OAR 150-317-0320: Modification of Federal Taxable Income: Dividends from Certain Subsidiaries

(1) For taxable years beginning before January 1, 1986, a corporation owning 50 percent or more of the voting stock of another corporation is allowed to subtract from federal taxable income amounts included as dividends from the subsidiary. The subtraction is limited, however, to the extent that the payor corporation is subject to Oregon tax. Example: Corporation S is a wholly-owned subsidiary of Corporation P. Corporation P does business only in Oregon, but Corporation S has activities within and without the state and an Oregon apportionment factor of 10 percent. In 1983, S pays dividends of $10,000, all of which are included in P’s federal taxable income. The allowable subtraction for P is $1,000 ($10,000 x 10 percent). (2) For tax years beginning on or after January 1, 1985, Oregon does not recognize any transaction between a corporation and a related domestic international sales corporation (DISC) or foreign sales corporation (FSC). Therefore, any dividends received in these years from a related DISC or FSC that are included in federal taxable income shall be subtracted to derive Oregon taxable income.