OAR 150-316-0183: Gross Income of Nonresidents; Retirement Income Derived from Oregon Sources

(1) Federal law (PL 104-95) prohibits states from taxing retirement income received after December 31, 1995, by individuals who are not residents of this state or who are not domiciled in this state. (a) Individuals who have Oregon as their domicile are taxed on all their retirement income, unless they meet the requirements to be taxed as nonresidents, as provided in ORS 316.027(1)(a)(A). (b) Under Oregon law, Oregon source retirement income received after December 31, 1995, and before January 1, 2000, is exempt from tax if the person receiving the income is taxed as a nonresident under ORS 316.027(1)(a)(A), regardless of where the person's domicile is located. (c) Beginning January 1, 2000, Oregon source retirement income is taxable if received by a person who is taxed as a nonresident but who is domiciled in Oregon. See OAR 150-316-0167 for information on calculating the amount of the Oregon source retirement income that is subject to tax. Example 1: Sam lived and worked in Oregon until his retirement in 1997. At retirement he gave up his Oregon domicile and moved to Arizona. Following Sam's change of domicile to Arizona, none of Sam's pension income is taxable by Oregon. Example 2: Douglas has lived and worked in Oregon all his life. On January 1, 1999, he retired, sold his personal residence, and took a temporary job working in Alaska. He plans to work for several years and then return to Oregon to live. He has not established a new domicile outside of Oregon, nor does he intend to give up his Oregon domicile. Douglas meets the requirements to be taxed as a nonresident under ORS 316.027(1)(a)(A). However, beginning January 1, 2000, his Oregon source pension will be taxable by Oregon because he has retained Oregon as his domicile. Douglas will follow the provisions of OAR 150-316-0167 to determine the amount taxable to Oregon. (2) Definitions. (a) "Domicile" means the place an individual considers to be the individual's true, fixed, permanent home. Domicile is the place a person intends to return to after an absence. A person can only have one domicile. It continues as the domicile until the person demonstrates an intent to abandon it, to acquire a new domicile, and actually resides in the new domicile. Factors that contribute to determining domicile include family, business activities and social connections. (b) "Retirement income" has the same meaning as in 4 USC 114 and means income from: (A) Qualifying employer pension and profit sharing plans exempt from tax under Internal Revenue Code (IRC) Section 401(a), such as corporate retirement plans and "Keogh" plans; (B) Annuity plans (IRC 403(a) and IRC 403(b)); (C) Cash or deferred compensation arrangements (IRC 401(k) plans and 457 plans); (D) Simplified employee pension plans ("SEPs") under IRC 408(k); (E) Individual retirement arrangements ("IRAs") and Roth IRAs under IRC 408(a), 408(b), and 408A; (F) Plans established and maintained by federal, state or local government for the benefit of employees (IRC 414(d)); (G) Any retired or retainer pay of a member or former member of a uniform service computed under chapter 71 of Title 10 of the United States Code; (H) Trusts, as described in IRC 501(c)(18), that were created before June 25, 1959, that meet the specific requirements of that IRC section; (I) Simple retirement account under IRC 408(p); (J) Payments received from nonqualified deferred compensation plans (as described in IRC 3121(v)(2)(C)) if the payments: (i) Are part of a series of substantially equal periodic payments that are made for the life or life expectancy of the recipient (or the joint lives or joint life expectancies of the recipient and the designated beneficiary of the recipient), or for a period of at least 10 years; or (ii) Are received after termination of employment and are paid under a plan, program, or arrangement maintained solely for the purpose of providing retirement benefits that exceed the amounts allowed under the qualified retirement plans described in paragraph 1 of this rule. (c) Retirement income does not include income received from stock options, restructured stock plans, severance plans, or unemployment benefits.