate Division of the Oregon Tax Court within normal 90-day time frame rather than 60-day listed in rules.

   150-305.145(3) clarifies when interest will and will not be waived.

   150-305.230 provides guidance for S-corporation shareholders who can represent the S-corporation.

   150-314.380(2)-(B) clarifies procedures when another taxing authority makes a change to a tax return.

   150-314.775 updates definitions for Composite Tax Returns and Pass-through Entity Withholding.

   150-314.778 clarifies procedures for filing composite tax returns.

   150-316.127(10) conforms rule to federal law related to nonresident waterway workers.

   150-315.068 provides guidance for use of the claim of right tax credit.

   150-316.680(1)(c)-(A); 150-316.680(1)(c)-(B); 150-316.789; and 150-316.791 are all repealed due to 2013 HB 2230 and consolidated into new rule 150-316.792

Rules Coordinator: Deanna Mack—(503) 947-2082

150-305.145(3)

Discretionary Waiver of Interest

(1) General Policy. The department does not generally waive interest because interest represents a charge for the use of money.

(2) Interest may be waived for good and sufficient cause upon request of the taxpayer as required in OAR 150-305.145(4) section (4).

(a) The department will waive interest charges if the department determines the taxpayer did not have the use of the money on which the interest is charged.

Example 1: Sue mailed her Oregon tax payment to the Internal Revenue Service (IRS) by mistake. The IRS cashed the check and six months later sent the money back to Sue as an overpayment. Two months later, Sue mailed payment to the department. The department will waive interest for the six-month period that Sue did not have use of the money.

(b) The department will waive interest imposed for failure to pay state tax on or before the due date if the taxpayer:

(A) Files an Oregon tax return on or before the due date of the return, excluding extensions;

(B) Submits the Oregon tax return in the same transmission as a federal tax return, using a department-approved alternative to filing a paper return;

(C) Pays any federal tax shown as due on the transmitted federal return on or before the due date using an electronic form of payment such as a credit card, debit card, or electronic funds transfer (ACH Debit);

(D) Pays any tax shown as due on the Oregon return within 30 days of the date shown on the Notice of Assessment sent to the taxpayer;

(E) Establishes to the department’s satisfaction that failure to pay Oregon tax was due to a good faith, mistaken belief of the taxpayer that the state tax had been paid; and

(F) Has not received relief under this subsection before.

(c) The waiver of interest provided by subsection (2)(b) of this rule applies only to interest otherwise imposed on unpaid tax and does not include interest imposed on the underpayment of estimated tax.

(3) When interest will not be waived.

(a) The department will not waive interest on a deficiency resulting from changes made to Oregon tax based on any adjustments reported by the Internal Revenue Service (IRS) or another state’s taxing authority, regardless of the time lapse between completion of the IRS or another state’s taxing authority adjustment and the completion of the Oregon audit report. ORS 314.380 and 314.410 require a taxpayer to report to the department a change in the taxpayer’s net income as defined under OAR 150-314.380(2)-(B) resulting from an adjustment by the IRS or another taxing authority.

(b) The department will not waive interest to the extent the taxpayer earned interest on the money from another taxing authority.

Example 2: Don mailed his Oregon tax payment with his Idaho return by mistake. Idaho cashed the check and three months later refunded the $1,000 plus $25 of interest. One month later, Don mailed his payment to Oregon and requested a waiver of Oregon’s interest charge of $35. The department will waive $10, which is the excess of interest charged over what Don received from Idaho.

(c) The department will not waive interest on underpayment of tax when the taxpayer requests that a refund shown on a delinquent return be applied to a later tax year. ORS 316.583 requires that a refund from a delinquent return that is applied to the next tax year is credited as an estimated payment as of the date the delinquent return was filed.

Example 3: Scott files his 2010 return on February 19, 2012 and requests that his tax year 2010 refund be applied to his tax year 2011 tentative tax. His 2010 tax return was due April 18, 2011. Because he filed his return late, the refund is credited as an estimated payment on February 19, 2012. The interest charged on the underpayment of 2011 estimated tax will not be waived because ORS 316.583 requires that the payment be credited as of the date the delinquent return is filed.

Stat. Auth.: ORS 305.100, 305.145

Stats. Implemented: ORS 305.145, 316.583

Hist.: REV 3-2005, f. 12-30-05, cert. ef. 1-1-06; REV 11-2007, f. 12-28-07, cert. ef. 1-1-08; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-305.230

Representation of Taxpayers before the Department of Revenue

(1) Application of ORS 305.230. The provisions of ORS 305.230 apply to all administrative proceedings before the Department of Revenue. Only those individuals who qualify under ORS 305.230 and this rule may represent the taxpayer.

(2) Individuals Authorized to Represent by Department Rule. The following individuals may represent the taxpayer before the department unless the individual is prohibited from representing the taxpayer by other Oregon law:

(a) An adult immediate family member of the taxpayer may represent the taxpayer.

(b) The taxpayer’s registered domestic partner may represent the taxpayer.

(c) A regular full-time employee of an individual employer may represent the employer.

(d) A general partner or a regular full-time employee of a partnership may represent the partnership. For general representation rules for partnerships see OAR 150-305.242(2) and 150-305.242(5).

(e) An officer or a regular full-time employee of a corporation (including a parent, subsidiary, or other affiliated corporation), association, or organized group may represent the corporation, association, or organized group.

(f) Any shareholder in an S corporation may be designated to represent that S corporation as the tax matters shareholder.

(g) Any tax matters shareholder or any shareholder of an S corporation may represent another shareholder or group of shareholders of that S corporation in matters related to adjustments of items that flow through from the S corporation to the shareholder’s return.

(h) Limited Liability Company (LLC) classified as a corporation. A member-manager, a non-member manager, or a regular full-time employee of the LLC may represent the LLC.

(i) Limited Liability Company classified as a partnership. Any member with management authority may represent the LLC (including a member in a member-managed LLC). Any regular, full-time employee of the LLC may represent the LLC. If the LLC has no members with management authority, then any member may represent the LLC (see ORS 63.130 and Treas. Reg. § 301.6231(a)(7)-2).

(j) A regular full-time employee of a trust, receivership, guardianship, or estate may represent the trust, receivership, guardianship, or estate.

(k) An officer or a regular employee of a governmental unit, agency, or authority may represent the governmental unit, agency, or authority in the course of his or her official duties.

(l) An individual may represent any individual or entity that is outside the United States before department personnel when such representation takes place outside the United States.

(m) An individual who prepares and signs a taxpayer’s tax return as the preparer, or who prepares a tax return but is not required (by the instructions to the tax return or by rule) to sign the tax return, may represent the taxpayer during an examination of the tax year or period covered by that tax return. This provision does not permit such individuals to represent taxpayers, regardless of the circumstances, before conference officers, revenue agents, legal counsel or similar department employees.

(n) A taxpayer’s authorized agent may represent the taxpayer in proceedings relating to the property tax assessment of designated utilities and companies by the Oregon Department of Revenue under ORS 308.505 through 308.665 and 308.805 through 308.820. For purposes of this rule, an “authorized agent” means a person who is authorized by a company assessed under ORS 308.505 to 308.665 and 308.805 to 308.820 to transact all business related to the filing or processing of an annual statement filed as required by ORS 308.525 or all business related to the filing of a request for a director’s conference under ORS 308.595.

(o) Persons authorized to represent in an ad valorem property tax conference or proceeding under ORS 305.230(1)(d), any person licensed by the Oregon State Board of Tax Practitioners, and consulting foresters may represent a taxpayer in any proceeding with respect to taxes imposed under ORS Chapter 321. For purposes of this rule, “consulting forester” means a person who is engaged by the taxpayer to render expert or professional advice in forest management related matters.

(p) The director may, subject to restrictions imposed under other Oregon law, authorize an individual who is not otherwise eligible under this rule to represent a taxpayer before the department. The sole fact that an individual does not qualify under another section of this rule is not an adequate reason to request special permission to represent a taxpayer.

(3) Revocation of Authorization. The department, in its discretion, may revoke the authority to represent a taxpayer granted under section (2) of this rule.

(4) Representation by a Tax Matters Shareholder.

(a) A tax matters shareholder may be designated to represent an S corporation before the Department of Revenue in any conference or proceeding with respect to the administration of any tax on or measured by net income.

(b) An S corporation that elects to designate a tax matters shareholder as its authorized representative in proceedings before the department for issues relating to the S corporation adjustments on a Notice of Deficiency must make the designation as provided in this rule.

(c) The tax matters shareholder designated for Oregon purposes may be the federal tax matters shareholder or may be another shareholder, and must be a shareholder who is:

(A) A shareholder in the S corporation at some time during the taxable year to which the Notice of Deficiency pertains; or

(B) A shareholder in the S corporation at the time the designation is made.

(d) In order to designate a tax matters shareholder, an S corporation must file a signed statement with the department. The statement must:

(A) Identify the shareholders making the designation by name, address, and social security number;

(B) Identify the S corporation and the designated shareholder by name, address, and taxpayer identification number;

(C) Declare that the statement is a designation of a tax matters shareholder for the taxable year to which the Notice of Deficiency relates; and

(D) Authorize the tax matters shareholder as a qualified representative under ORS 305.230 and identify the taxable year(s) of authorization.

