Tax Administration Policy – Net Operating Losses and Net Operating Loss Deductions from Passthrough Entities
Multnomah County’s (Multnomah) Preschool for All and Metro’s Supportive Housing Services personal income taxes begin with amounts included in federal and Oregon taxable income (attributable to Multnomah County or Metro sources for nonresidents). As a result, personal income tax returns for these jurisdictions will begin by including losses from passthrough entities (PTE) that may also be subject to Multnomah’s and Metro’s business income taxes. Adjustments are required to avoid a double deduction except as specifically authorized.
It is a taxpayer’s responsibility to calculate, claim, and support any Net Operating Loss or Net Operating Loss Deduction on the Multnomah and/or Metro personal income tax return. The Revenue Division is not required to perform these calculations on the taxpayer’s behalf.
Multnomah treats sole proprietorships as PTEs while Metro does not. Net Operating Losses (NOL) and Net Operating Loss Deductions (NOLD) from PTEs included in Oregon Taxable Income, or a nonresident’s Multnomah/Metro sourced income, will be treated as follows.
Passive activity losses allowed for federal and Oregon purposes, that do not originate from a PTE, are allowed on the personal income tax returns to the extent they are included in Oregon Taxable Income or a nonresident’s Multnomah/Metro sourced income. A NOL and NOLD from a PTE that is not, and was not, subject to Multnomah’s and/or Metro’s business income tax is also allowed on the personal income tax returns to the extent they are included in Oregon Taxable Income as a NOL or NOLD. These are losses are treated similarly to Oregon for personal income tax purposes.
A NOL from a PTE, that is subject to Multnomah’s and/or Metro’s business income tax is allowed on the Multnomah and/or Metro personal income tax returns for the same year in which the NOL originates, to the extent the loss is includable in Oregon Taxable Income or a nonresident’s Multnomah/Metro sourced income. The NOL allowed may offset any other income on the personal income tax return for the same tax year. The NOL cannot be carried to any other year on the personal income tax return as an NOLD. To the extent this NOL results in an NOLD included in Oregon Taxable Income or a nonresident’s Multnomah/Metro sourced income in another tax year, the NOLD must be added back on the Multnomah and/or Metro personal income tax returns.
An NOL or NOLD from a PTE subject to Multnomah’s and/or Metro’s business income taxes, from a prior year, is not allowed on the current year’s personal income tax returns. To the extent these amounts are included in Oregon Taxable Income or a nonresident’s Multnomah/Metro sourced income, they must be added back on the Multnomah and/or Metro personal income tax returns.
Example 1: The Lovejoy’s are residents of Multnomah County. One of the taxpayers operates a business within Multnomah County with 100% of the income apportioned to Multnomah County and files the following Multnomah County business income tax returns:
| Multnomah County business income tax return | SP-2021 | SP-2022 | SP-2023 |
|---|---|---|---|
Schedule C Net Income | $ (150,000) | $ 175,000 | $ 225,000 |
Self-Employment Tax Deduction | $ - | $ (5,000) | $ (12,000) |
Owner's Compensation Deduction | $ - | $ (127,500) | $ (134,000) |
Multnomah County Net Business Income | $ - | $ 42,500 | $ 79,000 |
Net Operating Loss Deduction | $ - | $ (31,875) | $ (59,250) |
MCBIT Income Subject to Tax | $ (150,000) | $ 10,625 | $ 19,750 |
The Lovejoy’s are also subject to the Multnomah County’s Preschool for All (PFA) and Metro Supportive Housing Services (SHS) personal income taxes. The Schedule C income and/or loss reported above is included in their Oregon taxable income.
Since one of the taxpayers pays the Multnomah County Business Income Tax, they are allowed a modification on the Multnomah County PFA personal income tax return for the income subject to the Multnomah County Business Income Tax.
