Fall 2022 Proposed Code Changes
Metro, Multnomah County and the City of Portland Revenue Division are proposing changes to their business income tax codes. The Revenue Division administers these taxes on behalf of Metro and Multnomah County. To maintain the conformity of the three jurisdictions’ tax laws, the changes to the Portland, Metro and Multnomah County codes will be substantially identical. If adopted, the changes are intended to apply to tax years beginning on or after January 1, 2023.
The proposed changes are shown in the two documents below. The first document shows changes to align the jurisdictions’ business income tax apportionment provisions more closely with the State of Oregon’s business income tax apportionment provisions. The second document shows administrative changes and citation corrections. There will be two separate ordinances: one for the conformity changes and one for the administrative and housekeeping changes. We intend to submit the conformity ordinance to City Council with a 12/31/2022 sunset date on Portland City Code (PCC) 7.02.600 and 7.02.610. They will be replaced with, PCC 7.02.601 and 7.02.611, reflecting the proposed changes.
The public comment period closed on August 5, 2022.
Conformity Changes
Adopting the State’s sales factor apportionment, as shown in the draft code language, reduces differences and allows the jurisdictions to adopt and conform to the State’s market-based sourcing of sales. Reducing apportionment and allocation differences will ease preparation of jurisdiction tax returns.
Complete conformity with the State’s apportionment for business income requires adoption of the State’s throwback provisions for the sale of tangible personal property. Throwback means assigning sales to the jurisdiction of origin when the sales are not taxable by the jurisdiction of destination. This application could result in more sales (for apportionment purposes) being assigned to the jurisdictions. We currently don’t apply throwback for our business income taxes and the proposed changes don’t apply throwback.
Administrative and Housekeeping Changes
The administrative changes being proposed update various provisions to reflect changes in and around forms and timing of communications, the recent addition of income tax programs we administer, and allow for administrative efficiency. Housekeeping changes include clarification on application of the Business License Law and a correction of a citation to an Oregon Administrative Rule.
Public Comment Summary
The Revenue Division has compiled the following list of comments received during the public comment period. Comments may have been consolidated where they were similar.
Conformity Changes
- Comment: Support all changes except the removal of the ability to propose alternative apportionment formulas.
Response: The ability to propose alternative apportionment formulas is still available. Adoption of Oregon’s apportionment and allocation statutes includes adoption of Oregon Revised Statute 314.667 Additional methods to determine extent of business activity in this state.
- Comment: Neither support nor opposition expressed to overall changes. Objected only to the removal of the ability to propose alternative apportionment formulas.
Response: The ability to propose alternative apportionment formulas is still available. Adoption of Oregon’s apportionment and allocation statutes includes adoption of Oregon Revised Statute 314.667 Additional methods to determine extent of business activity in this state.
- Comment: Expressed support for the code changes. Recommends conforming to Oregon’s special industry apportionment rules. Also encouraged changes to mirror Oregon’s tax structure for corporate and personal income taxes.
Response: If Multnomah County, Metro, and the City of Portland adopt the proposed code changes, rule changes will be considered through a separate administrative rule hearings process.
Incorporating the structural changes recommended in the current proposed code changes presents a challenge that will delay adoption of the currently proposed changes. It will impact many more people than the current proposed changes and require careful consideration to avoid unintended results.
Administrative and Housekeeping Changes
- Comment: Support all changes.
- Comment: Recommends extending the time limit to file a protest to a determination from 30 days to either 60 or 90 days. Basis for proposal; differences between the Department of Revenue and Revenue Division appeals procedures, Division notices can omit information on reason for adjustments, the likely increase of Revenue Division determinations, and the new Multnomah County and Metro taxes will require taxpayers with no prior filing requirement to comply.
Response: The 30-day time limit to file a protest is consistent with the Department of Revenue. Other than the Revenue Division notices being sent omitting information, the remaining issues appear to be primarily first year issues. The Revenue Division will take that into consideration with respect to the completeness of a protest that is filed within the protest period. The Revenue Division will review and update processes concerning information that should be included in determinations it issues.
Adoption
After the comment period closed on August 5, 2022, the Revenue Division worked with Metro and Multnomah County to review comments and determine the proposed code changes to present to the Portland City Council for consideration. The City Council voted to adopt the proposed code changes. Multnomah County and Metro have also adopted the same code changes. These changes take effect for tax years beginning on or after January 1, 2023.
Administrative and Housekeeping Changes Ordinance
Business Tax Administrative Rules Hearing
Date: Thursday, February 2, 2023; Time: 2:00pm to 3:00pm; Place: Virtual Meeting
The City of Portland Revenue Division will hold a public hearing on administrative rules interpreting the Business License Law, Multnomah County Business Income Tax Law, and Metro Business Income Tax Law. The proposed administrative rules relate to the three jurisdictions’ adoption of Oregon’s market-based sourcing apportionment.
More information, including how to submit oral/written testimony, can be found on our Event page.