LIC-6.01 - Payments Deemed to be Compensation to Owners

Administrative Rules Adopted by Bureaus Pursuant to Rule Making Authority (ARB)
Policy category
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Administrative Rules Adopted by Bureau of Licenses Pursuant to Rule-Making Authority

Payments deemed to be compensation to owners are not an allowed deduction under the Business License and Business Income Tax laws.

Generally, any payment included as wages, tips or other compensation on the owner’s federal Form W-2 would be deemed to be compensation to owners. Additionally, certain payments made by an entity on behalf of an owner are deemed to be compensation paid to an owner even if not included as wages on the W-2. These payments may include, but are not limited to: vehicle use, company paid housing, taxes paid on behalf of an owner, nonemployee compensation, management fees, and payments for legal, medical, vision benefits that are not provided to all employees.

Example 1: Partnership A is owned by 15 partners. The partnership elects to pay state and local taxes at the partnership level on behalf of the partners. The deduction for taxes paid on behalf of the partners is deemed compensation to owners and is therefore not an allowed deduction for the partnership.

Example 2: Corporation C is owned by 18 controlling shareholders. The corporation paid legal fees for one controlling shareholder for litigation unrelated to corporate activities. The corporation has no benefit plan that includes legal coverage. The deduction for legal fees paid on behalf of the controlling shareholder is deemed compensation to an owner and is therefore not an allowed deduction.


Portland City Code Section 7.02.600
Multnomah County Code Section 12.600

Submitted for inclusion in PPD September 17, 2002.
Originally adopted as Bureau of Licenses Administrative Rule 600.93-2 November 23, 1993.
Amended by Director of Revenue Bureau October 11, 2012.

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