(e) Only one tax matters shareholder may be designated and authorized to represent the corporation for each examination at the S corporation level which results in a Notice of Deficiency to the corporation.

(f) If a notice explaining the S corporation adjustments is mailed by the department to the tax matters shareholder with respect to any S corporation taxable year, the tax matters shareholder must supply the department with the name, address, ownership percentage and taxpayer identification number of each person who was a shareholder in the S corporation at any time during the taxable year, unless that information was provided in the S corporation return for that year.

(g) The tax matters shareholder for Oregon will bind the S corporation with respect to the proceedings between the department and the S corporation whose tax liability is in dispute. When appealing on behalf of the S corporation, the tax matters shareholder may exercise any administrative remedy before the department allowed by Oregon law.

(h) Other actions of the tax matters shareholder that are binding on the S corporation include, but are not limited to:

(A) Consent to the extension of the statute of limitations regarding an S corporation return.

(B) Making a settlement offer to the department.

(C) Acceptance of a closing agreement with the department.

(D) Consent to time and place of any appeals proceedings.

(5) S corporation Shareholder Representation.

(a) When the treatment of S corporation items on a shareholder’s return is consistent with the treatment of that item on the S corporation return and results in a deficiency, a tax matters shareholder or any shareholder of that S corporation may be designated to represent a shareholder or group of shareholders of that S corporation before the Department of Revenue in any conference or proceeding with respect to the administration of any tax on or measured by net income. All shareholders or groups of shareholders are not required to designate the same representative.

(b) A shareholder or group of shareholders that elect to designate an authorized representative in proceedings before the department for issues relating to the S corporation adjustments on a Notice of Deficiency must make the designation as provided in this rule.

(c) If the representative designated for Oregon purposes is a shareholder, the representative may be the tax matters shareholder or another shareholder, and must be a shareholder who is:

(A) A shareholder in the S corporation at some time during the taxable year to which the Notice of Deficiency pertains; or

(B) A shareholder in the S corporation at the time the designation is made.

(d) In order to designate a representative, a shareholder or group of shareholders of an S corporation must file a signed statement with the department. The statement must be signed by each shareholder electing that representative and:

(A) Identify the name, address, and social security number of each shareholder electing the representative;

(B) Identify the S corporation and the representative by name, address, and taxpayer identification number;

(C) Declare that the statement is a designation for the taxable year to which the Notice of Deficiency relates; and

(D) Authorize the representative as a qualified representative under ORS 305.230 and identify the taxable year(s) of authorization. The shareholder or group of shareholders may authorize the representative to represent the shareholders for issues other than S corporation issues that are heard during the same appeal with any S corporation adjustments.

(e) A shareholder or group of shareholders may not designate more than one representative for an appeal. While different shareholders can designate different representatives, each cannot not have more than one representative.

(f) If a group of shareholders has the same representative and has filed an appeal requesting a conference for the same S corporation adjustment the appeal will be resolved in a single conference.

(g) Shareholders who do not designate a representative as provided in this rule may appeal their Notice of Deficiency by following the administrative remedies under ORS 305.265 and the related rules.

(h) The representative will bind all shareholders who have made the designation under this section to all actions with respect to the proceedings between the department and the shareholder whose tax liability is in dispute. Any shareholder who has designated a representative may participate in any level of the administrative proceedings.

Example: Assume an S corporation with 10 shareholders has been examined and each shareholder receives a Notice of Deficiency. If 8 shareholders designate the same representative, their appeal will be heard collectively. If the representative requests a conference, the conference decision will apply to all 8 shareholders (all 8 shareholders may participate). The other 2 shareholders may appeal their cases individually because they did not make the election to be represented by the same representative.

(i) Other actions of the representative that are binding on the shareholders who have made the designation include, but are not limited to:

(A) Consent to the extension of the statute of limitations regarding S corporation items with respect to all electing shareholders.

(B) Making a settlement offer to the department.

(C) Acceptance of a closing agreement with the department.

(D) Consent to time and place of any appeals proceedings.

(6) Limited Liability Companies. When a limited liability company (LLC) has elected to be classified as a corporation and has made an S corporation election, section (4) applies to the LLC. When applying section (4) to an LLC, LLC members are treated as shareholders.

Stat. Auth.: ORS 305.100, 305.230

Stats. Implemented: ORS 305.230; ORS 63.810

Hist.: 12-31-88; RD 8-1983, f. 12-20-83, cert. ef. 12-31-83; RD 5-1986, f. & cert. ef. 12-31-86; RD 2-1988, f. 1-11-88, cert. ef. 1-15-88; RD 1-1997(Temp), f. 6-13-97, cert. ef. 7-4-97 thru 12-31-97; RD 5-1997, f. 12-12-97, cert. ef. 12-31-97; REV 3-2005, f. 12-30-05, cert. ef. 1-1-06; REV 10-2006, f. 12-27-06, cert. ef. 1-1-07; REV 10-2010, f. 7-23-10, cert. ef. 7-31-10; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-314.380(2)-(B)

Report of Changes in Federal Taxable Income

(1) Report Requirements. The report of change or correction required by ORS 314.380(2) must be:

(a) Filed in writing with the department;

(b) Signed by the taxpayer or the taxpayer’s authorized representative; and,

(c) Filed separately from any statement or attachment forming a part of the taxpayer’s original tax return.

(2) The report may be in the form of an amended return or a schedule showing the adjustments and the recomputation of the tax. Regardless of what form is used, the report must include either a copy of the report of the Internal Revenue Service (IRS) adjustment, federal revenue agent’s report or the audit report of the other state’s taxing authority, whichever is applicable, or other information sufficient to inform the department of each item on the tax return that has been changed or corrected.

(3) If the taxpayer does not concede the accuracy of any change or correction made by the IRS or other state’s taxing authority, the report filed with the department must include a full explanation of the reason why the taxpayer believes such change or correction to be erroneous. If the report is not filed in the manner stated in this rule, the department will not be considered to have been notified by the taxpayer.

(4) A report of a change or correction is treated as a timely claim for refund, pursuant to ORS 314.415, if filed with the department within two years after the date of the IRS adjustment or the audit report of the other state’s taxing authority.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.380

Hist.: 6-68; 12-70, Renumbered from 150-314.380(2); RD 12-1985, f. 12-16-85, cert. ef. 12-31-85; RD 10-1986, f. & cert. ef. 12-31-86; REV 9-1999, f. 12-30-99, cert. ef. 12-31-99; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-314.775

Definitions for Composite Tax Returns and Pass-through Entity Withholding

The following definitions apply for purposes of ORS 314.775 to 314.784, this rule, and OAR 150-314.778 to 150-314.784:

(1) “Disregarded entity” is an entity that is not recognized for income tax purposes and all items related to the entity are reported on the owner’s income tax return. Examples of disregarded entities are:

(a) Single member limited liability company (LLC), and

(b) Grantor trusts.

(2) “Distributive income” means the net amount of income, gain, deduction, or loss of a pass-through entity for the tax year of the entity and includes those items directly related to the entity that are considered in determining the federal taxable income of the owner or, in the case of an owner that is a corporation, would be included in its federal taxable income if the corporation were an individual.

(3) “Electing owner” means a nonresident owner that elects to participate in an Oregon composite tax return filed by a pass-through entity. An electing owner also includes the nonresident owner of a disregarded entity.

(4) “Modified distributive income” means the distributive income as defined in section (1) of this rule, of a pass-through entity, with the modifications provided in ORS Chapter 316 and other Oregon law that directly relate to those items taken into consideration by the pass-through entity in arriving at its distributive income. Such modifications include, but are not limited to, any Oregon modification necessary for depreciation, depletion, gain or loss difference on the sale of depreciable property, and any modification for federal tax credits, and do not include the federal tax subtraction, itemized deductions, and the Oregon standard deduction. Guaranteed payments are treated as a business income component of the entity’s distributive income and attributed directly to the owner receiving the payment.

(5) “Nonelecting owner” means a nonresident owner of a pass-through entity that is eligible, but does not elect to participate in a composite return and who is required to file an Oregon tax return.

(6) “Oregon-source distributive income” means the portion of the entity’s modified distributive income that is derived from or connected with Oregon sources. For entities operating in Oregon and one or more other states, Oregon-source distributive income is determined by attributing to Oregon sources that portion of the modified distributive income of the entity, as defined in section (3) of this rule, determined in accordance with the allocation and apportionment provisions of ORS 314.280 or 314.625 to 314.675.

(7) “Pass-through entity” means any entity that is recognized as a separate entity for federal income tax purposes, for which the owners are required to report income, gains, losses, deductions or credits from the entity for federal income tax purposes. Examples include:

(a) A partnership;

(b) An S corporation;

(c) A limited liability company that is treated as one of the above for tax purposes; and

(d) A trust that has been established or maintained primarily for tax avoidance purposes, including: an abusive tax shelter as defined in ORS 314.402, an entity subject to a penalty for promoting an abusive tax shelter under Internal Revenue Code (IRC) section 6700, and a tax shelter as defined under IRC section 6662 and related Treasury regulations.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.775

Hist.: REV 3-2005, f. 12-30-05, cert. ef 1-1-06; REV 2-2006, f. & cert. ef. 7-31-06, Renumbered from 150-2005 OL, Ch. 387; REV 10-2010, f. 7-23-10, cert. ef. 7-31-10; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-314.778

Oregon Composite Tax Return

(1) General provisions. A pass-through entity (PTE) doing business in or deriving income from sources within this state is required to file an Oregon composite tax return if requested by one or more electing owners. Estimated tax payments are required for the composite return if the total Oregon tax due for any electing owner is expected to be $1,000 or more for an individual; or $500 or more for a corporation.

