71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
Enrolled
House Bill 2730
Sponsored by Representative WITT; Representative NELSON
CHAPTER ................
AN ACT
Relating to taxation; creating new provisions; and amending ORS
314.280, 314.615, 314.655, 314.660 and 314.665; and repealing
sections 7, 8, 9, 10 and 11, chapter ___, Oregon Laws 2001
(Enrolled House Bill 2281).
Be It Enacted by the People of the State of Oregon:
SECTION 1. If House Bill 2281 becomes law, ORS 314.280 is
amended to read:
314.280. (1) If a taxpayer has income from business activity as
a financial organization or as a public utility (as defined
respectively in ORS 314.610 (4) and (6)) which is taxable both
within and without this state (as defined in ORS 314.610 (8) and
314.615), the determination of net income shall be based upon the
business activity within the state, and the Department of Revenue
shall have power to permit or require either the segregated
method of reporting or the apportionment method of reporting,
under rules and regulations adopted by the department, so as
fairly and accurately to reflect the net income of the business
done within the state.
(2) The provisions of subsection (1) of this section dealing
with the apportionment of income earned from sources both within
and without the State of Oregon are designed to allocate to the
State of Oregon on a fair and equitable basis a proportion of
such income earned from sources both within and without the
state. Any taxpayer may submit an alternative basis of
apportionment with respect to the income of the taxpayer and
explain that basis in full in the return of the taxpayer. If
approved by the department that method will be accepted as the
basis of allocation.
{ + (3)(a) Apportionment rules adopted by the department
under this section must apply the weightings used in ORS 314.650
to comparable factors used to apportion income from business
activity of taxpayers subject to this section.
(b) Notwithstanding paragraph (a) of this subsection, a
taxpayer primarily engaged in utilities or telecommunications may
elect to have income from business activity apportioned by
applying the weightings used in ORS 314.650 (1999 Edition) to
comparable factors used to apportion such income.
(c) The election shall be made in the time and manner
prescribed by the department by rule. The election shall continue
in force and effect for the tax year for which the election is
made and for each subsequent tax year until the year in which the
taxpayer revokes the election.
Enrolled House Bill 2730 (HB 2730-B) Page 1
(d) An electing taxpayer may revoke the taxpayer's election by
filing a revocation of election in the time and manner prescribed
by the department. The revocation shall apply to the tax year
following the year in which the election is made and to each
subsequent tax year.
(e) As used in this subsection:
(A) 'Telecommunications' means business operations that
conduct, maintain or provide for the transmission of voice data
and text between network termination points and
telecommunications reselling. Transmission facilities may be
based on one technology or a combination of technologies.
(B) 'Utilities' means business operations that provide electric
power, natural gas, steam supply, water supply or sewage removal
through a permanent infrastructure of lines, mains and pipes. + }
SECTION 2. If House Bill 2281 becomes law, ORS 314.655, as
amended by section 3, chapter ___, Oregon Laws 2001 (Enrolled
House Bill 2281), is amended to read:
314.655. (1) As used in ORS 314.650 { - and section 9 of this
2001 Act - } , the property factor is a fraction, the numerator
of which is the average value of the taxpayer's real and tangible
personal property owned or rented and used in this state during
the tax period and the denominator of which is the average value
of all the taxpayer's real and tangible personal property owned
or rented and used during the tax period.
(2) Property owned by the taxpayer is valued at its original
cost. Property rented by the taxpayer is valued at eight times
the net annual rental rate. Net annual rental rate is the annual
rental rate paid by the taxpayer less any annual rental rate
received by the taxpayer from subrentals.
(3) The average value of property shall be determined by
averaging the values at the beginning and ending of the tax
period but the Department of Revenue may require the averaging of
monthly values during the tax period if reasonably required to
reflect properly the average value of the taxpayer's property.
SECTION 3. If House Bill 2281 becomes law, ORS 314.660, as
amended by section 4, chapter ___, Oregon Laws 2001 (Enrolled
House Bill 2281), is amended to read:
314.660. (1) As used in ORS 314.650 { - and section 9 of this
2001 Act - } , the payroll factor is a fraction, the numerator of
which is the total amount paid in this state during the tax
period by the taxpayer for compensation, and the denominator of
which is the total compensation paid everywhere during the tax
period.
