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The Multnomah County Board of Commissioners adopted amendments under Ordinance 1321 which, effective January 18, 2024, modify some of the rules governing its "Preschool for All" personal income tax.

The amendments make the following changes:

• Form W-2 penalties: In addition to other filing and payment penalties, Multnomah County is authorized to assesses a penalty of $50 for each missing or incomplete Form W-2; the penalty can be waived for reasonable cause
• Electronic filing of returns: Multnomah County can require that returns prepared by paid tax preparers be filed electronically, via magnetic media or internet-based applications, if the paid preparer is required to file federal returns electronically; Multnomah County may establish exceptions to the electronic filing rule
• Pass-through income: The Ordinance clarifies the rules governing the deduction of pass-through income for tax filers

Preschool for All income tax

Effective January 1, 2021, the Multnomah County Preschool for All income tax provides funding to establish tuition-free preschool programs. (Multnomah County Code, Chapter 11, §500-§560.)

Tax rate. The program is funded by a personal income tax based on the following thresholds:

• Single taxpayers. All Oregon taxable income over $125,000 is taxed at 1.5%. All income above $250,000 is taxed at 3%. In 2026, the tax rate increases by 0.8%
• Joint filers. All Oregon taxable income over $200,000 is taxed at 1.5%. All income above $400,000 is taxed at 3%. In 2026, the tax rate increases by 0.8%

Resident and nonresident taxation. All Oregon taxable income of Multnomah County residents is subject to the tax. If employees live outside of Multnomah County, then only Multnomah County-sourced income is subject to the tax. If employees are working remotely (outside of Multnomah County) for a Multnomah County employer, their wages would not be subject to the tax. For example, if nonresident employees work 50% of the time in Multnomah County, 50% of their income would be subject to the tax.

Income tax withholding. Beginning January 1, 2021, withholding was voluntary. Beginning January 1, 2022, and each year thereafter, withholding is mandatory for all subject employees earning $200,000 or more during the calendar year, unless the employee opts out. An employee below the $200,000 earning threshold or with other tax considerations may opt in to withholding at an employee-designated amount, based on the employee's tax situation. An employee who meets the mandatory withholding criteria may opt out of withholding, based on the employee's tax situation.

Supplemental wages. If an employee has Multnomah County withholding established, supplemental payments should have withholding applied at 1.5% of the payment for employees with subject wages between $200,000 - $400,000. For employees with subject wages above $400,000, supplemental payments should have withholding applied at 3%. If an employee does not have Multnomah County withholding established, no withholding is required on supplemental payments.

Withholding certificate. Employees subject to the Multnomah County income tax may opt in or out and make other withholding elections by completing Form METRO/Multco OPT.

Returns. Employers are required to file quarterly Form WPFA-QR.

Withholding tax payments. Employers must use Form WIT-V for withholding payments made by check and not included with the quarterly withholding tax return.

Penalties. Beginning January 1, 2022, when an employer fails to remit in whole or in part any tax withheld at the time required, the Tax Administrator will assess a late payment penalty of:

• 5% of the balance of the tax paid after the original due date if the failure to remit is for four months or less
• An additional 20% of the balance of the tax paid after the original due date if the failure to remit is for more than four months
• An additional penalty of 100% of the balance of the tax paid after the original due date of all applicable tax years if the failure to remit is for three or more consecutive tax years

Ernst & Young LLP insights

For more information see the Multnomah County website and Tax Alert 2021-0678.