Oregon Corporate Activity Tax (CAT) – Is it eligible for the Multiple Activities Tax Credit?

The Oregon CAT is not eligible for the Multiple Activities Tax Credit and will be added to the list of Taxes Not Qualifying for the MATC  in ETA 3085.

Multiple Activities Tax Credit

Businesses may claim the Multiple Activities Tax Credit (MATC) against business and occupation (B&O) taxes if both of the following apply:

• Products were extracted or manufactured in Washington.
• Gross receipts taxes were paid to another state, foreign country, or territory.

Gross receipts taxes include taxes on extracting, manufacturing, and selling activities. This is similar to Washington’s B&O tax in that the tax base is not reduced by any allocation, apportionment, or other method resulting in a downward adjustment (WAC 458-20-19301(5)­).

In other words, if the external tax allows costs of doing business to be generally or routinely deducted from the tax base, the tax is not similar to Washington state's gross receipts tax.

Oregon Corporate Activity Tax

Section 63 of Oregon House Bill 3427 imposed a new tax on each person with taxable commercial activity for the privilege of doing business in Oregon. The tax rate for the CAT is 0.57% of taxable commercial activity over $1 million plus $250. Businesses with less than $1 million of taxable commercial activity will not have a payment obligation. The formula reads as follows:

$250 + [(Taxable Commercial Activity- $1 million) x .0057] = Tax Due

To determine the taxable commercial activity:

1.) Identify the greater of either:

• The amount of cost inputs.
• The taxpayer’s labor costs.

2.) Subtract 35% from the greater amount.

Summary

The Oregon CAT allows for a routine deduction of some costs of doing business, resulting in a downward adjustment of the tax base. Therefore, the Oregon CAT is not based solely on gross receipts of business activity, and it does not qualify as a gross receipts tax eligible for the MATC (RCW 82.04.440 and WAC 458-20-19301(5)).