A Succinct Summary of the Key Tax Provisions
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (colloquially, the “CARES Act” or the “Act”). The CARES Act is a historic $2.2 trillion relief package enacted by lawmakers in the wake of the COVID-19 pandemic. The Act is more than 880 pages in length and contains a multitude of provisions, all of which are intended to support individuals and businesses during these horrific times.
We have attempted to provide our readers with a broad overview of the most significant tax provisions of the Act. If a provision is potentially applicable to a given situation, please read the entire provision of the Act to affirm its application.
Yesterday, like other commentators, we reported that, in accordance with its terms, the Families First Coronavirus Response Act (“Act”) is effective on April 2, 2020. Please be aware, the U.S. Department of Labor (“DOL”) posted on its website a statement that the Act is effective on April 1, 2020. We assume this is not a premature April Fool’s joke. Accordingly, since DOL is the agency enforcing the non-tax aspects of the Act, we advise employers to ready themselves for the new law one day earlier than expected. It is better to be safe than sorry!
President Trump signed the Families First Coronavirus Response Act (the “Act”) on March 18, 2020. The Act becomes effective April 2, 2020, and contains a number of tax provisions that fund the Act’s mandatory paid leave provisions.
This blog post summarizes the Act’s paid leave and associated employer tax-related benefits. The Act is broad in application, creating complexity. In general, it applies to employers with fewer than 500 employees. We have attempted to dissect the Act in bite-sized, easily understandable chunks, removing the complexities whenever possible.
I hope our readers, their families and co-workers are safe and remain healthy during these trying times. As a distraction for tax geeks like us from the news about the Coronavirus that is permeating our lives these days, Peter and I decided to present more coverage on the Oregon Corporate Activity Tax (“CAT”).
On March 6, 2020, the Oregon Department of Revenue (the “Department”) published two new temporary rules that it had previously presented in draft form. While the rules are substantively the same as they were in draft form, there are several nuances worthy of discussion.
Temporary Rules Keep Rolling in
The Oregon Department of Revenue (the “Department”) recently issued four new temporary rules relative to the Oregon Corporate Activity Tax (the “CAT”). The new rules went into effect on February 1, 2020.
The new temporary rules provide much needed guidance with respect to three notable exclusions from the fangs of the CAT, namely the Grocery Exclusion, the Wholesale Exclusion and the Vehicle Exclusion.
The CAT Tour
As previously discussed, late last year, the Oregon Department of Revenue (the “Department”) conducted several town hall meetings with taxpayers and tax practitioners across the state to discuss the Corporate Activity Tax (the “CAT”), answer questions and solicit feedback about administration of the new tax regime. I am happy to report that the Department is hitting the road again!
The Department announced on February 6 that it will be hosting another series of meetings across the state next month. The meetings are aimed at providing information to and answering the questions of taxpayers and tax professionals about the CAT and the newly issued administrative rules.
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.
Recent Announcements
The Oregon Department of Revenue (the “Department”) has made several recent announcements regarding Oregon’s new Commercial Activity Tax (the “CAT”).
In an email dated December 4, 2019, the Department said it anticipated sharing initial drafts of the first batch of temporary administrative rules on its website in December 2019.
In the same email, the Department also announced that some issues will not be addressed in its rules. For example, the Department has determined that there is no way to provide guidance with respect to how businesses may properly estimate the amount of CAT liability attributable to particular transactions. The Department goes on to tell us, however, that many frequently asked questions will be addressed in forms, instructions, publications and/or FAQs on the Department’s website.
Importantly, the Department has made it clear that the CAT “does not prohibit any business subject to the CAT from passing the tax along to its customers.”
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder in 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; 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.
