FWW Alert: Oregon's New Corporate Activity Tax (CAT)
On May 16, 2019, Governor Kate Brown signed House Bill 3427. This law adopts a new Corporate Activity Tax ("CAT") system. The CAT is imposed on persons with "taxable commercial activity" in excess of $1 million and with a "substantial nexus" to Oregon.
The bill broadly defines a "person" to include, for example, individuals, combinations of individuals of any form, trusts, estates, partnerships, limited liability companies, corporations (S and C), entities that are disregarded for federal income tax purposes, and any other entities.
The tax is equal to $250 plus 0.57% of "taxable commercial activity" in excess of $1 million for the calendar year. The "taxable commercial activity" is reduced by 35% of the greater of the amount of cost inputs (cost of goods as calculated in arriving at federal taxable income under the Internal Revenue Code) or labor costs (total compensation of all employees, not including compensation paid to any employee in excess of $500,000). The CAT is in addition to Oregon's current corporate income tax and goes into effect for tax years beginning on or after January 1, 2020.
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