Bases calculation of all surplus kicker refunds on the same tax year.

Increases standard deduction for taxpayers claimed as dependents on another return from $500 to $650 for 1997 tax year. Ties to federal standard deduction thereafter.

Updates and corrects obsolete and erroneous references.

State: Reduces General Fund revenues by less than $10,000 in 1997-99 and in 1999-2001 (resulting from increase in dependent taxpayers' standard deduction).

Allows Department of Revenue to cancel any tax, penalty or interest when there is reasonable doubt as to the actual liability, taxpayer has supplied documentation to support the cancellation, and the taxpayer has complied with filing requirements.

Requires taxpayers to report changes resulting from federal audits that affect Oregon tax liability. Sets period for issuing notice of deficiency when taxpayer fails to report federal audit changes.

Authorizes Department of Revenue to disclose partnership or S corporation tax information to other partners or shareholders during tax audit.

Clarifies definition of a resident trust for tax purposes. Prohibits taxing routine activities deemed necessary to executing the decisions of non-resident corporate fiduciaries of interstate trusts.

None.

Allows Department of Revenue to adopt rules regarding verification and filing of returns by alternative (electronic) methods.

Prohibits transfer or assignment of refunds to third parties unless authorized by Department of Revenue.

Allows Department of Justice to delegate to Department of Revenue the performance of routine administrative tasks relating to tax claims before bankruptcy court.

None.

Allows recipients to withhold 6% from unemployment benefits for state income tax.

Requires withholding for third party wage payers.

None.

Requires certain Oregon combined withholding, unemployment and payroll taxpayers and certain corporate estimated taxpayers to pay by electronic funds transfer (EFT). Beginning July 1, 1998, requires taxpayers with combined state withholding obligations over $1 million per year to use EFT. Gradually reduces threshold so that, by July 1, 2001, all taxpayers required to use EFT for federal withholding are required to use EFT for state combined withholding.

State: Accelerating withholding will increase General Fund revenues by $233,660 in 1997-99, $770,000 in 1999-01, and $970,000 in 2001-03. Speeding-up fund transfers enables the state to collect withholding and estimated taxes sooner, increasing interest earnings.

Generally connects calculation of Oregon taxable income to the Internal Revenue Code as of December 31, 1996. This adopts for Oregon tax purposes all changes in the determination of taxable income made by Congress under the Small Business Job Protection Act of 1996 (P.L. 104-188), the Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191), and the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193), but continues "disconnect" provisions where the Legislature (in prior sessions) chose to calculate Oregon taxable income differently than done for federal taxes.

State: Reduces General Fund revenue in the 1997-99 biennium by $0.8 million, and increases General Fund revenue by $1.6 million in 1999-01. Generally tends to reduce taxes of individual taxpayers, and increases taxes of corporate taxpayers as shown below.

Establishes non-refundable childcare credit for low-income families. Calculates credit as a declining percentage of qualified childcare expenses. Taxpayers under 150% of federal poverty level get 40% of expenses, the maximum credit. The credit phases out for taxpayers over 200% of federal poverty level and cannot exceed tax liability.

Establishes non-refundable state Earned Income Tax Credit (EITC) for families eligible for the federal EITC. Sets state credit to 5% of the federal EITC but cannot exceed tax liability. (Note: The federal EITC phases out for taxpayers earning over about $30,000).

Excludes any federal EITC benefits received when computing the federal tax subtraction.

State: Reduces General Fund revenue by about $34 million in 1997-99 and $37 million in 1999-2001.

Extends the sunset date for the alternative energy systems property tax exemption to July 1, 2002.

Raises the residential alternative energy income tax credit from 40¢ to 60¢ per kilowatt hour of energy yield and the maximum credit from $1,000 to $1,500. Extends the credit to purchases of energy-efficient appliances based on energy saved, up to 25% of appliance cost. Extends the credit to buying alternative fuel vehicle or modifying vehicle to use alternative fuel. Sets credit to 25% of costs, up to $750.

Allows business tax credit for building residential fueling stations for alternative fuel vehicles. Sets credit to 25% of costs, up to $750. Allows builder to transfer credit to homeowner or purchaser.

Raises the eligible cost limit on each commercial and alternative fuel project claiming the business energy credit from $100,000 to $500,000. Expands eligibility additional types of natural gas fuels.

Begins changes on January 1, 1998.

Local: Extending property tax exemption reduces local revenue (prevents an increase) by about $1.2 million in 1998-99 (one year) and $2.5 million in the 1999-01 biennium.

State: Reduces General Fund revenue about $818,000 in 1997-99 and $908,000 in 1999-01.

Allows taxpayer to decline to make one-time adjustment in 1996 to reconcile the difference between federal and state property basis. Allows taxpayer to revoke the basis adjustment by filing an amended return.

Corrects reference in the surplus kicker statutes to include income tax credits in ORS Chapter 315 and income tax offsets in ORS Chapter 734. (Current language creates a possible loophole by referencing only those credits found in ORS Chapters 317 and 318).

