Oregon Unitary Reporting Mandate Reaches Tax Havens

Oregon Unitary Reporting Mandate Reaches Tax Havens

On August 1, 2013, Oregon Governor John Kitzhaber signed H.R. 2460, which requires for tax years beginning on or after January 1, 2014, the inclusion in a corporate taxpayer’s Oregon unitary tax return the income and apportionment factors of unitary corporations incorporated in certain 'tax haven' countries. This expansion of the Oregon tax system is not unique, but taxpayers need to insure that they are aware of the change and take the opportunity to look for planning opportunities.

Overview:

Effective for tax years beginning on or after January 1, 2014, tax returns must report  income or loss and apportionment factors of any corporation that is:

  1. a member of a unitary group; and
  2. incorporated in any of the following jurisdictions:
    • Andorra
    • Anguilla
    • Antigua and Barbuda
    • Aruba
    • the Bahamas
    • Bahrain
    • Barbados
    • Belize
    • Bermuda
    • the British Virgin Islands
    • the Cayman Islands
    • the Cook Islands
    • Cyprus
    • Dominica
    • Gibraltar
    • Grenada
    • Guernsey-Sark-Alderney
    • the Isle of Man
    • Jersey
    • Liberia
    • Liechtenstein
    • Luxembourg
    • Malta
    • \the Marshall Islands
    • Mauritius
    • Monaco
    • Montserrat
    • Nauru
    • the Netherlands Antilles
    • Niue
    • Samoa
    • San Marino
    • Seychelles
    • St. Kitts and Nevis
    • St. Lucia
    • St. Vincent and the Grenadines
    • the Turks and Caicos Islands
    • the U.S. Virgin Islands and Vanuatu

The new law also directs the Oregon Department of Revenue to issue regulations to provide guidance on the computation of income or loss for a corporation that is a member of a unitary group and that is not otherwise required to file a consolidated federal return and to prevent double taxation or double deduction of any amount included in the computation of income under this section. Additionally, the Oregon Department of Revenue is required to report to the Oregon Legislature on methods by which taxpayers shift income otherwise taxable by Oregon to sources outside the state, recommendations for addressing noncompliance attributable to out-of-state tax shelters. Such reports are also to recommend tax haven legislation and countries to be added or subtracted from the tax haven list.

With the enactment of H.R. 2460, Oregon joins several other jurisdictions that require some form of including entities from tax haven countries in their respective state tax bases. Oregon taxpayers should review their corporate structure for entities that are incorporated in the tax haven countries listed above to determine reporting changes for their 2014 tax years. A careful review is warranted since the inclusion of such entities could produce a benefit or create additional liability depending on a taxpayer's unique facts and circumstances.

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