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 626
A-Engrossed
Senate Bill 180
Ordered by the Senate April 30
Including Senate Amendments dated April 30
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.
Modifies definition of 'financial organization' for corporate
excise and income tax purposes.
Applies to tax years beginning on or after January 1, 2007
{ - , and to earlier tax years for which taxpayer may file claim
for refund, for which Department of Revenue may audit or make
adjustment to return or for which return is subject of appeal - }
.
Takes effect on 91st day following adjournment sine die.
A BILL FOR AN ACT
Relating to treatment of financial organizations in tax law;
creating new provisions; amending ORS 311.473, 314.610,
317.010, 317.056, 317.310 and 317.660; and prescribing an
effective date.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 314.610 is amended to read:
314.610. As used in ORS 314.605 to 314.675, unless the context
otherwise requires:
(1) 'Business income' means income arising from transactions
and activity in the regular course of the taxpayer's trade or
business and includes income from tangible and intangible
property if the acquisition, the management, use or rental, and
the disposition of the property constitute integral parts of the
taxpayer's regular trade or business operations.
(2) 'Commercial domicile' means the principal place from which
the trade or business of the taxpayer is directed or managed.
(3) 'Compensation' means wages, salaries, commissions and any
other form of remuneration paid to employees for personal
services.
(4) 'Financial organization' means { - any financial
institution or trust company, as those terms are defined in ORS
706.008, any industrial bank, land bank, safe deposit company,
private banker, cooperative bank, investment company, or any type
of insurance company. - } { + a person, corporation or other
business entity that is any of the following:
(a) A bank holding company under the laws of this state or
under the Bank Holding Company Act of 1956, 12 U.S.C. 1841 et
seq., as amended.
(b) A savings and loan holding company under the National
Housing Act, 12 U.S.C. 1701 et seq., as amended.
(c) A national bank organized and existing as a national bank
association under the National Bank Act, 12 U.S.C. 21 et seq., as
amended.
(d) A savings association, as defined in 12 U.S.C. 1813(b)(1),
as amended.
(e) A bank or thrift institution incorporated or organized
under the laws of any state.
(f) An entity organized under the provisions of 12 U.S.C. 611
to 631, as amended.
(g) An agency or branch of a foreign bank, as defined in 12
U.S.C. 3101, as amended.
(h) A state credit union the loan assets of which exceed
$50,000,000 as of the first day of the taxable year of the state
credit union.
(i) A production credit association subject to 12 U.S.C. 2071
et seq., as amended.
(j) A corporation, more than 50 percent of the voting stock of
which is owned, directly or indirectly, by a person or other
business entity described in paragraphs (a) to (i) of this
subsection, provided that the entity is not an insurer taxable
under ORS 317.655.
(k) A person that is not described in paragraphs (a) to (j) or
(L) of this subsection, that is not an insurer taxable under ORS
317.655 and that derives more than 50 percent of its gross income
from activities that a person described in paragraphs (c) to (i)
or (L) of this subsection is authorized to conduct, not taking
into account any income derived from nonrecurring extraordinary
sources.
(L) A person that derives at least 50 percent of the person's
annual average gross income, for financial accounting purposes
for the current tax year and the two preceding tax years, from
finance leases, excluding any gross income from incidental or
occasional transactions. For purposes of this paragraph, 'finance
lease ' means:
(A) A lease transaction that is the functional equivalent of an
extension of credit and that transfers substantially all of the
benefits and risks of the ownership of the leased property;
(B) A direct financing lease or a leverage lease that meets the
criteria of Financial Accounting Standards Board Statement
No. 13; or
(C) Any other lease that is accounted for as a financing by a
lessor under generally accepted accounting principles. + }
(5) 'Nonbusiness income' means all income other than business
income.
(6) 'Public utility' means any business entity whose principal
business is ownership and operation for public use of any plant,
equipment, property, franchise, or license for the transmission
of communications, transportation of goods or persons, or the
production, storage, transmission, sale, delivery, or furnishing
of electricity, water, steam, oil, oil products or gas.
(7) 'Sales' means all gross receipts of the taxpayer not
allocated under ORS 314.615 to 314.645.
(8) 'State' means any state of the United States, the District
of Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, and any foreign country or
political subdivision thereof.
