Oregon courts' recent examination of UDITPA provisions.

• Author: Cho, Mary
• Position: Uniform Division of Income for Tax Purposes Act

Uniformity in state income taxation has been an issue since at least 1957, when the Uniform Law Commission developed the Uniform Division of Income for Tax Purposes Act (UDITPA) to address how to appropriately divide the tax base among multiple states in which a taxpayer conducts business. Model statutes provided by UDITPA have been adopted by a majority of the states with a corporate income tax as well as into Article IV of the Multistate Tax Compact (MTC). The MTC, which is administered by the Multistate Tax Commission, became effective in 1967 and is charged with several tasks, including interpreting UDITPA statutes through proposed model uniform regulations. Oregon has been a compact member since 1967 and has historically adopted several Compact model statutes and regulations (former Or. Rev. Stat. [section] 305.655, enacted by Ch. 242, Laws 1967).

Over the past year, both the Oregon Supreme Court and the Oregon Tax Court have issued important state income tax decisions in which language suggested by UDITPA and adopted by Oregon played a crucial role. Specifically, the Oregon Tax Court applied Oregon's business income determination rules to a broadcasting company and considered the availability of an apportionment factor election to a service company. The Oregon Supreme Court applied cost-of-performance (COP) sales factor statutes to a communications company and determined how a utility company should source its electricity sales. All of these decisions may have potential application within and outside Oregon.

Business/Nonbusiness Income Determination

In Fisher Broadcasting Co. v. Department of Revenue, No. TC 5167 (Or. Tax Ct. 4/29/15), the Oregon Tax Court ruled that the gain from the sale of stock in an unrelated business by a non-Oregon communications company met the functional test to qualify as business income and was properly subject to Oregon corporation excise (income) tax as apportionable income. In its determination, the Tax Court looked to the controlling Oregon allocation and apportionment provisions derived from UDITPA, which apply to businesses other than financial organizations and public utilities (Or. Rev. Stat. [section] [section] 314.605-314.675). The Tax Court relied also on Oregon's statutory definitions of "business income" and "nonbusiness income," derived from UDITPA, as well as regulatory interpretations of these terms, in its analysis (Or. Rev. Stat. [section] [section] 314.610(1) and (5); Or. Admin. R...