Oregon Law

COVID-19: Changes in Federal Tax Law You Need to Know

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In response to the COVID-19 pandemic, the last few weeks have seen an unprecedented series of legislative actions by Congress, as well as a number of significant administrative actions by the Internal Revenue Service. Here is a brief synopsis of federal tax extensions and changes due to COVID-19.

Federal Filing and Payment Deadlines Extended

Initially, the IRS only offered a payment deadline extension in response to COVID-19. However, after much pressure, the IRS in response has instead provided much more comprehensive relief to mostly taxpayers in the U.S.

All taxpayers refers to: individuals, trusts, estates, (some) partnerships, associations, companies (including LLCs), corporations, nonprofits, and more that have a filing date of April 15, 2020.

  • For all taxpayers who are required to file a federal income tax return and/or submit a federal income tax payment for the 2019 tax year, due on April 15, 2020, the due date for both filing and paying is extended to July 15, 2020. This applies to all taxpayers regardless of the amount of their federal tax obligation.
  • This applies to all filers of Forms 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS, 1041, 1041-N, 1041-QFT, 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF, 8960 and 8991.
  • For self-employed taxpayers, relief is also provided for making federal estimated income tax payments.
  • The period of April 15, 2020 through July 15, 2020 is considered disregarded for the purposes of calculation of any interest, penalty, or addition to tax for failure to file the income tax returns or pay the income tax owed. Interest, penalties and any additions of tax will begin to accrue again on July 16, 2020.
  • No extension is provided for the payment or deposit of any other type of federal tax- including federal estate and gift tax.
  • Important to note that any taxpayer returns that were due on March 16, 2020, which include Form 1065, 1065-B, Form 1066, and Form 1120-S, are not included in any of the COVID-19 extensions for both filing and payment. However, any timely filed extensions will still extend the due date six months as normal.
  • For fiscal year taxpayers, if their federal income tax return for the fiscal year ending during 2019 is due on April 15, 2020, whether that is the original due date or the extension date, the taxpayer’s filing due date is postponed to July 15, 2020.

For taxpayers that qualify for extension, no additional form is required for the July 15, 2020.  Any additional extension beyond July 15, 2020 will require filing Form 4868 as usually required.

Business Tax Credits

On March 18, 2020, President Trump signed into law the Families First Coronavirus Act which eases compliance burdens on businesses. Additional business credits were then signed into law through the Coronavirus, Aid, Relief and Economic Security Act (CARES) on March 27.

Payroll Sick Leave Credit

The Emergency Paid Sick Leave Act (EPSLA) requires private employers with fewer than 500 employees to provide 80 hours of paid sick time to employees who are unable to work for virus-related reasons (certain exceptions may apply to less than 50-employee businesses). The pay is up to $511 per day with a $5,110 overall limit for each employee directly affected by the virus and up to $200 per day with a $2,000 overall limit for an employee providing care for someone with the virus.

The employer is allowed to receive a tax credit against their 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of the Social Security (OASDI) payroll tax (commonly known as the Railroad Retirement tax). This credit amount tracks to the per-employee limits described above. This credit can also be increased by both the amount of expenses in connection with a qualified health plan if the expenses are excludible from employee income, and the employer’s share of the payroll Medicare hospital tax imposed on any payments required under the EPSLA. Any credit amounts earned in excess of the 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} Railroad Retirement tax are refundable. The credit applies to wages paid in a period beginning no later than April 2, 2020, and ending on December 31, 2020.

Self-Employed Sick Leave Credit

Self-employed persons also qualify for a sick leave credit.  The credit treats the self-employed person as both the employer and employee for credit purposes. The $5,110 and $2,000 limits as described above in EPSLA, also apply here unless the self-employed person has insufficient self-employment income based on a formula. The credit applies to wages paid in a period beginning no later than April 2, 2020, and ending on December 31, 2020.

Payroll Family Leave Credit

The Emergency Family and Medical Leave Expansion Act (EFMLEA) requires employers with fewer than 500 employees to provide both paid and unpaid leave. This leave occurs when an employee must take care of a minor child due to a COVID-19 related emergency. The first 10 days can be unpaid, but then paid leave is required, based on the employee’s pay rate and pay hours. The leave cannot exceed $200 a day or $10,000 total per employee.

