71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
Enrolled
House Bill 2676
Sponsored by Representatives PATRIDGE, KAFOURY; Representative
WESTLUND, Senators BROWN, CASTILLO (at the request of Oregon
Commission on Child Care)
CHAPTER ................
AN ACT
Relating to dependent care tax credits; creating new provisions;
amending ORS 314.752, 315.204 and 318.031 and section 10,
chapter 682, Oregon Laws 1987, and section 87, chapter 625,
Oregon Laws 1989; and prescribing an effective date.
Be It Enacted by the People of the State of Oregon:
SECTION 1. Section 10, chapter 682, Oregon Laws 1987, as
amended by section 3, chapter 929, Oregon Laws 1991, is amended
to read:
{ + Sec. 10. + } { - Sections 2, 5 and 8, chapter 682,
Oregon Laws 1987, apply - } { + ORS 315.204 applies + } to tax
years beginning on or after January 1, 1988, and prior to January
1, { - 2002 - } { + 2007 + }. { - For all prior taxable
years, the law in effect and applicable for those years shall
continue to apply. - }
SECTION 2. Section 87, chapter 625, Oregon Laws 1989, as
amended by section 4, chapter 929, Oregon Laws 1991, is amended
to read:
{ + Sec. 87. + } The amendments to ORS 316.134 and section 5,
chapter 682, Oregon Laws 1987, by sections 10 and 20, chapter
625, Oregon Laws 1989, (relating to dependent care assistance
credit) apply to tax years beginning on or after January 1, 1988
{ - , and prior to January 1, 2002 - } .
SECTION 3. { + As used in sections 3 to 8 of this 2001 Act:
(1) 'Child care provider' means a provider, for compensation,
of care, supervision or guidance to a child on a regular basis in
a center or in a home other than the child's home. 'Child care
provider' does not include a person who is the child's parent,
guardian or custodian.
(2) 'Community agency' means a nonprofit agency that is:
(a) Located in a region, established under section 5 of this
2001 Act, in which it provides services related to child care,
children and families, community development or similar services;
and
(b) Eligible to receive contributions that qualify as
deductions under section 170 of the Internal Revenue Code.
(3) 'Qualified contribution' means a contribution made by a
taxpayer to the Child Care Division of the Employment Department
or a selected community agency for the purpose of promoting child
care, and for which an application is submitted for a tax credit
certificate under section 5 of this 2001 Act.
Enrolled House Bill 2676 (HB 2676-B) Page 1
(4) 'Tax credit certificate' means a certificate issued by the
Child Care Division to a taxpayer to qualify the taxpayer for a
tax credit under section 10 of this 2001 Act. + }
SECTION 4. { + (1) The Child Care Division of the Employment
Department, in collaboration with an advisory committee
established by the Child Care Division, shall establish a program
to:
(a) Allocate tax credit certificates to taxpayers that make
qualified contributions to the Child Care Division or a selected
community agency; and
(b) Distribute to child care providers moneys from qualified
contributions and other contributions.
(2) The purposes of the program are to:
(a) Encourage taxpayers to make contributions to the Child Care
Division or a selected community agency by providing a financial
return on qualified contributions and by soliciting other
contributions.
(b) Achieve specific and measurable goals for targeted
communities and populations by strategically allocating tax
credit certificates.
(c) Set standards for the child care industry concerning the
cost of providing quality, affordable child care.
(d) Strengthen the viability and continuity of child care
providers while making child care more affordable for low and
moderate income families. + }
SECTION 5. { + (1) For the purpose of implementing the program
established under section 4 of this 2001 Act, the Child Care
Division of the Employment Department, in collaboration with an
advisory committee established by the Child Care Division, shall:
(a) Establish regions in this state by rule in a manner that
facilitates the planning of the program, the allocation of tax
credit certificates to taxpayers and the distribution to child
care providers of moneys from contributions made to the Child
Care Division and selected community agencies.
