Chapter 584 Oregon Laws 2001

AN ACT

SB 520

Relating to energy incentives; creating new provisions; amending ORS 307.175, 317.112, 317.115, 469.160, 469.170, 469.172 and 470.170; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 307.175 is amended to read:

307.175. (1) Property equipped with solar, geothermal, wind, water, fuel cell or methane gas energy systems for the purpose of heating, cooling or generating electrical energy shall be exempt from ad valorem taxation in an amount that equals any positive amount obtained by subtracting the real market value of the property as if it were not equipped with such systems, from the real market value of the property so equipped.

[(2) This section applies to tax years beginning on or after January 1, 1976, but prior to July 1, 2002.]

(2) This section applies to tax years beginning prior to July 1, 2012.

(3) This section [shall] does not apply to property owned or leased by any individual or legal entity whose principal business activity is directly or indirectly the production, transportation or distribution of energy, including but not limited to public utilities as defined in ORS 757.005 and people’s utility districts as defined in ORS 261.010.

SECTION 2. The amendments to ORS 307.175 by section 1 of this 2001 Act apply to tax years beginning on or after July 1, 2002.

SECTION 3. ORS 317.112 is amended to read:

317.112. (1) A credit against taxes otherwise due under this chapter for the taxable year shall be allowed to a commercial lending institution in an amount equal to the difference between:

(a) The amount of finance charge charged during the taxable year including interest on the loan and interest on any loan fee financed at an annual rate of six and one-half percent, by the lending institution to a dwelling owner who is or who rents to a residential fuel oil customer, or who is or who rents to a wood heating resident for the purpose of financing energy conservation measures; and

(b) The amount of finance charge that would have been charged during the taxable year, including interest on the loan and interest on any loan fee financed by the lending institution for the loan for energy conservation measures at an annual rate [which] that is the lesser of the following:

(A) The annual rate charged by the commercial lending institution for nonsubsidized loans made under like terms and conditions at the time the loan for energy conservation measures is made; or

(B) An upper limit established by rule by the administrator of the Office of Energy.

(2) Any tax credit otherwise allowable under this section [which] that is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer’s tax liability for the next succeeding tax year. Any credit remaining unused in [such] the next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise until the 15th succeeding tax year. The credit may not be carried forward beyond the 15th succeeding tax year.

(3) In order to be eligible for the tax credit allowed under subsection (1) of this section, the loan shall:

(a) Be made only to an owner of an oil-heated or wood-heated dwelling who presents the results of an energy audit pursuant to [chapter 887, Oregon Laws 1977, chapter 889, Oregon Laws 1977, or under chapter 778, Oregon Laws 1981,] ORS 469.631 to 469.645, 469.649 to 469.659, 469.673 to 469.683 or 469.685 that is conducted by a fuel oil dealer, investor-owned utility[,] or publicly owned utility or through the Office of Energy, regardless of whether that fuel oil dealer or utility provides the dwelling’s space heating energy.

(b) Be subject to an annual rate not to exceed six and one-half percent and have a term not exceeding 10 years.

[(c) Be made on or before December 31, 2001.]

[(d)] (c) Not finance any materials installed in the construction of a new dwelling, additions to existing structures or remodeling that adds living space.

[(e)] (d) Finance only those energy conservation measures that are recommended as cost-effective in the energy audit, and any loan fee that is included in the body of the loan. [The requirement for cost-effectiveness shall not apply in the case of a dwelling owner who has obtained assistance and technical advice under chapter 887, Oregon Laws 1977, or chapter 889, Oregon Laws 1977.]

(4) The credit allowed under this section [shall] may not be allowed to the extent that the loan exceeds $5,000 for a single dwelling unit, or, if the dwelling owner is a corporation described in ORS 307.375, to the extent that the loan exceeds $2,000 for a single dwelling unit.

(5) A commercial lending institution may charge, finance and collect a nonrefundable front-end loan fee, and such a fee [shall] does not affect the eligibility of the loan for a tax credit under this section. The fee, if any, [shall] may not exceed that charged by the lending institution for nonsubsidized loans made under like terms and conditions at the time the loan for energy conservation measures is made.

