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Major ruling: Businesses can offset Corporate Minimum Tax with Credits

January 20, 2012

Oregon Court: Good News – Businesses Can Offset Corporate Minimum Tax with Credits
By Associated Oregon Industries

In a key court decision that flew under the radar during the Christmas holiday, the Oregon Tax Court sided with Con-Way, Inc. in its dispute with the Oregon Department of Revenue.

At issue: Con-Way’s use of Oregon’s Business Energy Tax Credit (BETC) to offset its corporate minimum tax liability under Measure 67.

For the 2009 tax year, Con-Way acquired a BETC credit of $75,000. Con-Way reported no net income for 2009, but generated enough sales to trigger a $75,000 corporate minimum tax liability under Measure 67. Con-Way applied its BETC credit to offset its 2009 tax liability.

The Oregon Department of Revenue disallowed Con-Way’s use of the BETC credit and instead assessed penalties and interest, asserting that the Measure 67 corporate minimum tax law requires a cash payment each year in the amount of any liability calculated under the Measure 67 scheme regardless of any tax credits.

The Tax Court disagreed. It admonished the Department, saying, “…the department asks the court to add words to the statute so that it reads that there is an obligation to pay ‘in cash and without regard to any tax credit otherwise available to the taxpayer.’ Not only does the statute not contain those words, the context of the revenue laws as a whole indicates that when the legislature desires to prevent a tax credit from being used to satisfy a minimum tax obligation, it knows how to say so and has, in fact, said so.”

In short the Court found no legislative evidence supporting the Department’s position.

The effect of the ruling to AOI members is that BETC credits may now be applied against corporate minimum tax liabilities.

Might the Legislature try and intervene? The interim legislative Revenue Committees discussed this issue last September. Representative Phil Barnhart (D-Eugene) argued that he and his Democratic colleagues meant to deny offsetting when they passed the tax increases in the 2009 Legislative session. Representative Vicki Berger (R-Salem) countered that she wasn’t in the group of legislators that passed Measure 67 and she didn’t see the words in the statute. The Tax Court affirmed her position.

AOI will keep a close watch on this issue during the February 2012 Legislative session. It is likely that a 3/5 supermajority vote of the legislature would be needed to deny Oregon companies the ability to offset corporate minimum tax liabilities with the BETC credit.

  
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