Chapter 316

NOTES OF DECISIONS

Unless the divorce decree specifically designates that payments are for child support, payments will be treated as alimony. Henderson v. Dept. of Rev., 5 OTR 153 (1972)

The goal of this chapter is to incorporate all of the provisions of the federal Internal Revenue Code; taxable income should be adjusted whenever the result of the adjustment is to give effect to the policies or principles of the federal Internal Revenue Code, even though no express authority for the adjustment is present in the statutes. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974); Smith v. Dept. of Rev., 270 Or 456, 528 P2d 73 (1974)

By its enactment of this chapter, the legislature intended to adopt §172 of the federal Internal Revenue Code allowing for the carryback and carryforward of net operating losses. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974)

Where plaintiff failed to appeal timely as required by this section, appeal rights were not preserved so that cause could be considered on merits. Dela Rosa v. Dept. of Rev., 11 OTR 201 (1989), aff’d 313 Or 284, 832 P2d 1228 (1992)

Where taxpayers paid foreign income taxes on foreign income and claimed foreign taxes paid as federal tax credit and as state business expense deduction, taxpayers who claim federal foreign tax credit are entitled only to foreign tax deduction provided in ORS 316.690. Whipple v. Dept. of Rev., 309 Or 422, 788 P2d 994 (1990)

For purposes of claim preclusion, all issues regarding taxpayer’s income tax liability for tax year constitute same claim. U.S. Bancorp v. Dept. of Revenue, 15 OTR 13 (1999)

ATTY. GEN. OPINIONS: Political contributions as credit against Oregon tax return, (1974) Vol 37, p 159

LAW REVIEW CITATIONS: 57 OLR 309 (1978); 16 WLR 373 (1979)

316.007

NOTES OF DECISIONS

Plaintiff’s expenses were incurred “while away from home in the pursuit of a trade or business” and therefore deductible under federal Internal Revenue Code of 1954, §162 (a) (2). Hilyard v. Dept. of Rev., 5 OTR 619 (1975)

Internal Revenue Code provision for deduction of contribution to municipal corporation applied to land deeded to water district for pump house. Act. Brice v. Dept. of Rev., 6 OTR 548 (1976)

Where taxpayers realized gain on sale of California property before moving to Oregon, gain was not taxable by state even though recognition was deferred under federal tax law until after taxpayers had established residency in Oregon. Denniston v. Dept. of Revenue, 287 Or 719, 601 P2d 1258 (1979)

Travel from union member’s home to place of business is personal commuting expense but travel from that situs of member’s business, the “hiring hall,” to assigned jobsite for temporary employment results in expense incurred in carrying on trade or business. Shelton v. Dept. of Rev., 10 OTR 12 (1985)

Oregon tax law is to follow federal provisions relating to measurement of taxable income; policy does not apply to Oregon provisions on withholding. Realty Group v. Dept. of Rev., 299 Or 377, 702 P2d 1075 (1985)

Non-immigrant student with F-1 Visa who is subject to federal income tax is subject to Oregon income tax. Gobina v. Dept. of Rev., 12 OTR 202 (1992)

316.012

NOTES OF DECISIONS

Plaintiff’s expenses were incurred “while away from home in the pursuit of a trade or business” and therefore deductible under Internal Revenue Code of 1954, §162 (a) (2). Hilyard v. Dept. of Rev., 5 OTR 619 (1975)

Where a nonbusiness loan was secured by valuable property, the security interest disqualified it for deduction under the Internal Revenue Code of 1954, §166 (d) (1) (B). Johnson v. Dept. of Rev., 6 OTR 21 (1975)

In computing gain on the sale of stock for income tax purposes, the cost basis on acquisition is used, not the value when the taxpayer became a resident of Oregon. Ray v. Dept. of Rev., 6 OTR 184 (1975)

Income from distribution of assets held by Klamath Indian Management Trust was taxable by state. Bettles v. Dept. of Rev., 7 OTR 153 (1977)

ATTY. GEN. OPINIONS: Political contributions as credit against Oregon tax return, (1974) Vol 37, p 159

316.014

See annotations under ORS 316.028.

