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Tuesday, March 29th
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Wednesday, April 13, 2015
4:30-630 p.m.
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corporate excise tax that would otherwise
apply. Under the current law, the minimum tax
is $150 for corporations with Oregon sales of
less than $500,000 and tops out at $100,000
for corporations with Oregon sales of $100
million or more. A Better Oregon’s proposal
would increase the minimum tax for sales
above $25 million to $30,001 plus 2.5 percent
of Oregon sales in excess of $25 million.
Under the proposal, the minimum tax imposed
on a corporation with $50 million of Oregon
sales would increase from $50,000 to
$655,001. The state has estimated that the
proposal would increase state revenues by
roughly $5.3 billion per biennium, which would
be a significant contribution to the state’s
general funds budget.
The proposed measure would apply both to
Oregon corporations and to foreign
corporations subject to Oregon income
taxation.
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However, it would affect only businesses
taxed as C corporations, not sole
proprietorships, partnerships, S corporations,
LLCs taxed as partnerships or corporations
that qualify as “benefit companies.” The
existing minimum tax rates would continue to
apply to such businesses. The materials
posted online by A Better Oregon do not
explain why the proposal applies only to C
corporations that are not benefit companies,
and not, for example, to large S corporations
or LLCs taxed as partnerships.
Legislative Update: Oregon
Business Taxation
Critics of the proposal have expressed
concern that high-revenue, low-margin
businesses may be unable to embed the
added cost associated with the minimum tax
in the prices charged to their customers. A
2014 study by Sageworks and reported by
Forbes analyzed financial statements of
privately held companies across more than
1,000 industries and found several industries
with net profit margins below 2.5 percent
(before tax). These industries included gas
stations, grocery stores, appliance stores, and
retirement and assisted living facilities.
By Justin E. Hobson
Oregon voters and the Oregon Legislature
may soon be considering proposals that
would dramatically increase the tax burden on
some businesses operating in the state.
Following are summaries of the two most
prominent proposals to increase business
taxes in Oregon, as well as a third proposal
that would generally shift the business tax
burden to businesses operating outside of
Oregon
2.5 Percent Gross Receipts Minimum Tax
The lobby group A Better Oregon has
proposed increasing the state corporate
minimum tax for corporations that have more
than $25 million of annual gross receipts from
Oregon sales. The proposed minimum tax
would be imposed if greater than the
This proposal, known as Initiative Petition 28
(IP28), is currently in the signature gathering
phase of the Oregon initiative process.
Signatures of 88,184 registered Oregon
voters, 6 percent of the total votes cast for
governor in the last election, are needed by
July 8 to get IP28 on the November ballot.
0.39 Percent Commercial Activities Tax
On February 1, Oregon Senator Mark Hass
proposed replacing the Oregon corporate
excise tax with a 0.39 percent commercial
activities tax (CAT) on gross receipts of
businesses that have annual Oregon sales in
excess of $1 million. If enacted, the CAT
would render the proposed 2.5 percent gross
receipts minimum tax, discussed above,
moot. The proposal also would double
Oregon’s standard deduction for individuals.
The result would shift a portion of the tax
burden in Oregon from individuals to
businesses and is estimated to increase state
revenue by roughly $1 billion per biennium.
Senator Hass acknowledged that his proposal
has a slim chance of being enacted during the
current legislative session.
A bill or an amendment to implement an
Oregon CAT has yet to be published as of this
writing. While the details of the CAT proposal
are not yet available, Ohio implemented a
similar measure in 2005 and an Oregon law
could be based on Ohio’s model. As such, the
CAT likely would apply uniformly to all entities
doing business in Oregon (including benefit
corporations) regardless of tax classification.
Market-based Sourcing
A third proposal has been made in the
Oregon legislature that does not dramatically
increase business taxation but would
generally shift the burden for service
providers. A proposed amendment to House
Bill 4026 would adopt market-based sourcing
of services and intangibles. Oregon currently
relies on the cost-of-performance
methodology for this sourcing.
States have generally adopted the marketbased sourcing methodology because it
increases the tax burden on out-of-state
businesses performing services for customers
located in that state. Under the cost-ofperformance methodology, services, and
intangibles are generally taxed where the
businesses are located (i.e., where the costs
associated with the service or intangible
revenue are incurred). Oregon businesses
with service and intangible sales to customers
located outside of the state would generally
benefit from this change, and non-Oregon
businesses with service and intangible sales
to customers located in Oregon generally
would be adversely impacted.
Observations
An advantage of taxes based on gross
receipts is that they reduce the volatility of tax
receipts. A disadvantage of such taxes is that
they impose a substantial burden on
businesses with low profit margins.
