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A: Oregon Governor Brown signed H.B. 2171 on July 20, 2015 which temporarily disallows the use of any tax credits to offset Oregon minimum tax. Taxpayers have been able to offset their Oregon minimum tax with Oregon credits since the 2013 Con-Way, Inc. v. Department of Revenue Oregon Supreme Court decision.
This recent legislation once again prohibits a taxpayer from offsetting minimum tax with credits by amending ORS 317.090 to provide that the minimum tax "may not be reduced, paid or otherwise satisfied through the use of any tax credit."
A: There are 3 essential take aways:
1. Effective retroactively for tax years beginning on or after January 1, 2015, Oregon tax credits can no longer offset the Oregon minimum tax.
2. This provision is effective for a six year period beginning January 1, 2015 through the 2020 tax year.
3. Taxpayers who have relied on tax credits offsetting the minimum tax for the 2015 tax year are required to recalculate their 2015 Oregon estimated tax and submit quarterly estimates. It is unknown at this time whether interest will be waived for underpayment of tax prior to the passage of H.B. 2171.
A: Keep in mind…
Credits earned from 2015 through 2020 can be carried forward. However, many of the Oregon tax credits (including the Qualified Research Activities Credit) have a carryover of three to five years, so there may be one or more tax years' worth of credits that will be lost during the six year moratorium. While it is possible that Oregon will provide an extension for the use of these credits, there is no legislation currently pending for that purpose.
It is unknown at this time whether the minimum tax will be imposed on a Corporation that is subject to the Oregon excise tax but has credits to offset the excise tax.