Chapter 568
AN ACT
SB 39
Relating to tax compliance; creating new
provisions; amending ORS 314.410 and 314.415; and prescribing an effective
date.
Be It Enacted by the People of
the State of
SECTION 1. Sections 2 to 13 of this 2007 Act are added
to and made a part of ORS chapter 314.
SECTION 2. As used in sections 2 to 13 of this 2007
Act:
(1) “Listed transaction”
means any of the following transactions:
(a) A listed transaction
under section 6707A of the Internal Revenue Code.
(b) A transaction
without economic substance in which an
(A) Transfers
income-producing assets to a real estate investment trust owned directly or
indirectly by the corporation; and
(B) With respect to
dividends paid from the real estate investment trust, claims a
dividend-received deduction and the real estate investment trust claims a
dividend-paid deduction.
(c) A transaction
without economic substance in which an
(A) Transfers income-producing
assets to a regulated investment company owned directly or indirectly by the
corporation; and
(B)
With respect to dividends paid from the regulated investment company, claims a
dividend-received deduction and the regulated investment company claims a
dividend-paid deduction.
(2) “
(a) That does business
in
(b)
That is owned by an
(3) “Reportable
transaction” means a transaction:
(a)
That is a reportable transaction under section 6707A of the Internal Revenue
Code; or
(b)
That is a listed transaction.
(4) “Transaction without
economic substance” means a transaction for which the taxpayer cannot
demonstrate a business purpose other than tax savings.
SECTION 3. (1) If required by rules adopted by the
Department of Revenue:
(a) Any person who
engages in a reportable transaction as a buyer or transferor shall report the
transaction to the department.
(b) Any person who, as
the result of a reportable transaction, acquires an interest in property, a
present or future right to income, a present or future right to claim a loss,
deduction, credit, exemption or other tax benefit or a present or future right
to an adjustment to basis shall report the transaction to the department.
(c) Any person who is
associated with a reportable transaction in an association that the department
has by rule identified as an association that requires reporting shall report
the transaction to the department.
(2) A reportable
transaction shall be reported to the department in the time, form and manner
prescribed by the department by rule. Rules adopted by the department under
this section may not apply to a reportable transaction occurring in a tax year
beginning before January 1, 2007.
NOTE:
Sections 4 through 7 were deleted by amendment. Subsequent sections were not
renumbered.
SECTION 8. (1) If a taxpayer has a listed transaction
understatement for a tax year, there shall be added to the tax liability of the
taxpayer for the tax year a penalty equal to 60 percent of the amount of the
understatement.
(2) The penalty imposed
under this section applies to listed transaction understatements discovered or
reported on or after January 1, 2008, and is in addition to and not in lieu of
any other penalty.
(3) As used in this
section, “listed transaction understatement” means the sum of:
(a) The amount
determined by multiplying the highest rate of tax imposed on the taxpayer under
ORS chapter 316 or, if the taxpayer is a corporation, under ORS chapter 317 or
318, by any net increase in taxable income that results from a difference
between the proper tax treatment of a listed transaction and the treatment of
the transaction on the return of the taxpayer; and
(b) The amount of any
decrease in the aggregate amount of credits determined for purposes of ORS
chapter 316 or, if the taxpayer is a corporation, for purposes of ORS chapter
317 or 318, that results from the taxpayer’s treatment of a listed transaction
and the proper tax treatment of that transaction.
(4) The Department of
Revenue may by rule further define “listed transaction understatement”
consistent with section 2 of this 2007 Act and subsection (3) of this section.
SECTION 9. (1) If a taxpayer fails to report to the
Department of Revenue a reportable transaction as required by section 3 of this
2007 Act, there shall be added to the tax liability of the taxpayer for the tax
year a penalty as follows:
(a) Individual
taxpayers, $3,300.
(b) Corporation
taxpayers, $16,700.
(2) If the reportable
transaction is a listed transaction, in lieu of the penalty provided in
subsection (1) of this section, the penalty shall be as follows:
(a) Individual
taxpayers, $33,000.
(b) Corporation
taxpayers, $66,000.
(3) This section applies
to tax years beginning on or after January 1, 2007.
NOTE:
Sections 10 and 11 were deleted by amendment. Subsequent sections were not
renumbered.
SECTION 12. (1) A penalty shall be imposed on a person
who promotes a tax shelter if:
(a) The person is or
would be subject to a penalty for promoting an abusive tax shelter under
section 6700 of the Internal Revenue Code; and
(b) The tax shelter
satisfies any of the following conditions:
(A) The tax shelter is
organized in this state.
(B) The tax shelter is
doing business in this state.
(C) The tax shelter
derives income from sources in this state.
(D) At least one
investor in the tax shelter is an
(2) The amount of the
penalty shall equal 100 percent of the amount of gross income derived by the
person in promoting the tax shelter.
(3) A penalty imposed
under this section shall be in addition to and not in lieu of any other
penalty.
