Oregon Corporate Tax Rate Compared to Other States
Oregon corporate tax rate compared to other states is lower than the marginal corporate income tax rates in 20 other states.4 min read updated on February 01, 2023
Oregon corporate tax rate compared to other states is lower than the marginal corporate income tax rates in 20 other states, making the state one of the most business-friendly in the country.
What Is the Maximum Marginal Tax Rate of Oregon for Corporate Income Tax?
Oregon's corporate income tax is levied at a maximum marginal rate of 7.600 percent and based on two tax brackets.
Are There States With Higher Marginal Corporate Income Tax Rates Than Oregon?
Twenty states have higher marginal corporate income tax rates compared to Oregon.
What Is Oregon Corporate Income Tax?
Oregon's corporate income tax is a form of business tax applied to the gross taxable income of most commercial entities registered or operating in the state. The tax is equivalent to the personal income tax paid by individuals, and it uses a bracketed tax system.
How Is Oregon Corporate Income Tax Filed?
An Oregon corporate income tax return is filed yearly, and businesses are allowed to deduct business expenses, such as the cost of goods sold, the salary of workers, and other costs of running a business.
What Kind of Businesses Have to Pay the Oregon Corporate Income Tax?
Generally, any business entity active in Oregon whose legal status is not a pass-through business (such as an S corporation, partnership, or sole proprietorship) are required to report their earnings and file their tax returns for both Oregon and federal corporate income taxes on their income.
A C corporation is the most common business entity that is required to pay corporate tax. C corporations are considered to pay double taxes because the company's earnings are subject to corporate tax, and the owners and shareholders of the corporation also pay personal income tax on their share of the company's profits.
On the other hand, S corporations and pass-through businesses don't pay double taxes as their earnings are not subject to corporate tax. But the members or owners of the business are required to pay Oregon and federal income tax on their share of the corporation's profit along with their personal tax returns.
Who Should File an Informational Tax Return?
The law requires all businesses registered in Oregon, irrespective of their tax status, to file an informational tax return with the Oregon Department of Revenue and a federal business tax return with the IRS through Form 1120.
Who Is Exempt From Oregon and Federal Income Taxes?
Some Oregon incorporated nonprofit organizations can get tax-exempt status for a part or all of their taxable income from Oregon and federal income taxes. 501(c) nonprofit entities certified in Oregon are not subject to the Oregon corporate income tax.
The following are the most common 501(c) corporations:
- Tax-Exempt Religious Organizations: Certified religious bodies, such as churches, mosques, and synagogues, are exempt from corporate income taxes according to the provisions of subsection 501(c)(3) of the IRC.
- Tax-Exempt Charities: Certified charities, including religious and nonreligious charities, are exempt from paying corporate income taxes according to the provisions of subsection 501(c)(3) of the IRC.
- Tax-Exempt Recreational Organizations: Under subsection 501(c)(7) of the IRC, recreational organizations and social clubs don't have to pay taxes on the dues and other funds collected from their members if the primary aim of the organization is nonprofit.
- Educational and Scientific Institutions: Educational and scientific groups which are not for profit have tax-exempt status, including nonprofit schools, colleges, and specific research institutions as provided by subsection 501(c)(3) of the IRC.
- Labor Unions: Labor unions and workers' organizations don't pay tax on dues and other revenues as covered under subsections 501(c)(4) and 501(c)(5) of the IRC.
How to Obtain an Oregon Tax-Exempt Status?
To obtain Oregon tax-exempt status, an entity needs to obtain 501(c) qualification as well as a Nonprofit Tax-Exempt ID Number from the IRS. Nonprofits who want to be exempt from Oregon's corporate tax may also need to file additional documentation with the Oregon Department of Revenue.
Are Oregon State Taxes Deductible From Gross Income?
When filing federal tax returns, businesses can deduct all Oregon state taxes from gross income. This means that a business can deduct any Oregon corporate income tax paid from its gross taxable income before calculating the federal income tax.
Does Oregon Have the Lowest Corporate Tax?
Based on the analysis of Oregon tax policies, tax experts say that Oregon corporate tax is one of the lowest in the country.
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