316.027

NOTES OF DECISIONS

There is no constitutional limitation of the state’s power to tax nondomiciliaries. Gwin v. Dept. of Rev., 5 OTR 40 (1972)

The contention that the defendant was in Oregon for business purposes of an indefinite period does not meet the test of a “temporary or transitory purpose.” Gwin v. Dept. of Rev., 5 OTR 40 (1972)

Plaintiffs were residents of Oregon even though they lived at a military reservation in Guam during the year in question. Vallee v. Dept. of Rev., 5 OTR 693 (1975)

Where, during taxable year in question, taxpayers’ only connections with Oregon were intention to maintain domicile here, ownership of residential property and receipt of rentals from it, they were “nonresident domiciliaries” entitled to tax exemption for that year. Ramsey v. Dept. of Rev., 7 OTR 478 (1978)

Under this section, legislative intent is to give tax relief to “domiciliary nonresident” who is gaining little benefit from state in form of government services and protection. Ramsey v. Dept. of Rev., 7 OTR 478 (1978)

Department of Revenue determination to include one-half of income of taxpayer’s husband earned in community property state in her reported Oregon income was proper and taxpayer’s intention to move to Washington with her husband, dependent on selling her Oregon home, was too uncertain in time to effect change of taxpayer’s domicile during subject years. Harlan v. Dept. of Rev., 10 OTR 497 (1987)

Where plaintiff owned real property on which family resided and to which he returned when not working elsewhere and plaintiff did spend more than 30 days in Oregon during 1982 and 1983, plaintiff was resident of Oregon and income earned in other states was taxable in Oregon. Dela Rosa v. Dept. of Rev., 11 OTR 201 (1989), aff’d 313 Or 284, 832 P2d 1228 (1992)

Change of domicile requires unconditional present intention to establish residence in new location and abandon residence in old location. Davis v. Dept. of Rev., 13 OTR 260 (1995)

Taxpayer, truck driver whose permanent abode was cab of truck, was Oregon resident for tax purposes because exception for person maintaining permanent place of abode outside of Oregon requires fixed location. Dept. of Revenue v. Glass, 15 OTR 117 (2000), aff’d 333 Or 1, 35 P3d 325 (2001)

Taxpayer, who owned and visited home in Oregon, owned and performed maintenance on rental properties in Oregon and likely would have remained in Oregon but for family ties out of state, is resident of Oregon. Dane v. Dept. of Revenue, 21 OTR 15 (2012)

Taxpayer, whose then-spouse resided in Oregon, who owned and maintained home in Oregon and who rented room out of state for employment, did not abandon Oregon domicile so remained resident of Oregon. Ashby v. Dept. of Revenue, 21 OTR 47 (2012)

Where taxpayers owned residences in California, Iowa, Italy and Oregon but registered to vote in Oregon, obtained Oregon driver’s licenses, filed Oregon full-year resident income tax returns and began filing California state income tax returns as nonresidents during years in question, taxpayers were domiciled in Oregon. Hillenga v. Dept. of Revenue, 21 OTR 396 (2014)

316.028

(formerly 316.014)

NOTES OF DECISIONS

“Net operating loss” under this section refers to definition of such loss, rather than amount, as contained in Internal Revenue Code. Lufkin v. Dept. of Rev., 11 OTR 410 (1990)

Taxpayer may not claim Oregon income tax deduction for carryover of federal income tax net operating loss generated in year in which resident was not subject to Oregon taxation. Zemke v. Dept. of Revenue, 17 OTR 18 (2003)

316.032

NOTES OF DECISIONS

Adoption by reference of the federal Internal Revenue Code does not require automatic adoption of the Internal Revenue Service’s determination of fair market value for computing capital gain. Cole v. Dept. of Rev., 6 OTR 166 (1975)

