Item B: School/Youth Services Funding

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?Inclusion of a rate reduction if the federal government continues the federal timber fund replacement by June 1, 2007 ?Application to tax years starting January 1, 2007 Corporate Income Tax A corporate income tax could be applied to the income of corporations doing business in Eugene. Alternatively, a surcharge could be applied to the state corporate income taxes owed by corporations doing business in Eugene. Based upon 2001 Eugene economic data, a 4.5% state corporate income tax surcharge would generate approximately $8.1 million. The only local corporate income tax in Oregon is levied by Multnomah County. Multnomah County’s Business Income Tax includes the following provisions: ?Assessed on all entities conducting business activity in Multnomah County ?Based on net business income and may be apportioned if the business has activity outside the County ?Rate is 1.45% of net income after allowable deductions and apportionment with no minimum tax In 1998, a one-year temporary increase to the rate was imposed on taxpayers who owed more than $100. This 0.5% increase was directed to assist schools in Multnomah County and raised approximately $10.5 million in revenues. Multnomah County’s income tax generated $50.9 million in FY06, and is expected to generate $57 million in FY07. Revenues currently generated from this tax are used for county general fund purposes. The City of Portland charges the County an administration fee of approximately $700,000 per year for collecting this tax. Business License Fee A business license fee could be imposed on any person, partnership, corporation or similar entity for the privilege of conducting business within the City of Eugene. Revenues generated would depend on the structure of the fee. The City of Portland imposes a business license fee as follows: ?Applies to all entities conducting business within the City of Portland (or earning income from sources within the city boundary) ?Imposes a license fee based on net business income. Business income may be apportioned if the licensee has business activity outside Portland. ?Imposes a 2.2% rate of net income after allowable deductions and apportionment. Roughly one- half of the businesses pay the minimum $100 annual business license fee. Portland’s fee generated $62 million in FY06, and is expected to generate $63.5 million in FY07. Revenues are used for General Fund purposes, which do not include funding for schools. The administration cost to the City of Portland for this fee is approximately $2.5 million per year. Portland is considering some changes to this fee in fiscal year 2008-09, including increasing the limit for the gross receipts exemption from $25,000 to $50,000, and changing the minimum annual fee to a tiered structure, possibly based upon gross receipts or number of employees. L:\CMO\2007 Council Agendas\M070418\S070418B.doc