Arts Education and Access Income Tax Administrative Rules
According to Portland City Code Chapter 5.73 (Arts Education and Access Income Tax), the Revenue Division (Division) shall adopt administrative rules necessary to implement tax collection and administration. (PCC 5.73.080 D.) The following rules were adopted under this authority.
For purposes of the Arts Education and Access Income Tax (“Tax”) administrative rules only, the following definitions apply:
A. “Income” includes, but is not limited to, all income earned or received from any source. Examples of income include, but are not limited to, interest from individual or joint savings accounts or other interest bearing accounts, child support payments, alimony, unemployment assistance, disability income, sales of stocks and other property (even if sold at a loss), dividends, gross receipts from a business and wages as an employee. “Income” does not include benefits payable under the federal old age and survivors insurance program or benefits under section 3(a), 4(a) or 4(f) of the federal Railroad Retirement Act of 1974, as amended, or their successors, or any other income a city or local municipality is prohibited from taxing pursuant to applicable state or federal law.
1. Examples of income the city is prohibited from taxing include, but are not limited to, Social Security benefits, Public Employee Retirement (PERS) pension benefits, federal pension benefits (FERS) and income from US Treasury bill notes and bonds interest.
2. Effective for tax years that begin on or after January 1, 2015, U.S. Department of Veterans Affairs (VA) disability benefits will not be considered taxable income for purposes of the Arts Tax.
3. The City may tax income federal and/or state governments choose not to tax.
B. “Income-earning” means the receipt of income from any source whatsoever, including, but not limited to, gainful employment and investments.
C. “Taxfiler” means a resident of the City who is or could be subject to the Tax or the taxfiler’s authorized representative.
D. “Taxfiler’s authorized representative” means a person to whom the taxfiler has provided written authorization to conduct business with the Division on the taxfiler’s behalf, as well as persons who are authorized by law to represent the taxfiler, such as a personal representative, guardian or attorney.
E. “Tax Year” means the calendar year.
F. “Certified Arts or Music Education Teachers” means arts or music teachers licensed by the Oregon Teachers Standard & Practices Commission (TSPC) or registered with TSPC as a charter school arts or music teacher in accordance with the requirements of ORS 342.125.
Authority of Director
A. The Director is authorized to reduce or waive any tax owed if it is determined to be uncollectible or not cost-effective to collect.
B. The Director is authorized to sign any settlement agreement compromising any asserted tax liability.
C. The Director is authorized to accept unrestricted gifts to the Arts Education and Access Fund on behalf of the Division and City.
D. The Director is authorized to resolve all issues regarding the correct amount of Net Revenues to be paid to the School Districts and to the Regional Arts and Culture Council (RACC).
E. Authority granted to the Director by these rules may be delegated in writing to another employee within the Division.
F. The Director is authorized to waive or extend any timeline required by these rules for good cause shown.
Disclosure of Financial Information
A. The Division will provide copies of the taxfiler’s own financial information filed with the Division for any tax year to the taxfiler upon request. The Division may recover from the taxfiler any reasonable copying costs incurred in fulfilling the request.
B. The Division may disclose and give access to taxfiler financial information and Social Security numbers to:
1. The City Attorney, his or her assistants and employees, and other legal representatives of the City, to the extent the Division deems disclosure or access necessary for the performance of the duties of advising or representing the Division; and
2. Other employees, agents and officials of the City, to the extent the Division deems disclosure or access necessary for such employees, agents or officials to:
a. aid in any legal collection effort on unpaid accounts, or
b. perform their duties under contracts or agreements between the Division and any other department, Division, agency or subdivision of the City relating to the administration of tax (e.g., issuing federal Form 1099s to refunds recipients).
3. The Division may require that employees, agents and officials of the Division or City identified in Paragraph B.2 above execute a certificate in a form prescribed by the Division, stating that the person has reviewed these provisions of law and is aware of the penalties for the violation (PCC 5.73.100 Confidentiality), prior to the performance of duties involving access to the financial information submitted to the Division.
Request for Financial Information
A. The Division may request financial information from the taxfiler to ascertain the correctness of any claim of exemption.
B. Failure of the taxfiler to provide information deemed reasonably necessary by the Division to support a claim of exemption by the taxfiler permits the Division to deny the exemption request.
C. The Division may request financial information, including but not limited to federal and state tax returns to ascertain the correctness of a statement by an individual that they do not have income and do not owe the tax.
