Qualified Business Income Reduced Tax Rate (QBIRTR)

# (1)

(1) Definitions. For purposes of ORS 316.043 and this rule:

(a) "Employee" means an individual in the service of another under any contract of hire, express or implied, oral or written, where the person for whom the service is performed has the power or right to control and direct the individual in the material details of how the work is to be performed.

(b) "Disregarded Entity" means an entity with only one owner that is not recognized for tax purposes as an entity separate from its owner.

(c) "Independent contractor" is a person who performs services for another but is not an employee.

(d) "Original return" is the first return filed for the tax year or the latest subsequent return filed by the due date of the return. If a timely extension was filed, the due date is the extended due date.

# (2)

(2) Timing of Election. The Qualified Business Income Reduced Tax Rate (QBIRTR) is irrevocable and must be made on the original return filed on or before the due date with regard to extensions.

# (3)

(3) Multi-tiered Entities. If a partnership or S corporation is an upper-tier partner in a lower-tier partnership and the lower-tier partnership meets the employee requirement, nonpassive income from the lower-tier partnership that passes through to the upper-tier entity and in turn to a partner or shareholder of the upper-tier partnership or S corporation may qualify for the QBIRTR, so long as the partner or shareholder of the upper-tier entity materially participates in the lower-tier partnership's trade or business and makes an election on the partner or shareholder's original return.

# (4)

(4) Employees of disregarded entities are treated as employees of the owner of the disregarded entities.

# (5)

(5) Employee Requirement.

(a) Leased employees include workers who are paid by a professional employer organization (PEO) that enters into a contract with a contracting company. The workers subsequently perform their services for the contracting company, which has the right to control and direct the leased employee in the material details of how the work is to be performed. The contracting company pays the PEO amounts of wages and other benefits due the workers, plus a fee for the PEO's services. The PEO directly pays the workers' wages for the services performed for the contracting company. Since the employees are performing services as employees for the contracting company and the contracting company is a common law employer responsible for paying their wages, these employees may be included as employees of the contracting company for purposes of the QBIRTR.

(b) Persons performing services for another not as employees, but as independent contractors may not be used to qualify for the QBIRTR.

(c) Each employee must work thirty hours per week. One may not aggregate employees who work the same position.

# (6)

(6) Individuals. All members are pass-through entities subject to the personal income tax imposed by ORS chapter 316 and have elected to pay the pass-through business alternative income tax. The pass-through entity will have an addition in their Oregon tax in order to be considered for the QBIRTR and a tax credit may be taken by the individual for taxes paid by the entity.