Current through Register Vol. 63, No. 9, September 1, 2024
(1) Surplus Credit
Generally. This rule applies for biennia beginning on or after July 1, 2011,
when personal income taxpayers are credited a surplus of tax revenues under ORS
291.349(4).
Taxpayers claim the credit in odd-numbered tax years and calculate the credit
based on the tax return information for the immediately preceding even-numbered
tax year (base tax year).
(2)
Surplus Credit Procedure. No later than October 15 following the end of the
biennium for which a surplus is determined, the department will make publicly
available to taxpayers the applicable surplus percentage amounts and
information giving guidance on the calculation of the surplus credit.
(a) Personal income taxpayers calculate their
surplus credit by multiplying the applicable surplus percentage amount by their
total personal income tax liability for the base tax year.
(b) The total personal income tax liability
is determined after allowing a credit for income taxes paid to another state
(under ORS 316.082,
316.131, and
316.292) and before any other
credit or offset against tax liability, allowed or allowable.
(c) If a surplus credit reduces tax liability
to zero, the department will refund any unused surplus credit amount as an
overpayment of tax. The department may offset an overpayment of tax due to any
unused surplus credit amount to pay debts owing to the State of Oregon or other
parties as indicated in ORS
314.415 and
293.250. The department will
issue a notice when this occurs. The department will offset any unused surplus
credit amount consistent with the priority set out in OAR
150-314.415(2)(f)-(B).
(3) Changes in filing status or
spouse/registered domestic partner (RDP). A taxpayer who files returns using a
different filing status in the base tax year and the immediately succeeding tax
year, when claiming a surplus credit, or who files jointly with a different
taxpayer in the base tax year and the immediately succeeding tax year, when
claiming a surplus credit, must compute their surplus credit as follows:
(a) From another filing status to married/RDP
filing jointly. The surplus credit allowed on the joint return is the
combination of the surplus credits as calculated based on each taxpayer's
separate return from the base tax year.
Example
1: George and Robin each file their 20XX personal income tax
returns, using the single filing status. George has a total personal income tax
liability of $2,000. Robin has a total personal income tax liability of $3,000.
In 20X1, George and Robin marry. After the end of the biennium in 20X1, a
surplus credit is determined with an applicable percentage amount of 5%. George
and Robin file their 20X1 personal income tax return jointly. They must each
calculate their surplus credit separately and report the sum on their return.
George's surplus credit is $100 ($2,000 x 0.05) and Robin's surplus credit is
$150 ($3,000 x 0.05). They will claim a surplus credit of $250 on their 20X1
joint personal income tax return.
(b) From married/RDP filing jointly to
another filing status. The surplus credits claimed by each taxpayer on their
separate returns must bear the same proportion to the total surplus credit
calculated according to ORS
291.349(5) as
the federal adjusted gross income of each taxpayer bears to the federal
adjusted gross income of both taxpayers on the joint return for the base tax
year.
Example 2: Shawna and Nathan are
married and file their 20XX personal income tax return, using the married
filing jointly filing status. Their total federal adjusted gross income (AGI)
is $65,000. Their total personal income tax liability is $5,000. Shawna's
portion of the total AGI is $45,500, or 70%. Nathan's portion of the total AGI
is $19,500, or 30%. In 20X1 Shawna and Nathan divorce and neither remarries
during that year. After the end of the biennium in 20X1, a surplus credit is
determined with an applicable percentage amount of 4%. When Shawna and Nathan
file their separate 20X1 personal income tax returns, they will calculate
separate surplus credits based on their 20XX AGI. Shawna will claim a surplus
credit of $140 (5,000 x 0.04 x 0.70). Nathan will claim a surplus credit of $60
(5,000 x 0.04 x 0.30).
