Withholding of state income taxes from certain periodic payments
(1) As used in this section:
(a) “Commercial annuity” means an annuity, endowment or life insurance contract issued by an insurance company authorized to transact insurance in the State of Oregon.
(b) “Department” means the Oregon Department of Revenue.
(c) “Designated distribution” means any distribution or payment from or under an employer deferred compensation plan, an individual retirement plan or a commercial annuity. “Designated distribution” does not include any amount treated as wages as defined in ORS 316.162 (Definitions for ORS 316.162 to 316.221), the portion of any distribution or payment that is not includable in the gross income of the recipient or any distribution or payment made under section 404(k)(2) of the Internal Revenue Code.
(d) “Employer deferred compensation plan” means any pension, annuity, profit-sharing or stock bonus plan or other plan deferring the receipt of compensation.
(e) “Individual retirement plan” means an individual retirement account described in section 408(a) of the Internal Revenue Code or an individual retirement annuity described in section 408(b) of the Internal Revenue Code.
(f) “Nonperiodic distribution” means any designated distribution which is not a periodic payment.
(g) “Payer” means any payer of a designated distribution doing business in or making payments or distributions from sources in this state.
(h) “Periodic payment” means a designated distribution which is an annuity or similar periodic payment.
(i) “Plan administrator” means a plan administrator as described in section 414(g) of the Internal Revenue Code, who is the administrator of a plan created by an Oregon employer.
(j) “Qualified total distribution” means any designated distribution made under a retirement, annuity or deferred compensation plan described in section 401(a), 403(a) or 457(b) of the Internal Revenue Code, that consists of the balance to the credit of the employee, exclusive of accumulated deductible employee contributions, made within one tax year of the recipient.
(2)(a) The payer of any periodic payment shall withhold from such payment the amount which would be required to be withheld from such payment under ORS 316.167 (Withholding of tax required) or 320.550 (Tax on wages) if the payment were wages paid by an employer to an employee. The time and manner of payment of withheld amounts to the department shall be the same as that required under ORS 316.197 (Payment to department by employer) for withholding of income taxes from wages.
(b) The payer of any nonperiodic distribution shall withhold from such distribution an amount determined under tables prescribed by the department.
(c) The maximum amount to be withheld under this section on any designated distribution shall not exceed 10 percent of the amount of money and the fair market value of other property received in the distribution. If the distribution is not subject to withholding for federal income tax purposes under section 3405 of the Internal Revenue Code, it shall not be subject to withholding under this section.
(3)(a) Except as provided in paragraph (b) of this subsection, the payer of a designated distribution shall withhold and be liable for payment of amounts required to be withheld under this section.
(b) In the case of any plan described in section 401(a), 403(a) or 457(b) of the Internal Revenue Code, or section 301(d) of the Tax Reduction Act of 1975, the plan administrator shall withhold and be liable for payment of amounts required to be withheld under this section, unless the plan administrator has directed the payer to withhold the tax and has provided the payer with the information required by rule of the department.
(4)(a) An individual may elect to have no withholding by a payer under subsection (2) of this section. If an individual has elected to have no federal withholding from payments or distributions described in this section the individual shall be deemed to have elected no withholding for state purposes, unless the individual notifies the payer otherwise.
(b) An election made under this subsection shall be effective as provided under rules promulgated by the department. The rules required under this paragraph shall provide the manner in which an election may be revoked and when such revocation shall be effective.
(c) An election made under this subsection does not apply to amounts required to be withheld under ORS 320.550 (Tax on wages).
(5) The payer of any periodic payment or nonperiodic distribution shall give notice to the payee of the right to make an election to have no state withholding from the payment or distribution. The department shall provide by rule for the time and manner of giving the notice required under this subsection.
(6) Any rules permitted or required to be promulgated by the department under this section shall, insofar as is practicable, be consistent with corresponding provisions of section 3405 of the Internal Revenue Code and regulations promulgated thereunder.
(7) Any designated distribution shall be treated as if it were wages paid by an employer to an employee within the meaning of ORS 316.162 (Definitions for ORS 316.162 to 316.221) to 316.221 (Disposition of withheld amounts) and 320.550 (Tax on wages) for all other purposes of ORS 316.162 (Definitions for ORS 316.162 to 316.221) to 316.221 (Disposition of withheld amounts) and 320.550 (Tax on wages). In the case of any designated distribution not subject to withholding by reason of an election under subsection (4) of this section, the amount withheld shall be treated as zero. [1985 c.87 §9; 2003 c.77 §17; 2017 c.750 §122d]
Note: 316.189 (Withholding of state income taxes from certain periodic payments) was added to and made a part of ORS chapter 316 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation.
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