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LIC-6.01 - Payments Deemed to be Compensation to Owners

Administrative Rules Adopted by Bureau of Licenses Pursuant to Rule-Making Authority


Payments deemed to be compensation to owners are not an allowed deduction under the Business License and Business Income Tax laws.


Generally, any payment included as wages, tips or other compensation on the owner’s federal Form W-2 would be deemed to be compensation to owners. Additionally, certain payments made by an entity on behalf of an owner are deemed to be compensation paid to an owner even if not included as wages on the W-2. These payments may include, but are not limited to: vehicle use, company paid housing, taxes paid on behalf of an owner, nonemployee compensation, management fees, and payments for legal, medical, vision benefits that are not provided to all employees.


Example 1: Partnership A is owned by 15 partners. The partnership elects to pay state and local taxes at the partnership level on behalf of the partners. The deduction for taxes paid on behalf of the partners is deemed compensation to owners and is therefore not an allowed deduction for the partnership.


Example 2: Corporation C is owned by 18 controlling shareholders. The corporation paid legal fees for one controlling shareholder for litigation unrelated to corporate activities. The corporation has no benefit plan that includes legal coverage. The deduction for legal fees paid on behalf of the controlling shareholder is deemed compensation to an owner and is therefore not an allowed deduction.


Portland City Code Section 7.02.600
Multnomah County Code Section 12.600

Submitted for inclusion in PPD September 17, 2002.
Originally adopted as Bureau of Licenses Administrative Rule 600.93-2 November 23, 1993.
Amended by Director of Revenue Bureau October 11, 2012.

Table of Contents
LIC-6.01 - Payments Deemed to be Compensation to Owners
LIC-6.02 - Self-Employment Tax Deduction and Health Care Premium Deduction
LIC-6.03 - Change of Ownership During the Year and Calculation of the Compensation Allowance Deduction
LIC-6.04 - Patronage Dividends
LIC-6.05 - Short Periods Count as Tax Year
LIC-6.06 - Definition of Controlling Shareholders and Calculation of Number of Controlling Shareholders
LIC-6.07 - Treatment of Currently Taxed Pass-Through Income
LIC-6.08 - Partnerships - Partner Level Deduction Election
LIC-6.09 - Qualified Retirement Plans
LIC-6.10 - De Minimus Business Activity for Personal Services
LIC-6.11 - Apportionment of Gains and Incomes Due to Sale of a Business
LIC-6.12 - Business Activity and Apportionment of Sales of Tangible Personal Property
LIC-6.13 - De Minimus Business Activity for Tangible Personal Property
LIC-6.14 - Apportionment of Gross Income from Business Activities Other than Sales of Tangible Personal Property
LIC-6.15 - Apportionment for Banking Income
LIC-6.16 - Apportionment for Domestic Insurers
LIC-6.17 - Apportionment for Freight Carriers
LIC-6.18 - Apportionment for Passenger Carriers
LIC-6.19 - Apportionment for Incomes Subject to PCC Chapters 7.12 or 7.14
LIC-6.20 - Apportionment for Providers of Electronic or Telephonic Services