OAR 150-314-0040
Withholding on Real Property Conveyances

(1)

For purposes of ORS 314.258 (Withholding in certain conveyances of real estate) and this rule:

(a)

“Authorized agent” does not include an employee of a transferee who merely makes payments to a transferor in connection with a conveyance, nor a person who performs services such as inspections, appraisals, drafting services, and recording services performed for the benefit of a transferor or transferee in a conveyance.

(b)

“Consideration” includes any encumbrance that the transferee agrees to pay or assume as well as the fair market value of any property conveyed or transferred to a transferor, or the fair market value of any service provided to a transferor.

(2)

Withholding requirements. Except as provided in subsection (2)(a) of this rule, an authorized agent must withhold tax for the year in which income is recognized for Oregon tax purposes and remit the tax withheld to the department.

(a)

An authorized agent is not required to withhold if:

(A)

The withholding amount calculated is less than $100 per transferor;

(B)

The total consideration for the property is less than or equal to $100,000;

(C)

The person making a conveyance is a resident of Oregon as defined in ORS 316.027 (“Resident” defined) on the closing date of the conveyance;

(D)

The person making a conveyance is a C-Corporation that is qualified to do business in Oregon on the closing date of the conveyance;

(E)

The transferor delivers to the authorized agent a written assurance as required in IRC section 6045(e) that the entire gain qualifies for exclusion under IRC section 121;

(F)

The transferor is an estate, certain trusts, S corporation, general partnership, or limited partnership, or a limited liability company that for purposes of Treasury Regulation section 301.7701-3 has not elected to be classified as an association taxable as a corporation and is not a disregarded entity the sole member of which is a transferor within the meaning of ORS 314.258 (Withholding in certain conveyances of real estate)(1)(f);

(G)

The transferor is an entity not described in ORS 314.258 (Withholding in certain conveyances of real estate)(1)(f), such as a government agency or instrumentality, or a municipal or public corporation;

(H)

The authorized agent is an attorney involved in a transaction where a licensed escrow agent is providing services for the conveyance; or

(I)

The transferor or the transferor’s tax advisor executes a written affirmation under penalty of perjury that the conveyance is not likely to be taxable to the transferor under Oregon law during the tax year of the transferor in which the conveyance occurs. Examples of such transactions include, but are not limited to, a conveyance that constitutes or is accomplished as part of:
(i)
A transfer that is the sale of a principal residence and the gain qualifies for exclusion under IRC section 121;
(ii)
A transfer to a corporation controlled by the transferor for purposes of IRC section 351;
(iii)
A transfer pursuant to a tax-free reorganization under IRC section 361;
(iv)
A transfer by a tax-exempt entity that does not give rise to unrelated business taxable income to the transferor under IRC section 512;
(v)
A transfer to a partnership in exchange for an interest in the partnership such that no gain or loss is recognized under IRC section 721;
(vi)
A transfer that qualifies for nonrecognition under IRC section 1031 or 1033 and the transferor enters into such a transaction;
(vii)
A transfer between spouses or incident to divorce for purposes of IRC section 1041; or
(viii)
Any other transaction in which gain is not recognized for purposes of ORS Chapters 316, 317, and 318, as explained to the department in writing at the time the transaction is completed.

(b)

The authorized agent must send the tax withheld to the department within 20 days of the date the proceeds from the conveyance are disbursed to the transferor.

(c)

If there is more than one transferor for one parcel, the authorized agent must withhold tax on each non-exempt transferor as if all transferors had equal ownership in the real property unless the transferor establishes to the authorized agent the actual ownership percentage in the real property, such as through recorded documents, tenancy-in-common agreements, or other documents. If the transferor establishes other than equal ownership, the authorized agent must withhold in proportion to each non-exempt transferor’s actual ownership percentage in the real property.

(d)

A transferor may claim the amount withheld by an authorized agent as a credit on the transferor’s corresponding personal income tax return or corporate income or excise tax return.

(e)

If the transferor is a limited liability company, the sole member of which is a transferor within the meaning of ORS 314.258 (Withholding in certain conveyances of real estate)(1)(f) (2008), and the limited liability company is a disregarded entity for federal income tax purposes, the transferor is the single member for purposes of this rule.

(3)

Calculation of amount to be withheld.

