71st OREGON LEGISLATIVE ASSEMBLY--2001 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 1241
House Bill 2274
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of Governor John A. Kitzhaber,
M.D., for Department of Revenue)
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 Department of Revenue to permit by rule credit
against personal income tax when necessary to avoid taxation of
same income by Oregon and other state, district, territory or
possession of United States.
Restates requirement that taxpayer file amended return if
taxpayer files original or amended federal or other state return
that changes Oregon taxable income or amount of tax. Permits
Department of Revenue to reduce claims for refund based on change
to Oregon tax liability caused by federal or other state return.
Takes effect on 91st day following adjournment sine die.
A BILL FOR AN ACT
Relating to taxation; creating new provisions; amending ORS
314.380, 314.410, 316.082 and 316.131; and prescribing an
effective date.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 316.082 is amended to read:
316.082. (1) A resident individual shall be allowed a credit
against the tax otherwise due under this chapter for the amount
of any income tax imposed on the individual, or on an Oregon S
corporation or Oregon partnership of which the individual is a
member (to the extent of the individual's pro rata share of the S
corporation or distributive share of the partnership), for the
{ - taxable - } { + tax + } year by another state { - of
the United States or the District of Columbia - } on income
derived from sources therein and that is also subject to tax
under this chapter.
(2) The credit provided under this section shall not exceed the
proportion of the tax otherwise due under this chapter that the
amount of the { + modified + }adjusted gross income of the
taxpayer derived from sources in the other { - taxing
jurisdiction - } { + state + } bears to the entire
{ + modified + } adjusted gross income of the taxpayer
{ - as modified by this chapter - } .
(3) The Department of Revenue shall provide by rule the
procedure for obtaining credit provided by this section and the
proof required. The requirement of proof may be waived partially,
conditionally or absolutely, as provided under ORS 315.063.
(4) No credit allowed under this section or ORS 316.292 shall
be applied in calculating tax due under this chapter if the tax
upon which the credit is based has been claimed as a deduction,
unless the tax { + upon which the credit is based + } is
restored to income on the Oregon return.
(5) Credit shall not be allowed under this section for income
taxes paid to a state { - which - } { + that + } allows a
nonresident a credit against the income taxes imposed by that
state for taxes paid or payable to the state of residence. It is
the purpose of this subsection to avoid duplicative taxation
through use of a nonresident, rather than a resident, credit for
taxes paid or payable to another state.
{ + (6) The Department of Revenue may adopt rules under this
section that provide a credit against the tax imposed by this
chapter when the department considers the credit necessary to
avoid taxation of the same income by this state and another
state. + }
{ - (6) - } { + (7) + } { - For purposes of - } { + As
used in + } this section: { +
(a) 'Modified adjusted gross income' means federal adjusted
gross income as modified by this chapter and the other laws of
this state applicable to personal income taxation. + }
{ - (a) - } { + (b) + } 'Oregon partnership' means an
entity that is treated as a partnership for Oregon excise and
income tax purposes.
{ - (b) - } { + (c) + } 'Oregon S corporation' means a
corporation that has elected S corporation status for Oregon
excise and income tax purposes.
{ + (d) 'State' means a state, district, territory or
possession of the United States. + }
{ - (7) - } { + (8) + } For purposes of this section:
(a) A direct tax imposed upon income of an Oregon S corporation
is an income tax imposed on the Oregon S corporation.
(b) An excise tax that is measured by income of an Oregon S
corporation is an income tax imposed on the Oregon S corporation.
{ - (8) - } { + (c) + } { - For purposes of subsection
(7) of this section, - } An excise tax is { - ' - } measured
by income { - ' - } only if the statute imposing the excise
tax provides that the base for the excise tax:
{ - (a) Includes: - }
{ - (A) Revenue from sales; - }
{ - (B) Revenue from services rendered; and - }
{ - (C) Income from investments; and - }
{ + (A) Includes revenue from sales and from services
rendered, and income from investments; and + }
{ - (b) - } { + (B) + } Permits a deduction for the cost of
goods sold and the cost of services rendered.