(a) Computation of tax. Each PTE filing a composite return on behalf of electing owners must calculate the tax for each electing owner. The tax liability for each electing owner on the composite return, determined without regard to the tax credits allowed under subsection (1)(b) of this rule, is calculated by applying the Oregon tax rates based on the owner’s filing status to the difference between the owner’s share of the entity’s Oregon-source distributive income for the taxable year and the owner’s self-employment tax deduction, as provided for in subsection (1)(b) of this rule. If distributive income is apportioned, the deduction must also be apportioned by multiplying the owner’s federal deduction for one-half self-employment tax (attributable to the owner’s share of the entity’s net earnings from self-employment) by the apportionment percentage provided in ORS 314.650 through 314.675. The PTE will report on the Oregon composite return the tax computed for each electing owner and total amounts for all electing owners.

(b) Credits and deductions. Below is a list of items that may or may not be allowed for electing owners. [Table not included. See ED. NOTE.]

(c) Losses.

(A) Net operating losses for Oregon nonresidents are computed under ORS 316.028. A PTE that has filed an Oregon composite tax return on behalf of nonresident individual owners may file amended returns to carry back the Oregon net operating losses incurred by the PTE. A schedule must be attached to any return filed under these provisions indicating the taxpayers affected and calculations of the loss amounts. These losses may also be carried forward. The allowed carryback and carryforward periods (including elections to forego the carryback period) are the same as provided under Internal Revenue Code section 172. The election to forego the carryback period must be made by attaching a statement to the Oregon composite return filed on or before the due date (including extensions) of the return for the loss year. Corporations are not allowed to carry back a net operating loss (ORS 317.476).

(B) Any refund of tax made pursuant to an original or amended composite return filed under these provisions will be paid to the PTE, regardless of changes in ownership or changes in the identity of nonresidents participating in an Oregon composite filing.

(2) Election to participate in an Oregon composite tax return. The following provisions apply:

(a) The owner must make a separate election for each tax year;

(b) The owner must not have been a resident of Oregon at any time during the owner’s tax year;

(c) The owner is considered to have made the election on the date the PTE files the composite return that includes the electing owner;

(d) By making the election, the owner elects to have the owner’s Oregon tax liability paid and reported by the PTE; and

(e) An electing owner is ultimately liable for tax, penalty and interest if the PTE fails to file a composite tax return or pay the tax on behalf of the owner.

(f) An electing owner may be a disregarded entity. The PTE must look to the owner of the disregarded entity to determine whether the owner of the disregarded entity will choose to join in the composite filing.

Example 1: Hermiston Partners is owned by four individuals, one grantor trust, and one single-member LLC. Both of these owners are disregarded entities. Therefore, Hermiston Partners will look to the nonresident owner of each disregarded entity to determine if that nonresident owner elects to join in the filing of a composite return.

The grantor trust is owned by a nonresident individual. Hermiston Partners looks to the individual who owns the grantor trust. Hermiston Partners must allow the individual to join in the filing of the composite return. Hermiston Partners will use the individual’s name and Social Security number on the composite, not the name or tax identification number of the disregarded trust. If the individual doesn’t join in the composite filing or file an affidavit, Hermiston Partners must send in estimated payments on the individual’s behalf as required in OAR 150-314.781.

The single-member LLC is solely owned by another partnership, Ontario LP. A partnership can’t join in the filing of a composite return. Thus, Hermiston Partners cannot include Ontario LP in the composite return and is not required to send in estimated payments on behalf of the LP. Ontario LP is the entity responsible for filing a composite return or sending estimated payments for its owners.

(3) Filing and payment requirements.

(a) Due date. The Oregon composite tax return is due the 15th day of the fourth month after the close of the tax year of the majority of the electing owners, in accordance with ORS 314.385.

Example 2: Around-the-Bend LLC (ATB) has a tax year ending June 30. The electing owners consist of four individuals and three corporations. Because the individuals are all calendar year taxpayers, the majority of the electing owners have a calendar tax year which ends December 31. Therefore the composite return and any estimated payments are due using a calendar tax year. For tax year 2010, the composite return will include the income reported by ATB for its 2009 tax year ending June 30, 2010. The 2010 composite return that ATB will file on behalf of its owners is due April 15, 2011.

Example 3: Coast Around Oregon Incorporated (CAO) is an S Corporation with a tax year ending October 31. The electing owners consist of 15 individuals, so they are all calendar year taxpayers. For tax year 2010, the composite return will include the income reported by CAO for its 2009 tax year ending October 31, 2010. The 2010 composite return that CAO will file on behalf of its owners is due April 15, 2011.

(b) Payment of amounts due. Payment of the amount due is made by the PTE on the owner’s behalf and must accompany the filing of the Oregon composite tax return in accordance with ORS 314.395. The payment must include the tax due plus any penalty or interest provided by Oregon law.

(c) Extensions of time to file. If the entity is granted a federal or Oregon extension of time to file the entity’s return (partnership return or S corporation return), an extension for filing the Oregon composite return is allowed. This is true even if the composite return reports the income in a different tax year than the entity’s partnership or S corporation return. The entity must keep a copy of the federal extension with its tax records. The extension to file the composite return is 6 months from the composite return due date regardless of the length of extension the entity received for its partnership or S corporation tax return.

Example 4: Pendleton LLC filed for extension for its 2012 fiscal tax year ending June 30, 2013 (2012 partnership return). The partnership return had a due date of October 15, 2013. Partnerships receive a 5-month extension so the due date with extension is March 15, 2014 for the partnership return. The owners of Pendleton LLC are calendar year filers. Therefore, they report the income in tax year 2013. The nonresident owners that elect to participate in the 2013 composite return filed by Pendleton have an extension to file because the partnership has an extension to file for the partnership return. The 2013 composite return reporting this income is due April 15, 2014; however, with the extension, it is due October 15, 2014. The 6-month extension applies, even though the income is reported in a different tax year for the owners and Pendleton LLC received a 5-month extension for filing its partnership return.

(d) An electing owner may file a separate tax return without revoking the election to join in the filing of a composite return. The income reported on the composite return is subtracted on the electing owner’s separate return and tax is paid only on the Oregon source income not reported on the composite return.

(4) Ineligibility or revoking an election to participate in a composite return.

(a) One or more owners may revoke the election to join in the Oregon composite tax return after the Oregon composite tax return has been filed. The revocation of the election must be made within three years from the date the Oregon composite tax return was filed. To revoke a previous election:

(A) The PTE must file an amended Oregon composite return removing the owner and request a transfer of any payment made on the owner’s behalf to the now nonelecting owner’s account, and

(B) The owner must file a separate return with the department showing all items of income and deduction from the PTE. This separate return will be treated as an original return and, if filed after the due date, any tax liability shown on the return is subject to interest and penalties in the same manner as any other delinquently filed original return. The decision to revoke a previous election by one or more owners has no effect on the election of the remaining owners.

(b) If any of the owners becomes ineligible, revokes an election, or declines to participate in filing an Oregon composite tax return, and the PTE made tax payments on the owner’s behalf, the PTE must submit a written transfer request to the department. The department will transfer the tax payment to the account of the nonresident owner only if the entity submits such a written request to the department. The request must contain:

(A) The name and federal employer identification number of the entity that made the tax payment(s);

(B) The name and social security number of the nonresident owner; and

(C) The specific dollar amount to transfer to the account of the owner.

(c) An owner who does not or cannot elect to participate, or who revokes a prior election, is subject to withholding on the owner’s share of the Oregon source distributive income under ORS 314.781 and OAR 150-314.781.

(5) Payment of tax on behalf of electing owners. An entity may be required to make quarterly tax payments to the department on behalf of all electing owners. The tax liability required to be paid is the sum of each electing owner’s estimated tax liability for that quarter that is attributable to each owner’s interest in the entity. In determining the electing owner’s tax liability, the provisions of ORS 314.505 to 314.525 or 316.579 to 316.589 regarding calculation of estimated tax apply. The entity must remit the tax payments to the department using forms and instructions provided by the department.

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

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.778

Hist.: REV 10-2010, f. 7-23-10, cert. ef. 7-31-10; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-315.068

Claim of Right Credit

(1) Credit qualifications. If you repaid income that was taxed in a prior year, you may be eligible for a credit on your Oregon return. This rule applies to repayments made on or after January 1, 2013 that are claimed on returns filed after the effective date of this rule. To claim the credit, you must:

(a) Claim a federal credit or deduction under Internal Revenue Code (IRC) section 1341; and

(b) Have paid Oregon tax in a prior year on the income that you repaid.

(2) Credit calculation. Your Oregon claim of right credit is the difference between the Oregon tax you paid in the prior year and the Oregon tax you would have paid without including the repaid income. Calculate your credit as follows:

(a) Refigure the Oregon tax before credits in the year the income was originally taxed by determining the tax for the year in which the income was originally taxed without the repaid income. Do not change the federal tax subtraction or any other items on the Oregon return.

