71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
Enrolled
House Bill 2033
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of House Interim Revenue
Committee for Oregon Winegrowers Association)
CHAPTER ................
AN ACT
Relating to the treatment of processing equipment for tax
purposes.
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 315. + }
SECTION 2. { + The Legislative Assembly finds that farming and
related agricultural activities make significant contributions to
the economy of this state and that the contributions of family
farms are important in maintaining the agricultural diversity
upon which consistent economic performance is based. The
Legislative Assembly further finds that changes in the
marketplace and in the expectations of consumers of agricultural
products have resulted in a need for greater vertical integration
and on-farm processing of agricultural commodities. The
Legislative Assembly declares that an income tax credit for
property taxes paid on on-farm processing machinery and equipment
encourages the continued operation and expansion of on-farm
processing and results in a greater share of the value of
agricultural products being retained by the farms in this state.
The Legislative Assembly further declares that an incentive in
the form of an income tax credit does not adversely impact the
revenues of local governments in this state. + }
SECTION 3. { + (1) As used in this section:
(a) 'Effective property tax rate' means:
(A) The ratio of the total amount of property taxes imposed on
the account that contains the machinery and equipment for which a
credit is being claimed (after application of ORS 310.150 but
prior to discount under ORS 311.505) over the assessed value of
the property tax account; and
(B) The ratio determined under subparagraph (A) of this
paragraph for the property tax year that begins in the income tax
year for which the credit is claimed.
(b) 'Farm operator' means a person that operates a farming
business as defined in section 263A of the Internal Revenue Code.
(c) 'Machinery and equipment' means machinery and equipment
that meets the definition of section 1245 property in section
1245 of the Internal Revenue Code.
(d) 'Processing':
(A) Means any activity that is directly related and necessary
to clean, sort, grade, produce, prepare, manufacture, handle,
Enrolled House Bill 2033 (HB 2033-BCCA) Page 1
package, store or ship a farm crop or livestock product after the
point of harvest and before the point of sale, in a modified
state or altered form.
(B) Does not include an activity primarily associated with the
promotion or retail sale of a product for personal or household
use that is normally sold through consumer retail distribution.
(e) 'Qualified machinery and equipment' means machinery and
equipment used in processing that meets the requirements of
subsections (3) and (4) of this section for the tax year.
(2) A taxpayer who is a farm operator may claim a credit
against the taxes that are otherwise due under ORS chapter 316
or, if the taxpayer is a corporation, under ORS chapter 317 or
318 for ad valorem property taxes paid or incurred on qualified
machinery and equipment.
(3) A credit under this section may be claimed only if:
(a) The machinery and equipment is owned by the farm operator
or by a person who is related to the farm operator under section
267 of the Internal Revenue Code;
(b) The machinery and equipment is used for processing
primarily occurring on land described in subsection (4) of this
section; and
(c)(A) The farm operator has grown or raised at least one-half
of the total volume of farm crop or livestock products processed
with the machinery and equipment for which the credit is being
claimed in three of the five previous income tax years; or
(B)(i) The farm operator has grown or raised at least one-tenth
of the total volume of farm crop or livestock products processed
with the machinery and equipment for which the credit is being
claimed in three of the five previous income tax years; and
(ii) The farm operator has used the machinery and equipment to
process at least one-half of the volume of the applicable farm
crop or livestock products grown or raised by the farm operator
in three of the five previous income tax years.
(4) In addition to the requirements under subsection (3) of
this section, a credit under this section may be claimed only if:
(a) The machinery and equipment is located on land that is
specially assessed for farm use under ORS 308A.050 to 308A.128
and the machinery and equipment is owned or otherwise controlled
by the farm operator; or
(b) The machinery and equipment is located on land that is
contiguous to land that is specially assessed for farm use under
ORS 308A.050 to 308A.128 and the machinery and equipment is owned
or otherwise controlled by the farm operator.
(5) A credit may be claimed under this section only for
qualified machinery and equipment that was subject to assessment
and property taxation for the property tax year beginning in the
income tax year for which the credit is being claimed.
(6) The amount of the credit shall be the lesser of:
(a) The effective property tax rate multiplied by the adjusted
basis of the qualified machinery and equipment; or
(b) $30,000.
(7) The adjusted basis of the qualified machinery and equipment
shall be the adjusted basis of the qualified machinery and
equipment for personal income or corporate excise or income tax
purposes as of the last day of the income tax year for which the
credit is being claimed, except that the adjusted basis shall be
increased by the cost of any qualified machinery and equipment
that the taxpayer elected to expense under section 179 of the
Internal Revenue Code, until the qualified machinery and
equipment is fully depreciated for personal income or corporate
Enrolled House Bill 2033 (HB 2033-BCCA) Page 2
excise or income tax purposes. The adjusted basis shall reflect
any depreciation allowable for the current tax year. A credit
under this section may not be allowed for a tax year in which the
qualified machinery and equipment is fully depreciated for
personal income or corporate excise or income tax purposes.
(8) The credit allowed under this section for any one tax year
may not exceed the tax liability of the taxpayer.
(9) 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 the 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.
(10) The credit allowed under this section is not in lieu of
any depreciation or amortization deduction to which the taxpayer
otherwise may be entitled under ORS chapter 316, 317 or 318 for
the tax year.
(11) The taxpayer's adjusted basis for determining gain or loss
may not be further decreased by any amount of credit allowed
under this section.
(12) A nonresident shall be allowed the credit under this
section in the proportion provided in ORS 316.117.
(13) If a change in the status of a taxpayer from resident to
nonresident or from nonresident to resident occurs, the credit
allowed under this section shall be determined in a manner
consistent with ORS 316.117.
(14) If a change in the taxable year of a taxpayer occurs as
described in ORS 314.085, or if the Department of Revenue
terminates the taxpayer's taxable year under ORS 314.440, the
credit allowed under this section shall be prorated or computed
in a manner consistent with ORS 314.085. + }
SECTION 4. { + (1) For the first three tax years in which a
taxpayer claims a credit under section 3 of this 2001 Act, a
taxpayer shall be deemed to have complied with the applicable
minimum production and processing volume requirements of section
3 (3)(c) of this 2001 Act if the taxpayer has satisfied these
requirements for the preceding tax year.
(2) For the fourth tax year in which a taxpayer claims a credit
under section 3 of this 2001 Act, the taxpayer shall be deemed to
have complied with the applicable minimum production and
processing volume requirements of section 3 (3)(c) of this 2001
Act if the taxpayer has satisfied these requirements for the
preceding tax year and at least one of the three tax years
immediately prior to the preceding tax year.
(3) For each tax year in which a credit is claimed under
section 3 of this 2001 Act, the taxpayer shall maintain records
sufficient to determine the taxpayer's production and processing
volume for purposes of section 3 (3)(c) of this 2001 Act. A
taxpayer shall maintain the records required under this
subsection for at least 10 years. + }
SECTION 5. { + (1) Sections 3 and 4 of this 2001 Act apply to
tax years beginning on or after January 1, 2002.
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(2) Except as provided in section 3 (9) of this 2001 Act,
credits allowed under section 3 of this 2001 Act apply to tax
years beginning before January 1, 2008. + }
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Passed by House April 10, 2001
Repassed by House June 15, 2001
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate May 25, 2001
Repassed by Senate June 19, 2001
...........................................................
President of Senate
Enrolled House Bill 2033 (HB 2033-BCCA) Page 4
Received by Governor:
......M.,............., 2001
Approved:
......M.,............., 2001
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2001
...........................................................
Secretary of State
Enrolled House Bill 2033 (HB 2033-BCCA) Page 5