(2) Compensation is paid in this state if:
(a) The individual's service is performed entirely within the
state; or
(b) The individual's service is performed both within and
without the state, but the service performed without the state is
incidental to the individual's service within the state; or
(c) Some of the service is performed in the state and (A) the
base of operations or, if there is no base of operations, the
place from which the service is directed or controlled is in the
state, or (B) the base of operations or the place from which the
service is directed or controlled is not in any state in which
some part of the service is performed, but the individual's
residence is in this state.
SECTION 4. If House Bill 2281 becomes law, ORS 314.665, as
amended by section 5, chapter ___, Oregon Laws 2001 (Enrolled
House Bill 2281), is amended to read:
Enrolled House Bill 2730 (HB 2730-B) Page 2
314.665. (1) As used in ORS 314.650 { - and section 9 of this
2001 Act - } , the sales factor is a fraction, the numerator of
which is the total sales of the taxpayer in this state during the
tax period, and the denominator of which is the total sales of
the taxpayer everywhere during the tax period.
(2) Sales of tangible personal property are in this state if:
(a) The property is delivered or shipped to a purchaser, other
than the United States Government, within this state regardless
of the f.o.b. point or other conditions of the sale; or
(b) The property is shipped from an office, store, warehouse,
factory, or other place of storage in this state and (A) the
purchaser is the United States Government or (B) the taxpayer is
not taxable in the state of the purchaser.
(3) Subsection (2)(b) of this section shall not apply to sales
of tangible personal property if:
(a) The sales are included in the numerator of a formula used
to apportion business income to another state of the United
States, a foreign country or the District of Columbia; and
(b) The other state, a foreign country or the District of
Columbia has imposed a tax on or measured by the apportioned
business income.
(4) Sales, other than sales of tangible personal property, are
in this state if (a) the income-producing activity is performed
in this state; or (b) the income-producing activity is performed
both in and outside this state and a greater proportion of the
income-producing activity is performed in this state than in any
other state, based on costs of performance.
(5) Where the sales apportionment factor is determined by
administrative rule pursuant to ORS 314.682, 314.684, 317.660 or
other law, the Department of Revenue shall adopt rules that are
consistent with the determination of the sales factor under this
section.
(6) For purposes of this section, 'sales':
(a) Excludes gross receipts arising from the sale, exchange,
redemption or holding of intangible assets, including but not
limited to securities, unless those receipts are derived from the
taxpayer's primary business activity.
(b) Includes net gain from the sale, exchange or redemption of
intangible assets not derived from the primary business activity
of the taxpayer but included in the taxpayer's business income.
(c) Excludes gross receipts arising from an incidental or
occasional sale of a fixed asset or assets used in the regular
course of the taxpayer's trade or business if a substantial
amount of the gross receipts of the taxpayer arise from an
incidental or occasional sale or sales of fixed assets used in
the regular course of the taxpayer's trade or business.
Insubstantial amounts of gross receipts arising from incidental
or occasional transactions or activities may be excluded from the
sales factor unless the exclusion would materially affect the
amount of income apportioned to this state.
SECTION 5. If House Bill 2281 becomes law, ORS 314.615, as
amended by section 6, chapter ___, Oregon Laws 2001 (Enrolled
House Bill 2281), is amended to read:
314.615. Any taxpayer having income from business activity
which is taxable both within and without this state, other than
activity as a financial organization or public utility or the
rendering of purely personal services by an individual, shall
allocate and apportion the net income of the taxpayer as provided
in ORS 314.605 to 314.675. Taxpayers engaged in activities as a
financial organization or public utility shall report their
Enrolled House Bill 2730 (HB 2730-B) Page 3
income as provided in ORS 314.280 and 314.675. { - A taxpayer
engaged in activities as a public utility may report the
taxpayer's income, at the election of the taxpayer, as provided
in ORS 314.650 or section 9 of this 2001 Act. - }
SECTION 6. { + If House Bill 2281 becomes law, sections 7, 8,
9, 10 and 11, chapter ___, Oregon Laws 2001 (Enrolled House Bill
2281), are repealed. + }
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Enrolled House Bill 2730 (HB 2730-B) Page 4
Passed by House May 30, 2001
Repassed by House July 5, 2001
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Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate July 5, 2001
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President of Senate
Enrolled House Bill 2730 (HB 2730-B) Page 5
Received by Governor:
......M.,............., 2001
Approved:
......M.,............., 2001
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Governor
Filed in Office of Secretary of State:
......M.,............., 2001
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Secretary of State
Enrolled House Bill 2730 (HB 2730-B) Page 6