(b) Subtract the refigured tax before credits from the Oregon tax before credits as filed (or amended or adjusted, if applicable). This is your claim of right credit.

Example 1: In 2012, Jerry was required to repay $10,000 of the unemployment compensation he had received in 2011. He claimed the claim of right credit on his federal return, so he can also claim the credit for Oregon. For 2011, Jerry had federal adjusted gross income (AGI) of $50,000 and Oregon tax before credits of $3,568. Jerry refigures his 2011 Oregon tax before credits without the repaid income. He reduces his federal AGI compared to what was included in his original 2011 federal return by the amount repaid, $10,000. All other Oregon items stay the same (including the federal tax subtraction). The recalculated Oregon tax before credits is $2,668. The difference between the refigured and original tax before credits is $900 ($3,568 minus $2,668). Jerry’s claim of right credit is $900.

(3) Federal deduction. If you claim a deduction under IRC § 1341 on your federal return, you can allow the deduction to flow through or you can claim a credit on your Oregon return. Determine by comparing the following amounts:

(a) Calculate Oregon tax before credits for the year of repayment with the deduction.

(b) Add back the federal deduction and figure your Oregon tax before credits. Then subtract the Oregon claim of right credit.

(c) If the tax in (a) is less, allow the deduction for Oregon also. If the tax in (b) is less, add back any deduction as required under ORS 316.680(2)(i) and claim the Oregon credit.

Example 2: In 2012, Shannon had to repay wages of $3,800 from tax year 2010. She qualifies to claim itemized deductions and chooses to claim the deduction on her federal return. Oregon allows this deduction to flow through or allows her to claim the credit instead. Her itemized deductions are mostly Oregon taxes, so her Oregon itemized deductions are less than the standard deduction. Therefore, she will not claim itemized deductions for Oregon and will claim the credit instead.

In 2010, she had federal AGI of $45,000 and her 2010 tax was $2,988. If Shannon had not received the $3,800 she had to repay, her 2010 tax would have been $2,679. Her 2012 credit is the difference of $342, which she will claim on her 2012 Oregon return as a claim of right credit. There’s no addition required because she claimed the standard deduction for Oregon, so the federal deduction did not flow through.

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

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 315.104

Hist.: REV 9-1999, f. 12-30-99, cert. ef. 12-31-99; REV 5-2000, f. & cert. ef. 8-3-00; REV 8-2001, f. & cert. ef. 12-31-01; REV 10-2006, f. 12-27-06, cert. ef. 1-1-07; REV 4-2013(Temp), f. & cert. ef. 6-5-13 thru 12-2-13; Administrative correction, 12-19-13; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-315.204-(A)

Dependent Care Credits: General Information

(1) Taxpayers must apply to the Department of Education, Early Learning Division, Office of Child Care and receive certification before being eligible for the Dependent Care Assistance or Dependent Care Information and Referral Services credits. Contact the Office of Child Care of the Department of Education for more information.

(2) For taxable years beginning on or after January 1, 1988, the following credits are available to employers that provide dependent care assistance or information and referral services to their employees:

(a) Dependent Care Assistance Credit. This credit is available to employers for the expenses paid or incurred by the employer for the care of employees’ dependents.

(b) Dependent Care Information and Referral Services Credit. This credit is available to employers that provide information and referral services to assist their employees in obtaining dependent care.

(3) Any tax credit otherwise allowable that is not used by the taxpayer in a tax year may be carried forward and offset against the taxpayer’s tax liability for up to five tax years. The amount of credit carried forward to a succeeding tax year is the sum of credits that exceed the tax liability, after other credits, for all prior tax years that are within the carryover period.

(a) If a credit carried forward from a prior year and a current year’s credit are available, the taxpayer must use the credit from the prior year first and then the current year’s credit.

(b) If a credit carried forward from a prior year and a current year’s credit are available, the two credits may be combined and taken up to the amount of tax liability for the year.

(4) If the taxpayer is an individual and the tax year is changed resulting in a short period return (a return covering a period of less than 12 months), the credit must be computed in a manner consistent with ORS 314.085.

(5) If the taxpayer is a part-year resident individual, the credit must be computed in a manner consistent with ORS 316.117.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 315.204

Hist.: RD 5-1988, f. 5-25-88, cert. ef. 6-1-88; RD 11-1988, f. 12-19-88, cert. ef. 12-31-88; RD 7-1991, f. 12-30-91, cert. ef. 12-31-91; RD 7-1993, f. 12-30-93, cert. ef. 12-31-93, Renumbered from 150-316.134-(A); REV 8-2001, f. & cert. ef. 12-31-01; REV 3-2005, f. 12-30-05, cert. ef. 1-1-06; REV 10-2009, f. 12-21-09, cert. ef. 1-1-10; REV 5-2010, f. & cert. ef. 3-15-10; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-316.102

Credit for Political Contributions

(1) In General: To qualify for the political contribution credit, the contribution must be a voluntary contribution of money made to one of the following:

(a) A major political party or its political committees, or a minor political party or its political committees;

(b) A candidate for federal, state or local office; or

(c) A political committee. Each of these categories is discussed in more detail in the following sections.

(2) Contributions to political parties. For purposes of this rule, a major political party is defined in ORS 248.006. A minor political party is defined in ORS 248.008. Contributions to any of these parties, or their political committees, qualify for the credit.

Example 1: In 2012, Jim contributes $50 to the Republican National Party, $50 to the Republican Committee to Re-elect U.S. Senators, $50 to the Democratic National Party Committee to Re-elect Senator Jones of California and $50 to the Libertarian Party. All contributions qualify for the political contribution credit. Jim will be able to claim a credit of $50 on his 2012 income tax return. If he files a joint return with his wife, they may claim a $100 credit.

(3) Contributions to candidates. Qualifying contributions are those made directly to the candidate or the principal campaign committee of the candidate.

(a) A principal campaign committee (PCC) means a candidate’s political committee. The PCC must have met the filing requirements contained in ORS Chapter 260.

(b) Candidates do not have to appear on a ballot in this state in the same year the contribution is made for the credit to be claimed. However, if the candidate is not on a ballot, at least one of the following must have occurred in the same year the contribution is made:

(A) A prospective petition is filed;

(B) A declaration of candidacy is filed;

(C) A certificate of nomination is filed; or

(D) A designation of a principal campaign committee is filed.

Example 2: Amanda filed a declaration of candidacy in November 2011 and appeared on the ballot for the 2012 primary election as a candidate for Oregon state senator. Contributions made in 2011 or 2012 to Amanda, or her principal campaign committee, will qualify for the credit.

(4) Contributions to political committees. Contributions made to a political committee will qualify only if the committee has certified the name of its treasurer to the appropriate filing officerin the manner provided in ORS Chapter 260. As used in this rule, “filing officer” means:

(a) For a political committee whose purpose is to support or oppose a candidate or measure in an election concerning an irrigation district formed under ORS chapter 545, the county clerk or secretary of the irrigation district as provided under ORS 260.005(9)(b).

(b) For all other purposes, the Secretary of State as provided under ORS 260.005(9)(a).

(c) Contributions may qualify under this provision even though:

(A) No measure appears on the ballot in the same year the contribution is made;

(B) The contribution is made to reduce a deficit from a prior year; or

(C) The political committee is formed by a national committee.

Example 3: Royal is a member of the Association of Certified Engineers of America. The association forms a Political Action Committee (PAC) in Oregon, certifies the name of its treasurer to the Secretary of State, and solicits voluntary donations from individual members. The PAC states in its material that it is organized and operated to support or oppose any political candidates or measures the directors of the association determine will impact its members. Contributions made to the PAC will qualify for the credit.

Example 4: Debra belongs to a trade union that engages in political activities. The union informs Debra that a certain percentage of her monthly dues is used for political purposes. No part of her dues payment will qualify for the credit because it is not a voluntary payment of money to a candidate or a political committee.

Example 5: Same facts as Example 4, but the union also solicits voluntary political contributions from its members. These funds are placed directly into a separate PAC, which is not subsidized in any way by the union, and are used for political activities. In January 1999, Debra signs up for a payroll deduction of $5 to be taken from her monthly checks. She may claim a credit of up to $50 on her tax return, or a credit of $60 (12 months x $5) if she files jointly with her husband.

(5) The amount of the contribution must be reduced by the fair market value of any items or services received in exchange for the contributions.

Example 6: A political committee solicits donations and offers T-shirts in return for contributions of $50 or more. Douglas contributes $50 and receives a T-shirt valued at $10. He may claim a political contribution credit of $40.

Example 7: Same facts as Example 6, except that Douglas contributes $100. He is entitled to a credit of $50 on a single return, or $90 on a joint return.

(6) A partnership or S corporation may make political contributions on behalf of its partners or shareholders. The credit may be claimed on the individual tax return, subject to all of the limitations in ORS 316.102 and this rule.

(7) Proof of the credit, such as a canceled check or receipt, should not be attached to the tax return but should be kept with the taxpayer’s records. Upon audit or examination, the taxpayer must provide documentation to verify the credit.