SECTION 2. ORS 316.131 is amended to read:
316.131. (1) A nonresident shall be allowed a credit against
the taxes otherwise due under this chapter for income taxes
imposed by and paid to the state of residence (not including any
preference, alternative or minimum tax) on income taxable under
this chapter, subject to the following conditions:
(a) The credit shall be allowed only if the state of residence
either:
(A) Does not tax the income of residents of this state derived
from sources within that state; or
(B) Allows residents of this state a credit against income
taxes imposed by that state on income for tax paid or payable
under this chapter.
(b) The credit shall not be allowed for taxes paid to a state
{ - which - } { + that + } allows its residents a credit
against the taxes imposed by that state for income tax paid or
payable under this chapter irrespective of whether its residents
are allowed a credit against the taxes imposed by this chapter
for income taxes paid to that state.
(c) Credit shall be allowed only for the proportion of the
taxes paid to the state of residence (not including preference,
alternative or minimum taxes) as the adjusted gross income
taxable under this chapter and also subject to taxes in the state
of residence bears to the entire adjusted gross income upon which
the taxes paid to the state of residence are imposed.
(d) The credit shall not exceed the proportion of the tax
payable under this chapter { - as - } { + that + } the
{ + modified + } adjusted gross income subject to tax in the
state of residence and also taxable under this chapter bears to
the entire { + modified + } adjusted gross income { - (as
modified) taxable under this chapter - } { + of the
taxpayer + }.
(2) For purposes of this section, the amount of { - ' - }
income taxes { - ' - } paid to another state { - shall
include - } { + includes + } the taxpayer's pro rata share of
any taxes on, or according to, or measured by, income or profits
paid or accrued { - , which - } { + that + } were paid by an S
corporation.
{ + (3) As used in this section:
(a) 'Modified adjusted gross income' means federal adjusted
gross income as modified by this chapter and the other laws of
this state applicable to personal income taxation.
(b) 'State' means a state, district, territory or possession of
the United States. + }
SECTION 3. { + The amendments to ORS 316.082 and 316.131 by
sections 1 and 2 of this 2001 Act apply to:
(1) Tax years beginning on or after January 1, 2001;
(2) Any tax year for which the Department of Revenue may issue
a notice of deficiency or a refund on the effective date of this
2001 Act; and
(3) Any tax year for which a proceeding is pending before the
Regular Division or Magistrate Division of the Oregon Tax Court
on the effective date of this 2001 Act. + }
SECTION 4. ORS 314.380 is amended to read:
314.380. (1) Every taxpayer shall, upon request of the
Department of Revenue, furnish a copy of the return for the
corresponding year, which the taxpayer has filed or may file with
the federal government, showing the taxpayer's net income and how
obtained and the several sources from which derived. Every
taxpayer shall, upon request of the department, furnish a copy of
any federal revenue agent's report or other audit report made
upon any audit or adjustment of the taxpayer's federal income tax
return or income tax return of another state.
(2)(a) { - If - } { + The taxpayer shall report to the
department + } { + any change in the taxpayer's taxable income
that is subject to tax by this state or any change in the
taxpayer's tax liability paid to or owing this state because:
(A) The Internal Revenue Service or other competent authority
has changed or corrected + } the amount of a taxpayer's taxable
income, tax credit or other amount taken into account in
determining the taxpayer's tax liability as reported on a federal
income tax return or an income tax return of another state for
any taxable year { + ; or + } { - is changed or corrected by
the United States Internal Revenue Service or other competent
authority, resulting in a change in the taxpayer's taxable income
that is subject to tax by this state or in the taxpayer's tax
liability paid to or owing this state, the taxpayer shall report
the change or correction to the department. - }
{ + (B) The taxpayer:
(i) Files an original or amended return that is accepted by the
Internal Revenue Service or the taxing authority of another
state; or
(ii) Is assessed tax by the Internal Revenue Service or the
taxing authority of another state for the failure to file a
return as required.