SECTION 13. Moneys collected under section 12 of this
2007 Act shall be considered net revenue from the tax imposed under ORS chapter
316 for purposes of ORS 316.502.
NOTE:
Sections 14 through 17 were deleted by amendment. Subsequent sections were not
renumbered.
SECTION 18. 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) If the department
finds that a return reports or reflects the use of a listed transaction, as
defined in section 2 of this 2007 Act, and that use of that listed transaction
results in a deficiency in tax paid, notice of that deficiency may be given at
any time within nine years after the return was filed.
[(3)(a)] (4)(a) The limitations to
the giving of notice of a deficiency provided in this section [shall] do 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)] to (3) of this section, whichever period expires
later.
(B) A notice of
deficiency mailed pursuant to this paragraph may assert any adjustment
necessary to arrive at the correct amount of
(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)] (1) to (3) of this section and paragraph (a) of this subsection.
[(4)] (5) 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)] (7) of this
section.
[(5)] (6) 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 Internal Revenue Code (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 section 1034 of the
Internal Revenue Code (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)] (7) 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)] (8) 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)] (9) 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) or (9)] (8) or (10) of this section; or
(b) Six months after the
date of the expiration of the agreed period for assessing a deficiency.
[(9)(a)] (10)(a) Notwithstanding the
other provisions of this section and ORS 314.415, the period for claiming a
refund or giving a notice of deficiency with respect to an item that is shown
or required to be shown on a taxpayer’s return and that is attributable to a
pass-through entity does not expire prior to three
years from the date of the filing of the pass-through entity return to which
the item on the taxpayer’s return relates.
(b) As used in this
subsection, “pass-through entity” means any entity that is recognized as a
separate entity for federal income tax purposes, for which the owners are
required to report income, gains, losses, deductions or credits from the entity
for federal income tax purposes.
NOTE:
Section 19 was deleted by amendment. Subsequent sections were not renumbered.
SECTION 20. ORS 314.415 is amended to read:
314.415. (1) If the
Department of Revenue determines pursuant to ORS 305.270 that the amount of the
tax due is less than the amount theretofore paid, the excess shall be refunded
by the department with interest at the rate established under ORS 305.220, for
each month or fraction of a month during a period beginning 45 days after the
due date of the return or the date the tax was paid, whichever is the later, to
the time the refund is made.
(2)(a) The department
may not allow or make a refund after three years from the time the return was
filed, or two years from the time the tax (or a portion of the tax) was paid,
whichever period expires later, unless before the expiration of this period a
claim for refund is filed by the taxpayer in compliance with ORS 305.270. In
any case, if the original return is not filed within three years of the due
date, excluding extensions, of the return, the department may allow or make a
refund only of amounts paid within two years from the date of the filing of the
claim for refund. If a refund is disallowed for the tax year during which
excess tax was paid for any reason set forth in this subsection, the department
may not allow the excess as a credit against any tax occurring on a return
filed for a subsequent year.
(b) The department may
not make a refund if the tax owed after offsets for all amounts owed the state,
or a county pursuant to a judgment obtained under ORS 169.151, is less than $1.
(c) If a taxpayer would
qualify under section 6511(h) of the Internal Revenue Code for a suspension of
the running of the periods specified for filing a claim for refund of federal
income tax, the period specified in paragraph (a) of this subsection shall also
be suspended.
(d) The department may
not pay an employee interest on a refund of a tax withheld by an employer if
the interest would be for any period prior to the time the employee files a
personal income tax return for the tax year involved or for any period prior to
the day that is 45 days after the date when the employee’s annual return for
that year was filed or was due, whichever is later.
(e) The department may
not pay interest on a refund of estimated tax paid under ORS 314.505 to 314.525
or 316.557 to 316.589 if the interest would be for any period prior to the time
the taxpayer files a tax return for the tax year involved or for any period prior
to the day that is 45 days after the date when the tax return for that year was
filed or was due, whichever is later.
(f) The amount of the
refund, exclusive of interest on the refund, may not exceed the portion of the
tax paid during the period preceding the filing of the claim or, if no claim is
filed, then during the period preceding the allowance of the refund during
which a claim might have been filed. Where there has been an overpayment of any
tax imposed, the amount of the overpayment and interest on the overpayment
shall be credited against any tax, penalty or interest then due from the
taxpayer, and only the balance shall be refunded.
(g) Except as provided
in ORS 305.265 (12), if, pursuant to a notice of deficiency or assessment, the
taxpayer pays the amount specified in the notice, or any part thereof, and if,
upon appeal, the Oregon Tax Court or the Oregon Supreme Court orders that all
or any part of the deficiency amount specified in the notice and paid by the
taxpayer be refunded, the amount so ordered to be refunded shall bear interest
at the rate established for refunds in ORS 305.220. Interest shall be computed
from the date of payment to the department. Nothing in this subsection shall
require that interest be paid upon any amount for any period for which interest
upon the same amount for the same period is required to be paid under ORS
305.419.
