Additional Guidance on the Oregon Corporate Activity Tax (CAT)

On May 16, 2019, Governor Kate Brown signed “The Student Success Act” that enacted Oregon’s Corporate Activity Tax (CAT) into law. The CAT rate of 0.57% will be applied to the net Oregon Commercial Activity.

Oregon gross receipts delivered to or benefit received in Oregon less:

• the greater of
  • 35% of apportioned cost inputs or
  • 35% of apportioned cost of labor
• $1,000,000 annual exemption.

There is still uncertainty with respect to the CAT. Some additional unofficial guidance has been released since the tax was enacted:

• Unitary* filing will be required regardless of business form
• It is likely that the federal attribution rules in determining the common ownership of unitary entities. (Lineal descendants are considered 1 person)
• At a high level, unitary is >50% common ownership AND either functional integration or same line of business
• The $1M annual exemption only applies once to a unitary group
• Registration is required annually for the tax when you reach $750,000 in gross Oregon commercial activity, regardless if they owe tax
• Estimated payments are not required until a business has actual tax liability
• The law does not prohibit taxpayers from passing the tax through to the customer

*The Student Success Act defines “Unitary” as a business enterprise in which there exists directly or indirectly between the members or parts of the enterprise a sharing or exchange of value as demonstrated by:

• Centralized management or a common executive force;
• Centralized administrative services or functions resulting in economies of scale; or
• Flow of goods, capital resources or services demonstrating functional integration.

“Unitary Business” may include a business enterprise the activities of which:

• Are in the same general line of business, such as manufacturing, wholesaling or retailing; or
• Constitute steps in a vertically integrated process, such as the steps involved in the production of natural resources, which might include exploration, mining, refining and Marketing.

Stay tuned for updates at Delapcpa.com.