Chapter 944 Oregon Laws 2001

AN ACT

HB 3770

Relating to taxation.

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

SECTION 1. Sections 2 to 4 of this 2001 Act are added to and made a part of ORS chapter 285B.

SECTION 2. As used in sections 2 to 4 of this 2001 Act:

(1) “Business firm” has the meaning given that term in ORS 285B.650.

(2) “County per capita personal income” means the most recently available county per capita personal income statistics published by the Bureau of Economic Analysis of the United States Department of Commerce for a county.

(3) “County unemployment rate” means the most recently available unemployment rate for the county, as determined by the Employment Department.

(4) “Facility” means the land, real property improvements and personal property that are used by a business firm to conduct business operations, and that are the subject of an application for preliminary certification under section 3 of this 2001 Act or annual certification under section 4 of this 2001 Act.

(5) “Qualified location” means any area within the boundaries of a city of 10,000 or fewer residents that is located in a county that:

(a) Has a county unemployment rate that is in the highest quartile of county unemployment rates in this state as of the date of the application for preliminary certification under section 3 of this 2001 Act; and

(b) Has a county per capita personal income that is in the lowest quartile of county per capita personal incomes in this state as of the date of the application for preliminary certification under section 3 of this 2001 Act.

SECTION 3. (1) A business firm seeking the income and corporate excise tax exemption allowed under section 6 or 8 of this 2001 Act shall, before the commencement of construction or installation of property or improvements at the location for which the exemption is sought and before the hiring of any employees at that location, apply to the Economic and Community Development Department for preliminary certification under this section.

(2) The application shall be on a form prescribed by the department and shall contain the following information:

(a) The proposed location of the facility;

(b) A description of the property to be constructed, acquired, installed or leased and that is to comprise the facility upon being placed in service;

(c) If any property described in paragraph (b) of this subsection is to be leased, the term of the lease;

(d) The number of full-time, year-round employees the business firm intends to hire;

(e) The minimum annual average compensation intended to be given to the employees described in paragraph (d) of this subsection;

(f) A description of any other business activities of the firm in this state at the time of application, sufficient for the department to be able to determine if the proposed facility will constitute a new business in this state; and

(g) Any other information that the department requires.

(3) An application filed under this section must be accompanied by a fee in an amount prescribed by the Economic and Community Development Department by rule. The fee required by the department may not exceed $500.

(4)(a) When an application is filed under this section, the department shall send copies of the application to the governing bodies of the city and county in which the facility is proposed to be located.

(b) The governing body of a city or county may object to the preliminary certification of a business firm if the firm would be in competition with an existing business employing individuals within the city or county or would be incompatible with economic growth standards that the city or county had adopted prior to the date of application for preliminary certification. If the governing body of the city or county decides to object to preliminary certification of the firm, the governing body shall adopt a resolution stating its objection and the reason for its objection.

(c) The governing body of a city or county has 60 days from the date the application is sent to the city or county to object to preliminary certification. If the objection is not made within the 60-day period, the city or county shall be deemed to have agreed to preliminary certification.

(5) When an application is filed under this section, the department shall review the application and determine whether all of the following requirements are met:

(a) The proposed facility is to be located at a qualified location.

(b) The proposed facility is intended to operate as a facility for at least 10 years following the date the facility becomes operational.

(c) The business firm intends to hire at least 10 employees for full-time, year-round employment at a minimum annual compensation of:

(A) 150 percent of the county per capita personal income of the county in which the facility is to be located as of the date of the application for preliminary certification; or

(B) 100 percent of the county per capita personal income of the county in which the facility is to be located as of the date of the application for preliminary certification and also provide health insurance coverage that at least equals the benefits provided to employees of the city or county in which the facility is to be located.

(d) The business operations of the business firm that are to be conducted at the facility constitute a new business that the firm does not operate at another location in this state.

(e) The business operations of the business firm will not compete with existing businesses in the city or county in which the facility is to be located.

(6) If the department determines that the proposed facility, if completed as described in the application, will meet the criteria set forth in subsection (5) of this section and the governing body of the city or county has not objected to preliminary certification of the firm, the department shall issue a preliminary certification to the firm.

(7) If the department determines that the proposed facility, as set forth in the application, does not meet the requirements for preliminary certification under this section, the department may not issue a preliminary certification. The applicant may appeal the decision to not issue a preliminary certification in the manner of a contested case under ORS 183.310 to 183.550. No appeal may be made if the reason for not issuing a preliminary certification is the objection of the governing body of the city or county under subsection (4) of this section.

SECTION 4. (1) Following completion of the construction, acquisition or lease of the facility and the hiring of employees to conduct business operations at the facility and the commencement of operations at the facility, a business firm that obtained preliminary certification under section 3 of this 2001 Act shall apply for annual certification under this section.

