Oregon proposed rules - broadcaster and unitary ownership threshold

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLPOn October 26, Oregon’s DOR filed a Notice of Proposed Rulemaking for Oregon Administrative Rules (OAR) 150-314-0465 (broadcaster sourcing) and 150-317-0510 (unitary common ownership threshold). The DOR’s stated need for the proposed amendment to OAR 150-314-0465 is to clarify that an interstate broadcaster computes their audience/subscriber ratio using the DOR’s market-based sourcing rule. The amendment to OAR 150-314-0465 eliminates the seven subsections in the rule in their entirety and replaces the language with: “A taxpayer meeting the definition of an interstate broadcaster under ORS 314.680 must compute the subscriber ratio or audience ratio using the provisions of OAR 150-314-0435.” OAR 150-314-0435 specifically provides Oregon’s market sourcing rules for the sourcing of sales receipts for other than tangible personal property. If adopted, the amended rule would be applied retroactively to tax years beginning on or after January 1, 2020. Oregon’s broadcaster sourcing rules have been the center of significant litigation, and a 2020 legislative push was unsuccessful due to a walk out by Republican Legislators. Considering the legislation that had been proposed earlier this year and the current statutory language, the DOR appears to be attempting to make an end run around the legislative process to support its litigation position.

The stated need for the proposed amendment to OAR 150-317-0510, the unitary ownership threshold rule, is to change the threshold percentage of common ownership and control necessary to establish a unitary relationship between two corporations from “more than 80 percent” to “more than 50 percent.” The changes to OAR 150-317-0510(10) consist of replacing the seven references to 80 percent with 50 percent. Oregon statute requires affiliates to be members of the federal consolidated filing group, which requires an 80 percent ownership threshold, in order to be included in the Oregon consolidated return. Considering this statutory requirement, the purpose of the proposed amendment is unclear at best and possibly beyond the scope of the DOR authority. 

The DOR did not use a formal Rule Advisory Committee for the rules but instead “sought and received input from key stakeholder groups of industry representatives” and “contacted the above stakeholder groups and these stakeholders have the interest and expertise necessary to provide relevant and adequate feedback on the proposed rules.” The groups the DOR communicated with in the rulemaking process include the Oregon State Bar Laws Committee, the Oregon Society of Certified Public Accountants, and the Oregon Association of Broadcasters. 

The hearing on the Notice of Proposed Rulemaking will be held on November 24, 2020 from 9:00-11:00 am PST. Public comments will be accepted by the DOR until 5 pm PST on the day of the hearing. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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