Larry's Tax Law

Last week, we reported on Maryland’s new gross receipts tax on revenues derived from digital advertising services (the “Tax”), the first of its kind in the nation.  Affected taxpayers and tax practitioners alike can breathe a sigh of relief—the Tax will not apply to tax years beginning before 2022.  Additionally, the broadcast news industry secured a significant victory by obtaining an exclusion from the Tax.

Maryland recently enacted the nation’s first tax on digital advertising.  The new tax, the Digital Advertising Gross Revenues Tax (the “Tax”), became law on February 12, 2021. 

The Tax has been surrounded by controversy from the very moment it was introduced in the Maryland House of Delegates.  In fact, a lawsuit to prevent the Comptroller of the Treasury of Maryland from enforcing the Tax was recently filed by a group of affected taxpayers.

Oregon State Senator Fred Girod, a Republican from Stayton, Oregon (District 9), is sponsoring Senate Bill 787 ("SB 787").  If passed, SB 787 would repeal the Oregon Corporate Activity Tax (the "CAT").  So far, the bill does not appear to have much momentum behind it, but time will tell.

Cats have a "righting reflex," allowing them to twist in midair if they fall from a high place so that they can land upright on their feet.  Because of this uncanny ability to potentially avoid disaster, it is often said cats have nine lives.  Well, the CAT has avoided death in the Oregon Legislature already on a number of occasions.  The question is whether the CAT can avoid another attempt to repeal it once and for all.

Senator Girod is a strong advocate for making a quality college education affordable for all students.  He is not, however, a friend of the CAT.  SB 787 is aimed at killing the CAT.

In the wake of the coronavirus pandemic, companies in wide-ranging industries across the country have unprecedented numbers of employees working from remote locations.  In a prior post, we discussed numerous issues that may arise from this new normal of teleworking, including tax, labor and employment, liability, and business registration implications. 

In this post, we drill down a bit further with respect to employers’ state tax reporting and payment obligations that may result from having employees working remotely in states other than where the employers maintain physical offices.  This is especially relevant in metropolitan areas that straddle multiple states, like here in Portland, Oregon.

Earlier this year, the Idaho Supreme Court, in Noell Industries, Inc. v. Idaho State Tax Comm’n, --- P.3d ---- (2020), ruled that gain from the sale of membership interests in a limited liability company that had business operations in Idaho by a taxpayer domiciled outside of Idaho was not business income.  As a result, the gain was not taxable in Idaho.

The court, in a 3-2 decision, upheld the district court’s reversal of the Idaho Tax Commission’s determination to tax the income.  The sharks were circling the taxpayer, ready to attack, but the majority of the justices on the Idaho Supreme Court intervened, saving the taxpayer from a savage death (or at least a boatload of taxes).

During the first special session of 2020, the Oregon legislature passed House Bill 4212 (“HB 4212”).  Governor Kate Brown (the “Governor”) signed HB 4212 into law on June 30, 2020. 

HB 4212 extends the time periods that apply to court proceedings, including those in the Oregon Tax Court (“Tax Court”), to provide relief to litigants who may be impacted by the COVID-19 pandemic.

On July 21, 2020, the Chief Justice of the Oregon Supreme Court (the “Chief Justice”) issued Order No. 20-027 (the “Order”) to facilitate the implementation of HB 4212.  In this post, we address the impact that HB 4212 and the Order may have on Tax Court cases.

Taxpayers with cases pending in either the magistrate or regular division of the Tax Court may be able to utilize these extended time periods.  Additionally, taxpayers may still have the ability to initiate or continue Tax Court proceedings if they missed the time period for doing so originally, including appealing adverse determinations to the magistrate division, regular division, or even the Oregon Supreme Court.

During the special session, the Oregon legislature passed House Bill 4202 (“HB 4202”), which Governor Kate Brown signed into law on June 30, 2020.  The legislation, which makes several technical and policy changes to the Oregon Corporate Activity Tax (the “CAT”), becomes effective on September 25, 2020.

The Oregon Legislative Revenue Office estimates that the modifications to the CAT resulting from HB 4202 will cost the state approximately $500,000 per year in lost tax revenue for each of the next six years.  The CAT was projected to raise approximately $1 billion per year in tax revenue.  Consequently, assuming these projections turn out to be accurate, the revenue losses attributable to HB 4202 should amount to less than one-tenth of 1 percent.

HB 4202 brings good news to farmers and provides some clarity for a small subset of Oregon taxpayers.  Unfortunately, the legislature did not repeal the CAT, and our lawmakers’ curiosity was not enough to cause them to look closely at the law and make the monumental changes that many taxpayers have been pleading for these past months.

As we reported last week, the Oregon Department of Revenue (“DOR”) scheduled a public hearing on June 23, 2020 to discuss the second set of temporary administrative rules relative to the Oregon Corporate Activity Tax (the “CAT”) that it intends to make permanent.  The show (held telephonically) occurred as scheduled.  Peter Evalds from our firm attended the hearing.  A summary of the key comments and concerns raised by attendees from the business and tax community, as well as our own guidance with respect to the rules, is set forth below.

The Oregon Department of Revenue (“DOR”) announced that it will be conducting a public hearing on June 23, 2020 to discuss a second set of temporary administrative rules relative to the Oregon Corporate Activity Tax (the “CAT”) that it intends to make permanent. 

Due to the COVID-19 pandemic, the hearing will be held telephonically.  The conference call will commence at 9:00 a.m. Pacific Time on June 23, 2020.

In a new temporary rule, the Oregon Department of Revenue (“DOR”) formalized its prior informal guidance relative to the assessment of penalties for failing to make sufficient estimated payments under Oregon’s Corporate Activity Tax (“CAT”).  The temporary rule provides some relief to CAT taxpayers whose businesses are adversely affected by COVID-19. 

Background

Pursuant to ORS 317A.137(2), a taxpayer must make estimated quarterly CAT payments.  As discussed previously, ORS 317A.161(2) imposes a penalty on taxpayers who fail to make estimated payments equal to at least 80 percent of their CAT liability for any quarter during 2020. 

The DOR announced in April that it would not assess penalties against a taxpayer for failure to make estimated CAT payments during 2020 if the taxpayer did not have the financial ability to make the estimated payments.  The DOR further stated that it would honor a taxpayer’s good faith compliance efforts if the taxpayer documents those efforts. 

Unfortunately, the DOR pronouncement about penalty abatement was contained in an email blast.  Consequently, many taxpayers and tax practitioners were concerned about whether such an informal announcement could be relied upon, what actually constitutes “good faith compliance efforts” and how to document the efforts.