In regard to question of deductibility of transportation expenses, position of Commissioner of Internal Revenue was that “temporary” or “indefinite” character of employment was determining factor and Department of Revenue properly determined that employment herein was indefinite so deductions were not allowed. Deblock v. Dept. of Rev., 286 Or 735, 596 P2d 560 (1979)

316.047

NOTES OF DECISIONS

Annuity income not taxed by Oregon because of difference in treatment of annuity income prior to 1969, and excluded from federal tax returns after 1969, is an exclusion rather than deduction, and this section is not applicable. Bronson v. Dept. of Rev., 5 OTR 86 (1972), aff’d 265 Or 211, 508 P2d 423 (1973)

The statute will not allow a short-term capital loss carryover to the 1969 tax year where such disallowance does not result in a double taxation or deduction. Rinehart v. Dept. of Rev., 5 OTR 210 (1973)

By enactment of this section the legislature intended that adjustments be made in the taxpayer’s net income to alleviate inconsistent treatment resulting from the transition from the Personal Income Tax Act of 1953 to the federal Internal Revenue Code. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974)

Despite apparent inconsistency between state and federal tax law, taxpayers were required to use deceased father’s basis in stock, rather than stepped-up basis, for determining gain for state income tax purposes. Seymour v. Dept. of Rev., 11 OTR 394 (1990), aff’d 311 Or 254, 809 P2d 100 (1991)

No double income taxation existed where state law required taxpayers to report gain on sale of stock calculated using decedent donor’s basis rather than stepped-up basis. Seymour v. Dept. of Rev., 311 Or 254, 809 P2d 100 (1991)

316.048

See also annotations under ORS 316.062 in permanent edition.

NOTES OF DECISIONS

For state purposes, taxable income is not synonymous per sewith federal taxable income but should be adjusted when necessary to reflect the principles of the federal Internal Revenue Code. Smith v. Dept. of Rev., 270 Or 456, 528 P2d 73 (1974)

Where income accrued prior to taxpayer becoming resident of Oregon, but was recognized and realized after taxpayer became resident, income was taxable. Dexheimer v. Dept. of Rev., 12 OTR 315 (1992)

ATTY. GEN. OPINIONS: Employer-provided health insurance benefits for same-sex domestic partners, (1999) Vol 49, p 197

316.078

ATTY. GEN. OPINIONS: Computation of tax credit for household and dependent care, (1976) Vol 38, p 294

316.082

NOTES OF DECISIONS

Washington business and occupation tax is tax levied on business activity and does not qualify for credit allowed for income based taxes paid to other states. Keller v. Dept. of Rev., 12 OTR 381 (1993), aff’d 319 Or 73, 872 P2d 414 (1994)

“Member” entitled to pro rata share of credit includes any person who must report S corporation income and deductions, whether or not person is shareholder. Bishop v. Department of Revenue, 14 OTR 10 (1996)

Taxpayer paying taxes to more than one other state must apply statutory credit limitation separately to tax paid to each other state rather than applying limit to aggregate taxes paid to all other states. Schuette v. Dept. of Revenue, 14 OTR 164 (1997), aff’d 326 Or 213, 951 P2d 690 (1997)

316.087

ATTY. GEN. OPINIONS: Computation of tax credit for retirement income, (1976) Vol 38, p 294

316.102

NOTES OF DECISIONS

Selective availability of contributor tax credit does not coerce candidates to refrain from expenditures and therefore does not violate free expression rights under Article I, section 8. VanNatta v. Keisling, 324 Or 514, 931 P2d 770 (1997)

ATTY. GEN. OPINIONS: Constitutionality of tax credit for political campaign contributions on condition recipient limit campaign expenditures, (1981) Vol 42, p 47

316.116

ATTY. GEN. OPINIONS: Tax credits for installation of alternative energy devices, (1977) Vol 38, p 1198

316.117

NOTES OF DECISIONS

Limiting nonresident taxpayer’s deduction of Oregon source loss to same proportional share that Oregon source income bears to total taxpayer income does not violate Privileges and Immunities Clause of United States Constitution. Roelli v. Dept. of Revenue, 14 OTR 201 (1997)