(3)(a) Notwithstanding
any provision to the contrary in ORS 305.265 or 305.270 or subsection (1) or
(2) of this section, if, prior to the expiration of the period prescribed in
subsection (2) of this section, the department and the taxpayer consent in
writing to the refund of tax after the expiration of the period prescribed:
(A) The department shall
make the refund prior to the expiration of the period agreed upon; and
(B) The department may
not make or allow a refund after the expiration of the period agreed upon
unless a claim for refund is filed by the taxpayer before the expiration of the
period agreed upon in compliance with the manner prescribed by the department.
The period so agreed upon may be extended by subsequent agreements in writing
made before the expiration of the period previously agreed upon.
(b) The department may
consent to extend the period during which a refund may be made only if the
taxpayer has consented to the assessment of additional tax, if additional taxes
are determined upon audit, after the expiration of the applicable [three-year or five-year] period
prescribed in ORS 314.410 (1) [and (2)]
to (3).
(4)(a) If the claim for
credit or refund relates to an overpayment on account of the deductibility by
the taxpayer, or by a partnership, of the worthlessness of a share of stock in
a corporation, of the right to subscribe for or to receive a share of stock in
a corporation, or of a debt, in lieu of the three-year period of limitation
prescribed in subsection (2) of this section, the period shall be seven years
from the date prescribed by law for the filing of the return for the year with
respect to which the claim is made.
(b) If the claim
described in paragraph (a) of this subsection is made after the expiration of
the three-year period prescribed in subsection (2) of this section, the
department may not allow interest with respect to any credit or refund
determined to be due upon the claim for the period beginning at the close of
the three-year period prescribed in subsection (2) of this section and ending
at the expiration of six months after the date on which the claim is filed.
(5)(a) If the claim for
credit or refund relates to an overpayment attributable to a net operating loss
carryback or a net capital loss carryback, in lieu of the three-year period of
limitation prescribed in subsection (2) of this section, the period shall be
the period that ends three years after the time prescribed by law for filing
the return (including extensions) for the taxable year of the net operating
loss or net capital loss that results in such carryback. In the case of such a
claim, the amount of the credit or refund may exceed the portion of the tax
paid within the period provided in subsection (1), (2) or (3) of this section,
whichever is applicable, to the extent of the amount of the overpayment
attributable to the carryback. If the allowance of a credit or refund of an
overpayment of tax attributable to a net operating loss carryback or a net
capital loss carryback is otherwise prevented by the operation of any law or
rule of law other than ORS 305.150, relating to closing agreements, the credit
or refund may be allowed or made if the claim for credit or refund is filed
within the period provided in this subsection. To the extent that the carryback
was not an issue in any proceeding in which the determination of a court,
including the Oregon Tax Court, has become final, the claimed credit or refund
applicable to that carryback may be allowed or made under this subsection.
(b) For purposes of
subsection (1) or (2) of this section, if any overpayment of tax results from a
carryback of a net operating loss or net capital loss, the overpayment shall be
deemed not to have been made prior to the later of:
(A) The due date of the
return for the taxable year in which such net operating loss or net capital
loss arises;
(B) The date the return
for the year in which the net operating loss or net capital loss arises is
filed; or
(C) The date of filing
of the return for the year to which the net operating loss or net capital loss
is carried back.
(6) Notwithstanding any
provision to the contrary in ORS 305.265 or 305.270 or this section, if the
taxpayer has agreed with the United States Commissioner of Internal Revenue for
an extension, or a renewal of an extension, of the period for proposing and
assessing deficiencies in federal income tax for any year, the period within
which a claim for credit or refund may be filed or credit or refund allowed or
made if no claim is filed shall be the period provided within subsections (1)
to (5) of this section or six months after the date of the expiration of the
agreed period for assessing deficiency in federal income tax, whichever period
expires later.
(7) If a joint return is
filed, the department may make separate refunds at the request of either
spouse. The separate refunds shall bear the same proportion to the total refund
as the adjusted gross income of each spouse bears to the adjusted gross income
of both spouses, or as otherwise determined by the department.
(8) If a taxpayer
entitled to a refund under subsection (1) of this section dies, the department
may issue a draft for payment of such refund under the terms and conditions set
out in ORS 293.490 to 293.500 exercising the same powers and subject to the
same restrictions pursuant to which the State Treasurer is authorized to pay
the amounts of warrants, checks or orders under those statutes.
SECTION 21. Sections 2, 8, 12 and 13 of this 2007 Act
apply to tax years beginning on or after January 1, 1999.
NOTE:
Sections 22 through 31 were deleted by amendment. Subsequent sections were not
renumbered.
SECTION 32. This 2007 Act takes effect on the 91st day
after the date on which the regular session of the Seventy-fourth Legislative
Assembly adjourns sine die.
Approved by the Governor June 25, 2007
Filed in the office of Secretary of State June 27, 2007
Effective date September 27, 2007
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