Oregon Corporate and Business Taxation an Orientation of Business Related Income Taxes

Oregon Corporate and Business Taxation An Orientation of Business Related Income Taxes

*Much of the data in this presentation was generously provided by DOR’s research section. The information presented also references DOR’s corporate income and excise tax report. Outline of Presentation

ImportantExcise Tax versus Income Tax TerminologUnitary Groups and Reporting yApportionment versus Allocation Nexus: Tangible and Intangible

Statistics on Business Taxpayers

1/26/2021 Legislative Revenue Office 2 Excise vs. Income Tax

• Tax imposed on Excise corporations for the Relevant tax privilege of doing CorporateCorporate business within a state Taxation Number: 29,009 Tax Net Tax Amount: $743 million Definitionsin Oregon • Tax on the income of those corporations that have Oregon-source income Income but are not doing Number: 1,245 business here Amount: $3.1 million tax • Note: Income tax filers are not subject to minimum tax 1/26/2021 Legislative Revenue Office 3 Unitary Business Unitary Group Unitary Businesses and A business that shares one of the followingGroups with another business Group of unitary businesses Management or executive forces sharing or exchanging within the Administrative services or functions group Flow of goods, resources, or services

1/26/2021 Legislative Revenue Office 4 Apportionment vs. Allocation

• How multistate income is divided among Apportionment the states for taxation • Oregon: 100% Sales Apportionment Factor

• Method of attributing nonbusiness income to states Allocation • Nonbusiness income is income or loss not associated with the taxpayer’s normal course

1/26/2021 of businessLegislative Revenue Office 5 Liability vs. Collections

• “Net Tax” Tax Liability • Amount of tax owed to the state

Tax • Amount of money the state Collections actually collects Tax Liability versus Tax Collections

1/26/2021 Legislative Revenue Office 6 Nexus

Does the state have the authority to tax?

Yes No

Oregon can tax Oregon cannot company tax company 1/26/2021 Legislative Revenue Office 7 Nexus Tangible Personal Property

• If the only interaction a company has with a state is the sale of tangible PL 86-272 personal property, the state cannot tax the company

South • Physical presence is not required to Dakota v. create substantial nexus Wayfair • Wayfair does not overrule PL 86-272

1/26/2021 Legislative Revenue Office 8 Nexus 2017: SB 28 (CH 549) Moved Oregon to Intangible Sales market based intangible sales

Cost of Market performance based

Sales go to state Sales go to state where customer where the work received the benefit was performed of the service

1/26/2021 Legislative Revenue Office 9 Combined Reporting

Not all states allow combined reporting, but when allowed….

Worldwide Water’s Edge

Requires all members of Requires only US a unitary group, including members of a unitary foreign entities, to be group to be included in included in taxable taxable income for income for apportionment apportionment

1/26/2021 Legislative Revenue Office 10 Combined Reporting

Not all states allow combined reporting, but when allowed…. Joyce Finnigan Considers each member of If one member of a unitary a unitary group separately group is taxable in Oregon, to determine which entities then all members are count for apportionment included in apportionment

1/26/2021 Legislative Revenue Office 11 Business Types

Sole Partnerships, LegalProprietorships LLPs, LLCs Purposes

S Corporations C Corporations

1/26/2021 Legislative Revenue Office 12 Business Types

• Corporate Excise Payers CorporateC- • Corporate Income Payers Corporations • Insurance Corporations Taxation • Entity-level tax exists Purposes • Considered Pass-Through Entities (PTEs) S- • No entity-level tax Corporations • Earnings taxed via PIT

1/26/2021 Legislative Revenue Office 13 C Corporation Tax Forms

Form OR-20 Form OR-20-INC Form OR-20-INS Form OR-20-S

• Corporations • Corporations • Insurance • S corps. doing with Oregon corporations doing business in source doing business Oregon income not business within Oregon doing within Oregon business Business Typeswithin state Corporate Taxation in Oregon 1/26/2021 Legislative Revenue Office 14 C Corporation Tax Forms

Form OR-20 Form OR-20-INC Form OR-20-INS Form OR-20-S

Returns: 29,009 Returns: 1,245 Returns: 1,158 Returns: 71,173 Net Tax ($M): 743 Net Tax ($M): 3 Net Tax ($M): 730 Net Tax ($M): 12** 1/26/2021 Legislative Revenue Office 15 Structure of C-Corp Tax Filings • Collectively, we refer to these two tax types as the Corporate C-Corporations Excise and Income Tax • Often used interchangeably • Differences do exist

1/26/2021 Legislative Revenue Office 16 Structure of C-Corp Tax Filings

C-Corporations

Doing Business Within Oregon

1/26/2021 Legislative Revenue Office 17 Structure of C-Corp Tax Filings

C-Corporations

Doing Business Within Oregon

Corporate Excise Tax

1/26/2021 Legislative Revenue Office 18 Structure of C-Corp Tax Filings

C-Corporations

Not doing business in Oregon Income from Oregon source

1/26/2021 Legislative Revenue Office 19 Structure of C-Corp Tax Filings

C-Corporations

Not doing business in Oregon Income from Oregon source

Corporate Income Tax

1/26/2021 Legislative Revenue Office 20 Structure of C-Corp Tax Filings

C-Corporations

Not doing business in Doing Business Within Oregon Oregon Income from Oregon source

Corporate Excise Corporate Income Tax Tax

1/26/2021 Legislative Revenue Office 21 Structure of C-Corp Tax Filings

C-Corporations

Not doing business in Doing Business Within Oregon Oregon Income from Oregon source

Corporate Excise Corporate Income Tax ≠ Tax

1/26/2021 Legislative Revenue Office 22 How Taxation Works

Source: Oregon Department of Revenue, Corporate Excise and Income Tax Report1/26/2021 (2017) Legislative Revenue Office 23 How Taxation Works

Source: Oregon Department of Revenue, Corporate Excise and Income Tax Report1/26/2021 (2017) Legislative Revenue Office 24 How Taxation Works

Source: Oregon Department of Revenue, Corporate Excise and Income Tax Report1/26/2021 (2017) Legislative Revenue Office 25 How Taxation Works

Source: Oregon Department of Revenue, Corporate Excise and Income Tax Report1/26/2021 (2017) Legislative Revenue Office 26 Apportionment Methods

Corporation Only Operates in Oregon?