For the Multnomah County PFA personal income tax, the Lovejoy’s would file the following resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40 | 2022 MC-40 | 2023 MC-40 |
|---|---|---|---|
Oregon Taxable Income | $ 250,000 | $ 425,000 | $ 400,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (10,625) | $ (19,750) |
Income Threshold Exemption | $ (200,000) | $ (200,000) | $ (200,000) |
MultCo PFA Income Subject to Tax | $ 50,000 | $ 214,375 | $ 180,250 |
Since there is no Metro SHS business income tax assessed at the individual level, no modification is allowed on the Metro SHS personal income tax return.
For the Metro SHS personal income tax, the Lovejoy’s would file the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ 250,000 | $ 425,000 | $ 400,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (200,000) | $ (200,000) | $ (200,000) |
Metro SHS Income Subject to Tax | $ 50,000 | $ 225,000 | $ 200,000 |
Example 2: Mr. Hogan is a resident of Multnomah County. They operate a business within Multnomah County with 100% of their income apportioned to Multnomah County and file the following Multnomah County business income tax returns:
| Multnomah County business income tax return | SP-2021 | SP-2022 | SP-2023 |
|---|---|---|---|
Schedule C Net Income | $ (100,000) | $ (150,000) | $ (75,000) |
Self-Employment Tax Deduction | $ - | $ - | $ - |
Owner's Compensation Deduction | $ - | $ - | $ - |
Multnomah County Net Business Income | $ (100,000) | $ (150,000) | $ (75,000) |
Net Operating Loss Deduction | $ - | $ - | $ - |
MCBIT Income Subject to Tax | $ (100,000) | $ (150,000) | $ (75,000) |
Mr. Hogan’s Oregon taxable income includes the Schedule C losses reported above. Since they did not have any income subject to tax, there is no modification allowed on their Multnomah County PFA personal income tax return.
For the Multnomah County PFA personal income tax, Mr. Hogan would file the following resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40 | 2022 MC-40 | 2023 MC-40 |
|---|---|---|---|
Oregon Taxable Income | $ 100,000 | $ 200,000 | $ 150,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ - | $ 75,000 | $ 25,000 |
With year 1 not being subject to any PFA, the “loss” is lost at the PFA level and would only carry forward at MCBIT level. While they may not have received a “benefit” for the full amount of Schedule C loss subject to MCBIT, they are not permitted to carryforward the loss for Multnomah County PFA purposes.
For the Metro SHS personal income tax, Mr. Hogan would file the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ 100,000 | $ 200,000 | $ 150,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ - | $ 75,000 | $ 25,000 |
Example 3: Ms. Flanders is a Multnomah County resident that owns four commercial properties in Multnomah County that operate at a loss that are reported on their Schedule E. They also have wages and other income over $150,000 that makes them unable to claim any passive losses on their federal income tax return. Since Ms. Flanders’ gross income from the commercial properties is over $100,000, they are still required to file a Multnomah County Business Income Tax Return. They file the following Multnomah County business income tax returns:
| Multnomah County business income tax return | SP-2021 | SP-2022 | SP-2023 |
|---|---|---|---|
Schedule E Net Income | $ - | $ - | $ - |
Self-Employment Tax Deduction | $ - | $ - | $ - |
Owner's Compensation Deduction | $ - | $ - | $ - |
Multnomah County Net Business Income | $ - | $ - | $ - |
Net Operating Loss Deduction | $ - | $ - | $ - |
MCBIT Income Subject to Tax | $ - | $ - | $ - |
Ms. Flanders is also subject to the Multnomah County PFA and Metro SHS personal income taxes. The Schedule E net income is reported on the federal return but not included in Oregon taxable income, due to Passive Activity Loss limitations. The loss is carried-forward on IRS Form 8582.
