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Is Your Business Prepared for Oregon's New Corporate Activity Tax?
This time of year is likely when you begin to prepare for how you’ll continue to grow and shape your business in 2020. Depending on the size of your business in Oregon, you may have an additional wrinkle to consider, a new state tax, the Corporate Activity Tax (CAT), that could have far reaching implications for Bend businesses and those across the state.
What is the CAT?
Earlier this year, the State Legislature established the CAT, requiring businesses with commercial activity in the state exceeding $750,000 to register for the tax. Businesses, of any type, with Oregon commercial activity exceeding $1 million annually are subject to a tax of $250 on the first $1 million of gross receipts and a .57% tax on gross receipts in excess of $1 million.
Here are some highlights from recent communications I’ve received on the topic:
- The tax is effective on January 1, 2020 and applies to any business entity that conducts business in Oregon; this includes corporations, partnerships, LLCs, S-corporations, and business activity of individuals, estates, and trusts.
- Registration is required within 30 days of exceeding the $750,000 registration threshold. Businesses can register early, beginning in early 2020 via the State’s Revenue Online portal; failing to register if your business has exceeded $750,000 in annual revenue can result in monthly penalties.
- Returns need to be filed annually by April 15 for the prior tax year. For businesses that have to pay the tax, estimated tax payments are required. Payments are due April 30, July 31, October 31, and January 31.
If you’re the owner of a business that’s likely to be impacted by the new tax you may have already received a letter from the Oregon Department of Revenue detailing some of the basics. The envelope looks similar to other tax notifications from the State, so you may want to check for any unopened mail.
Here’s what Wes Price, a longtime member of the EDCO Board, frequent participant in Bend Economic Development Advisory Board discussions, and partner at Price Fronk & Co. CPA, had to say about the CAT:
“The letters are out informing most businesses of the existence of Oregon’s new commercial activity tax. Don’t just automatically assume you’re exempt from the registration process; carefully review your sales activity and where your sales activity may go in 2020.”
How should I prepare?
First things first, this might be a good time to speak with your tax professional. If you expect your business to exceed $750,000 in revenue from commercial activity within the state in 2020 you will likely need to register your business. If you’ll exceed $1 million, you’ll likely be on the hook for payments in the coming year. There are deductions available, identifying a professional who can help you work through your plans for 2020 and prepare for these new costs will help avoid unexpected costs or penalties down the road.
As mentioned above, reading through the State’s FAQ on the CAT and signing up for their mailing list is another way to ensure you’re in the loop on any changes or updates going forward.
While this tax takes effect on January 1, 2020, state officials are currently drafting the rules governing how the CAT will be applied. Initial guidance from the Department of Revenue is expected in December, with additional updates coming throughout the first few months of 2020. Expect to hear more from me on the topic as the state releases their rules; if you have specific questions, the Department of Revenue has a dedicated email address: email@example.com.
Feeling confused? While this isn’t a City of Bend tax, I’m happy to work with you and our local economic development partners to find resources here in Bend that can help you prepare for these looming changes. Please get in touch and thank you for doing business in Bend.
Ben Hemson is the City of Bend’s Business Advocate, you can reach him at firstname.lastname@example.org or 541-388-5529.