71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 2186
House Bill 2729
Sponsored by Representative WITT
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Eliminates limitation on fields of research for which research
credit may be claimed. Increases percentage of expenses that may
be used to compute credit and maximum amount that taxpayer can
claim as credit.
Modifies alternative research tax credit by basing credit on
percentage of qualified research expenses that exceed percentage
of average annual gross receipts.
Permits either credit to be claimed by individuals and other
business entities in addition to corporations.
Applies to research tax credits taken in tax years beginning on
or after January 1, 2002.
A BILL FOR AN ACT
Relating to taxation; creating new provisions; and amending ORS
314.752, 317.152 and 317.154.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 317.152 is amended to read:
317.152. (1) A credit against taxes otherwise due under
{ - this chapter - } { + ORS chapter 316 or, if the taxpayer
is a corporation, under ORS chapter 317 or 318 + } shall be
allowed to eligible taxpayers for increases in qualified research
expenses and basic research payments. The credit shall be
determined in accordance with section 41 of the Internal Revenue
Code, except as follows:
{ - (a) The applicable percentage specified in section 41(a)
of the Internal Revenue Code shall be five percent. - }
{ - (b) - } { + (a) + } 'Qualified research' and 'basic
research' shall consist { + only + } of research { - in the
fields of advanced computing, advanced materials, biotechnology,
electronic device technology, environmental technology or straw
utilization, but only to the extent that such research is - }
conducted in Oregon.
{ - (c) - } { + (b) + } The following { - shall - } { +
do + } not apply to the credit allowable under this section:
(A) Section 41(c)(4) of the Internal Revenue Code (relating to
the alternative incremental credit).
{ + (B) Section 41(e)(7)(E) of the Internal Revenue Code
(relating to the ineligibility of certain taxpayers). + }
{ - (B) - } { + (C) + } Section 41(h) of the Internal
Revenue Code (relating to termination of the federal credit).
{ - (2) As used in this section: - }
{ - (a) 'Advanced computing' means leading edge technologies
used in the design and development of computing hardware and
software. This includes innovations in design of the full
spectrum of hardware from hand-held calculators to super
computers, including all peripheral equipment. It also includes
innovations in design and development software executing on all
computing hardware for any purpose. - }
{ - (b) 'Advanced materials' means high value metals, new and
improved wood-based materials, composites and plastics. - }
{ - (c) 'Biotechnology' means biochemistry, molecular
biology, genetics and engineering dealing with the transformation
of biological systems into useful processes and products. - }
{ - (d) 'Electronic device technology' means the design and
development of electronic materials and devices such as advances
in integrated circuits and superconductivity. - }
{ - (e) 'Environmental technology' means environmental
assessment, cleanup and alternative energy sources. - }
{ - (f) 'Straw utilization' means innovations in the use of
straw and straw-based materials. - }
{ - (3) - } { + (2) + } For purposes of this
section { + , + } { - : - }
{ - (a) - } 'eligible taxpayer' means a { - corporation,
other than corporations excluded under Internal Revenue Code
section 41(e)(7)(E), that is engaged in research in the fields of
advanced computing, advanced materials, biotechnology, electronic
device technology or environmental technology - } { + taxpayer
that is subject to taxation under ORS chapter 316, 317 or 318 and
that conducts research in this state + }.
{ - (b) 'Internal Revenue Code' means the Internal Revenue
Code as amended and in effect on December 31, 1998. - }
{ - (4) - } { + (3) + } The Income Tax Regulations as
prescribed by the Secretary of the Treasury under authority of
section 41 of the Internal Revenue Code shall also apply for
purposes of this section, except as modified by this section or
as provided in rules adopted by the Department of Revenue.
{ - (5) - } { + (4) + } The maximum credit under this
section { - shall - } { + may + } not exceed { + the sum of:
(a) + } $500,000 { + ; and
(b) 25 percent of the taxpayer's tax liability for the tax year
that is in excess of $500,000 before the liability is reduced by
the amount in paragraph (a) of this subsection + }.
{ - (6) - } { + (5) + } Any tax credit that is otherwise
allowable under this section and that is not used by the taxpayer
in that 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 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.
SECTION 2. ORS 317.154 is amended to read:
317.154. { - (1) A credit against taxes otherwise due under
this chapter shall be allowed for qualified research expenses
that exceed 10 percent of Oregon sales. - }
{ - (2) For purposes of this section: - }
{ - (a) 'Internal Revenue Code' means the Internal Revenue
Code as defined in ORS 317.152. - }
{ - (b) 'Oregon sales' shall be computed using the laws and
administrative rules for calculating the numerator of the Oregon
sales factor under ORS 314.665. - }
{ - (c) 'Qualified research' has the meaning given the term
under section 41(d) of the Internal Revenue Code and shall
consist only of research in the fields of advanced computing,
advanced materials, biotechnology, electronic device technology,
environmental technology or straw utilization, all as defined
under ORS 317.152, but only to the extent that such research is
conducted in Oregon. - }
{ - (3) The credit under this section is equal to five
percent of the amount by which the qualified research expenses
exceed 10 percent of Oregon sales. - }
{ - (4) The credit under this section shall not exceed
$10,000 times the number of percentage points by which the
qualifying research expenses exceed 10 percent of Oregon
sales. - }
{ + (1) A credit against taxes otherwise due under ORS
chapter 316 or, if the taxpayer is a corporation, under ORS
chapter 317 or 318 shall be allowed for qualified research
expenses in the amount of the sum of the following:
(a) 2.65 percent of qualified research expenses for the tax
year that exceed 1 percent but are 1.5 percent or less of the
average annual gross receipts;
(b) 3.2 percent of qualified research expenses for the tax year
that exceed 1.5 percent but are 2 percent or less of the average
annual gross receipts; and
(c) 3.75 percent of qualified research expenses for the tax
year that exceed 2 percent of the average annual gross
receipts. + }
{ - (5) - } { + (2) + } The maximum credit under this
section { - shall - } { + may + } not exceed { + the sum of:
(a) + } $500,000 { + ; and
(b) 25 percent of the taxpayer's tax liability for the tax year
that is in excess of $500,000 before the liability is reduced by
the amount in paragraph (a) of this subsection + }.
{ - (6) - } { + (3) + } Any tax credit that is otherwise
allowable under this section and that is not used by the taxpayer
in that 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 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.
{ + (4) As used in this section:
(a) 'Average annual gross receipts' of qualified research
expenses means the average annual gross receipts of the taxpayer
for the four tax years preceding the tax year for which the
credit is being determined.
(b) 'Qualified research' has the meaning given that term in
section 41(d) of the Internal Revenue Code and shall consist only
of research conducted in this state. + }
SECTION 3. 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
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) { + , ORS 317.152
(research), ORS 317.154 (alternative research) + } and ORS
317.115 (fueling stations necessary to operate an alternative
fuel vehicle).
SECTION 4. { + The amendments to ORS 314.752, 317.152 and
317.154 by sections 1 to 3 of this 2001 Act apply to research tax
credits taken in tax years beginning on or after January 1,
2002. + }
SECTION 5. { + ORS 317.152, 317.153 and 317.154 are added to
and made a part of ORS chapter 315. + }
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