2017 ORS 316.856¹
Severance pay
  • rules

(1) As used in this section:

(a) “Invest” means to exchange cash for equity, debt, convertible debt or management responsibilities, accompanied by terms that substantiate ownership or control of an interest in a business. “Invest” does not mean to make a loan to a business.

(b) “Material participation” has the meaning given that term in section 469 of the Internal Revenue Code.

(c) “Severance pay” means funds paid to an employee upon termination of employment, other than back wages, vacation pay or sick pay.

(d) “Small business” has the meaning given that term in ORS 183.310 (Definitions for chapter).

(2) There shall be subtracted from federal taxable income an amount equal to severance pay that a taxpayer receives during the tax year and invests in a new or existing small business in this state if:

(a) The investment occurs on or before the due date for the return for the tax year or the expiration of the extension period for filing that return, if any;

(b) The investment continues for at least 24 months following termination of employment;

(c) The taxpayer materially participates in the small business;

(d) The taxpayer has not previously claimed a subtraction under this section; and

(e) The small business is not the employer that paid the severance pay and does not have any owner in common with the employer that paid the severance pay.

(3) The subtraction under this section may not exceed the lesser of:

(a) The minimum balance of principal that remains invested by the taxpayer in the small business at the close of any month during the 24 months following termination of employment; or

(b) $500,000.

(4) If at any time the Department of Revenue determines that a taxpayer is not in compliance with any of the provisions of this section, the department shall disallow the subtraction under this section. Upon this disallowance, the department shall determine the amount of tax due absent the subtraction under this section and immediately shall collect any taxes due by reason of the disallowance.

(5) The Department of Revenue shall establish by rule procedures for administering this section, including procedures for verifying the receipt of severance pay by the taxpayer. [2010 c.66 §2]

Chapter 316

Notes of Decisions

Unless the divorce decree specifically designates that pay­ments are for child support, pay­ments will be treated as alimony. Henderson v. Dept. of Rev., 5 OTR 153 (1972)

The goal of this chapter is to incorporate all of the pro­vi­sions of the federal Internal Revenue Code; taxable income should be adjusted whenever the result of the adjust­ment is to give effect to the policies or principles of the federal Internal Revenue Code, even though no express authority for the adjust­ment is present in the statutes. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974); Smith v. Dept. of Rev., 270 Or 456, 528 P2d 73 (1974)

By its enact­ment of this chapter, the legislature intended to adopt §172 of the federal Internal Revenue Code allowing for the carryback and carryforward of net operating losses. Christian v. Dept. of Rev., 269 Or 469, 526 P2d 538 (1974)

Where plaintiff failed to ap­peal timely as re­quired by this sec­tion, ap­peal rights were not preserved so that cause could be considered on merits. Dela Rosa v. Dept. of Rev., 11 OTR 201 (1989), aff’d 313 Or 284, 832 P2d 1228 (1992)

Where taxpayers paid foreign income taxes on foreign income and claimed foreign taxes paid as federal tax credit and as state business expense deduc­tion, taxpayers who claim federal foreign tax credit are entitled only to foreign tax deduc­tion provided in ORS 316.690 (Foreign income taxes). Whipple v. Dept. of Rev., 309 Or 422, 788 P2d 994 (1990)

For purposes of claim preclusion, all issues re­gard­ing taxpayer’s income tax liability for tax year constitute same claim. U.S. Bancorp v. Dept. of Revenue, 15 OTR 13 (1999)

Atty. Gen. Opinions

Political contribu­tions as credit against Oregon tax return, (1974) Vol 37, p 159

Law Review Cita­tions

57 OLR 309 (1978); 16 WLR 373 (1979)

1 Legislative Counsel Committee, CHAPTER 316—Personal Income Tax, https://­www.­oregonlegislature.­gov/­bills_laws/­ors/­ors316.­html (2017) (last ac­cessed Mar. 30, 2018).
2 Legislative Counsel Committee, Annotations to the Oregon Revised Stat­utes, Cumulative Supplement - 2017, Chapter 316, https://­www.­oregonlegislature.­gov/­bills_laws/­ors/­ano316.­html (2017) (last ac­cessed Mar. 30, 2018).
3 OregonLaws.org assembles these lists by analyzing references between Sections. Each listed item refers back to the current Section in its own text. The result reveals relationships in the code that may not have otherwise been apparent.