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Oregon & California Tax Issues
 
Oregon Income & Excise Tax Increases

 
On January 26, 2010, Oregon voters approved Measures 66 and 67 imposing retroactive tax increases for business entities and individuals.  The most significant changes are outlined below.
 
Business Excise Tax
Prior to the law change, Oregon imposed a $10 minimum excise tax on C and S corporations, while partnerships were not subject to any minimum tax.  Beginning with the 2009 tax year, S corporations and partnerships are now subject to a minimum tax of $150.  For C corporations, the new law imposes a graduated minimum tax that is based on Oregon sales.  Beginning with the 2009 tax year, the minimum tax starts at $150 for C corporations with Oregon sales of less than $500,000.  This minimum tax increases to a maximum minimum tax of $100,000 for corporations with sales of $100 million or more.
 
Corporate Income Tax
In the past, the corporate income tax rate has been fixed at 6.6%.  Under the new law, corporate taxpayers are subject to a higher marginal rate on taxable income in excess of $250,000.  For these taxpayers, the tax rate will be 7.9% for the 2009 and 2010 tax years and 7.6% for the 2011 and 2012 tax years.
 
Personal Income Tax
Prior to the law change, Oregon imposed a maximum tax rate of 9% on individuals.  For the 2009, 2010 and 2011 tax years, the top marginal tax rate increases to 11%.  The top marginal tax rate will decrease to 9.9% beginning with the 2012 tax year.
 
Under the previous law, Oregon allowed a personal income tax deduction of up to $5,500 for federal income taxes paid.  The new law imposes a phase-out of this deduction for higher-income taxpayers.  This deduction begins to phase-out for individuals with federal adjusted gross income of $125,000, or $250,000 for married filing joint. 
 
The Oregon Department of Revenue will waive interest due based on the underpayment of estimated tax from the retroactive rate increases or from the reduction in the Oregon deduction for federal income taxes paid. This personal income tax amnesty is limited to the 2009 tax year.
 
California Franchise Tax Board after Nonfilers
 
The California Franchise Tax Board (FTB) is contacting more than 900,000 individuals who earned California income but failed to file a California personal income tax return in 2008.  Individuals who receive a notice from the FTB will have 30 days to file their California tax return or prove why one is not due.  The FTB will estimate the amount of state tax due and issue a tax assessment which includes interest, fees, and penalties of up to 50%. 
 
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