(b) Identify for each region contribution and child care goals
that are consistent with the purposes provided in section 4 (2)
of this 2001 Act. The goals identified under this paragraph shall
take into account the resources and needs of the region.
(c) Develop by rule the application process a community agency
must complete to represent a region, and any process for the
renewal of such representation.
(d) Select a community agency in each region.
(e) Enter into an agreement with each community agency selected
to represent a region to have the community agency perform the
functions specified in section 7 of this 2001 Act.
(f) Determine the total value in tax credit certificates
available to taxpayers in each region, based on goals identified
under paragraph (b) of this subsection, and transmit those
determinations to the selected community agencies by February 1
of each year. The total value in tax credit certificates
available to all selected community agencies in this state may
not exceed $500,000 per calendar year.
(g) Determine the total value of moneys to be available to each
selected community agency to distribute to providers based on
goals identified under paragraph (b) of this subsection, and
distribute those moneys in the manner provided in section 6a of
this 2001 Act to the selected community agencies by June 30 of
the year following the year the application is made. The total
value of moneys available to all selected community agencies in
this state may not exceed the amount of contributions received
Enrolled House Bill 2676 (HB 2676-B) Page 2
from taxpayers during the tax year minus any reasonable
administrative costs incurred by the Child Care Division and the
selected community agencies.
(2) If a taxpayer makes a contribution to the Child Care
Division or a selected community agency for child care but does
not want to receive the tax credit available under section 10 of
this 2001 Act, the taxpayer may receive only deductions and
credits otherwise allowed for a charitable contribution. A
contribution described in this subsection shall be deposited in
the Child Care Fund established under ORS 657A.010.
(3)(a) If a taxpayer makes a contribution to the Child Care
Division or to a selected community agency and wants to receive
the tax credit available under section 10 of this 2001 Act, the
taxpayer shall submit an application for a tax credit certificate
with the contribution. If the contribution is made to a selected
community agency, the selected community agency shall forward the
application and contribution to the Child Care Division.
(b) The application for a tax credit certificate shall be
available to taxpayers from the Child Care Division and from
selected community agencies in a form prescribed by the Child
Care Division. The application must be submitted by December 31
of each year and contain such information as the division
requires.
(c) The Child Care Division shall consider applications for tax
credit certificates in the chronological order in which the
applications are received by the division and shall approve
applications in an amount that does not exceed the limitations
imposed by subsection (1)(f) of this section.
(d) The Child Care Division may not issue a tax credit
certificate to a taxpayer to the extent the claim for credit in
the application, when added to the total amount of claims for
credit previously certified by the Child Care Division for
distribution, exceeds the value of tax credit certificates
available to the Child Care Division for the calendar year.
(e) The Child Care Division shall send a copy of all tax credit
certificates issued under this section to the Department of
Revenue.
(f) Contributions made under this subsection shall be deposited
in the Child Care Fund.
(4) A taxpayer that receives a notice of denial of a tax credit
certificate or that receives a tax credit certificate issued for
an amount that is less than the amount contributed may request a
refund for the amount contributed within 90 days of the Child
Care Division's denial or issuance of the certificate. The Child
Care Division must send notice of a denial or changed amount and
refund the amount for which a tax credit will not be granted
within 30 days after receiving the request. The refund shall be
made from the Child Care Fund.
(5) The Child Care Division may establish by rule any other
provisions required to implement the program established under
sections 3 to 8 of this 2001 Act. + }
SECTION 6. { + (1) In selecting a community agency for a
region under section 5 of this 2001 Act, the Child Care Division
of the Employment Department shall consider:
(a) A prospective agency's financial soundness, net worth, cash
flow and accounting capacity to manage the tax credit program;
(b) A prospective agency's demonstrated ability to serve low
and moderate income families;
(c) The degree to which the governing board of the prospective
agency is representative of the region in which the agency is
Enrolled House Bill 2676 (HB 2676-B) Page 3
located, has a low turnover rate of board members, has experience
with financial matters and has a demonstrated history of
collaboration with other community agencies; and
(d) The experience and expertise of the executive or managing
officer and staff of the prospective agency in child care
business management and small business development.
