Schedule OR-PTE-NR Instructions                                                2022
                                 Qualifying business income reduced tax rate for 
                                                 Oregon nonresidents

                                                                   • Materially participate in the business;
General information                                                • Have ordinary business income that doesn’t exceed 
                                                                   $5 million;
If you have qualifying income earned in Oregon by a sole 
                                                                   • Employ one or more employees in Oregon who meet the 
proprietorship, partnership, or an S corporation, you may 
                                                                   employee requirements described below; and
elect to use a reduced tax rate for that income. The reduced 
                                                                   • If ordinary business income is more than $250,000, comply 
tax rate can be claimed for qualifying income up to $5 mil-        with the employee-to-owner ratio requirement shown in 
lion. Use Schedule OR-PTE-NR to claim this reduced tax rate        this table or meet the income distribution requirement 
if you’re a nonresident.                                           described below.
Important: The qualifying business income reduced tax              Employee-to-owner ratio requirement. Unless the income 
rate is an irrevocable election that must be made each year        distribution requirement is met, partnerships and S corpora-
on an original return. You can’t amend to revoke or make           tions with more than $250,000 in ordinary business income 
the election after your original return is filed unless you        must have, at a minimum, the number of qualifying employ-
file an amended return on or before the original due date of       ees in Oregon per owner as shown in this table. The com-
April 18, 2023, or if filing on extension, October 17, 2023. See   bined total of hours worked by the qualifying employees, 
the “Amending” section for more information. The annual            up to 1,200 hours per employee, must be at least the number 
election is made by completing Schedule OR-PTE-NR and              shown in this table.
checking box 46C on the Oregon Form OR-40-N. 
                                                                   Partnership and S corporation employee requirements:
Qualifying income may only be modified for depreciation 
before applying the reduced tax rate. No other additions,          Ordinary          But not   Employees    Aggregate 
subtractions, or deductions are allowed in the calculation         business     more than      required     hours worked 
of the tax on qualifying income.                                   income is at                             by employees
                                                                   least
Schedule OR-PTE-NR is for Oregon nonresidents only. If 
you are an Oregon full-year resident, use Schedule OR-PTE-         $0                $250,000  One           1,200
FY. If you are an Oregon part-year resident, use Schedule                                      One per 
                                                                   $250,001          $500,000                1,200
OR-PTE-PY.                                                                                     owner
                                                                                               Two per 
                                                                   $500,001     $1,000,000                   2,400
                                                                                               owner
Qualifications
                                                                                               Four per 
                                                                   $1,000,001   $2,500,000                   4,800
                                                                                               owner
Generally
                                                                                               Ten per 
To be eligible for the reduced tax rate, you must materially       $2,500,001   $5,000,000                   12,000
                                                                                               owner
participate in the business, have at least the minimum num-
ber of qualifying Oregon employees, and meet any specific          Income distribution requirement. A partnership or S 
requirements for a sole proprietorship or for a partnership        corporation with more than $250,000 in ordinary business 
or S corporation.                                                  income may still qualify for the reduced tax rate even if 
                                                                   the employee-to-owner ratio shown in this table isn’t met, 
Sole proprietorship                                                so long as income distributions don’t exceed 25 percent of 
                                                                   ordinary business income. Calculate the percentage using 
To be eligible for the reduced tax rate, a sole proprietor must:   the total distributions and total ordinary business income 
• Have qualifying business income from the sole                    for the current tax year and up to two of the most recent tax 
proprietorship;                                                    years. Treat an annual amount of less than zero as zero for 
• Materially participate in the business; and                      that year.
• Employ one or more employees in Oregon who meet the              Qualifying business income. For your income to qualify for 
employee requirements explained below.                             the reduced tax rate, it must be nonpassive income earned in 
                                                                   Oregon by a sole proprietorship, partnership, or S corpora-
Partnership or S corporation
                                                                   tion. Income from trusts and estates doesn’t qualify for the 
To be eligible for the reduced tax rate, a partner or S corpora-   reduced tax rate. 
tion shareholder must:
                                                                   “Nonpassive income” is income other than that from passive 
• Have qualifying business income from the partnership or          activities as defined in Section 469 of the Internal Revenue 
S corporation;                                                     Code (IRC). This includes, but isn’t limited to, nonpassive 

