Consistent with its plan announced earlier this year, on April 26, 2020, and April 27, 2020, the Oregon Department of Revenue (“DOR”) issued the first batch of permanent rules related to the Oregon Corporate Activity Tax (“CAT”). For those of us tracking the DOR’s rulemaking process, this was expected, albeit a few days earlier than anticipated. 

Newly Issued Permanent Rules

As promised, the DOR issued 17 permanent rules, 16 of which it previously had issued in a “draft” and/or “temporary” form before now. In our April 14, 2020 article, we set forth the 17 rules the DOR would address in its first batch.

Below is a list of the newly issued permanent rules.

  • The embedded links below are to our previous discussions of those draft/temporary rules, which are relevant now, as the DOR did not materially change those rules.
  • The bold rules are those that the DOR has modified in its recent issuance as well as OAR 150-317-1025, a brand new rule that was not previously issued in “draft” and/or “temporary” form. Those rules are each discussed below.


Rule Title


Definition of Commercial Activity


Substantial Nexus Guidelines for the Corporate Activity Tax (CAT)


Factors Used in Determining Whether a Group of Persons Are Engaged in a Unitary Business and Filing Requirements for Unitary Groups


Corporate Activity Tax:  Unitary Groups with Non-U.S. Members – Reporting Requirements


Sourcing Commercial Activity to Oregon from Sales of Tangible Personal


Sourcing Commercial Activity to Oregon of Other than Sales of Tangible Personal Property


Agent Exclusion


Exclusion for Subcontracting Payments


Property Brought into Oregon


Retail Sale of Groceries Exclusion


Cost Input or Labor Cost Subtraction


Employee Compensation: Labor Cost Subtraction


Estimated Tax: When Estimated Payments are Required


Estimated Tax Payments: Delinquent or Underestimated Payment or Both, Constitutes Underpayment


Estimated Tax:  Unitary Groups and Apportioned Returns


Extensions of Time to File


Motor Vehicle Resale Certificate – Documentation Required


Modified or Newly Issued Rules

The DOR modified five existing rules and issued one new rule.

OAR 150-317-1025 (Unitary Groups with Non-U.S. Members – Reporting Requirements).

As noted in our earlier summary, on April 10, 2020, the DOR indicated it would be releasing a rule on the topic of unitary groups with non-U.S. members. That rule was included in this packet and numbered as OAR 150-317-1025 (“Rule 1025”). This rule starts with the general propositions that, for purposes of the CAT, a unitary group may include non-U.S. members; and, generally, a unitary group must include all of its members. Rule 1025, however, provides a special rule that permits certain unitary groups to omit from the CAT return a non-U.S. member’s information if that member has (1) no commercial activity sourced to Oregon under ORS 317A.128; (2) commercial activity excluded under ORS 317A.100(1)(b) that would not be sourced to Oregon if it was not included in commercial activity; (3) no transactions with another unitary group member that meets certain requirements; and (4) no cost inputs or labor costs that are attributable to the unitary group’s CAT computation.

OAR 150-317-1100 (Agent Exclusion).

Perhaps the most anticipated new rule was the Agent Exclusion in OAR 150-317-1100. This rule had received much attention in the months since it was first released in draft and temporary form. The DOR delivered notable changes to the rule. For example, the DOR deleted the example of the piano renovation company. The DOR also added two new examples specific to the construction industry. A summary of the key changes/additions is as follows:

  • Example 2, HR Company: The DOR updated the example to further clarify that companies providing HR services may exclude from their CAT computation compensation and related payroll amounts paid to their clients’ employees.
  • Example 3, Staffing Company: Similar to Example 2, the DOR clarified that staffing companies may exclude from the CAT computation wages and payroll taxes paid by employers to the workers of the staffing company.
  • Example 4, Fixed-Price Construction Contracts: Here the DOR noted that when a construction contractor bears all the risks associated with completing a project in a cost-effective manner for a fixed contract price, the entire amount of the contract price is included in the contractor’s CAT computation.
  • Example 5, Cost-Plus Construction Contracts: As a contrast to Example 4, the DOR contemplated “cost-plus” contracts in which a contractor earns a fee for delivering the contracted construction services. The rule, however, includes the notion that the contractor “must act on behalf of and under the direction and control of” the owner as it pertains to “the use of subcontractors.” In that case, the rule concludes the contractor may exclude from its CAT computation the amounts paid to the subcontractors.

