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Phone: 503-823-5157

Arts Tax: 503-865-4278

111 SW Columbia St, Suite 600, Portland, OR 97201

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BTAR 600.94-3 Qualified Retirement Plans

City of Portland Revenue Bureau, License and Tax Division

Business Tax Administrative Rule 600.94-3

Qualified Retirement Plans

For taxable years which begin on or after January 1, 1993, contributions made by an employer into a Qualified Retirement Plan will be allowed as a deduction for purposes of the Business License and Business Income Tax laws. To be "qualified", a plan must meet the requirements of IRC Sec. 401(a). If the plan allows nondeductible employee contributions, those contributions are not an allowed deduction for business license or business income tax purposes. An Individual Retirement Account (IRA) established by an individual who does not operate a Schedule C trade or business activity is not an allowed deduction.

Example 1: Adams and Baker Partnership is owned by 15 partners. Each partner receives pass-through ordinary net income from self employment. Additionally, the partnership passes through a deduction of $15,000 for each partner's Keogh plan contributions. Since the Keogh is a qualified plan, a deduction will be allowed for the Keogh contributions when determining the partnership net income.

Example 2: Connie Cole, a sole proprietor, makes annual tax deferred contributions into a qualified simplified employee plan of $10,000 from her interior design business. When calculating her net income, a deduction will be allowed for the contributions to the simplified employee plan.

Example 3: Stan Stevens is required to file a combined license/tax return for the rents he receives from a commercial building located in Portland. He also receives wages as a night watchman. Stan's total income reported on his federal form 1040 would allow him to fund a fully deductible IRA in the amount of $2,000 based on his taxable compensation from his night watchman job. However, the IRA is not an allowed deduction for business license or business income tax purposes since it is not funded by the taxable compensation of a Schedule C trade or business. Rents reported on Schedule E are not considered taxable compensation for IRA purposes.

Adopted: 8/29/94

(PCC 7.02.600 / MCC 5.60.600)

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