Corporations with current-year profits often pay little or no tax because of carrybacks and carryforwards of both tax losses and credits.

The swings in our economy have been so great over the past few years that many businesses incurred substantial losses during recent bad times (such as 2000-2003). It may be taking some of them a while to work those through. Newer firms also have significant losses to carry forward just because it takes a while to reach profitability. The U. S. and Oregon tax codes wisely recognize this.

I also wonder how many BO readers (and members of the overall population understand the distinction between net sales, gross profits and net profits. "Profitability" refers only to NET profits before taxes. My experience is that there is widespread misunderstanding of these distinctions.

Oh I don't know Chuck, perhaps they paid that out as income or a dividend and paid regular income tax to salem and the feds? that would pop your little bubble now wouldn't it.

Or maybe they REINVESTED their profits back into the company in order to grow and stabilize it for future employment growth. That would bust your little bubble as well.

Or maybe they did retain the profits and just let them sit there. If they did that they know full well that they have merely delayed paying the taxes on those profits until they either sell the business or distribute them as dividends. At that time the tax will be paid.

I know that if I have decent profits sitting on the books as the end of the year approaches then I look for equipment or tools to purchase. I would much rather re-invest the profits into my business than give any money to the clowns in Salem. Salem isn't going to do much if anything to help me run the business so I don't see any reason to send them money. In fact, there is a whole bunch of folks in Salem who work hard at trying to destroy any viable business in the State. The less money sent to Salem the better.

Oh crap, here he goes again

FASB profits DO NOT equal IRS taxable income. This has been explained to you numerous times(and on numerous posts) and yet you continue to willfully ignore that fact. I strongly suggest you take a class in Federal Income Taxation.

+++++++++++++++++++++++++++++++++++++++ IRS Form 1120 US Corporation Income Tax Return

Line 28 Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11

Line 29 Less: a Net operating loss deduction b Special deductions (Schedule C, line 20)

Line 30 Taxable income. Subtract line 29c from line 28 (see instructions)

Here is where the confusion lies in this post: the author is using Line 28 while the IRS and the State of Oregon use Line 30 as the determinate of TAXABLE INCOME. +++++++++++++++++++++++++++++++++++++++

Here is an example of what this means: XYZ, Inc has 2008 taxable income of $(50,000)

XYZ, Inc has 2009 taxable income b/f NOL deduction & special deductions of $ 50,000

What does XYZ, Inc get to legally place on Line 30 of their 2009 tax return????

$0.00 of taxable income

Why do corporations get to do this? Because the law says they can. Just like you deduct property taxes or mortgage interest from your 1040 because the law says you can.

Sorry, Chuck, but you are wrong.

According to your source material, only 1,112 companies paying the minimum tax in 2006 had Oregon Taxable Income of more than $0.

You can only get to your "over 5,000" number (5,156 I believe is the number you quoted in your earlier piece) by including 4,900 companies with some sort of losses carried forward, 4,770 of which had Oregon Taxable Income of $0 or less after those losses were carried forward.

So clearly your use of "profits" comes pretty much exactly as MP97303 has said, before accounting for any carry-forward losses.

By the way, of those 1,112 corporations with Oregon Taxable Income, 969 (87%) of them had taxable income no greater than $50,000, the lowest (non-zero) category reported in your source document.

Those big scary numbers you worry about don't really look so big and scary when you apply a little perspective...

Chuck,

Keep up the good work. I'm going to save this post, including its links, to refer to when the next corporate spokesperson tries to BS me about Oregon taxes--

Chuck, to extend your last comment further:

Thousands of residents who live in Oregon, some who may even live in Dunthorpe, SoWa, the Pearl, and Lake Oswego have considerable income that may be from sources such as tax free annuities or tax-free municipal bonds. Granted, none of this income is earned income. These same citizens may pay no federal or state income taxes; they may pay a nominal sum in property taxes, but may have no correlation to their income.

Should these folks also pay their fair share what ever that may be?

Yes, I know it sounds like I am defending the rich. Someday, I too hope to join their ranks. In the meantime I am obliged to pay any taxes due according to current law and I am permitted to take any deduction or tax credit I am also permitted under law.

In another thread it was suggested that perhaps calling the corporate minimum tax a tax is a misnomer. More appropriate might be a business license fee. Some jurisdictions determine this fee based on number of employees, or number of square feet occupied. In the case of a business fee, it is also sometimes fixed, with no correlation to gross revenues or profits.

What has been missing from the corporate tax discussion in the various threads over the past several months is that there is an implied correlation that business profitability is proportional to the amount of state services consumed. This is not necessarily so.

What I look for in any business that is established in Oregon, or is likely to set up operations here is how likely it is to grow and generate new jobs for the region. I'd much rather have a company set up shop here that is geared to developing jobs with above average pay.