(b) In the case of a change or correction made by the Internal
Revenue Service or by the taxing authority of another state, + }
the report shall either concede the accuracy of the determination
or state wherein the taxpayer believes it to be erroneous.
{ - (b) A change or correction that results in a reduction in
Oregon tax liability shall - } { + The report may + } be
treated by the department as a claim for refund pursuant to ORS
314.415 { - and, - } { + if the department determines that
the taxpayer's correct Oregon tax liability is a reduction from
the taxpayer's Oregon tax liability prior to the filing of the
report. + } Notwithstanding the limitations of ORS 314.415,
{ + a claim for refund under this paragraph + } shall be deemed
timely if received by the department within two years after the
{ + federal or other state + } correction was made.
{ - (3) - } { + (c) + } { - Any taxpayer filing an
amended federal income tax return or amended income tax return of
another state reporting - } { + In the case of a taxpayer
filing an original or amended federal or other state return that
reports + } a change in the taxpayer's taxable income that is
subject to tax by this state or { + that results in a change + }
in the taxpayer's tax liability paid to or owing this state { + ,
the report required by this subsection shall be an amended Oregon
return. The taxpayer + } shall { - also - } file { - an - }
{ + the + } amended return with the department within 90 days
thereafter.
{ - (4) - } { + (3) + } For purposes of this section
{ - , - } { + :
(a) + } A change or correction of a taxpayer's taxable income
is deemed to be made on the date of the audit report making the
change or correction { + ; and
(b) The date on which an original or amended return is accepted
by the Internal Revenue Service or other state taxing authority
is the date the original or amended return is filed if the return
is subsequently accepted by the Internal Revenue Service or other
state taxing authority + }.
{ - (5) - } { + (4) + } The provisions of ORS 305.305 shall
constitute the exclusive remedy of a person whose notice of
deficiency or assessment is based upon a change or correction of
the person's taxable income under this section.
SECTION 5. ORS 314.410 is amended to read:
314.410. (1) At any time within three years after the return
was filed, the Department of Revenue may give notice of
deficiency as prescribed in ORS 305.265.
(2) If the department finds that gross income equal to 25
percent or more of the gross income reported has been omitted
from the taxpayer's return, notice of the deficiency may be given
at any time within five years after the return was filed.
(3)(a) The limitations to the giving of notice of a deficiency
provided in this section shall not apply to a deficiency
resulting from false or fraudulent returns, or in cases where no
return has been filed.
(b) { + (A) + } If the Commissioner of Internal Revenue or
other authorized officer of the federal government or an
authorized officer of another state's taxing authority makes a
change or correction as described in ORS 314.380
(2)(a) { + (A) + } and, as a result of the change or correction,
an assessment of tax { + or issuance of a refund + } is
permitted under any provision of the Internal Revenue Code or
applicable law of the other state, { + or pursuant to an
agreement between the taxpayer and the federal or other state
taxing authority that extends the period in which an assessment
of federal or other state tax may be made, + } then notice of a
deficiency under any Oregon law imposing tax upon or measured by
income for the corresponding tax year may be mailed within two
years after the department is notified by the taxpayer or the
commissioner or other tax official of the correction, or within
the applicable three-year or five-year period prescribed in
subsections (1) and (2) of this section, { - respectively, - }
whichever period expires { - the - } later.
{ + (B) A notice of deficiency mailed pursuant to this
paragraph may assert any adjustment necessary to arrive at the
correct amount of Oregon taxable income and Oregon tax liability
for the tax year for which the federal or other state change or
correction is made.
