Oregon Corporate Activity Tax

What is CAT? A tax imposed for the privilege of doing business in Oregon This tax is in addition to any other taxes or fees imposed under the tax laws...

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What is CAT?

  • A tax imposed for the privilege of doing business in Oregon
  • This tax is in addition to any other taxes or fees imposed under the tax laws of Oregon
  • This tax is imposed on the seller/service provider, not on the purchaser
  • This tax is an annual privilege tax for the calendar year
  • A taxpayer is subject to the tax for doing business during any portion of such calendar year

Who is Subject to CAT?

  • A tax is owed if the person’s taxable commercial activity exceeds $1 million
  • Nexus exists where a person regularly takes advantage of Oregon’s economy to realize commercial activity and may be established through significant economic presence
  • Any person or unitary group with commercial activity in excess of $750,000 in the tax year shall register with the DOR

What is Commercial Activity?

  • The fair market value of all amounts realized in the regular course of a trade or business (including bartering)
  • Sale of tangible personal property if and to the extent the property is delivered to a purchaser in Oregon
  • Performance of services, if and to the extent the service is delivered to a location within Oregon
  • Sale, rental, lease or license of real property located in Oregon
  • Sale, rental, lease or license of tangible personal property located in Oregon
  • Sale, rental, lease or license of intangible property, if and to the extent the property is used in Oregon

What Costs are Deductible for CAT?

  • A taxpayer shall subtract from commercial activity sourced to Oregon 35% of the greater of total labor costs or the cost of inputs
  • The subtraction under this section may not exceed 95% of the taxpayer’s commercial activity in Oregon
  • A taxpayer must apportion the labor cost or cost input subtraction, by means of a commercial activity ratio for activity in Oregon compared to all activities

What Method of Accounting is Used?

  • A Taxpayer’s method of accounting for commercial activity, cost inputs and labor costs for a tax year shall be the same as the taxpayer’s method of accounting for income purposes. If a method of accounting changes for income tax purposes, commercial activity for CAT shall be changed accordingly

How Much Tax is Imposed?

  • The corporate activity tax imposed is equal to $250 plus the product of the taxpayer’s taxable commercial activity in excess of $1 million for the calendar year multiplied by .57 percent (.0057)

What is the Effective Date of the Tax?

  • This tax applies to tax years beginning on or after January 1, 2020 and to returns filed on or before April 15, 2021
  • Registration is required within 1 month of the organization’s commercial activity exceeding

$750,000 in gross sales, with a penalty of $100/month up to $1,000 imposed for failure to register

What is a Unitary Group?

  • Need to look at facts and circumstances
    • Unitary business means business enterprises in which there exists direct or indirect relationships
    • Centralized management, common executive force, economies of scale, same business line, etc.
    • A group of persons with more than 50% common ownership
    • A unitary group shall register, file and pay taxes as a single taxpayer and may exclude receipts from among its members
    • All members of a unitary group are jointly and severally liable for taxes, penalties, and interest

What Income is Excluded from CAT (not an exhausted list)?

  • Interest income and dividends, except interest on credit sales
    • Sale of 1221 or 1231 assets, regardless of how long the asset was held
    • Proceeds received attributable to repayment, maturity or redemption of the principal of loans, bonds, mutual funds, CD’s or marketable securities
    • Proceeds received on payment from insurance policies, except from the loss of business revenue
    • Damages received from litigation in excess of amounts that would be commercial activity
    • Amounts received by an agent on behalf of another in excess of the agent’s renumeration
    • Tax refunds

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