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On 6 October, the Oregon Tax Court’s Regular Division reversed its prior decision and held that Subpart F income included in Oregon taxable income qualifies as a “gross receipt” for sales factor apportionment purposes. This finding allowed the Tax Court to evaluate whether a sales factor statutory provision operates to include or exclude such Subpart F income from the sales factor. 

The Tax Court concluded that Subpart F income would be excluded from the sales factor. However, “reinclusion” would occur if the income is “derived from the taxpayer’s primary business activity.” Because this is a factual matter and the Tax Court was ruling on motions for summary judgment, the proceedings remain with the parties to work through the factual considerations.

The takeaway: Although further proceedings remain, the Tax Court’s conclusions are significant. Acknowledging that Subpart F income qualifies as “gross receipts” allows such income to enter the sales factor unless otherwise excluded. Oregon taxpayers receiving Subpart F income should consider whether they could include unsubtracted Subpart F income in their Oregon sales factors.