Chapter 928 Oregon Laws 2001

AN ACT

SB 764

Relating to pollution control tax credits; creating new provisions; amending ORS 315.304, 468.165 and 468.170; and prescribing an effective date.

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

SECTION 1. ORS 468.165 is amended to read:

468.165. (1) Any person may apply to the Environmental Quality Commission for certification under ORS 468.170 of a pollution control facility or portion thereof erected, constructed or installed by the person in Oregon if:

(a) The air or water pollution control facility was erected, constructed or installed on or after January 1, 1967.

(b) The noise pollution control facility was erected, constructed or installed on or after January 1, 1977.

(c) The solid waste facility was under construction on or after January 1, 1973, the hazardous waste or used oil facility was under construction on or after October 3, 1979, and if:

(A) The facility's principal or sole purpose conforms to the requirements of ORS 468.155 (1) and (2);

(B) The facility will utilize material that would otherwise be solid waste as defined in ORS 459.005, hazardous waste as defined in ORS 466.005 or used oil as defined in ORS 459A.555 by mechanical process or chemical process or through the production, processing including presegregation, or use of, materials which have useful chemical or physical properties and which may be used for the same or other purposes, or materials which may be used in the same kind of application as its prior use without change in identity;

(D) The end product of the utilization, other than a usable source of power, is competitive with an end product produced in another state; and

(E) The Oregon law regulating solid waste imposes standards at least substantially equivalent to the federal law.

(d) The hazardous waste control facility was erected, constructed or installed on or after January 1, 1984, and if:

(A) The facility's principal or sole purpose conforms to the requirements of ORS 468.155 (1) and (2); and

(B) The facility is designed to treat, substantially reduce or eliminate hazardous waste as defined in ORS 466.005.

(2) The application shall be made in writing in a form prescribed by the Department of Environmental Quality and shall contain information on the actual cost of the facility, a description of the materials incorporated therein, all machinery and equipment made a part thereof, the existing or proposed operational procedure thereof, and a statement of the purpose of prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or recycling or appropriate disposal of used oil served or to be served by the facility and the portion of the actual cost properly allocable to the prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil.

(3) The Director of the Department of Environmental Quality may require any further information the director considers necessary before a certificate is issued.

(4) The application shall be accompanied by a fee established under subsection (5) of this section. The fee may be refunded if the application for certification is rejected.

(5) By rule and after hearing the commission may adopt a schedule of reasonable fees which the department may require of applicants for certificates issued under ORS 468.167 and 468.170. Before the adoption or revision of any such fees the commission shall estimate the total cost of the program to the department. The fees shall be based on the anticipated cost of filing, investigating, granting and rejecting the applications and shall be designed not to exceed the total cost estimated by the commission. Any excess fees shall be held by the department and shall be used by the commission to reduce any future fee increases. The fee may vary according to the size and complexity of the facility. The fees [shall] may not be considered by the commission as part of the cost of the facility to be certified.

(6) The application shall be submitted after construction of the facility is substantially completed and the facility is placed in service and within [two years] one year after construction of the facility is substantially completed. Failure to file a timely application shall make the facility ineligible for tax credit certification. An application [shall] may not be considered filed until it is complete and ready for processing. The commission may grant an extension of time to file an application for circumstances beyond the control of the applicant that would make a timely filing unreasonable. However, the period for filing an application [shall] may not be extended to a date beyond December 31, [2003] 2008.

SECTION 2. ORS 468.170 is amended to read:

468.170. (1) The Environmental Quality Commission shall act on an application for certification before the 120th day after the filing of the application under ORS 468.165. The action of the commission shall include certification of the actual cost of the facility and the portion of the actual cost properly allocable to the prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil. The actual cost or portion of the actual cost certified [shall] may not exceed the taxpayer's own cash investment in the facility or portion of the facility. Each certificate shall bear a separate serial number for each such facility.

(2) If the commission rejects an application for certification, or certifies a lesser actual cost of the facility or a lesser portion of the actual cost properly allocable to the prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil than was claimed in the application for certification, the commission shall cause written notice of its action, and a concise statement of the findings and reasons therefor, to be sent by registered or certified mail to the applicant before the 120th day after the filing of the application.

(3) If the application is rejected for any reason, including the information furnished by the applicant as to the cost of the facility, or if the applicant is dissatisfied with the certification of actual cost or portion of the actual cost properly allocable to prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil, the applicant may appeal from the rejection as provided in ORS 468.110. The rejection or the certification is final and conclusive on all parties unless the applicant takes an appeal therefrom as provided in ORS 468.110 before the 30th day after notice was mailed by the commission.