Stat. Auth.: ORS 305.100 & 316.102

Stats. Implemented: ORS 316.102

Hist.: 1-69; 12-70; 11-73; 12-19-75; 12-19-77; TC 9-1978, f. 12-5-78, cert. ef. 12-31-78; TC 19-1979, f. 12-20-79, cert. ef. 12-31-79; RD 6-1983(Temp), f. 12-20-83, cert. ef. 12-31-83; RD 2-1984, f. & cert. ef. 2-21-84; RD 12-1985, f. 12-16-85, cert. ef. 12-31-85; RD 15-1987, f. 12-10-87, cert. ef. 12-31-87; 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 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-316.127(10)

Gross Income of Nonresidents: Waterway Workers

(1) General Policy. The State of Oregon imposes taxes on Oregon source income of nonresidents to the extent allowed under Oregon and federal law and exempts Oregon source income of nonresidents to the extent provided under federal law: 46 USCA 11108. Under both federal and state law, compensation of a nonresident waterway worker is exempt from Oregon taxation to the extent the compensation is paid to an individual engaged on a vessel and performing assigned duties as a licensed pilot in more than one State or to an individual performing regularly assigned duties while engaged as a master, officer, or crewman on a vessel operating on the navigable waters in two or more states.

(2) For purposes of ORS 316.127(10) and this rule:

(a) “Master” is the commander of a merchant vessel, who is in charge of the vessel, its crew, its passengers, and the care and control of the vessel and cargo.

(b) “Member of a crew” or “crew member” is an individual carried on board a vessel who is not required to obtain a license (though they may be required to obtain certification) who provides services such as navigation and maintenance of the vessel, its machinery, systems, or services essential for propulsion and safe navigation or to provide services for passengers on board.

(c) “Navigable waters” are waters that are subject to the ebb and flow of the tide and waters that are presently used, or were used in the past, to transport interstate or foreign commerce.

(d) “Officer” is an individual carried on board the vessel who must obtain a specialized license and who provides navigation and maintenance of the vessel, its machinery, systems, and arrangements essential for propulsion and safe navigation.

(e) “Passenger” is a person on board a vessel other than:

(A) The master, a member of the crew, or other person employed or engaged in any capacity in the business of the vessel; or

(B) A child under one year of age.

(f) “Regularly assigned duties” are those duties performed on a regular basis (i.e. daily, weekly, or monthly). Duties that are performed on sporadically or intermittently as occurs when serving on an “on-call” or “as-needed” basis are not “regularly assigned duties.”

(g) “Vessel” is watercraft used, or capable of being used, as a means of transportation on navigable waters in 2 or more states for business purposes.

(h) “Waterway worker” is a nonresident who is:

(A) Engaged on a vessel to perform assigned duties in more than one State as a pilot licensed under section 7101 of Title 46 of the United States Code or licensed or authorized under the laws of a State, or

(B) An individual who performs regularly assigned duties while engaged as a master, officer, or member of a crew on a vessel operating on the navigable waters in two or more states.

Example 1: Ben, a resident of Washington, is a crew member and works on a dredging vessel on the Willamette River in Oregon and the Cowlitz River in Washington six months of the year. The other six months of the year Ben works in the company’s office in Portland, Oregon. Only six months of compensation from his employer is exempt because it’s for services Ben performed on the dredging vessel and is not taxable by Oregon. The remaining six months of compensation is taxable by Oregon.

Example 2: Kirk, a nonresident, works for a log mill located on the Oregon shore of the Columbia River. He spends 6 hours a day piloting a tugboat on the river carrying logs to the mill. For the remaining 2 hours of his shift, he works in the mill doing maintenance on mill equipment as well as other tasks. Kirk’s compensation for his time working on the tugboat is not subject to Oregon tax. However, the time he spent working in the mill in Oregon is Oregon-source income and subject to Oregon tax. Kirk may exclude 75 percent (6 divided by 8) of his total compensation from this employer from Oregon taxation. He will only report 25 percent of his wages in the Oregon column of his nonresident return.

Example 3: Remy, a nonresident, is a crew member and works on a vessel plying the Columbia and Willamette rivers. Remy makes weekly trips from Hood River to Tualatin and back, hauling cargo on the vessel. Each trip entails three days on the Columbia River and two days on the Willamette River. All of Remy’s income is exempt and is not taxable to Oregon.

Example 4: Jim, a nonresident, works in Oregon for a water transportation company that plies the waters of the Columbia River. On occasion, he is called upon to work as a member of a crew for a full day on one of the company’s vessels when they are short-handed. His income is taxable by Oregon, even for the days he works on the vessel, because his work on the vessel is on an as-needed, sporadic, or intermittent basis.

Example 5: Ken, a Washington resident, works in Oregon as a manager for a water transportation company whose two vessels traverse the Columbia River. Once every quarter, Ken boards the company’s vessels to check on the employees working on the vessel. Ken’s income is taxable by Oregon, even for the days that he spends on board a vessel because he is not a pilot, master, officer, or crew member of the vessel.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 316.127

Hist.: REV 11-2007, f. 12-28-07, cert. ef. 1-1-08; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-316.368

Petitioning Department to Equally Split Joint Liability

(1) A tax liability incurred by spouses filing a joint tax return is joint and several. Each spouse is responsible for the entire liability. However, the department may split a joint tax liability equally between two separated or divorced spouses. Either spouse may file a petition to split the joint liability equally between the spouses. In order to split the liability, the department must be satisfied that payment of the entire liability by the petitioning spouse will cause undue hardship on the petitioner and petitioner’s household. Mere inconvenience is insufficient to establish hardship. A statement in the divorce decree is also insufficient to relieve either spouse of the liability.

(2) The conditions listed below may constitute hardship. The examples given are not intended to be all-inclusive.

(a) Annual household income of the petitioning spouse, number of dependents and limited assets within the household are such that petitioner could not, in the department’s opinion, pay the entire liability within five years.

Example 1: The petitioning spouse receives social security income with no other income and only minimal assets.

Example 2: The petitioning spouse earns $20,000 annually, is not receiving child or spousal support, and is the sole support of three adolescent dependents. Household assets are minimal. The liability owed jointly with the petitioner’s ex-spouse is $4,000.

(b) Major medical problems or a prolonged illness of either the petitioning spouse or a family member that either severely limits petitioning spouse’s earning ability or creates an extreme financial burden on household resources.

Example 3: Petitioning spouse or family member has a major illness and has been forced to retire. The only household income is from social security.

Example 4: The petitioning spouse has a major illness and family is living on disability and attempting to meet high medical costs.

(3) Included within the petition must be:

(a) An explanation of how payment of the entire liability will cause undue hardship on the petitioner and petitioner’s household;

(b) The current address of the non-petitioning spouse (if known);

(c) A completed Statement of Financial Condition for Individuals (form number 150-860-009);

(d) A copy of the legal separation or divorce decree; and

(e) An explanation of how the petitioner will pay the remaining liability.

(4) Following review of the petition, the department will either:

(a) Accept the petition, cause the liability to be split equally between spouses and notify both spouses of the action; or

(b) Notify the petitioning spouse the petition has not been accepted.

(5) Acceptance by the department of the petition is discretionary. If the department denies a petition to split a joint liability, the petitioner may appeal that denial to the Magistrate Division of the Oregon Tax Court.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 316.368

Hist.: RD 5-1993, f. 12-30-93, cert. ef. 12-31-93; RD 7-1994, f. 12-15-94, cert. ef. 12-30-94; REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-316.693

Special Oregon Medical Subtraction

(1) Eligible Expenses. Expenses eligible for this subtraction are those authorized under IRC §213. Medical and dental expenses not allowed for this subtraction include expenses:

(a) Otherwise deducted in the calculation of Oregon taxable income for any tax period; or

(b) Paid on behalf of any other individual who is not an eligible taxpayer or eligible spouse of the taxpayer under ORS 316.693.

Example 1: Sam (age 66) and Rebecca (age 60) file a joint return and claim Rebecca’s 80-year-old mother as a dependent. During the year, Sam and Rebecca paid $4,000 in medical and dental expenses: $1,000 for Sam, $1,000 for Rebecca and $2,000 for Rebecca’s mother. Sam’s medical expenses are the only medical expenses that qualify for the special Oregon medical subtraction because Rebecca does not meet the age requirement and Rebecca’s mother is a dependent.

Example 2: Shannon and Dustin, both age 66, file a joint return with Oregon itemized deductions. During the year, Shannon and Dustin paid $18,900 in unreimbursed medical and dental expenses: $6,900 for self-employed health insurance premiums (claimed on the front of Form 1040), $10,000 for health insurance for two employees (claimed on Schedule C), and $2,000 of unreimbursed medical and dental expenses (claimed on Schedule A, line 1). Only the medical and dental expenses on Schedule A, line 1 ($2,000) can be used in the calculation of eligible expenses for the special Oregon medical subtraction because deduction for the self-employed health insurance was already used in the calculation of Oregon taxable income and employee insurance is not an eligible expense.

(2) Calculation of Eligible Expenses.

(a) General rule. The general rule is that if the expenses can be attributed to a particular individual, only that individual can claim those expenses.

Example 3: Mary (age 59) and Steve (age 66). Mary and Steve each have their own insurance policy and do not cover each other on the individual policies. Mary’s premium is $350 per month and Steve’s premium is $400 per month. The only expenses that are eligible to be considered for this subtraction are Steve’s premiums, ($4,800). Depending on his income and the portion of Steve’s premiums already included in itemized deductions on Schedule A, Steve may claim up to $1,800 as a special Oregon medical subtraction.