D. Failure of the taxfiler to provide information deemed reasonably necessary by the Division to support a claim of no income permits the Division to assess the tax.
E. Pursuant to authority granted by 42 USC 405 (c)(2)(C)(i), the Division may require taxpayers to provide their full Social Security number. The purpose of this requirement is to assist in the administration of the Arts Tax including, but not limited to, compliance with federal Form 1099 filing requirements and comparison of Arts Tax filings to federal taxfiler information.
If a taxfiler is unable to pay the full tax when due, the Division may establish a payment plan and charge the taxfiler a reasonable fee pursuant to written Division policy.
As a precondition to challenging the payment of the tax in a lawsuit, a taxfiler must file a protest in accordance with this Administrative Rule and pursue all administrative appeals under this Administrative Rule. Failure to follow the requirements of this Administrative Rule waives the taxfiler's right to protest pursuant to this rule. There are two ways to file a protest. A taxfiler can pay the tax and seek a refund or a taxfiler can challenge the tax prior to payment. A taxfiler should keep in mind that a failure to pay the tax when due may result in additional penalties and interest as provided in these rules.
1. Protests Prior to Payment of Tax. If prior to payment of any tax or penalties the taxfiler claims no tax or assessed penalties is owed, the taxfiler may protest imposition of the tax or penalties by following the procedures in this Administrative Rule. Failure to follow the requirements of this Rule waives the taxfiler’s right to protest the Division’s decision. To protest the assessed tax or penalties the taxfiler must do the following:
A. The taxfiler must submit written notice of the protest prior to the due date of the tax return.
B. The taxfiler's protest must state the taxfiler’s name, address, year of birth and the last four digits of their Social Security number and state the grounds for the protest. The Division shall mail a response to the taxfiler within 60 calendar days after the protest is filed.
C. If the Division denies the protest, the taxfiler may file a written request for reconsideration of the denial to the Director within 30 days of the date the Division’s response. The Director is not required to reconsider untimely requests for reconsideration.
D. If a request for reconsideration is timely received, the Director may uphold or reverse the Division’s decision. That decision is final and concludes all administrative appeals. The Director’s decision will be mailed to the taxfiler.
E. The Division’s notice that the tax is owed, its response to a protest, and the Director’s decision are each valid if sent to the taxfiler’s last known address.
2. Pay the Tax and Seek a Refund. If a taxfiler claims no tax or assessed penalties are owed, the taxfiler may protest the imposition of the tax or penalties by paying the tax and penalties and requesting a refund of their payment in accordance with this Administrative Rule.
A. In order to receive a refund, taxfilers must submit a written request to the Division within 365 calendar days of the later of:
1. the due date of the tax return; or
2. the date the payment was made.
B. Refund claims may be submitted by filing the Arts Tax Refund Request Form (Form AREF) in accordance with the provisions of this rule.
A. Penalties will be assessed if a taxfiler fails to pay the full tax when due.
B. The penalty for filing late for the 2012 tax year (due June 10, 2013) is:
- Fifteen dollars ($15) if the failure to pay is for a period of four (4) months and five (5) days or less; and
- In addition to the fifteen dollars ($15) stated above, the sum of twenty dollars ($20) if the failure to pay lasts for a period greater than four (4) months and five (5) days.
C. The penalty for filing late for tax year 2013 (due April 15, 2014) and beyond is:
- Fifteen dollars ($15) if the failure to pay is for a period of six (6) months or less; and
- In addition to the fifteen dollars ($15) stated above, the sum of twenty dollars ($20) if the failure to pay lasts for a period greater than six (6) months.
- In other words, the additional $20 will be due if the tax is not paid by October 15 (or the next business day if October 15th falls on a weekend or legal holiday).
D. The Division may waive or reduce any penalty for good cause shown pursuant to its rule on discretionary penalty waivers.
A. See PCC 5.73.010 for the definition of “resident” or “resident of the City.” Generally, the definition of resident will follow the definition used by the State of Oregon for individual income tax purposes (but applying the definition to the City of Portland instead of the State of Oregon). You are generally considered a Portland resident (even if you live outside Portland) if you are “domiciled” in Portland. If you think of Portland as your permanent home, the center of your financial, social and family life, and Portland is the place you intend to come back to when you are away, you are considered to be domiciled in Portland. Regardless of where you are domiciled, you are considered a resident of Portland if you spend more than 200 days of the year in Portland unless you can prove that you were in Portland for temporary or transitory purposes. You are a Portland resident if you temporarily moved out of Portland.
