Opposition to Proposed 754 Policy
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Declaration of Opposition to Proposed Tax Law Changes
If you own business property or an interest in an entity doing business in the City of Portland and/or Multnomah County, you could be seeing a significantly larger tax bill if the Director is successful in passing the proposed changes to the Business License and Business Income tax laws!
The proposed change in long standing tax law will cause the increase in tax because the loss of certain amounts that are fully deductible for federal tax purposes will be disallowed in the calculation of the City/County tax. None of us can fight this alone but together we can at least make our objections known!
An owner's tax basis in property and entities is eligible for an increase, or step up in basis, at life events such as the death of an owner or at a change in ownership of a passthrough entity. This step up allows the new owner to deduct additional depreciation expense from their taxable base for federal and state tax purposes. The City/County are proposing to eliminate this deduction for purposes of calculating the City/County tax base.
For example, if you have a depreciation expense of $100,000 related to a step up your tax bill will increase by $3,650 each year. This will also require you to prepare and retain separate basis information for the City/County in addition to the basis information that you retain for the IRS and the state. As a result, taxpayers will incur greater costs to maintain records to properly reflect their basis for City/County purposes.
There are many reasons why this new law should not be passed, but to begin with the following are front and center:
1. The position diverges from the IRC and Oregon law therefore it is a law change (Current State Law is tied to the IRC as of 12/31/2016 )
2. Nearly impossible to enforce equitably among taxpayers because the step up is not always evident
a. Changes in presentation (Tax vs Book) would effectively hide the deduction Line 13 vs line 1
3. Most of the transactions which result in a step up are not taxable transactions such as the transfer of ownership upon the death of the owner. There is no real basis for the City/County to impose a tax on income that is not taxable for Federal or State purposes.
4. Cost of compliance is not justified by the revenues generated
5. Planning opportunities are available to circumvent the rule
6. Incentivizes business and individuals to consider investing outside of the City/County
Please join your neighbors and business associates in opposing this proposed law change by:
· Sharing the issues with others in the community
· Signing on to this Community Declaration of Opposition
· Joining us at the legislative hearings we will alert all signers as soon as the hearing date is set
· Submit a written letter of opposition to the proposed rule at the hearing or within the prescribed period after the hearing
· Contacting your Representatives in the City/County
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