Schedule OR-PTE-NR Instructions                                        2023
                                      Qualified business income reduced tax rate for 
                                                 Oregon nonresidents

                                                                   • Has ordinary business income that doesn’t exceed 
General information                                                $5 million;
                                                                   • Employs one or more employees in Oregon who meet the 
If you have qualifying income earned in Oregon by a sole 
                                                                   employee requirements described below; and
proprietorship, partnership, or an S corporation, you may 
                                                                   • If ordinary business income is more than $250,000, com-
elect to use a reduced tax rate for that income. The reduced       plies with the employee-to-owner ratio requirement or 
tax rate can be claimed for qualifying income up to $5 mil-        meets the income distribution requirement described 
lion. Use Schedule OR-PTE-NR to claim this reduced tax rate        below.
if you’re a nonresident.
                                                                   Employee-to-owner ratio requirement. Unless the income 
Important: The qualifying business income reduced tax              distribution requirement is met, partnerships and S corpora-
rate is an irrevocable election that must be made each year        tions with more than $250,000 in ordinary business income 
on an original return. You can’t amend to revoke or make           must have, at a minimum, the number of qualifying employ-
the election after your original return is filed unless you        ees in Oregon per owner as shown in this table. The com-
file an amended return on or before the original due date of       bined total of hours worked by the qualifying employees, 
April 15, 2024, or if filing on extension, October 15, 2024. See   up to 1,200 hours per employee, must be at least the number 
the “Amending” section for more information. The annual            shown in this table.
election is made by completing Schedule OR-PTE-NR and 
                                                                   Partnership and S corporation employee requirements:
checking box 46C on the Oregon Form OR-40-N. 
Qualifying income may only be modified for depreciation            Ordinary          But not   Employees Aggregate 
before applying the reduced tax rate. No other additions,          business     more than      required  hours worked 
subtractions, or deductions are allowed in the calculation         income is at                          by employees
of the tax on qualifying income.                                   least
                                                                   $0                $250,000  One           1,200
Schedule OR-PTE-NR is for Oregon nonresidents only. If 
                                                                                               One per   1,200 per 
you are an Oregon full-year resident, use Schedule OR-PTE-         $250,001          $500,000
FY. If you are an Oregon part-year resident, use Schedule                                      owner         owner
OR-PTE-PY.                                                                                     Two per   2,400 per 
                                                                   $500,001     $1,000,000
                                                                                               owner         owner
                                                                                               Four per  4,800 per 
Qualifications                                                     $1,000,001   $2,500,000
                                                                                               owner         owner
                                                                                               Ten per   12,000 per 
Generally                                                          $2,500,001   $5,000,000
                                                                                               owner         owner
To be eligible for the reduced tax rate, you must materially       Income distribution requirement. A partnership or S 
participate in the business, have at least the minimum num-        corporation with more than $250,000 in ordinary business 
ber of qualifying Oregon employees, and meet any specific          income may still qualify for the reduced tax rate even if 
requirements for a sole proprietorship or for a partnership        the employee-to-owner ratio shown in this table isn’t met, 
or S corporation.                                                  so long as income distributions don’t exceed 25 percent of 
                                                                   ordinary business income. Calculate the percentage using 
Sole proprietorship
                                                                   the total distributions and total ordinary business income 
To be eligible for the reduced tax rate, a sole proprietor must:   for the current tax year and up to two of the most recent tax 
                                                                   years. Treat an annual amount of less than zero as zero for 
• Have qualifying business income from the sole 
                                                                   that year.
proprietorship; 
• Materially participate in the business; and                      Qualifying business income. For your income to qualify for 
• Employ one or more employees in Oregon who meet the              the reduced tax rate, it must be nonpassive income earned in 
employee requirements explained below for at least 1,200           Oregon by a sole proprietorship, partnership, or S corpora-
aggregate hours during the tax year.                               tion. Income from trusts and estates doesn’t qualify for the 
                                                                   reduced tax rate. 
Partnership or S corporation
                                                                   “Nonpassive income” is income other than that from passive 
To be eligible for the reduced tax rate, a partner or S corpo-     activities as defined in Section 469 of the Internal Revenue 
ration shareholder must have qualifying income from and            Code (IRC). This includes, but isn’t limited to, nonpassive 
materially participate in a partnership or S corporation that:     income reported on federal Schedules C (line 31), E [line 28, 

150-101-367-1 (Rev. 09-06-23) Draft 3                            1                            2023 Schedule OR-PTE-NR Instructions

