Oregon has issued guidance regarding inclusion of accumulated deferred foreign income under IRC Sec. 965 in the sales factor. Oregon will exclude the amounts from the sales factor.
What Does the Federal Law Require?
Under IRC Sec. 965, taxpayers must include the accumulated post -1986 deferred foreign income of foreign corporations in their federal taxable income for 2017 and 2018. In Oregon the deemed repatriation is treated as a dividend and is eligible for the dividend received subtraction.
Before 2018 is the Deemed Repatriation Included in the Sales Factor?
Before 2018, Oregon excluded gross receipts from the holding of an intangible from the sales factor unless derived from the taxpayer’s primary business activity. The deemed repatriation arises from the holding of an intangible in a foreign corporation. The intangible is the ownership interest of the foreign corporation. Thus, the deemed repatriation must be excluded from the sales factor for tax years beginning before 2018, unless it is from the taxpayer’s primary business activity.
After 2017 is the Deemed Repatriation Included in the Sales Factor?
After 2017, Oregon excludes all receipts from the sales factor unless the receipts are received in the regular course of the taxpayer’s trade or business. In addition, Oregon excludes certain sales of intangible property from the sales factor. Dividends and deemed dividends from subsidiaries are excluded. Therefore, the deemed repatriation amount is excluded from the sales factor for tax years beginning after 2017.
Oregon Revenue Bulletin 2018-01, Oregon Department of Revenue, November 9, 2018, ¶401-424