Status of business, estate and other taxes in 2011 Legislature

Final Tax Issues Addressed
Article by  J.L. Wilson

— AOI and business groups pleased that R&D Tax Credit is extended until 2018

As the Legislature completes its work on a final package of tax credits and minor tax reforms, it appears that AOI’s primary concern – the Research & Development (R&D) Tax Credit – will survive for another six years. The 2011 Oregon Legislature largely played tax issues down the middle. Overall, it was relatively quiet on the tax front. No proposal moved that didn’t have significant support from both Republicans and Democrats. Oregon business is clearly emerging from the 2011 Legislative session in a better place than where it entered, not only because of the continuity due to a relative lack of activity on tax issues, but also because of the significant accomplishment of SB 301.

Here is where the significant tax issues stand today:

Connection to the Federal Tax Code. (SB 301) Done. Governor signed. Oregon companies are now fully connected to the federal tax code and can take advantage of federal proposals designed to incent business growth – primarily bonus depreciation on capital expenditures and increased Section 179 expensing limits.

Estate Taxes. (HB 2541) Pending. Changes Oregon’s estate tax law to make the $1M threshold for estate taxes an actual deduction for all estates. Currently, Oregon estates valued at over $1M are taxed on the first dollar of estate value. HB 2541 changes this by taxing estates only on the value of the estate in excess of $1M. Oregon’s top estate tax rate of 16% remains unchanged. However, it should be noted Oregon is in the minority of states that still levy estate taxes. Only 20 states still levy taxes on estates.

Measure 67 fix for Agriculture Co-ops. (HB 3058) Pending. Under Oregon’s new Measure 67 gross receipts tax, agricultural cooperatives are being double-taxed – once at the cooperative level and again when revenues are distributed to co-op members through dividends. HB 3058 eliminates the gross receipts tax on cooperatives for business it conducts with its own members.

Business Tax Credits. (HB 3672) Pending. The good news is that AOI’s supported credit – the R&D Tax Credit – was saved. So was the Film and Video Tax Credit. The Business Energy Tax Credit was split into a series of smaller, more tailored credits (Renewable Energy Credit, Energy Conservation Credit, etc.). However, none of these credits were spared from the paring knife. The maximum R&D Credit per company was reduced from $2M to $1M. The Film and Video Credit will be pared back from $7.5M per year to $6M.

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