Taxes Imposed Upon or Measured by Net Income
Withholding in certain conveyances of real estate
(1)As used in this section:
(a)“Authorized agent” means an agent who is responsible for closing and settlement services in a conveyance.
(b)“Closing and settlement services” means services that are provided by:
(A)A licensed escrow agent in a real estate closing escrow as provided in ORS 696.505 (Definitions for ORS 696.505 to 696.590) to 696.590 (Penalty amounts); or
(B)An attorney for the benefit of a transferor or a transferee in a conveyance, if, simultaneously with the conveyance, the attorney deposits the unpaid purchase price into the attorney’s client trust account for disbursal pursuant to the written instructions of, or the agreement between, the transferor and transferee.
(c)“Consideration” includes the amount of cash paid for a conveyance and the amount of any lien, mortgage, contract, indebtedness or other encumbrance existing against the property conveyed to which the property remains subject or which the purchaser agrees to pay or assume.
(d)“Conveyance” means a transfer or a contract to transfer fee title to any real estate located in the State of Oregon.
(e)“Net proceeds” means the net amount to be disbursed to the transferor, prior to reduction for withholding, as shown on the transferor’s settlement statement for the conveyance.
(A)An individual who is not a resident of this state, as defined in ORS 316.027 (“Resident” defined), on the closing date of the conveyance; or
(B)A corporation taxed under section 11 of the Internal Revenue Code and subchapter C, chapter 1 of the Internal Revenue Code, that is not domiciled in this state or that is not registered or otherwise qualified to do business in this state on the closing date of the conveyance.
(2)An authorized agent providing closing and settlement services in a conveyance is required to withhold from consideration payable to a transferor an amount equal to the least of:
(a)Four percent of the consideration for the conveyance;
(b)The net proceeds resulting from the conveyance; or
(c)Eight percent of the gain includable in the transferor’s Oregon taxable income. In arriving at this amount, the authorized agent may rely upon the transferor’s written affirmation of the amount of includable gain.
(3)An authorized agent is not required to withhold amounts under this section if:
(a)The consideration for the conveyance does not exceed $100,000;
(b)The conveyance is pursuant to a judicial foreclosure proceeding, a writ of execution, a nonjudicial foreclosure of a trust deed or a nonjudicial forfeiture of a land sale contract;
(c)The conveyance is in lieu of foreclosure of a mortgage, trust deed or other security instrument or a land sale contract with no additional monetary consideration;
(d)The transferor is a personal representative, executor, conservator, bankruptcy trustee or other person acting under judicial review;
(e)The transferor delivers to the authorized agent a written assurance as provided in section 6045(e) of the Internal Revenue Code that the sale or exchange qualifies for exclusion of gain under section 121 of the Internal Revenue Code;
(f)The authorized agent obtains a written affirmation that the transferor is unlikely to owe Oregon income tax as a result of the conveyance;
(g)The amount that would be withheld under subsection (2) of this section is less than $100, or less than a minimum amount established by rule by the Department of Revenue; or
(h)The authorized agent is an attorney and a licensed escrow agent is providing services in the conveyance.
(4)(a) Amounts withheld pursuant to this section are held in trust for the State of Oregon and shall be paid to the department in the time and manner prescribed by the department by rule.
(b)If an authorized agent fails to remit an amount withheld by the agent under this section by the time remittance is required, the department may recover from the authorized agent the amount withheld with interest at the rate established under ORS 305.220 (Interest on deficiency, delinquency or refunds).
(c)If an authorized agent fails to withhold when withholding is required under this section, the department may recover a penalty not to exceed the greater of:
(B)10 percent of the amount required to be withheld under this section, but not more than $2,500.
(d)The department may not proceed with collection actions against the authorized agent if the authorized agent:
(A)Withholds the required amount in connection with a conveyance and timely remits the funds to the department;
(B)Is not required to withhold an amount under this section; or
(C)Demonstrates to the department that the authorized agent obtained a written affirmation as described in this section or an assurance as provided in section 6045(e) of the Internal Revenue Code prior to disbursal of funds due the transferor resulting from the conveyance.
(e)A transferor may claim the amount withheld by an authorized agent on the transferor’s personal income tax return or corporate income tax return or excise tax return.
(f)An authorized agent may withhold funds under this section without written instructions to withhold from the transferor.
(g)A written affirmation, as provided under this section, shall be executed by the transferor or the transferor’s tax advisor under penalty of perjury and shall contain the transferor’s taxpayer identification number. The authorized agent shall retain for six years from the date of the closing of the conveyance any written affirmation obtained by the agent in connection with the conveyance. The department shall prescribe by rule the form and content of the written affirmation and procedures for submission to the department of the information contained in the written affirmation.
(h)It shall be a defense to any claim by the department or by a transferor against an agent that the agent has acted in reasonable reliance upon representations made by the transferor or the transferor’s tax advisor. [2007 c.864 §4; 2008 c.54 §1; 2009 c.174 §13]
Law Review Citations
9 WLJ 249 (1973); 5 EL 516 (1975)