B. Examples of Residency:
1. Jen, a resident of California, takes a vacation to Portland for an entire month during 2012. She also has a temporary work assignment in Portland during 2012 that lasts two months. Jen is able to provide her full-year resident California income tax return and Oregon non-resident tax return as proof that she is a California resident. Since Jen is not a resident of Portland, no tax is due.
2. Esteban maintains a home in Portland and works in Portland. He purchased a summer home in Palm Springs, California and each year thereafter spent about three or four months in that state. He continued to spend six or seven months of each year in Portland. He continued to maintain his home and his social and business connections in Portland and files a full-year Oregon income tax return. Esteban is domiciled in Portland and is taxed as a resident of Portland because he has not demonstrated intent to abandon his Portland domicile nor has he shown intent to make California his permanent home. Esteban is a resident of Portland so he would be subject to the tax.
3. Kahri changed her permanent residence to a location outside of Portland on September 1, 2012. She had no intention of moving back to Portland. She would be subject to the tax in 2012 as she was a resident for a portion of that year, but she would not be subject to the tax in subsequent years that she is not a Portland resident.
4: Barbra is a full-time student attending college in California. She pays out-of-state tuition and returns to her parents’ home in Portland every summer where she works a summer job. She also works a part-time job in California. Barbra’s stay in California is for a temporary or transitory purpose; therefore, she is a resident of Portland and is subject to the tax.
5. Kita is a full-time student attending Portland State University in Portland on a F1 visa. Her parents live in Stockholm, Sweden where Kita graduated from high school. Kita stays in Portland throughout the year, attending summer classes and working at a part-time job in Portland. Kita returns home to Stockholm at least once a year to visit and stays with her parents and intends to return to Sweden upon graduation. She pays non-resident tuition to PSU and files an Oregon Form 40N Non-resident income tax return. By providing copies of her F1 (student) visa, her tuition billing statement and her non-resident tax return, Kita has proven that she is in Portland for a temporary or transitory purpose. Kita is not a resident of Portland therefore would not be subject to the tax.
6. Allen and Vicki are married filing a joint Oregon return. They have a residence in Benton County. On July 2, 2012 Allen moved to Portland because of a permanent job offer. Both spouses visit each other on weekends but each spouse considers their separate residence to be their permanent residence. Allen votes in Portland and his car is registered to his Portland address. Allen would be subject to the tax as a resident of Portland, but Vicki would not be considered a resident of Portland and therefore would not be subject to the tax.
C. If an individual establishes residency by moving into Portland at any time during the tax year, the individual is liable for payment of the full tax (regardless of the number of days they are a resident of Portland).
D. If an individual established residency outside Portland by moving at any time during the tax year, the individual is liable for payment of the full tax. In other words, the tax may not be prorated for partial year residency.
A. Residents within a household do not owe the tax if the household income is at or below the federal poverty guidelines for the 48 Contiguous States and the District of Columbia established by the federal Department of Health and Human Services for that tax year.
B. “Residents within a household” generally means all residents within a dwelling who are included on a single federal or state joint tax return (for example, taxfiler, spouse and dependents).
C. A person within a dwelling who is 18 years of age or older, is not a dependent on the income tax return of another person and who is not permitted to file a joint tax return under Oregon law shall be deemed a household of a single person.
1. Example: Father, mother, daughter and grandfather live within the same dwelling. Father, mother and daughter are included on a joint Oregon tax return. Grandfather is not included on that joint tax return as a dependent. Grandfather is not part of the “household” for purposes of determination of household income.
2. Example: Partner A and Partner B have a registered domestic partnership under Oregon law and are therefore permitted to file a joint Oregon tax return. Both partners are considered to be part of the household. A third person, C, lives in the dwelling who is over the age of 18, is not a dependent of A or B and is unrelated to Partner A and Partner B. C is considered to be a household of a single person.
D. “Household income” means:
1. For individuals filing a joint return for the State of Oregon, the combined income of all individuals included in that joint tax return (including dependents).
2. For individuals whose Oregon filing status is “married filing separately,” the combined income of both spouses filing (and any dependents). However, if the two married individuals are living separately and maintaining two separate households independently, each separately filed return would be considered on its own to determine household income.
3. For individuals whose Oregon filing status is “head of household,” the combined income of the individual and the “qualifying person’s” (i.e., dependent) income during the period of time the dependent lived with the individual.
