1. What is the Corporate Activity Tax?
a. A corporate activity tax is imposed on each person (Defined in Question #4) with taxable commercial activity (Defined in Question #2) doing business in this state.
b. The corporate activity tax imposed for each calendar year shall equal $250 plus the product of the taxpayer’s taxable commercial activity in excess of $1 million for the calendar year multiplied by 0.57 percent.
c. The tax imposed is in addition to any other taxes or fees imposed under the tax laws of this state. The tax imposed is imposed on the person receiving the commercial activity and is not a tax imposed directly on a purchaser.
d. The tax imposed is an annual tax for the calendar year and shall be remitted quarterly to the Department of Revenue. A taxpayer is subject to the annual corporate activity tax for doing business during any portion of such calendar year.
2. What is the definition of taxable commercial activity?
a. “Taxable commercial activity” means almost any commercial activity sourced to this state, less any subtraction described in question #3.
b. “Commercial activity” means the total amount realized by a person, arising from transactions and activity in the regular course of the person’s trade or business, without deduction for expenses incurred by the trade or business.
i. Commercial activity does not include various items for example:
1. Interest income
2. Receipts from sale of assets
3. Tax refunds
4. Receipts from the wholesale or retail sale of groceries.
5. This is not an exhaustive list. Please check with your CPA for additional exceptions from commercial activity
3. What can be subtracted from the Commercial Activity in order to calculate the tax?
a. A taxpayer shall subtract from its commercial activity sourced to this state 35 percent of the greater of the following amounts paid or incurred by the taxpayer in the tax year:
i. The amount of cost inputs; or
ii. The taxpayer’s labor costs.
1. Includes total compensation for all employees, not to include compensation paid to any single employee in excess of $500,000.
iii. The amounts shall be apportioned to this state in the manner required for apportionment of income under Oregon tax laws.
iv. The subtraction under this section may not exceed 95 percent of the taxpayer’s commercial activity in this state.
4. What is the definition of “Person” for the CAT?
a. A person is includes:
ii. combinations of individuals of any form,
v. trustees in bankruptcy,
viii. joint-stock companies,
ix. business trusts,
xii. limited liability partnerships,
xiii. limited liability companies,
xv. joint ventures,
xviii. entities organized as for-profit corporations under ORS chapter 60,
xix. C corporations,
xx. S corporations,
xxi. qualified subchapter S subsidiaries,
xxii. qualified subchapter S trusts,
xxiii. trusts, entities that are disregarded for federal income tax purposes and
xxiv. any other entities.
5. Registration Requirements?
a. Any person or unitary group with commercial activity in excess of $750,000 in the tax year shall register with the Department of Revenue.
i. Registration is required even though the person / taxpayer may not be subject to the tax (i.e. the commercial activity is under the $1,000,000 threshold).
6. Does a return need to be filed?
a. For purposes of the corporate activity tax imposed, every person doing business in this state with commercial activity for the tax year in excess of $1 million shall file not later than April 15 of the following year an annual return. The return must be filed with the Department of Revenue in a form prescribed by the department.
b. We are waiting on guidance from the ODR regarding the prescribed form to file the return on.
7. When does the CAT become effective?
a. The CAT applies to tax years beginning on or after January 1, 2020.