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.

1. What is measure 97?

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.

2. What is the current Oregon corporate minimum tax?

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.

3. What would the money be used for?

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.

4. How would this affect me?

  • Oregon Companies: The tax increase would only be directly imposed upon corporations structured as a C-corporation. And then only those that have Oregon sales over $25 million. The nonpartisan Legislative Revenue Office established that this was about 3.6% of corporate filers in 2013. The tax increase would not directly impact any companies structured as an LLC, S-corporation, partnership, sole proprietor or recognized by Oregon as a benefit company.
  • Oregon Residents: The tax increase would not directly be imposed on Oregonians. However, it is expected that the higher tax would result in higher consumer prices for Oregonians. It is also speculated that the revenue generated would eliminate many private sector jobs while providing some public sector jobs and improve our education system.

5. Do other states have a similar tax?

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.