73rd OREGON LEGISLATIVE ASSEMBLY--2005 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 320
House Bill 2088
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of Governor Theodore R.
Kulongoski for Department of Revenue and Office of Regulatory
Streamlining.
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Authorizes pass-through entities to file composite tax returns
on behalf of nonresident individuals, corporations or trusts.
Establishes withholding requirements for pass-through entities
that have nonresident owners.
Applies to tax years beginning on or after January 1, 2006.
A BILL FOR AN ACT
Relating to taxation; creating new provisions; and repealing ORS
314.760.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + As used in sections 1 to 4 of this 2005 Act:
(1) 'Distributive income' means the net amount of income, gain,
deduction or loss of a pass-through entity for the tax year of
the entity.
(2) 'Lower-tier pass-through entity' means a pass-through
entity, an ownership interest of which is held by another
pass-through entity.
(3) 'Nonresident' means:
(a) An individual who is not a resident of this state;
(b) A corporation, partnership or other business entity that
has a commercial domicile, as defined in ORS 314.610, that is
outside this state; or
(c) A trust that is not a resident trust or qualified funeral
trust under ORS 316.282.
(4) 'Owner' means a person that owns an interest in a
pass-through entity.
(5) 'Pass-through entity' means any entity that is recognized
as a separate entity for federal income tax purposes, for which
the owners are required to report income, gains, losses,
deductions or credits from the entity for federal income tax
purposes.
(6) 'Upper-tier pass-through entity' means a pass-through
entity that owns an interest in another pass-through entity. + }
SECTION 2. { + (1) A pass-through entity having distributive
income attributable to Oregon sources shall file a composite
return of personal income and corporate income and excise tax on
behalf of owners that elect to be included in the composite
return filed by the entity.
(2) A pass-through entity shall file a composite return under
this section only if one or more owners that are nonresidents
make an election under this section.
(3) The election shall be made by owners in the time, form and
manner prescribed by the Department of Revenue.
(4) The composite return shall report the share of distributive
income of each electing owner, the share of distributive income
from Oregon sources of each electing owner, the amount of tax
withheld under section 3 of this 2005 Act on behalf of each
electing owner and any other information required by the
department. The composite return shall be filed with the
department in the time, form and manner prescribed by the
department.
(5)(a) An electing owner may file a nonresident personal income
tax return or a corporate excise or income tax return for the tax
year of the electing owner in which the electing owner's share of
distributive income reported on the composite return is properly
reportable.
(b) An electing owner that files a return under this subsection
shall receive credit for any tax paid on behalf of the owner by
the pass-through entity. + }
SECTION 3. { + (1) A pass-through entity shall withhold tax as
prescribed in this section if:
(a) The pass-through entity has distributive income from Oregon
sources; and
(b) One or more owners of the entity are nonresidents and do
not have other Oregon source income.
(2) For each taxpayer described in subsection (1)(b) of this
section who is subject to tax under ORS chapter 316, the entity
shall withhold tax at the highest marginal rate applicable for
the tax year under ORS 316.037. The withheld tax shall be
computed based on the taxpayer's share of the entity's
distributive income from Oregon sources for the entity's tax
year.
(3) For each corporation described in subsection (1)(b) of this
section, the entity shall withhold tax at the rate applicable for
the tax year under ORS 317.061 and 318.020. The tax shall be
computed based on the corporation's share of the entity's
distributive income from Oregon sources for the entity's tax
year.
(4) A pass-through entity that is required to withhold tax
under this section shall file a withholding return or report with
the Department of Revenue setting forth the share of Oregon
source distributive income of each nonresident owner, the amount
of tax withheld under this section and any other information
required by the department. The return shall be filed with the
department on the form and in the time and manner prescribed by
the department. Taxes withheld under this section shall be paid
to the department in the time and manner prescribed by the
department.
(5) A pass-through entity that is required to withhold tax
under this section shall furnish a statement to each owner on
whose behalf tax is withheld. The statement shall state the
amount of tax withheld on behalf of the owner for the tax year of
the entity. The statement shall be made on a form prescribed by
the department and shall contain any other information required
by the department.
(6) The department shall apply taxes withheld under this
section by a lower-tier pass-through entity on distributions to
an upper-tier pass-through entity to the withholding required by
the upper-tier pass-through entity under this section.
(7) A pass-through entity is liable to the State of Oregon for
amounts of tax required to be withheld and paid under this
section. A pass-through entity is not liable to an owner of the
pass-through entity for amounts required to be withheld under
this section that were paid to the department as prescribed in
this section. + }
SECTION 4. { + (1) A pass-through entity is not required to
withhold taxes under section 3 of this 2005 Act on behalf of a
nonresident owner if:
(a) The nonresident owner has a share of distributive income
that is less than $1,000 for the tax year of the pass-through
entity;
(b) Withholding is not required pursuant to a rule adopted
under this section;
(c) The owner makes a timely election under section 2 of this
2005 Act to have taxes on the owner's distributive share of
income paid and reported on the composite return described in
section 2 of this 2005 Act, and the composite return is filed by
the pass-through entity; or
(d) The pass-through entity is a publicly traded partnership,
as defined in section 7704(b) of the Internal Revenue Code, that
is treated as a partnership for federal tax purposes and that
agrees to file an annual information return on the form and in
the time and manner prescribed by the Department of Revenue and
containing the information required by the department, including
but not limited to the name, address and taxpayer identification
number of each person with an ownership interest in the entity
that results in the person receiving Oregon source income of more
than $500.
(2) The department may adopt rules setting forth circumstances
under which pass-through entities are not required to withhold
taxes under section 3 of this 2005 Act. + }
SECTION 5. { + Sections 1 to 4 of this 2005 Act apply to tax
years beginning on or after January 1, 2006. + }
SECTION 6. { + Sections 1 to 4 of this 2005 Act are added to
and made a part of ORS chapter 314. + }
SECTION 7. { + A nonresident shareholder of an S corporation
or a nonresident partner may not join in the filing of an Oregon
multiple nonresident S corporation or partnership return for a
tax year beginning on or after January 1, 2006. + }
SECTION 8. { + ORS 314.760 is repealed on January 2, 2008. + }
SECTION 9. { + Nothing in the repeal of ORS 314.760 by section
8 of this 2005 Act affects the filing of an Oregon multiple
nonresident S corporation or partnership return for a tax year
beginning before January 1, 2006. + }
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