A proposed initiative (Initiative Petition 28 (IP 28)) if approved by voters for the November 8, 2016 ballot, would significantly increase Oregon's minimum corporate excise tax on corporations with $25 million or more in Oregon sales. Under current law, the minimum corporate excise tax rate ranges from $150 on corporations with less than $500,000 in Oregon sales up to $100,000 on corporations with $100 million or more in Oregon sales. If approved by the voters, for tax years beginning on or after January 1, 2017, IP 28 would increase the minimum tax paid by corporations with more than $25 million in Oregon sales to $30,001, plus 2.5% of the excess over $25 million in Oregon sales.

Under IP 28, the amount of Oregon gross receipts will be determined by multiplying total gross receipts by the Oregon sales factor used under the Oregon corporate income tax. Just as under current law, the minimum tax would only apply to C corporations - LLCs, partnerships and other taxpayers would still be subject to only a $150 minimum fee. Further, under legislation passed in 2015, credits, such as Oregon's research and development credit, could not be used to offset the minimum tax determined under the proposed gross receipts method under IP 28.

IP 28 yet to be certified to appear on the November 8, 2016 Oregon ballot and its supporters must obtain 88,184 valid signatures by July 8, 2016, for it to qualify to appear on the ballot. The group sponsoring the initiative believes it will be successful in obtaining the requisite signatures and that will likely mean that the measure will be placed before Oregon voters this Fall.

Implications

If IP 28 qualifies to appear on the November ballot and is approved by Oregon's voters, proponents estimate that the revised minimum corporate excise tax provisions would generate over $5 billion during each two-year budget cycle. The changes to the minimum tax would mostly affect businesses with high gross sales and low profits, such as grocery stores, pharmacies, utilities and other retail businesses. Corporate excise tax filers should examine their Oregon returns and estimate the potential impact this new minimum gross receipts tax could have on their business if it is ever enacted.

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