Chapter 54
AN ACT
SB 1101
Relating to withholding of income tax in real estate transfers;
creating new provisions; amending ORS 314.258 and 696.581; and prescribing an
effective date.
Be It Enacted by the People of
the State of
SECTION 1.
ORS 314.258 is amended to read:
314.258. (1) As used in
this section:
(a) “Authorized agent”
means an agent who is responsible for closing and settlement services in a
conveyance [of a real property interest].
(b) “Closing and
settlement services” means services that are provided [for the benefit of a transferor or a transferee in connection with a
conveyance of a real property interest, and the receipt or disbursement of
moneys in connection with a sale, lease, encumbrance, mortgage or deed of trust
in or related to real property.] by:
(A) A licensed escrow
agent in a real estate closing escrow as provided in ORS 696.505 to 696.590; or
(B) An attorney for the
benefit of a transferor or a transferee in a conveyance, if, simultaneously
with the conveyance, the attorney deposits the unpaid purchase price into the
attorney’s client trust account for disbursal pursuant to the written
instructions of, or the agreement between, the transferor and transferee.
(c) “Consideration” includes
the amount of cash paid for a conveyance and the amount of any lien, mortgage,
contract, indebtedness or other encumbrance existing against the property
conveyed to which the property remains subject or which the purchaser agrees to
pay or assume.
[(c)] (d) “Conveyance” means [a sale, lease, encumbrance, mortgage or creation of a secured interest
in real property.] a transfer or a contract to transfer fee title to any
real estate located in the State of
(e) “Net proceeds” means
the net amount to be disbursed to the transferor, prior to reduction for
withholding, as shown on the transferor’s settlement statement for the
conveyance.
[(d) “Real property interest” means a United States real property
interest, as defined in section 897(c) of the Internal Revenue Code, that is
located in the State of Oregon.]
(f) “Transferor”
means:
(A) An individual who is
not a resident of this state, as defined in ORS 316.027, on the closing date of
the conveyance; or
(B) A corporation taxed
under section 11 of the Internal Revenue Code and subchapter C, chapter 1 of
the Internal Revenue Code, that is not domiciled in this state or that is not
registered or otherwise qualified to do business in this state on the closing
date of the conveyance.
(2)[(a) If there is a conveyance of a real property interest, the]
An authorized agent providing closing and settlement services in a
conveyance is required to withhold from consideration payable to a
transferor an amount equal to the least of:
[(A)] (a) Four percent of the consideration for the [real property interest being conveyed]
conveyance;
[(B)] (b) [Four percent
of] The net proceeds resulting from the conveyance; or
[(C)] (c) [Ten] Eight
percent of the gain includable in the transferor’s
[(b) For purposes of this subsection, a transferor is:]
[(A) An individual who is not a resident of this state at the time of
both the closing date of the conveyance and the date on which proceeds of the
conveyance are disbursed; or]
[(B) A C corporation that, immediately after the conveyance of the real
property interest, is not doing business in this state.]
(3)[(a) Notwithstanding subsection (2) of this section,] An authorized
agent is not required to withhold amounts under this section if [the authorized agent obtains a written
affirmation executed by the transferor on a form prescribed by the Department
of Revenue certifying under penalty of perjury that]:
[(A)] (a) The consideration for the conveyance does not
exceed $100,000;
[(B) The transferee is acquiring the real property interest through
foreclosure; or]
(b) The conveyance is
pursuant to a judicial foreclosure proceeding, a writ of execution, a
nonjudicial foreclosure of a trust deed or a nonjudicial forfeiture of a land
sale contract;
(c) The conveyance is in
lieu of foreclosure of a mortgage, trust deed or other security instrument or a
land sale contract with no additional monetary consideration;
(d) The transferor is a
personal representative, executor, conservator, bankruptcy trustee or other
person acting under judicial review;
(e) The transferor
delivers to the authorized agent a written assurance as provided in section
6045(e) of the Internal Revenue Code that the sale or exchange qualifies for
exclusion of gain under section 121 of the Internal Revenue Code;
(f) The authorized agent
obtains a written affirmation that the transferor is unlikely to owe
(g) The amount that
would be withheld under subsection (2) of this section is less than $100, or
less than a minimum amount established by rule by the Department of Revenue; or
(h) The authorized agent
is an attorney and a licensed escrow agent is providing services in the
conveyance.
[(C) The transferor:]
[(i) If an individual, is a resident of this state;]
[(ii) If a corporation, has a permanent place of business in this state;
or]
[(iii) Has professionally competent knowledge or advice that the
transferor will not owe tax under ORS chapter 316, 317 or 318 for the tax year
because the conveyance is an exchange that qualifies for deferral under section
1031 or 1033 of the Internal Revenue Code or is a nontaxable transaction under
Oregon tax law.]
[(b) If withholding is not retained and remitted to the department
pursuant to this section, the authorized agent shall retain the written
affirmation described in this subsection for six years from the date of the
closing of the conveyance transaction and shall present the written affirmation
to the department immediately upon request in writing from the department.]
[(4) For purposes of this section, a corporation is not doing business
in this state if:]
[(a) The corporation has not been issued a certificate of existence or a
certificate of authorization by the Secretary of State as described in ORS
60.027; and]
[(b) The corporation does not maintain a permanent office with a staff
of at least one employee in this state or does not own or lease property in
this state other than the property that is the subject of the conveyance.]