(2) The division shall select the community agency that, in the
judgment of the division and based on the criteria set forth in
subsection (1) of this section, will best serve the interests of
the region for which it is selected. + }
SECTION 6a. { + (1) On or before April 1 following each
calendar year, the Child Care Division of the Employment
Department shall distribute revenues in the Child Care Fund that
are derived from contributions made in the calendar year, minus
the amounts needed to make refunds under section 5 (4) of this
2001 Act and to cover expenses of the Child Care Division in
administering sections 3 to 8 of this 2001 Act.
(2) Distributions shall be made to community agencies selected
under section 5 of this 2001 Act in the proportion that the Child
Care Division determines best promotes the provision of child
care in this state.
(3) Moneys distributed to selected community agencies shall be
disbursed to child care providers, consistent with rules adopted
by the Child Care Division relating to the disbursement of moneys
by selected community agencies. The Child Care Division shall
consider the factors described in section 7 (3)(h) of this 2001
Act when adopting rules under this subsection. + }
SECTION 7. { + (1) Each community agency selected under
section 5 of this 2001 Act shall encourage taxpayers to make
contributions for child care and shall disburse moneys
distributed to the community agency to child care providers
located in the region that the selected community agency
represents, pursuant to section 6a of this 2001 Act and rules
adopted thereunder.
(2) A selected community agency shall encourage taxpayers to
make contributions for child care by promoting the program
established under section 4 of this 2001 Act and by soliciting
other contributions.
(3) A selected community agency must:
(a) Coordinate an application process by which persons may
apply to be participating providers;
(b) Enter into agreements with participating providers under
which the duties and responsibilities of participating providers
and the community agency are stated;
(c) Provide or coordinate required training for participating
providers;
(d) Monitor participating providers, through visits to
providers and otherwise;
(e) Oversee the process by which a participating provider
verifies the income of a family and establishes the total child
care fee charged to a family;
(f) Report on participating provider compliance with section 8
of this 2001 Act and other applicable requirements to
contributors and the Child Care Division of the Employment
Department;
(g) Establish a maximum family income level for the region for
purposes of the child care fee limitation to which participating
providers are subject under section 8 (1)(h) of this 2001 Act;
(h) Determine, consistently with rules adopted by the Child
Care Division, the amount of moneys to be disbursed to a
Enrolled House Bill 2676 (HB 2676-B) Page 4
participating provider based on the incomes of the families the
provider serves, the child care fees the provider charges and the
actual cost to the provider of providing quality, affordable
child care; and
(i) Forward applications and moneys it receives from taxpayers
as contributions to the Child Care Division.
(4)(a) By the end of each calendar year, a selected community
agency must distribute to participating child care providers all
moneys that are available to the agency as a result of the
determination made by the Child Care Division under section 5
(1)(g) of this 2001 Act. Each selected community agency shall
distribute a substantial portion of the moneys to participating
child care providers that are home-based businesses.
(b) Distributions shall be based on the actual costs of
providing quality, affordable child care in the region for which
distributions are being made, including training costs, operating
costs and wages.
(5) For the purpose of making distributions to child care
providers, a selected community agency shall identify child care
providers in the region it represents that meet the requirements
of section 8 of this 2001 Act. The selected community agency may
develop a process through which child care providers apply to
receive distributions of moneys from contributions made by
taxpayers. + }
SECTION 8. { + (1) Each selected community agency shall select
participating child care providers that meet the following
requirements:
(a) If a home-based business, the provider must enter into an
agreement with the community agency to continue to provide child
care services for at least an additional two years.
(b) If a home-based business, the provider must serve at least
two families that have incomes that are 80 percent or less of the
median income for the region. If a center, at least 25 percent of
the families the provider serves must have incomes that are 80
percent or less of the median income for the region.
