United States

Portland: City Council Considering a Surtax Aimed at Income Inequality and Funding Homeless Services

Dec 05, 2016
From KPMG TaxWatch

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The City of Portland, Oregon is considering an ordinance that, if passed, would impose a surtax on the business license tax liability of certain publicly-traded companies whose ratio of CEO compensation to the compensation of the median worker is equal to or greater than 100:1. Currently, the City of Portland business license tax is imposed on a taxpayer’s “net income” at a 2.2 percent rate. Beginning in 2017, an SEC rule adopted in 2015 requires public companies to disclose the ratio of compensation of the company's CEO to the median compensation of all of its employees. If approved by the Council, effective for tax years beginning on or after January 1, 2017, the “pay ratio surtax” would apply to publicly traded-companies subject to the SEC pay ratio reporting requirements. The rate of the surtax would be dependent on the company’s reported ratio. If the reported ratio is at least 100:1, but less than 250:1, the surtax would be 10 percent of a company’s base tax liability. If the company’s reported ratio is 250:1 or greater, the surtax rate would be 25 percent. A company that pays a median worker $50,000 per year could pay its CEO up to $4.9 million before the surtax would apply. The City’s Revenue Division estimates that the surtax would increase the City’s general fund revenues by $2.5 million to $3.5 million annually. Most of the revenue would be allocated to fund services for the homeless.

The City Council will vote on the ordinance on December 7, 2016. Please contact Rob Passmore at 503-820-6844 or Vinh Tran at 503-820-6803 with questions.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.