(b) Expenses that cannot be attributed to a particular individual. A taxpayer that cannot determine to whom the expense is attributable must prorate the expense using a method that is reasonable based on the taxpayer’s particular facts and circumstances. Common examples of expenses that are not attributable to a particular individual include, but are not limited to, medical, dental or long-term care insurance premiums. Depending on the facts and circumstances, reasonable methods of proration for such expenses may include:

(A) Dividing the eligible expenses that are for more than one person by the number of individuals covered by the policy.

(B) In the case of spouses filing separate returns, splitting any eligible expenses paid out of a joint checking account in which the taxpayer and the taxpayer’s spouse have the same interest equally, unless you can show otherwise.

Example 4: Branden (age 66) and Natalie (age 61) file a joint return with Oregon itemized deductions and three dependent children. During the year, Branden and Natalie paid $19,380 in medical expenses: $16,600 in health insurance premiums for a plan that covered Branden, Natalie, and all three children; $500 in dental expenses for Branden; $1,500 in medical expenses for Natalie; and $780 in medical and dental expenses for the children. Natalie and the children’s medical and dental expenses do not qualify for this subtraction because Natalie does not meet the age requirement and the children are dependents. For Branden and Natalie, a reasonable method to calculate the joint expenses attributable to Branden is to divide the total health insurance premiums paid ($16,600) by the number of insured (5) to arrive at $3,320 for Branden’s portion of the joint expenses. Add the additional medical expenses attributable to Branden, $500, to arrive at a total of $3,820 of eligible expenses.

(3) Taxpayer who itemizes deductions. If a taxpayer has already claimed a portion of the eligible expenses as an itemized deduction on federal schedule A, line 4, the taxpayer must make an adjustment for those eligible expenses already deducted. Only medical and dental expenses for an age-qualifying taxpayer that are not already deducted in the calculation of Oregon taxable income are eligible for the subtraction. The taxpayer must prorate medical and dental expenses included in itemized deductions to determine what portion is eligible for this subtraction.

Example 5: Jeff and Maggie, both age 64, file a joint return with Oregon itemized deductions and federal Adjusted Gross Income (AGI) of $55,000. Jeff and Maggie also claim Maggie’s 84-year-old mother as a dependent. During the year, Jeff and Maggie paid $12,300 in unreimbursed medical and dental expenses: $3,400 for self-employed health insurance premiums (claimed on the front of the 1040), $1,200 for Jeff, $4,200 for Maggie, $1,500 for Maggie’s mother, and $2,000 in long-term care insurance premiums for Jeff and Maggie.

Jeff and Maggie deduct the entire self-employed health insurance premiums on the federal return; therefore, they do not include those expenses in the calculation of the subtraction. They can only include the $8,900 of medical expenses claimed on Schedule A, line 1, to calculate the subtraction ($1,200 for Jeff, $4,200 for Maggie, $1,500 for Maggie’s mother, and $2,000 in long-term care insurance premiums for Jeff and Maggie).

For Jeff and Maggie, a reasonable method to calculate their joint expenses is to divide by two the total long-term care insurance premiums paid ($2,000) to arrive at $1,000 for each individual. Add the additional medical expenses attributable to Jeff and Maggie to arrive at total eligible expenses before calculating the subtraction. Jeff’s expenses total $2,200 ($1,200 + $1,000) and Maggie’s expenses total $5,200 ($4,200 + $1,000).

Jeff’s expenses claimed on the Schedule A are 24.7% of the total expenses ($2,200 divided by $8,900). Maggie’s expenses claimed on the Schedule A are 58.4% of the total expenses ($5,200 divided by $8,900). Jeff and Maggie could not deduct $5,500 of their expenses on Schedule A because of the AGI limitation. Jeff’s portion of the expenses that were not deducted are $1,359 ($5,500 x 24.7%; rounded). Maggie’s portion of the expenses that were not deducted is $3,212 ($5,500 x 58.4%). Based on their federal AGI, each of their expenses may not exceed $1,400 for this subtraction. Jeff’s expenses are less than the limit, so his subtraction is limited to $1,359. Maggie’s expenses are more than the limit, so her subtraction is $1,400. They will claim a $2,759 special Oregon medical subtraction on their return.

Stat. Auth.: ORS 305.100 & 316.693

Stats. Implemented: ORS 316.693

Hist.: REV 10-2013, f. 12-26-13, cert. ef. 1-1-14

150-316.792

Military Pay Subtraction

(1) Definitions.

(a) “Uniformed services” refers only to services under the orders of the President of the United States and means the commissioned corps of the National Oceanic and Atmospheric Administration (i.e., the Coast and Geodetic Survey) and the Public Health Service (regular and reserve), consistent with 10 USC § 101(a)(5)(B) and (5)(C). Other members of the National Oceanic and Atmospheric Administration and the Public Health Service, or members of these organizations not under the orders of the President, are not included in this definition and would not qualify for an Oregon military pay subtraction.

(b) “Home of the taxpayer” is where the taxpayer does any of the following:

(A) Maintains his or her primary residence;

(B) Lives with his or her family; or

(C) Incurs continuing living expenses, such as mortgage or rent, utilities, and real and personal property taxes and insurance.

(2) Military pay subtraction. A member of the Armed Forces as defined in ORS Chapter 316 and this rule may subtract the following from their taxable military pay:

(a) Year of entry-Year of discharge. Military pay earned for services performed outside of Oregon.

(A) Year of discharge includes termination of full-time active duty from the Armed Forces of the United States.

(B) Year of entry is for initial enlistment or draft and only allowed one time per taxpayer, but the subtraction for year of discharge is allowed each time a taxpayer is discharged.

(C) The date of the enlistment order or date of discharge is the applicable tax year.

Example 1: Brian is domiciled in Oregon and remains domiciled in Oregon for all years relevant to this example. He enlists in the U.S. Army for the first time in 2004 and is stationed in California. In 2008, he is discharged and moves back to Oregon. The Army offers him a position in Portland, Oregon. He accepts the offer and reenlists shortly after the discharge. In 2012, Brian is reassigned to Florida. He plans to retire from the Army in 2024 and move back to Oregon. Brian will qualify for a subtraction of all military pay earned outside Oregon for tax year 2004 because that is his initial year of enlistment into the Armed Forces. He will also qualify for a subtraction for all of his military pay earned outside Oregon for tax years 2008 and 2024 because both years are treated as a year of discharge. From 2008 to 2012, he will qualify for a subtraction of $6,000 of his military pay while stationed in Oregon.

Example 2: Karen is domiciled in Oregon and remains domiciled in Oregon for all years relevant to this example. She enlists in the U.S. Navy in 2000 and is discharged in 2004 and returns to Oregon. Karen decides to reenlist in 2005 at which time she leaves Oregon and is assigned outside Oregon for the rest of her military career. In 2021, she retires from the Navy and returns to Oregon. Karen qualifies for a subtraction of military pay earned outside Oregon for tax year 2000 because that is her initial year of enlistment into the Armed Forces. She will also qualify for a subtraction for her military pay earned outside Oregon for tax years 2004 and 2021 because both years are treated as a year of discharge. Karen does not qualify for a subtraction for her military pay earned outside Oregon in 2005 under the year of entry or year of discharge rules because it was not her initial year of entry. However, she may subtract all of her military pay earned outside Oregon for that year under the subtraction for service performed outside of Oregon discussed in subsection (2)(b) of this rule.

(b) Service outside Oregon. Military pay earned for service performed outside of Oregon from August 1, 1990, to the date set by the President as the end of combat activities in the Persian Gulf Desert Shield area can be subtracted (Executive Order 12744).

Example 3: Jan enlisted in the Air Force Reserves in 2010. She was called to active duty September 15, 2013, and shipped to Fort Lewis, Washington. She earned a total of $10,000 military pay in 2013. $2,000 was earned in Oregon before September 15. She qualifies to subtract her military pay earned outside Oregon after September 15. Jan also qualifies to subtract the remaining $2,000 because it is less than $6,000. Her military pay subtraction is $10,000.

Example 4: Mike enlisted in the Oregon Army National Guard in 2000. He was called to active duty on August 1, 2013 and assigned outside Oregon. He earned $15,000 in military pay -- $10,000 prior to August 1, and $5,000 after. Mike’s military pay subtraction for 2013 is $11,000 ($5,000 for service performed outside Oregon and up to $6,000 of his remaining military pay).

(c) Reserve component members away from home overnight. The taxpayer is “away from home” when the taxpayer is required to stay in a temporary location that is not a home of the taxpayer and is not allowed to go home while at the temporary location. The pay earned while away from home for 21 days or longer may only be subtracted by someone who is a member of a reserve component; reserves or National Guard.

Example 5: Hallie is a member of the Army National Guard assigned to her unit in Medford and earned a total of $12,000 for the year. She was required to go on assignment to Umatilla from April 5 to June 23 and stayed overnight in that area. Hallie wasn’t authorized to go home during this time. She may subtract the $3,000 she earned during her assignment because she was away from home overnight for 21 days or longer. She may also subtract $6,000 of her remaining military pay.

