Or. Admin. Code § 150-316-0167 - Gross Income of Nonresidents; Pensions and Retirement Income Received by Oregon Domiciliaries
The provisions of this rule apply to pension and retirement income received after December 31, 1999, by persons who are domiciled in Oregon but who are taxed as nonresidents under Oregon law.
(1)Definitions.
(a)Qualified Employer Retirement
Benefit Plan. "Qualified employer retirement benefit plan" means any
employer-related plan that is defined and administered pursuant to part I of
subchapter D of chapter 1 of subtitle A of the Internal Revenue Code. This
includes, but is not limited to, the following employer administered plans:
qualifying pension and profit sharing plans, annuity plans, cash or deferred
compensation arrangements, or tax-shelter annuity plans.
(b)Qualified Employee Retirement
Benefit Plan. "Qualified employee retirement benefit plan" means any
plan established and maintained solely by an employee or on the employee's
behalf that is defined and administered pursuant to part I of subchapter D of
chapter 1 of subtitle A of the Internal Revenue Code. This includes, but is not
limited to, the following employee-related plans: individual retirement
accounts, individual retirement annuities, simplified employee pension plans,
or self-employed retirement plans.
(2)
(a)General provisions. In
general, Oregon nonresident taxpayers who have not given up their Oregon
domicile must include in Oregon taxable income distributions received from
qualified employer and employee retirement benefit plans that are derived from
or connected with services performed in Oregon. Only contributions made to a
retirement plan while the employee was performing services in Oregon are
considered Oregon source income when received by the nonresident taxpayer.
Resident taxpayers include in Oregon taxable income the same amount of the
distribution as included for federal purposes regardless of where the services
were performed or when the contributions were made to the plan.
Example 1
: Joanne lived in
Oregon and worked in Washington during her employment years. Upon her
retirement, she moved her domicile to Florida. Her retirement income is not
Oregon source income and is not subject to Oregon tax, because the job services
were not performed in Oregon. Any retirement income actually or constructively
received while an Oregon resident is subject to Oregon tax under ORS
316.048.
Example 2
: Doug always lived
and worked in Colorado. Subsequent to his retirement, he moved to Oregon and
became an Oregon resident. While he remains an Oregon resident, all of his
retirement distributions are subject to Oregon tax under ORS
316.048. If he later moves out
of Oregon, none of the distributions received after his change of residence are
subject to Oregon tax.
(b) Exception. If the compensation is not
taxable by Oregon due to federal Public Law (P.L.) 101-322, then the related
retirement benefits are not taxable. See OAR 150-316.127-(E) regarding
P.L.
101-322 .
(3)Qualified Employer Retirement
Benefit Plans.
(a)General. Contributions or
compensation paid by an employer pursuant to any qualified employer's
retirement benefit plan must be included in Oregon taxable income when received
by a nonresident taxpayer who is domiciled in Oregon if such contribution or
compensation is derived from or attributable to Oregon sources. For purposes of
this subsection, "taxpayer" means the employee or any other beneficiary of the
employee's interest in the plan. This income is from Oregon sources if it
relates to services performed in Oregon.
(b) If the employee is receiving a
single-life annuity, the employee must first compute the expected return using
the tables set forth in Treas. Reg. Section 1.72-9, and then make the
applicable allocations set forth below to determine the Oregon source amount.
Once the Oregon source amount is determined, use Example 4 under subsection
(3)(d) of this rule to determine the amount of income to be reported to Oregon
each year. If the retirement account also contained employee contributions, the
employee must compute and apply the Oregon exclusion ratio defined in
subsection (3)(d)(B) of this rule.
(c) The next two examples are intended to
help define Oregon source income and are based on the assumption that the
employee is receiving distributions from a profit sharing account that contains
only the employer's contributions, plus interest earnings. Because profit
sharing distributions may be irregular in both the timing and amount of the
distribution, at the employee's election, expected return cannot be computed
for these accounts.
Example 3
:
Sam lived and worked in Oregon until retirement in January 2000. At retirement
he kept his Oregon domicile and moved to Arizona on a temporary basis,
intending to return to Oregon in a few years. Sam is taxed as a nonresident
under the provisions of ORS
316.027. His retirement account
balance at retirement was $100,000. This included $30,000 in employer
contributions and $70,000 in earnings. Of this amount, $30,000 is Oregon source
income and is subject to Oregon tax as long as he remains domiciled in Oregon.
Earnings on the account are not subject to Oregon tax if they were not actually
or constructively received until after he left Oregon. Sam files an Oregon
nonresident return and reports 30 percent of each distribution each year until
$30,000 has been reported to Oregon.
(d) If an employee, while performing services
within Oregon, makes contributions to a qualified employer retirement benefit
plan, those contributions are considered part of the taxpayer's basis to the
extent the employee has received no tax benefit with respect to such
contributions. For purposes of the following examples, the following phrases
are defined.
(A)Employee
contributions. "Employee contributions" means those contributions made
to a qualified employer retirement benefit plan by an employee while the
employee was performing services in Oregon.
(B)Oregon exclusion ratio.
"Oregon exclusion ratio" means the ratio of the total employee contributions
plus total earnings to the total expected return. Total expected return is to
be calculated using the tables set forth in Treas. Reg. Section 1.72-9.
(C)Oregon annual exclusion
amount. "Oregon annual exclusion amount" means the product of the
total distributions received during a taxable period and the Oregon exclusion
ratio.
(D)Oregon
receipts. "Oregon receipts" mean the excess of the total distributions
received during a taxable period over the Oregon annual exclusion amount.
(E)Oregon taxable
percentage. "Oregon taxable percentage" means the ratio of the total
Oregon source distributions to the total expected return net of the employee's
contributions. The total Oregon source distributions means the amount subject
to Oregon tax. This includes the employer contributions or compensation amounts
relating to services performed within Oregon.
(F)Amount currently taxable for
Oregon purposes. "Amount currently taxable for Oregon purposes" means
the product of the Oregon receipts and the Oregon taxable percentage.
Example 4
: Assume the same
facts as in Example 3, except that Sam receives his benefits in the form of a
single-life annuity to be paid at $1,200 per month for the rest of his life.
His expected return using the annuity tables pursuant to Treas. Reg. Section
1.72-9 is $216,000 ($1,200/mo. x 12 months x 15.0 (from Table I)). The amount
of income he reports to Oregon for each payment is $167 ($1,200/mo. x ($30,000
÷ $216,000)) or $2,000 annually until the entire $30,000 has been
reported to Oregon.
(4) Qualified Employee Retirement Benefit
Plans. Distributions from qualified employee retirement benefit plans must be
included in Oregon taxable income to the extent a tax benefit was received for
Oregon purposes with respect to the contributions made by the taxpayer.
Interest or other income earned on such contributions is taxable by Oregon only
to the extent distributed while the taxpayer was an Oregon resident. Oregon
taxable income includes all distributions until the taxpayer has recovered the
total amount of distribution subject to Oregon tax.
Example 5
: Assume the same
facts as Example 3, except that Sam also invested in an individual retirement
arrangement (IRA) while living and working in Oregon His balance in the IRA at
retirement is $63,000 ($20,000 of his tax deductible contributions and $43,000
of earnings). Any IRA distribution included in federal taxable income will also
be taxable to Oregon until Sam has reported a total of $20,000 to
Oregon.
Notes
Stat. Auth.: ORS 305.100
Stats. Implemented: ORS 316.127
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