On August 23, 2022, the Regular Division of the Oregon Tax Court issued its opinion in Santa Fe Natural Tobacco Co. v. Department of Revenue, State of Oregon. The court determined that the taxpayer in that case is subject to the corporate excise tax.
The taxpayer, Santa Fe Natural Tobacco Co., required that its wholesale customers located in Oregon accept and process returned goods. In addition, the taxpayer’s in-state sales representatives, who did not maintain inventory, routinely confirmed and processed purchase orders between Oregon retailers and wholesalers.
More than 25 years ago, effective January 1, 1997, Treasury issued what have been called the “Check-the-Box” regulations (the “Regulations”).1 The Regulations ended decades of battles between taxpayers and the IRS over entity classification. Further, the Regulations simplified entity classification and brought much needed certainty to most entity classification decisions.
Under the Regulations, a business entity with more than one owner is either classified for federal tax purposes as a corporation or a partnership.2 Likewise, a business entity with only one owner is either classified as a corporation or is disregarded for federal income tax purposes as being separate and apart from its owner.3
If a business entity is disregarded, its activities are generally treated for federal tax purposes as the activities of its owner. There are five notable exceptions to that rule.
In accordance with ORS 305.157, the director of the Oregon Department of Revenue (“DOR”) ordered an automatic extension of the 2019 tax year income tax filing and payment due dates. Oregon now joins several other states and the U.S. Department of the Treasury in this regard.
For Oregon personal income taxpayers, the order means:
- The Oregon income tax return filing due date for tax year 2019 is automatically extended from April 15, 2020 to July 15, 2020.
- The Oregon income tax payment deadline for payments due with the 2019 tax year return is automatically extended to July 15, 2020.
- The time for making estimated tax payments for tax year 2020 is not extended.
- The tax year 2019 six-month extension to file, if requested, continues to extend only the filing deadline until October 15, 2020.
- Taxpayers do not need to file any additional forms or notify the DOR to qualify for this Oregon tax filing and payment extension.
Charitable organizations work hard to maintain exempt status. These organizations operate in a highly regulated landscape: In exchange for enjoying freedom from income taxes, they must comply with strict organizational and operational rules. Even before the Tax Cuts and Jobs Act (“TCJA”), adhering to these rules required constant oversight. The TCJA changes the rules, impacting both the operations and funding of these organizations.
On the operational side, we review below: Changes to the rules on unrelated business taxable income and employee fringe benefits, the new excise taxes imposed on executive compensation, and college and university endowments, and changes to substantiation requirements for certain donations.
On the funding side, we review below: How changes to the standard deduction (addressed in more detail in a prior blog post), cash contribution limits, deductions for payments to colleges and universities for the right to purchase athletic event tickets, and the estate tax may impact donors and charitable giving patterns.
In November 2016, the Board of Commissioners of Cook County, Illinois, passed (by a slim margin of one vote) the Sweetened Beverage Tax Ordinance (“Soda Tax”). It imposed a tax at the rate of one-cent-per-ounce for all sweetened beverages sold at the retail level in the county.
The Soda Tax was expected to generate $200 million a year for Cook County. If you assume a population of 5.2 million in Cook County (home to the city of Chicago), the annual tax collections equate each citizen consuming over 10 ounces of sweetened beverages per day. That is an alarming figure. Factoring in visitors to the county, the number is likely a bit less than that figure, but nevertheless the number, or shall I say, “consumption assumption,” is definitely larger than one would expect.
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.
Upcoming Speaking Engagements
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationNew York, NY, 10.23.22-10.28.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationSan Diego, CA, 11.13.22-11.18.22