New Surtax in Portland, Oregon, Is Aimed at Businesses with Highly Paid CEOs

At its December 7, 2016 meeting, the Portland City Council approved a new surtax to its business license tax for publicly traded companies subject to US Securities and Exchange Commission (SEC) disclosure and reporting requirements with a 3–1 vote.

The surtax is imposed on companies with a high CEO pay ratio. In 2015, the SEC adopted a rule requiring public companies to disclose their pay ratio reflecting the total compensation of their CEOs to the median compensation of their employees.

The “CEO Tax”

A company is subject to the surtax if its pay ratio is at least 100:1 as reported on SEC disclosures. For companies with a pay ratio between 100:1 and 250:1, the surtax is equal to 10 percent of a company’s business license tax base liability. The surtax increases to 25 percent if the pay ratio is 250:1 or greater.

For example, a business with $10 million in net income apportioned to the city of Portland and a reported pay ratio greater than 250:1 would have a base liability of $220,000 ($10,000,000 x 2.2%) and a surtax of $55,000 ($220,000 x 25%) for a total tax liability of $275,000.

The surtax is effective for tax years beginning on or after January 1, 2017.

The Portland Business License Tax

All corporations doing business in Portland are subject to the 2.2 percent business license tax.

Multnomah County, which encompasses most of Portland’s city limits, imposes a separate business income tax of 1.45 percent. Although the two taxes are reported on one form, the surtax applies only to the city of Portland’s business license tax, not Multnomah County’s business income tax.

Taxpayers with income from business activities inside and outside the city of Portland must apportion their income to Portland using a single receipts factor. Provisions to determine Portland apportionment can vary from Oregon apportionment rules for sales of tangible personal property and service income.

Regardless of where a corporation is headquartered, and even if the CEO never travels to Portland, the surtax applies if the corporation is subject to the business license tax and its pay ratio exceeds the thresholds.

We’re Here to Help

If you have questions about how this new surtax will affect your business, contact your Moss Adams professional or email We can help you determine your Portland business license tax obligations and apportionment methodology while analyzing and implementing mitigating strategies.

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