(c) If the taxpayer files an original or amended federal or
other state return as described in ORS 314.380 (2)(a)(B), the
department may reduce any claim for refund as a result of a
change in Oregon tax liability related to the original or amended
federal or other state return, but may not give notice of a
deficiency for an adjustment to Oregon tax liability following
the expiration of the applicable period prescribed in subsections
(1) and (2) of this section and paragraph (a) of this
subsection. + }
(4) The tax deficiency must be assessed and notice of tax
assessment mailed to the taxpayer or authorized representative,
who is authorized in writing, within one year from the date of
the notice of deficiency unless an extension of time is agreed
upon as prescribed in subsection (6) of this section.
(5) Notwithstanding other provisions of this section, the
period for the assessment of any deficiency attributable to any
part of the gain realized upon the sale or exchange of the
taxpayer's principal residence, as provided in { + section 1034
of + } the
{ - federal - } Internal Revenue Code { - as applicable to
the Personal Income Tax Act of 1969, shall - } { + (as in
effect prior to the repeal of section 1034 of the Internal
Revenue Code by the Taxpayer Relief Act of 1997 (P.L. 105-34)),
does + } not expire prior to the expiration of three years from
the date the department is notified by the taxpayer of:
(a) The cost of purchasing the new residence which the taxpayer
claims results in nonrecognition of any part of such gain;
(b) The taxpayer's intention not to purchase a new residence;
or
(c) A failure to purchase a new residence within the period
prescribed in { - the federal - } { + section 1034 of the + }
Internal Revenue Code { - as applicable to the Personal Income
Tax Act of 1969 - } { + (as in effect prior to the repeal of
section 1034 of the Internal Revenue Code by the Taxpayer Relief
Act of 1997 (P.L. 105-34)) + }.
(6) If, prior to the expiration of any period of time
prescribed in this section for giving of notice of deficiency or
of assessment, the department and the taxpayer consent in writing
to the notice of deficiency being mailed or deficiency being
assessed after the expiration of such prescribed period, notice
of such deficiency may be mailed or the deficiency assessed at
any time prior to the expiration of the period agreed upon. The
period so agreed upon may be extended by subsequent agreements in
writing made before the expiration of the period agreed upon.
(7) In the case of a deficiency attributable to the application
to the taxpayer of a net operating loss carryback, notice of such
deficiency may be mailed at any time before the expiration of the
period within which notice of a deficiency for the taxable year
of the net operating loss which results in such carryback may be
mailed.
(8) Notwithstanding the other provisions of this section, if
any taxpayer agreed with the United States Commissioner of
Internal Revenue or the taxing authority of another state for an
extension, or renewals thereof, of the period for giving notices
of deficiencies and assessing deficiencies in income tax for any
year, the period for mailing notices of deficiencies of tax for
such years and the period for filing a claim for refund under ORS
314.380 (2)(b) shall expire on the later of:
(a) The expiration of an applicable period described in
subsections (1) to (7) of this section; or
(b) Six months after the date of the expiration of the agreed
period for assessing a deficiency.
(9) For purposes of this section, ORS 314.415 and any other
provision of law establishing the time for which a refund may be
claimed or notice of deficiency may be given with respect to a
tax imposed on or measured by net income, 'return' means the
return required to be filed by the taxpayer and does not include
a return of any person from whom the taxpayer has received an
item of income, gain, loss, deduction or credit.
SECTION 6. { + The amendments to ORS 314.380 and 314.410 by
sections 4 and 5 of this 2001 Act apply to:
(1) Reports to the Department of Revenue that are prescribed by
ORS 314.380 and that are required to be made on or after October
4, 1997.
(2) Notices of deficiency and refund claim reductions made on
or after October 4, 1997. + }
SECTION 7. { + Notwithstanding section 6 of this 2001 Act, any
notice of deficiency issued in compliance with ORS 314.410 (1997
Edition or 1999 Edition) on or after October 4, 1997, and before
the effective date of this 2001 Act is hereby validated and
approved. + }
SECTION 8. { + This 2001 Act takes effect on the 91st day
after the date on which the regular session of the Seventy-first
Legislative Assembly adjourns sine die. + }
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