Shortly after the 2019 Legislature enacted the Corporate Activity Tax (“CAT”), the Oregon Department of Revenue (“DOR”) began what effectively has become its rulemaking process. That process started with informal meetings with practitioners and eventually evolved into a “listening tour” of sorts that expanded to include members of industry. Through that listening process, the DOR identified a number of issues it intended to address using its formal rulemaking authority.

The DOR initially indicated it would issue three tranches of temporary rules, one each month from January through March. The DOR would then follow rulemaking laws in providing notice and obtaining comments, and during the 180 days temporary administrative rules are effective. The DOR indicated it would issue final rules in the months from April through June.

On December 9, 2019, the DOR issued eight draft rules on its website at The DOR indicated those eight rules would be officially filed with the Secretary of State on January 1, 2020. The DOR reiterated its intention to continue releasing temporary guidance in February and March. The following are brief summaries of the eight temporary rules issued on December 9.

Agent Exclusion (150-317-1100).

Perhaps the most discussed guidance anticipated to date, this draft rule leaves many questions unanswered. That being said, this rule does provide that, for purposes of the CAT, an “agent” is “a person who is acting on behalf of another, and is subject to that other person’s control. The DOR indicates this determination will be made using all of the facts and circumstances. If a transaction party is determined to be an agent, that party “may exclude the fair market value of property, money and other amounts from their commercial activity only to the extent the property, money and other amounts are received or acquired on behalf of the person who controls the agent.” The rule goes on to provide an agent must subject the agent’s fee, commission, or remuneration to the CAT.

The draft rule concludes with four examples. In the first example, an escrow company is permitted to exclude the amount of a down payment from its computation of the CAT, but not its commission for providing the escrow services. In the second example, a piano company agrees to renovate a concert piano in return for certain fees. This example concludes the piano company does not include the value of the piano in its CAT computation, but must include the value of the services performed. In the third example, a payroll company is instructed to subject its fees to the CAT, but not other amounts held for the benefit of its customers. Finally, in the fourth example, the same payroll company from the third example is permitted to exclude from its computation of the CAT certain amounts paid for reimbursements of amounts paid to the customers’ employees.

Estimated Tax: When Estimated Payments Are Required (150-317-1300).

In any year in which a person is required to file a CAT return and is expected to have a tax liability in excess of $5,000, this draft rules instructs the person to make estimated tax payments. That is the case even if the person will have a credit balance from a prior period. Moreover, estimated payments are required regardless when during the year the person exceeds the $1M floor for being subject to CAT taxation. The rule reiterates the statutory requirement that estimated payments are due on April 30, July 31, October 31, and January 31.

A special rule is provided for short periods of less than 12 months:

  • If the period is less than four months, then only one payment in the amount of 100% of the tax is due, and that payment is due on the due date for the return.
  • If the period is longer than four months but less than six months, one payment of one-half of the estimated tax is due on the 15th day of the fourth month, and the balance is due on the due date for the return.
  • If the period is six months or longer but less than nine months, three payments are required (one-third on the 15th day of the fourth month, one-third on the 15th day of the six month, and the balance on the due date for the return).
  • If the period is nine months or longer but less than twelve months, four payments are required using a similar methodology.

If a person believes the person has overpaid, no refunds are generally due before the filing of the return; however, the person may request a refund. The DOR will evaluate each such request on the facts and circumstances.

If a person overpays, the person may make an irrevocable election to carry over the overpayment to the following tax period. The rule contains ordering rules for how to apply those overpayments.

The DOR will credit estimated payments on the date received. All estimated CAT payments must be made by electronic funds transfer (unless the person obtains a one-time waiver from the DOR).

Estimated Tax: Unitary Groups and Apportioned Returns (150-317-1320).

This draft rules provides that if two or more entities file a single CAT return as a unified group, each entity will be jointly and severally liable for the filing and payment of the estimated tax.

For persons who are required to apportion commercial activity, for purposes of the subtraction from the computation of the CAT, they are required to use either the current period’s actual or the prior full year’s apportionment factor to meet the annualization exception to underpayment of estimated taxes.

Substantial Nexus Guidelines for the CAT (150-317-1010).

Out-of-state persons have asked for guidance on when they are subject to the CAT, and this draft rule provides some guidance. In short, the draft rule provides for a standard of “substantial nexus” to apply with respect to the CAT. The draft rule includes a number of factors the DOR may consider in determining whether substantial nexus exists. The draft rule makes it clear the DOR will apply this as broadly as constitutionally permissible.

The draft rule concludes with two examples. In the first example, a wine and beer distributor is found to have substantial nexus because it registers with the OLCC. In the second example, an e-services company is found to have sufficient nexus because it has economic activity in excess of the CAT’s $750K filing requirement, even though its activity is below the $1M taxation threshold.

Factors Used in Determining Whether a Group of Persons Are Engaged in a Unitary Business and Filing Requirements for Unitary Groups (150-317-1020).

This draft rule provides the general rule that “if the activities of one business either contribute to the activities of another business or are dependent upon the activities of another business, those businesses are part of a unitary business.” This drat rule is the most detailed of the draft rules and is more than twice the length of any of the other rules. As such, we are omitting a detailed description of this rule at this time. Look for future updates that detail this and other rules.

Property Brought into Oregon (150-317-1130).

An interesting component of the CAT is its “use” tax. This draft rule explains more about how the use tax will be employed with respect to persons and unitary groups. In the event the person or unitary group uses property transferred into Oregon in the business of the person or the unitary group within one year of receiving the property outside of Oregon, then the value of that property will be subject to the CAT.

Extensions of Time to File (150-317-1330).

This draft rule provides for a six-month extension of the time to file upon the showing of “good cause,” which is defined to include death, destruction of records, unavoidable and unforeseen absence of the taxpayer from the state, or required information is not available or in the proper form. “Good cause” does not include, among other factors, reliance on a professional to merely timely file the return, or reliance on an employee of the person to prepare a timely return.

Estimated Tax Payments: Delinquent or Underestimated Payment or Both, Constitutes Underpayment (150-317-1310).

This draft rule deals with situations in which the estimated CAT tax payments are insufficient under the above rules. Given this rule will not apply at the outset of 2020, we omit a detailed discussion at this time. Look for future updates that detail this and other rules.

If you have any questions regarding the CAT, please contact Dan Eller at or 503-796-3762. Dan will be monitoring developments with the CAT and providing updates from time to time.

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