The corresponding tax credit functions substantially similar to the payroll tax credit described above. The credit is against the same 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} Railroad Retirement Tax, and tracks to the $200 and $10,000 dollars employee limits described above.

Self-Employed Family Leave Credit

The Act also provided the self-employed a similar refundable income tax credit for family leave. The self-employed person is treated as both employer and employee for purposes of the credit. The credit is subject to a $10,000 limit, and may be reduced if there is insufficient self-employment income determined by formula.

Wage Exemption

Any wages paid as required sick leave payments for either EPSLA or EFMLEA are not considered wages for purposes of the employer’s 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} portion of the payroll tax, again often referred to as the Railroad Retirement Tax.

Employee Retention Credit for Employers

For eligible employers who have their operations fully or partially suspended as a result of government order, or who have experienced a greater than 50{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} reduction in quarterly receipts, measured on a year-over-year basis, the provision provides a refundable payroll tax credit for 50{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of wages to certain employees. Employers receiving Small Business Interruption Loans do not qualify for the credit. The qualifying wages depend on whether the employer has an average number of full-time employees in 2019 of 100 or fewer, if so, all employee wages are eligible.  If over 100 full-time employees, only the wages of furloughed employees or faced a reduction of hours as a result of employer’s closure or reduced gross receipts are eligible for the credit.

Other Changes in the Federal Tax Code

Recovery Rebates for Individuals

The CARES Act provides individuals with a refundable credit against income taxes they owe for the 2020 tax year equal to $1,200 ($2,400 for joint filers), not to exceed the tax liability for the year. Any taxpayer that has qualifying income (earned income, social security, and/or pension income), taxable income greater than zero, and gross income greater than the standard deduction, then the taxpayer is entitled to a refundable credit of at least $600 ($1,200 for joint filers), plus $500 per qualifying child. The phase-out begins at $75,000 ($150,000 for joint filers).

Payroll Tax Deferment

The CARES Act also allows employers and self-employed individuals to defer paying the employer portion of certain payroll taxes through the end of 2020. Half of the deferred amount of payroll taxes will be due December 31, 2021, and the remaining half will be due December 31, 2022. Any taxpayer receiving a Small Business Act Loan are excluded from this deferral program.

Deductibility of Interest Expenses Temporarily Increased

The Cares Act temporarily and retroactively increases the limitation of the deductibility of interest expense under Code Sec. 163(j)(1) from 30{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} to 50{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} for tax years 2019 and 2020.

Temporary Repeal of Taxable Income Limitation for Net Operating Losses (NOLs)

The Cares Act temporarily removes the taxable income limitation to allow an NOL to fully offset income. This will apply to the 2018, 2019 and 2020 tax years, allowing taxpayers to file amended returns and receive refunds for those that qualify.

Net Operating Loss (NOL) Rule Changes

Any losses arising in 2018, 2019, and 2020 can be carried back to the five preceding years. For any NOLs arising in tax years before 2021, those carrybacks may offset 100 percent of income for the prior 5 years. An amended return may be filed to claim the benefit back to the 2013 tax year.

Cancellation of Indebtedness Income

For small businesses that receive certain loans from the government under the CARES act, any such forgiveness of the loan granted to these taxpayers shall not be considered income.

More Changes Likely to Come

As the situation develops, we will continue to document additional changes made at the federal level.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.

Nicholas Rogers - Attorney

 

Nicholas D. Rogers joins SYK Estate Planning and Taxation practice with a passion for helping individuals, small business and nonprofits. His practice includes a focus on estate planning, federal and state tax controversy, business formation and planning, as well as trust and estate administration.

The COVID-19 Oregon Special Session

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For those of you who are following the Oregon Legislature’s response to the COVID-19 pandemic, we expect the Governor to announce a special session in the next day or two. Topics that we expect the legislature to address include: provisions for rent and mortgage assistance, bans on evictions, loans to small businesses, food benefits, and expanded healthcare access. The Salem Statesman Journal has been doing a great job tracking the proposals for this emergency session:

https://www.statesmanjournal.com/story/news/2020/03/30/coronavirus-oregon-legislative-response-covid-19-special-sessions/2928604001/

We also expect that the Oregon Laws Commission’s remote notary proposal to be included in the proposal.