(c) The provider must accept children for whom child care is
paid for through an Adult and Family Services Division subsidy.
(d) The provider and the employees of the provider must provide
high quality child care.
(e) The provider, if the provider is an individual, and the
employees of the provider must have adequate training and must
attend required training established by the Child Care Division.
(f) The provider must maintain adequate liability insurance,
financial records and parent policies and contracts, and permit
the selected community agency to conduct visits.
(g) If a home-based business, the provider must be registered
with the Child Care Division. If a center, the provider must be
certified by the Child Care Division.
(h) For care provided to children of families whose income does
not exceed the level established by the selected community agency
under section 7 (3)(g) of this 2001 Act, the provider must agree
to limit the total child care fees charged to a family to a
percentage established by the Child Care Division by rule.
(2) In selecting participating child care providers, selected
community agencies must give preference to providers that provide
child care to low and moderate income families. + }
SECTION 9. { + Section 10 of this 2001 Act is added to and
made a part of ORS chapter 315. + }
SECTION 10. { + (1) A credit against the taxes otherwise due
under ORS chapter 316 or, if the taxpayer is a corporation, under
Enrolled House Bill 2676 (HB 2676-B) Page 5
ORS chapter 317 or 318 is allowed to a taxpayer for certified
contributions made to the Child Care Division or a selected
community agency under section 5 of this 2001 Act.
(2) The amount of a tax credit available to a taxpayer for a
tax year under this section shall equal the amount stated in the
tax credit certificate received under section 5 of this 2001 Act.
(3) The credit allowed under this section may not exceed the
tax liability of the taxpayer for the tax year in which the
credit is claimed.
(4) A taxpayer shall include the tax credit certificate
received under section 5 of this 2001 Act with the return filed
with the Department of Revenue for the tax year to which the tax
credit certificate applies.
(5) The credit allowed under this section is in addition to,
and not in lieu of, any credit or deduction allowed under this
chapter or ORS chapter 316, 317 or 318 for charitable
contributions and contributions made in relation to child care.
(6) A credit under this section may be claimed by a nonresident
or part-year resident without proration.
(7) Any tax credit otherwise allowable under this section that
is not used by the taxpayer in a particular tax 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, but may not be carried forward
for any tax year thereafter.
(8) The definitions in section 3 of this 2001 Act apply to this
section. + }
SECTION 11. ORS 314.752 is amended to read:
314.752. (1) Except as provided in ORS 314.740 (5)(b), the tax
credits allowed or allowable to a C corporation for purposes of
ORS chapter 317 or 318 shall not be allowed to an S corporation.
The business tax credits allowed or allowable for purposes of ORS
chapter 316 shall be allowed or are allowable to the shareholders
of the S corporation.
(2) In determining the tax imposed under ORS chapter 316, as
provided under ORS 314.734, on income of the shareholder of an S
corporation, there shall be taken into account the shareholder's
pro rata share of business tax credit (or item thereof) that
would be allowed to the corporation (but for subsection (1) of
this section) or recapture or recovery thereof. The credit (or
item thereof), recapture or recovery shall be passed through to
shareholders in pro rata shares as determined in the manner
prescribed under section 1377(a) of the Internal Revenue Code.
(3) The character of any item included in a shareholder's pro
rata share under subsection (2) of this section shall be
determined as if such item were realized directly from the source
from which realized by the corporation, or incurred in the same
manner as incurred by the corporation.
(4) If the shareholder is a nonresident and there is a
requirement applicable for the business tax credit that in the
case of a nonresident that the credit be allowed in the
proportion provided in ORS 316.117, then that provision shall
apply to the nonresident shareholder.
