U.S. Government Interest in Retirement Accounts

(1) Interest or dividends on U.S. obligations under ORS 316.680(1)(a) included in distributions from self-employed plans or individual retirement accounts as described under sections 401 to 408 of the Internal Revenue Code shall be subtracted from federal taxable income to determine Oregon taxable income.

(2) Annuities: The amount of the subtraction shall be determined by applying a “state exempt-interest ratio” to distributions received as annuity payments to the extent the payments are included in federal adjusted gross income for the taxable year. The “state exempt-interest ratio” is the year-to-date balance of qualifying interest or dividends under ORS 316.680(1)(a) included in the account balance prior to the current year distribution divided by the account balance prior to the current year distribution. The year-to-date balance of qualifying interest or dividends is equal to the cumulative total of those earnings less any prior year’s subtraction. The ratio shall be applied on the later of the annuity starting date or the date on which the taxpayer established residency. The annuity starting date shall be the date determined under Treas. Reg. Section 1.72-4(b). To see the formula and several examples, along with illustrative tables, for this rule click on the PDF link.

(3) Lump-sum distributions: For lump-sum distributions from individual retirement accounts and self-employed retirement plans, the subtraction shall be equal to the total qualifying interest under ORS 316.680(1)(a) included in the account balance at the time of distribution.

(4) Change of status from nonresident to resident: Nonresidents who become residents sometime after the annuity starting date shall use the same formula for computation of the ratio as if they were residents at the annuity starting date. For purposes of the formula shown in subsection (2)(a), “a” will equal the year-to-date balance of qualifying interest or dividends which is equal to the cumulative total of those earnings less any prior years deemed or actual subtraction. [Publications: The publication(s) referred to or incorporated by reference in this rule is available from the Department of Revenue pursuant to ORS 183.360(2) and ORS 183.355(6).]

[ED. NOTE: To view attachments referenced in rule text, click here to view rule.]