(2) The application shall be filed with the Economic and Community Development Department on or before 30 days after the end of the income or corporate excise tax year of the business firm.

(3) The application shall contain the following information:

(a) A description of the business operations conducted at the facility;

(b) The date business operations commenced at the facility;

(c) The number of full-time, year-round employees employed by the business firm at the facility;

(d) A schedule of the annual compensation paid to the employees; and

(e) Any other information required by the department.

(4) An application filed under this section must be accompanied by a fee in an amount prescribed by the Economic and Community Development Department by rule. The fee required by the department may not exceed $100.

(5) The department shall review a business firm's application and approve the application if:

(a) The business operations of the firm at the facility commenced within 10 years before the date of application for annual certification;

(b) The facility and the business operations actually conducted at the facility are reasonably similar to the proposed facility and proposed operations described in the application for preliminary certification; and

(c) The business firm has met the employment and minimum compensation requirements described in section 3 (5)(c) of this 2001 Act.

(6) In the case of the first application for annual certification filed by a business firm under this section, the department may approve the application only if, in addition to the requirements under subsection (5) of this section, business operations commenced at the facility within six months following the date of preliminary certification under section 3 of this 2001 Act.

(7) The department may consult with the city or county in determining whether to approve or disapprove an application under this section.

(8) If the department determines to approve an application, it shall issue an annual certification to the business firm.

(9) If the department determines to disapprove an application, the business firm or any owner of the business firm may not be allowed the exemption described in section 6 or 8 of this 2001 Act for the tax year for which the annual certification was sought or for any subsequent tax year.

(10) The decision of the department to disapprove an application under this section may be appealed in the manner of a contested case under ORS 183.310 to 183.550.

(11) An annual certification may not be issued under this section for a tax year that is more than 10 years following the year business operations at the facility are commenced.

(12) The department must determine to approve or disapprove an application under this section within 30 days of the date the application is filed.

SECTION 5. Section 6 of this 2001 Act is added to and made a part of ORS chapter 316.

SECTION 6. (1) For each tax year in which a business firm receives an annual certification under section 4 of this 2001 Act, the income of the taxpayer apportionable to the certified facility of the business firm shall be exempt from tax under this chapter.

(2) The income of a resident taxpayer that is exempt under this section shall be determined by:

(a) Multiplying the federal taxable income of the taxpayer by the ratio of the taxpayer's federal adjusted gross income derived from the business firm over the taxpayer's federal adjusted gross income; and

(b) Multiplying the amount determined under paragraph (a) of this subsection by the ratio of the business firm's income derived from the firm's activities at the certified facility over the business firm's income from all business activities.

(3) The income of a nonresident or part-year resident taxpayer that is exempt under this section shall be determined by:

(a) Multiplying the Oregon-sourced federal taxable income of the taxpayer by the ratio of the taxpayer's federal adjusted gross income derived from the business firm over the taxpayer's federal adjusted gross income; and

(4) The Department of Revenue shall by rule prescribe a method by which a business firm determines the extent to which the firm's income is derived from the firm's activities at the certified facility.

(5)(a) A partnership or S corporation shall report the information necessary to compute exempt income under this section to the firm's owners within 30 days following the issuance of the annual certification to the partnership or S corporation under section 4 of this 2001 Act.

(b) The department may permit extensions of time for reporting the information required under this subsection.

(6) As used in this section:

(a) “Business firm” has the meaning given that term in section 2 of this 2001 Act.

(b) “Certified facility” means a facility, as defined in section 2 of this 2001 Act, for which an annual certification under section 4 of this 2001 Act has been issued.

SECTION 7. Section 8 of this 2001 Act is added to and made a part of ORS chapter 317.

SECTION 8. (1) For each tax year in which a business firm has received an annual certification for a facility under section 4 of this 2001 Act, the income of the business firm that is apportionable to the certified facility shall be exempt from tax under this chapter.

(2) The income of a business firm that is exempt under this section shall be determined by multiplying the taxable income of the business firm (as determined before application of this section) by the sum of:

(a) 50 percent of the ratio of the payroll of the business firm from employment at the certified facility over total statewide payroll of the business firm, as determined under ORS 314.660; and

(b) 50 percent of the ratio of the average value of the property of the business firm at the certified facility over the average value of the property of the business firm statewide, as determined under ORS 314.655.

(3) The sum computed under subsection (2) of this section shall be the amount of the business firm's income that is exempt from tax under this chapter.

(4) As used in this section:

(a) “Business firm” has the meaning given that term in section 2 of this 2001 Act.

(b) “Certified facility” means a facility, as defined in section 2 of this 2001 Act, for which an annual certification under section 4 of this 2001 Act has been issued.

Approved by the Governor August 9, 2001

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

Effective date January 1, 2002

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