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Background

TigerAs previously reported, the new Oregon Corporate Activity Tax (the “CAT”) went into effect on January 1, 2020.  The new law is quite complex and arguably not very well thought out by lawmakers.  Although the Oregon Department of Revenue (the “DOR”) has worked hard to bring clarity to the CAT through rulemaking, many questions remain, including application of the many exemptions and computation of the required tax estimates.  Despite pleas by small businesses to repeal or at least put the CAT in hibernation until the uncertainties resulting from the COVID-19 pandemic have been alleviated, both Oregon’s Governor and the state’s lawmakers have proclaimed in so many words that the show must go on – the CAT will remain in place, even during these horrific times.

WrenchLike other commentators, we have been writing extensively about the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the historic $2.2 trillion relief package enacted last month by lawmakers in the wake of the COVID-19 pandemic.

In a prior post, we provided a summary and analysis of numerous tax provisions of the CARES Act. 

In this post, we expand on our previous coverage of the CARES Act relative to net operating losses (“NOLs”), and provide an overview of new guidance issued by the IRS.

GlassesThe U.S. Department of Labor (the “DOL”) issued, effective April 6, 2020, temporary rules (“Rules”) relative to the Families First Coronavirus Response Act (the “FFCRA”).  The Rules focus on the “Small Employer Exemption” (defined below).  Importantly, the DOL’s guidance answers several questions that have been the topic of debate among many business owners, tax advisors and commentators.

Background

As discussed in prior posts, the FFCRA went into effect on April 1, 2020.  The legislation contains a number of tax provisions that fund the FFCRA’s mandatory paid leave provisions. 

A Succinct Summary of the Key Tax Provisions

CavalryOn 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.

CautionYesterday, 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!    

FamilyPresident 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.

Hammer and chiselI 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

CatThe 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

BusAs 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.

Magnifying glassI 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. 

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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.

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