In summary, the Agent Exclusion has seen substantial changes here in the issuance of this permanent rule. That being said, we predict at least Examples 4 and 5 will receive comments regarding their wording and application. We will continue to watch the finalization of this rule closely.

OAR 150-317-1120 (Exclusion for Subcontracting Payment).

The DOR added 150-317-1120(2) to clarify that the subcontractor labor payment exclusion is in addition to the subtraction allowed under ORS 317A.119.

OAR 150-317-1200 (Cost Input or Labor Cost Subtraction).

The DOR made notable changes to this rule. For example, the DOR added a special rule for a taxpayer or unitary group that apportions between states. That change, found in OAR 150-317-1200(3), provides that if a taxpayer is identical to the entity, or made up of a group of entities that is identical to the group of entities, reporting on the apportionment schedule filed for purposes of Oregon income or excise taxation under ORS Chapters 314, 316, 317, or 318, then that taxpayer or unitary group may elect to use the single sales factor apportionment percentage from the taxpayer’s or unitary group’s Oregon apportionment schedule filed under such ORS Chapters to calculate the subtraction amount. To use the rule, the electing taxpayer or group must:

  • Use the most recent return covering a 12-month period filed with the department; and
  • Demonstrate that substantially all the receipts included in the sales on the Oregon income or excise tax return are attributable to receipts included in commercial activity.

The rule also provides an alternative method that states a taxpayer may elect the use of separate accounting to remove all cost inputs or labor cost from the subtraction that are attributable to a person’s receipts from an item that is not commercial activity, if the costs attributable to receipts from an item that is not commercial are readily identified in the taxpayer’s books and records maintained in the ordinary course of business as amounts separate from costs attributable to receipts from an item that is commercial activity.

Finally, the DOR also moved Example 2 to Example 1, and added six more examples. The six additional examples address the new unitary rule.

  • Example 2: This examples illustrates a scenario in which one can use the apportionment percentage by meeting the requirements set forth above.
  • Example 3: This example illustrates the requirement that the unitary groups must be identical in order to use the apportionment percentage under this rule.
  • Example 4: This example illustrates the requirement that a unitary group must demonstrate that substantially all of its sales included in its sales factor must be attributable to sales included in commercial activity.
  • Example 5: This example provides that a unitary group may not use the apportionment percentage under this rule when the group consists of two partnerships who must file their own separate partnership returns under ORS Chapter 314.
  • Example 6: This example illustrates the alternative method set forth in OAR 150-317-1200(3). In this example, the taxpayer was able to use the separate accounting method because it separately recorded the labor costs attributable to the commercial activity from the labor costs that were not attributable to commercial activity in its books.
  • Example 7: This examples again illustrates the alternate method set forth in OAR 150-317-1200(3) and discussed in Example 6. Specifically, this example highlights the principle that costs attributable to receipt from an item that is not commercial must be readily identified in the taxpayer’s books and records.

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

This rule provides guidance to taxpayers in determining when CAT payments are required. Notably, this permanent rule adopts the language of the temporary rule, clarifies that persons subject to unrelated business income have the same obligations as other persons under the CAT, and provide a higher estimated tax payment threshold for the first year of tax. This higher threshold, $10,000, is the same increased threshold we discussed in our April 27, 2020 article.

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

Although we anticipated edits to the temporary version of this rule, the DOR ended up adopting the temporary rule and making minor grammatical changes. A summary of this rule can be found in our December 10, 2019 article.

Public Comment and Hearing Schedule

Finally, the DOR has not announced any changes to the public comment or hearing schedules. Accordingly, the public hearing date is still slated as May 26, 2020 (via call-in number), and the public comment deadline is also May 26, 2020 (via email: and via mail: 955 Center St. NE, Salem, OR 97301).

We will continue to follow any developments related to the CAT, including any changes to the public comment and hearing schedule and the upcoming second batch of permanent rules. 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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