(c) From married/RDP filing jointly to
married/RDP filing jointly with a different spouse/RDP. The provisions of this
subsection apply to a taxpayer who files a joint return with one spouse/RDP for
the base tax year and then divorces, marries a different spouse/RDP during the
immediately succeeding tax year, and files a joint return with their new
spouse/RDP for the immediately succeeding tax year. The surplus credit allowed
on the joint return with the new spouse/RDP is the combination of the surplus
credits as calculated based on each taxpayer's separate return from the base
tax year.
Example 3: Duane and Fern are
married and file their 20XX personal income tax return, using the married
filing jointly filing status. Their total AGI is $80,000. Their total personal
income tax liability is $7,500. Duane's portion of the total AGI is $48,000, or
60%. Fern's portion of the total AGI is $32,000, or 40%. In 20X1, Duane and
Fern finalize their divorce. Duane marries Leslie that same year. Leslie filed
a 20XX personal income tax return, using the single filing status. Her total
personal income tax liability was $2,000. After the end of the biennium in
20X1, a surplus credit is determined with an applicable percentage amount of
2%. When Duane and Leslie file their joint 20X1 personal income tax return,
they must each calculate their surplus credits separately and report the sum on
their return. Duane's surplus credit is $90 ($7,500 x 0.02 x 0.60), calculated
according to subsection (b) of this section. Leslie's surplus credit is $40
($2,000 x 0.02). They will then add their separate credits and claim a $130
surplus credit on their joint 20X1 personal income tax return. Fern will claim
a surplus credit of $60 ($7,500 x 0.02 x 0.40) on her 20X1 personal income tax
return.
(d) Death of a
taxpayer. The provisions of this subsection apply when a taxpayer dies during
the base or immediately succeeding tax year and personal income taxpayers are
credited a surplus of tax revenues after the end of that biennium. The
taxpayer's representative may file a return on their behalf to claim the
surplus credit. If one of the two taxpayers on a jointly filed return from the
base tax year dies, the surviving taxpayer from the joint return may claim the
full amount of the surplus credit.
(4) Surplus Credit and subsequent increase in
tax liability. If a taxpayer claims a surplus credit and subsequently there is
an increase in the tax liability for the base tax year, the taxpayer must
recalculate and apply their surplus credit in the following manner:
(a) Determine the revised surplus credit
under section (2) of this rule using the total personal income tax liability as
determined in an audit or review or as self-assessed by the taxpayer if an
amended return is filed with the department;
(b) If within the time allowed by law, adjust
or amend the return for the odd-numbered tax year to include the revised
surplus credit.
Example 4: Beth files her
20XX Oregon personal income tax return showing a total personal income tax
liability of $5,000. A surplus credit of 10% of 20XX tax year personal income
tax liabilities is determined for tax year 20X1. Beth files her 20X1 Oregon
personal income tax return claiming a surplus credit of $500 ($5,000 x 0.10).
Later, the department adjusts her 20XX personal income tax return increasing
her tax liability before credits by $2,000. Beth's revised 20XX total personal
tax liability is $7,000 ($5,000 + $2,000). She will multiply this amount by 10%
to calculate her revised surplus credit of $700 for tax year 20X1. Within the
time allowed by law, Beth must correct her 20X1 personal income tax return to
claim the additional $200 ($700 [allowed] - $500 [already claimed]) of surplus
credit. The department may offset the additional $200 to any outstanding debt
before refunding any portion to Beth.
(5) Surplus Credit and subsequent decrease in
liability. If a taxpayer claims a surplus credit and subsequently there is a
decrease in tax liability for the base tax year, the taxpayer must recalculate
and apply their surplus credit in the following manner:
(a) Determine the revised surplus credit
under section (2) of this rule using the total personal income tax liability as
determined in an audit or review or as self-assessed by the taxpayer if an
amended return is filed with the department;
(b) If within the time allowed by law, adjust
or amend the return for the odd-numbered tax year to include the revised
surplus credit.