(4)(a) The commission shall certify a pollution control, solid waste, hazardous waste or used oil facility or portion thereof, for which an application has been made under ORS 468.165, if the commission finds that the facility:

(A) Was erected, constructed or installed in accordance with the requirements of ORS 468.165 (1);

(B) Is designed for, and is being operated or will operate in accordance with the requirements of ORS 468.155; and

(C) Is necessary to satisfy the intents and purposes of ORS 454.010 to 454.040, 454.205 to 454.255, 454.505 to 454.535, 454.605 to 454.755, ORS chapters 459, 459A, 466 and 467 and ORS chapters 468, 468A and 468B and rules thereunder.

(b) No determination of the proportion of the actual cost of the facility to be certified shall be made until receipt of the application.

(c) If one or more facilities constitute an operational unit, the commission may certify such facilities under one certificate.

(d) A certificate under this section is effective for purposes of tax relief in accordance with ORS 307.405 and 315.304 if, on or before December 31, [2001] 2007, erection, construction or installation of the facility is completed, the facility is placed in service and the application for certification is filed with the commission under ORS 468.165.

(5) A person receiving a certificate under this section may take tax relief only under ORS 315.304, depending upon the tax status of the person's trade or business except that:

(a) A corporation organized under ORS chapter 65 or any subsequent transferee of the corporation shall take tax relief only under ORS 307.405; and

(b)(A) A corporation organized under ORS chapter 62 or any predecessor to ORS chapter 62 relating to the incorporation of cooperative associations or the subsequent transferee of the corporation may make an irrevocable election to take the tax relief under either ORS 315.304 or 307.405. The corporation shall make the election at the time of applying for the certificate, except that a corporation receiving a certificate prior to December 31, 1995, may make the election at any time on or before December 31, 1995. If a corporation elects on or before December 31, 1995, to take the tax relief under ORS 315.304, any income taxes, penalties or interest otherwise payable by the corporation for improperly taking the tax relief under ORS 315.304 in a taxable year prior to making the election shall be waived.

(B) In the case of a corporation making the election under subparagraph (A) of this paragraph, the election applies to:

(i) All existing or future facilities that are certified under this section, if the corporation claimed a credit under ORS 315.304 for a tax year beginning prior to December 31, 1995; or

(ii) All future facilities that are certified under this section, if the corporation did not claim a credit under ORS 315.304 for a tax year beginning prior to December 31, 1995.

(6) If the person receiving the certificate is a partnership, each partner shall be entitled to take tax credit relief as provided in ORS 315.304, based on that partner's pro rata share of the certified cost of the facility.

(7) Certification under this section of a pollution control facility qualifying under ORS 468.165 (1) shall be granted for a period of 10 consecutive years which 10-year period shall begin with the tax year of the person in which the facility is certified under this section, except that if ad valorem tax relief is utilized by a corporation organized under ORS chapter 62 or 65 the facility shall be exempt from ad valorem taxation for a period of 20 consecutive years.

(8) Portions of a facility qualifying under ORS 468.165 (1)(c) may be certified separately under this section if ownership of the portions is in more than one person. Certification of such portions of a facility shall include certification of the actual cost of the portion of the facility to the person receiving the certification. The actual cost certified for all portions of a facility separately certified under this subsection [shall] may not exceed the total cost of the facility that would have been certified under one certificate. The provisions of ORS 315.304 (8) [shall] apply to any sale, exchange or other disposition of a certified portion of a facility.

(9) A certificate issued under this section shall state the applicable percentage of the certified cost of the facility, as determined under section 6 of this 2001 Act.

(10) If the construction or installation of a facility is commenced after December 31, 2005, the facility may be certified only if the facility or applicant is described in section 6 (3) of this 2001 Act. A facility described in section 6 (2) of this 2001 Act for which construction or installation is commenced after December 31, 2005, may not be certified under this section.

SECTION 3. (1) Notwithstanding ORS 315.304 (9), in the case of a pollution control facility for which unexpired tax credits exist as of the tax year of the taxpayer that begins in the 2001 calendar year, if the facility is in use and operation during the tax year immediately following the third succeeding tax year described in ORS 315.304 (9), any credit under ORS 315.304 remaining unused may be carried forward to that fourth succeeding tax year. If the facility is in use and operation during the tax year immediately following the fourth succeeding tax year, any credit under ORS 315.304 remaining unused may be carried forward to that fifth succeeding tax year. If the facility is in use and operation during the tax year immediately following the fifth succeeding tax year, any credit under ORS 315.304 remaining unused may be carried forward to that sixth succeeding tax year, but may not be carried forward to any tax year thereafter.

