Corporate Income Tax: Pay Ratio Surtax Adopted in Portland, Oregon

On December 7, 2016, the City Council in Portland, Oregon approved the imposition of a surtax on certain publicly traded companies with high rates of pay for CEOs compared to other employees. Specifically the surtax is applicable to publicly traded companies subject to U.S. Securities and Exchange Commission (SEC) Dodd-Frank Mandate pay-ratio reporting requirements that exceed certain thresholds. For tax years beginning on or after January 1, 2017, a surtax of 10% of the Business License Tax liability is imposed if a company subject to the Dodd-Frank Mandate reports a CEO-to-employee pay ratio of at least 100:1 but less than 250:1. If the pay ratio is 250:1 or greater, the surtax increases to 25% of the Business Tax liability. This surtax is imposed in addition to the 2.2% tax imposed by the City of Portland.

Currently, there are no additional tax forms to report the surtax as the surtax is reported on the City of Portland income tax return. Companies subject to the Dodd-Frank Mandate should review their reporting options outlined under the Mandate in order to determine the impact of this surtax. 

Takeaway for Publicly Traded Companies Operating In Portland, Oregon

Any publicly traded company subject to Dodd-Frank Mandate pay-ratio reporting requirements by the SEC that is operating within the City of Portland should review the ratio of its CEO’s compensation to the median compensation of its employees in order to determine if it will be subject to the surtax.