316.119

NOTES OF DECISIONS

Where part-year resident receives income or loss from S corporation, income or loss is prorated on per share, per day basis. Perlman v. Dept. of Revenue, 17 OTR 60 (2003)

316.124

NOTES OF DECISIONS

Guaranteed distributions to nonresident partners are subject to apportionment and taxation as part of distributive share of partnership income. Pratt & Larsen Tile v. Dept. of Rev., 13 OTR 270 (1995)

Treating guaranteed payments as partnership proceeds is not inconsistent with treating Oregon share of those proceeds as ordinary income under ORS 314.712. Reeve/Tubbs v. Dept. of Revenue, 15 OTR 148 (2000), aff’d 333 Or 190, 37 P3d 981 (2001)

Nonresident taxpayer’s federally determined distributive share of pass-through entities’ income and loss may not be aggregated prior to apportionment to Oregon. Cook v. Dept. of Rev., 23 OTR 107 (2018)

316.127

NOTES OF DECISIONS

The taxation of distributed and undistributed dividend income to nonresident shareholders of a Subchapter S corporation is proper. O’Neil v. Dept. of Rev., 6 OTR 467 (1976)

Imposing income tax on income of nonresident stockholders of closely held corporation electing federal Subchapter S tax treatment when income was derived from sources in the state does not demand shareholder’s property without due process of law. Kulick v. Department of Revenue, 290 Or 507, 624 P2d 93 (1981)

Allowing Oregon residents to adjust their taxable income by subtracting income taxes paid on alimony while not allowing nonresidents same opportunity because such payments are not attributable to income earned in state violates taxpayers’ rights under Privileges and Immunities Clause of United States Constitution. Wood v. Dept. of Rev., 305 Or 23, 749 P2d 1169 (1988)

Right to employment does not constitute intangible personal property used to produce income. Ballard v. Dept. of Rev., 13 OTR 201 (1994)

316.135

See annotations under ORS 316.752.

316.140

NOTE: Repealed November 4, 1993; ORS 315.354 enacted in lieu

See annotations under ORS 315.354.

316.142

NOTE: Repealed November 4, 1993; ORS 315.356 enacted in lieu

See annotations under ORS 315.356.

316.159

NOTES OF DECISIONS

Subtraction for plan or trust distributions that consist of contributions for which taxpayer was not granted deduction, exclusion or exemption applies only if contributions were subject to taxation by other state. Leaf v. Dept. of Revenue, 15 OTR 53 (1999)

316.162

NOTES OF DECISIONS

One who exercises no day-to-day supervision or control of corporate affairs, despite offices or title held, is not personally liable for withholding taxes because that person is not the employer within the meaning of this section. Frutiger v. Dept. of Rev., 270 Or 821, 529 P2d 910 (1974); Bellotti v. Dept. of Rev., 12 OTR 543 (1993)

Corporate officer or employee “duty” to perform employer acts refers to duty owed to corporation, not legally imposed duty. Olson v. Dept. of Rev., 304 Or 241, 744 P2d 240 (1987)

316.167

NOTES OF DECISIONS

Relinquishment of authority to sign checks does not excuse officer from liability for payment. Robblee v. Dept. of Revenue, 13 OTR 505 (1996), aff’d 325 Or 515, 942 P2d 765 (1997)

Withholding tax is not subject to ORS 305.419 requirement that tax be paid prior to filing of appeal. Zamani v. Dept. of Revenue, 19 OTR 318 (2007)

316.207

NOTES OF DECISIONS

Taking appeal from notice of liability in “manner” provided for appeal from notice of assessment does not make time for appealing from notice of assessment applicable to appeal from notice of liability. Fackler v. Dept. of Revenue, 18 OTR 67 (2004)

316.222

See annotations under ORS 314.276.