As expected, it doesn’t sound like Oregon corporate activity estimates made the cut to address, so Q1 estimates will need to made as usual.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

Changes to Charitable Giving Limits in the CARES Act

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The newly passed Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) contains two provisions that will be of interest to folks who want to help their communities this year.  Section 2104 creates an above the line deduction of up to $300 for contributions made in 2020. This is important because after the Tax Cuts and Jobs Act (TCJA) a couple years ago, many folks no longer itemize, which means that they are not eligible to receive a tax benefit for the charitable deductions that they make over the course of the year. So, if you now claim the standard deduction, individual taxpayers can claim a deduction for the amounts up to $300 that they donate to charity. They don’t let you double-dip though, so if you itemize, you would claim your deductions on Schedule A as usual.

Additionally, Section 2105 of the CARES  Act eliminates the cap on individual charitable contributions. Previously, taxpayers couldn’t deduct contributions over 60 percent of their adjusted gross income.  The corporate cap was raised from 10 percent to 25 percent (including the food donation cap, which had been 15{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6}). Section 2105 only applies to contributions made in 2020.

A link to the two sections is here.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

Family First Law & What It Means

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I. Federal Legislative Actions

On Friday, March 13, 2020, the House announced that they reached a deal with President Trump’s administration in response to the COVID-19 outbreak.

At 1:00am early Saturday morning, the House passed HR 6201 with a 363 – 40 vote. The emergency bill is cited as “Families First Coronavirus Response Act.”

On March 18, 2020, the Senate passed the bill with a 90 – 8 vote. On March 18, 2020, the President signed the bill into law.

The law provides temporary paid sick and family medical leave, increases funding for health, food security and unemployment insurance programs, and provides free coronavirus testing.

Below is an outline of the highlights of the law.

II. Emergency Family Medical Leave Expansion Act

Division C | p. 12

Term

Begins on the date the Act takes effect, and ends December 31, 2020.

Eligible Employees

Eligible employees are employees who have been employed at least 30 calendar days by the employer with respect to whom leave is requested.

Employer Threshold

The Act creates a threshold for qualifying employers. Accordingly, Employers who employ 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year are subject to the Emergency Medical Leave Expansion Act.

Employers with fewer than 50 employees

The Secretary of Labor has the authority to issue regulations for good cause to exempt small businesses with fewer than 50 employees from the paid leave requirement.

Qualifying Need Related to a Public Health Emergency

The Act protects employees with a “qualifying need related to a public health emergency.” The term “qualifying need related to a public health emergency,” with respect to leave, means that the employee is unable to work due to a need for leave to care for the son or daughter under 18 years old of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.

Unpaid Leave – Initial 10 Days

The first 10 days that an employee takes leave may be unpaid. The employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave under this section; however, the employer may not require the election to substitute.

Paid Leave – After Initial 10 Days

The employer shall provide paid leave for each day of leave that the employee takes after taking the initial 10 days’ leave. The pay shall be calculated based on:

  1. An amount that is not less than 2/3 of an employee’s regular rate of pay; and
  2. The number of hours that the employee would otherwise be normally scheduled to work.

In no event shall paid leave exceed $200 per day, or $10,000 in the aggregate.

Employees with Varying Schedules

For those employees whose schedules vary week-to-week, the employer should calculate hours by determining the average number of hours that employee is scheduled for per day over the 6-month period ending on the date that the employee’s leave begins. If the employee has not worked for 6-months prior, the employer should consider the reasonable expectation of hours that the employee would normally be scheduled.

Notice

Where practicable, the employee shall give notice to the employer where the necessity for leave is foreseeable.

III. Emergency Unemployment Insurance Stabilization and Access Act of 2020

Division D | p. 15

Notification

The State shall notify an employee at the time of their separation from employment of the availability of unemployment compensation.

Notice of Received/Processed Application

The State must then notify the applicant when the application is received and is being processed.

