[Revenews] Update on reconnect

[PURKEYPILE Steve]

Today, the Senate passed SB 301.  This follows yesterday's passage of the same bill in the House of Representatives.  The bill now heads to the governor for his signature.

For tax year 2010 - Proceed with filing returns!  The bill reconnects Oregon to the federal definition of taxable income including all of the changes Congress made in 2010 with these significant exceptions:

(1) Additional expensing allowed under IRC section 179 (Oregon's limit remains at $134,000 with a dollar for dollar reduction beginning at $530,000); and
(2) Bonus depreciation allowed under IRC section 168(k).

To reiterate, Oregon is connected to the following items for tax year 2010:
* Tuition and fees deduction
* Educator expenses deduction
* Exemption of imputed income related to the extension of health insurance coverage provided to adult children (as allowed by the Affordable Care Act)
* Modification of the calculation of the self-employment tax
* Tax free distributions from IRAs for charitable purposes
* Contribution of capital gain property for conservation purposes
* Any amount excluded from income under section 2011 of the Small Business Jobs Act relating to the sale of small business stock
* Additional start-up expenses deducted under section 2031 of the Small Business Jobs Act
* Any other federal difference except those listed below

Important!  Remember that Oregon remains disconnected from (and an addition on the 2010 return is required) for the following items:
-IRC section 139A (federal subsidies for prescription drug plans) [ORS 316.837; ORS 317.401]
-IRC section 199 (domestic production activities - QPAI) [ORS 316.836; ORS 317.398]
-IRC section 108(i) (discharge of indebtedness from the reacquisition of an applicable debt instrument after December 31, 2008) [ORS 316.739(1); ORS 317.301(1)]
-IRC section 179 (temporary federal increase of 179 expense deduction) [ORS 316.739(3) ORS 317.301(3)]
-IRC section 168(k) (bonus deprecation) [ORS 316.739(2); ORS 317.301(2)]

Some frequently asked questions:
Question: I filed a return and added back some items that we are now connected to (for example, the tuition and fees deduction).  Will the department make the adjustment or should I amend?
Answer:  You need to file an amended return removing the addition.

Question: I forgot to add back the depreciation and expensing differences.  Should I file an amended return or will the department make the adjustment?
Answer:  You need to file an amended return with the add back in order to avoid the possibility of additional penalties and interest later.

For tax year 2011 - After some discussion and debate, the legislature has reinstated a full, rolling reconnect for tax year 2011 including the depreciation and expensing provisions.

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Steve Purkeypile
Personal Income Tax Policy
Oregon Department of Revenue



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