(2) For purposes of this section, unexpired tax credits include credits claimed pursuant to ORS 315.304 (2) and credits carried over from previous tax years pursuant to ORS 315.304 (9).

SECTION 4. ORS 315.304 is amended to read:

315.304. (1) A credit against taxes imposed by ORS chapter 316 (or, if the taxpayer is a corporation, under ORS chapter 317 or 318) for a pollution control facility or facilities certified under ORS 468.170 shall be allowed if the taxpayer qualifies under subsection (4) of this section.

(2) For a facility certified under ORS 468.170, the maximum credit allowed in any one tax year shall be the lesser of the tax liability of the taxpayer or [one-half] the applicable percentage of the certified cost of the facility, as determined under section 6 or 7 of this 2001 Act, multiplied by the certified percentage allocable to pollution control, divided by the number of years of the facility's useful life. The number of years of the facility's useful life used in this calculation shall be the remaining number of years of useful life at the time the facility is certified but not less than one year nor more than 10 years.

(3) To qualify for the credit the pollution control facility must be erected, constructed or installed in accordance with the provisions of ORS 468.165 (1) and must be certified for tax relief under ORS 468.155 to 468.190.

(4) To qualify for a tax credit under this section:

(a) The taxpayer who is allowed the credit must be:

(A) The owner, including a contract purchaser, of the trade or business that utilizes Oregon property requiring a pollution control facility to prevent or minimize pollution;

(B) A person who, as a lessee or pursuant to an agreement, conducts the trade or business that operates or utilizes such property; or

(C) A person who, as an owner, including a contract purchaser, or lessee, owns or leases a pollution control facility that is used:

(i) In a business that is engaged in a production activity described in 40 C.F.R. 430.20 (as of July 1, 1998); or

(ii) For recycling, material recovery or energy recovery as defined in ORS 459.005; and

(b) The facility must be owned or leased during the tax year by the taxpayer claiming the credit and must have been in use and operation during the tax year for which the credit is claimed.

(5) Regardless of when the facility is erected, constructed or installed, a credit under this section may be claimed by a taxpayer:

(a) For a facility qualifying under ORS 468.165 (1)(a) or (b), only in those tax years which begin on or after January 1, 1967.

(b) For a facility qualifying under ORS 468.165 (1)(c), in those tax years which begin on or after January 1, 1973.

(6) For a facility certified under ORS 468.170, the maximum total credit allowable shall not exceed one-half of the certified cost of the facility multiplied by the certified percentage allocable to pollution control.

(7) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the facility to which the taxpayer otherwise may be entitled under ORS chapter 316, 317 or 318 for such year.

(8) Upon any sale, exchange or other disposition of a facility, notice thereof shall be given to the Environmental Quality Commission who shall revoke the certification covering such facility as of the date of such disposition. Notwithstanding ORS 468.170 (4)(c), the transferee may apply for a new certificate under ORS 468.170, but the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor. The sale, exchange or other disposition of shares in an S corporation as defined in section 1361 of the Internal Revenue Code or of a partner's interest in a partnership shall not be deemed a sale, exchange or other disposition of a facility for purposes of this subsection.

(9) Any tax credit otherwise allowable under this section which 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, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in ORS 468.170.

(10) The taxpayer's adjusted basis for determining gain or loss shall not be further decreased by any tax credits allowed under this section.

(11) A person described in subsection (4)(a)(C) of this section may, but need not, operate the facility or conduct a trade or business that utilizes property requiring the facility. If more than one person has an interest under subsection (4)(a)(C) of this section in the facility, only one person may claim the credit allowed under this section. However, portions of the facility may be certified separately in the same manner as provided in ORS 468.170 (8) if ownership of the portions is in more than one person. The person claiming the credit as between an owner, including a contract purchaser, and lessee under this subsection shall be designated in a written statement signed by both the lessor and lessee of the facility. This statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which a tax credit is claimed.

(12)(a) A taxpayer may not be allowed a tax credit under this section for any tax year during which the taxpayer is convicted of a felony under ORS 468.922 to 468.956 that is related to the facility for which the tax credit would otherwise be claimed, or for the four tax years succeeding the tax year during which the taxpayer is convicted.