Non-Charge for COVID-19

The State may not charge employers directly impacted by COVID-19 due to an illness in the workplace, or direction from a public health official to isolate or quarantine workers. (p. 41).

IV. Emergency Paid Sick Leave Act

Division E | p. 18

Covered Employers

The Emergency Paid Sick Leave Act applies to private employers that employ fewer than 500 employees, and public agencies that employ one or more employees.

Employers Must Provide

An employer shall provide to each employee employed by the employer paid sick time for any of the following uses:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a health care professional to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.
  4. The employee is caring for an individual who is subject to an order described in (i), or has been advised as described in (ii).
  5. The employee is caring for the son or daughter of such employee if the school or place of care for the son or daughter has been closed or the childcare provider is unavailable due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Amount of Paid Time

For full time employees, the employee is entitled to 80 hours of paid sick time.

For part time employees, the employee is entitled to the number of hours equal to the number of hours that employee works on average, over a 2-week period.

No Carryover

Paid sick time under this Act shall not carry over from one year to the next.

Termination

Paid sick leave under this Act terminates beginning with the employee’s next scheduled work shift immediately following termination of the need for paid sick time, as described in (b) above.

Immediate Use

Paid sick time under this Act shall be available for immediate use by the employee for purposes described in section (b) above, to cover the hours during which the employee is using paid sick time.

Employer with Existing Paid Sick Time Policy

The employee may first use the paid sick time under the Act. The employer may not require the employee to use the paid leave provided by the employer before using paid sick leave under the Act.

Cover Employee

The employer may not require the employee seek a replacement employee to cover in their absence.

Notice

The employer shall post, and keep posted, in a conspicuous place on the premises, the requirements described in the Act.

Model Notice

Seven days after the enactment of this Act, the Secretary of Labor shall make publicly available a model of a notice that meets the requirements of the Act.

Discrimination, Discipline, Discharge

It is unlawful for an employer to discriminate against, discharge, or discipline an employee who takes leave in accordance with the Act and has filed any complaint or proceeding under this Act.

Violation

An employer who fails to provide paid sick leave will be considered to have failed to pay minimum wages in violation of section 6 of the Fair Labor Standards Act of 1938 (29 USC 206), and shall be subject to the penalties described in sections 16 and 17 therefrom.

Effective Date

This Act and the requirements of this Act shall take effect not later than 15 days after the date of enactment for the Emergency Paid Sick Leave Act. The Act shall expire on December 31, 2020.

Payroll Tax Credits for Paid Sick and Paid Family and Medical Leave

Division G | p. 33

The Act makes several changes to Federal Insurance Contributions Act (FICA), which is at IRC 3111.  The FICA taxes are Social Security, Medicare, and Medicaid.  We anticipate larger changes to the income and excise tax rules as part of the $1 trillion economic stimulus package currently working its way through Congress.

Paid Sick Leave.

    1. 100% Tax Credit. The employer shall be allowed as a credit against the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter an amount equal to 100% of the qualified sick leave wages paid by the employer with respect to such calendar quarter.
    2. $200 Daily Limit per Employee. The amount of qualified sick leave wages taken into account with respect to any individual shall not exceed $200 for any day for which the individual is paid qualified sick leave wages.
    3. Overall Limit on Number of Days Taken into Account. The aggregate number of days taken into account under this section for any calendar quarter shall not exceed the excess of:
      1. 10, over
      2. The aggregate number of days so taken into account for all preceding calendar quarters.
    4. Election of Applicability. This section shall not apply with respect to any employer for any calendar quarter if such employer elects not to have this section apply.

Self-Employed Individuals.

      1. Eligibility. Must be someone who regularly carries on a trade or business under Section 1402 of the IRC, and would be entitled to paid leave during the taxable year under the Emergency Paid Sick Leave Act (see section (2) of Division E highlights above).
      2. Coverage. There shall be allowed as a credit against the tax imposed by subtitle A of the Internal Revenue Code of 1986 for any taxable year an amount equal to 100% of the qualified sick leave equivalent amount with respect to the individual.
  • (There are more details in the self-employment provisions that I can dig into should our clients prefer. I am not sure is this section is particularly relevant to our clients.)