150-101-367-1 (Rev. 08-30-22)                                    1                            2022 Schedule OR-PTE-NR Instructions

income reported on federal Schedules C (line 31), E [line 28,     employee worked at least 30 hours in Oregon can be counted. 
column (k)], and F (line 34); IRC Section 1231 gains treated as   Hours worked by an employee that is a spouse or other fam-
ordinary income; guaranteed payments; and royalties. Non-         ily member that isn’t an owner, member, or limited partner 
passive income doesn’t include wages, interest, dividends, or     can be used to meet the hour requirements. Independent 
capital gains for the purpose of the reduced tax rate.            contractors can’t be used for the employee requirement.
Tiered entities. If you received nonpassive income that           Example 2: A sole proprietorship had one employee that 
passed-through an upper-tier entity to you from a qualifying      worked a total of 1,440 hours during the year in Oregon. 
lower-tier entity, that income qualifies for the reduced tax      The employee worked 32 hours per week for 30 weeks and 
rate if the lower-tier entity meets the employee requirement.     worked 24 hours per week for 20 weeks. The total qualifying 
                                                                  hours is 960 (32 hours x 30 weeks) since the proprietor can’t 
Coordination with pass-through entity elective tax (PTE-E         count hours worked less than 30 hours in a week. Because 
tax). Certain partnerships and S corporations may elect to        the total qualifying hours worked in Oregon is less than 
pay PTE-E tax. This means they have elected to pay Oregon         1,200, the nonpassive income from the sole proprietorship 
income tax at the entity level. Individuals who are direct        doesn’t qualify for the reduced tax rate.
or indirect members of an electing entity are allowed a tax 
credit for the PTE-E tax paid by the entity. Individuals must     Example 3: A partnership with three partners employed 
also report an addition for any PTE-E tax deducted on an          six employees during the year in Oregon. One employee 
entity-level federal return. The addition amount will be          worked 32 hours a week for 30 weeks and the other five 
added to qualified business income, but only to the extent        employees each worked 20 hours per week for 40 weeks in a 
that the ordinary business income reported on the entity-         job share position. Only the hours worked by the employee 
level federal return qualifies for the reduced tax rate. See      that worked 32 hours per week can be used toward the 
the instructions for column (b) for additional information.       1,200 hour requirement. Since the total hours (30 weeks x 32 
                                                                  hours per week = 960 total hours) worked by that employee 
Example 1: Bryant is the sole shareholder of an S corpora-        don’t exceed the 1,200 hour requirement, and the other five 
tion. Marcus is the sole shareholder of an S corporation. The     employees don’t qualify for purposes of the employee ratio 
two S corporations each have a 50 percent ownership in a          requirement, the nonpassive income from the partnership 
partnership. Bryant and Marcus both materially participate        doesn’t qualify for the reduced tax rate.
in the partnership, which has ordinary business income of 
                                                                  Example 4: An S corporation with two shareholders and 
$2 million. The partnership employs ten full-time employees 
                                                                  annual ordinary business income of $800,000 has three 
in Oregon. Bryant and Marcus receive a distributive share of 
                                                                  employees, all of whom work 35-hour weeks. The office man-
nonpassive income from the partnership that passes through 
                                                                  ager and the two shareholders each work 50 weeks a year, a 
their respective S corporations. They also receive a salary 
                                                                  sales clerk works for 30 weeks a year, and a delivery driver 
as reasonable compensation for the work performed for the 
                                                                  works 20 weeks a year, for a total of 3,500 hours worked by 
partnership. The distributive share of nonpassive income 
                                                                  non-owner employees. Annual income distributions to the 
they receive from the partnership (as passed through to 
                                                                  shareholders include $150,000 in ordinary business income. 
them from their respective S corporations) qualifies for the 
                                                                  With only three employees, this business doesn’t meet the 
reduced tax rate since the partnership meets the ordinary 
                                                                  employee ratio requirement; however, because it distributes 
business income and employee requirements. However, the           less than 25 percent of its ordinary business income to the 
salary received from the partnership doesn’t qualify for the      shareholders each year, its nonpassive income still qualifies 
reduced tax rate.                                                 for the reduced tax rate.
Material participation. Material participation has the same       Temporary or “leased” employees. If a qualifying busi-
meaning as defined for federal purposes under IRC Section         ness contracts with a professional employer organization to 
469. A taxpayer materially participates in an activity if he      employ temporary or “leased” employees, those employees 
or she works on a regular, continuous and substantial basis       can be used to qualify a business for the reduced tax rate if 
in operations, and must meet any one of the seven material        the employees meet the hour requirements.
participation tests in Treasury Regulation Section 1.469-5T(a).
Grouping activities. You may group trade, business, or 
                                                                  Amending
rental activities into a single activity if they form an appro-
priate economic unit for the purpose of meeting the mate-         You can’t amend to revoke or make the election after your 
rial participation test under Treasury Regulation Section         original return is filed unless the amended return is filed on 
1.469-4(c). This treatment is also allowed for the purposes       or before the original due date of April 18, 2023 or if filing 
of the qualifying business income reduced tax rate and the        on extension, October 17, 2023.
material participation requirement.
                                                                  Example 5: Liam filed his original return on March 3, 2023, 
Employee requirement.         The business must have the          and didn’t elect the reduced tax rate. He files an amended 
required number of employees who performed work for the           return on April 13, 2023, and makes the election. His 
business in Oregon for the required number of hours during        amended return will be accepted allowing the reduced tax 
the tax year. Only the hours worked in a week in which the        rate because it was filed before the original due date.

