In Oracle Corp. v. DOR, TC-MD 070762C (Or. Tax Feb. 11, 2010), the Oregon Tax Court ruled that a taxpayer was not under a duty to report business/non-business positions consistently and was not estopped from claiming that certain income was nonbusiness income in Oregon, but business income in California.

The taxpayer claimed that income from gains on the sales of stock and other corporate assets constituted non-business income for Oregon tax purposes. Or. Admin. R. 150- 314.615-(A) requires a multistate taxpayer to disclose inconsistent treatment of business/ non-business income in all Multistate Tax Compact Member States in which it is tax-able. The Department of Revenue (DOR) argued that the taxpayer failed to disclose that it claimed business income on the gains for California tax purposes and therefore violated a duty of consistent reporting required by the regulation. The DOR also argued that estoppel applied to prevent the taxpayer from claiming inconsistent positions.

The Oregon magistrate rejected the DOR’s contentions for a number of reasons, including: the DOR’s regulation would require the court to become an expert in the tax laws of multiple states; there are differences among states’ laws; the DOR’s position would result in limiting the DOR’s ability to disagree with the treatment of income by another state; and estoppel was inapplicable.

There is a recent trend by states to require taxpayers to disclose tax positions taken in other states. This case provides solid rationale for arguing that such requests are irrelevant – states do not apply their laws consistently and taxpayers should not be expected to file tax returns consistently.