Happy New Year! I hope you all had a wonderful holiday season. Mine was a bit extended, but I’m finally ready to get serious again. Back to work!
In the spirit of the new year, let’s talk about a new Oregon Law, House Bill 2592. This law, effective January 1, 2008, will affect all non-Oregon residents selling property in Oregon and/or sellers that will not reside in Oregon after the close of their property. My understanding of this law is that at closing, the escrow agent is required to withhold a portion of the seller proceeds for income taxes. The amount withheld will be remitted by the escrow agent to the Oregon Department of Revenue (DOR). When withholding applies, the closing agent will prepare a DOR withholding transmittal form. You might have to consult with your professional tax advisor in order to complete the form because the escrow agent will be unable to advise you. The amount withheld will be the lesser of the following three amounts:
- Four percent of the consideration involved in the transaction;
- Four percent of the net proceeds resulting from the transaction; or
- Ten percent of the taxable gain.
Withholding will not apply if any of the following requirements are met:
- The consideration for the real property does not exceed $100,000;
- The property is acquired through foreclosure;
- The transferor (owner) is a resident of Oregon-or if a C corporation-has a permanent place of business in this state; or
- The transferor receives professional advice that the transfer will not result in Oregon taxable income.
The new sales contract will have wording pertaining to this law and it sounds to me like the escrow agents will be asking the right questions to determine whether a seller is exempt or not but it’s important for all sellers to at least be familiar with this new law.