150-101-367-1 (Rev. 08-30-22)                                   2                          2022 Schedule OR-PTE-NR Instructions

Example 6: Maggie filed her original return on March 12,             an S corporation, or  Pfor a partnership. Don’t enter LLC or 
2023, and didn’t elect the reduced tax rate or file an exten-        anything other than the codes listed. 
sion. She files an amended return on May 4, 2023, and elects 
                                                                     Column (a): 
the reduced tax rate. The reduced tax rate will be denied                       Enter Oregon-source nonpassive losses attribut-
since the amended return was filed after the original due            able to the qualifying sole proprietorship, partnership, or S 
date of April 18, 2023, and she didn’t file an extension.            corporation. Include qualifying nonpassive losses such as 
                                                                     IRC Section 1231 losses treated as ordinary losses.
Example 7: Sam filed his original return on a timely filed 
extension on May 12, 2023, and elects the reduced tax rate.          Column (b): For partnerships and S corporations only. 
The reduced tax rate election will be allowed because it was         Enter Oregon-source Section 179 expense deduction you 
made on his original return.                                         reported in Part II, Section 28, column (i) of your federal 
                                                                     Schedule E attributable to the qualifying partnership 
Example 8: Allen filed his original return on a timely filed 
                                                                     or S corporation.   Don’t   complete this column for sole 
extension on May 3, 2023, and didn’t elect the reduced tax 
                                                                     proprietorships.
rate. He files an amended return on July 1, 2023 and makes 
the election. His amended return will be accepted allowing           Column (c): Enter Oregon-source nonpassive income attrib-
the reduced tax rate and his amended return will be treated          utable to the qualifying sole proprietorship, partnership, or 
as the original return for the reduced tax rate election.            S corporation. Include qualifying nonpassive income such 
If you claimed the reduced tax rate on your original return,         as royalties and IRC Section 1231 gains treated as ordinary 
you must amend Schedule OR-PTE-NR if:                                income. Don’t include passive income, capital gains, interest 
                                                                     income, wages, or dividends. 
• An IRS audit (or other state audit) resulted in a change that 
affects your Oregon return;                                          Column (d). If you are not a member of an entity that elected 
• You amended your federal (or other state) return and the           to pay PTE-E, enter 0. Otherwise, if all of the ordinary busi-
changes you made affect your Oregon return;                          ness income passed through from the entity qualifies for this 
• You have a net operating loss (NOL); or                            reduced tax rate, enter the amount from Schedule OR-K-1, 
• You need to correct income or deductions you originally            line 2. However, if not all of the ordinary business income 
reported.                                                            passed through from the entity qualifies for this reduced 
Note: If you amend after the due date for the return of April        tax rate, use the federal Schedule K-1 (or Oregon Schedule 
18, 2023 (or October 17, 2023, if filing on extension), you must     OR-K-1) and Oregon Schedule OR-21-K-1 issued by the elect-
use the tax on line 12a of the Tax worksheet even if line 13a        ing entity and this formula to determine the amount to enter 
is less.                                                             on column (d):
                                                                             Qualifying business income from electing entity
Schedule instructions                                                                             ÷
                                                                          Ordinary business income from Schedule K-1, box 1 
Use the following instructions to complete Schedule OR-                                           ×  
PTE-NR. Complete the entire schedule and include it with                        Addition from Schedule OR-21-K-1, line 2 
your Oregon Form OR-40-N.                                                                         = 
                                                                                    Amount to claim on column (d)
Section A instructions
                                                                     See Form OR-21 Instructions and our website for information 
Complete a line for each qualifying sole proprietorship, part-       about the PTE-E tax.
nership, or S corporation. Only list businesses that qualify. 
Use additional schedules if necessary and put the total from         Line 6: Report the totals for columns (a), (b), and (c). If more 
all schedules on line 6 of the first page.                           than one page is used, report the total of all pages on the 
                                                                     first page.
Note: You must list all nonpassive income (or loss) from qual-
ifying sole proprietorships, partnerships, and S corporations        Line 9: If line 9 is 0 or less, you can’t use the reduced tax 
for each individual making the election. You can’t selectively       rate. Return to line 46 and complete the rest of Form OR-
choose which qualifying income (or losses) to report.                40-N. If line 9 is more than 0, enter the amount on line 2b 
                                                                     of Section B. 
For each qualifying business, enter the business name, fed-
eral employer identification number (FEIN), number of quali-
fying employees, business code number, and entity type.              Section B instructions
Business code number. Enter the business code number                 The tax worksheet in Section B will help you calculate which 
(or North American Industry Classification System code) as           tax rate is more beneficial to you. Complete each line to 
reported on line c of federal Form 1065, line b of federal Form      determine your tax. 
1120S, or line b of federal Schedules C or F.                        Lines 4 and 7: Report only the depreciation modification 
Entity type. Enter the appropriate code for how the business         attributable to the qualifying sole proprietorships, partner-
files for tax purposes:       SP for a sole proprietorship, SC for   ships, or S corporation listed in Section A. 
150-101-367-1 (Rev. 08-30-22)                                      3                              2022 Schedule OR-PTE-NR Instructions

