Oregon imposes an interest charge on certain installment sales that meet the requirements of Internal Revenue Code (IRC) Section 453A, as adopted by Oregon law under ORS 314.302. This interest applies to certain large installment sales where gain is reported over time using the installment method.
Who Is Subject to the Interest Charge?
The interest charge may apply if both of the following conditions are met:
- The sales price of the property sold exceeds $150,000.
- The aggregate face amount of the taxpayer's outstanding installment obligations exceeds $5,000,000 at the end of the tax year.
These rules apply to taxpayers who report gain using the installment method under IRC Section 453.
How the Interest Is Determined
- The Oregon interest charge applies when interest on the deferred tax liability is required for federal income tax purposes under IRC Section 453A. Oregon generally computes the interest in the same manner as the federal calculation, subject to Oregon-specific provisions.
- For tax year 2025, the Oregon interest rate is 9% per year, or 0.75% per month.
- The Oregon interest is reported as an addition to tax on the Oregon return.
Apportionment and Nonresident Rules
- Nonresidents: When determining whether Oregon interest applies and the amount of interest, only installment obligations arising from dispositions of property located in Oregon are considered.
- Part-year residents: For the portion of the year the taxpayer was a nonresident, only installment obligations arising from dispositions of Oregon property are considered. For the portion of the year the taxpayer was a resident, all installment obligations are considered.
- Oregon law also authorizes the Department of Revenue to adopt rules concerning the derivation, attribution, and apportionment of installment obligations or income from installment obligations. Therefore, do not state that the Oregon apportionment factor from the year of sale automatically remains fixed for all subsequent years unless the applicable Oregon rule specifically requires that treatment
Interest Charge vs. Installment Interest
The Oregon interest charge under ORS 314.302 is separate from any interest paid by the purchaser under the installment sale agreement.
- Interest paid by the purchaser is reported as interest income under the applicable federal and Oregon income tax rules.
- Interest under ORS 314.302 is a statutory interest charge imposed on certain large installment sales that meet the requirements of IRC Section 453A. It is not a penalty.
Important Notes
- The Oregon interest charge applies when the taxpayer is required to pay interest on the deferred tax liability for federal purposes under IRC Section 453A.
- Oregon generally calculates the interest in the same manner as the federal calculation, subject to Oregon-specific modifications.
- For 2025, the Oregon interest rate is 9% annually (0.75% per month).
- For nonresidents and part-year residents, apply Oregon's specific rules for installment obligations arising from dispositions of Oregon property.
- Taxpayers should retain records of the installment sale, outstanding installment obligations, federal IRC §453A calculation, and information necessary to determine the Oregon portion of the liability.
Source:
2025 Oregon Publication OR-17
IRC §453A – Special Rules for Nondealers
Oregon Revised Statutes – Chapter 314
Disclaimer: Always verify with the official Oregon Department of Revenue forms, instructions, and publications for the most accurate and up-to-date guidance. This response is based on limited retrieved context and may not cover all applicable rules or requirements.