Oregon Tax Rule Invalidated For Failure to Consider Impact on Small Business

Because of a recent court decision, perhaps Oregon government agencies will begin to meaningfully consider the economic impact of state regulations on small Oregon businesses.

In Oregon Cable Telecommunications Association v. Department of Revenue the Oregon Court of Appeals invalidated a property tax regulation affecting cable and internet service providers. The court invalidated the rule because it failed to provide a legally sufficient small business impact statement.

 

Since 2005 all Oregon government agencies subject to the Administrative Procedures Act who adopt, amend or repeal any rule must as part of the rule making process satisfy the following steps:

  • Estimate the number of small businesses subject to the proposed rule.
  • Identify the types of small business industries and businesses subject to the proposed rule.
  • Briefly describe the reporting, recordkeeping and other administrative activities required to comply, including costs of professional services.
  • Identify the equipment, supplies, labor and increased administration required to comply.
  • Describe the manner in which small businesses were involved in the development of the proposed rule. [ORS 183.336(1)]

If the cost of compliance with the proposed rule has a significant adverse effect on small business, the agency, to the extent consistent with the public health and safety purposes of the rule, must reduce the economic impact of the rule on small business. [ORS 183.540]

This law defines “small business” as an independently owned and operated corporation, partnership, sole proprietorship or other legal entity with 50 or fewer employees. [ORS 183.310(10)]

This ruling represents a victory for small businesses in Oregon, as it aids in providing protection against the adoption of agency rules which fail to adequately consider the impact on small businesses. 

  • Generalized assumptions or undetermined estimates of the impact of the proposed rule are no longer adequate. 
  • Small businesses that will be impacted by the proposed rule have enforceable rights to require compliance with the above-described rules. 

This case invalidated a rule adopted by the Oregon Department of Revenue, but the holding applies to all Oregon governmental agencies when they adopt rules affecting small businesses. 

Hopefully, these agencies will communicate more meaningfully with small businesses and consider the economic impact of their regulations before adopting their rules.

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