4. For individuals whose Oregon filing status is “qualifying widow(er),” the income of the individual and the dependent claimed as an exemption on the tax return.
5. If no tax return is filed because the income of the household is below the filing limits, the combined incomes earned or received by the individuals who otherwise would be considered as residents of a household if a tax return were filed.
E. For purposes of determining if household income is at or below the federal poverty guideline, “Household income” includes all positive income, whether or not included in Oregon taxable income or federal adjusted gross income. Household income includes, but is not limited to income from jobs, net self-employment income, positive net rental income, Social Security benefits, PERS benefits, federal (including VA) retirement benefits, disability benefits (including VA disability), child support, unemployment benefits, alimony, pensions, interest and other investment income. Losses shall be treated as zero income.
Liability Date of “Eighteen Years Old”
To determine liability, age shall be determined as of December 31st of each taxable year. The tax will be imposed upon a resident, who is otherwise liable for payment of the full amount of tax, if the resident reaches their 18th birthday by December 31st of any taxable year. The tax may not be prorated if an individual is less than 18 years of age for a portion of a tax year.
Date for Paying Tax
A. For tax year 2012, the due date of the tax is June 10, 2013.
B. For each taxable year following 2012, the due date shall be on the April 15th that falls immediately after the end of that taxable year.
C. If April 15th falls on a weekend or legal holiday the due date shall be the first business day following the weekend or legal holiday.
D. The Revenue Division will accept payments postmarked on the due date as timely.
E. There are no extensions of time for payment of the tax. The Division may, in limited circumstances, administratively allow partial payments and payment plans for taxfilers who may be suffering hardship in timely making the tax payment. The Division may, at its sole discretion, allow a short grace period before the assessment of a late filing penalty.
Refund claims must be filed in writing by filing the Arts Tax Refund Request Form (Form AREF) with the Division within 365 calendar days of the later of either, (1) the due date of the tax return, or (2) the date the Arts Tax payment was made. When determining the last date the Division will accept a refund claim based on the due date of the tax return, if the 365th day falls on a weekend or legal holiday, the date will be the next business day.
The Division will process complete, timely filed written refund claims within 90 calendar days from the later of:
1) the date the complete Form AREF, written refund claim was postmarked; or
2) the date set by the Division as the last day to timely file Form AREF for a tax year.
If the above dates fall on a weekend or legal holiday, the deadline will be moved to the next business day.
A complete Form AREF must include all information necessary to process a refund for each taxpayer requesting a refund. For persons who paid the tax a complete Form AREF must include, the name of the taxpayer entitled to a refund, their address, year of birth and full Social Security number (as required by IRS regulations for form 1099 reporting), the amount of the refund, and the reason for the refund. If the taxpayer is seeking a refund for person(s) other than the taxpayer for whom the tax was paid, a complete Form AREF must include all of the information listed above as well as the last four (4) digits of the Social Security number(s) of the person(s) for whom a refund is sought and the tax amount and reason for the refund and evidence reflecting the basis upon which the person is legally allowed to make a claim for another individual (i.e., a power of attorney, guardianship, conservatorship, proof that person for whom a refund is sought is a dependent, paid the tax originally, etc.).
If a timely filed refund application filed on Form AREF is not processed within the time period required above, simple interest will be paid on any overpaid tax amount at the statutory rate from ORS 82.010. If the refund application is processed within the time period required above, no interest shall be paid.
Disbursement Calculation for Districts with Charter Schools
For those school districts with one or more charter schools, the Division will calculate an Average Teacher Salary for the school district as a whole without including the charter school(s). Each individual charter school must provide enrollment and teacher salary data directly to the Division (if the school district does not have the information) so that the Division can calculate the Average Teacher Salary for the individual charter school.
Distribution of net revenues from the Arts Education and Access Fund will be made directly to each school district with an Intergovernmental Agreement (IGA) with the City. The distribution will break out the funds for the school district and the funds for each individual charter school. The Division will additionally provide the following Average Teacher Salary information to the school district to allow them to pass through funding based on their individual IGA with each charter school:
- Average Teacher Salary for the District as a whole
- Average Teacher Salary for the District without the charter school(s)
- Average Teacher Salary for the charter schools as a whole
- Average Teacher Salary for each charter school
Permanent Filing Exemption for Seniors or Permanently Disabled Individuals
Residents who are at least 70 years of age or permanently disabled as of December 31 of a tax year and whose taxable income for that tax year is less than $1,000 (or they qualify for the household poverty exemption) may request a permanent filing exemption. This filing exemption will relieve the resident of their responsibility to file an annual statement that they are not subject to the $35 tax. This filing exemption will apply to all subsequent tax years as long as the resident is not subject to the tax. If a resident is granted a permanent exemption and subsequently becomes subject to the tax, they will be required to again request a permanent filing exemption for tax years subsequent to the year(s) that they were subject to the tax.
