Current through Register Vol. 61, No. 4, April 1, 2022
For dividends received or accrued after
December 31, 1987, in tax years ending after December 31, 1987, a corporation
is allowed to subtract from federal taxable income 80 percent of dividends
received or deemed received from another corporation. Dividends deemed received
includes subpart F income included in federal taxable income pursuant to IRC
section 951. In order to take the Oregon dividends received deduction, however,
the taxpayer must first add back the federal dividend received deductions
allowed by IRC sections 243 and 245 and the dividends eliminated under the
federal consolidation rules. Exceptions to this general rule are as follows:
(a) Dividends received from corporations
owned less than 20 percent by the recipient must be reduced by a 70 percent
rather than 80 percent dividends received deduction for dividends received or
accrued after December 31, 1987.
(b) Dividends received from a foreign sales
corporation and deducted under IRC section 245(c) are not added back. These
dividends are totally excluded from Oregon taxable income.
(c) Dividends received from a related
domestic international sales corporation are totally excluded from Oregon
taxable income. A subtraction is allowed for these dividends to the extent they
are included in federal taxable income.
(d) Dividend income included in federal
taxable income pursuant to the "gross-up" provisions of IRC section 78 is not
taxable by Oregon. These dividends are subtracted in full under ORS
(e) Dividends eliminated under IRC section
243(a)(3) are not added back to federal taxable income on the Oregon return if
the recipient and the payer corporations are both members of the same unitary
group filing an Oregon consolidated tax return. If they are not members of the
same Oregon consolidated group, the 100 percent federal dividend deduction is
added back to federal taxable income and the appropriate Oregon dividends
received deduction is subtracted.
(2) Unlike the federal dividend received
deduction, the Oregon deduction is permitted on dividends received or deemed
received from foreign as well as domestic corporations. Income included in
federal taxable income pursuant to IRC section 951(a) qualifies for the
dividend received deduction. Such income is a dividend "deemed received."
Dividends from tax exempt corporations and dividends that qualify for a federal
dividend deduction limited to a certain measure of income qualify for the full
Oregon dividend deduction. An example of the latter is a dividend from a
Federal Home Loan Bank.
Oregon dividends received deduction is not allowed with respect to "dividends"
that are not treated as dividends under federal law or dividends that are not
included in federal taxable income as provided in ORS
For tax years beginning on or after January 1, 2006, ORS
provides that a dividend that is not treated as a dividend under IRC section
243(d) or 965(c)(3) may not be treated as a dividend for purposes of the Oregon
dividends received deduction.
Example: L Corporation received $10,000 in
"dividend" income from a mutual savings bank. L Corporation does not own stock
in the bank. The $10,000 represents interest income on funds deposited in the
mutual savings bank, and not dividend income. Since these "dividends" are not
treated as dividends for purposes of the federal dividends received deduction
under the provisions of IRC section 243(d)(1), they are not eligible for the
Oregon dividends received deduction.
(4) For tax years beginning on or after
January 1, 2006, a taxpayer may not claim an Oregon dividend received deduction
for a dividend if the federal dividends received deduction is not allowed
because of IRC section 246(a) or (c).
(5) In the case of dividends on debt-financed
portfolio stock, the percentage of the Oregon dividend received deduction will
be reduced in the same manner as the federal deduction under IRC section
(6) For tax years beginning
before January 1, 2007, a dividends received deduction allowed under IRC
section 965 for federal tax purposes is allowed in determining taxable income
under ORS chapter 317 for the same tax year as the deduction is allowed for
federal tax purposes. IRC section 965 provides a temporary dividends received
deduction for cash dividends received from controlled foreign
(7) In the case of
any dividend received from an alien, domestic, or foreign insurer that would be
included in the taxpayer's consolidated Oregon return but for the application
or (7), the Oregon dividends received
deduction is 100%.
Admin. R. 150-317-0330
f. 12-16-85, cert. ef. 12-31-85; RD 15-1987, f. 12-10-87, cert. ef. 12-31-87;
RD 7-1989, f. 12-18-89, cert. ef. 12-31-89; RD 12-1990, f. 12-20-90, cert. ef.
12-31-90; RD 9-1992, f. 12-29-92, cert. ef. 12-31-92; REV 2-2003, f. &
cert. ef. 7-31-03; REV 3-2005, f. 12-30-05, cert. ef. 1-1-06; Renumbered from
68-2016, f. 8-15-16, cert. ef.
71-2017, amend filed 12/22/2017, effective
[Publications: Contact the Oregon
Department of Revenue for information about how to obtain a copy of the
publication referred to or incorporated by reference in this rule pursuant to
Statutory/Other Authority: ORS
Statutes/Other Implemented: ORS