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 1988
Senate Bill 229
Sponsored by Senator DECKERT, Representative HILL
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.
Authorizes Director of Economic and Community Development
Department to designate up to three electronic commerce zones.
Exempts property of business firm engaged in electronic commerce
from property taxation if firm obtains certification. Allows
credit against income or corporate excise tax for ___ percent of
tax liability of firm that is apportioned to electronic commerce
zone.
A BILL FOR AN ACT
Relating to taxation; creating new provisions; and amending ORS
314.752 and 318.031.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 2 to 13 of this 2001 Act are added to
and made a part of ORS chapter 285B. + }
SECTION 2. { + As used in sections 2 to 13 of this 2001 Act:
(1) 'Business firm' has the meaning given that term in ORS
285B.650.
(2) 'Electronic commerce' means engaging in commercial or
retail transactions predominantly over the Internet or a computer
network, utilizing the Internet as a platform for transacting
business or facilitating the use of the Internet by other persons
for business transactions, and may be further defined by the
Economic and Community Development Department by rule.
(3) 'Electronic commerce zone' means a geographic area that has
been designated an electronic commerce zone by the Director of
the Economic and Community Development Department. + }
SECTION 3. { + The Legislative Assembly finds and declares
that the economic well-being of the people of this state is
greatly enhanced by the continued encouragement, development,
growth and expansion of business primarily engaged in electronic
commerce. The Legislative Assembly further declares that there
are areas in the state that need the particular attention of
government to help attract private investment in electronic
commerce businesses and to help resident businesses to reinvest
and develop electronic commerce capabilities. Therefore, it is
declared to be the purpose of sections 2 to 13 of this 2001 Act
to stimulate and protect economic success by providing property,
income and corporate excise tax incentives for investments
furthering electronic commerce in these areas of the state. + }
SECTION 4. { + (1) A city or a county may apply to the
Director of the Economic and Community Development Department for
designation of an area within the city or county as an electronic
commerce zone.
(2) With the prior consent of the governing body of the city, a
county may apply to the director on behalf of a city for
designation of any area within that city as an electronic
commerce zone.
(3) A city and a county, or any combination of cities and
counties, may apply to the director for designation of an area
situated partly within the city and partly in unincorporated
territory within the county as an electronic commerce zone.
(4) Any area proposed for designation as an electronic commerce
zone must consist of a total area of not more than 12 square
miles, with 12 miles or less as the greatest distance between any
two points within the zone. The area of the zone shall be
calculated by excluding that portion of the zone that lies below
the ordinary high water mark of a navigable body of water, and
any road, railroad, electric transmission line or pipeline rights
of way that connect otherwise unconnected areas of an electronic
commerce zone. These areas shall not be more than five miles
apart.
(5) An application for designation of an electronic commerce
zone shall be in such form and contain such information as the
Economic and Community Development Department may require by
rule. The application shall:
(a) Be submitted on behalf of one or more local government
units as described in subsections (1) to (3) of this section by
action of the governing body of each applicant;
(b) Contain a description of the area sought to be designated
as an electronic commerce zone; and
(c) Contain information sufficient to allow the director to
determine if the criteria established in section 7 of this 2001
Act are met. + }
SECTION 5. { + (1) The Economic and Community Development
Department may apply to have an area designated as an electronic
commerce zone. The application shall be made to the Director of
the Economic and Community Development Department by filing an
application with the director that contains the information
described in section 4 (5)(b) and (c) of this 2001 Act and any
other information the department considers necessary for action
to be taken on the application.
(2) At the time that an application is filed under this
section, the department shall give notice of the application to
the governing body of each city or county in the proposed
electronic commerce zone.
(3) In order to permit affected cities and counties to comment
on the efficacy of the proposed electronic commerce zone, the
director may not act on an application filed by the department
until 30 days after the date of filing. + }
SECTION 6. { + (1) The Director of the Economic and Community
Development Department shall review each application filed under
section 4 or 5 of this 2001 Act and shall approve or disapprove
each application within 60 days of the date the application was
filed.