Paid Family Leave.

    1. 100% Tax Credit. The employer shall be allowed as a credit against the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter an amount equal to 100% of the qualified family leave wages paid by the employer with respect to such calendar quarter.
    2. Wages Limit. The amount of qualified family leave wages taken into account with respect to any individual shall not exceed:
      1. $200 for any day for which the individual is paid qualified family leave wages; and
      2. In the aggregate with respect to all calendar quarters, $10,000.

Credit Limit. The credit allowed under this subsection with respect to any calendar quarter, shall not exceed the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter on the wages paid with respect to the employment of all employees of the employer.

Election of Applicability. This section shall not apply with respect to any employer for any calendar quarter if such employer elects not to have this section apply.

Tax on Employers.

  • Not Wages. Any wages required to be paid by reason of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act shall not be considered wages for the purposes of Section 3111(a) of the Internal Revenue Code of 1986.

A more sweeping tax bill is still pending at this time related to income tax and insurance tax implications. For more specifics on the current law, as well as pending legislation, we encourage you to consult one of the experienced tax lawyers at Samuels Yoelin Kantor LLP.

ODR: Rules for Oregon’s new Corporate Activity Tax (CAT)

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The Oregon Department of Revenue has posted a schedule of public meetings on its website. These meetings are intended to provide information to business taxpayers and tax professionals about the recently-adopted Temporary administrative rules for Oregon’s new Corporate Activity Tax (CAT). We encourage all business owners who anticipate having more than $1 million in gross receipts to learn about this new tax system in Oregon, which will not only apply to corporations.

They have also posted new FAQ’s on their website relating to how the CAT will apply to: (1) wholesale sales made for resale outside of Oregon and (2) the retail and wholesale sale of groceries.

The schedule of meetings is located here: https://www.oregon.gov/DOR/programs/businesses/Documents/MarchEducationTourSchedule.pdf

The Department’s page on the CAT is located here: https://www.oregon.gov/DOR/programs/businesses/Pages/corporate-activity-tax.aspx

If you have any questions about how this new tax will apply to you, please contact Valerie Sasaki at 503-226-2966.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

Oregon Legislature Corrects Procedural Hurdle in ORS 124.100(6) for Financial Elder Abuse Claims

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Oregon Legislature Corrects Procedural Hurdle in ORS 124.100(6) for Financial Elder Abuse Claims

The National Adult Protective Services Association reports that 90{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of financial abusers are family members or trusted others. And financial abuse is vastly under-reported: it is estimated that only one in 44 cases are reported to state protective services. Estimates of financial elder abuse and fraud costs range from $2.9 billion to $36.5 billion annually.

The attorneys at Samuels Yoelin Kantor watch for legal changes that may affect our current and future clients. A new Oregon law, effective January 1, 2020, should help vulnerable Oregonians that have been victims of abuse by making it harder to dismiss civil actions for abuse under ORS Chapter 124. This chapter of the Oregon Revised Statutes is also known as the Elderly Persons and Persons with Disabilities Abuse Prevention Act (“Act”).

Oregon lawmakers recently addressed an issue that enabled abusers to avoid elder abuse claims based on a technical procedural requirement.  

In June 2019, the legislature passed and Governor Kate Brown signed Senate Bill 783. The new law amends the reporting provision at ORS 124.100(6). Currently, a party filing a civil claim for abuse (financial or physical) under the Act must notify the Attorney General of Oregon within 30 days after commencing the action. Failure to notify the AG has big consequences. A 2016 Oregon Court of Appeals case mandates that an action be dismissed if the commencing party fails to notify the AG within the required time. See Bishop v. Waters, 280 Or. App. 537, 546–48 (2016).

Amended ORS 124.100(6) applies to cases commenced on or after January 1, 2020, and provides that claims will no longer be subject to dismissal due to this strictly construed AG notification requirement. Senate Bill 783 eliminates the 30-day time period, and expressly allows a commencing party to cure a failure to notify the AG by “mailing” a copy of the complaint, or other initial pleading, any time prior to entry of judgment. Further, a court may not enter judgment for the plaintiff until proof of mailing is filed with the court.