For the Multnomah Country PFA personal income tax, Ms. Flanders would file the following resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40 | 2022 MC-40 | 2023 MC-40 |
|---|---|---|---|
Oregon Taxable Income | $ 450,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ 325,000 | $ 275,000 | $ 300,000 |
For the Metro SHS personal income tax, Ms. Flanders would file the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ 450,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ 325,000 | $ 275,000 | $ 300,000 |
Example 4: The Argyle’s are nonresidents of Metro and Multnomah County. One of the taxpayers operates a business within Multnomah County with 100% of the income apportioned to Multnomah County and files the following Multnomah County business income tax returns:
| Multnomah County business income tax return | SP-2021 | SP-2022 | SP-2023 |
|---|---|---|---|
Schedule C Net Income | $ (150,000) | $ 175,000 | $ 130,000 |
Self-Employment Tax Deduction | $ - | $ (25,000) | $ (15,000) |
Owner's Compensation Deduction | $ - | $ (112,500) | $ (86,250) |
Multnomah County Business Income | $ (150,000) | $ 37,500 | $ 28,750 |
Net Operating Loss Deduction | $ - | $ (28,125) | $ (21,563) |
MCBIT Income Subject to Tax | $ (150,000) | $ 9,375 | $ 7,188 |
The Argyle’s also have some other income earned in Metro and Multnomah County and are subject to filing the personal income tax returns. The Schedule C income and/or loss reported above is included in their Metro and Multnomah County sourced income reported on Schedule-INC of the personal income tax returns.
Since one of the taxpayers pays the Multnomah County Business Income Tax, they are allowed a modification on the Multnomah County PFA personal income tax return for the income subject to the Multnomah County Business Income Tax. For the Multnomah County PFA personal income tax, the Argyle’s would file the following non-resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40-NP | 2022 MC-40-NP | 2023 MC-40-NP |
|---|---|---|---|
Multnomah County Sourced Income | $ 250,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (9,375) | $ (7,188) |
Income Threshold Exemption | $ (200,000) | $ (200,000) | $ (200,000) |
MultCo PFA Income Subject to Tax | $ 50,000 | $ 190,625 | $ 217,813 |
Since there is no Metro SHS business income tax assessed at the individual level, no modification is allowed on their Metro SHS personal income tax returns. For the Metro SHS personal income tax, the Argyle’s would file the following non-resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40-NP | 2022 MET-40-NP | 2023 MET-40-NP |
|---|---|---|---|
Metro Sourced Income | $ 250,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (200,000) | $ (200,000) | $ (200,000) |
Metro SHS Income Subject to Tax | $ 50,000 | $ 200,000 | $ 225,000 |
Example 5: The Keubler’s are nonresidents of Metro and Multnomah County. They have 2 commercial properties located in Metro/Multnomah County and 2 commercial properties located outside of the jurisdictions. They file the following Multnomah County business income tax returns:
| Multnomah County business income tax return | SP-2021 | SP-2022 | SP-2023 |
|---|---|---|---|
Schedule E Net Income | $ (180,000) | $ 200,000 | $ 250,000 |
Self-Employment Tax Deduction | $ - | $ - | $ - |
Owner's Compensation Deduction* | $ - | $ (134,000) | $ (134,000) |
Multnomah County Subject Net Income | $ (180,000) | $ 66,000 | $ 116,000 |
Multnomah County Apportionment % | 50% | 50% | 50% |
Multnomah County Net Business Income | $ (90,000) | $ 33,000 | $ 58,000 |
Net Operating Loss Deduction | $ - | $ (24,750) | $ (43,500) |
MCBIT Income Subject to Tax | $ (90,000) | $ 8,250 | $ 14,500 |
The Keubler’s also have some income earned in Metro and Multnomah County and are subject to filing the personal income tax returns. The Schedule E income and/or loss reported above is included in their Metro and Multnomah County sourced income reported on Schedule-INC of the returns.
Since one of the taxpayers pays the Multnomah County Business Income Tax, they are allowed a modification on the Multnomah County PFA personal income tax return for the income subject to the Multnomah County Business Income Tax.
