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Oregon CAT: DOR Issues Third Round of Temporary Rules

March 9, 2020

Overview

On Friday, March 6, 2020, the Oregon Department of Revenue (“DOR”) issued its third round of temporary administrative rules. This round of temporary rules consists of two draft rules the DOR had issued in late February 2020, OAR 150-317-1220 and OAR 150-317-1120, with no material changes.

With respect to the former, you can read our February 25, 2020 update. With respect to the latter, draft (now temporary) OAR 150-317-1120 defines “single-family residential construction” for purposes of Oregon Revised Statutes (“ORS”) 317A.122. ORS 317A.122 provides general contractors an exclusion from their commercial activity under the Oregon Corporate Activity Tax (“CAT”) equal to 15% of the payments made to subcontractors for labor costs pursuant to a contract for single-family residential construction. The rule defines “single-family residential construction” as the construction of new single-family housing, such as single-family detached or semidetached houses and townhouses or row houses, where each housing unit: (1) is separated from the adjacent unit by a ground-to-roof wall; (2) has no housing units constructed above or below it; (3) does not share heating or air-conditioning systems; and (4) does not share utilities.

On a different note, the short session of the Oregon Legislature (“Legislature”) ended early on Thursday, March 5, as the Legislature was unable to resolve an impasse between the Democratic majority and Republican minority regarding a climate change bill. Unfortunately, this means the two bills relating to the Oregon CAT, HB 4009 and HB 4138, did not become law. Although the Legislature may convene a special session before year-end to address those bills, among others, as of today, that remains unclear. As such, taxpayers should proceed in planning their affairs vis-à-vis the CAT with the current statutes and the DOR’s rulemaking in mind.

Nevertheless, we will continue to track HB 4009, HB 4138, and many other tax bills as they are being considered by the Legislature. Please be on the lookout for additional updates in the event of a special session and beyond.

Finally, as a reminder, the DOR has scheduled an “Education Tour” for the month of March. As of today, this Education Tour continues, in spite of recent concerns regarding the potential spread of COVID-19 and Governor Brown’s declaration of a state of emergency in response to those concerns.

In the meantime, if you have any questions or comments about the CAT, please do not hesitate to contact Dan Eller or Alee Soleimanpour.

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