(2) A substantial understatement of net tax exists for any tax year if the amount of the understatement for the tax year exceeds:
(a) Except as provided in paragraph (b) of this subsection, $2,400.
(b) In the case of a corporation other than an S corporation, as defined in section 1361 of the Internal Revenue Code, or a personal holding company, as defined in section 542 of the Internal Revenue Code, $3,500.
(c)(A) For a calendar year beginning on or after January 1, 2017, the Department of Revenue shall make a cost-of-living adjustment to the net tax threshold amounts described in paragraphs (a) and (b) of this subsection.
(B) The cost-of-living adjustment for a calendar year is the percentage by which the monthly averaged U.S. City Average Consumer Price Index for the 12 consecutive months ending August 31 of the prior calendar year exceeds the monthly averaged index for the period beginning September 1, 2015, and ending August 31, 2016.
(C) As used in this paragraph, "U.S. City Average Consumer Price Index" means the U.S. City Average Consumer Price Index for All Urban Consumers (All Items) as published by the Bureau of Labor Statistics of the United States Department of Labor.
(D) If any adjustment determined under subparagraph (B) of this paragraph is not a multiple of $50, the adjustment shall be rounded to the next lower multiple of $50.
(E) The adjustment shall apply to all tax years beginning in the calendar year for which the adjustment is made.
(3) In the case of any item attributable to an abusive tax shelter:
(a) No reduction of the amount of the understatement shall be made with regard to that item regardless of the existence of substantial authority for the treatment of the item by the taxpayer.
(b) No reduction of the amount of the understatement shall be made with regard to that item regardless of the disclosure of the facts affecting the tax treatment of the item unless, in addition to the disclosure, the taxpayer reasonably believed that the tax treatment of the item was more likely than not the proper treatment.
(4) As used in this section:
(a) "Abusive tax shelter" means any partnership, corporation or other organization or entity, any investment plan or arrangement or any other plan or arrangement, which has as its principal purpose the evasion or improper avoidance of federal or state income tax. "Abusive tax shelter" includes any investment or activity in connection with which tax benefits derived by investors are not clearly intended under the tax laws or any investment or activity that involves little or no economic reality, making use of unrealistic allocations of income or expenses, inflated appraisals of asset values, losses substantially in excess of investment, mismatching of income and expenses, financing techniques that do not conform to standard commercial business practice or mischaracterization of the substance of the investment or activity.
(b) "Understatement" means the excess of the amount of the net tax required to be shown on the return for the tax year over the amount of the net tax shown on the return, reduced by any portion of the understatement that is attributable to:
(A) The tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment; or
(B) Any item with respect to which:
(i) The relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return; and
(ii) There is a reasonable basis for the tax treatment of the item by the taxpayer.
(5) The penalty imposed under this section is in addition to any other penalty imposed by law. A penalty imposed under this section shall be treated for all purposes as an additional deficiency subject to the provisions of ORS 305.265, but shall not bear interest.
(6) The department may waive all or any part of the penalty imposed under this section on a showing by the taxpayer that there was reasonable cause for the understatement, or any portion thereof, and that the taxpayer acted in good faith. [1987 c.843 §9; 1995 c.556 §25a; 2015 c.32 §1]
Structure 2021 Oregon Revised Statutes
Volume : 08 - Revenue and Taxation
Chapter 314 - Taxes Imposed Upon or Measured by Net Income
Section 314.011 - Definitions; conformance with federal income tax law.
Section 314.033 - Application of federal Tax Reform Act of 1986 (P.L. 99-514).
Section 314.059 - Application of American Recovery and Reinvestment Act of 2009 (P.L. 111-5).
Section 314.075 - Evading requirements of law prohibited.
Section 314.085 - Taxable year; rules.
Section 314.091 - Abeyance of tax during periods of active duty military service.
Section 314.105 - Definitions for ORS 314.105 to 314.135.
Section 314.115 - Adjustment to correct effect of certain errors; use limited.
Section 314.125 - When adjustment may be made.
Section 314.256 - Lobbying expenditures; proxy tax; rules.
Section 314.258 - Withholding in certain conveyances of real estate; rules.
Section 314.260 - Taxation of real estate mortgage investment conduits.
Section 314.276 - Method of accounting.
