On April 10, 2018, and April 13, 2018, Oregon Governor Kate Brown signed into law S.B. 1529 and S.B. 1528 (the Bills), respectively, which provide a series of changes to Oregon’s income tax laws in response to recent federal tax changes as part of the federal Tax Cuts and Jobs Act. Most notably, the Bills: (i) update the state’s IRC conformity date to December 31, 2017; (ii) decouple from the federal temporary dividend received deduction with respect to the transition tax under IRC § 965 by requiring an addback of the federal deduction allowed under IRC § 965(c); (iii) provide relief from double taxation of repatriated income for taxpayers subject to Oregon tax under the state’s tax haven legislation by allowing a credit equal to the lessor of any taxes paid attributable to the tax haven addback for years beginning on or after January 1, 2014, and before January 1, 2017, or the amount of Oregon tax attributable to income reported under IRC § 965 for tax years beginning on or after January 1, 2017, and before January 1, 2018; and (iv) establish a state Opportunity Grant Fund and provide individual and corporate income tax credits for contributions made to this fund. Although taxpayers are required to addback the amounts deducted under IRC § 965(c), the Oregon Department of Revenue has issued guidance stating their position that the transition tax’s income inclusion is eligible for the state’s dividends received deduction under ORS 317.267(2)(b), which provides an 80% deduction for dividends received from a 20% owned corporation and a 70% deduction for all other dividends.
The Bills also repeal the tax haven addback found under Oregon Revised Statutes section 317.716 and require the Department of Revenue to evaluate the efficacy of including global intangible low-taxed income (GILTI) under IRC § 951A in the state tax base in comparison to Oregon’s now-repealed tax haven addback, with a report to be issued on or before December 1, 2020.