(1) Interest and dividend income on
obligations of the federal government which are exempt from state income
taxation but not from federal income taxation shall be subtracted from federal
taxable income in arriving at Oregon taxable income.
(2) Amounts that may not be subtracted
include:
(a) Timely payments of interest by
the insurer of obligations backed by the U.S. government;
(b) Interest received on federal tax refunds.
Example: Paul and Margaret filed a joint income
tax return and received a federal tax refund from the U.S. Treasury Department
for $1,200. This amount included $1,000 tax and $200 interest. The $200
interest amount does not qualify for the subtraction for interest or dividend
income on U.S. government obligations as provided under ORS
316.680(1)(a).
(c) Interest received on obligations of
territories and possessions of the United States. Interest on these obligations
is not taxable for federal or state purposes and is not included in federal
adjusted gross income so no subtraction is made on the Oregon return. Interest
on the following obligations is not subtracted under ORS
316.680(1)(c):
(A) Territory of Guam
(B) Commonwealth of Puerto Rico
(C) Territory of Puerto Rico
(D) Territory of Samoa
(E) Territory of Virgin Islands
(d) Income received from
repurchase agreements. These are agreements in which a seller other than the
United States sells securities (which can be federal obligations), and agrees
to repurchase the same or similar securities at a price that includes interest
for the period of the sale. The seller, in this case, is the true owner; and,
the buyer merely receives interest under a contract with the seller. It is not
interest paid by the United States, but it is income (or the equivalent to
interest) paid by the seller at the time of repurchase.
(3) For interest received from organizations
that invest in U.S. government securities refer to OAR
150-316-0507.
(4) If expenses connected with U.S.
government obligations are claimed as an itemized deduction, an adjustment is
required. These expenses include interest on indebtedness incurred to carry the
bonds or notes and expenses incurred in the production of income from the bonds
or notes. Oregon doesn't allow a deduction for these expenses, since the income
from the bonds or notes is exempt from Oregon tax. The subtraction allowable
under ORS
316.680(1)(a)
shall be reduced by the amount of the expenses deducted in arriving at federal
taxable income.
Example: Charles reported $500 interest income
from Series EE Bonds. He borrowed $6,000 to purchase the bonds. During the year
he paid $200 interest on the amount he borrowed. He claimed the $200 interest
expense as an itemized deduction. His allowable subtraction under ORS
316.680(1)(a)
of $300 is computed as follows: [Formula not included. See ED.
NOTE.]
(5) Below is a list
of obligations that may or may not qualify for the subtraction permitted under
ORS 316.680(1)(a).
[List not included. See ED. NOTE.]
Notes
Or. Admin. Code §
150-316-0509
RD 10-1986,
f. & cert. ef. 12-31-86; 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 7-1991, f. 12-30-91, cert. ef.
12-31-91; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; Renumbered from
150-316.680(1)(a),
REV
64-2016, f. 8-15-16, cert. ef.
9/1/2016;
REV
30-2017, f. & cert. ef.
7/21/2017
Stat. Auth.: ORS
305.100
Stats. Implemented: ORS
316.680