(6) Nothing in this section or in rules adopted under this section shall be construed to cause a loan to violate the usury laws of this state.

(7) As used in this section, “annual rate,” “commercial lending institution,” “cost-effective,” “dwelling,” “dwelling owner,” “energy audit,” “energy conservation measures,” “finance charge,” “fuel oil dealer,” “residential fuel oil customer,” “space heating” and “wood heating resident” have the meaning given those terms in ORS 469.710.

SECTION 4. The amendments to ORS 317.112 by section 3 of this 2001 Act apply to corporate excise or income tax years beginning on or after January 1, 2001.

SECTION 5. ORS 469.160 is amended to read:

469.160. As used in ORS 316.116, 317.115 and 469.160 to 469.180:

(1) “Alternative energy device” means:

(a) Any system, mechanism or series of mechanisms, including photovoltaic systems, that uses solar radiation or wind for space heating, cooling or electrical energy for one or more dwellings [that meets or exceeds 10 percent of the total energy requirement for the dwelling or dwellings];

(b) Any system that uses solar radiation for:

(A) Domestic water heating; or

(B) Swimming pool, spa or hot tub heating and that meets the requirements set forth in ORS 316.116;

(d) A wind powered turbine that generates electricity;

(e) Any wind powered device used to offset or supplement the use of electricity by performing a specific task such as pumping water;

(f) Equipment used in the production of alternative fuels;

(g) A generator powered by alternative fuels and used to produce electricity;

(h) A fuel cell;

(i) An energy efficient appliance; or

(j) An alternative fuel device.

(2) “Alternative fuel device” means any of the following:

(a) An alternative fuel vehicle;

(b) Related equipment; or

(3) “Alternative fuel vehicle” means a motor vehicle as defined in ORS 801.360 that is:

(a) Registered in this state; and

(b) Manufactured or modified to use an alternative fuel, including but not limited to electricity, natural gas, ethanol, methanol, propane and any other fuel approved in rules adopted by the administrator of the Office of Energy that produces less exhaust emissions than vehicles fueled by gasoline or diesel. Determination that a vehicle is an alternative fuel vehicle shall be made without regard to energy consumption savings.

(4) “Coefficient of performance” means the ratio calculated by dividing the usable output energy by the electrical input energy. Both energy values must be expressed in equivalent units.

(5) “Contractor” means a person whose trade or business consists of offering for sale an alternative energy device, construction service, installation service or design service.

(6)(a) “Cost” means the actual cost of the acquisition, construction and installation of the alternative energy device paid by the taxpayer for the alternative energy device.

(b) For an alternative fuel vehicle, “cost” means the difference between the cost of the alternative fuel vehicle and the same vehicle or functionally similar vehicle manufactured to use conventional gasoline or diesel fuel or, in the case of modification of an existing vehicle, the cost of the modification. “Cost” does not include any amounts paid for remodification of the same vehicle.

(c) For a fueling station necessary to operate an alternative fuel vehicle, “cost” means the cost to the contractor of constructing or installing the fueling station in a dwelling and of making the fuel station operational in accordance with the specifications issued under ORS 469.160 to 469.180 and any rules adopted by the administrator of the Office of Energy.

(d) For related equipment, “cost” means the cost of the related equipment and any modifications or additions to the related equipment necessary to prepare the related equipment for use in converting a vehicle to alternative fuel use.

(7) “Domestic water heating” means the heating of water used in a dwelling for bathing, clothes washing, dishwashing and other related functions.

(8) “Dwelling” means real or personal property ordinarily inhabited as a principal or secondary residence and located within this state. “Dwelling” includes, but is not limited to, an individual unit within multiple unit residential housing.

(9) “Energy efficient appliance” means a clothes washer, clothes dryer, water heater, refrigerator, freezer, dishwasher, appliance designed to heat or cool a dwelling or other major household appliance that has been certified by the Office of Energy to have premium energy efficiency characteristics.

(10) “First year energy yield” of an alternative energy device is the usable energy produced under average environmental conditions in one year.

(11) “Fueling station” includes but is not limited to a compressed natural gas compressor fueling system or an electric charging system for vehicle power battery charging.