(5) As used in this section, 'business tax credit' means a tax
credit granted to personal income taxpayers to encourage certain
Enrolled House Bill 2676 (HB 2676-B) Page 6
investment, to create employment, economic opportunity or
incentive or for charitable, educational, scientific, literary or
public purposes that is listed under this subsection as a
business tax credit or is designated as a business tax credit by
law or by the Department of Revenue by rule and includes but is
not limited to the following credits: ORS 315.104 (forestation
and reforestation), ORS 315.134 (fish habitat improvement), ORS
315.138 (fish screening, by-pass devices, fishways), ORS 315.156
(crop gleaning), ORS 315.164 (farmworker housing), ORS 315.204
(dependent care assistance), ORS 315.208 (dependent care
facilities), ORS 315.234 (child development program
contributions), ORS 315.254 (youth apprenticeship sponsorship),
ORS 315.304 (pollution control facility), ORS 315.324 (plastics
recycling), ORS 315.354 and ORS 469.207 (energy conservation
facilities), ORS 315.504 (Oregon Capital Corporation), ORS
315.604 (bone marrow transplant expenses) and ORS 317.115
(fueling stations necessary to operate an alternative fuel
vehicle) { + and section 10 of this 2001 Act (contributions for
child care) + }.
SECTION 12. ORS 318.031 is amended to read:
318.031. It being the intention of the Legislative Assembly
that this chapter and the Corporation Excise Tax Law of 1929
shall be administered as uniformly as possible (allowance being
made for the difference in imposition of the taxes and the
operative date of this chapter), the provisions of ORS 305.140
and 305.150 and ORS chapter 314 and of the following sections of
ORS chapter 315 or 317, as amended on or before August 3, 1955,
and as they may thereafter be amended, are incorporated into this
chapter by this reference and made a part hereof: ORS 315.104,
315.134, 315.156, 315.204, 315.208, 315.234, 315.254, 315.304,
315.504 and 315.604 { + and section 10 of this 2001 Act + }
(all only to the extent applicable for a corporation) and ORS
317.010, 317.013, 317.018 to 317.022, 317.030, 317.035, 317.038,
317.080, 317.152 to 317.154, 317.259 to 317.303, 317.310 to
317.386, 317.476 to 317.485, 317.510 to 317.635 and 317.705 to
317.725 and section 40, chapter 835, Oregon Laws 1997, and
section 4, chapter 358, Oregon Laws 1999.
SECTION 13. { + Section 10 of this 2001 Act applies to tax
years beginning on or after January 1, 2002, and before January
1, 2007. + }
SECTION 14. ORS 315.204 is amended to read:
315.204. (1) A credit against the taxes otherwise due under ORS
chapter 316 (or, if the taxpayer is a corporation, under ORS
chapter 317 or 318) shall be allowed to a resident employer or to
a corporation that is an employer for amounts paid or incurred
during the taxable year by the employer for dependent care
assistance actually provided to an employee if the assistance is
furnished pursuant to a program which meets the requirements of
section 129(d) of the Internal Revenue Code { + and if the
employer has received a certificate as provided in subsection (2)
of this section + }. { +
(2)(a) Each employer that elects to receive a credit allowed
under subsection (1) of this section must submit an application
to the Child Care Division of the Employment Department each year
the employer wishes to receive the credit. The Child Care
Division shall prescribe by rule the form of the application and
the information required to be given on the application.
(b) The Child Care Division shall issue a certificate to each
employer that submits an application under this subsection. + }
Enrolled House Bill 2676 (HB 2676-B) Page 7
{ - (2) - } { + (3) + } The amount of the credit allowed
under subsection (1) of this section shall be 50 percent of the
amount so paid or incurred by the employer during the taxable
year but shall not exceed $2,500 of dependent care assistance
actually provided to the employee.
{ - (3)(a) - } { + (4)(a) + } A credit against the taxes
otherwise due under ORS chapter 316 (or, if the taxpayer is a
corporation, under ORS chapter 317 or 318) shall be allowed to a
resident employer, or to a corporation that is an employer, based
upon amounts paid or incurred by the employer during the taxable
year to provide information and referral services to assist
employees of the employer employed within this state to obtain
dependent care.
