Oregon Administrative Rules › Chapter 150 - DEPARTMENT OF REVENUE › Division 314 - INCOME TAXATION GENERALLY GENERAL PROVISIONS › Section 150-314-0351 - Two or More Businesses of a Single Taxpayer

Current through Register Vol. 63, No. 7, July 1, 2024
(1) A taxpayer may have more than one "trade
			 or business". In such cases, it is necessary to determine the apportionable
			 income attributable to each separate trade or business. The income of each
			 business is then apportioned by an apportionment formula that takes into
			 consideration the factors, both in and out of state that relate to the trade or
			 business, the income of which is being apportioned.
Example:
The taxpayer is a conglomerate with three
				operating divisions. One division is engaged in manufacturing aerospace items
				for the federal government. Another division is engaged in growing tobacco
				products. The third division produces and distributes motion pictures for
				theaters and television. There is no strong central management as each division
				operates independently of one another. Each division operates in this state as
				well as in other jurisdictions. In this case, it could be concluded that the
				taxpayer is engaged in three separate "trades or businesses." Accordingly, the
				amount of apportionable income attributable to the taxpayer's trade or business
				activities in this state is determined by applying an apportionment formula to
				the apportionable income of each business.
(2) The determination of whether the
			 activities of the taxpayer constitute a unitary business will turn on the facts
			 of each case. In general, the activities of the taxpayer will be considered
			 unitary if there is evidence to indicate that the divisions under consideration
			 are integrated with, dependent upon, or contribute to each other and to the
			 operations of the taxpayer as a whole (see OAR 150-314-0349). The following
			 factors are considered to be good indicia of a unitary business; and the
			 presence of any of these factors creates a strong presumption that the
			 activities of the taxpayer constitute a unitary business:
(a) Same type of business. A taxpayer is
			 generally engaged in a unitary business when all of its activities are in the
			 same general line. For example, a taxpayer operating a chain of retail grocery
			 stores will most always be engaged in a unitary business.
(b) Steps in a vertical process. A taxpayer
			 is almost always engaged in a unitary business when its various divisions are
			 engaged in different steps in a large vertically structured enterprise. For
			 example, a taxpayer that explores for and mines copper ores; concentrates,
			 smelts, and refines the copper ores; and fabricates the refined copper into
			 consumer products, is engaged in a unitary business regardless of the fact that
			 the various steps in the process are operated substantially independently of
			 each other with only general supervision from the taxpayer's executive
			 offices.
(c) Strong centralized
			 management. A taxpayer which might otherwise be considered as engaged in more
			 than one trade or business is properly considered a unitary business when there
			 is a strong central management coupled with the existence of centralized
			 departments for such functions as financing, advertising, research, or
			 purchasing. Thus, some conglomerates may properly be considered a unitary
			 business when the central executive officers are involved in the operations of
			 the various divisions and there are centralized offices which perform for the
			 divisions the normal matters which a truly independent business would perform
			 for itself, such as accounting, personnel, insurance, legal, purchasing,
			 advertising, or financing.