(12) “Placed in service” means:

(a) The date an alternative energy device is ready and available to produce usable energy or save energy.

(b) For an alternative fuel vehicle:

(A) In the case of purchase, the date that the alternative fuel vehicle is first purchased as an alternative fuel vehicle ready and available for use.

(B) In the case of modification, the date that the modification is completed and the vehicle is ready and available for use as an alternative fuel vehicle.

(c) For a fueling station necessary to operate an alternative fuel vehicle, the date that the fueling station is first operational.

(d) For related equipment, the date that the equipment is first operational.

(13) “Related equipment” means equipment necessary to convert a vehicle to use an alternative fuel.

SECTION 6. ORS 469.170 is amended to read:

469.170. (1) Any person may claim a tax credit under ORS 316.116 (or ORS 317.115, if the person is a corporation) if the person:

(a) Meets the requirements of ORS 316.116 (or ORS 317.115, if applicable);

(b) Meets the requirements of ORS 469.160 to 469.180; and

(c) Pays, subject to subsection [(10)] (9) of this section, all or a portion of the costs of an alternative energy device.

(2) A credit under ORS 317.115 may be claimed only if the alternative energy device is a fueling station necessary to operate an alternative fuel vehicle.

(3) In order to be eligible for a tax credit under ORS 316.116 or 317.115, a person claiming a tax credit for construction or installation of an alternative energy device (including a fueling station) shall have the system certified by the Office of Energy or constructed or installed by a contractor certified by the Office of Energy under subsection (5) of this section. This subsection does not apply to an alternative fuel vehicle or to related equipment. Certification of an alternative fuel vehicle or related equipment shall be accomplished under rules that shall be adopted by the administrator of the Office of Energy.

(4) Verification of the purchase, construction or installation of an alternative energy device shall be made in writing on a form provided by the Department of Revenue and, if applicable, shall contain:

(a) The location of the alternative energy device;

(b) A description of the type of device;

(c) If the device was constructed or installed by a contractor, evidence that the contractor has any license, bond, insurance and permit required to sell and construct or install the alternative energy device;

(d) If the device was constructed or installed by a contractor, a statement signed by the contractor that the applicant has received:

(A) A statement of the reasonably expected energy savings of the device;

(B) A copy of consumer information published by the Office of Energy;

(D) A copy of the contractor’s certification certificate or alternative energy device system certificate as appropriate;

(e) If the device was not constructed or installed by a contractor, evidence that:

(A) The Office of Energy has issued an alternative energy device system certificate for the device; and

(B) The taxpayer has obtained all building permits required for construction or installation of the device;

(f) A statement, signed by both the taxpayer claiming the credit and the contractor if the device was constructed or installed by a contractor, that the construction or installation meets all the requirements of ORS 469.160 to 469.180 or, if the device is a fueling station and the taxpayer is the contractor, a statement signed by the contractor that the construction or installation meets all of the requirements of ORS 469.160 to 469.180;

(g) The date the alternative energy device was purchased;

(h) The date the alternative energy device was placed in service; and

(i) Any other information that the administrator of the Office of Energy or the Department of Revenue determines is necessary.

(5)(a) When the Office of Energy finds that an alternative energy device can meet the standards adopted under ORS 469.165, the administrator of the Office of Energy may issue a contractor system certification to the person selling and constructing or installing the alternative energy device.

(b) Any person who sells or installs more than 12 alternative energy devices in one year shall apply for a contractor system certification. An application for a contractor system certification shall be made in writing on a form provided by the Office of Energy and shall contain:

(A) A statement that the contractor has any license, bonding, insurance and permit that is required for the sale and construction or installation of the alternative energy device;

(B) A specific description of the alternative energy device, including, but not limited to, the material, equipment and mechanism used in the device, operating procedure, sizing and siting method and construction or installation procedure;

(D) The range of installed costs to purchasers of the device;

(E) Any important construction, installation or operating instructions; and

(F) Any other information that the Office of Energy determines is necessary.

(c) A new application for contractor system approval shall be filed when there is a change in the information supplied under paragraph (b) of this subsection.