(d) Other military pay. Any taxable military pay that is not eligible for one of the above subtractions may be subtracted up to $6,000. The military pay subtraction may not exceed the taxable military pay on the return. If both taxpayers on a joint tax return are eligible for a military pay subtraction, each person’s subtraction is separately figured before adding them together to report on the return.

Example 6: Joe is a member of the Marine Corps and on active duty for all of 2013. He is domiciled and stationed in Oregon. He earned $25,000 of military pay during 2013. Joe’s military pay subtraction is $6,000.

Example 7: Mary and Clyde are married and both members of the Army National Guard. During 2013, Mary was stationed overseas on active duty for 10 months. She received $1,000 of military pay before she was deployed. During her deployment she received $28,000 and $15,000 of that was excluded from federal taxable income. Of the total $29,000 she made, she’s only reporting $14,000 as taxable income. She qualifies for a military pay subtraction of all $14,000; $13,000 of her taxable military pay was earned outside Oregon and the remaining taxable military pay is eligible as other military pay. Clyde remained in Oregon during 2013 and earned $10,000 of taxable military pay. He isn’t eligible for any of the subtractions allowed for certain situations, but he is eligible to subtract up to $6,000 of his taxable military pay. Together the subtraction on their joint Oregon tax return is $20,000; $14,000 is Mary’s and $6,000 is Clyde’s.

(3) Combat zone benefits.

(a) Additional time to file and pay. Members of the Armed Forces who served in a combat zone are allowed extra time to take care of their Oregon income tax matters. Taxpayers are allowed the statutory filing period of 3 months and 15 days following the close of the tax year plus at least 180 days after the later of:

(A) The last day the person was in a combat zone (or the last day the area qualifies as a combat zone); or

(B) The last day of any continuous qualified hospitalization for injury from service in the combat.

(b) Eligible actions. The following are some of the income tax actions that can be extended:

(A) Filing any return of income tax (except withholding taxes);

(B) Paying any income tax (except withholding taxes);

(C) Filing a petition with the Tax Court;

(D) Filing a refund claim;

(E) Collection of any income tax due by the Department of Revenue.

(c) For purposes of this subsection (3), “income tax” includes the taxes imposed upon the income of estates and trusts and paid by the fiduciary thereof.

Example 8: Margaret entered Saudi Arabia on August 26, 2012. She remained there through March 16, 2013, when she departed for the United States. She was not injured and did not return to the combat zone. She has 285 days (180 plus 105) after her last day in the combat zone, March 16, to file her 2012 income tax return. The 105 additional days are the number of days in the three and a half month filing period that were left when she entered the combat zone (January 1–April 15). Margaret’s return is due by December 26, 2013.

Example 9: Leonard’s ship entered the Persian Gulf on January 5, 2013. On February 15, 2013, he was injured and flown to a U.S. hospital. Leonard remained in the hospital through April 21, 2013. He has 281 days (180 plus 101) after April 21, his last day in the hospital, to file his 2012 income tax return. The 101 additional days are the number of days in the three and a half month filing period that were left when he entered the combat zone (January 5–April 15). His 2012 return is due by January 27, 2014.

Stat. Auth.: ORS 305.100 & 316.792

Stats. Implemented: ORS 316.792

Hist.: REV 10-2013, f. 12-26-13, cert. ef. 1-1-14


Rule Caption: Corporate tax: apportionment, time for adjustments, HOA income, conforming changes: HB 3477, SB 307, and minimum tax.

Adm. Order No.: REV 11-2013

Filed with Sec. of State: 12-26-2013

Certified to be Effective: 1-1-14

Notice Publication Date: 11-1-2013

Rules Amended: 150-314.280(3), 150-314.410(4), 150-315.304(9), 150-317.010(4), 150-317.067

Rules Repealed: 150-305.655

Subject: 150-314.280(3) provides for the manner of making the double-weighted apportionment election for certain entities.

   150-314.400(4) provides instructions for time to adjust a return based on another taxing authority’s correction that causes a change to the Oregon tax return.

   150-315.304(9) makes conforming changes to the Pollution Control Facilities tax credit based on the Con-Way tax court case.

   150-317.010 removes language made obsolete because of 2013 HB 3477

   150-317.067 explains how homeowners’ associations calculate income.

   150-305.655 is repealed based on changes to MTC statute in 2013 SB 307.

Rules Coordinator: Deanna Mack—(503) 947-2082

150-314.280(3)

Election to Use Alternative Apportionment Weightings by Taxpayers Engaged in Utilities or Telecommunications; Revocation of Election

(1) A taxpayer engaged in utilities or telecommunications as defined in ORS 314.280(3)(e)(A) and (B) may elect to use the double-weighted sales apportionment factor weightings in ORS 314.650 (1999 Edition).

(2) This election is made by completing schedule AP using the double-weighted sales apportionment factor weightings on the original or amended tax return for each tax year for which the election is made to use the alternative factor weightings. For processing purposes check the appropriate box in the information section.

(3) A taxpayer may revoke the election to use the double-weighted sales apportionment factor weightings. This revocation is made by completing schedule AP using the single-sales apportionment factor on the original tax return.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.280

Hist.: REV 8-2002, f. & cert. ef. 12-31-02; REV 3-2005, f. 12-30-05, cert. ef 1-1-06; REV 11-2013, f. 12-26-13, cert. ef. 1-1-14

150-314.410(4)

Time Limit to Make Adjustment

(1) The provisions of this rule that apply to a federal change or correction apply to reports that are received by the department on or after October 4, 1997. The provisions of this rule that apply to another state’s change or correction apply to changes or corrections made on or after October 23, 1999.

(2) The department may mail a Notice of Deficiency at any time within two years after the department receives notification of a change or correction contained in:

(a) A report received from the Internal Revenue Service;

(b) A report received from another state’s taxing authority; or

(c) The written report filed by the taxpayer as required by ORS 314.380(2)(a)(A).

Example 1: Ron filed his 1996 federal and state returns on time. The Internal Revenue Service (IRS) audited and adjusted his federal return in March 2000. The department may mail a Notice of Deficiency within two years of receiving the report of the Internal Revenue Service adjustment.

(3) The department may mail a Notice of Deficiency if, at the time the change or correction by the Internal Revenue Service or another state’s taxing authority was made, an assessment or issuance of a refund of federal or other state’s tax based on the change or correction was within the time permitted by federal tax law or the tax law of the other state, as applicable. This provision applies regardless of whether an adjustment to the return is allowable under any other provision of Oregon law.

Example 2: ABC Corporation was audited by the IRS for tax year 1991. ABC Corporation signed an agreement with the IRS to extend the period of time for assessing federal tax. No separate extension agreement was signed with Oregon. Following completion of the federal audit, the department may mail a Notice of Deficiency at any time within two years of receiving the report of the Internal Revenue Service adjustment.

Example 3: Sally filed a timely 1993 tax return. In 1999, the IRS determined that Sally had omitted an item of income that was more than 25 percent of the gross income shown on the return. The IRS assessed additional tax based on Internal Revenue Code section 6501(e), which allows an assessment to be issued within six years of the filing of the return when there is such an omission. The department may mail a Notice of Deficiency based on the federal RAR within two years of receiving that report.

(4) The department may not mail a Notice of Deficiency based on a federal adjustment or the audit report of another state if, at the time of the change or correction, the tax year was closed to adjustment for Oregon purposes and also closed for adjustment under federal tax law, or the law of the other state, whichever applies.

Example 4: Lester filed timely 1995, 1996 and 1997 federal and state tax returns. In 1999, the Internal Revenue Service issued an adjustment that indicated Lester had incorrectly figured a capital loss for 1995. However, the IRS did not assess additional federal tax for 1995 because the year was not open to adjustment under any provision of federal law. Because both the federal and state returns were closed to adjustment, the department may not use the provisions of ORS 314.410(3)(b) to issue a Notice of Deficiency based on the Internal Revenue Service adjustment.

(5) When the department is notified of a change or correction, the department is not limited to the adjustments reflected in the IRS report, the report of the other state’s taxing authority, or the taxpayer’s written report submitted in the format required by OAR 150-314.380(2)-(B). The department may make any adjustments deemed necessary to properly reflect Oregon taxable income or Oregon tax liability for the year in question.

Example 5: Paul, a California resident, worked temporarily in Oregon in 1995 before returning to California. In April 1996, Paul filed a nonresident Oregon return for 1995 and claimed a credit for taxes paid to California. In March 2000, California audited his 1995 California return and in July 2000 Paul paid additional tax to California based on additional wages earned in Oregon. Paul filed a claim for refund with Oregon in November 2000, as allowed by ORS 314.380(2)(b). In reviewing the claim, the department allowed the increase in the credit for taxes paid to another state based on the increased wages. However, the department determined Paul had incorrectly calculated the political contribution credit and issued an adjusted refund.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 314.410

Hist.: RD 10-1986, f. & cert. ef. 12-31-86; RD 7-1989, f. 12-18-89, cert. ef. 12-31-89; RD 9-1992, f. 12-29-92, cert. ef. 12-31-92; REV 9-1999, f. 12-30-99, cert. ef. 12-31-99; REV 12-2000, f. 12-29-00, cert. ef. 12-31-00; Renumbered from 150-314.410(3), REV 8-2008, f. 8-29-08, cert. ef. 8-31-08; REV 11-2013, f. 12-26-13, cert. ef. 1-1-14

150-315.304(9)

Pollution Control Facilities: Tax Credit Carry Forward

(1) The amount of pollution control facility tax credit that may be carried forward to a succeeding tax year is the sum of credits that exceed the tax liability, after other credits, for all prior tax years that are within the carryover period.