For the Multnomah County PFA personal income tax, the Keubler’s would file the following non-resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40-NP | 2022 MC-40-NP | 2023 MC-40-NP |
|---|---|---|---|
Multnomah County Sourced Income | $ 375,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (8,250) | $ (14,500) |
Income Threshold Exemption | $ (200,000) | $ (200,000) | $ (200,000) |
MultCo PFA Income Subject to Tax | $ 175,000 | $ 191,750 | $ 210,500 |
Since there is no Metro SHS business income tax assessed at the individual level, no modification is allowed on their Metro SHS personal income tax returns. For the Metro SHS personal income tax, the Keubler’s would file the following non-resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40-NP | 2022 MET-40-NP | 2023 MET-40-NP |
|---|---|---|---|
Metro Sourced Income | $ 375,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (200,000) | $ (200,000) | $ (200,000) |
Metro SHS Income Subject to Tax | $ 175,000 | $ 200,000 | $ 225,000 |
Example 6:
- Burnside and Ankeny LLP is a partnership that derives 100% of its business income from the Metro and Multnomah County business income taxes. It files the following Multnomah County business income tax returns:
Multnomah County business income tax return | P-2021 | P-2022 | P-2023 |
|---|---|---|---|
Ordinary Income | $ 1,000,000 | $ 2,250,000 | $ 1,800,000 |
Schedule K and Oregon modifications | $ (1,300,000) | $ (1,500,000) | $ (900,000) |
Owner's Compensation Deduction | $ - | $ (268,000) | $ (268,000) |
Multnomah County Subject Net Income | $ (300,000) | $ 482,000 | $ 632,000 |
Multnomah County Apportionment % | 100% | 100% | 100% |
Multnomah County Net Business Income | $ (300,000) | $ 482,000 | $ 632,000 |
Net Operating Loss Deduction | $ - | $ (300,000) | $ - |
MCBIT Income Subject to Tax | $ (300,000) | $ 182,000 | $ 632,000 |
The partnership also files the following Metro SHS business income tax returns:
| Metro SHS business income tax return | 2021 METBIT-65 | 2022 METBIT-65 | 2023 METBIT-65 |
|---|---|---|---|
Ordinary Income | $ 1,000,000 | $ 2,250,000 | $ 1,800,000 |
Add-back of deductions not allowed | $ - | $ - | $ - |
Schedule K and Oregon modifications | $ (1,300,000) | $ (1,500,000) | $ (900,000) |
Metro Subject Net Income | $ (300,000) | $ 750,000 | $ 900,000 |
Metro Apportionment % | 100% | 100% | 100% |
Metro Apportioned Net Income | $ (300,000) | $ 750,000 | $ 900,000 |
Net Operating Loss Deduction | $ - | $ (300,000) | $ - |
Metro Income Subject to Tax | $ (300,000) | $ 450,000 | $ 900,000 |
- Mr. Ankeny is a 50% partner in Burnside and Ankeny LLP and is a resident of Multnomah County. They are subject to both the Metro and Multnomah County personal income taxes. The pass-through income or loss from the partnership is included in their Oregon taxable income. Since the partnership is subject to both the Metro and Multnomah County business income taxes, they are entitled to a pass-through modification for the mutually taxed income of the respective jurisdiction on their personal income tax returns.
For the Multnomah County PFA personal income tax, Mr. Ankeny files the following resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40 | 2022 MC-40 | 2023 MC-40 |
|---|---|---|---|
Oregon Taxable Income | $ 375,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (91,000) | $ (316,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ 250,000 | $ 184,000 | $ - |
Since Mr. Ankeny is only a 50% partner, they are only entitled to their distributive share of mutually taxed income by Multnomah County.
For the Metro SHS personal income tax, Mr. Ankeny files the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ 375,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (225,000) | $ (450,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ 250,000 | $ 50,000 | $ - |
Since Mr. Ankeny is only a 50% partner, they are only entitled to their distributive share of mutually taxed income by Metro.
- Ms. Burnside is the other 50% partner of Burnside and Ankeny LLP. They are a nonresident of Multnomah County but reside within Metro. They are subject to both the Metro and Multnomah County personal income taxes. The pass-through income or loss from the partnership is included in their Oregon taxable income. Since the partnership is subject to both the Metro and Multnomah County business income taxes, they are entitled to a pass-through modification for the mutually taxed income of the respective jurisdictions on their personal income tax returns.
