Chapter 716
AN ACT
SB 179
Relating to insurance company income apportionment; creating new
provisions; amending ORS 317.122 and 317.660; and prescribing an effective
date.
Be It Enacted by the People of
the State of
SECTION 1.
ORS 317.660 is amended to read:
317.660. (1) [In lieu of the provisions of ORS 314.280,]
If the income of an insurer is derived from business done both within and
without this state, the determination of Oregon taxable income shall be arrived
at by apportionment based upon an averaging of the following three factors:
(a) [(1) Insurance sales factor: The percentage
obtained by dividing (a)] An insurance sales factor, the numerator of
which is the direct premiums (excluding reinsurance accepted and without
deduction of reinsurance ceded) received by the insurer during the [taxable] tax year on policies and
contracts [which] that are
allocated to this state and to other jurisdictions in which the insurer is not
authorized to do business [by (b)],
and the denominator of which is the total of such premiums received by the
insurer during the [taxable] tax
year on policies and contracts that had been sold within and without this
state. For purposes of this [subsection]
paragraph, “premiums” means sums properly included in [appropriate] those schedules of the annual statement filed
by the insurer with the Director of the Department of Consumer and Business
Services[, which] that appropriately
allocate premiums by jurisdiction. [If
the exclusion of reinsurance premiums results in an apportionment formula that
does not fairly represent the extent of the taxpayer’s activity in this state,
the taxpayer may petition for and the Department of Revenue may permit, or the
Department of Revenue may require, the inclusion of reinsurance premiums in the
insurance sales factor.]
(b) [(2) Wage and commission factor: The
percentage obtained by dividing (a)] A wage and commission factor, the
numerator of which is the total of wages, salaries, commissions and other
compensation for personal services paid in this state during the tax period to
employees and insurance [salesmen]
producers in connection with the business of the insurer, [by (b)] and the denominator of which
is the total wages, salaries, commissions and other compensation for
personal services paid everywhere during the tax period to employees and
insurance [salesmen] producers in
connection with the business of the insurer. For [determining the place of payment] purposes of this paragraph,
the procedure set forth in ORS 314.660 (2) shall [apply] be used to determine the place of payment.
(c) [(3) Real estate income and interest factor:
The percentage obtained by dividing (a)] A real estate income and
interest factor, the numerator of which is the total net income [(after deducting from gross rental income
real estate expenses, property taxes and depreciation attributable thereto,
which are included in appropriate schedules of the annual statement filed by
the insurer with the Department of Consumer and Business Services)]
received from real property within this state plus gross interest received on
loans secured by real property within this state during the [taxable year, by (b)] tax year, and
the denominator of which is the total net income received from real
property within and without this state plus gross interest received on loans
secured by real property within and without this state during the [taxable] tax year. For
purposes of this paragraph:
(A) “Total net income
received from real property” means gross rental income from real property
reduced by all of the following items attributable to the property, as reported
by the insurer in the annual statement filed with the Department of Consumer
and Business Services:
(i) Rental real estate
expenses;
(ii) Rental real estate
property taxes; and
(iii) Rental real estate
depreciation.
(B) Any imputed rent
from property owned and occupied by the company shall be excluded from total
net income received from real property.
(C) If the denominator
of the factor is less than zero, the factor shall be zero.
(D) Unless subparagraph
(C) of this paragraph applies, if the numerator is greater than the
denominator, the factor shall be one.
(2) If application of
the apportionment formula described in subsection (1) of this section,
including but not limited to the exclusion of reinsurance premiums from the
insurance sales factor under subsection (1)(a) of this section, results in an
apportionment that does not fairly and equitably represent the taxpayer’s
insurance business activity in this state, the taxpayer may petition the
Department of Revenue for and the department may permit, or the department may
require, to achieve an apportionment that fairly and equitably represents the
taxpayer’s insurance business activity:
(a) The exclusion of any
one or more factors;
(b) The inclusion of one
or more additional factors that will fairly and equitably represent the
taxpayer’s business activity in this state;
(c) The inclusion of
reinsurance premiums in the insurance sales factor; or
(d) The employment of
any other method to achieve a fair and equitable apportionment of the taxpayer’s
income.
SECTION 2.
ORS 317.122 is amended to read:
317.122. (1) A credit
against taxes imposed by this chapter shall be allowed insurers for the gross
premium tax paid on fire insurance premiums in accordance with ORS 731.820.
(2) A credit against the
taxes otherwise due under this chapter shall be allowed to an insurer. The
amount of the credit shall be the lesser of:
(a) The amount of any
assessments paid by the insurer during the tax year pursuant to ORS 656.612; or
(b) The total profit
attributable to the workers’ compensation line of business, net of reinsurance
and including all investment gain attributable to the workers’ compensation
line of business, determined in the manner prescribed under ORS 731.574 by the
Director of the Department of Consumer and Business Services, with the
modifications under ORS 317.655 attributable to the workers’ compensation line
of business, and then apportioned in accordance with ORS 317.660 and multiplied
by the corporate tax rate set forth in ORS 317.061. In making the apportionment
under ORS 317.660 for purposes of this paragraph, the [factors] insurance sales factor shall be determined using
only items attributable to the workers’ compensation line of business.