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 
$2 million. The partnership employs ten full-time employees       Example 4: An S corporation with two shareholders and 
in Oregon. Bryant and Marcus receive a distributive share of      annual ordinary business income of $800,000 has three 
nonpassive income from the partnership that passes through        employees, all of whom work 35-hour weeks. The office man-
their respective S corporations. They also receive a salary       ager and the two shareholders each work 50 weeks a year, a 
as reasonable compensation for the work performed for the         sales clerk works for 30 weeks a year, and a delivery driver 
partnership. The distributive share of nonpassive income          works 20 weeks a year, for a total of 3,500 hours worked by 
they receive from the partnership (as passed through to           non-owner employees. Annual income distributions to the 
them from their respective S corporations) qualifies for the      shareholders include $150,000 in ordinary business income. 
reduced tax rate since the partnership meets the ordinary         With only three employees, this business doesn’t meet the 
business income and employee requirements. However, the           employee ratio requirement; however, because it distributes 
salary received from the partnership doesn’t qualify for the      less than 25 percent of its ordinary business income to the 
reduced tax rate.                                                 shareholders each year, its nonpassive income still qualifies 
Material participation. Material participation has the same       for the reduced tax rate.
meaning as defined for federal purposes under IRC Section         Temporary or “leased” employees. If a qualifying busi-
469. A taxpayer materially participates in an activity if they    ness contracts with a professional employer organization to 
work on a regular, continuous and substantial basis in opera-     employ temporary or “leased” employees, those employees 
tions, and meet any one of the seven material participation       can be used to qualify a business for the reduced tax rate if 
tests in Treasury Regulation Section 1.469-5T(a).                 the employees meet the hour requirements.
Grouping activities. You may group trade, business, or 
rental activities into a single activity if they form an appro-   Amending
priate economic unit for the purpose of meeting the mate-
rial participation test under Treasury Regulation Section         You can’t amend to revoke or make the election after your 
1.469-4(c). This treatment is also allowed for the purposes       original return is filed unless the amended return is filed on 
of the qualifying business income reduced tax rate and the        or before the original due date of April 15, 2024, or if filing 
material participation requirement.                               on extension, October 15, 2024.
Employee requirement.   The business must have the                Example 5: Liam filed his original return on March 3, 2024, 
required number of employees who performed work for the           and didn’t elect the reduced tax rate. He files an amended 
business in Oregon for the required number of hours during        return on April 12, 2024, and makes the election. His 
the tax year. Only the hours worked in a week in which the        amended return will be accepted allowing the reduced tax 
employee worked at least 30 hours in Oregon can be counted.       rate because it was filed before the original due date.

