OAR 150-317-1025: Corporate Activity Tax: Election to Exclude Non-U.S. Members from Unitary Group

(1) General Rule. For purposes of the Corporate Activity Tax (CAT), a unitary group is defined as a group of persons with more than 50 percent common ownership, either direct or indirect, that is engaged in business activities that constitute a unitary business. Unitary group members include entities formed in the United States and entities formed outside the United States (“non-U.S. members”). Generally, a unitary group must file a group return that includes all members that are part of the unitary group unless a modified unitary group election is made pursuant to and sections (2) and (3) of this rule . (2) Modified Unitary Group Election. A unitary group may elect to modify unitary group membership to exclude all non-U.S. members from the unitary group that : (a) have no commercial activity sourced to Oregon under ORS 317A.128; and (b) have no commercial activity excluded under ORS 317A.100(1)(b) that would otherwise be sourced to Oregon if it were included in commercial activity, including, but not limited to, ORS 317A.100(1)(b)(FF) (receipts from transactions among members of a unitary group). If a unitary group makes an election under section (3), it may not include in the unitary group any non-U.S. member that meets the criteria for exclusion under this section. (3)(a) A unitary group must make an election to exclude all non-U.S. members described in section (2) of this rule on an original or amended return filed on or before the due date including extensions or an original return filed after the due date of the return including extensions in accordance with forms and instructions. The election is an annual election and must be made separately for each tax year. An election under this rule is binding for and applicable to the tax year it is made. (b) For purposes of the subtraction under ORS 317A.119 and OAR 150-317-1200, the unitary group’s labor costs or cost inputs attributable to receipts from an item that is commercial activity and any amounts used to apportion costs to Oregon in the manner provided in ORS 317A.119(3) or (4) may not include any amounts of a non-U.S. member excluded from the unitary group u nder this section. (4) If a unitary group excludes non-U.S. members from the unitary group under section (3) of this rule, the group must maintain a list of excluded non-U.S. members and keep the list in the unitary group’s records. The list must include the name of the excluded entity, the tax identification number of the excluded entity (including federal tax identification number, if applicable), contact information for the excluded entity, and any other identifying information related to the excluded entity specified in forms or instructions. The list must be made available to the department upon request of the department. (5) Upon examination of the return that is filed, the department may determine the election to exclude one or more n on-U.S. members from the unitary group i s not proper and may disallow the election in whole or in part. Such determination may be based on consideration of all facts and circumstances with respect to the election and may include, but is not limited to: (a) whether any member of the unitary group fails to comply with any provisions of this rule; or (b) whether a member was excluded from the unitary group with a substantial objective of avoiding the CAT. (6) Notwithstanding sections (2) and (3) of this rule, if property is transferred into Oregon under ORS 317A.109(1)(b) that is included in taxable commercial activity of the modified unitary group, the group must maintain information about any member, including non-U.S. members excluded by election, that transferred property to or received property in a location outside this state within one year before the transfer of the property into this state. The information must be made available to the department upon request of the department.