(b) The amount of any tax credit that is otherwise allowable under this section but for paragraph (a) of this subsection shall be considered to be claimed by the taxpayer for purposes of determining the amount of tax credit that may be claimed in a tax year in which paragraph (a) of this subsection permits the taxpayer to claim the credit.

SECTION 5. Sections 6 to 8a of this 2001 Act are added to and made a part of ORS 468.155 to 468.190.

SECTION 6. For purposes of ORS 315.304, the applicable percentage of the certified cost of a facility shall be one of the following:

(1) If the facility is certified under ORS 468.155 to 468.190 (1999 Edition) or if construction or installation of the facility is commenced prior to January 1, 2001, and completed prior to January 1, 2004, 50 percent.

(2) Except as provided in subsection (1) or (3) of this section, if the facility is certified pursuant to application for certification filed on or after January 1, 2002, and:

(a) Construction or installation of the facility is commenced on or after January 1, 2001, and on or before December 31, 2003, 25 percent; or

(b) Construction or installation of the facility is commenced after December 31, 2003, and on or before December 31, 2005, 15 percent.

(3) If certified pursuant to application for certification filed on or after January 1, 2002, 35 percent if:

(a) The applicant is certified under International Organization for Standardization standard ISO 14001;

(b) A Green Permit that applies to the facility has been issued under ORS 468.501 to 468.521;

(c) The facility is a nonpoint source or is regulated as a confined animal feeding operation under ORS 468B.200 to 468B.230;

(d) The facility is used for material recovery or recycling, as those terms are defined in ORS 459.005;

(e) The facility is used in an agricultural or forest products operation and is used for energy recovery, as defined in ORS 459.005;

(f) The certified cost of the facility does not exceed $200,000;

(g) Construction or installation of the facility is entirely voluntary and no portion of it is required in order to comply with a federal law administered by the United States Environmental Protection Agency, a state law administered by the Department of Environmental Quality or a law administered by a regional air pollution authority; or

(h) The applicant demonstrates to the Department of Environmental Quality that the applicant uses an environmental management system at the facility. In order for the department to determine that the applicant uses an environmental management system at the facility:

(A) The applicant must have the environmental management system used at the facility reviewed by an independent third party familiar with environmental management systems and submit a report to the department stating that the provisions of this paragraph have been met. The report shall be accompanied by supporting materials that document compliance with the provisions of this paragraph. The report shall include certification from a registered or certified environmental management auditor employed by, or under contract with, the independent third party that reviewed the environmental management system; or

(B) The department shall contract with an independent third party familiar with environmental management systems to review the environmental management system employed at the facility. The third party shall review the environmental management system, and, if the third party determines that the environmental management system meets the provisions of this paragraph, a registered or certified environmental management system auditor employed by, or contracted with, the third party shall certify that determination to the department. The department shall recover from the applicant the costs incurred by the department as prescribed in ORS 468.073. An applicant shall be liable for the costs of the department under this subparagraph without regard to whether the department certifies the facility as a pollution control facility. The department may not certify a facility to which this subparagraph applies until the department has received full payment from the applicant.

SECTION 6a. As used in section 6 of this 2001 Act, “environmental management system” means a continual cycle of planning, implementing, reviewing and improving the actions undertaken at the facility to meet environmental obligations and improve environmental performance that meet:

(1) The standards established by the International Organization for Standardization under ISO 14001;

(2) The standards established in the Green Permit program established under ORS 468.501 to 468.521; or

(3) Other standards that meet criteria established by the Environmental Quality Commission by rule.

SECTION 7. (1) If a person has obtained pollution control facility certification in which the applicable percentage is 35 percent because of issuance of a Green Permit described under section 6 (3)(b) of this 2001 Act that applies to the certified facility and the Green Permit is revoked, the applicable percentage for any remaining tax credit to be claimed under ORS 315.304 shall be the applicable percentage described under section 6 (2) of this 2001 Act. If the construction or installation of the facility is commenced on or after January 1, 2006, the pollution control facility certification shall be revoked.

(2) The Department of Environmental Quality shall inform the Department of Revenue of the revocation.

SECTION 8. If a person is convicted of a felony under ORS 468.922 to 468.956, the county district attorney or the Attorney General, whichever was the prosecuting officer, shall give notice of the conviction to the Department of Revenue.

