I apologize in advance for focusing my blog these past several weeks on the new Oregon Corporate Activity Tax (“CAT”), but my mind keeps finding new facets to this tax regime that I suspect most tax practitioners and even the lawmakers who passed the legislation may not have envisioned or anticipated. So, please indulge me as I explore another one of these numerous issues in this installment of the blog.
After the passage of the Tax Reform Act of 1986 and the introduction of Code Section 469, we started seeing tax practitioners focusing attention on trying to figure out how their clients could be characterized as active participants in a trade or business activity. Their goal is simple – they want to avoid the deduction limitations imposed by the passive activity loss rules contained in Code Section 469.
A dog will immediately respond to you when you call out. On the other hand, when you call out to a cat, the cat will take a message and promise to get back to you later. This is not the case with the Corporate Activity Tax (“CAT”). The Oregon Department of Revenue (“DOR”) is doing everything possible to provide taxpayers and tax practitioners with prompt and helpful guidance and support relative to the CAT, the new state tax regime that became effective on January 1, 2020.
As previously discussed, late last year, the DOR conducted several town hall meetings with taxpayers and tax practitioners across the state to discuss the CAT, answer questions and solicit feedback about administration of the tax regime. In addition, as promised, the DOR started issuing draft temporary rules this past December to provide clarity and address many uncertainties in the new law. It quickly removed the “draft” stamp from the rules. The rules keep rolling in! To date, the DOR has issued a total of 12 temporary rules. We have already provided a discussion of eight of those temporary rules. In this post, we discuss the remaining four temporary rules.
On January 6, I presented a new White Paper, The Oregon Corporate Activity Tax – You Can Run and You Can Hide, but This New Tax Is Effective January 1, 2020, at the Oregon Society of Certified Public Accountants Annual State and Local Tax Conference. We had a large number of attendees, including representatives of the Oregon Department of Revenue (the “DOR”). Based upon the numerous questions I received (during and after the presentation), it is clear that tax practitioners are busy thinking about this new tax regime and how it applies to their clients. Unfortunately, in this particular case, I do not believe the curiosity will kill the CAT. It looks like it is here to stay.
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.