why OR taxes federal tax stimulus rebate ?

As I understand IRS does not charge tax on 2008 tax stimulus rebate, nor many states.
Why Oregon charges tax on it ? Can any expert explain ?
Thanks
-Gary
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Just guessing. Because the state allows a deduction for federal taxes paid. Any refund would therefore be taxable.
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wrote

paid.
But the RRC isn't a refund of a deducted tax per se. Didn't Congress tell us it's not taxable? (Did they follow up with a section in their bill to make it exempt at the states' level?)
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"D. Stussy" wrote:

I don't think Congress could do that. States aren't required to follow the Federal definition of income, and many don't.
Oregon does allow a deduction for Federal income tax paid. Whether they addressed the 2008 stimulus payments in state legislation I don't know. -------
Phil Marti, VITA Volunteer Clarksburg, MD
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wrote

(Did they follow up with a section in their bill to

can the feds do that? what about state's rights?
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wrote

tell
There are certain things for which there's a federal preemption. Federal benefits fit one of those general categories. Otherwise, states would be taxing every federal payment every way they could - and that doesn't happen. We may start by looking at things such as the 10th amendment.
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I received this detailed explanation by e-mail from an author who prefers not to post himself but gave permission. --------------------------------------
I have been an AARP Tax Aide instructor and counselor in Oregon for several years. We discussed this issue. The Oregon Department of Revenue states that it is not taxing the stimulus; but that is not true. The legislature did not pass any law dealing with it; so the DoR decided to make the payment a subtraction from a subtraction instead of an addition, that unfairly discriminates against different taxpayers IMO.
The amount of the Oregon federal income tax subtraction is capped each year: $5,500 in 2007, and $5,600 in 2008. Oregon requires filers to subtract the amount of the stimulus received from their 2008 Oregon federal income tax subtraction which again is capped. Taxpayers who paid more federal income tax for 2007 than $5,500 plus the amount of stimulus received got no Oregon tax benefit from the stimulus.
Further, although the stimulus was based on filing status in 2007, Oregon is requiring taxpayers who file 2008 returns to subtract the stimulus amount from their capped 2008 subtraction. In most cases, Oregon is in effect taxing the stimulus by increasing Oregon AGI. In some cases, including mine, Oregon is taxing the stimulus twice - once on the 2007 return because the net federal income tax was more than $5,500 + stimulus and did not lower Oregon AGI, and again on 2008 returns by subtracting the stimulus amount from the capped ($5,600) federal income tax subtraction, even if the 2008 federal net tax was more than $5,600.
Oregon residents who ordinarily do not need to file income tax returns but did in 2007 only to get a stimulus payment (e.g. seniors with mostly social security income not taxed at all by Oregon), and are not filing 2008 returns, are not being taxed on their stimulus payments. Even worse, Oregon is in effect taxing in advance stimulus payments that may or may not be received in 2009 via the 2008 Recovery Rebate Worksheet, such as taxpayers who had additional dependents in 2008 or whose AGI in 2007 was not enough to receive the full rebate but may get more based on their 2008 federal returns.
At least four other states enacted laws exempting the federal stimulus payments from state income taxes. Oregon did not. States are facing decreased revenues in the current economy, and Oregon is looking for ways to replace them. It is not unusual for Oregon to employ uneven and perhaps illegal taxation rules. It has done so in the past, and has been sued successfully over some, such as not taxing state employee pension income but taxing federal employee pension income.
-------
Phil Marti, VITA Volunteer Clarksburg, MD
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several
that
not
year:
the
Oregon
is
mine,
but
social
Oregon
taxpayers
to
to
but
Based on that, I smell pending litigation over this mess in Oregon. I'm glad I don't have any clients there. So, depending on the precise facts and circumstances of the taxpayer, they could be singly taxed, doubly taxed, or not taxed at all on this, despite ODR saying it's not taxable?
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If the Oregon Department of Revenue has stated that it is not taxing the stimulus payments then take them at their word and omit the stimulus payment from the calculation of Oregon taxes. Actually the stimulus payment is a loan from the Government on which taxpayers are going to be paying interest on in the form of taxes for years. And everybody knows that loan proceeds are not taxable.
" so the DoR decided to make the payment a subtraction from a subtraction instead of an addition" The decision maker who came up with that should be tried and convicted for criminal stupidity. A subtraction from a subtraction is an addition.
y = a - ( x - 1) y = a +1 - x

And the 50,000 Federal employees who were scammed by the State of Oregon and then received their part of the $400,000,000 that had to be refunded by Oregon because of the snafu that ran from 1991 through 1997 were instructed by IRS to include those refunds in the calculation of Taxable Social Security benefits. Go read with great care section 111(a) of the Internal Revenue Code and consider what happens when a tax refund is included in the calculation of taxable Social Security benefits. First the taxpayers were scammed by the State of Oregon and then they were scammed by IRS.
Here is an excerpt from the October 19, 1999 minutes of the Citizen'a Advocacy Panel for the Pacific Northwest.
Speaker 2 Concerned about taxability of Social Security benefits when a State tax refund is received.
Approximately 50,000 recipients of state income tax refunds that the Oregon Department of Revenue is sending to federal retirees, their estates, or beneficiaries may owe federal income tax on some or all of the amounts refunded. The refunds represent state income tax paid for years 1991 through 1997 and any interest required by state law. The state of Oregon is refunding income tax paid by federal retirees because the Oregon Supreme Court ruled that the state erroneously taxed their pensions.
The concern is the taxability of Social Security benefits when a state tax refund is received. The original state tax deduction is a Schedule A itemized deduction, which reduces taxable income but not Adjusted Gross Income (AGI). The refund of the state income tax is added to income on the front of the Form 1040, U.S. Individual Income Tax Return. It increases the AGI and consequently, can affect Social Security taxability. So originally a taxpayer gets no benefit on the Social Security taxability when he/she takes the state tax deduction, but when the state tax is refunded it increases the AGI and possibly increases the taxable Social Security benefits.
Panel comments
Members will take a closer look at the speakers documentation
Appreciate the speaker contacting us
Does anyone care to guess who "Speaker 2" was?
Cheers,
WDK

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On Apr 9, 1:24am, snipped-for-privacy@aol.com wrote:

Maybe I was a little harsh. When convicted the decision maker should get community service and probation. For"community service" he could appear on the major TV talk shows and investigative shows such as 60 Minutes and explain why itemized deduction recoveries should not be added to gross income but rather added on page 2 of the 1040 following the subtraction for itemized deduction recoveries as suggested by Prof. Matthew Barrett (Notre Dame) in his law review article published in 1994. In this way the objectives of section 111(a) of the IRC would be met with minimum numerical manipulations. No more "tax bubbles" as a result of the the recoveries inflating taxable social security benefits and reducing credits, exemptions, deductions, etc.

More conventionaly, the above should have been expressed as
y = x - ( a - 1) y = x + 1 - a
where x = income before the subtraction for the federal income tax a = normal subtraction of federal income tax 1 = stimulus payment and y= "taxable income".

Cheers,
WDK
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