(d) The Office of Energy may issue contractor system certificates to each contractor who on October 3, 1989, has a valid dealer system certification, which shall authorize the sale and installation of the same domestic water heating alternative energy devices authorized by the dealer certification.

(e) If the Office of Energy finds that an alternative energy device can meet the standards adopted under ORS 469.165, the administrator may issue an alternative energy device system certificate to the taxpayer constructing or installing or having an alternative energy device constructed or installed.

(f) An application for an alternative energy device system certificate shall be made in writing on a form provided by the Office of Energy and shall contain:

(A) A specific description of the alternative energy device, including, but not limited to, the material, equipment and mechanism used in the device, operating procedure, sizing, siting method and construction or installation procedure;

(B) The constructed or installed cost of the device; and

(6) To claim the tax credit, the verification form described in subsection (4) of this section shall be submitted with the taxpayer’s tax return for the year the alternative energy device is placed in service or the immediately succeeding tax year. A copy of the contractor’s certification certificate, alternative energy device system certificate or alternative fuel vehicle or related equipment certificate also shall be submitted.

(7) The verification form and contractor’s certificate, alternative energy device system certificate or alternative fuel vehicle or related equipment certificate described under this section shall be effective for purposes of tax relief allowed under ORS 316.116 or 317.115.

(8) The verification form and contractor’s certificate described under this section may be transferred to the first purchaser of a dwelling or, in the case of construction or installation of a fueling station in an existing dwelling, the current owner, who intends to use or is using the dwelling as a principal or secondary residence.

[(9) A tax credit under ORS 316.116 or 317.115 is allowed only with respect to an alternative energy device that is placed in service on or before December 31, 2001.]

[(10) An investor owned utility that pays to a contractor the present value to the utility of the tax credit granted for a fueling station under ORS 316.116 or 317.115 shall be entitled to claim the credit in the manner and subject to rules adopted by the Department of Revenue to carry out the purposes of this subsection.]

(9) Any person that pays the present value of the tax credit for an alternative energy device provided under ORS 316.116 or 317.115 and 469.160 to 469.180 to the person who constructs or installs the alternative energy device shall be entitled to claim the credit in the manner and subject to rules adopted by the Department of Revenue to carry out the purposes of this subsection. The Office of Energy may establish by rule uniform discount rates to be used in calculating the present value of a tax credit under this subsection.

SECTION 7. ORS 469.172 is amended to read:

469.172. The following devices are not eligible for the alternative energy device tax credit under ORS 316.116:

(1) Standard efficiency furnaces;

(2) Standard back-up heating systems;

(3) Woodstoves or wood furnaces, or any part of a heating system that burns wood;

[(4) Air-to-air and air-to-water heat pumps or any device that uses ambient air to make heat;]

[(5)] (4) Heat pump water heaters that are part of a geothermal heat pump space heating system;

[(6)] (5) Structures that cover or enclose a swimming pool;

[(7)] (6) Swimming pools, hot tubs or spas used to store heat;

[(8)] (7) Above ground, uninsulated swimming pools, hot tubs or spas;

[(9)] (8) Photovoltaic systems installed on recreational vehicles;

[(10) Devices that use water or geothermal resources for space heating, cooling, electrical energy, domestic water heating or swimming pool, spa or hot tub heating;]

[(11) Devices that use wind for space heating, cooling, domestic water heating or swimming pool, spa or hot tub heating;]

[(12)] (9) Conversion of an existing alternative energy device to another type of alternative energy device;

[(13)] (10) Repair or replacement of an existing alternative energy device; or

[(14)] (11) Any other device identified by the Office of Energy. The Office of Energy may adopt rules defining standards for eligible and ineligible devices under this section.

SECTION 8. ORS 317.115 is amended to read:

317.115. (1) A business tax credit is allowed against the taxes otherwise due under this chapter based upon costs paid or incurred for construction or installation in a dwelling of a fueling station necessary to operate an alternative fuel vehicle. The credit is allowed to the contractor who constructs the dwelling in which the fueling station is incorporated or installs the fueling station in the dwelling but may be taken by [an investor owned utility] any person under the circumstances described in ORS 469.170 [(10)] (9) and the rules adopted thereunder.