Example 1: A corporate excise taxpayer built a pollution control facility in 1995 at a certified cost of $80,000. The certified percentage allocable to pollution control is 50 percent and the facility has a useful life of eight years. The maximum credit allowed in one tax year is calculated as follows: The $80,000 certified cost is multiplied by the 50 percent allocable to pollution control, yielding $40,000 as the total amount of credit to be claimed over the eight year life of the facility. The $40,000 divided by eight equals $5,000, the maximum yearly credit. See ORS 315.304(2). The taxpayer claimed the maximum credit on tax returns for 1995 and 1996. On the taxpayer’s 1997 return, the taxpayer is subject to a corporate excise tax of $1,000 that is offset by $1,000 of the pollution control facility tax credit, leaving $4,000 of credit to be carried forward.

(2) If a credit carried forward from a prior year and a current year’s credit are available, the taxpayer must use the credit from a previous year first and then the current year’s credit.

(3) If a credit carried forward from a prior year and a current year’s credit are available, the two credits may be combined and taken up to the amount of tax liability for the year.

Example 2: The taxpayer described in the prior example computes a tax of $8,000 for 1998. The taxpayer will offset that tax with $8,000 of credit ($4,000 carried over from 1997 plus $4,000 of the current year’s $5,000 credit), leaving $1,000 of the 1998 credit to be carried forward.

(4) When a facility is sold, the amount of unused credit carried forward from tax years before the sale is retained by the seller to offset tax in future years.

Example 3: Calendar year taxpayer A sold a facility to taxpayer B on January 1, 2001. A’s allowable pollution control facility credit for 2000 was $500, but A had a net loss and no tax liability to offset. The unused 2000 credit will be carried forward by A to offset A’s future taxes.

(5) A taxpayer that has unexpired credits at the beginning of tax year 2001 may carry those credits forward for up to three additional tax years, but only if the facility is in use and operation during the tax year to which the credit is carried.

Example 4: Calendar year corporation taxpayer B received certification for a pollution control facility with a 10 year asset life and was first eligible to claim the credit in tax year 1996. B reported losses for tax years 1996 through 2000 and was not able to claim the allowable credits for those years. The credit allowed for 1996 was carried forward to 1997, 1998, and 1999 and expired. The credit allowed for 1997 was carried forward to 1998, 1999, and 2000 and expired. The credits allowed for tax years 1998 through 2005 were unexpired at the beginning of B’s 2001 tax year and are eligible to be carried forward for up to six years.

Example 5: Taxpayer B from Example 4 reports a loss in tax year 2002 and closes the pollution control facility on December 31, 2002. B’s unused credits from 1998 and 1999 may not be carried forward to 2003 because the facility was not in use and operation during the tax year to which the credit is carried and the three year period for carryover expired in 2001 and 2002 respectively. The credits for tax years 2000, 2001, and 2002 are eligible to be carried forward for up to three years. No credits may be computed for tax years 2003, 2004, and 2005, but the unused credits carried forward from 2000, 2001, and 2002 may be claimed in the three later years.

Example 6: Corporation taxpayer C’s pollution control facility is certified on January 1, 2001. C is able to offset only half of its allowable credit against tax on its 2001 return. The balance of the 2001 credit may only be carried forward for up to three years. C did not have unexpired credits at the beginning of its tax year beginning in 2001.

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 315.304

Hist.: 1-69; 10-73; 7-76; 1-1-77, Renumbered from 150-316.097(11) to 150-316.097(9); 12-31-85; 12-31-86; 12-31-88, Renumbered from 150-316.097(9); 12-31-93; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; REV 11-2013, f. 12-26-13, cert. ef. 1-1-14

150-317.010(4)

Definition: “Doing Business”

(1) A taxpayer is doing business when it engages in any profit-seeking activity in the State of Oregon. What transaction or transactions need be entered into within this state in the course of such an activity to constitute the doing or carrying on of business within the state is primarily a question of fact, depending upon the circumstances in each case.

Example 1: The taxpayer is clearly doing business within this state if it occupies, has, maintains or operates an office, shop, store, warehouse, factory, agency or other place within this state where some of its affairs are systematically and regularly carried on, notwithstanding the fact that it may also enter into transactions outside this state.

Example 2: A corporation engaged in the sale of tangible personal property is doing business within this state if sales activities are regularly carried on within this state by an employee or agent of the seller, and if either a stock of goods is maintained within this state, or an office or other place of business where affairs of the corporation are regularly carried on is maintained within this state.

Example 3: A foreign corporation consigns goods to one or more consignees within Oregon who then sell the goods. The foreign corporation is doing business in Oregon since it has sales activity and a stock of goods within Oregon.

(2) A foreign corporation whose business is providing services is “doing business” in this state if it has employees providing those services in Oregon. It does not matter whether the services are provided on the client’s property or on the corporation’s own property since it is engaged in a profit seeking activity in Oregon.

(3) If a foreign corporation’s business activities in this state are confined to purchase and storage of personal property incident to shipment outside the state, the corporation is not deemed to be doing business for corporation excise tax purposes if the following conditions are met:

(a) The personal property remains in the exact state or form as it was when purchased during the time it is located within Oregon.

(b) The foreign corporation is not an affiliate of another foreign or domestic corporation, as defined in section 1504 of the Internal Revenue Code, which is doing business in Oregon.

(4) The fact that a corporation has no employees in Oregon does not mean the corporation is not doing business in this state. If activities are performed in Oregon by a third party on behalf of the corporation, and the activities are not protected under Public Law 86-272, the corporation is doing business in Oregon.

Example 4: The provision of in-state repair and warranty services by an independent contractor for a direct marketing computer company, advertised as part of its standard warranty or as an option that can be separately purchased, contribute significantly to the company’s ability to establish and maintain its market for computer hardware sales in Oregon. Therefore, the computer company is doing business in Oregon. The extension of immunity for activities by independent contractors under Public Law 86-272 does not include repair and warranty service.

(5) A corporation that is not “doing business” in Oregon may still be subject to tax in this state. The Oregon corporation income tax under ORS Chapter 318 imposes tax on corporations that have income derived from sources within Oregon. See OAR 150-318.020(2) for a list and description of the activities that, if conducted in Oregon, will result in a corporation being subject to the corporation income tax.

[Publications: The publication(s) referred to in this rule is available from the agency pursuant to ORS 183.360(2) and 183.355(6).]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 317.010

Hist.: 1959; 1-1-77, Renumbered from 150-317.010(8); RD 7-1983, f. 12-20-83, cert. ef. 12-31-83; RD 12-1990, f. 12-20-90, cert. ef. 12-31-90; RD 6-1996, f. 12-23-96, cert. ef. 12-31-96; REV 12-1999, f. 12-30-99, cert. ef. 12-31-99; REV 11-2013, f. 12-26-13, cert. ef. 1-1-14

150-317.067

Tax on Homeowner’s Association Income

Homeowners associations, such as condominium management associations and residential real estate management associations, may elect to be treated as tax-exempt organizations for taxable years beginning on and after January 1, 1978. But this tax-exempt status will protect the association from tax only on its exempt function income, such as membership dues, fees, and assessments received from member-owners of residential units in the particular condominium or subdivision involved. The homeowners association taxable income will be taxed at the corporate rates provided in ORS 317.061. To qualify for the election, the association must meet the following conditions:

(1) A copy of the federal Form 1120-H filed with the Internal Revenue Service must be filed with the Oregon Department of Revenue no later than the time prescribed by law for filing the return.

(2) It must be organized and operated as provided in section 528(c) of the Internal Revenue Code.

(3) “Homeowners association taxable income” is determined pursuant to section 528(d) of the Internal Revenue Code and pertinent federal regulations. However, net capital gains shall be included in the computation of homeowners association taxable income and shall receive no special treatment.

(4) “Exempt function income” is determined pursuant to section 528(d) of the Internal Revenue Code and pertinent federal regulations.

(5) If a homeowners association that elects to be treated as a tax exempt organization has positive homeowners association taxable income, it shall be reported on an Oregon Corporation Excise Tax Return, Form 20and the association is subject to the greater of the calculated corporation excise tax or the minimum tax.

(6) If a homeowners association that elects to be treated as a tax-exempt organization does not have positive homeowners association taxable income, the association is not required to file an Oregon Corporation Excise Tax Return, Form 20 and is not subject to the minimum tax.

[Publications: Publications referenced are available from the agency pursuant to ORS 183.360(2) and 183.355(1)(b).]

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 317.067

Hist.: 10-7-77; TC 9-1978, f. 12-5-78, cert. ef. 12-31-78, Renumbered from 150-317.080(6)(b); RD 12-1990, f. 12-20-90, cert. ef. 12-31-90; REV 12-1999, f. 12-30-99, cert. ef. 12-31-99; REV 11-2013, f. 12-26-13, cert. ef. 1-1-14

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, 2013.

2.) Copyright Oregon Secretary of State: Terms and Conditions of Use

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