OAR 150-316-0185: Gross Income of Nonresidents: Waterway Workers

(1) General Policy. The State of Oregon imposes taxes on Oregon source income of nonresidents to the extent allowed under Oregon and federal law and exempts Oregon source income of nonresidents to the extent provided under federal law: 46 USCA 11108. Under both federal and state law, compensation of a nonresident waterway worker is exempt from Oregon taxation to the extent the compensation is paid to an individual engaged on a vessel and performing assigned duties as a licensed pilot in more than one State or to an individual performing regularly assigned duties while engaged as a master, officer, or crewman on a vessel operating on the navigable waters in two or more states. (2) For purposes of ORS 316.127(10) and this rule: (a) "Master" is the commander of a merchant vessel, who is in charge of the vessel, its crew, its passengers, and the care and control of the vessel and cargo. (b) "Member of a crew" or "crew member" is an individual carried on board a vessel who is not required to obtain a license (though they may be required to obtain certification) who provides services such as navigation and maintenance of the vessel, its machinery, systems, or services essential for propulsion and safe navigation or to provide services for passengers on board. (c) "Navigable waters" are waters that are subject to the ebb and flow of the tide and waters that are presently used, or were used in the past, to transport interstate or foreign commerce. (d) "Officer" is an individual carried on board the vessel who must obtain a specialized license and who provides navigation and maintenance of the vessel, its machinery, systems, and arrangements essential for propulsion and safe navigation. (e) "Passenger" is a person on board a vessel other than: (A) The master, a member of the crew, or other person employed or engaged in any capacity in the business of the vessel; or (B) A child under one year of age. (f) "Regularly assigned duties" are those duties performed on a regular basis (i.e. daily, weekly, or monthly). Duties that are performed on sporadically or intermittently as occurs when serving on an "on-call" or "as-needed" basis are not "regularly assigned duties." (g) "Vessel" is watercraft used, or capable of being used, as a means of transportation on navigable waters in 2 or more states for business purposes. (h) "Waterway worker" is a nonresident who is: (A) Engaged on a vessel to perform assigned duties in more than one State as a pilot licensed under section 7101 of Title 46 of the United States Code or licensed or authorized under the laws of a State, or (B) An individual who performs regularly assigned duties while engaged as a master, officer, or member of a crew on a vessel operating on the navigable waters in two or more states. Example 1: Ben, a resident of Washington, is a crew member and works on a dredging vessel on the Willamette River in Oregon and the Cowlitz River in Washington six months of the year. The other six months of the year Ben works in the company’s office in Portland, Oregon. Only six months of compensation from his employer is exempt because it’s for services Ben performed on the dredging vessel and is not taxable by Oregon. The remaining six months of compensation is taxable by Oregon. Example 2: Kirk, a nonresident, works for a log mill located on the Oregon shore of the Columbia River. He spends 6 hours a day piloting a tugboat on the river carrying logs to the mill. For the remaining 2 hours of his shift, he works in the mill doing maintenance on mill equipment as well as other tasks. Kirk’s compensation for his time working on the tugboat is not subject to Oregon tax. However, the time he spent working in the mill in Oregon is Oregon-source income and subject to Oregon tax. Kirk may exclude 75 percent (6 divided by 8) of his total compensation from this employer from Oregon taxation. He will only report 25 percent of his wages in the Oregon column of his nonresident return. Example 3: Remy, a nonresident, is a crew member and works on a vessel plying the Columbia and Willamette rivers. Remy makes weekly trips from Hood River to Tualatin and back, hauling cargo on the vessel. Each trip entails three days on the Columbia River and two days on the Willamette River. All of Remy’s income is exempt and is not taxable to Oregon. Example 4: Jim, a nonresident, works in Oregon for a water transportation company that plies the waters of the Columbia River. On occasion, he is called upon to work as a member of a crew for a full day on one of the company's vessels when they are short-handed. His income is taxable by Oregon, even for the days he works on the vessel, because his work on the vessel is on an as-needed, sporadic, or intermittent basis. Example 5: Ken, a Washington resident, works in Oregon as a manager for a water transportation company whose two vessels traverse the Columbia River. Once every quarter, Ken boards the company's vessels to check on the employees working on the vessel. Ken's income is taxable by Oregon, even for the days that he spends on board a vessel because he is not a pilot, master, officer, or crew member of the vessel.