Fillable Form Sps - Severance Pay Subtraction (Page 3 of 3) in pdf

Instructions for Form SPS

Oregon Severance Pay Subtraction

• Business activity code as listed on one of the following

You may subtract severance pay when invested in certain small

businesses. You must claim the subtraction in the same year

federal forms:

you receive the severance pay.

— Form 1065, line A;

— Schedule C, Form 1040, box B;

General qualifications required to claim the

— Schedule K, line 2a; or

severance pay subtraction

— Form 1120S, box B.

• Description of how your investment impacts the small

Your severance pay investment:

business, (for example: buying hardware, new hires,

• Cannot be invested in the same business that paid your

severance pay.

marketing, expansion, etc.).

• Must occur before the due date of your tax return (includ-

Part C: Severance pay subtraction calculation

ing extensions).

worksheet

• Cannot be a loan to a qualifying small business. (You must

receive an ownership interest.)

The subtraction is the lesser of your investment or $500,000.

• Must stay invested in the business for 24 consecu-

If the business has operations outside of Oregon, you must

tive months. (If you withdraw any portion during the

multiply line 4 by your sales factor.

24-month period, you must amend your tax return to

correct the subtraction amount.)

Keeping records

The business you are investing in must:

You must keep current and complete records of your time

• Not have more than 50 employees, including yourself.

spent working in the business to show you meet the mini-

• Operate for profit (cannot be a nonprofit business).

mum material participation requirements. You must also

• Be independently owned and operated from all other

keep a monthly log of the amount of severance pay you

businesses.

invested in the business for 24 months beginning with the

You must materially participate in the business (this means

date of your termination.

you are regularly, continuously, and substantially involved

in the operation of the business).

Filing instructions

You are considered to be materially participating if you:

Include this form with your tax return for the year in which

• Worked more than 500 hours per year in the business;

you are claiming the subtraction. If you are filing electroni-

• Worked more than 100 hours per year in the business and

cally, fax a copy of this form to 503-945-8786, labeled “Attn:

at least as much as any other employee or owner; or

Suspense,” or mail it to:

• Have performed substantially all of the work in the

business.

COR-TROL

Attn: Suspense

Note: If you are using either the 500 or 100-hour qualifica-

PO Box 14999

tion, you must keep a log of your time spent working in the

Salem OR 97309-0990

business.

Part A: Severance pay information

Have questions? Need help?

Severance pay is compensation (other than wages, vacation,

General tax information ......................

or sick pay) paid to you upon termination of your employment.

Salem ................................................................. 503-378-4988

Toll-free from an Oregon prefix .................. 1-800-356-4222

Part B: Small business information

Asistencia en español:

The law requires us to collect information about the business

En Salem o fuera de Oregon .......................... 503-378-4988

you have invested in. You must provide the following business

Gratis de prefijo de Oregon ......................... 1-800-356-4222

information in order to receive a subtraction:

• Name, address, and phone number.

TTY (hearing or speech impaired; machine only):

• Oregon BIN or FEIN.

Salem area or outside Oregon ....................... 503-945-8617

• Year the business started.

Toll-free from an Oregon prefix .................. 1-800-886-7204

• Information about number of employees and gross sales

Americans with Disabilities Act (ADA): Call one of the help

• Type of entity (partnership, sole proprietorship, C or S

Corporation, LLC, etc.).

numbers above for information in alternative formats.

150-101-705 (Rev. 10-10)

Form Sps - Severance Pay Subtraction Page 3

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