Sen. Mark Hass outlines corporate tax reform

Senator Mark Hass and his corporate tax reform work group has released an outline of a gross receipts tax that would replace the current Oregon Corporate tax. The tax rate hasn’t yet been agreed to, but would fall within 0.25% – 1%. Legislative Revenue Officer Paul Warner estimates that after accounting for a loss of revenue from the repealed corporate income tax, various rates would product the following approximate net income per biennium

  • rate of 0.25% would bring in  $288 million
  • rate of 0.5 % would bring in $1.2 billion
  • rate of 0.75% rate would raise close to $2.2 billion
  • rate of 1% rate would bring in $3.1 billion

Here is the framework:

Guiding Principles

  • Broad base and low rates to minimize economic distortions.
  • Destination based tax to keep export businesses competitive.
  • Simplify business taxes by repealing complex corporate income tax and replacing with one page corporate activities tax form.
  • Maintain balanced treatment for different business entities by allowing partial credit for pass-throughs.

Establish corporate activities tax 1-1-18

  • Based on gross receipts derived from destination based sales in Oregon.
  • All business entities are subject to the corporate activities tax.
  • Business entities with annual gross receipts less than $150,000 in Oregon are not required to file a corporate activities tax return.
  • Businesses with gross receipts greater than $150,000 but less than $1 million must file a return and pay a $250 flat amount.
  • Businesses with annual Oregon gross receipts greater than $1 million are subject to a corporate activities tax equal to $250 plus _____% of gross receipts greater than $1 million.
  • Financial institutions are subject to the corporate activities tax with the definition of gross receipts in Oregon determined by rule.
  • Gross receipts derived from the sale of motor fuel is calculated separately with the revenue placed in the Highway Fund. 

Exemptions from the Corporate Activities Tax

  • Government transactions.
  • Donations received by non-profit organizations.
  • Transactions among closely related business entities.
  • Gross receipts of qualified distribution centers.

Credits

  • Pass through entities are allowed a credit equal to ______% of corporate activities taxes paid at the entity level. 

Repeal of Corporate income tax starting with 2018 corporate tax year

  • Unused corporate tax credits can be applied to corporate activities tax liability and carried forward up to three years.

Tax Base Description

  • Estimated businesses below $150,000 threshold=100,000
  • Estimated number of filers paying $250 flat amount=37,000
  • Estimated filers paying corporate activities tax rate =18,000
  • % of corporate activities tax paid by filers with gross receipts above $25 million=74%
  • % of corporate activities tax paid by filers with gross receipts above $100 million =55.7%

Strategies to minimize pyramiding

  • Keep rate low and base broad.
  • Exempt transactions among closely related business entities.
  • Exempt qualified distribution centers.

Personal income tax adjustments targeted at low income households

  • Expand earned income tax credit.
  • Lower bottom personal income tax rates. o Increase standard deduction.
  • Increase personal exemption credit.

Powered by WordPress. Designed by Woo Themes