The Billups Company CPA's, Inc.

Measure 67 has passed in Oregon and many corporations have asked about how the tax will affect them.  The measure raised the minimum tax to $150 from $10 and is retroactively applied to 2009.  The tax is limited to $150 for S-corporations and Partnerships.  Sole Proprietors are not impacted by this measure.  C-Corporations will see their minimum taxes climb based on their Oregon sales whether or not they show an annual profit.  If they show a profit, the measure would raise their tax rate from 6.6% to 7.9% on income over $250,000.  The rate returns to the current level for most companies in 2013.  This tax will hit those companies that have large sales but low profit margins.

One way a C-Corporation can protect their business from this new retroactive tax increase is to see if they can convert to an S-Corporation.  Corporations with calendar tax years beginning Jan. 1 can make the election retroactively to the first of this year by filing the form by March 15, 2010. While this won’t avoid the retroactive increase for 2009, it will begin to reduce tax liability immediately in 2010.

Before converting it’s wise to talk to us about it first.  C-Corporation’s must meet certain requirements to see if they qualify to elect S-Corporation status.  Also, tax consequences should be considered to determine if conversion is worthwhile.

If you are just starting a business it seems it’s more important than ever to weigh the pros and cons of which type of entity you will be.  Oregon’s new measure 67 tax increase might sway many new business’s towards S-Corporation status.