The Oregon legislature has made it harder for a defendant to dismiss otherwise valid abuse claims, due to a procedural technicality. The change helps protect the victims of elder abuse while maintaining the notification requirement. This change then helps the AG track and prosecute elder abuse in Oregon.

Samuels Yoelin Kantor LLP is one of the few law firms in Oregon with equally strong estate planning attorneys and fiduciary litigation attorneys. Our attorneys have the experience to recognize the signs of potential elder financial abuse. We know how to bring claims for victims of abuse. Many of our attorneys are licensed in both Oregon and Washington, and litigate claims in both states.

Who can bring a claim under Oregon’s financial elder abuse statute?

The victim, a guardian, conservator, or attorney-in-fact for the victim, a personal representative for a decedent who was a vulnerable person at the time of the abuse, or a trustee for a trust on behalf of the trustor or spouse of the trustor who is a vulnerable person. ORS 124.100(3). In addition to persons with certain mental or physical conditions, any person age 65 or older (regardless of health), qualifies as a “vulnerable person.” ORS 124.100(1).

What are some common forms of financial abuse?

Misuse of a Power of Attorney or joint bank account, overcharging for services, or improperly transfer title to property. Outright threats to abandon unless the victim complies with the abuser’s demands can by itself be financial elder abuse.

What are some warning signs of abuse?

  • An unexplained withdrawal, transfer, credit card charge, or payments that are unusual, or don’t otherwise fit with the explanation.
  • The elder is not given an opportunity to speak for themselves without the presence of a particular care giver, family member, or anyone else suspected of abuse.
  • The elder is extremely withdrawn, defensive, not communicative, or unresponsive. Victims frequently feel shame and embarrassment.
  • Unpaid bills, overdue rent, utility shut-off notices.

Report abuse

If you suspect someone is being abused, neglected, or financially exploited in Oregon or Washington, please reach out to the Oregon Department of Human Services or Washington State Department of Social and Health Services.

Also, you may consider hiring a private attorney to employ legal tools to prevent harm, or recover financial losses. Contact Samuels Yoelin Kantor LLP to speak with an experienced fiduciary litigator who understands financial elder abuse claims in Oregon and Washington.

Darlene Pasieczny, Attorney

Darlene Pasieczny is a fiduciary and securities litigator at SYK. She represents clients both in Oregon and Washington, with matters regarding trust and estate disputes, financial elder abuse cases, securities litigation, and represents investors nationwide in FINRA arbitration. Her article, New Tools Help Financial Professionals Prevent Elder Abuse, was featured in the January 2019, Oregon State Bar Elder Law Newsletter.

Ballot Measure 104: Oregon Gets Down & Dirty With What It Means To Raise Revenue

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Vote - Oregon Ballot Measure 104

All summer we have been talking about the fallout from the Supreme Court’s decision in South Dakota v. Wayfair. We analyzed the opinion when it came out; we looked at the initial state responses in August; and we looked at one of the early Federal proposals in September. It’s been an exciting ride!

One of the things we’ve come to realize is that the Wayfair decision signals a convergence of the disparate state nexus thresholds for different types of tax. Correctly or not, the Commerce Clause and Due Process nexus thresholds for sales tax and income tax regimes are converging around the idea that a taxpayer needs to have “minimum contacts” with a taxing jurisdiction and must “purposefully avail” themselves of the jurisdiction’s economic market. Thanks to Public law 86-272 (codified at 15 USC §§ 381-384), nuance still exists in the areas of sales of solicitation of sales of tangible personal property. Also, the requirements of internal and external consistency help limit the deleterious impact of having thousands of taxing jurisdictions each doing their own thing.

The challenge, of course, is that there isn’t a good definition of how to distinguish a “fee” from a “tax.”

Because there are all of these limitations and restrictions on a state’s ability to tax activity within its borders (however that may be defined), states in the last few years have been relying more and more heavily on “fees.” The challenge, of course, is that there isn’t a good definition of how to distinguish a “fee” from a “tax.”

