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Office of Management & Finance

Revenue Division

Arts Tax: 503-865-4278

Business Taxes: 503-823-5157

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

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BTAR 600.93-2A Payments Deemed to be Compensation to Owners

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Business Tax Administrative Rule 600.93-2A

Payments Deemed to be Compensation to Owners

Payments deemed to be compensation to owners are not an allowed deduction under the Business License and Business Income Tax laws.

Generally, any payment included as wages, tips or other compensation on the owner’s federal Form W-2 would be deemed to be compensation to owners. Additionally, certain payments made by an entity on behalf of an owner are deemed to be compensation paid to an owner even if not included as wages on the W-2.  These payments may include, but are not limited to:  vehicle use, company paid housing, taxes paid on behalf of an owner, nonemployee compensation, management fees, and payments for legal, medical, vision benefits that are not provided to all employees.

Example 1:  Partnership A is owned by 15 partners.  The partnership elects to pay state and local taxes at the partnership level on behalf of the partners.  The deduction for taxes paid on behalf of the partners is deemed compensation to owners and is therefore not an allowed deduction for the partnership.

Example 2:  Corporation C is owned by 18 controlling shareholders.  The corporation paid legal fees for one controlling shareholder for litigation unrelated to corporate activities.  The corporation has no benefit plan that includes legal coverage.  The deduction for legal fees paid on behalf of the controlling shareholder is deemed compensation to an owner and is therefore not an allowed deduction.



Adopted: 11/23/93

Amended: 10/11/12 (housekeeping changes)

(PCC 7.02.600 / MCC 12.600)