2011 ORS § 316.683¹
State exempt-interest dividends
  • rules

(1) A regulated investment company, or a pool of assets managed by a fiduciary, including a financial institution, shall be qualified to pay state exempt-interest dividends, as defined in subsection (2) of this section, to its shareholders or beneficiaries.

(2) The term state exempt-interest dividend means any dividend or part thereof (other than a capital gain dividend, as defined in section 852(b) of the Internal Revenue Code) paid by a regulated investment company, or any pool of assets managed by a fiduciary, including but not limited to a financial institution, and designated by it as a state exempt-interest dividend in a written notice mailed to its shareholders or beneficiaries not later than 60 days after the close of its taxable year. If the aggregate amount so designated with respect to a taxable year (including state exempt-interest dividends paid after the close of the taxable year in the manner described in section 855 of the Internal Revenue Code) is greater than the excess of (a) the amount of interest and dividends received on obligations described in ORS 316.680 (Modification of taxable income) (1)(a), over (b) the sum of the amount of any deductible interest on indebtedness incurred to carry such obligations and the amount of any deductible expenses incurred in the production of interest and dividend income from such obligations, the portion of such distribution which shall constitute a state exempt-interest dividend shall be only that proportion of the amount so designated as the amount of such excess for such taxable year bears to the amount so designated. The exemption created by this section shall not exceed the portion of the dividend which is attributable to items of interest described in ORS 316.680 (Modification of taxable income) (1)(a).

(3) A state exempt-interest dividend shall be treated by a shareholder or beneficiary for all purposes as an item of interest described in ORS 316.680 (Modification of taxable income) (1)(a). The shareholder or beneficiary shall subtract from federal taxable income the state exempt-interest dividends received with respect to the shares of a regulated investment company or any pool of assets managed by a fiduciary, including but not limited to a financial institution. However, the amount subtracted under this section shall be reduced (but not below zero) by an amount equal to any deductible interest on indebtedness incurred to carry such shares multiplied by the state exempt-interest dividends and divided by the total dividends on such shares for the taxable year.

(4) If a shareholder of a regulated investment company, or a beneficiary of a pool of assets managed by a fiduciary, including a financial institution, receives a state exempt-interest dividend with respect to any share, and the share is held by the taxpayer for six months or less, then any loss on the sale or exchange of the share shall, to the extent of the amount the state exempt-interest dividend, be disallowed. The Department of Revenue may adopt rules that reduce the holding period requirements to less than six months.

(5) As used in this section, financial institution means a financial institution as defined in ORS 706.008 (Additional definitions for Bank Act). [1987 c.293 §12b; 1989 c.988 §2; 1993 c.18 §81; 1993 c.229 §24; 1993 c.318 §13; 1997 c.631 §457]