(2) The director may approve an application and thereby
designate the area that is the subject of the application as an
electronic commerce zone if the director determines that the area
meets the criteria set forth in section 7 of this 2001 Act and
that the purposes of sections 2 to 13 of this 2001 Act will be
promoted by the designation.
(3) The determination of the director to approve or disapprove
an application is a discretionary determination. The
determination is final and may not be appealed.
(4) The director may approve as many as three electronic
commerce zones in this state. To the extent practicable, the
director shall designate zones that are geographically diverse
and representative of the geographic regions of this state.
(5) If a designated electronic commerce zone is terminated, the
director may approve a new application for designation under this
section. + }
SECTION 7. { + A proposed electronic commerce zone must be in
an area in which:
(1) Fifty percent or more of the households have incomes below
80 percent of the median income of this state, as defined by the
most recent federal decennial census;
(2) The unemployment rate is at least 2.0 percentage points
greater than the comparable unemployment rate for this entire
state, as defined by the most recently available data published
or officially provided and verified by the United States
Government, the Employment Department, the Portland State
University Center for Population Research and Census or special
studies conducted under a contract with a regional academic
institution; or
(3) The Economic and Community Development Department
determines on a case-by-case basis, using evidence provided by
the city or county applying for designation of the proposed
electronic commerce zone, that there exists a level of economic
hardship at least as severe as that described in subsection (1)
or (2) of this section. The evidence shall be based on the most
recently available data from official sources and may include,
but is not limited to, a contemporary decline of the population
in the proposed electronic commerce zone, the percentage of
persons in the proposed electronic commerce zone below the
poverty level relative to the percentage of the entire population
of this state below the poverty level or the unemployment rate
for the county or counties in which the proposed electronic
commerce zone is located. + }
SECTION 8. { + (1) An electronic commerce zone shall be
terminated if the Director of the Economic and Community
Development Department determines that the conditions under
section 7 of this 2001 Act upon which zone designation was based
are no longer present in the zone.
(2) At least 60 days prior to the date the zone is terminated,
notice of the proposed termination shall be given:
(a) In writing to cities and counties in which the electronic
commerce zone is located;
(b) In writing to business firms that are precertified under
section 11 of this 2001 Act but not certified under section 10 of
this 2001 Act; and
(c) By publication in a newspaper of general circulation in the
county in which the electronic commerce zone is located.
(3) The notice shall state that the affected electronic
commerce zone is proposed to be terminated and the date, time and
location of each hearing described in subsection (4) of this
section.
(4) The Economic and Community Development Department shall
conduct one or more hearings on the termination of the zone, at
which cities, counties, other local governments, business firms
or other interested persons may testify and present information
relating to the proposed termination.
(5) Following the completion of all hearings, the director
shall determine whether to terminate the zone.
(6) The termination of a zone under this section does not
affect the property tax exemption for the property of a certified
business firm under section 15 of this 2001 Act or the income or
excise tax credit that a certified business firm may claim under
section 17 of this 2001 Act.
(7) The termination of a zone under this section does not alter
the obligation of a business firm that has been certified under
section 10 of this 2001 Act to file annual reports if required to
do so under section 13 of this 2001 Act. + }
SECTION 9. { + (1) At any time following the designation of an
electronic commerce zone and before the termination of the zone,
a business firm seeking the tax benefits set forth in sections 15
and 17 of this 2001 Act shall apply to the Economic and Community
Development Department for certification.
(2) The application shall be on a form prescribed by the
department and shall contain any information required by the
department, including all of the following:
(a) A description of the activities engaged in by the applicant
within the electronic commerce zone that the applicant believes
constitute electronic commerce.
(b) The dates on which the applicant began operations in each
of the activities listed in paragraph (a) of this subsection.
(c) The number of employees hired during each year of
operations and the number of employees currently employed by the
business firm who are employed in the activities described in
paragraph (a) of this subsection and whose place of employment is
within the electronic commerce zone. If the duties of an employee
described in this paragraph are only partly related to the
activities described in paragraph (a) of this subsection, the
application shall indicate the percentage of time in which the
employee is engaged in the electronic commerce activities.
(d) The average annual wage of employees described in paragraph
(c) of this subsection.
