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.
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.
As 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.
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; 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.