New taxes impact Portland, Oregon area businesses and individuals
INSIGHT ARTICLE |
Effective Jan. 1, 2021, Portland, Oregon area businesses and individuals are subject to new taxes at the regional and county levels. Voters in greater Portland and Multnomah County approved measures in recent elections that levy additional taxes beginning as early as April 1, 2021, including a Supportive Housing Services Tax (regional government) and a Preschool for All Tax (Multnomah County).
Supportive Housing Services Tax
The Supportive Housing Services Tax is a program to raise money for people experiencing homelessness or at risk for experiencing homelessness. Initiated by Metro, the regional government of Clackamas, Multnomah and Washington counties, the program was passed by voters in May 2020 and will be funded by a 1% tax on taxable income of more than $125,000 for individuals and $200,000 for couples filing jointly, as well as a 1% tax on profits from businesses with gross receipts of more than $5 million.
Metro is providing an online address tool for taxpayers to determine if they are in the Metro jurisdiction, thus subject to the tax, either by residency, business location or work situs. Portland will be administering the tax on Portland Revenue Online (PRO).
For 2021, employers in the Metro jurisdiction can voluntarily withhold the tax from employee’s paychecks. Withholding will become mandatory in 2022 for employees earning $200,000 or more annually. Employees have the option of opting out of withholding. Additionally, employers are required to file quarterly and annual reconciliations and report local wages and tax withheld on employee W-2 forms.
The business tax portion of this new program is based on the net income of businesses located in Metro with over $5 million in gross receipts from both within and without of Metro’s jurisdiction. Estimated quarterly payments for the tax are expected to be required but administrative rules for the tax are still undergoing rulemaking.
Preschool for All Tax
The Preschool for All Tax was passed by Multnomah County voters in the November election to provide funding for three and four year olds in the county to access “free, high-quality, developmentally appropriate, culturally responsive preschool experiences.” The tax is imposed on the personal income of residents of Multnomah County as well as non-residents with Multnomah County-sourced income.
Individuals with Oregon taxable income over $125,000 will be taxed at 1.5%, increasing to 3% for incomes above $250,000. Joint filers with Oregon taxable income over $200,000 will be taxed at the 1.5% rate with the 3% rate for incomes above $400,000.
The tax will have similar withholding to the Supportive Housing Services Tax, voluntary in 2021 and required in 2022 for employees earning over $200,000 annually from a single employer. Employees can opt out of withholding. It is anticipated that withholding tables will be published soon.
The tax is due on April 15 of the following year on a separate return. An annual report, in addition to quarterly withholding, is also required of county employers. The tax is collected by Portland on behalf of Multnomah County. The city will be able to accept remitted taxes in April 2021.
Businesses and individuals operating/working in the Portland area and Multnomah County should be aware of these new taxes and the withholding and filing requirements that are effective as early as the second quarter of 2021. Taxpayers with questions about these new taxes should consult with their state and local tax professional for more information.