(e) The number of employees of the applicant employed outside
of the electronic commerce zone as of the date of the application
and for the three preceding years, separately stated for each
year.
(f) A description of the equipment or other property, including
intangible property, in which the business firm made investments
in order to engage in electronic commerce within the electronic
commerce zone. If the property is real property or tangible
personal property, the property described must be located or used
in the electronic commerce zone. If the property is used both for
activities described in paragraph (a) of this subsection and for
other activities, the application shall indicate the percentage
of total use that is related to electronic commerce in the zone.
(g) An itemized schedule of the costs of the investments
described in paragraph (f) of this subsection.
(3) The department shall review each application submitted
under this section and shall certify or deny certification based
on whether the firm meets the criteria set forth in section 10 of
this 2001 Act.
(4) The department may request any documentation or undertake
any investigation necessary to ascertain the veracity of any
statement made on an application.
(5) The department shall certify or deny certification within
180 days following the date the application is filed with the
department.
(6) A denial of certification may be appealed to the department
in the manner of a contested case under ORS 183.310 to
183.550. + }
SECTION 10. { + (1) The Economic and Community Development
Department shall certify a business firm as eligible for the
property tax exemption under section 15 of this 2001 Act and the
income or excise tax credit under section 17 of this 2001 Act if
all of the following apply:
(a) The business activities of the firm that are conducted in
an electronic commerce zone and that are the subject of the
application filed under section 9 of this 2001 Act are primarily
related to electronic commerce.
(b) The business firm has made investments of at least $ ___ in
real or personal property, including intangible property, that is
primarily used in electronic commerce or to support electronic
commerce operations after the date the zone was established.
(c) The business firm has hired as least ___ full-time
equivalent employees for each $___ of annual gross receipts at a
place of employment located in the electronic commerce zone after
the date the zone was established.
(d) The employees described in paragraph (c) of this subsection
are employed primarily in electronic commerce activities of the
business firm.
(e) The employees described in paragraph (c) of this subsection
are compensated at an annual rate of not less than ___ percent of
the average annual wage of the county or counties in which the
zone is located.
(2) As used in this section, 'primarily' means more than 80
percent. + }
SECTION 11. { + (1) A business firm that has not yet commenced
any activities within an electronic commerce zone that would
permit the firm to receive tax benefits under section 15 or 17 of
this 2001 Act may seek precertification under this section.
(2) The application shall be on a form prescribed by the
Economic and Community Development Department and shall contain
any information required by the department, including all of the
following:
(a) A description of the activities the applicant plans to
engage in within the electronic commerce zone.
(b) The dates on which the applicant plans to begin operations
in each of the activities listed in paragraph (a) of this
subsection.
(c) The number of employees the applicant plans to hire who
will be employed in the activities described in paragraph (a) of
this subsection and whose place of employment will be within the
electronic commerce zone.
(d) The expected average annual wage of employees described in
paragraph (c) of this subsection.
(e) A description of the equipment or other property, including
intangible property, in which the business firm intends to invest
to engage in electronic commerce within the electronic commerce
zone.
(f) An itemized schedule of the costs of the investments
described in paragraph (e) of this subsection.
(3) The department shall review each application submitted
under this section and shall precertify or deny precertification
based on whether the firm would be certified under section 10 of
this 2001 Act if the firm actually completed the hiring and
investments described in the application and commenced the
business activities described in the application as of the dates
set forth in the application.
(4) The department may request any documentation or undertake
any investigation necessary to ascertain the veracity of any
statement made on an application.
(5) The department shall precertify or deny precertification
within 180 days following the date the application is filed with
the department.
(6) A denial of precertification may be appealed to the
department in the manner of a contested case under ORS 183.310 to
183.550. + }
SECTION 12. { + (1) A business firm that has been precertified
under section 11 of this 2001 Act must be certified under section
10 of this 2001 Act if:
(a) The business firm undertakes all of the hiring and
investments that were set forth in the precertification
application, commences the business activities set forth in the
precertification application by the dates set forth in the
precertification application and files an application for
certification; and
(b) The electronic commerce zone has not been terminated as of
the date the application for certification is filed.
