Oregon Administrative Rules
Chapter 150 - DEPARTMENT OF REVENUE
Division 314 - INCOME TAXATION GENERALLY GENERAL PROVISIONS
Section 150-314-0520 - Pass-through Entity Withholding Requirements

(1) Withholding requirement. A pass-through entity with Oregon-source distributive income and one or more nonresident owners that have no other Oregon-source income, is required to withhold tax on behalf of the owner unless that owner makes an election as described in OAR 150-314-0515, the pass-through entity elects to pay the pass-through entity elective tax, or meets an exception described in 150-314-0525. "Tax payment" or "owner payment" means pass-through entity withholding, which is an estimated tax payment sent on behalf of the owner. The entity must withhold tax as follows:

(2) Information retention requirement. The pass-through entity must retain in its records the information listed in this section and submit it to the Department of Revenue on request:

(3) Information reporting to owner requirement. The pass-through entity, by the due date of its information return, must provide each applicable nonelecting owner with an information statement containing the owner's share of the entity's withholding tax payments to be claimed as estimated tax payments on the owner's tax return.

(4) Periodic remittance requirement.

(5) Annual report requirement. For estimated tax payments due on or after January 1, 2013, the entity will submit an annual report. The report is due the last day of the second month following the close of the entity's tax year. The report will have the following information for each owner included in the pass-through entity withholding payments: owner's name, owner's federal tax identification number, owner's mailing address, owner's share of each payment made on the owner's behalf, and any additional information requested by the department in the filing instructions. The department may request other information as needed. The owners will not receive credit for payments made on their behalf until the annual report has been filed by the entity.

Example 2: ABC Partners, an Oregon partnership, has 2 nonresident owners who each own 25 percent of the partnership. One is an individual, Rachel, and one is a corporation, Eli & Alexandria Inc. (E&A). Because neither elects to join in filing a composite return and neither has filed an affidavit, ABC must withhold Oregon tax. ABC Partners estimates its Oregon-source distributive income for 2013 will be $1,500,000. For 2013, the entity will calculate the tax payment for each period based on the nonresident owners' share of 25 percent of $1,500,000 and the appropriate tax rate. Rachel's pass-through entity withholding is 9.9 percent (the highest marginal tax rate for 2013) multiplied by $375,000 multiplied by 25 percent. This is $9,281 (rounded) for each period. E&A's pass-through entity withholding is 6.6 percent multiplied by $375,000 multiplied by 25 percent. This is $6,188 (rounded) for each period. ABC Partners will add together the amounts estimated for all owners and send in one payment each period of $15,469. ABC Partners will submit these payments using its tax year. Since ABC Partners uses a calendar tax year, the due dates for each payment for tax year 2013 are April 15, June 17, September 16, 2013 and January 15, 2014. If ABC Partners was a fiscal year taxpayer, then it would submit pass-through entity owner payments by the estimated tax payment due dates for that fiscal tax year instead. At the end of its tax year, ABC Partners will submit an annual report. Since it has no changes to account for, it will show $9,281 of each quarterly payment belongs to Rachel and $6,188 of each quarterly payment belongs to E & A Inc.