SECTION 2. ORS 317.010 is amended to read:
317.010. As used in this chapter, unless the context requires
otherwise:
(1) 'Centrally assessed corporation' means every corporation
the property of which is assessed by the Department of Revenue
under ORS 308.505 to 308.665.
(2) 'Department' means the Department of Revenue.
(3)(a) 'Consolidated federal return' means the return permitted
or required to be filed by a group of affiliated corporations
under section 1501 of the Internal Revenue Code.
(b) 'Consolidated state return' means the return required to be
filed under ORS 317.710 (5).
(4) 'Doing business' means any transaction or transactions in
the course of its activities conducted within the state by a
national banking association, or any other corporation; provided,
however, that a foreign corporation whose activities in this
state are confined to purchases of personal property, and the
storage thereof incident to shipment outside the state, shall not
be deemed to be doing business unless such foreign corporation is
an affiliate of another foreign or domestic corporation which is
doing business in Oregon. Whether or not corporations are
affiliated shall be determined as provided in section 1504 of the
Internal Revenue Code.
(5) 'Excise tax' means a tax measured by or according to net
income imposed upon national banking associations, all other
banks, and financial, centrally assessed, mercantile,
manufacturing and business corporations for the privilege of
carrying on or doing business in this state.
{ - (6) 'Financial institution' or 'financial corporation '
means a bank or trust company organized under ORS chapter 707,
national banking association or production credit association
organized under federal statute, building and loan association,
savings and loan association, mutual savings bank, and any other
corporation whose principal business is in direct competition
with national and state banks. - }
{ + (6) 'Financial organization' has the meaning given that
term in ORS 314.610, except that it does not include a credit
union as defined in ORS 723.006, an interstate credit union as
defined in ORS 723.001 or a federal credit union. + }
(7) 'Internal Revenue Code,' except where the Legislative
Assembly has provided otherwise, refers to the laws of the United
States or to the Internal Revenue Code as they are amended and in
effect:
(a) On December 31, 2004; or
(b) If related to the definition of taxable income, as
applicable to the tax year of the taxpayer.
(8) 'Oregon taxable income' means taxable income, less the
deduction allowed under ORS 317.476, except as otherwise provided
with respect to insurers in subsection (11) of this section and
ORS 317.650 to 317.665.
(9) 'Oregon net loss' means taxable loss, except as otherwise
provided with respect to insurers in subsection (11) of this
section and ORS 317.650 to 317.665.
(10) 'Taxable income or loss' means the taxable income or loss
determined, or in the case of a corporation for which no federal
taxable income or loss is determined, as would be determined,
under chapter 1, Subtitle A of the Internal Revenue Code and any
other laws of the United States relating to the determination of
taxable income or loss of corporate taxpayers, with the
additions, subtractions, adjustments and other modifications as
are specifically prescribed by this chapter except that in
determining taxable income or loss for any year, no deduction
under ORS 317.476 or 317.478 and section 45b, chapter 293, Oregon
Laws 1987, shall be allowed. If the corporation is a corporation
to which ORS 314.280 or 314.605 to 314.675 (requiring or
permitting apportionment of income from transactions or
activities carried on both within and without the state) applies,
to derive taxable income or loss, the following shall occur:
(a) From the amount otherwise determined under this subsection,
subtract nonbusiness income, or add nonbusiness loss, whichever
is applicable.
(b) Multiply the amount determined under paragraph (a) of this
subsection by the Oregon apportionment percentage defined under
ORS 314.280, 314.650 or 314.670, whichever is applicable. The
resulting product shall be Oregon apportioned income or loss.
(c) To the amount determined as Oregon apportioned income or
loss under paragraph (b) of this subsection, add nonbusiness
income allocable entirely to Oregon under ORS 314.280 or 314.625
to 314.645, or subtract nonbusiness loss allocable entirely to
Oregon under ORS 314.280 or 314.625 to 314.645. The resulting
figure is 'taxable income or loss' for those corporations
carrying on taxable transactions or activities both within and
without Oregon.
(11) As used in ORS 317.122 and 317.650 to 317.665, ' insurer'
means any domestic, foreign or alien insurer as defined in ORS
731.082 and any interinsurance and reciprocal exchange and its
attorney in fact with respect to its attorney in fact net income
as a corporate attorney in fact acting as attorney in compliance
with ORS 731.458, 731.462, 731.466 and 731.470 for the reciprocal
or interinsurance exchange. However, 'insurer' does not include
title insurers or health care service contractors operating
pursuant to ORS 750.005 to 750.095.