(a)

An authorized agent is required to withhold from the consideration payable to the transferor and remit to the department the least of:

(A)

Four percent of the consideration for the real property;

(B)

Eight percent of the amount of gain on the conveyance that is includable in the transferor’s Oregon taxable income; or

(C)

The net proceeds from the conveyance.

(b)

A transferor subject to withholding must deliver to an authorized agent at or before conveyance of the real property a written affirmation, signed under penalty of perjury, identifying the amount of withholding required by subsection (a) of this section. If the transferor fails to deliver the form timely, the authorized agent must withhold four percent of the amount of consideration, or if less, all the net proceeds.
Example 1: Anne sold her rental property for $300,000. Her federal and Oregon adjusted basis in the property is $250,000. She has an outstanding mortgage against the property of $157,000 and closing costs are $3,350. At closing, she determines she is not exempt from withholding so her escrow officer must withhold tax based on the least of four percent of the consideration, eight percent of the gain includable in Oregon taxable income, or all of the net proceeds.
Step 1) Determine four percent of the consideration. In this case, it is $12,000 ($300,000 x 0.04 = $12,000).
Step 2) Determine eight percent of the gain includable in Oregon taxable income as follows:
$300,000 Consideration less
$250,000 Federal and Oregon adjusted basis equals
$50,000 Gain
$4,000 ($50,000 x 0.08 = $4,000) is eight percent of the gain.
Step 3) Determine the “net proceeds” as follows:
$139,650 Net amount disbursed to seller ($300,000 consideration - $157,000 mortgage – $3,350 closing costs = $139,650) $139,650 is the “net proceeds” from this conveyance.
Step 4) Because eight percent of the gain ($4,000) is the lowest of the amounts calculated in steps one, two, or three, Anne’s escrow officer would withhold and remit $4,000.

(c)

Installment sales. If a transferor elects to recognize income from the conveyance using the installment method under IRC section 453, the transferor may reduce the gain by the amount of the installment that will be recognized in future years. The withholding calculation is based on the entire consideration and net proceeds, or the modified gain to determine the lowest of the three methods provided in subsection (a) of this section.
Example 2: Assume the same facts as Example 1 except that Anne is selling the property on an installment basis and recognizing the income from the sale using the installment method under IRC section 453 over five years in equal installments. Because Anne is selling the property over time, the amount of gain includable in Oregon taxable income is $10,000 for the year of the conveyance ($50,000 ÷ 5 years = $10,000) and $10,000 in each year thereafter. Eight percent of the amount included in Oregon taxable income is $800. Anne’s escrow officer would withhold and remit $800 for the year of the conveyance because it is the least amount using the three methods provided in subsection (a) of this section.

(d)

Deferred exchanges. If a transferor enters into a like-kind exchange under IRC section 1031, withholding is not necessary at the time the transferor relinquishes the property to a Qualified Intermediary (QI) unless part of the proceeds from the sale are disbursed to the transferor.
Example 3: Robert entered into an exchange under IRC section 1031 to defer tax on the gain from the sale of his rental property. The consideration for the property was $500,000. Robert’s federal and Oregon adjusted basis in the property is $150,000. He holds a first mortgage of $190,000 and he incurred $10,000 in costs related to the conveyance. Robert requested $50,000 from the consideration directly. Robert’s escrow officer transferred title of the property and $250,000 of the consideration to a QI and the escrow officer disbursed $50,000 directly to Robert as requested. The escrow officer is required to withhold on the amount disbursed to Robert as follows:
Step 1) Determine four percent of the consideration. In this case, it is $20,000 ($500,000 x 0.04 = $20,000).
Step 2) Determine eight percent of the gain includable in Oregon taxable income as follows:
$500,000 Consideration
$150,000 Federal and Oregon adjusted basis
$350,000 Gain
$300,000 Gain eligible for deferral under IRC section 1031
$50,000 gain includable in Oregon taxable income.
Eight percent of the gain is $4,000.
Step 3) Determine the “net proceeds” as follows:
$50,000 Net amount disbursed to seller shown on the settlement statement before reducing for withholding.
Step 4) The lowest of the amounts calculated in steps one, two, or three is $4,000 (8 percent of the gain). Robert’s escrow officer would withhold and remit $4,000.

(4)

Written affirmation.

(a)

Intentionally left blank —Ed.

(A)

To claim exemption under subparagraph (2)(a)(I) of this rule, the transferor or the transferor’s tax advisor must complete and sign a written affirmation under penalty of perjury, that the transferor is exempt from withholding because the transferor is unlikely to owe Oregon tax as a result of the conveyance, before the funds related to the transaction are disbursed.