(2) The credit is 25 percent of the cost of the fueling station but the total credit shall not exceed $750 if the fueling station is placed in service on or after January 1, 1998.

(3) To qualify for a credit under this section, all of the following are required:

(a) The fueling station must be constructed, installed and operated in accordance with ORS 469.160 to 469.180 and a certificate issued thereunder.

(b) The contractor must present with the claim for credit a verification form signed not only by the contractor but by the owner, contract purchaser or tenant authorizing the contractor to claim the credit and indicating that the owner, contract purchaser or tenant will not claim a credit based upon the cost of the same fueling station under ORS 316.116 or this section.

(c) The credit must be claimed for the tax year in which the fueling station that has been certified under ORS 469.160 to 469.180 first is placed in service or the immediately succeeding tax year.

(4) The credit allowed under this section shall not affect the computation of basis for purposes of this chapter, nor shall the credit affect the computation or be in lieu of any depreciation deduction for the fueling station.

(5) The credit allowed under this section in any one year shall not exceed the tax liability of the taxpayer for that year.

(6) Any tax credit otherwise allowable under this section that is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer’s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter.

(7) The certificate and verification form described under ORS 469.170 may be transferred by the contractor to the first purchaser of the dwelling that incorporates the fueling station if the purchaser intends to use the dwelling as a principal or secondary residence or, in the case of construction or installation of a fueling station in an existing dwelling, the current owner, if the current owner intends to use, or uses, the dwelling as a principal or secondary residence. A certificate and verification form so transferred may be used by the purchaser to claim a credit under ORS 316.116.

SECTION 9. The amendments to ORS 317.115, 469.160, 469.170 and 469.172 by sections 5 to 8 of this 2001 Act apply to applications for tax credits under ORS 316.116 or 317.115 that are approved by the Office of Energy on or after January 1, 2001.

SECTION 10. ORS 470.170 is amended to read:

470.170. (1) When a loan is made under this chapter[,] to an applicant other than a municipal corporation, the loan shall be secured [by] pursuant to a mortgage [or], trust deed, security agreement, pledge, assignment or similar instrument, by a security interest or lien on real or personal property in the full amount of the loan [which mortgage or security agreement shall be a lien upon real or personal property] or as the administrator of the Office of Energy shall require for adequate security, including but not limited to long-term leasehold interests or equitable interests in real property or personal property [as the administrator of the Office of Energy shall require for adequate security]. In lieu of, or in addition to, any of the collateral otherwise described in this subsection, the applicant may secure the loan by providing credit enhancement, including but not limited to a letter of credit or payment bond, or a guaranty acceptable to the administrator.

(2) When a loan is made to a municipal corporation for the development of a small scale local energy project under this chapter, the loan shall be secured as the administrator shall require for adequate security. The security may be in the form of a lien, mortgage, interest under a lease-purchase contract or other form of security acceptable to the administrator and the municipal corporation.

(3) When a loan made under this chapter is secured by a lien on the real property of the applicant, the administrator shall perfect the lien by recording as provided by law.

(4) Upon payment of all amounts loaned to an applicant pursuant to this chapter, the administrator shall file a satisfaction or release notice that indicates repayment of the loan.

(5) The administrator may cause to be instituted appropriate proceedings to foreclose liens for delinquent loan payments, and shall pay the proceeds of any such foreclosure, less the administrator’s expenses incurred in foreclosing, into the sinking fund. In a foreclosure proceeding the administrator may bid on property offered for sale in the proceedings and may acquire title to the property on behalf of the state.

(6) The administrator may take any action, make any disbursement, hold any funds or institute any action or proceeding necessary to protect the state’s interest.

(7) The administrator may settle, compromise or release, for reasons other than uncollectibility as provided in ORS 293.240, all or part of any loan obligation so long as the administrator’s action is consistent with the purposes of this chapter and does not impair the ability to pay the administrative expenses of the Office of Energy or the obligations of any bonds then outstanding.

SECTION 11. This 2001 Act takes effect on the 91st day after the date on which the regular session of the Seventy-first Legislative Assembly adjourns sine die.

Approved by the Governor June 25, 2001

Filed in the office of Secretary of State June 25, 2001

Effective date October 6, 2001

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