For the Multnomah County PFA personal income tax, Ms. Burnside files the following non-resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40-NP | 2022 MC-40-NP | 2023 MC-40-NP |
|---|---|---|---|
Multnomah County Sourced Income | $ (150,000) | $ 375,000 | $ 450,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (91,000) | $ (316,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ - | $ 59,000 | $ 9,000 |
Since Ms. Burnside is only a 50% partner, they are only entitled to their distributive share of mutually taxed income by Multnomah County.
For the Metro SHS personal income tax, Ms. Burnside files the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ (150,000) | $ 425,000 | $ 575,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (225,000) | $ (450,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ - | $ 75,000 | $ - |
Since Ms. Burnside is only a 50% partner, they are only entitled to their distributive share of mutually taxed income by Metro.
Example 7:
- Oregon City Cruisers LLC files as a partnership for federal purposes and derives 100% of its business income inside Metro. It does not do any business in Multnomah County. It files the following Metro SHS business income tax returns:
Metro SHS business income tax return | 2021 METBIT-65 | 2022 METBIT-65 | 2023 METBIT-65 |
|---|---|---|---|
Ordinary Income | $ (800,000) | $ 1,000,000 | $ 1,200,000 |
Add-back of deductions not allowed | $ - | $ - | $ - |
Schedule K and Oregon modifications | $ (200,000) | $ (350,000) | $ (900,000) |
Metro Subject Net Income | $ (1,000,000) | $ 650,000 | $ 300,000 |
Metro Apportionment % | 100% | 100% | 100% |
Metro Apportioned Net Income | $ (1,000,000) | $ 650,000 | $ 300,000 |
Net Operating Loss Deduction | $ - | $ (487,500) | $ (225,000) |
Metro Income Subject to Tax | $ (1,000,000) | $ 162,500 | $ 75,000 |
- Ms. Juneberry is a resident of Multnomah County and is a 50% partner of Oregon City Cruisers. They are subject to both the Metro and Multnomah County personal income taxes. The pass-through income or loss from the partnership is included in their Oregon taxable income. Since the partnership is subject to only the Metro business income tax, they are only entitled to a pass-through modification for the mutually taxed income on their Metro personal income tax return.
For the Multnomah County PFA personal income tax, Ms. Juneberry files the following resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40 | 2022 MC-40 | 2023 MC-40 |
|---|---|---|---|
Oregon Taxable Income | $ 375,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ - | $ - |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ 250,000 | $ 275,000 | $ 300,000 |
For the Metro SHS personal income tax, Ms. Juneberry files the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ 375,000 | $ 400,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (81,250) | $ (37,500) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ 250,000 | $ 193,750 | $ 262,500 |
Since Ms. Juneberry is only a 50% partner, they are only entitled to their distributive share of mutually taxed income by Metro.
