Registering a business in Oregon
Businesses are required to register with the Oregon Secretary of State. Some businesses may be required to register with the Oregon Department of Revenue. You can find more information on registering your business here.
S-Corporation Income Tax
Oregon recognizes the federal S-election, and Oregon s corporations are not required to pay tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income.
S corporations are required to pay the $150 minimum franchise tax.
LLC/Partnership Income Tax
LLCs and partnerships are not required to pay income tax to Oregon. Instead, income from the business is distributed to individual LLC members or partners, who then pay Oregon income tax on that amount with their personal return.
LLCs and partnerships are required to pay the $150 minimum franchise tax.
Pass through entities with distributive income attributable to Oregon sources must file a composite return on behalf of electing owners. Composite tax filers will want to use the individual income tax rates below to figure estimated payments.
Individual Income Tax
Oregon has a static conformity with the Internal Revenue Code as it existed on December 31, 2018.
They use the federal AGI as a starting point when calculating the income tax, which is modified by certain Oregon adjustments and/or subtractions.
They allow either the standard deduction and itemized deduction, both of which are state defined.
The 2020 standard deduction for each filing status is:
• $2,315 for single or married filing separately.
• $3,725 for head of household.
• $4,630 for married filing jointly or qualifying widow(er).
You may claim personal exemption credits for yourself, your spouse and any dependents allowed on your federal return. In 2020, the maximum credit was $210. The credit will phase out based on your federal AGI and filing status.
Oregon does not conform to the Internal Revenue Code (IRC) Section 199A, also known as the QBI deduction. However, they do offer lower tax rates on qualified business income. Qualifying business income could be from a sole proprietorship, a partnership, or an S corporation. You may elect to calculate your Oregon income tax using a reduced tax rate for that income and the reduced tax rate can be applied to qualifying business income up to $5 million. Some qualifications include materially participating and employing at least one employee in Oregon.
Individual Income is taxed at different rates depending upon filing status and income. Tax rates are as follows.
Partnership returns are due on March 15th. S corporation returns are due on the 15th day of the month following the due date after your federal return is due.
Individual income and composite returns are due on the 15th day of the fourth month following the close of the tax year.
S corporations that expect to owe more than $500 in tax will be required to make quarterly estimated payments. Individuals who can expect to owe more than $1,000 will be required to make quarterly estimated payments.
Estimated payment vouchers can be found at the link here.
Filing an Extension
Pass through entities and individuals will be granted a 6 month extension if one has been granted federally. If a federal extension is not necessary, taxpayers can use a payment voucher and check the extension payment box to request an extension.
Failure to file a timely return may result in a 20% penalty on the tax due for s corporations and individuals. Partnerships may be assessed a $50/ month penalty up to 5 months.
Some cities and counties in Oregon may assess an income tax on businesses separate from any state taxes. As a key example, Multnomah County, which includes the City of Portland, assesses the Multnomah County Business Income Tax (MCBIT). The MCBIT applies to every entity doing business in the county that has gross income of $100,000 or more; the rate is 2% of net business income, with a minimum tax of $100.
If your business was formed or is located in another state, but generates income in Oregon, it may be subject to Oregon taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Oregon Secretary of State:
Oregon Department of Revenue: