Oregon Administrative Rules › Chapter 150 - DEPARTMENT OF REVENUE › Division 317 - CORPORATION EXCISE TAX ACT OF 1929: RULES AND GENERAL PROVISIONS › Section 150-317-1020 - Corporate Activity Tax Unitary Business Factors, Common Ownership and Filing Requirements for Unitary Groups

Current through Register Vol. 63, No. 7, July 1, 2024
(1)
Definition.
As used in this rule, the term "entity" or
			 "business entity" refers to any individual or legal entity described in ORS
			 317A.100(14).
(2) The presence of all of the factors
			 described in ORS 317A.100(19)(a)(A)-(C)
			 will demonstrate that a unitary business exists, but the presence of one or two
			 such factors may also demonstrate the flow of value requisite for a unitary
			 business determination.
(3)
The Concept of a Unitary Business
. A unitary business is a
			 single economic enterprise that is made up either of separate parts of a single
			 entity or a commonly owned group of entities that are sufficiently
			 interdependent, integrated, and interrelated through their activities so as to
			 provide a synergy and mutual benefit that produces a sharing or exchange of
			 value among them and a significant flow of value to the separate parts. This
			 sharing or exchange of value may also be described as requiring that the
			 operation of one part of the business be dependent upon, or contribute to, the
			 operation of another part of the business. In other words, if the activities of
			 one business either contribute to the activities of another business or are
			 dependent upon the activities of another business, those businesses are part of
			 a unitary business.
(4)
Requirement for a Unitary Business
. The sharing or exchange of
			 value described in section (3) that defines the scope of a unitary business
			 requires more than the mere flow of funds arising out of a passive investment
			 or from the financial strength contributed by a distinct business undertaking
			 that has no operational relationship to the unitary business. In Oregon, the
			 unitary business principle will be applied to the fullest extent allowed by the
			 U.S. Constitution.
(5)
Separate Trades or Businesses Conducted within a Single
			 Entity
. A single entity may have more than one unitary business. In
			 such cases, it is necessary to determine the commercial activity attributable
			 to each separate unitary business for purposes of sourcing commercial activity
			 to Oregon under ORS 317A.128, and the subtraction
			 under ORS 317A.119.
(6)
Unitary Business Unaffected by
			 Formal Business Organization
. A unitary business may exist within a
			 single entity or among a commonly owned group of entities.
(7)
Determination of a Unitary
			 Business
. A unitary business is characterized by significant flows of
			 value evidenced by factors such as those described in
Mobil Oil Corp.
			 v. Vermont
, 445 U.S. 425 (1980) and ORS
			 317A.100(19)(a)(A) to
			 (C): centralization of management, economies
			 of scale, and functional integration. These factors provide evidence of whether
			 the business activities operate as an integrated whole or exhibit substantial
			 mutual interdependence. Facts suggesting the presence of the factors mentioned
			 above should be analyzed in combination for their cumulative effect and not in
			 isolation. A particular business operation may be suggestive of one or more of
			 the factors mentioned above.
(8)
Description and Illustration of Centralization of Management, Economies
			 of Scale, and Functional Integration.
(a)
Centralization of
			 Management
. Centralization of management exists when officers,
			 directors, partners, members, managers, or others jointly participate in the
			 management decisions that affect the respective business activities and that
			 may also operate to the benefit of the entire economic enterprise.
			 Centralization of management can exist whether the centralization is effected
			 from a parent entity to a subsidiary entity, from a subsidiary entity to a
			 parent entity, from one subsidiary entity to another, from one division within
			 a single entity to another division within an entity, or from any combination
			 of the foregoing. Centralization of management may exist even when day-to-day
			 management responsibility and accountability has been decentralized, so long as
			 the management has an ongoing operational role with respect to the business
			 activities. An operational role can be effected through mandates, consensus
			 building, or an overall operational strategy of the business, or any other
			 mechanism that establishes joint management.
(A)
Facts Providing Evidence of
			 Centralization of Management
. Evidence of centralization of management
			 is provided when common officers, directors, partners, members, managers, or
			 others participate in the decisions relating to the business operations of the
			 different segments. Centralization of management may exist when management
			 shares or applies knowledge and expertise among the parts of the business.
			 Existence of common officers, directors, partners, members, managers, or
			 others, while relevant to a showing of centralization of management, does not
			 alone provide evidence of centralization of management. Common officers are
			 more likely to provide evidence of centralization of management than are common
			 directors.
(B)
Stewardship
			 Distinguished
. Centralized efforts to fulfill stewardship oversight
			 are not evidence of centralization of management. Stewardship oversight
			 consists of those activities that any owner would take to review the
			 performance of or safeguard an investment. Stewardship oversight is
			 distinguished from those activities that an owner may take to enhance value by
			 integrating one or more significant operating aspects of one business activity
			 with the other business activities of the owner. For example, implementing
			 reporting requirements or mere approval of capital expenditures may evidence
			 only stewardship oversight.