The Oregon Department of Revenue has filed a notice of proposed rulemaking on the administrative regulations for the corporate activity tax (C.A.T.). The hearing will be held on May 26 via teleconference due to the novel coronavirus pandemic.
The notice includes rules addressing the following subject areas:
- Definition of Commercial Activity
- Substantial Nexus Guidelines
- Unitary Group Determinations
- Unitary Groups with Non-U.S. Members—Reporting Requirements
- Sourcing Sales of Tangible Personal Property
- Sourcing Sales of Intangible Personal Property
- Agent Exclusion
- Definition of Single-Family Residential Construction
- Property Brought into Oregon
- Retail Sale of Groceries Exclusion
- Cost Inputs or Labor Cost Subtraction
- Employee Compensation Labor Cost Subtraction
- Estimated Tax Payment Requirements
- Estimated Tax Delinquent or Underestimated Payment
- Estimated Tax Unitary Groups and Apportioned Returns
- Estimated of Time to File
- Motor Vehicle Resale Certificate
These rules largely follow the temporary administrative regulations filed on December 30, 2019 (see “Oregon Department of Revenue Issues Guidance for Corporate Activity Tax” and “Oregon Department of Revenue Issues Additional Tax Guidance“). However, there are two noteworthy deviations for the statutory subtraction and filing groups.
The rule for the statutory subtraction (“Cost Inputs or Labor Cost Subtraction”) provides for a “special rule” allowing certain corporate taxpayers—i.e., those with the same unitary entities for both the income tax and C.A.T. and substantially all (95 percent or more) of commercial activity included in the sales factor—to use their sales factor apportionment percentage for computing their statutory subtraction to Oregon. Additionally, the rule for worldwide unitary groups (“Unitary Groups with Non-U.S. Members—Reporting Requirements”) may allow some taxpayers to omit information of certain foreign entities.
The Department is expected to hold another regulatory hearing on June 23 for administrative rules not included in the temporary administrative order. You can view these rules and additional information on the Department’s website here.