Amend Business License Law Code related to the apportionment and allocation of income (amend Code Chapter 7.02)

The City of Portland ordains: Section 1. The Council finds: In May 2011, the City Council passed ordinance 184597, adopting changes to the Business License Law to align more closely with the Oregon Revised Statutes specifically regarding the concept of “jurisdiction to tax” which impacts apportionment of income. The Cost of Performance apportionment method assigns income and the related tax to the location where a business performs services. The Market-Based Sourcing apportionment method assigns income and the related tax to the location of a business’ customer. Both the City of Portland and the State of Oregon used Cost of Performance apportionment for services through 2017. The State of Oregon adopted Market-Based Sourcing apportionment for services beginning with 2018. The City of Portland still uses Cost of Performance apportionment. Generally, it is desirable for the Business License Law to be in conformity with the state’s income tax law. These changes bring City of Portland back into conformity with the state. Apportionment rules are important to businesses when they do business both within and outside the City and clear guidance assists the Revenue Division as it administers the Business License Law. It is necessary to amend the apportionment section of the Business License Law to achieve greater conformity with the State of Oregon statutes to adopt Market-Based Sourcing of sales for income from services and intangible assets. The Revenue Division administers business income taxes for Multnomah County and Metro. It is essential for taxpayer compliance with, and for Revenue Division’s administration of, the business taxes for the three jurisdictions that substantially similar provisions are adopted by each jurisdiction. The Revenue Division has been working closely with Multnomah County and Metro to ensure that the proposed legislation is supported by all three jurisdictions and will be implemented uniformly with all three jurisdictions. The proposal to align the local income tax apportionment rules more closely to the state income tax has received broad support from the Portland area business community, including the Portland Business Alliance. NOW, THEREFORE, the Council directs: City Code Chapter 7.02 is amended as set forth in the attached Exhibit A, but shall not take effect until such time as substantially similar provisions are adopted by the governing bodies of Multnomah County and Metro to applicable provisions of the Multnomah County Code and Metro Code.