The permanent filing exemption will be granted automatically if the resident provides the required information and signed statement. The resident must provide their full name, full Social Security Number and their year of birth. The resident must also sign a statement that 1) they are at least 70 years old or have a permanent disability during the first tax year of the permanent exemption request and 2) their taxable income is less than $1,000 or they qualify for the household poverty exemption.
In determining whether a disabled individual qualifies for this filing exemption, the Revenue Division will apply the same criteria that the Oregon Department of Revenue uses to determine whether an individual qualifies (or would qualify) for an additional individual income tax exemption for a severe disability. The Revenue Division may request verification, such as a letter from a physician or a copy of the Oregon Individual Income Tax Return, that an individual is permanently disabled. Generally, you are considered to have a permanent disability if any of the following apply:
- You permanently lost the use of one or both feet; or
- You permanently lost the use of both hands; or
- You are permanently blind; or
- You have a permanent condition that, without special equipment or outside help, limits your ability to earn a living, maintain a household, or transport yourself; or
- You are unable to earn a living due to a permanent condition or impairment of indefinite duration.
Discretionary Penalty Waivers
As provided in Penalties, the Division may waive or reduce penalties for “good cause”. The Division defines “good cause” by using the following criteria:
The Division will waive penalties if there are circumstances beyond the taxfiler's control that caused the failure to file or pay, as defined below. The circumstance must have existed at the time the return or payment was due. The return must be filed and the tax must be paid within a reasonable period of time depending on the facts and circumstances of each case. Circumstances that are accepted by the Division as "circumstances beyond the taxfiler's control" include:
1) Death or serious illness of the taxfiler or a member of the taxfiler's immediate family;
2) Destruction by fire, a natural disaster, or other casualty of the taxfiler's home, place of business, or records needed to prepare the returns.
3) Unavoidable and unforeseen absence of the taxfiler from the City that began before the due date of the return; and
4) A Division employee provided erroneous written information to the taxfiler that caused the taxfiler to incur the penalty if:
a) The taxfiler's reliance on the erroneous written information caused the failure of the taxfiler to pay or file timely;
b) The taxfiler supplied the Division with complete information connected with the erroneous written information given; and
c) The taxfiler could not reasonably be expected to be knowledgeable in the tax matter connected with the erroneous written information.
Circumstances that are not accepted by the Division as "circumstances beyond the taxfiler's control" include, but are not limited to:
a) Reliance on a professional to merely prepare a return on time;
b) Reliance on an employee of the taxfiler to prepare a return on time;
c) Inability of the taxfiler to pay the tax unless there is also a cause listed in 1) through 4) above.
The Division may require verification of the taxfiler’s statements regarding facts and circumstances prior to approving a penalty waiver.
When a taxfiler does not qualify for relief under 1) through 4) above, the Division will consider a penalty waiver for one tax period only as long as the taxfiler has not already received a penalty waiver for any other tax period; and
a) The taxfiler moved into the City during the tax year on which the penalty was assessed; or
b) The taxfiler has a history of filing and paying on time.
Discretionary penalty waiver and/or reduction requests are not subject to the protest process or timeline outlined in Protests. The taxfiler must file a written request with the Division detailing why a penalty should be waived within 30 days of receipt of a billing notice that assesses a penalty. The Division must respond to requests to reduce and/or waive penalties within 60 days from the date the written request is received. If the taxfiler has requested that penalties be waived and the Division denies the taxfiler's request for this discretionary waiver of penalties, the taxfiler may request a conference with the Director (or designee) within 30 days of the date of the Division’s notice of denial. If the conference with the Director results in a denial of the penalty waiver request, that decision is final and may not be appealed.
Adopted: February 20, 2013
Amended: March 19, 2013, May 2, 2013, July 15, 2013, April 14, 2014, March 16, 2015, May 8, 2015, December 30, 2015, February 3, 2016, July 7, 2016