Or. Admin. Code § 150-316-0535

Current through Register Vol. 63, No. 11, November 1, 2024

Section 150-316-0535 - Federal Tax Deduction: Accrual Method of Accounting Required; Deductions Allowable to Cash Basis Taxpayers; Refunds to Be Included

(1) Regardless of the method of accounting used by the taxpayer to report income to the federal government and to the State of Oregon, the federal income tax deduction for tax years beginning on or after January 1, 1969, shall be computed under the accrual method of accounting. Under ORS 316.685, an individual's federal income tax for the year must first be computed. The amount of federal income tax for that year will be the taxpayer's deduction on the Oregon income tax return for the same year. Time of actual payment will not be significant.

(2) For tax years beginning January, 1979, or later, any additional federal tax for a prior year shall be deducted when the tax is paid or when the adjustment is finally determined, whichever is later.

(3) If a person receives a refund of federal income taxes previously deducted on an Oregon return, the amount received shall be added to income in the year in which the refund was received. However, a taxpayer should add only those refunds for which a prior tax benefit has been received.

(4) Federal Tax Deduction:

(a) For tax years beginning on or after January 1, 1987, the federal tax deduction on each return is limited to the lesser of:

(A) The amount of federal tax accrued attributable to the current year; or

(B) $3,000 ($1,500 if married filing separately).

(b) Refunds of federal tax for a prior year for which a previous tax benefit was received are included as income in the year received. The amount of the addition on the Oregon return is the amount of tax benefit received. Tax benefit is the amount of federal tax deducted in a prior year for which you received a refund in a later year.

(c) Additional tax for a prior year. The deduction for additional federal income taxes paid or determined for tax years beginning on or after January 1, 1987, is the lesser of:

(A) The amount of federal tax accrued attributable to the current year plus any deficiencies paid or determined for prior years during the current year; or

(B) $3,000 ($1,500 if married filing separately).

(d) If additional federal income taxes are paid or determined in tax years beginning on or after January 1, 1987, for tax years beginning on or before December 31, 1986, the deduction for the additional tax is the lesser of:

(A) The difference between the federal tax deducted on the original return and $7,000 ($3,500 if married filing separately); or

(B) The actual amount of additional federal income taxes paid or determined.

(5) If husband and wife change from separate returns to joint returns after the original return is filed, the federal tax subtraction to be claimed on the amended return shall be the amount of combined federal tax liability shown on the original returns subject to the dollar limitation in effect for the taxable year. Any additional tax due or refund from the amended federal return shall be reported on the Oregon return in the year paid or received.

Or. Admin. Code § 150-316-0535

1-69; 12-70; 11-73; 9-74; 12-19-75; 11-19-76; 12-31-77; 12-31-78, Renumbered from 150-316.072; 12-31-79, Renumbered from 150-316.072(1); 12-31-83; RD 12-1984, f. 12-5-84, cert. ef. 12-31-84; RD 15-1987, f. 12-10-87, cert. ef. 12-31-87; RD 7-1989, f. 12-18-89, cert. ef. 12-31-89; Renumbered from 150-316.685(1), REV 64-2016, f. 8-15-16, cert. ef. 9/1/2016; REV 56-2017, f. & cert. ef. 8/8/2017; REV 41-2020, amend filed 12/23/2020, effective 1/1/2021

To see several examples, along with calculations for this rule click on the PDF link.

To view attachments referenced in rule text, click here to view rule.

Statutory/Other Authority: ORS 305.100

Statutes/Other Implemented: ORS 316.685