Oregon CAT: Oregon Department of Revenue Addresses Good Faith Effort Standards for Penalty Waivers for Underpayments of Estimated Payments
On April 24, 2020, Governor Brown directed the Oregon Department of Revenue (“DOR”) to refrain from assessing underpayment charges against taxpayers who do not pay at least 80% of their quarterly payment based on their total annual liability, or who fail to make a payment for tax year 2020, if the taxpayer can show they made a “good faith” effort to comply with ORS 317A.137(2). We addressed Governor Brown’s April 24, 2020 announcement in our April 27, 2020 article.
On June 5, 2020, the DOR promulgated temporary rule OAR 150-317-1500 (Good Faith Effort) to provide taxpayers guidance before the second quarterly estimated payment deadline of July 31, 2020. No penalty will be assessed for an installment of quarterly estimated payments if the taxpayer made a good faith effort to comply with the law. OAR 150-317-1500 provides:
- For tax years beginning on or after January 1, 2020, the following circumstance demonstrates “good faith”: The taxpayer made a reasonable estimate of the quarterly installment based on information available to the taxpayer at the time the quarterly installment was due.
- Additionally, for tax years beginning on January 1, 2020, and ending January 1, 2021, the following circumstances demonstrate “good faith”:
- A taxpayer cannot reasonably determine, at the time the quarterly installment is due, whether the taxpayer will have Corporate Activity Tax (“CAT”) liability for tax year 2020 due to the negative impact of COVID-19;
- The taxpayer did not have sufficient funds to pay the required installment for the quarter, due to the impact of COVID-19 on the taxpayer’s business; or
- The taxpayer cannot reasonably calculate the required quarterly installment or annual tax liability due to the impact of COVID-19 on the taxpayer’s business.
- Documentation: The taxpayer must retain documentation showing the good faith effort, as the DOR may request that information at a later date. Our recommendation is that you keep this in mind. You should be maintaining these records going forward.
As always, we will continue to follow any developments related to the CAT. In the meantime, if you have any questions or comments about the CAT, please do not hesitate to contact Dan Eller or Alee Soleimanpour.
Please visit Schwabe’s COVID-19 resource page for additional information.
- Dan EllerShareholder
- Alee SoleimanpourAssociate