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State & Local Tax Alert
Breaking state and local tax developments from Grant Thornton LLP
Oregon Voters Approve Increases of Minimum Corporate Tax,
Rates for Large Corporations and High-Income Individuals Release date
January 29, 2010
At a special election held on January 26, 2010, Oregon voters approved a measure that
provides a new sliding scale for determining minimum corporate tax and increases the tax States
rate for large corporations.1 Also, voters approved a measure that creates two new
Oregon
personal income tax brackets for high-income individuals.2 The tax increases are
effective for tax years beginning on or after January 1, 2009. The legislation was
enacted last year,3 but a group of citizens successfully petitioned to have the tax increases Issue/Topic
considered by the voters at the special election. Corporate Income Tax /
Personal Income Tax
Corporate Tax Increases
Contact details
Minimum Tax
Scott Remington
Portland
For tax years beginning on or after January 1, 2009, Oregon revamps the minimum T 503.276.5907
E scott.remington@gt.com
corporate tax by installing a sliding scale based on Oregon sales as determined under the
state’s sales factor rules.4 Prior to amendment, Oregon imposed a $10 minimum tax on all Steve Jensen
Seattle
C corporations subject to the corporate excise tax and all S corporations. The new T 206.398.2484
minimum tax for C corporations and affiliated groups ranges between $150 for taxpayers E steve.jensen@gt.com
with less than $500,000 of Oregon sales to $100,000 for taxpayers with $100 million or Giles Sutton
more of Oregon sales. Note that there are a total of 12 different levels of minimum tax Charlotte
T 704.632.6885
that can be imposed, depending upon the amount of Oregon sales. In effect, a tax of E giles.sutton@gt.com
approximately 0.1 percent is imposed on gross sales equal to each minimum Jamie C. Yesnowitz
bracket amount. The amended statute provides a definition of “Oregon sales” for Washington, D.C.
T 202.521.1504
purposes of the new minimum corporate tax.5 E jamie.yesnowitz@gt.com
Chuck Jones
Chicago
T 312.602.8517
E chuck.jones@gt.com
www.GrantThornton.com/SALT
1 Measure 67, Unofficial Election Results, Oregon Secretary of State, January 27, 2010.
Approximately 53 percent of the voters approved this measure.
2 Measure 66, Unofficial Election Results, Oregon Secretary of State, January 27, 2010.
Approximately 54 percent of the voters approved this measure.
3 Ch. 745 (H.B. 3405), Ch. 746 (H.B. 2649), Laws 2009.
4 OR. REV. STAT. § 317.090(2).
5 OR. REV. STAT. § 317.090(1).
Grant Thornton LLP - 2
Corporate Income/Excise Tax Rates
Measure 67 adds progressivity to the state’s corporate income/excise tax rate, which stood
at 6.6 percent for all companies prior to 2009. For tax years beginning on or after January
1, 2009 and before January 1, 2011, the 6.6 percent tax rate is applied to corporate taxable
income up to $250,000.6 When corporate taxable income exceeds $250,000, a 7.9 percent
rate applies. The higher income tax bracket is scheduled to be reduced from 7.9 percent
to 7.6 percent for tax years beginning on or after January 1, 2011 and before January 1,
2013. For tax years beginning on or after January 1, 2013, the 6.6 percent corporate tax
rate will become applicable for taxpayers with corporate taxable income up to $10 million,
while corporate taxable income exceeding $10 million will continue to be taxed at 7.6
percent.7
New Personal Income Tax Brackets
Measure 66 adds progressivity to the state’s personal income tax by creating two new
income tax brackets for high-income individuals.8 Prior to 2009, most levels of taxable
income were taxed at a 9 percent tax rate. For tax years beginning on or after January 1,
2009 and before January 1, 2012, single and married individuals filing separately with
taxable income over $125,000 but not over $250,000 are subject to a 10.8 percent tax rate
on such income, while taxable income over $250,000 will be subject to an 11 percent tax
rate.9 The 10.8 percent tax rate is applicable to joint filers, heads of households and
surviving spouses with taxable income over $250,000 but not over $500,000, with the 11
percent tax rate applicable to income over $500,000. Beginning with the 2012 tax year,
these two new brackets are scheduled to be combined into one, taxing all income over
$125,000 for single and married individuals filing separately (all income over $250,000 for
joint filers, heads of households and surviving spouses) at 9.9 percent.10 The new law also
reduces or eliminates the deduction for federal income taxes paid for most high-income
taxpayers.11
Commentary
The Oregon voters historically have rejected tax increases and the imposition of a sales
tax. However, proponents of the measures argued that the tax increases were necessary
for education, public safety and healthcare.12 The tax rate increases are limited to large
corporations and high-income individuals. While other states have temporarily increased
taxes on high-income individuals in the past couple of years, Oregon is permanently
imposing a higher tax rate on these individuals.
6 OR. REV. STAT. § 317.061.
7 Id.
8 Ch. 746 (H.B. 2649), Laws 2009.
9 OR. REV. STAT. §§ 316.037, 316.042.
10 Id.
11 OR. REV. STAT. § 316.695(3).
12 Arguments in Favor of Measures 66 and 67, Online Voters’ Guide for January 26, 2010 Special
Election, Oregon Secretary of State.
Grant Thornton LLP - 3
The increase in the corporate minimum tax will be extremely significant for some
corporations. The $100,000 minimum tax for companies with a sufficiently large Oregon
presence as measured by the sales factor is unlike any minimum tax currently imposed by a
state on corporations. This tax could adversely affect companies in loss positions that
otherwise would not have substantial Oregon income tax liability.
Additionally, Oregon has yet to issue guidance with respect to the utilization of net
operating loss carryforwards and credits (Oregon is generally quite generous with respect
to the availability of research & experimentation credits and business energy tax credits).
Based on the current law now in effect, some taxpayers that have their income tax reduced
by these loss carryforwards or credits effectively may not receive any benefit due to the
minimum tax regime.
Furthermore, special consideration should be given to the impact that the increase in the
corporate tax rate may have on ASC 740 (formerly FAS 109) computations, as well as the
presentation of the corporate tax on their income statements (income taxes versus
minimum taxes which are not based on income).
The information contained herein is general in nature and based on authorities that are subject to change.
It is not intended and should not be construed as legal, accounting or tax advice or opinion provided by
Grant Thornton LLP to the reader. This material may not be applicable to or suitable for specific
circumstances or needs and may require consideration of nontax and other tax factors. Contact Grant
Thornton LLP or other tax professionals prior to taking any action based upon this information. Grant
Thornton LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that
could affect information contained herein. No part of this document may be reproduced, retransmitted or
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facsimile transmission, recording, re-keying or using any information storage and retrieval system without
written permission from Grant Thornton LLP.
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not written tax advice directed at the particular facts and circumstances of any person. Persons
interested in the subject of this document should contact Grant Thornton or their tax advisor
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