| 2007 Corporate Tax Changes |
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Federal law
Oregon has a retroactive connection to federal changes made since December 31, 2004 to the definition of federal taxable income as well as an automatic connection to future changes to the federal definition of taxable income, except when a specific Oregon law provides for different treatment.
Insurance companies (Senate Bill 179, 2007 Legislature)
- For tax years beginning on or after January 1, 2007, insurance companies that are doing business in more than one state will apportion their income to Oregon using only the insurance sales factor.
- Insurance companies are now able to request an alternative apportionment formula if the formula provided in statute does not fairly and equitably reflect the insurance business activity in the state.
Reportable transactions
Oregon now has a mandatory reporting requirement for participation in listed or reportable transactions. If you are required to report listed or reportable transactions to the IRS on Form 8886 or if you participated in a real estate investment trust (REIT) or regulated investment company (RIC) as defined in Senate Bill 39 of the 2007 Oregon Legislature you must check the "Form 8886/REIT/RIC" box on your Oregon tax return.
The bill also contains penalties for failure to comply with this requirement as well as various other penalties for transactions discovered on or after January 1, 2008.
Changes to corporate kicker (surplus credit)
The 2007 Oregon Legislature repealed the corporate kicker that would have applied to the 2007 tax year and replaced it with the "one-time small sales credit."
If there is a corporate surplus calculated in a future biennium, the surplus credit will be calculated based on the tax before credits from the prior year's return. For example, if a surplus credit is due on the 2009 tax return, the surplus credit will be based on tax before credits from the 2008 tax return. If tax liability is not great enough to absorb the entire credit there is an unlimited carryover period to use up the credit.
Definition of unitary business
Oregon Revised Statute 317.705 was updated by Senate Bill 178 of the 2007 Oregon Legislature to remove the term "single trade or business" and replace it with the more common "unitary business."
New credits or changes to credits
Please refer to the corporation credit publication for all credits allowed to corporations and who to contact for more information or certification.
- Biofuel producer credit. An agricultural producer or collector of biomass is allowed a credit for biomass that is used in Oregon as biofuel or to produce biofuel. The amount of the credit is determined by the quantity of the biomass multiplied by the appropriate rate set by statute. This credit may be transferred to another taxpayer after notice is given to the Department of Revenue.
- Business energy tax credit. This credit has been expanded to give facilities that use or produce renewable energy resources or are renewable energy resource equipment manufacturing facilities a tax credit equal to 10 percent of the certified cost for five years. There are also new requirements for installations in single-family homes, high-performances homes and homebuilder-installed systems.
- Diesel engine replacement credit. There are new requirements to qualify for this credit, the engine emissions must be 0.01 grams per brake horsepower-hour or less of particulate matter. The maximum amount of credits that may be certified is $500,000 or less per calendar year. Qualifying purchases may be made through 2011.
- Diesel engine repower and retrofit credit. A credit is available for 25 percent of the certified cost for repower and 50 percent of the certified cost for retrofit. Certification will be done by The Environmental Quality Commission who will also establish, by rule, standards to qualify for the credit. This credit may be transferred to another taxpayer when notice is given to the Department of Revenue. This credit will be available in tax years beginning on or after January 1, 2008.
- Film production development contribution credit. The total amount of credits that may be certified by the Oregon Film and Video Office has increased to $5 million per fiscal year. The credit must be first claimed in a tax year beginning before January 1, 2012.
- Lender's credit: affordable housing. Qualifying loans to finance housing projects with tax credit certifications issued on or after September 27, 2007 now includes loans to finance the construction, development, acquisition, or rehabilitation of manufactured dwelling parks and housing preservation projects. The total credits that may be certified has increased to $13 million per fiscal year.
- One-time small sales credit. To qualify for this one-time credit, the filing entity must be a C corporation with Oregon sales of less than $5 million for the tax year. The amount of the credit is equal to 67 percent of the tax after all other credits. Oregon sales for purposes of this credit are calculated in the same manner as for apportionment purposes. If the corporation does not apportion income, Oregon sales are calculated in the same manner as if the corporation were to apportion income.
Other modifications
- Dividends-received deduction: In tax years beginning on or before January 1, 2007, the dividends-received deduction allowed under IRC section 965 (dividends from controlled foreign corporations), is allowed in determining Oregon taxable income for the same tax year as the federal deduction is allowed.
- Sale of manufactured dwelling park: The amount of gain included in federal taxable income that is attributable to the sale of a manufactured dwelling park to a tenant's association, facility purchase association, or tenant's association supported nonprofit organization as described in ORS 90.820; to a community development corporation as described in ORS 458.210; or to a housing authority as defined in ORS 456.005 are exempt from corporation excise and income tax. The effective date of this subtraction has been extended to tax years beginning before January 1, 2014.
- Manufactured dwelling park tenant payments (HB 2735, 2007 Legislature): Payments received under ORS 90.505 to 90.840 from a manufactured dwelling park landlord to compensate a tenant for costs incurred due to the closure of the park are exempt from corporate income and excise tax.
Withholding on sales of Oregon real property by non-residents
Beginning with transactions occurring on or after January 1, 2008, there is a new requirement to withhold tax from the proceeds of sales of Oregon real property by non-residents. This applies to individual non-residents as well as C corporations that are not doing business in Oregon. The amount to be withheld is the least of three amounts:
- Four percent of the consideration involved in the transaction;
- Four percent of the net proceeds resulting from the transaction; or
- Ten percent of the taxable gain.
Withholding is not required if one of the following requirements is met:
- The consideration for the real property does not exceed $100,000;
- The property is acquired through foreclosure;
- The transferor (owner) is a resident of Oregon—or if a C corporation—has a permanent place of business in this state; or
- The transferor receives professional advice that the transfer will not result in Oregon taxable income.
This law change is due to House Bill 2592 (Chapter 864, 2007 Oregon Laws). The Department of Revenue is currently adopting an administrative rule that will provide further guidance to this requirement. We will have forms available on our website prior to January 1, 2008.
Updated September 2007
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