Much like obscenity, jurists tend to think that they should be able to identify a fee when they see it (apologies to Justice Stewart). However, it’s not that simple. A fee payment may be defined as a “fixed charge” or “a sum paid or charged for a service.” From practical perspective, what this means is that specific line items in a governmental budget need to be tied to a charge or schedule of charges. Taxes, on the other hand, are typically understood to be general assessments to pay for government services. Taxes are subject to constitutional limitations. It remains to be seen if the same restrictions apply to fees.

The Oregon Constitution, Article I, §32 states: “No tax or duty shall be imposed without the consent of the people or their representatives in the Legislative Assembly; and all taxation shall be uniform on the same class of subjects within the territorial limits of the authority levying the tax.”  At Article IV, §25(2), the Oregon Constitution states: “Three-fifths of all members elected to each House shall be necessary to pass bills for raising revenue.” Courts have generally limited the impact of this to legislation defined as tax increases. There are no corollaries for fees. Certain things, such as state level professional licensure and county inspection services seem directly tied to benefits provided in a way that would be difficult to capture with what we commonly think of as a tax. The bigger issue comes when a fee looks a lot like a tax assessment in disguise.

For example, when the City of Tigard decided that it wanted to enter into a massive water project with the City of Lake Oswego, it was able to enact a rate increase in the guise of a fee to pay for that project. What this meant in practical terms was a hypothetical, impoverished baby lawyer who had only paid $85 every other month for water/sewer service now had to pay that same amount every month. When that hypothetical baby lawyer contacted the City of Tigard to ask why this wasn’t funded through a separate property tax assessment, which would have been more appropriate, she was told that the City didn’t have to go that route so it didn’t. As an aside, it was a pretty facile and not very satisfying answer to provide to a beleaguered, hypothetical baby tax lawyer.

Oregon’s Nonconformity

This long-simmering issue has come to a head in the debate over Ballot Measure 104 (“Measure 104”), on the November 6, 2018 ballot. This would add a definition to the Oregon Constitution’s §25 of “raising revenue” to include changes to tax exemptions, credits, and deductions that result in increased state revenue, as well as the creation or increase of state taxes and fees. Interestingly, the impetus for this measure doesn’t seem to be primarily fee increases. Rather, it was Oregon’s nonconformity with the Tax Cuts and Jobs Act’s addition of IRC 199A, which in most cases decreased the effective tax rate on pass through entities.

A recent article by Oregon Public Broadcasting highlights some of the issues associated with Measure 104, including the challenges involved in our system of conformity to the federal definition of taxable income. The authors correctly highlighted the issue that an opt-out of a federal tax exemption could be construed in Oregon as legislation to raise revenue. Therefore, the legislation specifically opting-out of the federal exemption may be seen as revenue raising and subject to a 3/5 majority approval requirement.

Proponents of Measure 104 have argued that politicians have created a climate that is not friendly to taxpayers because it is not predictable how much a taxpayer will have to pay over to state government from one year to the next. Opponents of Measure 104 have made a variety of arguments that mostly seem to come back to “if you pass this, it will tie the hands of legislators to do what needs to be done.” It may be that both sides are correct. At the end of the day, Oregon voters will have to decide how much they trust the politicians (that they elected) to protect both their wallets and the various things that the state does.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

Tax Reform Now: Five Actions to Consider Before December 31, 2017

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Tax and Business

Congress officially passed the Tax Cuts and Jobs Act on December 20th. Despite conflicting reports on when President Trump will sign the Act, he will sign it. Here are five last-minute actions you should consider for tax planning before the New Year to minimize your 2017 and 2018 tax liability.

One: Make Your Oregon Fourth Quarter Estimated Tax Payment by December 31st

Individuals who pay quarterly state income taxes should consider making their fourth quarter payment by December 31st. The Act limits the deduction for state and local taxes to $10,000 unless the taxes are paid and accrued in carrying on a trade or business.  In Oregon, the fourth quarter estimated payment is due on January 16, 2018. Paying by December 31st assures that these individuals can maximize their 2017 state and local tax deduction one last time. Strongly consider this action if you receive substantial investment income or are self-employed. The final version of the Act only allows a deduction for payments made for tax years on or before 2017, so do not make an estimated payment for 2018 taxes.