SECTION 3. ORS 317.056 is amended to read:
317.056. Except as otherwise required by federal law { + and
except as provided in ORS 317.080 + }, every financial
{ - corporation - } { + organization + } located within this
state shall be subject to county, city, district, political
subdivision and all other local taxes imposed generally on a
nondiscriminatory basis throughout the jurisdiction of the taxing
authority, at the same rates and in all respects in the same
manner and to the same extent as are mercantile, manufacturing
and business corporations, and shall pay annually to the state an
excise tax according to or measured by its Oregon taxable income,
to be computed in the manner provided by this chapter at the rate
provided in ORS 317.061.
SECTION 4. ORS 317.310 is amended to read:
317.310. (1) To derive Oregon taxable income of a financial
{ - institution which - } { + organization that + } has
changed from the reserve method of accounting to the specific
charge-off method of accounting for federal tax purposes, there
shall be subtracted from federal taxable income amounts
{ - which - } { + that + } the financial
{ - institution - } { + organization + } recognized pursuant
to section 585(c)(3) of the Internal Revenue Code.
(2) To derive Oregon taxable income, after the modification
prescribed in subsection (1) of this section, the balance in the
reserve for bad debts, as determined under ORS 317.333 (2) (1985
Replacement Part), shall be taken into income using the same
method as the financial { - institution - } { +
organization + } used for federal tax purposes pursuant to
section 585(c)(3) of the Internal Revenue Code.
(3) Subsections (1) and (2) of this section { - shall - }
{ + do + } not apply to bad debt reserves for which an election
under section 585(c)(4) of the Internal Revenue Code has been
made. A financial
{ - institution which - } { + organization that + } uses the
method described in section 585(c)(4) of the Internal Revenue
Code shall apply that same method to the balance in the reserve
for bad debts, as determined under ORS 317.333 (2) (1985
Replacement Part), and adjust its Oregon taxable income
accordingly.
SECTION 5. ORS 317.660 is amended to read:
317.660. { - 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:
(1) Insurance sales factor: The percentage obtained by dividing
(a) the direct premiums (excluding reinsurance accepted and
without deduction of reinsurance ceded) received by the insurer
during the taxable year on policies and contracts which are
allocated to this state and to other jurisdictions in which the
insurer is not authorized to do business by (b) the total of such
premiums received by the insurer during the taxable year on
policies and contracts that had been sold within and without this
state. For purposes of this subsection, 'premiums' means sums
properly included in appropriate schedules of the annual
statement filed by the insurer with the Director of the
Department of Consumer and Business Services, which 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.
(2) Wage and commission factor: The percentage obtained by
dividing (a) 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 in connection with
the business of the insurer, by (b) the total wages, salaries,
commissions and other compensation for personal services paid
everywhere during the tax period to employees and insurance
salesmen in connection with the business of the insurer. For
determining the place of payment, the procedure set forth in ORS
314.660 (2) shall apply.
(3) Real estate income and interest factor: The percentage
obtained by dividing (a) 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) 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 year.
SECTION 6. { + The amendments to ORS 314.610, 317.010,
317.056, 317.310 and 317.660 by sections 1 to 5 of this 2007 Act
apply to tax years beginning on or after January 1, 2007. + }
SECTION 7. ORS 311.473 is amended to read:
311.473. (1) Any financial institution, { - as defined in ORS
317.010, - } or agent or representative of a financial
institution, that, in the process of foreclosing any security
interest or other lien on taxable personal property, including
property classified as real property machinery and equipment, or
after the lien is foreclosed, causes the property to be removed,
or is knowledgeable that the property will be removed by another
after the foreclosure sale, from the county in which the property
is assessed or seized, shall notify the tax collector of that
county prior to the removal. The notice shall be mailed to the
tax collector, return receipt requested, and shall contain a
description of the property that is the subject of the
foreclosure, together with the name and address of the owner or
owners of the property.
(2) Failure to give the notice required under subsection (1) of
this section shall not affect the foreclosure, but the tax
collector shall have recourse against the financial institution
on behalf of the taxing units for any damages sustained on
account of failure to mail the notice.
SECTION 8. { + 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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