Example 5: Use the same facts
as example 4, except Beth files a 20XX amended personal income tax return
reducing her total personal income tax liability from $5,000 to $3,000 and
claiming a refund of $2,000. Beth's revised surplus credit for tax year 20X1 is
$300 ($3,000 x 0.10). Within the time allowed by law, Beth must correct her
20X1 personal income tax return to include the revised credit and determine the
amount previously allowed that she must pay back. Beth's original surplus
credit was $500. This means she must pay back $200 ($500 [original surplus
credit] - $300 [revised surplus credit]). In addition to any other allowable
offsets, the department will offset the refund from Beth's 20XX amended return
to pay back the excess surplus credit she previously claimed, plus
interest.
(6)
Interest accrual.
(a) Interest accrues
according to ORS 314.415 on a refund of any
unused surplus credit amount under subsection (2)(c) of this rule.
(b) Interest accrues according to ORS
314.400(7) on
the amount of any surplus credit that a taxpayer must pay back under section
(5) of this rule.
(7)
Tax determined by the department on behalf of a delinquent taxpayer. If a
taxpayer fails to file a return, the department may determine the taxpayer's
tax liability under ORS
314.400. If the department
determines a taxpayer's tax liability for a tax year in which personal income
taxpayers are credited a surplus of tax revenues under 291.349(4), the amount
of surplus credit will not be included in the department's calculation of tax
liability until:
(a) The taxpayer files a
return with the department for the base tax year;
(b) The taxpayer accepts the tax liability
assessed by the department for the base tax year; or
(c) The taxpayer's liability is determined by
the court for the base tax year.
(8) Returns and the statute of limitations.
The department will refund any unused surplus credit amount as an overpayment
of tax only as the limitations under ORS
314.415 will allow.
(9) Claiming a surplus credit when a taxpayer
otherwise has no requirement to file. The provisions of this section apply to
taxpayers who are not otherwise required to file a return. If a taxpayer files
a return and has, or the department determines the taxpayer has, a personal
income tax liability for the base tax year, the taxpayer must file a return in
the immediately succeeding tax year in order to claim a surplus credit and
receive a refund.
(10) Joint
return apportionment of refund. If two taxpayers together file a joint return
claiming a surplus credit and either spouse requests the department make
separate refunds under ORS
314.415(7), the
department will apportion the total refund according to 314.415(7) and OAR
150-314.415(7). The following is an example applying this section and
subsection (3)(a) of this rule:
Example 6:
John and Mary were not married and filed their 20XX personal income tax returns
separately. John had a total personal income tax liability of $3,000. Mary had
a total personal income tax liability of $1,000. In 20X1, they marry and later
file their personal income tax return using the married filing jointly filing
status. A surplus credit of 4% of 20XX tax year personal income tax liabilities
is determined for tax year 20X1. John and Mary calculate their total surplus
credit according to subsection (3)(a) of this rule. John calculates a separate
surplus credit of $120 ($3,000 x 0.04) and Mary calculates a separate surplus
credit of $40 ($1,000 x 0.04). They claim a total surplus credit of $160 on
their 20X1 personal income tax return.
Mary is behind on her student loan payments and the department
offsets Mary and John's entire 20X1 refund to pay that debt. John requests that
the department split the 20X1 refund, to avoid offsetting his portion of the
refund to pay Mary's loan. Their 20X1 joint return contains the following
information:
AGI: $50,000; John's AGI: $40,000 (80% of total AGI); Mary's
AGI: $10,000 (20% of total AGI); Total Refund $1,000.
The surplus credit calculation and the calculation for
splitting refunds are independent of each other. The department splits the
total refund according to ORS
314.415(7) and
OAR 150-314.415(7). John's portion of the refund is $800 ($1,000 x 0.80) and
the department sends it to him. Mary's portion of the refund is $200 ($1,000 x
0.20) and the department offsets it to pay her student loan.
Publications: Publications referenced are available from the
agency.
Stat. Auth.: ORS
291.349 &
305.100
Stats. Implemented: ORS
291.349