The state and counties have expended considerable effort over the years to attract businesses to the region. For those that fail, they disappear with no lasting benefit to the state. For those that succeed, the reward is a critical look by government at their financial coffers.

You must admit that whatever laws are in place to set tax rates, the intent is to influence future actions by businesses.

Taxes are the price we pay for a civil society. We just can't seem to agree on who should be paying and who should get a pass. It's easy to pick on big "bad" business since their numbers are small when compared to the overall voting population.

Perhaps even non-profits should be subject to taxes? their numbers are small, too.

From the source:

Credits A corporation can claim any of more than 35 applicable credits to reduce its Oregon tax liability. Only one of the credits is refundable. Most allow unused credit amounts to be carried forward and used in later years.

Its not just business that gets to use credits to offset taxes. How many of you have claimed the following on your Form 40? 33 Exemption credit. 34 Retirement income credit. 35 Child and dependent care credit. 36 Credit for the elderly or the disabled. 37 Political contribution credit. 39 Other credits. Identify:

What about all of the Residential Energy Tax Credits that are available to make you home more energy efficient? How many of you don't take those....

What we have is outrage that a biz is taking legally allowable deductions and credits. What is sad is that there is not equal outrage when an individual does the same.

Of the 950 tax returns filed in TY 2006 by C Corps with Oregon taxable income of $1,000,000+, only 31 payed the minimum tax. 3.26% of the category

That is 0.0009357% of ALL returns filed. So lets bring the hammer down on the other 99.999% of C's so some of you can be happy.

Exhibit 3.14 Oregon DOR

Who am I? I'm David Wright. Always have been. For years I've identified myself as such on this board. It's not a mystery, Chuck.

I'm a person who is actually capable of not only reading, but comprehending a simple table of data in a publication from the Oregon Department of Revenue. A claim you apparently can not make, Chuck.

Chuck, will you publicly admit that you just plain got your facts wrong (a disturbing tendency you have, given that your job involves understanding the facts at least well enough to analyze public policy)? Or have YOU no shame?

I've never used a bumpersticker, Chuck. I prefer to actually think about public policy issues, and rarely is the correct answer found in a few words zipping by at 60 mph.

Tax the unemployed? Well, sure, if you're going to keep the corporate minimum at all, it'd only be fair. But after reading Robert Harris' argument recently in our other thread on this subject, I've changed my preference. It's much better to drop the corporate minimum entirely. Not $10. $0.

Hypothetically, Chuck, what would the net impact to the state budget be if the corporate minimum tax was eliminated entirely?

Based on your 2006 source data, that would be a net loss of $208,030. Something less than that, actually, since a very small portion of those who pay the minimum would pay something between $0 and $10 without the minimum, but I'll give you the highball loss estimate just to be a good sport.

Think we might be able to find a couple of hundred thousand dollars to save in a general fund that runs, what, about $6,900,000,000 each year (give or take)? That's about 0.003% for those who are "math-challenged" like Chuck (talk about pointing fingers and having 3 point back to you!)

Let me put those numbers another way:

$6,900,000,000  Annual General Fund w/ $10 minimum tax
$6,899,791,970  Annual General Fund w/ NO minimum tax
$      208,030  Difference

Think maybe we can reduce some of those tax credits offered by the state that you seem to hate so much (unless, of course, it's a credit that you love)? Why in 2006 more than $60,000,000 of tax credits were actually used by C-Corps to pay their taxes (out of more than $150,000,000 claimed), maybe we could shave 0.33% off of that (resulting in corporations with actual taxable income paying actual taxes, rather than spreading that burden over the vast majority of corporations without taxable income).

You see, Chuck, there are a number of ways to skin that cat without resorting to taxing unemployed people. There are many ways that might be good public policy, but don't fit nicely on a bumper sticker. People who take the time to actually understand the issues (and the correct underlying facts) might be able to come up with some pretty good ways to allow the state to make up whatever miniscule revenue would be lost by dropping the corporate minimum entirely.

But no, let's not have that discussion. Instead let's try to distract attention from the fact that you can't quite seem to understand the data that you're analyzing, and turn it back on the big bad bogeymen who use numbers and math and reading comprehension to confuse people.

Chuck, you remind me a very great deal of our dear departed Commander-in-Chief, who also never let facts get in the way of what he knew in his gut.

And it seems to me that you're largely full of the same stuff.

Phew! Mr. Wright, that's one hell of a math based rant. It was quite fun!

I can't wait to see mp97303's and David Wright's bumperstickers: "Keep the $10 Corporate Minimum Tax and Raise Taxes on the Unemployed - Vote No on Measures 66 and 67."

Who are these folks? Have they no shame?

Great reply.....No Chuckie, as I have stated many times before, I would love to see either:

1) A minimum tax on individuals as long as there is one on corporations so that all tax paying entities are treated equally.......OR

2) The elimination of the min tax and the implementation of a state business license fee of some sliding scale value. (My preferred option)