We have been covering Oregon’s new Corporate Activity Tax (the “CAT”) over the past few months. As previously discussed, the Oregon Department of Revenue (the “Department”) has been conducting town hall meetings with stakeholders across Oregon. The last meeting was held in Salem on October 4, 2019.
In this post, we continue our coverage of the CAT with a discussion of the Department’s town hall meeting that Peter Evalds attended in Portland, Oregon on October 3, 2019. We address significant issues discussed at the Portland meeting that were not discussed at the Beaverton meeting we covered a few weeks ago.
What We Learned from one of the Oregon Department of Revenue’s Town Hall Meetings
Over the past few months, we have written extensively on the blog about Oregon’s new Corporate Activity Tax (the “CAT”). As announced in our last post, the Oregon Department of Revenue (the “Department”) is in the process of conducting town hall meetings with stakeholders across Oregon. Peter Evalds attended the Department’s town hall meeting in Beaverton, Oregon on Thursday, September 19, 2019. In this post, we highlight some of the more significant issues that were discussed at that meeting.
Garvey Schubert Barer, PC and Foster Pepper PLLC have combined to create a mission-driven firm and to expand reach and services. Foster Garvey PC, created by the combination of these two legacy Pacific Northwest law firms, officially launches today, October 1, 2019.
I previously announced that the owners of Garvey Schubert Barer and Foster Pepper voted overwhelmingly to combine forces. Since then, both firms have been working closely to advance the shared goal of ensuring clients have access to a greater breadth and depth of service offerings, creating a one-stop shop for clients while continuing to preserve the relationships, culture and first-rate service clients have come to expect.
We have recently discussed in several blog posts Oregon’s new Corporate Activity Tax (“CAT”), a gross receipts tax that will become effective January 1, 2020. As we announced in our most recent post on this topic, the Oregon Department of Revenue (the “Department”) will soon commence the rule drafting process. In order to obtain input from taxpayers and tax advisors, it will hold town hall meetings around the state.
Yesterday, the Department announced the schedule of these meetings. Surprisingly, the first meeting is scheduled for tonight in Newport, and meetings will take place later this week in Corvallis and Beaverton. Additional meetings throughout the state will occur over the next few weeks. The meeting in Portland will take place at the Portland State Office Building in the Lloyd District on Thursday, October 3, 2019, from 5:30 pm to 7:00 pm.
Earlier this year, rumors surfaced that the IRS plans to clean house and phase out all attorney positions from the Office of Professional Responsibility (“OPR”), an independent arm of the Service tasked with enforcing discipline relating to tax professionals practicing before the IRS. On August 7, 2019, the Taxation Section of the American Bar Association (the “Tax Section”) sent a letter to IRS Commissioner Charles P. Rettig urging him to reconsider this housekeeping plan.
The Tax Section is absolutely correct in its position. Attorney oversight within OPR is critical to ensure OPR’s independence, to ensure the proper interpretation of legal rules applicable to tax practitioners, and to ensure that legal doctrines such as due process and privilege are not undermined.
As discussed in recent blog posts, the Oregon Legislative Assembly recently enacted a Corporate Activity Tax (“CAT”). Governor Kate Brown signed the legislation into law, effective January 1, 2020. Put in simplest terms, the CAT is a gross receipts tax on businesses with greater than $1 million of “commercial activity sourced to this state.”
Given the broadness of the new law and the many anticipated difficulties that taxpayers, tax advisors and the government will likely encounter determining what constitutes “commercial activity sourced to this state,” the need for the Oregon Department of Revenue (the “Department”) to adopt administrative rules on the new law is evident.
As we reported in our June 4 blog post, Oregon lawmakers had recently enacted a “corporate activity tax” (“CAT”) that applies to certain Oregon businesses. The new law, absent challenge, becomes effective January 1, 2020.
We also recently reported that a prominent group of Oregon businesses planned to challenge the CAT. It appears, however, that the momentum for a challenge has recently died.
In this blog post, we discuss the reasons causing the death of the challenge. In addition, we cover some technical changes in the new law that are currently awaiting Governor Kate Brown’s signature.
Please join me later this month in New York City for NYU’s Tax Conferences in July. I will be speaking at the program’s Advanced Subchapter S Conference on July 25-26, 2019.
I will be presenting my new White Paper entitled “The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, but It Isn’t Free of Potholes and Obstacles.” We will explore the complexities that may impede travel on this two-way road, including the built-in-gains tax, LIFO recapture, excessive passive income, unreasonable compensation, personal holding company status, excessive accumulated earnings, and re-election hindrances and restrictions.
Earlier this week, a local tax practitioner asked us whether it was true that the City of Portland no longer allows depreciation deductions resulting from an election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of computing tax under the City of Portland Business License Tax (“BLT”) and the Multnomah County Business Income Tax (“BIT”). The answer we gave was “yes.” Of course, the response we received from the practitioner was “why.” That question is more difficult to answer than the original question. Nevertheless, we present this blog post to remind tax practitioners of the City’s position on this issue and to discuss the implications of the City’s new position.
I want to share some exciting news with you.
Our firm, over the years, has explored mergers with other law firms, both medium and large. We never completed a merger, however, due in most part to cultural differences. Our firm is not and probably never will be “big law.” Instead, as you know, we partner/collaborate with our clients in a manner to bring about the best results for clients, give back to our community in a big and meaningful way, and create an environment for our attorneys and staff that is as nonhierarchical as possible. “Big law” is generally not consistent with that approach to practicing law and, as a consequence, we have stayed the course alone for over 50 years.
Things are changing! For the past eight months, I have been on a GSB committee exploring a merger with another Pacific Northwest law firm. This time, we found a great firm to partner with, a law firm with consistent values and culture, and great attorneys and staff. The firm is Foster Pepper, PLLC.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