Exempts from taxation income earned by certain non-resident federal employees working at federal hydroelectric facilities on the Columbia River.

State: Allowing the 1996 basis adjustment reduces General Fund revenue in 1997-99 and 1999-01 by less than $20,000 per biennium. The surplus kicker change reflects current practice. The federal employee exemption avoids federal legislation that will preempt the state from taxing that income.

Automatically connects calculation of state taxable income to the Internal Revenue Code each time code is amended (i.e. "rolling reconnect").

No impact known at this time. However any future changes in federal taxable income will automatically be adopted and affect Oregon income tax revenue.

Extends sunset date for equipment donation tax credit from January 1, 1998 to January 1, 2004. Expands types of educational institutions for which donation of equipment may be claimed as a credit to include public pre-kindergarten through grade 12 institutions.

State: Reduces General Fund revenue by $200,000 in 1997-99 and 1999-01.

Appropriates funds for the operations of the Department of Revenue, including funds for enhanced audit and collection of income taxes.

State: General Fund revenue increase of $10,192,000 from enhanced collections.

Establishes program to allow prepayment of college tuition.

Establishes the Post-secondary Education Expense Program Board to administer the program. Defines membership, organization, duties, and powers of the Board. Sets membership qualifications and term of office. Exempts Board from most personnel and public contracting laws.

Establishes a community college plan and a university plan. Requires Board to calculate payments to prepay tuition based on highest public tuition, expected investment term and earnings, and administrative costs. Limits administrative costs to 4% of payment. Specifies benefits if beneficiary attends private or out-of-state accredited, non-profit college. Pays refund if beneficiary dies, is disabled, or receives scholarship. Requires Board to design contracts, guaranteed by the State of Oregon, which specify conditions and payments to purchase prepaid tuition.

Establishes Post-secondary Education Expense Trust Fund to hold and invest moneys deposited on behalf of participants. Requires fund be managed on an actuarially sound basis.

Exempts benefits received by a qualified beneficiary from personal income tax beginning in 1999.

Takes effect upon voter approval of HJR 72.

State: Reduces General Fund revenue by $84,000 in 1997-99, $400,000 in 1999-01, and $860,000 in 2001-03. The revenue loss occurs to the extent these investments replace taxable investments, such as mutual funds. Prepaid tuition earnings are tax exempt both when earned and when received.

These estimates are rough because the terms and conditions of the contracts are not known. The estimate assumes 7,600 initial enroll with an average purchase of two years tuition. Thereafter it assumes 4,000 enrollees per year purchase a half year's tuition and all continue to purchase a half years tuition each year until a full 4 years has been purchased. It assumes half of these investments replace taxable investments.

Permits Oregonians to establish tax-deductible Medical Savings Accounts (MSAs) notwithstanding federal limits on the maximum number of eligible account holders.

State: Negligible. While HB 2488 relaxes the cap on the number of MSAs, it does not alter the federal eligibility conditions (e.g. that participants be employed by small employers).

Extends eligibility for Rural Medical Practice Income Tax Credit to include rural optometrists. Limits maximum number of eligible optometrists in the 1997-99 biennium to five.

State: General Fund reduction of $50,000 in 1997-99, based on the maximum credit of $5,000 per eligible individual per year. In 1999-01 expanded participation may result in a loss of $176,000.

Increases the cap on the total amount of tax credit allowed for lending institution loans for the construction, development or rehabilitation of low-income housing from $3 million to $4 million.

State: General Fund reduction of about $500,000 in 1997-99 and 1999-01.

Imposes personal income tax on Oregon lottery prizes exceeding $600. Instructs Oregon State Lottery Commission to withhold income taxes on prizes over $600. Begins January 1, 1998.

State: Increases General Fund revenue by about $2.5 million in 1997-99 (one year) and by about $5 million in 1999-01 (full biennium).

Appropriates $80 million in General Fund revenues from the 1995-97 biennium to be applied to settlement of a case involving the Industrial Accident Fund.

State: Increases 1997-99 General Fund revenues by $80 million. [Note: The increase occurs because a 1996 special session law reduces 1995-97 kicker credits (paid in 1997-99) if more appropriations are made in the 1995-97 budget. Personal refunds are cut $49 million and corporate credits $31 million.]

Amends Oregon Constitution to allow the state to incur debt to guarantee a prepaid tuition trust fund. Pledges full faith and credit of the state to satisfy state guarantees. Limits debt to 0.5% of true cash value of state.

Allows the state to issue bonds or to borrow from the Common School Fund as required to satisfy the state's obligations under a prepaid tuition plan. Allows a state property tax to pay bond premiums and interest.

Submits amendment to voters at November 1998 general election.

Local: None. Any borrowing from the Common School Fund must be repaid.

State: See HB 2403, the enabling legislation.

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