United States

Oregon: Conformity Legislation Enacted; Department Issues Guidance on Mandatory Repatriation

Apr 23, 2018
From KPMG TaxWatch

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On April 10, 2018, Senate Bill 1529 was signed into law, which updates Oregon’s conformity to the Internal Revenue Code. Oregon has somewhat unique conformity, as the state adopts the Code as of a specific date, but has rolling conformity to changes that relate to the definition of taxable income. Senate Bill 1529 defines “Internal Revenue Code” as the federal Internal Revenue Code, as amended and in effect on December 31, 2017. Although generally applicable to tax years beginning on or after January 1, 2018, Senate Bill 1529 provides that federal changes enacted before January 1, 2018 apply for corporate excise tax purposes, to the extent they can be made applicable, in the same manner as applied under the Internal Revenue Code and related federal law. For tax years beginning on or after January 1, 2017, Senate Bill 1529 requires taxpayers to add back amounts deducted from federal income for income repatriated, deemed or otherwise, under the Tax Cuts and Jobs Act (P.L. 115-97). Guidance recently issued by the Department addressing Senate Bill 1529 mandates  that corporate taxpayers add to federal taxable income the amount included on Line 1 of the IRC 965 Transition Tax Statement. This addition amount should be included on Schedule OR-ASC-CORP, using code 184. A copy of the federal IRC 965 Transition Tax Statement should be submitted with the federal return. Per the Department’s guidance, corporations are allowed an Oregon dividends—received deduction for the Oregon repatriation addition. If the repatriation is derived from a 20 percent owned corporation, the subtraction is computed by multiplying the repatriation addition by 80 percent. Otherwise, the subtraction is computed by multiplying the amount of the repatriation addition by 70 percent. This subtraction is reported on Schedule OR-ASC-CORP using code 377. Oregon does not adopt the federal election to pay tax on the repatriated income over an eight-year period.

Senate Bill 1529 also repeals Oregon’s tax haven inclusion provisions retroactively to 2017 and provides for a tax credit to recognize the interaction between tax payments required by Oregon’s tax haven law and repatriation-related tax payments. In other words, to the extent a taxpayer has already paid Oregon tax on its deferred E&P due to the tax haven provisions, a credit will be allowed. Per the Department’s guidance, the credit will be equal to the lesser of two amounts:

―      The Oregon tax attributable to the IRC 965 inclusion for tax year 2017.

―      The total Oregon tax attributable and imposed on the tax haven listed jurisdiction additions as filed or as adjusted for tax years 2014, 2015, and 2016.

 The Oregon credit will be computed using Oregon Form OR-REPAT-CR, Repatriation Credit. This form will be available soon and must be included to claim the credit. The Department is currently drafting an administrative rule that will provide guidance as to how the repatriation credit will be calculated.  Another recently signed bill, Senate Bill 1528 (signed April 13, 2018), requires taxpayers to add back amounts deducted for federal purposes under IRC section 199A. Please contact Rob Passmore at 503-820-6844 with questions on these bills.

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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.