Example 9: Liam reports an addition for depreciation attrib-     such as a farm liquidation long-term capital gains or farm 
utable to a qualifying sole proprietorship he owns on line       income averaging, you’ll need to use the appropriate work-
30S of his Form OR-40-N. He also reports a subtraction for       sheet or schedule, 2022 Worksheet FCG or 2022 Schedule 
depreciation attributable to a qualifying partnership on line    OR-FIA-40-N, to calculate the tax on line 1a.
33S of his Form OR-40-N. In Section B, Liam will report the 
                                                                 Line 14a: Enter the lesser of line 12a or 13a. If line 12a is less 
addition on line 4 and the subtraction on line 7.
                                                                 than 13a, enter the amount on line 14a on line 46 of Form 
Line 10a: Use Tax rate chart A below for the taxable income      OR-40-N and check box 46c. If line 13a is less than 12a, it 
reported on 8a. Report the tax on line 10a. Note: If you have    isn’t more beneficial for you to use the reduced tax rate. Enter 
other income that qualifies for an alternative tax rate, such    the amount from line 13a on line 46 of Form OR-40-N and 
as a farm liquidation long-term capital gains or farm income     complete the rest of the return.
averaging, you’ll need to use the appropriate worksheet or 
schedule, 2022 Worksheet FCG or 2022 Schedule OR-FIA-
40-N, to calculate the tax on line 10a. Don’t include the non-   Do you have questions or need help?

passive income listed on line 8a in the calculation.               www.oregon.gov/dor
Line 11b: Use Tax rate chart B below for the taxable income      503-378-4988 or 800-356-4222
reported on line 9b and report the tax on line 11b.              questions.dor@dor.oregon.gov
Line 13a: Use Tax rate chart A below for the taxable income      Contact us for ADA accommodations or assistance in other 
reported on line 1a. Report the tax on line 13a. Note: If you    languages.
have other income that qualifies for an alternative tax rate, 

2022 Tax rate chart A
2022 tax rate chart—Use this chart only for income reported on lines 1a and 8a of Section B. Report the tax on Section B, 
lines 10a and 13a. 
Chart S: For persons filing single or married filing separately:
If your taxable income isn’t over $3,750 ...............................................................................your tax is 4.75% of taxable income
If your taxable income is over $3,750 but not over $9,450 ..........................your tax is $178 plus 6.75% of excess over $3,750
If your taxable income is over $9,450 but not over $125,000 ......................your tax is $563 plus 8.75% of excess over $9,450
If your taxable income is over $125,000 ....................................................your tax is $10,674 plus 9.9% of excess over $125,000
Chart J: For persons filing jointly, head of household, or qualifying widow(er) with dependent child:
If your taxable income isn’t over $7,500 ...............................................................................your tax is 4.75% of taxable income
If your taxable income is over $7,500 but not over $18,900 ........................your tax is $356 plus 6.75% of excess over $7,500
If your taxable income is over $18,900 but not over $250,000 ...............your tax is $1,126 plus 8.75% of excess over $18,900
If your taxable income is over $250,000 ...................................................your tax is $21,347 plus 9.9% of excess over $250,000

2022 Tax rate chart B
2022 pass-through entity reduced tax rate chart—Use this chart only for qualifying income reported on line 9b of 
Section B. Report the tax on Section B, line 11b. 
If your taxable income isn’t over $500,000 ..........................................................................your tax is 7% of qualifying income
If your taxable income is over $500,000 but not over $1 million ........your tax is $35,000 plus 7.5% of excess over $500,000
If your taxable income is over $1 million but not over $2.5 million .......your tax is $72,500 plus 8% of excess over $1 million
If your taxable income is over $2.5 million but not over $5 million ........your tax is $192,500 plus 9% of excess over $2.5 million
If your taxable income is over $5 million ..........................................your tax is $417,500 plus 9.9% of excess over $5 million

150-101-367-1 (Rev. 08-30-22)                                  4                     2022 Schedule OR-PTE-NR Instructions