Oregon has not extended the due date of the first payment for its new Corporate Activity Tax (CAT). Accordingly, the first CAT payment is due April 30, 2020.

Taxpayers subject to the CAT

Any business concern that has "substantial nexus" with Oregon, regardless of legal entity form (i.e., corporations, partnerships, LLCs, sole proprietorships, etc., are all treated the same under the CAT), must pay the CAT based on its Oregon "commercial activity." "Commercial activity" for purposes of the CAT law generally means a person's or unitary group's total amount realized from transactions and activity in the regular course of its trade or business, without deduction for expenses incurred (in essence, Oregon gross receipts).¹ Commercial activity is sourced to Oregon under market-based sourcing rules. Oregon commercial activity generally includes the gross receipts from the following:

• Sale, rental, lease or license of real property located in Oregon
• Rental, lease or license of tangible personal property located in Oregon
• Sale of tangible personal property delivered to a purchaser in Oregon
• Sale of a service delivered to a purchaser in Oregon

or

"Substantial nexus" for CAT purposes includes:

• "Bright-line" presence, which consists of having one or more of the following in Oregon during the calendar year: (i) $50,000 in property; (ii) $50,000 in payroll; (iii) $750,000 in commercial activity (i.e., gross receipts); or (iv) at least 25 percent  of the person's (or unitary group's) total property, total payroll or total commercial activity
• Other nexus with the state, to the extent that the person can be required to remit the CAT under the US Constitution

CAT payment deadlines and requirements

On April 30, 2020, persons or unitary groups with substantial nexus with Oregon and an annual CAT liability exceeding $5,000 must pay 25 percent  of their CAT liability for the 2020 calendar year.³

Oregon, like the federal government and many other states, has extended some of its tax filing and payment deadlines in response to the COVID-19 emergency. It has not, however, extended its CAT filing and payment deadlines. As of the date of this Alert, the April 30, 2020 estimated CAT deadline remains unchanged.⁴ The Oregon Department of Revenue (Department) has said that it will not assess underpayment penalties to taxpayers making a good faith effort to estimate their first quarter payments.

Taxpayers may make Oregon CAT estimated payments through the Department's website at here.

Alternatively, taxpayers may mail a check or money order to the Department by completing and mailing the following form (Department Form OR-CAT-V) to the Department at the address listed in the form here.

Additionally, a taxpayer with Oregon commercial activity exceeding $750,000 must register with the Department within 30 days of exceeding the $750,000 threshold.⁵ As such, a person or unitary group whose commercial activity exceeds $750,000 on March 31, 2020, must register with the Department by April 30, 2020.

Persons obligated to register for the CAT can do so on the Department's website here. A taxpayer must provide its mailing address, the date it exceeded or expects to exceed $750,000 in Oregon commercial activity, a valid email address or current log-in, and its North American Industry Classification System (NAICS) code,⁶ which is often included on a taxpayer's federal income tax return.

Implications

Generally, taxpayers that fail to timely make estimated tax payments or underestimate their estimated tax payments by more than 20 percent  percent will be subject to a penalty. If the failure or underpayment exceeds one month, the penalty is 20 percent  of the required payment. Reasonable cause is not a defense to the penalty.⁷ In response to the COVID-19 emergency, however, the Department stated that it will not assess underpayment penalties to taxpayers making a good faith effort to estimate their first quarter payments.

Taxpayers that fail to timely register will also be subject to a penalty. The penalty for late registrations is $100 per month that a person or unitary group has failed to register, capped at $1,000 in a calendar year.⁸

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ENDNOTES

¹ ORS 317A.100(1) (defining commercial activity).

² ORS 317A.128 (sourcing rules for commercial activity).

³ ORS 317A.137(2), Or. Temp. Admin. R. 150-317-1300 (payment deadlines).

⁴ Ore. Dept. of Rev., Revenue Director Order 2020-01, Tax filing and payment relief for Oregonians (Mar. 24, 2020).

⁵ ORS 317A.131 (registration).

⁶ NAICS codes are currently managed in the US by the United States Bureau of Labor Statistics and are generally available here (as well as other governmental websites.)

⁷ ORS 317A.161(2), 314.400(3), Or. Temp. Admin. R. 150-317-1310 (penalties).

⁸ ORS 317A.131(3) (registration rules).