Enactment of SB 164 and Changes to Oregon’s Corporate Activity Tax
Although Oregon’s 2021 legislative session turned out to be relatively quiet from a tax perspective, we did experience some changes to Oregon’s Corporate Activity Tax (“CAT”). Those changes were primarily in the form of SB 164. The enactment of SB 164 ushers in the following CAT changes.
Fiscal Year Filings. Since the enactment of the CAT, taxpayers in tax years other than December 31 calendar years have commented on the need to move their CAT reporting and payment obligations to their fiscal years. Those taxpayers noted how the traditional calendar-year CAT system could cause them to maintain an additional set of books in order to compute their CAT obligations.
SB 164 now requires fiscal-year taxpayers (as determined under Internal Revenue Code Section 441) to register with the Oregon Department of Revenue (“DOR”) and file a short-year return for the period January 1, 2021, through the end of the taxpayer’s fiscal year. To the extent the taxpayer is running up against the $750,000 CAT registration and/or $1,000,000 CAT payment thresholds, the statute provides for a pro-rata determination based on the days in the short year as compared to a calendar year. All required short-year returns for tax year 2021 must be filed no later than April 15, 2022.
SB 164 made several other changes to the CAT law to conform this change from a calendar year to the taxpayer’s fiscal year. Additionally, SB 164 makes changes to the unitary group rules to account for differing accounting periods within a particular unitary group.
Changes to the Definition of “Commercial Activity” under ORS 317A.100(1)(a). The following provisions of ORS 317A.100(1)(a) (“commercial activity” defined) were modified:
- (W) – the vehicle dealer exception was expanded to cover “an exchange of new vehicles between franchised motor vehicle dealerships.”
- (AA) – the term “net revenue” was changed to “receipts” with respect to residential care facilities, to the extent those receipts are derived from or received from service compensation related to a medical assistance or Medicare recipient.
- (EE) – receipts from the wholesale or retail sale of groceries include “receipts of a person that owns groceries at the time of sale and compensation of any consignee engaged in effecting the sale of groceries on behalf the owner of the groceries, but only to the extent that the compensation relates to grocery sales.”
Other Unitary Group Changes. SB 164 requires unitary groups to designate a single member as the reporting entity for purposes of registering, filing, and paying on behalf of the unitary group. That designation may be changed only when the designated member no longer has substantial nexus under ORS 317A.116, when the designated member is no longer a member of the unitary group, or as provided by rule of the DOR.
In response to SB 164, on September 30, 2021, the DOR announced it had updated the Frequently Asked Questions (“FAQs”) on its website. The changes to the FAQs primarily follow the SB 164 provisions described above. Additionally, the DOR now expressly states CAT returns cannot be filed on the DOR’s Revenue Online service. CAT returns must be filed via the mail or an approved e-file vendor.
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