As discussed in recent blog posts, the Oregon Legislative Assembly recently enacted a Corporate Activity Tax (“CAT”). Governor Kate Brown signed the legislation into law, effective January 1, 2020. Put in simplest terms, the CAT is a gross receipts tax on businesses with greater than $1 million of “commercial activity sourced to this state.”
Given the broadness of the new law and the many anticipated difficulties that taxpayers, tax advisors and the government will likely encounter determining what constitutes “commercial activity sourced to this state,” the need for the Oregon Department of Revenue (the “Department”) to adopt administrative rules on the new law is evident.
The Department was given legislative authority to promulgate rules with respect to many provisions of the CAT, including the taxation of property transferred into Oregon, determining the source of revenue, and registration procedures. In fact, the Department recently announced that it will soon commence the process of drafting rules which will likely continue into the latter part of this year. The Department has further announced that it intends to involve stakeholders in the rulemaking process. In this regard, it will hold stakeholder meetings around the state. We recommend that tax advisors attend these stakeholder meetings and offer the Department input on the CAT, including concerns, questions and comments about the CAT, its application, compliance matters and applicable tax reporting. Keep a look-out for the stakeholder meeting dates and locations. One way to stay informed and to obtain the meeting dates and locations for the stakeholder meetings would be to subscribe to the CAT program mailing list. That can be accomplished on the Department’s website.
In an email sent to the CAT program mailing list on August 7, 2019, the Department indicated that it already has assembled a team that is working to identify the rules the Department will need to promulgate. Further, the Department expects to have an initial set of rules drafted by January 2020. The CAT is a new tax regime for Oregon businesses. Getting clarity and guidance is ever important for our clients.
The rules will be drafted in multiple stages. The Department is making the rules relating to registration and estimated tax payments a priority. While we certainly understand the need to focus on registration and payment issues, this means that it may be a while before we see guidance relative to some significant issues like sourcing, and application of the numerous carve-outs and exceptions to the tax.
We will continue to update you as we learn more. Stay tuned!
Larry's practice focuses on tax planning and advice, tax controversy and business transactions. He regularly advises clients in structuring mergers and acquisitions, joint ventures and other business transactions.
Peter’s practice focuses on tax, business transactions, and real estate. His tax practice includes tax planning and tax controversy. His business practice includes entity formation, corporate compliance and governance ...
Larry J. Brant is a Shareholder in Garvey Schubert Barer, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; New York, New York; Washington, D.C.; 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
- "Tax Law Update for Family Law Practitioners," Oregon State Bar - Family Law Section 2019 Annual ConferenceSunriver, OR, 10.11.19
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, but It Isn’t Free of Potholes and Obstacles," New York University 78th Institute on Federal TaxationNew York, NY, 10.20.19-10.25.19
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, but It Isn’t Free of Potholes and Obstacles," Oregon Society of Certified Public Accountants (OSCPA) 2019 Northwest Federal Tax ConferencePortland, OR, 10.28.19
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, but It Isn’t Free of Potholes and Obstacles," New York University 78th Institute on Federal TaxationSan Francisco, CA, 11.10.19–11.15.19
- "The Oregon Corporate Activity Tax," Oregon Society of Certified Public Accountants (OSCPA) 2020 OSCPA State & Local Tax ConferencePortland, OR, 1.6.20