The Oregon Legislature, in House Bill 3373, created the Office of the Taxpayer Advocate within the Oregon Department of Revenue. The new law became effective on September 25, 2021. According to the Oregon Department of Revenue website, the office is open and “here to help.”
The mission of the Office of the Taxpayer Advocate is threefold:
- To assist taxpayers in obtaining “easily understandable” information about tax matters, department policies and procedures, including audits, collections and appeals;
- To answer questions of taxpayers or their tax professionals about preparing and filing returns; and
- To assist taxpayers and their tax professionals in locating documents filed with the department or payments made to the department.
Last fall, the IRS announced, with respect to pass-through entities (LLCs or other entities taxed as partnerships or S corporations), that, if state law allows or requires the entity itself to pay state and local taxes (which normally pass through and are paid by the ultimate owners of the entity), the entity will not be subject to the $10,000 state and local taxes deductibility cap (the “SALT Cap”).
On February 4, 2021, Senate Bill 727 (“SB 727”) was introduced in the Oregon Legislature. SB 727 is Oregon’s response to the IRS announcement (see discussion below).
On June 17, 2021, after some amendments, SB 727 was passed by the Senate and referred to the House. Nine days later, the House passed the legislation without changes. On June 19, 2021, Oregon Governor Kate Brown signed SB 727 into law, effective September 25, 2021. In general, it applies to tax years beginning on or after January 1, 2022. Interestingly, SB 727 sunsets at the end of 2023.
In relevant part, SB 727 allows pass-through entities to make an annual election to pay Oregon state and local taxes at the entity level. For pass-through entities that make the election, their owners will potentially be able to deduct more than $10,000 of Oregon state and local taxes on the federal income tax return. However, it gets even better—SB 727 includes a refundable credit feature that may result in further tax savings for some owners of pass-through entities.
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.
When we thought times were bad enough with the COVID-19 pandemic and widespread social unrest in our country, the West Coast, including the Pacific Northwest, was struck with unprecedented wildfires and massive windstorms, taking lives, destroying property and rendering the air quality throughout the region unhealthy. On September 16 and 17, the Internal Revenue Service announced good news for many taxpayers residing in Oregon.
In News Release OR-2020-23 and News Release IR-2020-215, the IRS announced that, due to the wildfires and windstorms striking Oregon, the deadline for certain Oregonians to file returns and make tax payments will be extended to January 15, 2021.
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.
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.
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 Advanced Conference on Subchapter SNew York, NY, 7.21.22-7.22.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationNew York, NY, 10.23.22-10.28.22
- "The Intersection of Code Section 1031 and Opportunity Zones," 2022 OSCPA Northwest Federal Tax Conference10.24.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationSan Diego, CA, 11.13.22-11.18.22