(1) Withholding requirement. A pass-through
entity with Oregon-source distributive income and one or more nonresident
owners that have no other Oregon-source income, is required to withhold tax on
behalf of the owner unless that owner makes an election as described in OAR
150-314-0515, the pass-through entity elects to pay the pass-through entity
elective tax, or meets an exception described in 150-314-0525. "Tax payment" or
"owner payment" means pass-through entity withholding, which is an estimated
tax payment sent on behalf of the owner. The entity must withhold tax as
follows:
(a) For nonelecting owners subject
to tax under ORS Chapter 316, each owner's share of estimated Oregon-source
distributive income for the taxable year multiplied by the highest percent in
316.037; and
(b) For nonelecting
owners subject to tax under ORS Chapter 317 or 318, each owner's share of
estimated Oregon-source distributive income for the taxable year multiplied by
the rates in 317.061.
(2)
Information retention requirement. The pass-through entity must retain in its
records the information listed in this section and submit it to the Department
of Revenue on request:
(a) Calculation of the
amount required to be withheld pursuant to this rule;
(b) Whether payments were submitted in
addition to the quarterly withholding tax amounts required to be remitted under
section (4) of this rule; and
(c) A
detailed summary of the nonelecting owner's share of the aggregate withholding
tax payments made by the pass-through entity for the taxable year and the
nonelecting owner's share of the aggregate additional withholding tax liability
paid. See the annual report requirement in section (5) of this
rule.
(3) Information
reporting to owner requirement. The pass-through entity, by the due date of its
information return, must provide each applicable nonelecting owner with an
information statement containing the owner's share of the entity's withholding
tax payments to be claimed as estimated tax payments on the owner's tax
return.
(4) Periodic remittance
requirement.
(a) The entity must remit
amounts required to be withheld to the department on a quarterly basis using a
method approved by the department. The quarterly withholding tax remittance
amounts are generally the sum of:
(A) The
highest marginal tax rate for the end of the entity's tax year in ORS
316.037 multiplied by the sum of
the noncorporate nonelecting owner's estimated share of the entity's
Oregon-source distributive income and then multiplied by 25 percent;
and
(B) The applicable rate in ORS
317.061 multiplied by the sum of
the corporate nonelecting owner's estimated share of the entity's Oregon-source
distributive income and then multiplied by 25 percent.
(b) The due dates of these required payments
are the 15th day of the 4th, 6th, 9th, and 12th month of the entity's tax year.
Due dates are moved to the next business day when they occur on a weekend or
legal holiday. Exception: Fiscal year entities whose owners are all
noncorporate taxpayers using a calendar tax year can elect to use the due dates
for the owners' calendar tax year instead. This is the 15th day of the 4th,
6th, and 9th month of the tax year and the 1st month of the succeeding tax year
for the calendar year containing the entity's fiscal year end.
Example 1: Mountain LLC uses a fiscal tax year ending April
30th. Its fiscal year 2013 is from May 1, 2013 to April 30, 2014. Using its tax
year, the quarterly payments are due August 15th, 2013; October 15th, 2013;
January 15, 2014; and April 15, 2014. Since all of the owners of Mountain LLC
are individuals using a calendar tax year, the LLC can opt to use the due dates
for the owners' tax year instead. Because those owners report this income on
their 2014 calendar year return, those due dates are: April 15, 2014; June 16,
2014; September 15, 2014; and January 15, 2015.
(5) Annual report requirement. For estimated
tax payments due on or after January 1, 2013, the entity will submit an annual
report. The report is due the last day of the second month following the close
of the entity's tax year. The report will have the following information for
each owner included in the pass-through entity withholding payments: owner's
name, owner's federal tax identification number, owner's mailing address,
owner's share of each payment made on the owner's behalf, and any additional
information requested by the department in the filing instructions. The
department may request other information as needed. The owners will not receive
credit for payments made on their behalf until the annual report has been filed
by the entity.
Example 2: ABC Partners, an Oregon partnership, has 2
nonresident owners who each own 25 percent of the partnership. One is an
individual, Rachel, and one is a corporation, Eli & Alexandria Inc.
(E&A). Because neither elects to join in filing a composite return and
neither has filed an affidavit, ABC must withhold Oregon tax. ABC Partners
estimates its Oregon-source distributive income for 2013 will be $1,500,000.
For 2013, the entity will calculate the tax payment for each period based on
the nonresident owners' share of 25 percent of $1,500,000 and the appropriate
tax rate. Rachel's pass-through entity withholding is 9.9 percent (the highest
marginal tax rate for 2013) multiplied by $375,000 multiplied by 25 percent.
This is $9,281 (rounded) for each period. E&A's pass-through entity
withholding is 6.6 percent multiplied by $375,000 multiplied by 25 percent.
This is $6,188 (rounded) for each period. ABC Partners will add together the
amounts estimated for all owners and send in one payment each period of
$15,469. ABC Partners will submit these payments using its tax year. Since ABC
Partners uses a calendar tax year, the due dates for each payment for tax year
2013 are April 15, June 17, September 16, 2013 and January 15, 2014. If ABC
Partners was a fiscal year taxpayer, then it would submit pass-through entity
owner payments by the estimated tax payment due dates for that fiscal tax year
instead. At the end of its tax year, ABC Partners will submit an annual report.
Since it has no changes to account for, it will show $9,281 of each quarterly
payment belongs to Rachel and $6,188 of each quarterly payment belongs to E
& A Inc.
Notes
Or. Admin. R.
150-314-0520
REV 10-2010,
f. 7-23-10, cert. ef. 7-31-10; REV 9-2012, f. 12-18-12, cert. ef. 1-1-13; REV
2-2013, f. & cert. ef. 3-28-13; Renumbered from 150-314.781,
REV
34-2016, f. 8-12-16, cert. ef.
9/1/2016;
REV
35-2022, amend filed 12/28/2022, effective
1/1/2023
Publications: Publications referenced are available from the
agency.
Statutory/Other Authority: ORS
305.100
Statutes/Other Implemented: ORS
314.781