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Example 6: Maggie filed her original return on March 12,           an S corporation, or  Pfor a partnership. Don’t enter LLC or 
2024, 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 3, 2024, and elects 
                                                                   Column (a). Enter Oregon-source nonpassive losses attribut-
the reduced tax rate. The reduced tax rate will be denied 
                                                                   able to the qualifying sole proprietorship, partnership, or S 
since the amended return was filed after the original due 
                                                                   corporation. Include qualifying nonpassive losses such as 
date of April 15, 2024, and she didn’t file an extension.
                                                                   IRC Section 1231 losses treated as ordinary losses.
Example 7: Sam filed his original return on a timely filed 
                                                                   Column (b). For partnerships and S corporations only. 
extension on May 13, 2024, and elects the reduced tax rate. 
                                                                   Enter Oregon-source Section 179 expense deduction you 
The reduced tax rate election will be allowed because it was 
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, 2024, and didn’t elect the reduced tax         proprietorships.
rate. He files an amended return on July 1, 2024, 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 
                                                                   as royalties and IRC Section 1231 gains treated as ordinary 
If you claimed the reduced tax rate on your original return,       income. Don’t include passive income, capital gains, interest 
you must amend Schedule OR-PTE-NR if:                              income, wages, or dividends. 
• An IRS audit (or other state audit) resulted in a change that    Column (d). If you are not a member of an entity that elected 
affects your Oregon return;                                        to pay PTE-E tax, enter 0. Otherwise, if  all of the ordinary 
• You amended your federal (or other state) return and the         business income passed through from the entity qualifies 
changes you made affect your Oregon return;                        for this reduced tax rate, enter the amount from Schedule 
• You have a net operating loss (NOL); or                          OR-21-K-1, line 2. However, if not all of the ordinary busi-
• You need to correct income or deductions you originally          ness income passed through from the entity qualifies for this 
reported.                                                          reduced tax rate, use the federal Schedule K-1 (or Oregon 
Note: If you amend after the due date for the return of April      Schedule OR-K-1) and Oregon Schedule OR-21-K-1 issued by 
15, 2024 (or October 15, 2024, if filing on extension), you must   the electing entity and this formula to determine the amount 
use the tax on line 12a of the Tax worksheet even if line 13a      to enter on column (d):
is less. 
                                                                   Qualifying business 
                                                                        income from  
Schedule instructions                                                 electing entity           Addition from       Amount to 
                                                                                           x      Schedule        = claim on 
                                                                   Ordinary business            OR-21-K-1, line 2   column (d)
Use the following instructions to complete Schedule OR-                 income from  
PTE-NR. Complete the entire schedule and include it with           Schedule K-1, box 1
your Oregon Form OR-40-N. 
                                                                   See Form OR-21 Instructions and our website for information 
Section A instructions                                             about the PTE-E tax.
Complete a line for each qualifying sole proprietorship, part-     Line 4. Report the totals for columns (a), (b), (c), and (d). If 
nership, or S corporation. Only list businesses that qualify.      more than one page is used, report the total of all pages on 
Use additional schedules if necessary and put the total from       the first page.
all schedules on line 4 of the first page.                         Line 7. If line 7 is 0 or less, you can’t use the reduced tax 
Note: You must list all nonpassive income (or loss) from qual-     rate. Return to line 46 and complete the rest of Form OR-
ifying sole proprietorships, partnerships, and S corporations      40-N. If line 7 is more than 0, enter the amount on line 2b 
for each individual making the election. You can’t selectively     of Section B. 
choose which qualifying income (or losses) to report.
                                                                   Section B instructions
For each qualifying business, enter the business name, fed-
eral employer identification number (FEIN), number of quali-       The tax worksheet in Section B will help you calculate which 
fying employees, business code number, and entity type.            tax rate is more beneficial to you. Complete each line to 
                                                                   determine your tax. 
Business code number. Enter the business code number 
(or North American Industry Classification System code)            Lines 4 and 7. Report only the depreciation modification 
as reported on line C of federal Form 1065, line B of federal      attributable to the qualifying sole proprietorships, partner-
Form 1120-S, or line B of federal Schedules C or F.                ships, or S corporation listed in Section A. 
Entity type. Enter the appropriate code for how the business       Example 9: Liam reports an addition for depreciation attrib-
files for tax purposes: SP for a sole proprietorship, SC for       utable to a qualifying sole proprietorship he owns on line 
150-101-367-1 (Rev. 09-06-23) Draft 3                            3                              2023 Schedule OR-PTE-NR Instructions

30S of his Form OR-40-N. He also reports a subtraction for      income averaging, you’ll need to use the appropriate work-
depreciation attributable to a qualifying partnership on line   sheet or schedule, 2023 Worksheet FCG or 2023 Schedule 
33S of his Form OR-40-N. In Section B, Liam will report the     OR-FIA-40-N, to calculate the tax on line 1a.
addition on line 4 and the subtraction on line 7.
                                                                Line 14a. Enter the lesser of line 12a or 13a. If line 12a is less 
Line 10a. Use Tax rate chart A below for the taxable income     than 13a, enter the amount on line 14a on line 46 of Form 
reported on 8a. Report the tax on line 10a. Note: If you have   OR-40-N and check box 46c. If line 13a is less than 12a, it 
other income that qualifies for an alternative tax rate, such   isn’t more beneficial for you to use the reduced tax rate. Enter 
as farm liquidation long-term capital gains or farm income      the amount from line 13a on line 46 of Form OR-40-N and 
averaging, you’ll need to use the appropriate worksheet or      complete the rest of the return.
schedule, 2023 Worksheet FCG or 2023 Schedule OR-FIA-
40-N, to calculate the tax on line 10a. Don’t include the non-
passive income listed on line 8a in the calculation.            Do you have questions or need help?

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

2023 Tax rate chart A
2023 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 $4,050 ...............................................................................your tax is 4.75% of taxable income
If your taxable income is over $4,050 but not over $10,200 ........................your tax is $192 plus 6.75% of excess over $4,050
If your taxable income is over $10,200 but not over $125,000 ..................your tax is $607 plus 8.75% of excess over $10,200
If your taxable income is over $125,000 ................................................... your tax is $10,652 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 $8,100 ...............................................................................your tax is 4.75% of taxable income
If your taxable income is over $8,100 but not over $20,400 ........................your tax is $385 plus 6.75% of excess over $8,100
If your taxable income is over $20,400 but not over $250,000 ...............your tax is $1,215 plus 8.75% of excess over $20,400
If your taxable income is over $250,000 ...................................................your tax is $21,305 plus 9.9% of excess over $250,000

2023 Tax rate chart B
2023 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. 09-06-23) Draft 3                         4                     2023 Schedule OR-PTE-NR Instructions