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On November 8th, 2016, Oregonians will have an important vote to cast. This vote, however, is not their choice for the next president. Oregonians will be asked to weigh in on the Oregon Business Tax Increase Initiative, or Measure 97.
Have you been too busy watching the presidential debates to read up on Measure 97? Don't sweat it. We've come up with the top 5 things to know before deciding how you'll vote.
Measure 97 is a proposal to restructure and increase the Oregon corporate minimum tax. Under the current law, the minimum tax is capped at $100,000 for Oregon sales greater than $100 million. The proposal would remove the $100,000 cap and impose a 2.5% tax on sales over $25 million. For example, if a corporation has $50 million in Oregon sales, their minimum tax would increase from $50,000 to $655,000.
Under the current law, Oregon C-corporations are taxed at the greater of two calculations:
#1. The calculated corporate net income tax: 6.6% on taxable income up to $1 million and 7.6% on taxable income over $1 million.
#2: The corporate minimum tax: A progressive tax schedule based on Oregon sales, not net income. This means that even if a corporation has no income after expenses, they are still subject to the tax based on the amount of Oregon sales. Currently, the minimum tax ranges from a $150 min. to a max of $100,000 if sales exceed $100 million.
The tax revenue generated would go into the Oregon General Fund. The measure proposes the funds be used on public early childhood and K-12 education, healthcare, and services for senior citizens. However, the Oregon Constitution does not allow revenue to be reserved for a certain use. Any revenue raised would be distributed by a future Legislature.
Currently, five other states have a business tax based on gross sales. These other states impose their tax on all business types, while Measure 97 applies only to C-corporations. Each of these states provides exemptions from the tax for essentials such as medicine and food while Measure 97 does not. The proposed rates under Measure 97 are exponentially higher than the rates of these other states.
Have questions on how Measure 97 would impact you or your business? Reach out to our team today!
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Delap LLP is one of Portland’s largest local tax, audit, and consulting accounting firms, located in Lake Oswego, Oregon.