Example 8:
- Stumptown Services Corporation is an S corporation that earns 100% of its business income in Portland. It is subject to both Metro and Multnomah County business income taxes. It files the following Multnomah County business income tax returns, with NOL generated prior to TY 2021:
Multnomah County business income tax return | SC-2021 | SC-2022 | SC-2023 |
|---|---|---|---|
Ordinary Income | $ 2,000,000 | $ 1,250,000 | $ 1,800,000 |
Owner's Compensation Addback | $ 400,000 | $ 400,000 | $ 400,000 |
Schedule K and Oregon modifications | $ (1,500,000) | $ (1,000,000) | $ (900,000) |
Owner's Compensation Deduction | $ (400,000) | $ (400,000) | $ (400,000) |
Multnomah County Subject Net Income | $ 500,000 | $ 250,000 | $ 900,000 |
Multnomah County Apportionment % | 100% | 100% | 100% |
Multnomah County Net Business Income | $ 500,000 | $ 250,000 | $ 900,000 |
Net Operating Loss Deduction | $ (375,000) | $ (125,000) | $ - |
MCBIT Income Subject to Tax | $ 125,000 | $ 125,000 | $ 900,000 |
The S corporation also files the following Metro SHS business income tax returns:
| Metro SHS business income tax return | 2021 METBIT-20S | 2022 METBIT-20S | 2023 METBIT-20S |
|---|---|---|---|
Ordinary Income | $ 2,000,000 | $ 1,250,000 | $ 1,800,000 |
Add-back of deductions not allowed | $ - | $ - | $ - |
Schedule K and Oregon modifications | $ (1,500,000) | $ (1,000,000) | $ (900,000) |
Metro Subject Net Income | $ 500,000 | $ 250,000 | $ 900,000 |
Metro Apportionment % | 100% | 100% | 100% |
Metro Apportioned Net Income | $ 500,000 | $ 250,000 | $ 900,000 |
Net Operating Loss Deduction | $ - | $ - | $ - |
Metro Income Subject to Tax | $ 500,000 | $ 250,000 | $ 900,000 |
- Everett is a 25% shareholder of Stumptown Services Corporation. They are a nonresident of Multnomah County but reside within Metro. They are subject to both the Metro and Multnomah County personal income taxes. The pass-through income from the S corporation is included in their Oregon taxable income and Multnomah County sourced income. Since the partnership is subject to both the Metro and Multnomah County business income taxes, they are entitled to a pass-through modification for the mutually taxed income of the respective jurisdiction on their personal income tax returns.
For the Multnomah County PFA personal income tax, Everett files the following non-resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40-NP | 2022 MC-40-NP | 2023 MC-40-NP |
|---|---|---|---|
Multnomah County Sourced Income | $ 200,000 | $ 300,000 | $ 425,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ (31,250) | $ (31,250) | $ (225,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ 43,750 | $ 143,750 | $ 75,000 |
For the Metro SHS personal income tax, Everett files the following resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40 | 2022 MET-40 | 2023 MET-40 |
|---|---|---|---|
Oregon Taxable Income | $ 400,000 | $ 425,000 | $ 575,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (62,500) | $ (225,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ 275,000 | $ 237,500 | $ 225,000 |
Example 9:
- Lieser Corp is an S corporation that operates in the Metro and Multnomah County jurisdictions. The corporation is subject to both business taxes. It files the following Multnomah County business income tax returns:
Multnomah County business income tax return | SC-2021 | SC-2022 | SC-2023 |
|---|---|---|---|
Ordinary Income | $ (500,000) | $ 750,000 | $ 600,000 |
Owner's Compensation Addback | $ - | $ 134,000 | $ 134,000 |
Schedule K and Oregon modifications | $ - | $ - | $ - |
Owner's Compensation Deduction | $ - | $ (134,000) | $ (134,000) |
Multnomah County Subject Net Income | $ (500,000) | $ 750,000 | $ 600,000 |
Multnomah County Apportionment % | 100% | 90% | 75% |
Multnomah County Net Business Income | $ (500,000) | $ 630,000 | $ 450,000 |
Net Operating Loss Deduction | $ - | $ (500,000) | $ - |
MCBIT Income Subject to Tax | $ (500,000) | $ 130,000 | $ 450,000 |
The S corporation also files the following Metro SHS business income tax returns:
| Metro SHS business income tax return | 2021 METBIT-20S | 2022 METBIT-20S | 2023 METBIT-20S |
|---|---|---|---|
Ordinary Income | $ (500,000) | $ 750,000 | $ 600,000 |
Add-back of deductions not allowed | $ - | $ - | $ - |
Schedule K and Oregon modifications | $ - | $ - | $ - |
Metro Subject Net Income | $ (500,000) | $ 750,000 | $ 600,000 |
Metro Apportionment % | 100% | 100% | 80% |
Metro Apportioned Net Income | $ (500,000) | $ 750,000 | $ 480,000 |
Net Operating Loss Deduction | $ - | $ (500,000) | $ - |
Metro Income Subject to Tax | $ (500,000) | $ 250,000 | $ 480,000 |
- Lieser is the sole shareholder of the S corporation and is a non-resident of both Metro and Multnomah County. The only income they have sourced to the jurisdictions is from the S corporation.