Section 314.287 - Costs allocable to inventory.
Section 314.300 - Passive activity loss; determination; treatment; rules.
Section 314.306 - Income from discharge of indebtedness; bankruptcy; insolvency.
Section 314.307 - Definitions; reportable transactions.
Section 314.308 - Reportable transactions; rules.
Section 314.310 - Liability of transferee of taxpayer for taxes imposed on taxpayer.
Section 314.330 - Lien if grantor or other person determined to be owner of trust.
Section 314.360 - Information returns; penalties.
Section 314.362 - Filing return on magnetic media or other machine-readable form; rules.
Section 314.364 - Authority of department to require filing of returns by electronic means; rules.
Section 314.385 - Form of returns; time for filing; alternative filing formats; rules.
Section 314.395 - Time for payment of tax; interest on delayed return.
Section 314.402 - Understatement of net tax; penalty; cost-of-living adjustment; waiver of penalty.
Section 314.403 - Listed transaction understatement; penalty.
Section 314.404 - Penalty for failure to report reportable transaction.
Section 314.406 - Penalty for promotion of abusive tax shelter.
Section 314.415 - Refunds; interest; credits.
Section 314.419 - Foreclosure of lien.
Section 314.423 - Status of lien.
Section 314.425 - Examining books, records or persons.
Section 314.430 - Warrant for collection of taxes.
Section 314.440 - Tax as debt; termination of taxable period and immediate assessment of tax.
Section 314.505 - Estimate of tax liability by corporations; rules.
Section 314.515 - Installment schedule for payment of estimated tax.
Section 314.518 - Estimated tax payments by electronic funds transfer; phase-in; rules.
Section 314.520 - State agency authority over certain electronic funds transfer payments.
Section 314.525 - Underpayment of estimated tax; interest; nonapplicability of penalties.
Section 314.605 - Short title; construction.
Section 314.610 - Definitions for ORS 314.605 to 314.675.
Section 314.620 - When taxpayer is considered taxable in another state.
Section 314.630 - Allocation to this state of net rents and royalties.
Section 314.635 - Allocation to this state of capital gains and losses.
Section 314.642 - Allocation to this state of lottery prizes.
Section 314.645 - Allocation to this state of patent and copyright royalties.
Section 314.655 - Determination of property factor.
Section 314.660 - Determination of payroll factor.
Section 314.666 - Market for sales in this state.
Section 314.667 - Additional methods to determine extent of business activity in this state; rules.
Section 314.668 - Definitions.
Section 314.669 - Legislative findings; purposes.
Section 314.671 - Qualifying investment contract; duration; remedies.
Section 314.673 - Rules; report to Legislative Assembly.
Section 314.674 - Apportionment of broadcasting sales.
Section 314.712 - Partnerships not subject to income tax; exceptions.
Section 314.716 - Basis of partner’s interest; gain or loss on sale; election to adjust basis.
Section 314.718 - Treatment of contributions to partnership.
Section 314.720 - Treatment of distributions from partnership.
Section 314.722 - Publicly traded partnerships taxed as corporations.
Section 314.724 - Information return; penalty; rules.
Section 314.731 - Definitions.
Section 314.735 - Time limit for notice of deficiency.
Section 314.737 - Time limit for claim for refund or credit.
Section 314.765 - Employee fringe benefits; foreign income.
Section 314.766 - Tax on built-in gain.
Section 314.767 - Tax on excess net passive income.
Section 314.768 - S corporation or shareholder elections; rules.
Section 314.770 - Disclosure of S corporation items to shareholder.
Section 314.771 - Recapture of LIFO benefits.
Section 314.772 - Business tax credits; allowance to shareholders.
Section 314.775 - Definitions for ORS 314.775 to 314.784.
Section 314.781 - Withholding; required returns and statements; pass-through entity liability.
Section 314.784 - Circumstances when pass-through entity withholding is not required; rules.
Section 314.835 - Divulging particulars of returns and reports prohibited.
Section 314.840 - Disclosure of information; persons to whom information may be furnished.
Section 314.843 - Reporting of information to consumer reporting agency; rules.
Section 314.865 - Use of certain information for private benefit prohibited.
Section 314.870 - Time for performing certain acts postponed by reason of service in a combat zone.