Oregon: Guidance Issued on Fiscal Year CAT Filings

Oregon Senate Bill 164, which was recently signed into law, modifies certain provisions of the Corporate Activity Tax (CAT). Recall, the CAT became effective January 1, 2020 and the extended due date for the first CAT return is October 15, 2021. Currently, all taxpayers file their CAT returns using the calendar year as the CAT year. One of the more significant changes in Senate Bill 164 is the adoption of 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.

To facilitate the change, fiscal year taxpayers will need to file a short-year return covering 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. Importantly, this short-year return will be due on April 15, 2022. In its recently-released guidance, the Department of Revenue notes that the changes in Senate Bill 164, including the new definition of tax year, will require changes the rules and CAT guidance. The Department if working on making these changes. Please contact Vinh Tran with questions.