(B)

To determine whether the transferor is unlikely to owe Oregon income tax as a result of the conveyance, the gain may not be offset against any other items of gain, loss, deduction, or credit the transferor expects to claim on the related tax return unless the item is directly related to the conveyance. For example, if an Oregon nonresident must pay tax on the gain from the sale of the Oregon property to both Oregon and the state of residency, and the Oregon nonresident must claim the credit for taxes paid to the state of residency on the Oregon nonresident return, the transferor established that he or she is unlikely to owe Oregon tax as a result of the conveyance.

(C)

The transferor must provide the completed written affirmation to the authorized agent providing closing and settlement services.

(b)

Basing withholding on the amount of includible gain. If the transferor is subject to withholding, the transferor may calculate tax based on the amount of gain includible in Oregon taxable income. The transferor must complete and sign the written affirmation under penalty of perjury that the calculation is true and accurate to the best of the transferor’s knowledge.

(c)

Sale of a principal residence. The gain from the sale of a principal residence may qualify for exemption from withholding under either ORS 314.258 (Withholding in certain conveyances of real estate)(3)(e) or 314.258 (Withholding in certain conveyances of real estate)(3)(f). If the transferor is eligible to exclude the entire gain under IRC section 121, they must complete a written assurance similar to that found in IRC section 6045(e) pursuant to 314.258 (Withholding in certain conveyances of real estate)(3)(e) and this rule. If the transferor completes the written assurance, it is in lieu of the written affirmation required under 314.258 (Withholding in certain conveyances of real estate)(3)(f) and subsection (4)(a) of this rule and the transferor need not complete the written affirmation. However, the authorized agent must provide the information contained in the written assurance in the same manner as information contained in the written affirmation. If the gain is not fully excludible under IRC section 121, the transferor must complete the written affirmation calculating the gain under penalty of perjury.

(d)

In addition to retaining the completed written affirmation or assurance in the authorized agent’s records, the authorized agent must send a copy of the affirmation or assurance to the department within 30 days of the date of the conveyance.

(5)

Failure to withhold.

(a)

An authorized agent who relies on the written representation made by the transferor that the transferor is either exempt from or not subject to withholding, is not liable for amounts required to be withheld under ORS 314.258 (Withholding in certain conveyances of real estate). An authorized agent who relies on the calculation shown on the written affirmation provided by the transferor is not liable for the amount that was required to be withheld in excess of that shown on the written affirmation. The transferor is liable for the tax and may be subject to interest charged on the underpayment of estimated tax.

(b)

Penalty assessment. The department may assess a failure-to-withhold penalty if an authorized agent fails to demonstrate to the department’s satisfaction that the authorized agent met the requirements of ORS 314.258 (Withholding in certain conveyances of real estate).

(A)

For conveyances that occurred before May 23, 2008, the department will not assess the failure-to-withhold penalty if an authorized agent met the requirements of either ORS 314.258 (Withholding in certain conveyances of real estate) (2007) or 314.258 (Withholding in certain conveyances of real estate) (2008).

(B)

For conveyances that occurred on or after May 23, 2008, the department will not assess the failure-to-withhold penalty if an authorized agent met the requirements of ORS 314.258 (Withholding in certain conveyances of real estate) (2008) and related rules.

(6)

Failure to remit. If an authorized agent withholds tax from the transferor’s disbursal and fails to remit the same amount to the department timely, the authorized agent is liable to the State of Oregon for those amounts. The department may collect such amounts from the authorized agent together with interest under ORS 305.220 (Interest on deficiency, delinquency or refunds).
[ED. NOTE: Tables referenced are available from the agency.]

Source: Rule 150-314-0040 — Withholding on Real Property Conveyances, https://secure.­sos.­state.­or.­us/oard/view.­action?ruleNumber=150-314-0040.

