The Oregon Senate has advanced legislation that would treat global intangible low-taxed income as a deemed dividend for state tax purposes and require taxpayers to add back their federal GILTI deductions on their state taxes.
S.B. 851, sponsored by the Senate Committee on Finance and Revenue, was approved by the chamber 22 to 7 on June 17 and is now in the House. The bill is in response to fears that taxpayers would claim both the 50 percent federal GILTI deduction and the state’s dividends received deduction.
“Oregon is automatically connected to [the federal GILTI] provision,” committee Chair Mark Hass (D) said on the Senate floor June 17. Without S.B. 851, “our tax code would treat it in a way that creates confusion and ambiguity,” he added.
S.B. 851 “says GILTI income will be treated as foreign income, and that the taxpayers in this category will receive up to an 80 percent [state] deduction to account for foreign taxes paid” after adding back their federal GILTI deduction, Hass said. The final version of the Senate bill had no formal opposition from stakeholders, he added.
According to staff analysis of the bill, the treatment of GILTI under S.B. 851 would be the same as the way the Department of Revenue would require taxpayers to treat GILTI without the legislation. However, the state would be protected under S.B. 851, because “without this fix the result would be certain litigation,” Hass said.
S.B. 851 would also require individual taxpayers to add back the federal deduction for the Tax Cuts and Jobs Act’s one-time deemed repatriation tax on foreign earnings accumulated after 1986 — also to avoid a double deduction. Oregon in 2018 enacted legislation (S.B. 1529) that required such an addback, but staff said the legislation specifically applied to corporate taxpayers and not individuals, which they said was an oversight.
The provision was opposed by Sen. Herman Baertschiger Jr. (R), who noted that S.B. 851 would apply the state addback for the federal deemed repatriation tax deduction retroactively to tax year 2017. “To go back that far, make things retroactive back that far, I’m uncomfortable with that,” he said.
A legislative analysis of S.B. 851 said the DOR’s current position is that individuals must add back the federal deduction for the one-time deemed repatriation tax, and thus the provision is not anticipated to collect additional revenue but might result in a small number of filers needing to adjust their taxes. However, the bill wouldn't apply any penalties or interest on any additional taxes due because of adjustments related to the issue.