The Oregon Department of Revenue (DOR) has recently begun issuing notices regarding the Oregon Corporate Activity Tax (CAT) to taxpayers with business activity within the state. The CAT is effective for tax years beginning on or after January 1, 2020, making 2020 the initial year of implementation.
The Oregon Department of Revenue (DOR) has recently began issuing notices regarding the Oregon Corporate Activity Tax (CAT) to taxpayers with business activity within the state. The CAT is effective for tax years beginning on or after January 1, 2020, making 2020 the initial year of implementation.
The new Corporate Activity Tax is imposed on businesses for the privilege of doing business in the state of Oregon. The CAT is measured based on a business’s commercial activity, the amount of business realized from transactions and activity in Oregon. Commercial activity is computed as Oregon sourced income less a 35% subtraction for the greater of labor costs or cost inputs apportioned to Oregon.
Businesses with commercial activity in excess of $750,000 are required to register with the Oregon Department of Revenue and those in excess of $1 million will be subject to the tax (see below). For businesses subject to the CAT, the tax is determined as follows: a $250 minimum plus 0.57% of Oregon commercial activity in excess of $1 million. Although the CAT is based on annual Oregon commercial activity, DOR requests that taxpayers calculate and make quarterly estimated payments based on anticipated Oregon commercial activity. A taxpayer is required to make quarterly estimated payments if a CAT liability of $10,000 or more is expected, which corresponds to commercial activity of $2,710,526.
However, due to the impact the COVID-19 pandemic, DOR has adjusted the estimated payment requirements for 2020 for those in excess of $10,000 in tax. The department states that if a taxpayer made a good faith effort to comply and/ or did not have the financial ability to make an estimate, no penalties will be assessed. Supporting documentation should maintained (additional information can be found on the Beyond the CAT FAQ webpage).
Administrative rules governing Oregon’s new Corporate Activity Tax continue to develop and should be monitored by those subject to the tax (or potentially subject in the future). Information regarding the CAT, including an e-mail mailing list, guidance on how to register, frequently asked questions, and administrative rules (both adopted and temporary) may be found on Oregon DOR’s website at the links below:
How to Register: https://www.oregon.gov/dor/programs/businesses/Documents/CAT/CAT-Registration-Training.pdf
About the Tax: https://www.oregon.gov/dor/programs/businesses/Pages/corporate-activity-tax.aspx
CAT FAQ: https://www.oregon.gov/dor/programs/businesses/Pages/CAT/CATFAQ.aspx
Beyond the CAT FAQ: https://www.oregon.gov/dor/programs/businesses/Pages/CAT/Beyond-CAT-FAQ.aspx
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Computation of Oregon’s commercial activity and application of possible exemptions can be complex. If you require assistance or have any questions regarding the Oregon Corporate Activity Tax, contact us.