OREGON CHAPTER NEWSLETTER |
The 2.5 percent gross receipts minimum tax
proposed by A Better Oregon would impose
disparate tax burdens on businesses
having differing forms of organization but
similar revenues. This could force affected
businesses to restructure in a manner that
minimizes its impact. Businesses that may
be affected by these proposals should
certainly consult with their tax advisors.
Justin Hobson is a member of Lane
Powell’s Taxation Practice Group where his
practice includes all aspects of business
taxation. He has particular experience
counseling clients on a variety of crossborder tax matters, including global
restructuring, cross-border transactions,
entity formation, tax treaties, accounting for
income taxes, transfer pricing, import and
export taxes, custom duties and valueadded taxes. He can be reached at
503.778.2136 or hobsonj@lanepowell.com.
Member Spotlight
This Quarter we interviewed Tamara
Kessler. Tamara is VP and General
Counsel at Advantage Professional
Management, LLC (Advantage Dental) and
is a member of the ORACC Board.
Advantage Professional Management is a
dental services company located in the
Pacific Northwest, operated and owned by
dentists partnering for individual, group and
self-insured insurance.
How many people work in your legal
department and in how many locations?
Although Advantage Dental has 40 clinics
throughout Oregon, Advantage Dental’s
headquarters is located in Redmond,
Oregon and my office is located at the
headquarters. The legal department
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consists of two people; myself and a
paralegal. I also manage the compliance
department and the administrative
department as part of my job duties.
Other than your colleagues and clients
what do you like most about your job? I
am part of the Executive Team at
Advantage Dental which allows me to
participate in business strategy discussions.
For as long as I can remember, I have
always wanted to be a lawyer and my close
friends sometimes called me “Ally McBeal”
but I also enjoyed business strategies and
operations. As a result, I decided to get my
MBA. What I like most about my job is that
by being a part of the Executive Team, I
have the opportunity to not only use my
legal education but also my business
education. In addition, I am able to see the
“results” of the legal or business advice I
have given. Whereas, when I was in
private practice; a client would come in, I
would advise them and then I may or may
not know the “result” of that advice.
What is one thing about your company
you would like the world most to know?
Advantage Dental is more than just a
company with 40 dental clinics. It provides
dental services to roughly 330,000
Medicaid patients in Oregon through its
clinics and approximately 350 contracted
dentists. Advantage Dental is an innovative
company that is driven by the philosophy to
prevent the oral infection that causes
cavities so that no person has to suffer with
tooth pain. Advantage Dental also has a
non-profit called Advantage Smiles for Kids
that provides orthodontics to children that
are at-risk through donations, orthodontists
donating their time, and grants. Most of the
children in the program have experienced
varying degrees of bullying or teasing due
to way their teeth look and in many cases,
the child is afraid or ashamed to smile. It is
just amazing to me how much this program
has change the lives of these children by
not only providing them with orthodontic
care and giving them a smile they can be
proud of, but by also requiring the child to
achieve good grades and participate in
volunteer activities as part of the program.
What is the best job you had before this
one, either in the legal profession or
outside of it? The best job I had before
working for Advantage Dental was working
CHAPTER LEADERSHIP
President
Bonnie Page, General Counsel
Smarsh Inc.
bpage@smarsh.com
Past President
James Williams, Senior Counsel
Xerox Corporation
james.williams5@xerox.com
Treasurer
Bill Barber, VP/Senior Counsel
Umpqua Bank
billbarber@umpquabank.com
Secretary
Marc Bocci, Associate General Counsel,
Corporate Secretary
Portland General Electric Company
marc.bocci@pgn.com
Vice Presidents
Tamara Kessler, General Counsel
Advantage Professional Management, LLC
tamarak@advantagedental.com
Jay Nusbaum,Vice President and General
Counsel
Vestas American Wind Technology, Inc.
jonus@vestas.com
J. Stuart Patterson, Vice President and
Associate General Counsel
Hewlett-Packard Company
stuart.patterson@hp.com
Joshua Simko, Assistant General Counsel,
Licensing
NIKE, Inc.
Josh.Simko@nike.com
Ben Buhayar, Attorney
NWEA
Ben.buhayar@nwea.org
Katerina Kogan, Attorney
ESI, Inc.
kogank@esi.com
Yumi O’Neil, Associate General Counsel
Cambia Health Solutions
Yumi.oneil@modahealth.com
Gary Lau, Associate General Counsel
Cambia Health Solutions
Gary.Lau@cambiahealth.com
Robert Scott, Vice President and General
Counsel
Opal Labs Inc.
robert@workwithopal.com
Anthony Stark, General Counsel and Vice
President of Corporate Development
DiscoverOrg, LLC
Anthony.stark@discoverorg.com
David Meisels, General Counsel
D&M Holdings
David.meisles@dmh-global.com