An astounding number of new state and local single purpose taxes and assessments have been enacted over the last several years. Below are brief summaries of the most recently enacted taxes becoming effective this year and next, as well as an overview of other recently enacted state and local taxes.
Effective in 2021
Multnomah County Preschool Personal Income Tax
An individual income tax of up to 3.0%, as follows:
- Unmarried – Income over $125,000 taxed at 1.5%, income over $250,000 taxed at 3.0%
- Married Filing Joint – Income over $200,000 taxed at 1.5%, income over $400,000 taxed at 3.0%
- Note the significant marriage penalty
Withholding will be required in 2022, but employees may be able to opt out.
Tax is due 4/15 on a separately filed return. It is currently unknown who is going to administer the tax program.
No estimated taxes required (as of yet).
Tax is imposed on 100% of Oregon taxable income, above thresholds noted above, even if earned outside Multnomah County or the state of Oregon, for all Multnomah County residents. It is also imposed on any income earned within the County for those who are non-residents of Multnomah County.
Metro Supportive Housing Services Business and Personal Income Tax
Business income tax of 1% of net profits for any business with total gross receipts of more than $5 million.
Personal income tax of 1%, as follows:
- Unmarried – Income over $125,000 taxed at 1%
- Married Filing Joint – Income over $200,000 taxed at 1%
- Note the significant marriage penalty
There will be a provision to eliminate the double taxation which exists in the current law, as it was drafted. The law was not drafted by tax policy experts.
Withholding will be required but employees can opt out in 2021. Businesses will be required to make quarterly estimated tax installments, but the procedures are to be determined.
Tax is due 4/15 on a separately filed return, to be administered by the City of Portland. Businesses will also have to file quarterly and annual withholding reconciliation returns, separate from the Oregon OQ.
The tax is imposed on all residents of Metro Districts, and on any income earned within a Metro District.
It should be noted that with these two new taxes, residents of Multnomah County will now face the highest marginal tax rate of anywhere in the U.S., according to a study by Ernst & Young.
Effective in 2022
Oregon Paid Family and Medical Leave (“PFMLI”) Payroll and Wage Earner Tax
A payroll tax beginning in 2022, with an initial rate of 1% (to be determined annually by the Oregon Employment Division). Employees will contribute 60% of the tax, employers will contribute 40% of the tax.
It will function similarly to unemployment insurance and benefits are to be used for up to 12 weeks of family and medical leave beginning in 2023.
Self-employed individuals can opt in.
Small businesses with fewer than 25 employees are not subject to the 40% of the 1% contribution but can voluntarily do so. If they do, they will be eligible for worker replacement grants to help cover the cost of temporary employees during the absence of staff due to family/medical leave.
And, don’t forget about new State and local taxes enacted in 2020 and 2019:
Oregon Commercial Activity Gross Receipts Tax (CAT)
A new gross receipts tax effective in 2020.
A rate of .57% of Oregon sourced gross sales over $1 million.
All businesses with gross receipts over $750,000 must register with the State of Oregon.
Tax is due 4/15 on a separately filed return. The tax is a calendar year tax, regardless of a business’ fiscal year.
Complex rules govern amounts allowed as a 35% subtraction against gross receipts, generally either cost of goods sold or compensation costs. Once the subtraction is applied to gross receipts, the tax rate of .57% is applied to the result.
Complex rules govern sourcing and nexus. There are different rules for revenues and for expenses.
Commonly owned enterprises are grouped together under rules for unitary filing.
Quarterly estimated tax payments are required if total tax is expected to exceed $10,000.
Oregon Statewide Transit Wage Earner Tax
A tax on wages of .1%, effective in 2018.
Paid by employees through required withholding, employer transmits and reports the tax on a separately filed quarterly return.
All Oregon wages are subject, even if the employee does not reside in the state.
City of Portland Residential Rental Registration Unit Tax
A per unit fee of $60 on all residential units located within the City of Portland, effective in 2019.
Tax is due 4/15 and included with the City of Portland/Multnomah County Business Tax Return. A separate schedule identifying all residential rental units is required.
The above are brief summaries only. Each tax is very complex, and in the case of the newly enacted taxes, many administrative rules will need to be issued to clarify the details. To learn more about these taxes and other potential taxes which may affect you, visit the official websites for the state of Oregon and for your local municipalities.