Understanding Oregon Initiative Petition 17 (IP 17)

Understanding Oregon Initiative Petition 17 (IP 17)

August 12, 2024

The Oregon Rebate and its Proposed Corporate Tax Changes

If approved by voters, Oregon’s Initiative Petition 17 (IP 17) would result in potential annual rebates of $1,160 for each eligible Oregon resident and a significant tax increase for an estimated 2,200 corporations, according to the analysis report from the State of Oregon’s Legislative Revenue Office. Once partial corporate fiscal years are satisfied, the annual rebate amounts could increase substantially to $1,605 in 2027 and $1,686 in 2028, according to projections.

Oregon IP 17 Overview

Oregon’s Initiative Petition 17 is currently undergoing its signature certification by the Oregon Elections Division of the Secretary of State’s Office. Once completed and certified, it will continue its path to the November 5th election ballot. Oregon election ballots begun to be mailed to voters on August 7th.

IP 17 would remove the current cap on corporate minimum tax on sales that exceed $25 million and distribute the tax revenues received to every Oregon resident who has resided in the state over 200 days. S-corporations would also move from having a flat $150 minimum tax (regardless of revenues or profits) to also being subject to an additional 3% minimum tax rate if their gross sales exceed $25 million.

If approved by voters, January 1, 2025, would be the effective date of the changes noted in the initiative.

Initiative 17’s Corporate Minimum Tax Impact

While most businesses will be unaffected by the new proposed minimum tax rate, C-corporations and S-corporations with sales exceeding $25 million annually will be subject to increased assessments that will likely have them consider changes to the way they do business in Oregon. Based on current records, 1,422 C-corporations would be affected and 791 S-corporations.

Opponents of the proposal believe that it will result in higher consumer prices as the increased taxation costs at each stage of production would need to be passed on to the end users. Businesses that operate with lower margins are particularly at risk of needing to shift supply chain operations out of state. The Oregon Legislative report acknowledges that the pyramiding of taxes would occur and impact certain industries disproportionately when more transactions are involved in producing their products for end users.

Oregon IP 17 Rebate Program

The bulk of Initiative Petition 17 is centered around the rebates it would provide to all individuals who reside in Oregon for more than 200 days within a calendar year. The tax rebates would be available regardless of income or whether the individual files a tax return. Oregon estimates that 84% of the rebates would be distributed via tax credits and 16% would be distributed by direct payment.

As noted above, the 2025 tax year is expected to garner tax rebates of $1,160 per person if the measure is approved. The average tax reduction per return is projected to be $2,100. Higher income categories stand to have larger average tax reductions due to a greater number of individuals per return.

The focus for proponents of IP 17 is providing rebates to every Oregon resident. They’ve focused on an estimated $750 per person, so Oregon’s analysis is likely to earn cheers. They see each rebate as an economic stimulus for communities and a significant effort to help reduce child poverty levels.

Be Ready for Oregon IP 17

Initiative Petition 17 would significantly shift the tax burden from individuals to corporations. Both groups should invest time toward tax planning if the initiative passes. Businesses with over $25 million in sales will need to analyze the potential impact of the change, as should every business that works with those that may be affected.

REDW’s State and Local Tax (SALT) advisors are standing by to provide guidance on the potential impact of Oregon’s Initiative Petition 17 so individuals and organization leaders are fully prepared to make informed decisions prior to or soon after election day.

Contact us today to enlist trusted expertise on your options.


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