[(5)(a)] (4)(a) Amounts withheld pursuant to this section are
held in trust for the State of
(b) If an authorized
agent fails to remit an amount withheld [or
required to be withheld] by the agent under this section by the time
remittance is required, the department may [enforce
collection in the same manner as the department enforces the collection of
amounts withheld by employers under ORS 316.162 to 316.221] recover from
the authorized agent the amount withheld with interest at the rate established
under ORS 305.220.
(c) If an authorized
agent fails to withhold when withholding is required under this section, the
department may recover a penalty not to exceed the greater of:
(A) $500; or
(B) 10 percent of the
amount required to be withheld under this section, but not more than $2,500.
[(c)] (d) [Notwithstanding
paragraph (b) of this subsection,] The department may not proceed with
collection actions against the authorized agent if the authorized agent:
[(A) Presents the department with the written affirmation described in subsection
(3) of this section; and]
(A) Withholds the
required amount in connection with a conveyance and timely remits the funds to
the department;
(B) Is not required to
withhold an amount under this section; or
[(B)] (C) Demonstrates to the department that the authorized
agent obtained [the] a written
affirmation as described in this section or an assurance as provided in
section 6045(e) of the Internal Revenue Code prior to disbursal of funds
due the transferor resulting from the conveyance.
(e) A transferor may
claim the amount withheld by an authorized agent on the transferor’s personal
income tax return or corporate income tax return or excise tax return.
(f) Notwithstanding ORS
696.581 (2), an authorized agent may withhold funds under this section without
written instructions to withhold from the transferor.
(g) A written
affirmation, as provided under this section, shall be executed by the
transferor or the transferor’s tax advisor under penalty of perjury and shall
contain the transferor’s taxpayer identification number. The authorized agent
shall retain for six years from the date of the closing of the conveyance any
written affirmation obtained by the agent in connection with the conveyance.
The department shall prescribe by rule the form and content of the written
affirmation and procedures for submission to the department of the information
contained in the written affirmation.
(h) It shall be a
defense to any claim by the department or by a transferor against an agent that
the agent has acted in reasonable reliance upon representations made by the
transferor or the transferor’s tax advisor.
SECTION 2.
ORS 696.581 is amended to read:
696.581. (1) An escrow
agent may not accept funds, property or documents in any escrow transaction
without dated, written escrow instructions from the principals to the
transaction or a dated executed agreement in writing between the principals to
the transaction.
(2) Except as
provided in ORS 314.258, an escrow agent may not close an escrow or
disburse any funds or property in an escrow without obtaining dated, separate
escrow instructions in writing from the principals to the transaction adequate
to administer and close the transaction or, in the case of disbursement, to
disburse the funds and property.
(3) The following
statement or its substantial equivalent shall appear on or be attached to all
written escrow instructions prepared by an escrow agent for signature of the
principals to a transaction. The statement shall be in at least 10-point bold
type. The statement shall either appear immediately above the signatures of the
principals or be separately initialed by the principals:
______________________________________________________________________________
It is understood by the
parties signing the above or attached instructions that the instructions are
the complete instructions between this firm as an escrow agent and you as a
principal to the escrow transaction. These instructions may not include all the
terms of the agreement which is the subject of this escrow. Read these
instructions carefully, and do not sign them unless they are acceptable to you.
______________________________________________________________________________
(4) An escrow agent may
not solicit or accept any original, amended or supplemental escrow instructions
containing any blank to be filled in after signing. An escrow agent shall not
allow any alteration of original, amended or supplemental escrow instructions,
unless the alteration is signed or initialed by all principals who signed or
initialed the instructions before the alteration.
(5) An escrow agent may
accept client funds, in excess of earnest money required in transaction
documents to be held, as individual funds of the principal who has paid them
into escrow. Such individual funds may be disbursed with only the separate
written instructions of the principal who deposited the funds into escrow.
(6) An escrow agent may
open a one-sided escrow, as defined by rule by the Real Estate Commissioner.
Such escrow funds may be disbursed with only the separate written instructions
of the principal who deposited the funds into escrow.
(7) Except as authorized
in ORS 105.475, notwithstanding the requirement for dated, separate escrow
instructions to close an escrow or disburse funds or property in an escrow, an
escrow agent:
(a) May disburse earnest
money deposited based on an agreement of the parties executed after the initial
sales agreement; and
(b) May not impose
additional requirements on the principals to the transaction, including a
requirement that the principals sign a release of liability in favor of the
escrow agent.
SECTION 3. The
amendments to ORS 314.258 and 696.581 by sections 1 and 2 of this 2008 Act
apply to conveyances occurring on or after January 1, 2008. Any withholding
made or exemption accepted by an agent in accordance with ORS 314.258 before
the effective date of this 2008 Act is deemed to be in compliance with this
2008 Act.
SECTION 4. This
2008 Act takes effect on the 91st day after the date on which the special
session of the Seventy-fourth Legislative Assembly adjourns sine die.
Approved by the Governor March 11, 2008
Filed in the office of Secretary of State March 11, 2008
Effective date May 23, 2008
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