Or. Admin. R. 150-314-0520

Current through Register Vol. 63, No. 6, June 1, 2024

Section 150-314-0520 - Pass-through Entity Withholding Requirements

(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.

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