Some relief announced for Oregon corporate activity tax
Oregon's tax agency has announced changes intended to help some businesses subject to the state's new corporate activity tax.
A couple of the changes by the Department of Revenue will allow businesses more time to pay if their estimated tax liability is $10,000 or less during the first year of the tax, which took effect Jan. 1. The $10,000 threshold is new and was doubled from the original $5,000.
These businesses will not have to make quarterly payments, the first of which would have been due Thursday, April 30 — or any payments this year.
Other changes by the department will not penalize businesses for underestimating quarterly tax payments, or failing to make payments if they are unable to do so because of the slowdown in economic activity as a result of the coronavirus pandemic.
In its announcement, the department says it will consider good-faith efforts to comply with the law and requested businesses to maintain documentation.
If a business knows it owes at least $10,000 in taxes for 2020 and can pay, the department added, it should proceed with quarterly payments and comply with the law.
The 2019 Legislature created a new corporate activity tax, proceeds from which go into an earmarked state fund for school improvement programs under the Student Success Act. The tax was projected to bring in $1.175 billion for the 2019-21 budget cycle — the projection was made before the coronavirus pandemic — and generate about $1 billion annually for schools.
The tax generally applies to businesses with more than $1 million annually in Oregon commercial activity.
Gov. Kate Brown, in an April 22 video conference sponsored by the Portland Business Alliance and others, told more than 1,000 participants she would not recommend suspending the tax.
"The investment we make now in our schools via the Student Success Act will help our state's children recover and get us back on track for the future of Oregon," she said.
More than 30 business organizations, including the alliance and Oregon Business & Industry, have urged suspension of the tax for the first six months of this year to help businesses maintain cash flows. Some have supported online petition drives to that effect.
Brown did say that businesses should not be penalized for missing or late quarterly reports, which are due April 30, July 31, Oct. 31 and Jan. 31.
In its announcement, the department specified what businesses should document to show the economic effects of coronavirus-related curtailments or closures:
• Their inability to pay a quarterly payment because of insufficient funds due to COVID-19.
• Their inability to reasonably calculate a quarterly payment or annual tax liability due to their business affected by COVID-19.
• That the taxpayer is unclear at this time whether the business will owe corporate activity taxes in April 2020 due to COVID-19 effects, after taking into consideration exclusions and subtractions in the law.