Napier & Company, LCC

What does Oregon’s Pass of Measures 66 and 67 mean to you?

Measure 67

Prior to 2009, S corporations and partnerships paid a minimum tax of only $10. With the passage of Measure 67, all entities doing business in Oregon, other than single member LLCs and exempt organizations now must pay at least a $150 minimum tax. So, for many of our business clients who are S Corporations or Partnerships, the additional tax is only $140.

For C Corporations, there is also an additional tax. Prior to 2009, C Corporations paid a tax of 6.6% based on the NET taxable income of the business. For 2009 and beyond, C Corporations pay tax on the greater of (a) a tax on GROSS receipts which ranges from .03% to.1% or (b) an increased excise tax based on NET taxable income.

The tax on gross receipts will impact businesses with high gross receipts and low profit margins by increasing taxes. The increased excise tax is for C corporations that have taxable income above $250,000. The rate for 2009 and 2010 goes from 6.6% to 7.9% on the amount of taxable income over $250,000. For 2011 and 2012, the rate on the taxable income amount over $250,000 decreases to 7.6%. In 2013 and beyond, the 6.6% applies to taxable income up to $10 million and the excess over $10 million is taxed at 7.6%.

Some C corporations may qualify to elect to be S corporations thus reducing tax to the $150 minimum and eliminating any excise tax because income is passed through to the owners. There are many requirements for a corporation to qualify to make an S election. Doing this to avoid the impact of Measure 67 may not necessarily be wise. The owners of S Corporations could also have an increase in tax made effective by Measure 66 passing.

The best advice would be to contact us for further assistance to determine if you should elect to be an S corporation.

Measure 66

The passage of measure 66 last month brought new, increased tax rates for certain high income individual filers. This is not a tax that will affect everyone.

What the rates have been: Before 2009, Oregonian’s were taxed at almost a flat rate of 9% on their Oregon taxable income.

The new rates: The current 9% tax rate increases for taxable income above certain thresholds. The new marginal rates for tax years 2009, 2010 and 2011 will be:

• 10.8% for taxable income above $125,000 (single filers) and $250,000 (joint filers).

• 11% for taxable income above $250,000 (single filers) and $500,000 (joint filers).

The new marginal rate for tax years 2012 and beyond will be:

• 9.9% for taxable income above $125,000 (single filers) and $250,000.

Another change relates to the phase out of the Federal tax subtraction from the Oregon taxable income. For 2009, that limit is $5,850 and was $5,600 in 2008. With Measure 66 passing, the federal income tax liability subtraction will be phased out for taxpayers starting with adjusted gross income above $125,000 (single filers) and $250,000 (joint filers) and completely phased out at adjusted gross income above $145,000 (single filers) and $290,000 (joint filers).

If you have any questions regarding Measure 66, please contact us.