74th OREGON LEGISLATIVE ASSEMBLY--2007 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 627
Senate Bill 179
Printed pursuant to Senate Interim Rule 213.28 by order of the
President of the Senate in conformance with presession filing
rules, indicating neither advocacy nor opposition on the part
of the President (at the request of Governor Theodore R.
Kulongoski 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 insurers with both in-state and out-of-state
business activity to petition Department of Revenue for
modification of apportionment formula used to apportion income
between Oregon and out-of-state sources, if existing formula does
not produce fair and equitable apportionment. Authorizes
department to permit or require modification of apportionment
formula in order to produce fair and equitable apportionment.
Applies to tax years beginning on or after January 1, 2007, and
to tax years for which returns are subject to audit or adjustment
by department.
Takes effect on 91st day following adjournment sine die.
A BILL FOR AN ACT
Relating to insurance company income apportionment; creating new
provisions; amending ORS 317.660; and prescribing an effective
date.
Be It Enacted by the People of the State of Oregon:
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 { + , as described in
subsection (2) of this section, + } 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) The factors described in subsection (1) of this section,
expressed as percentages, shall be averaged by adding the factors
together and dividing the sum by three. The number of factors to
be averaged shall be reduced by the number of factors that are
not present in the taxpayer's business both within and without
the state.
(3) If application of the apportionment formula described in
subsections (1) and (2) 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. { + The amendments to ORS 317.660 by section 1 of
this 2007 Act apply to:
(1) Tax years beginning on or after January 1, 2007; and
(2) Any tax year for which a return is subject to audit or
adjustment by the Department of Revenue on or after the effective
date of this 2007 Act. + }
SECTION 3. { + 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. + }
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