SECTION 8a. For purposes of ORS 468.155 to 468.190, the construction or installation of a facility is commenced when the person constructing or installing the facility has obtained all necessary preliminary approvals and has begun continuous on-site modification, construction, installation or other activity, the completion of which will cause the person to be able to obtain certification under ORS 468.155 to 468.190. Interruptions and delays resulting from natural disasters, strikes, litigation or other matters beyond the control of the owner shall be disregarded in determining whether the actions undertaken by the person are continuous. The burden of demonstrating that construction or installation of a facility is commenced shall be borne by the person filing an application for certification under ORS 468.165.

SECTION 9. (1) The Legislative Assembly finds that the concept of environmental responsibility has matured beyond basic compliance with regulatory requirements to one in which citizens and businesses voluntarily implement innovative solutions to achieve shared environmental goals.

(2) The Legislative Assembly declares that a pollution control tax credit that shifts the majority of the incentive away from compensation for basic regulatory compliance and toward encouraging voluntary investment is an effective way to achieve environmental goals.

(3) The Legislative Assembly finds and declares that it is the policy of this state to promote sustainability and provide incentives for the voluntary prevention, elimination, reduction or control of air pollution, water pollution, solid waste and hazardous waste through the voluntary application of innovative solutions to achieve the environmental goals of this state.

(4) The Legislative Assembly declares it to be the policy of this state to promote social, economic and environmental principles of sustainability by providing incentives to individuals and businesses that support social, economic and environmental sustainability goals.

SECTION 10. (1) There is created the Pollution Control Tax Credit Improvement and Review Task Force. The task force is charged with the following two primary undertakings:

(a) To study and review the existing pollution control tax credit program under ORS 468.155 to 468.190 and 315.304; and

(b) To compare the pollution control tax credit program with other types of incentives to see which type of incentive is most efficient and effective in achieving the policies set forth in section 9 of this 2001 Act.

(2) In studying and reviewing the existing pollution control tax credit program under subsection (1)(a) of this section, the task force shall consider, but is not limited to considering:

(a) Ways to achieve administrative efficiency;

(b) Measures to simplify the existing program and reduce the complexity faced by the applicant in the application and certification process; and

(c) Methods for measuring the environmental effectiveness or economic development achieved as a result of the pollution control tax credit program.

(3) In studying pollution control incentives under subsection (1)(b) of this section, the task force shall consider, but is not limited to considering:

(a) Incentives that promote sustainability, recycling or reductions in harmful emissions and toxics;

(b) Benefits to local economies and local government tax revenues that are related to the incentives being reviewed; and

(c) Incentives that simultaneously support community economic, environmental and social sustainability objectives through the collaborative efforts of business, government and nonprofit organizations.

(4) The Governor shall appoint to the task force:

(a) Not more than seven members, with the concurrence of the Speaker of the House of Representatives and the President of the Senate. A member appointed under this section must represent one of the following interests, each interest of which must be represented on the task force:

(A) Agriculture;

(B) Business;

(C) Environmental advocacy; and

(D) The general public. A member of the general public appointed under this paragraph must be knowledgeable about the principles of sustainability.

(b) One ex officio nonvoting representative from the Economic and Community Development Department and one ex officio nonvoting representative of the Department of Environmental Quality and the Environmental Quality Commission.

(5)(a) The President of the Senate shall appoint one senator to the task force and the Speaker of the House of Representatives shall appoint one member of the House of Representatives to the task force.

(b) A member of the Legislative Assembly appointed to the task force shall be entitled to an allowance as authorized by ORS 171.072 from funds appropriated to the Legislative Assembly.

(6)(a) The task force shall report on an ongoing and periodic basis to the interim committees of the Seventy-first Legislative Assembly having jurisdiction over revenue and environmental matters.

(b) The task force shall prepare a final written report of the findings and recommendations of the task force and shall present the report to the committees of the Seventy-second Legislative Assembly having jurisdiction over revenue and environmental matters.

(7) The Legislative Revenue Officer shall provide the staff and administrative support necessary for the performance of the functions of the task force.

(8) Official action by the task force created under this section shall require the approval of a majority of the members of the task force. All legislation recommended by official action of the task force must indicate that it is introduced at the request of the task force. Such legislation shall be prepared in time for presession filing pursuant to ORS 171.130, for presentation to the regular session of the Seventy-second Legislative Assembly.

SECTION 11. Section 10 of this 2001 Act is repealed July 1, 2003.

SECTION 12. 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 August 9, 2001

Filed in the office of Secretary of State August 9, 2001

Effective date October 6, 2001

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