SECTION 3.
ORS 317.660, as amended by section 1 of this 2007 Act, is amended to read:
317.660. (1)(a)
If the income of an insurer is derived from business done both within and
without this state, the determination of
[(a)] (b) [An insurance
sales factor,] The insurance sales factor shall consist of a fraction, the
numerator of which is the amount of direct premiums (excluding
reinsurance accepted and without deduction of reinsurance ceded) received or
earned by the insurer during the tax year on policies and contracts that
are allocated to this state and to other jurisdictions in which the insurer is
not authorized to do business, and the denominator of which is the total of
such premiums received or earned by the insurer during the tax year on
policies and contracts that had been sold within and without this state.
(2) For purposes
of this [paragraph,] section:
(a) “Net income” means
net income properly recorded in the statement of income reported in the annual
statement filed by the insurer with the Director of the Department of Consumer
and Business Services.
(b) “Premiums” means sums properly included in
those schedules of the annual statement filed by the insurer with the Director
of the Department of Consumer and Business Services that appropriately allocate
premiums by jurisdiction. If the exclusion of reinsurance premiums results
in an insurance sales factor that does not fairly represent the extent of the
taxpayer’s activity in this state, the taxpayer may petition for and the
Department of Revenue may permit, or the Department of Revenue may require, the
inclusion of reinsurance premiums in the insurance sales factor. If the annual
statement of the insurer does not report received premiums then the insurance
sales factor shall be determined based on earned premiums.
(3) If application of
the apportionment formula described in subsection (1) of this section results
in an apportionment that does not fairly and equitably represent the taxpayer’s
insurance business activity in this state, the taxpayer may petition the
Department of Revenue for and the department may permit, or the department may
require, to achieve an apportionment that fairly and equitably represents the
taxpayer’s insurance business activity:
(a)(A) The exclusion of
the insurance sales factor; and
(B) The inclusion of one
or more additional factors that will fairly and equitably represent the
taxpayer’s business activity in this state;
(b) The inclusion of the
insurance sales factor and one or more additional factors that will fairly and
equitably represent the taxpayer’s business activity in this state; or
(c) The employment of
any other method to achieve a fair and equitable apportionment of the taxpayer’s
income.
[(b) A wage and commission factor, the numerator of which is the total
of wages, salaries, commissions and other compensation for personal services
paid in this state during the tax period to employees and insurance producers
in connection with the business of the insurer, and the denominator of which is
the total wages, salaries, commissions and other compensation for personal
services paid everywhere during the tax period to employees and insurance
producers in connection with the business of the insurer. For purposes of this
paragraph, the procedure set forth in ORS 314.660 (2) shall be used to
determine the place of payment.]
[(c) A real estate income and interest factor, the numerator of which is
the total net income received from real property within this state plus gross
interest received on loans secured by real property within this state during
the tax year, and the denominator of which is the total net income received
from real property within and without this state plus gross interest received
on loans secured by real property within and without this state during the tax
year. For purposes of this paragraph:]
[(A) “Total net income received from real property” means gross rental
income from real property reduced by all of the following items attributable to
the property, as reported by the insurer in the annual statement filed with the
Department of Consumer and Business Services:]
[(i) Rental real estate expenses;]
[(ii) Rental real estate property taxes; and]
[(iii) Rental real estate depreciation.]
[(B) Any imputed rent from property owned and occupied by the company
shall be excluded from total net income received from real property.]
[(C) If the denominator of the factor is less than zero, the factor
shall be zero.]
[(D) Unless subparagraph (C) of this paragraph applies, if the numerator
is greater than the denominator, the factor shall be one.]
[(2) If application of the apportionment formula described in subsection
(1) of this section, including but not limited to the exclusion of reinsurance
premiums from the insurance sales factor under subsection (1)(a) of this section,
results in an apportionment that does not fairly and equitably represent the
taxpayer’s insurance business activity in this state, the taxpayer may petition
the Department of Revenue for and the department may permit, or the department
may require, to achieve an apportionment that fairly and equitably represents
the taxpayer’s insurance business activity:]
[(a) The exclusion of any one or more factors;]
[(b) The inclusion of one or more additional factors that will fairly
and equitably represent the taxpayer’s business activity in this state;]
[(c) The inclusion of reinsurance premiums in the insurance sales
factor; or]
[(d) The employment of any other method to achieve a fair and equitable
apportionment of the taxpayer’s income.]
SECTION 4. The
amendments to ORS 317.660 by section 1 of this 2007 Act apply to tax years
beginning before January 1, 2007.
SECTION 5. The
amendments to ORS 317.122 and 317.660 by sections 2 and 3 of this 2007 Act
apply to tax years beginning on or after January 1, 2007.
SECTION 6. 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 28, 2007
Filed in the office of Secretary of State July 2, 2007
Effective date September 27, 2007
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