Measures 66 & 67 - Explained by a CPA

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Measures 66 and 67 were a huge hotbed issue not only in Portland, but across the state of Oregon and to some extent the nation.  There were literally millions of dollars spent on both sides of the issue and a lot of misinformation passed by both sides.  In an attempt to be a responsible voter, I read the actual bills, the summaries, and commentaries from both sides.  Since then I have even read articles in the New York Times and Chicago Tribune.

Either way, the bills passed and the time to argue about them is over.  They are now written into law and I think it would be good for people to see how, if at all, it will affect them.  This information was passed on to me by a colleague and I wish they would have spent $10 million on advertising this vs. the commercials we all had to endure.  That being said, I pulled this information from the blog of Shauna Zobrist who is a CPA at Sherwood Tax and Accounting.  I found it very simple and concise.  It is important to take a look at the flow chart that is linked about half way through.

Shauna Expressions : http://shauna.sherwoodtax.com/blog/entry/the-facts-of-oregons-new-tax/

This entry was written by shauna and posted on January 31, 2010 at 10:20 pm.

Emotions run high on both sides of the campaign that ended Tuesday with a victory for the supporters of Measure 66 and 67.  Now the buzz is all about really trying to understand the new taxes.  How will the taxes affect you?  Everyone is talking about it, but misinformation seems to be the only common denominator.  Let’s talk about the facts and answer some of the misunderstanding about the new law.

Measure 66 increased the state income tax rate for households who have taxable income over $250,000 or individuals with taxable income over $125,000 from 9% to 10.8% plus a temporary bracket for those earning over $500,000 at 11%.  This tax is retroactive to 2009 so high income tax payers will have a tax bill that they didn’t plan for. 

Business in Oregon is affected by Measure 67.  If you have a business entity of any kind except for sole proprietors, you will pay some additional tax.  The Oregon Center for Public Policy has created a flow chart that is the best I’ve found in making the tax implications to business clear.  The flow chart helps to bring clarity to the new taxes and who they will affect. 

S Corporations, LLC’s and partnerships will pay $150 to file a tax return rather than $10.  They will continue to pay tax on the net business income on their personal tax returns.  The biggest misrepresentation of the campaign was that corporations only pay $10 in tax.  Of course anyone with common sense knows that this wasn’t true.  Business owners of S Corporations or LLC’s pay plenty of tax in Oregon.  Luckily if you have an S Corporation or an LLC this is the extent of your tax increase (unless your business income puts you in the “high income” category for personal taxes).  However, also tied to this legislation you will now pay $100 to renew your corporate filing each year rather than $50.

C Corporations are the ones who get hurt the most.  Corporations are designated with the IRS as either a “C Corp” or “S Corp.”  The difference is that a C Corporation pays tax as an entity rather than passing its taxable income to its owners.  If you are a C Corporation who has revenue over $500,000, even if you don’t have any profit, you will now pay a minimum tax of $500 and the tax increases as your revenues increase.  This will affect small and large companies in Oregon.