For the Multnomah County PFA personal income tax, Lieser files the following non-resident personal income tax returns:
| Multnomah County PFA personal income tax return | 2021 MC-40-NP | 2022 MC-40-NP | 2023 MC-40-NP |
|---|---|---|---|
Multnomah County Sourced Income | $ (500,000) | $ 630,000 | $ 450,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (130,000) | $ (450,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
MultCo PFA Income Subject to Tax | $ - | $ 375,000 | $ - |
For the Metro SHS personal income tax, Lieser files the following non-resident personal income tax returns:
| Metro SHS personal income tax return | 2021 MET-40-NP | 2022 MET-40-NP | 2023 MET-40-NP |
|---|---|---|---|
Metro Sourced Income | $ (500,000) | $ 750,000 | $ 480,000 |
Less: Exempt Income | $ - | $ - | $ - |
Pass Through Modification | $ - | $ (250,000) | $ (480,000) |
Income Threshold Exemption | $ (125,000) | $ (125,000) | $ (125,000) |
Metro SHS Income Subject to Tax | $ - | $ 375,000 | $ - |
Example 10: Barberry is a resident of Metro. They have a 2021 passthrough loss from an S corporation that flows through to their Oregon tax return. The S corporation does not have a Metro SHS Business Income Tax filing requirement. The Oregon Taxable Income reported on the 2021 MET-40 includes the pass-through loss. Barberry does not have a modification to their Oregon Taxable Income on their 2021 MET-40.
Example 11: Rogahn is a resident of Metro. They have a 2021 passthrough loss from a partnership that flows through to their Oregon tax return. The partnership has a Metro SHS Business Income Tax filing requirement, generating an NOL on the 2021 METBIT-65. The Oregon Taxable Income reported on the 2021 MET-40 includes the pass-through loss. Barberry does not have a modification to their Oregon Taxable Income on their 2021 MET-40.
Example 12:
Multnomah County - Mount Hood Surfing LLC, an S corporation, has filed its Multnomah County business income tax return reporting losses for tax years 2019 and 2020, generating an NOL for Multnomah County Business Income Tax purposes. In tax year 2021, it reports a profit and is entitled to claim the NOL from previous years.
Cleveland is a resident of Multnomah County. They are a shareholder of Mount Hood Surfing LLC. The losses from tax years 2019 and 2020 from the S corporation created a net operating loss for federal purposes that Cleveland was unable to utilize in the years reported. In tax year 2021, Cleveland is able to use their federal net operating loss deduction (NOLD) to offset the positive income earned from the S corporation. The income and NOLD are reported on their OR-40 and are reported in Oregon Taxable Income on the 2021 MC-40. Even though these losses were generated before tax year 2021, the S corporation gets the benefit of the NOLD for the Multnomah County Business Income Tax. Cleveland will need to add back the NOLD taken on their federal and state personal income tax returns as a PTI Modification addition on the 2021 MC-40, as they are not allowed an NOL deduction for an entity that is subject to the Multnomah County Business Income Tax.
Metro - Mount Hood Surfing LLC, an S corporation, also files its METBIT-20S for tax year 2021 reporting positive income. There is no NOL allowed for the METBIT-20S since the entity did not generate any NOL for Metro as there was no filing requirement prior to tax year 2021.
Cleveland is also a resident of Metro and files a 2021 MET-40, starting with the Oregon Taxable Income that included the NOLD from their pass-through income. Cleveland does not have a PTI modification on their 2021 MET-40 for the NOLD on their federal and state income tax returns from the S corporation’s losses from tax years 2019 and 2020.
07/25/2023 ______Tyler Wallace _____
Date Revenue Division Director
Adopted: 07/25/2022