150‑314‑0005
Period of Computation of Taxable Income 150‑314‑0010
Mitigation of Effect of Limitations and Other Provisions 150‑314‑0012
Determination by Agreement 150‑314‑0025
Pollution Control Facilities: Revocation of Certificate 150‑314‑0027
Pollution Control Facilities: Facilities Not Eligible for Tax Credit 150‑314‑0035
Formula for Apportionment of Lobbying Expenses Subject to Proxy Tax 150‑314‑0040
Withholding on Real Property Conveyances 150‑314‑0045
REMIC Filing Requirements 150‑314‑0047
REMIC Income Taxable to Nonresidents 150‑314‑0055
Change in Methods of Accounting or Reporting 150‑314‑0060
Election to Use Alternative Apportionment Weightings by Taxpayers Engaged in Utilities or Telecommunications 150‑314‑0062
Apportionment and Allocation of Income of Financial Organizations and Public Utilities from Business Activities Within and Without Oregon 150‑314‑0064
Definitions 150‑314‑0066
Apportionment and Allocation of Income Generally 150‑314‑0068
Allocation of Income 150‑314‑0070
Apportionment Factors Generally 150‑314‑0072
Apportionment Factors 150‑314‑0074
Modified Factors for Carriers of Freight or Passengers: General Rule 150‑314‑0076
Modified Factors for Carriers of Freight or Passengers: Special Rules — Railroads 150‑314‑0078
Modified Factors for Carriers of Freight or Passengers: Special Rules — Airlines 150‑314‑0080
Modified Factors for Carriers of Freight or Passengers: Special Rules — Trucking Companies 150‑314‑0082
Modified Factors for Companies Engaged in Sea Transportation Service 150‑314‑0084
Modified Factors for Companies Involved in Interstate River Transportation Service 150‑314‑0086
Other Methods: Limited Application 150‑314‑0088
Modified Factors for Financial Institutions 150‑314‑0090
Public Utilities: Sale of Commodities 150‑314‑0100
Disallowance of Certain Intercompany Transactions Involving Intangible Assets 150‑314‑0105
Farm Income Averaging 150‑314‑0110
Allocation of Oregon Modifications to Passive Activity Losses 150‑314‑0115
Interest on Deferred Oregon Tax Liability with Respect to Installment Obligations 150‑314‑0120
Reduction of Tax Attributes after Discharge of Debt 150‑314‑0125
Listed Transaction Reporting Requirement 150‑314‑0130
Definition: Final Determination 150‑314‑0135
Returns When Accounting Period Changed 150‑314‑0140
Information Returns 150‑314‑0142
Brokers’ Information Returns 150‑314‑0150
Requirement to File Returns Electronically (Corporation E-file Mandate) 150‑314‑0152
Requirement to File Returns Electronically 150‑314‑0160
Report of Changes in Federal Taxable Income 150‑314‑0165
Filing Returns of Income: Due date 150‑314‑0167
Filing Returns of Income: Extensions, Chapters 316, 317 and 318 150‑314‑0169
Standards for Substitute Tax Forms 150‑314‑0171
Alternative Filing Methods 150‑314‑0173
Time Limitations Affected by Military Service 150‑314‑0175
Time Limitations for Persons Outside United States 150‑314‑0185
Payment of Tax 150‑314‑0187
Responsibility for Tax Payments 150‑314‑0195
Delinquency Penalty 150‑314‑0197
Failure to File Penalty 150‑314‑0199
Interest on Deficiencies and Delinquencies 150‑314‑0205
Substantial Understatement Penalty (SUP) 150‑314‑0207
Waiver of 20 Percent Substantial Understatement of Net Tax Penalty Imposed under ORS 314.402 150‑314‑0209
Substantial Authority, Adequate Disclosure and Reasonable Basis 150‑314‑0215
Listed Transaction Understatement 150‑314‑0220
Additional Assessments 150‑314‑0222
Five-Year Statute of Limitations 150‑314‑0224
Time Limit to Make Adjustment 150‑314‑0226
Notification of Gain Realized Upon the Sale or Exchange of a Principal Residence 150‑314‑0228
Extension of Period for Assessment 150‑314‑0230
Effect of Federal Extension of Period for Assessment 150‑314‑0240
Refunds Generally 150‑314‑0242
Refunds 150‑314‑0244
Minimum Offset Amount 150‑314‑0246
Interest Computation — Offset 150‑314‑0248
Refund Offset Priority 150‑314‑0250
