Oregon Metro Implements New Supportive Housing Services Tax Effective January 2021

Voters in the Metro region of Portland, Oregon, approved a new supportive housing services income tax (Metro tax) on businesses and individuals. The tax helps fund services for persons who are homeless or at risk of becoming homeless.

In December 2020, the Metro Council approved new sections to Metro’s Code to implement this new tax. The tax is effective January 1, 2021, and introduces a 1% tax on:

  • Business net income, including income from pass-through entities
  • Taxable income of Metro residents and nonresidents with Metro-sourced income

Below, we cover implications for businesses and individuals, legal and implementation factors to consider when applying the tax, and more.

Implications for Businesses

Businesses with total receipts from all sources—both inside and outside Metro boundaries—of more than $5 million are subject to the tax. The tax is 1% of Metro-sourced net income, with a minimum tax of $100 for any year. Pass-through entities, such as partnerships and S corporations, must also remit the tax.

Sole proprietorships and disregarded entities aren’t subject to the tax as separate entities. Instead, the sole proprietor will pay tax under the personal tax statutes, and disregarded entities will be taxed along with the business owner.

Calculation and Taxation Method

Tax Base

As with the current Portland Business License Tax and Multnomah Business Income Tax, the Metro tax base begins with Oregon taxable income, with an addition for the Portland Clean Energy Surcharge, or any taxes—including local taxes—on or measured by net income. In contrast to the current local taxes, the Metro tax doesn’t limit the compensation deduction to owners.


Single-sales factor apportionment will be used when calculating the Metro tax. Sourcing rules for the sale of tangible personal property (TPP) and other receipts currently mirror the rules used by City of Portland for the Business License and Business Income taxes.

These rules differ in key ways from those used by the state of Oregon for the sale of TPP and other income-producing activities.

Apportionment for Sale of TPP

A seller may not apportion its net income from the sale of TPP unless a jurisdiction outside Metro may tax the seller. In other words, the seller’s activities outside Metro must exceed protections of Public Law (PL) 86-272. The other jurisdiction doesn’t need to tax the seller and may be located within or outside of Oregon. When the seller may apportion, throwback doesn’t apply.

Sourcing for Sale of TPP

A sale of TPP occurs in Metro when it’s, “delivered or shipped to a purchaser within the District regardless of the free-on-board (FOB) point or other conditions of sale.”

Both the state of Oregon and the city of Portland have published rules regarding sourcing these sales. Oregon Administrative Rule (OAR) 150-314-0429(2)(a) provides that transportation may be made by seller, purchaser, or common carrier. In contrast, Portland’s Business Tax Administrative Rule (BTAR) 610.93-2A, which also applies to Multnomah County, provides that if the purchaser takes physical title—either by picking up the TPP itself or by directing the pickup of the TPP—delivery occurs at point of pickup.

The new Metro Code Section 7.05.030(a) directs the code administrator to construe the Metro tax in conformity with regulations that govern the Multnomah County income tax, so BTAR 610.93-2A would likely apply. That means a sale of TPP may be included in the Metro numerator, but it may not be included in the Oregon numerator, and vice versa.

Non-TPP Sales

Metro adopted the income-producing activity rule, often referred to as cost of performance, for assigning receipts from activities other than the sale of TPP. Oregon uses market sourcing, so the same transaction may be included in the Metro numerator but not the Oregon numerator, and vice versa.

Apportionment rules for specific industries or types of income adopted by Oregon will be used if they apply to fact situations that Metro hasn’t addressed.

Implications for Individuals

Separate filers are subject to the tax on income over $125,000, while joint filers are subject to tax on income over $200,000.

Oregon residents are subject to the tax on Oregon taxable income. Part-year residents must prorate income based on residency, and nonresidents are subject to the tax on income from sources within Metro—including wages paid for work performed within Metro and items reported by a pass-through entity. Individuals may subtract income from a pass-through entity if the income was previously taxed by Metro.

Administrative Provisions

For 2021, a business must offer withholding to its employees in writing as soon as it can configure its payroll system to capture and remit the taxes withheld. For 2022, withholding will be mandatory for all employees that work in Metro and earn at least $200,000 during the calendar year.

If a business anticipates a liability of at least $1,000, it must make quarterly estimated tax payments on April 15, June 15, September 15, and December 15.

Draft tax return forms haven’t yet been released.

Metro Boundary Considerations

The Metro district incorporates portions of Clackamas, Multnomah, and Washington Counties, but Metro’s boundaries don’t align with county boundaries. It will be important to review residential and business addresses to determine whether a residence, business location, or delivery location is located within or outside of the Metro boundary.

Additionally, businesses that provide services from multiple locations, through employees working from home or other remote arrangements, should review their systems for tracking revenues from services provided inside and outside Metro boundaries.

Businesses that sell TPP should review their activities outside the Metro boundary and determine whether they exceed PL 86-272 protections. 

Individuals who are considering changing residency should carefully review the rules for both domicile and residence and document all actions and activities taken to abandon a Metro domicile and establish a new domicile.

Potential Legal Challenge

Oregon Revised Statutes (ORS) 268.505 imposes certain limitations on local Oregon jurisdictions. Currently, it’s unclear whether ORS 268.505 bars Metro from taxing pass-through entities. Additionally, ORS 268.505 may require that Metro follow Oregon’s apportionment methodology, which includes market sourcing provisions. When adopted by state and local governments, these sourcing provisions often shift tax burdens away from businesses based in the jurisdiction and toward businesses that operate remotely.

On December 30, 2020, Metro Council published a notice stating it initiated a validation proceeding in the Oregon Circuit Court seeking a judgment that ORS 268.505 doesn’t constrain Metro’s authority to impose this new tax on pass-through entities, or Metro’s ability to require apportionment methods that vary from Oregon law.  

A coalition is being formed to help support a legal challenge of Metro’s interpretation. This initiative is being spearheaded by the Portland Business Alliance and several businesses and trade organizations across the state. 

We’re Here to Help

If you or your business would like assistance navigating the Metro tax or its impacts, contact your Moss Adams professional.

Contact Us with Questions

Enter security code:
 Security code