316.587

NOTES OF DECISIONS

Potential benefit of this section to taxpayer is not conditioned on whether taxpayer timely filed tax return. Finley v. Dept. of Revenue, 21 OTR 276 (2013)

316.680

(formerly 316.067)

See also annotations under ORS 316.067 in permanent edition.

NOTES OF DECISIONS

The $3,000 ceiling on the income tax deduction is limited to each return and a married couple filing jointly may only properly take one such deduction. Newell v. Dept. of Rev., 6 OTR 458 (1976)

This section does not violate equal protection. Newell v. Dept. of Rev., 6 OTR 458 (1976)

Provision of this section allowing federal retirement benefits only limited exemption from state personal income tax while state retirement benefits were completely exempt impermissibly discriminated against employees of federal government in violation of constitutional doctrine of intergovernmental tax immunity. Ragsdale v. Dep. of Rev., 312 Or 529, 823 P2d 971 (1992); Anderson v. Dept. of Rev., 313 Or 1, 828 P2d 1001 (1992)

State exercised its taxing power, not its constitutional taking power, with amendment taxing previously exempt state employee pension benefits. Hughes v. State of Oregon, 314 Or 1, 838 P2d 1018 (1992)

ATTY. GEN. OPINIONS: Taxability of federal income tax rebates, (1975) Vol 37, p 525

LAW REVIEW CITATIONS: 16 WLR 373 (1979); 72 OLR 487 (1993)

316.685

NOTES OF DECISIONS

Since the federal statute allows, at the taxpayer’s election, the deferral of tax on gains realized on an involuntary conversion, and the federal regulation permits a rescission of this election, no tax would accrue for federal purposes until reinvestment was actually made or the election was rescinded. Renville v. Dept. of Rev., 5 OTR 202 (1973)

In arriving at the net operating loss under §172 of the federal Internal Revenue Code, the federal income tax deductions allowed under this section shall be included as a deduction from gross income. Bechtold v. Dept. of Rev., 5 OTR 629 (1975), aff’d273 Or 762, 543 P2d 665 (1975)

LAW REVIEW CITATIONS: 16 WLR 379 (1979)

316.690

NOTES OF DECISIONS

This section, which formed basis for defendant’s denial of plaintiff’s deduction of foreign taxes as business expenses on Oregon income tax returns, was constitutional and did not result in double taxation. Whipple v. Dept. of Rev., 11 OTR 117 (1988), aff’d 309 Or 422, 788 P2d 994 (1990)

No state or federal constitutional provision or treaty requires Department of Revenue to allow deduction for foreign taxes greater than deduction allowed by this section. Whipple v. Dept. of Rev., 309 Or 422, 788 P2d 994 (1990)

316.716

NOTES OF DECISIONS

No state or federal constitutional provision or treaty requires Department of Revenue to allow deduction for foreign taxes greater than deduction allowed by ORS 316.690. Whipple v. Dept. of Rev., 309 Or 422, 788 P2d 994 (1990)

316.752

(formerly 316.135)

NOTES OF DECISIONS

“Medical equipment” under this section does not include contact lenses, glasses or combination thereof and plaintiff is not “severely disabled.” Bladorn v. Dept. of Rev., 11 OTR 113 (1988)

316.777

NOTES OF DECISIONS

“Oregon Indian Reservation” means land within current reservation boundaries, not original boundaries. Feather v. Dept. of Rev., 12 OTR 367 (1993)

316.824

LAW REVIEW CITATIONS: 16 WLR 381 (1979)

316.832

LAW REVIEW CITATIONS: 16 WLR 381 (1979)

316.838

LAW REVIEW CITATIONS: 16 WLR 385 (1979)

316.846

NOTES OF DECISIONS

Taxpayer, who received Graduate Teaching Fellowship that required teaching hours and included salary, health insurance and tuition waiver, cannot qualify for additional subtraction from income under this section because fellowship is not scholarship but is compensatory in nature. Herzog v. Dept. of Revenue, 20 OTR 175 (2010); Voy v. Dept. of Revenue, 20 OTR 179 (2010)