United States

Oregon: Governor’s Budget Includes Various Tax Increases; City of Portland Approves New Pay-Ratio Surtax

Dec 12, 2016
From KPMG TaxWatch

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Governor Kate Brown of Oregon recently released her fiscal year 2017-2019 Executive Budget, which includes certain recommended revenue changes to address the state’s estimated $1.7 billion shortfall. Notably, the Governor proposes to reinstate the insurance and managed care organization tax that expired in 2013. The budget would also eliminate lower tax rates for non-passive partner income, which is estimated to raise an additional $177 million for the general fund. Another change that would affect business taxpayers is to eliminate the dividend subtraction for Interest Charge–Domestic International Sales Corporations. Significant tobacco and alcohol-related tax and fee increases would also raise additional general fund revenues.

In other Oregon news, on December 7, 2016, the Portland City Council approved a local business license tax surcharge that will apply to companies whose CEOs earn more than 100 times the amount of the typical workers at the company. Effective for tax years beginning on or after January 1, 2017, the “pay ratio surtax” applies to publicly traded-companies subject to the SEC pay ratio reporting requirements. The pay ratio compares the compensation of the company CEO to the pay of the median employee in the company, and the rate of the surtax is dependent on the company’s reported ratio. If the reported ratio is at least 100:1, but less than 250:1, the surtax is 10 percent of a company’s base tax liability. If the company’s reported ratio is 250:1 or greater, the surtax rate is 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 will increase the City’s general fund revenues by $2.5 million to $3.5 million annually. Most of the revenue will be allocated to fund services for the homeless. Please stay tuned to TWIST for future legislative updates.

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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.