Metro is a regional government authority for three counties in the greater Portland, Oregon area: Clackamas County, Multnomah County and Washington County. On February 25, 2020, the Metro Council voted to refer a ballot measure to voters in these three counties for the May 19, 2020 election. If passed, the measure would create two new net income taxes:
Nothing in the measure explicitly limits the tax to Metro district-source net income. However, to avoid federal constitutional issues, and in light of the measure’s stated intent to follow the rules that have been adopted for the Multnomah County business income tax, we anticipate that, in the case of an entity that does business both within and outside of the Metro district, this tax would be based on income apportioned to the Metro district.
The proceeds from the taxes would fund collection of the taxes and the creation and implementation of plans to combat homelessness within the Metro district.
The measure leaves numerous questions regarding the taxes unanswered, even given the stated policy of following (i) Oregon law and administrative rules with respect to the personal income tax, and (ii) the Multnomah County business income tax rules with respect to the business profits tax. The Multnomah County business income tax, for instance, is paid at the entity level, including by entities that are pass-throughs for state income tax purposes, such as partnerships and S corporations. If the state personal income tax rules are applied to the Metro personal income tax and the Multnomah County business income tax rules applied to the business profits tax, the income of a pass-through entity that flows through to its members could be subject to both taxes. If the measure is adopted by the voters, we anticipate that Metro will issue additional guidance.
If you would like to know more about the proposed taxes, please contact one of our Oregon tax partners: John Gadon, firstname.lastname@example.org, 503.778.2130, or Eric Kodesch, email@example.com, 503.778.2107.
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