Oregon Administrative Rules › Chapter 150 - DEPARTMENT OF REVENUE › Division 315 - PERSONAL INCOME TAX CREDITS › Section 150-315-0181 - Oregon Kids Credit: Calculation of losses to be added back

Current through Register Vol. 63, No. 7, July 1, 2024
(1) For the purpose of calculating the
			 modified adjusted gross income for the Oregon Kids Credit, each type of loss
			 shall be considered individually. To determine individual losses, combine all
			 income or loss from each separate source. If a net loss results from such
			 combination, the net loss is used to calculate total losses.
Example 1: Eva and Honza file a joint return. They each have
				their own sole proprietorship, and they each report the income on a separate
				Schedule C. Eva reports net profit of $125,000 on her Schedule C. Honza reports
				a net loss of ($140,000) on his Schedule C. They report a combined net loss of
				($15,000) when reporting Schedule C income on their federal personal income tax
				return. They have no other losses. When calculating their modified adjusted
				gross income for the Oregon Kids Credit, they would report a Schedule C loss of
				($15,000). Due to their net Schedule C loss being less than $20,000, no amount
				would be added back when calculating their modified adjusted gross
				income.
Example 2: Milan files Schedule C, Schedule D, and Schedule E
				with his federal return. He has a ($14,000) net loss on his Schedule C, net
				capital gain of $20,000 on Schedule D, and a ($19,000) loss on Schedule E. He
				has no other losses. Since his Schedule D shows a net gain, it is not used to
				calculate his loss limit for the Oregon Kids Credit. His Schedule C loss and
				Schedule E loss total $33,000. The amount that exceeds $20,000, which is
				$13,000 ($33,000 - $20,000), would need to be added back when calculating his
				modified adjusted gross income.
(2) Oregon modifications to federal profits
			 and losses are taken into account when calculating loss limits of the credit.
			 For example, subtractions for marijuana or psilocybin business expenses (other
			 than cost of goods sold) are allowed for Oregon per ORS
			 316.680(1)(i)-(j)
			 but are not claimed on a Schedule C due to Section
			 280E of the Internal Revenue Code.
			 These subtractions need to be included in Schedule C profit or loss for the
			 purpose of calculating the modified adjusted gross income for the Oregon Kids
			 Credit. Other subtractions for Oregon that modify federal gains, profits, or
			 losses and that must be used in the calculation of modified adjusted gross
			 income include Oregon-only passive losses, suspended losses, net operating
			 losses, losses due to basis or depreciation differences, and pass-through
			 entity adjustments.
Example 3: Jonathan has a marijuana business he owns as a sole
				proprietor that has gross profit of $30,000 on his federal Schedule C. He is
				not able to claim all his business expenses due to Section
				280E of the Internal Revenue Code,
				but he is able to claim the expenses on his Oregon return as a subtraction. He
				claimed a subtraction for $55,000 in marijuana business expenses on his Oregon
				return. Combining his net Schedule C profit with his marijuana business expense
				subtraction leaves him with a net loss of ($25,000) ($30,000 - $55,000). He
				would need to add back $5,000 ($25,000 - $20,000) when calculating his modified
				adjusted gross income for the Oregon Kids Credit, the amount that exceeds
				$20,000.
Statutory/Other Authority: ORS
				  305.100
Statutes/Other Implemented: 2023 Oregon Laws ch. 538 §
				  2