Refunds 150‑314‑0252
Effect of Federal Extension of Period for Assessment 150‑314‑0254
Separate Refunds When a Joint Return Has Been Filed 150‑314‑0256
Refunds of Tax Overpayments to Spouse or Heirs 150‑314‑0265
Model Recordkeeping and Retention 150‑314‑0267
Requirement to Provide Copies of Documents 150‑314‑0275
Definition: Collection Charge 150‑314‑0277
Payment Secured by Bond, Deposit or Otherwise 150‑314‑0279
Statute of Limitation on Tax Collection 150‑314‑0285
Assessment of Withholding Tax Against Liable Officers 150‑314‑0290
Estimated Tax: When Estimates Are Required 150‑314‑0292
Estimated Tax: When Estimates Are Required For Tax Exempt Corporations 150‑314‑0294
Estimated Tax: Affiliated Corporations 150‑314‑0300
Estimated Tax: Due Dates of Payments for Short-Period Returns 150‑314‑0302
Estimated Tax: Application of Payments 150‑314‑0310
Requirement to Use Electronic Funds Transfer 150‑314‑0315
Corporation Estimated Tax: Delinquent or Underestimated Payment or Both, Constitutes Underpayment 150‑314‑0317
Estimated Tax: Consolidated Return Underpayments 150‑314‑0319
Estimated Tax: Apportioned Returns 150‑314‑0321
Estimated Tax: Application of Net Loss, Annualized Income Exception 150‑314‑0323
Estimated Tax: Interest on Underpayment 150‑314‑0325
Estimated Tax: Computation of Underpayment 150‑314‑0327
Underpayment of Estimated Tax 150‑314‑0335
Apportionable and Nonapportionable Income Defined 150‑314‑0337
Apportionable and Nonapportionable Income 150‑314‑0339
Proration of Deductions 150‑314‑0345
Apportionment and Allocation of Income Generally 150‑314‑0347
Application of ORS 314.610 to 314.667: Allocation 150‑314‑0349
Apportionment and Allocation for a Taxpayer Carrying on a Unitary Business 150‑314‑0351
Two or More Businesses of a Single Taxpayer 150‑314‑0353
Apportionment for Long-Term Construction Contracts 150‑314‑0355
Special Rules: Installment Sales 150‑314‑0357
Modified Factors for Motion Picture and Television Film Producers 150‑314‑0365
Taxable in Another State 150‑314‑0367
Taxable in Another State 150‑314‑0369
Taxable in Another State 150‑314‑0371
Taxable in Another State 150‑314‑0380
Allocation of Interest and Dividends 150‑314‑0385
Apportionment Formula 150‑314‑0390
Property Factor 150‑314‑0392
Property Factor 150‑314‑0394
Property Factor 150‑314‑0396
Property Factor 150‑314‑0398
Property Factor 150‑314‑0400
Property Factor 150‑314‑0402
Property Factor 150‑314‑0404
Property Factor 150‑314‑0406
Property Factor 150‑314‑0415
Payroll Factor 150‑314‑0417
Payroll Factor 150‑314‑0425
Sales Factor 150‑314‑0427
Sales Factor 150‑314‑0429
Sales Factor 150‑314‑0431
Sales Factor 150‑314‑0435
Sales Factor 150‑314‑0437
Gross Receipts Related to Deferred Gain or Loss 150‑314‑0455
Modified Factors for Publishing 150‑314‑0460
Apportionment of Net Loss 150‑314‑0465
Sales Factor for Interstate Broadcasters 150‑314‑0470
Interstate Broadcasters: Net Income Attributable to this State 150‑314‑0475
Consistent Treatment of Partnership Items 150‑314‑0480
Publicly Traded Partnerships Taxed as Corporations 150‑314‑0485
Partnership Information Returns 150‑314‑0487
Partnership Penalty 150‑314‑0495
Corporation Tax Credits — Converting a C Corporation to an S Corporation 150‑314‑0497
Corporation Tax Credits — Converting an S Corporation to a C Corporation 150‑314‑0510
Definitions for Composite Tax Returns and Pass-through Entity Withholding 150‑314‑0515
Oregon Composite Tax Return 150‑314‑0520
Pass-through Entity Withholding Requirements 150‑314‑0525
Exceptions to Pass-through Entity Withholding Requirements 150‑314‑0530
Divulging Particulars of Returns and Reports Prohibited 150‑314‑0535
Information That May Be Furnished 150‑314‑0540
Rewards for Information 150‑314‑0545
Combat Zone Benefits 150‑314‑0733
Partnership Pays Election After Federal Centralized Partnership Audit Adjustments
Last Updated

Jun. 24, 2021

Rule 150-314-0040’s source at or​.us