Oregon: Legislation Allowing Fiscal Year Filings for CAT Pending Enactment

The Oregon legislature recently approved legislation, Senate Bill 164, that modifies certain provisions of the Corporate Activity Tax (CAT) law. Recall, the CAT became effective January 1, 2020 and the extended CAT return due date is October 15, 2021. Currently, all taxpayers file their CAT returns using the calendar year as the CAT year. Senate Bill 164 adopts a new definition of “tax year,” which defines that term to mean a taxpayer’s annual accounting period for federal income tax purposes. As such, under the legislation, taxpayers will use their federal tax year as the tax year for the CAT. There are special rules for determining the CAT year for a unitary group.  For the 2021 calendar year, fiscal year taxpayers will be required to register with the Department and file a short year tax return by April 15, 2022 to facilitate the transition. The short year will be the period from January 1, 2021 to the last day of the taxpayer’s fiscal year that ends in 2021. Taxpayers subject to this short year filing requirement are required to prorate the commercial activity threshold of $750,000, the tax rate threshold of $1 million, and the allowed subtraction amount for cost inputs or labor by the number of days from January 1, 2021 to the last day of the taxpayer’s fiscal year that ends in calendar year 2021. The bill also mandates that the unitary group designate a single member as the reporting entity to register, file and pay taxes on behalf of the unitary group. The unitary group may change the reporting entity only when the entity no longer has substantial nexus with Oregon. Please contact Vinh Tran with questions.