OAR 150-316-0155: Nonresident Partners: Guaranteed Payments

(1) Guaranteed payments paid to nonresident partners of a partnership that has business activity in the state of Oregon are treated as a distributive share of partnership income for Oregon tax purposes. In order to determine the income attributable to Oregon sources, each nonresident partner’s entire distributive share, including the guaranteed payments, is then subject to the allocation and apportionment provisions of ORS 314.605 to 314.675. Example 1: Frank is a 25 percent partner in the law firm DC & H, Associates, a calendar year partnership. DC & H’s main office is in Washington, but it also has a branch office in Oregon. Frank lives in Seattle and works in the Washington branch of the firm. For tax year 1992, Frank received $100,000 in guaranteed payments from the partnership. Frank’s 25 percent share of partnership profits after the deduction of guaranteed payments was $50,000. DC & H calculated an Oregon apportionment percentage of 20 percent. Frank’s 1992 Oregon source income attributable to the law firm is calculated as follows: [See PDF link below.] (2) The inclusion of guaranteed payments into a nonresident partner’s share of apportionable income is irrespective of that partner’s percentage interest in the profit or loss of the partnership. Example 2: Assume the same facts as in Example 1, except that Frank does not share in the profits or loss of the partnership. Frank’s 1992 Oregon source income attributable to the law firm is calculated as follows:[See PDF link below.] (3) See ORS 314.610 and the Administrative Rules thereunder for a definition of Oregon business activity. [ED. NOTE: To view attachments referenced in rule text, click here to view rule.]