(b) The amount of the credit allowed under this subsection
shall be 50 percent of the amounts paid or incurred during the
taxable year.
{ - (4) - } { + (5) + } No amount paid or incurred during
the taxable year of an employer in providing dependent care
assistance to any employee shall qualify for the credit allowed
under subsection (1) of this section if the amount was paid or
incurred to an individual described in section 129(c)(1) or (2)
of the Internal Revenue Code.
{ - (5) - } { + (6) + } No amount paid or incurred by an
employer to provide dependent care assistance to an employee
shall qualify for the credit allowed under subsection (1) of this
section if the amount paid or incurred is paid or incurred
pursuant to a salary reduction plan or is not paid or incurred
for services performed within this state.
{ - (6) - } { + (7) + } If the credit allowed under
subsection (1) or { - (3) - } { + (4) + } of this section is
claimed, the amount of any deduction allowed or allowable under
ORS chapter 316, 317 or 318 for the amount that qualifies for the
credit (or upon which the credit is based) shall be reduced by
the dollar amount of the credit allowed. The election to claim a
credit allowed under this section shall be made at the time of
filing the tax return in accordance with any rules adopted by the
Department of Revenue.
{ - (7) - } { + (8) + } The amount upon which the credit
allowed under subsection (1) of this section is based shall not
be included in the gross income of the employee to whom the
dependent care assistance is provided. However, the amount
excluded from the income of an employee under this section shall
not exceed the limitations provided in section 129(b) of the
Internal Revenue Code. For purposes of ORS 316.162, with respect
to an employee to whom dependent care assistance is provided,
'wages' does not include any amount excluded under this
subsection. Amounts excluded under this subsection shall not
qualify as expenses for which a credit is allowed to the employee
under ORS 316.078.
{ - (8) - } { + (9) + } A nonresident shall be allowed the
credit allowed under subsection (1) or { - (3) - } { +
(4) + } of this section. The credit shall be computed in the same
manner and be subject to the same limitations as the credit
granted to a resident.
{ - (9) - } { + (10) + }If a change in the taxable year of
the taxpayer occurs as described in ORS 314.085, or if the
department terminates the taxpayer's taxable year under ORS
314.440, the credit allowed by this section shall be prorated or
computed in a manner consistent with ORS 314.085.
Enrolled House Bill 2676 (HB 2676-B) Page 8
{ - (10) - } { + (11) + } If a change in the status of a
taxpayer from resident to nonresident or from nonresident to
resident occurs, the credit allowed by this section shall be
determined in a manner consistent with ORS 316.117.
{ - (11) - } { + (12) + } 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,
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.
{ - (12) - } { + (13) + } For purposes of the credit
allowed under subsection (1) or { - (3) - } { + (4) + } of
this section:
(a) The definitions and special rules contained in section
129(e) of the Internal Revenue Code shall apply to the extent
applicable.
(b) 'Employer' means an employer carrying on a business, trade,
occupation or profession in this state.
{ - (13) - } { + (14) + } In the case of an on-site
facility, in accordance with any rules adopted by the department,
the amount upon which the credit allowed under subsection (1) of
this section is based, with respect to any dependent, shall be
based upon utilization and the value of the services provided.
SECTION 15. { + The amendments to ORS 315.204 by section 14 of
this 2001 Act apply to dependent care assistance credits taken in
tax years beginning on or after January 1, 2002. + }
SECTION 16. { + 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. + }
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Passed by House April 9, 2001
Repassed by House June 5, 2001
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate June 1, 2001
...........................................................
President of Senate
Enrolled House Bill 2676 (HB 2676-B) Page 9
Received by Governor:
......M.,............., 2001
Approved:
......M.,............., 2001
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2001
...........................................................
Secretary of State
Enrolled House Bill 2676 (HB 2676-B) Page 10