The DOR Issues Second Round of Temporary CAT Rules
Consistent with its plan announced late last year, this week the Oregon Department of Revenue (“DOR”) issued its second round of temporary administrative rules. This round of temporary rules was essentially a compilation of four draft rules the DOR issued during January, with no material changes.
You can read our updates from January 7, 2020, regarding the motor vehicle resale certificates rule; and January 15, 2020, detailing draft rules regarding the wholesale groceries exclusion, the retail sale of groceries exclusion, and property sold out of state. Given the temporary rules issued this week tracking those draft rules, these summaries track with the temporary rules.
On a different note, on January 24, 2020, Dan moderated a panel on the Oregon Corporate Activity Tax (“CAT”) at the Annual Business Meeting of the Associated General Contractors in Portland. Leah Putnam from the DOR was also on that panel. Although Ms. Putnam was clear to note her comments were not intended to be statements of the DOR, she did provide some interesting commentary on the CAT rules and their development by the DOR. In particular, Ms. Putnam noted the DOR is further considering the temporary rule concerning the “agent exclusion,” as well as the rules in area of unitary groups and unitary businesses. We remain hopeful the DOR will further clarify the agency rule, as that remains one of the most asked about rules released to date.
Finally, the short session of the Oregon Legislature began this week in Salem. At least two bills are currently pending in the Legislature that concern the CAT. HB 4009 contains a number of provisions, including specifying which taxpayer must register if more than one taxpayer comprises a group for purposes of the CAT; providing that returns and allowances may offset commercial activity; providing a commercial activity ratio for purposes of apportioning the CAT; and, importantly, providing for penalties for failure to file. This latter set of provisions is noteworthy because many taxpayers and practitioners have asked the DOR whether it would provide relief from penalties, at a minimum, in the first year the CAT is implemented due to its complexity. The enhanced penalty provisions included in HB 4009 indicate at least some in Salem view penalty relief as being a low priority.
HB 4138 is a bill relating to the CAT in the context of prescription drug sales.
It should be underscored HB 4009 and HB 4138 are concepts at this point, and are not the law. We will be tracking these and many other tax bills as those bills are considered by the Legislature. Look for additional updates throughout the short session and beyond.