Two: Give More to Your Favorite Charities

Give and you shall receive . . . more in 2017 than 2018. For itemizing taxpayers, charitable contributions are one of the most well-known and utilized deductions. The Act’s decease to the marginal tax rates and the doubling of the standard deduction means a charitable deduction claimed on a 2017 tax return will yield more tax savings than the identical deduction on future tax returns. If you expect your marginal tax rate to decrease, or if you itemize now but might not under the new law, consider talking to your tax advisor about how some last minute giving could be the best gift you receive this holiday season. If you do not have a charity in mind, consider donating to Oregon’s Campaign for Equal Justice, whose mission is to make equal access to justice a reality for all Oregonians.

Three: Pay Your Local Property Taxes in Full for 2017-2018

Starting in 2018, individuals will not be able deduct more than $10,000 of their state and local income taxes and their local property taxes. While Oregon allows property taxes to be paid in installments, to be assured an individual can deduct the maximum amount of property taxes paid for the 2017-2018 year, consider writing a check for the installments due in 2018 to your county before the year end. Check with your tax advisor if you are subject to the AMT. The AMT limits the amount of the property tax deduction.

Four:  Pay and Claim Those Unreimbursed Employee Expenses and Other Miscellaneous Deductions Now – Including Your Tax Preparation Fees and Certain Legal Fees

As of 2018, miscellaneous itemized deductions will become a deduction of the past. This includes the deduction for tax preparation expenses, certain legal fees, and unreimbursed employment expenses. Unreimbursed employment expenses can include everything from tools & supplies, union dues, expenses for work related travel, subscriptions to business journals, attending seminars and more. If you expect to pay these expenses next year you should consider paying for them before December 31st. Of course, if you are self-employed or own a business, you will still be able to deduct some of these expenses against business income under the new law. In short: Consider paying your CPA for 2017 tax advice and your 2017 tax filing by December 31st.

Five: Delay That Taxable Gift

Taxpayers considering gifts that would result in the payment of gift taxes or GST may want to wait until 2018. The exemptions for both double in 2018 and a delay in the timing of the gift could reduce or eliminate any tax liability incurred. However, do not hesitate to make that 2017 annual exclusion gift!

Stay Tuned

This article is the first in a series planned to address the numerous changes to tax law imposed by the Tax Cuts and Jobs Act. We strongly recommend you consult with your tax attorneys and tax advisors on the impact of the act on your 2017 taxes and to plan for future years.

Caitlin M. Wong brings her passion for tax law and her commitment to empowering others to her practice at Samuels Yoelin Kantor LLP. Caitlin has experience with all aspects of both federal and state taxation, including tax planning for companies as well as individuals, audits, appeals, tax court litigation, estate planning and trust and estate litigation.

Heat Wave Reminder – Oregon Law Allows Public Intervention if a Child or Animal is in Danger

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Pets left in vehicles

A law recently passed in Oregon allows the public to step up if there is a child or animal they believe to be in danger – without being held liable for damages.

Portland is currently in the midst of what could be a record breaking heat wave. The city is forecast to have temperatures climbing above 100 degrees this week. Health officials are urging citizens to stay hydrated and take precautions when traveling.

The state of Oregon also is doing its part to protect those who may not be able to protect themselves. A new law protects Good Samaritans from both civil and criminal liability if they break a vehicle window to help either an unattended child or animal that they believe to be in danger.

House Bill 2732 was signed into immediate effect by Gov. Kate Brown at the end of June 2017.

Previously, citizens were required to contact law enforcement before stepping in to help a child or animal that was locked inside of a hot car.

The law goes on to explain that individuals should “use no more force than is necessary to enter the [car] and remove the child or animal”. After they are removed, the individual would also need to stay with them, until both police and first responders arrive, or the vehicle’s owner returns.

KATU reports that “the law is intended to help children and pets left alone in parked cars during sweltering heat. Concerned citizens should first try to locate the vehicle’s owner and contact the local animal control agency or police department before breaking into the vehicle. Breaking a car window should be considered a last resort.”

The Oregon Humane Society has said that temperatures inside cars can become oven-like in just 20 minutes.

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