(2) Nothing in this section prohibits the Economic and
Community Development Department from certifying a precertified
business firm under section 10 of this 2001 Act if the
precertified business firm does not qualify for mandatory
certification under subsection (1) of this section. + }
SECTION 13. { + (1) For ___ years following the year in which
a business firm is certified under section 10 of this 2001 Act,
the firm must annually file a report with the Economic and
Community Development Department.
(2) The report shall be filed at the time prescribed by the
department by rule and shall contain all information the
department requires to be reported, including:
(a) A summary of all of the electronic commerce activities of
the certified business firm that are conducted within the
electronic commerce zone;
(b) The number of full-time equivalent employees employed by
the firm in electronic commerce activities conducted in the
electronic commerce zone;
(c) The number of full-time equivalent employees employed by
the firm throughout the rest of this state; and
(d) The average annual compensation of the employees described
in paragraph (b) of this subsection.
(3) The department shall revoke the certification of a business
firm if the firm:
(a) Fails to file a required report;
(b) Ceases to conduct electronic commerce activities in the
electronic commerce zone;
(c) Fails to maintain an average annual total employment in
this state that is at least ___ percent of the full-time
equivalent employment the firm had in this state at the time
application for certification under section 10 of this 2001 Act
was made;
(d) Fails to maintain an average annual employment in the
electronic commerce zone that is at least _____ percent of the
full-time equivalent employment the firm had in the electronic
commerce zone at the time application for certification under
section 10 of this 2001 Act was made; or
(e) Fails to maintain an annual average compensation for
electronic commerce employees that is not less than ___ percent
of the average annual wage of the county or counties in which the
electronic commerce zone is located.
(4) The department shall send a written notice of the
certification revocation to the business firm, the county
assessor and the Department of Revenue.
(5) A decision to revoke the certification of a business firm
may be appealed to the Economic and Community Development
Department in the manner of a contested case under ORS 183.310 to
183.550.
(6) A certification that has been revoked under this section
may be reinstated within six months of the date of revocation if
the business firm rectifies the circumstance that served as the
basis for the revocation + } { + under subsection (3) of this
section + } { + .
(7) After ___ years following the date a business firm is
certified under section 10 of this 2001 Act, the certification of
the business firm may not be revoked under this section. + }
SECTION 14. { + Section 15 of this 2001 Act is added to and
made a part of ORS chapter 307. + }
SECTION 15. { + (1) Property of a business firm is exempt from
ad valorem property tax if:
(a) The property is located within an electronic commerce zone;
and
(b) The assessment date for the tax year is no more than ___
years following the year in which the firm was certified under
section 10 of this 2001 Act.
(2) The assessor shall record in the assessment and tax roll
the amount of the taxes that would have been due on the property
if the property were not exempt under the notation 'potential
additional tax. '
(3)(a) If the county assessor has received notice from the
Economic and Community Development Department that certification
of the business firm has been revoked under section 13 of this
2001 Act, the property shall be disqualified from exemption under
this section.
(b) The total amount of additional tax described in subsection
(2) of this section shall be added to the roll for the tax year
next following disqualification, to be collected and distributed
in the same manner as other property taxes for the tax year.
(c) Additional taxes collected under this subsection shall be
deemed to have been imposed in the year to which the additional
taxes relate.
(4) As used in this section, 'business firm' and ' electronic
commerce zone' have the meanings given those terms in section 2
of this 2001 Act. + }
SECTION 16. { + Section 17 of this 2001 Act is added to and
made a part of ORS chapter 315. + }
SECTION 17. { + (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 taxpayer that is a
certified business firm engaged in electronic commerce in an
electronic commerce zone.
(2) Except as provided under subsection (6) of this section,
the credit may be claimed in a tax year that begins in a calendar
year that is no more than _____ years following the year in which
the business firm was certified under section 10 of this 2001
Act.
(3)(a) The amount of the credit equals _____ percent of the
taxpayer's tax liability that is apportioned to the electronic
commerce zone under this subsection.
(b) The tax liability of the taxpayer, after application of all
credits that the taxpayer may claim, shall be multiplied by the
sum of:
(A) 50 percent of the ratio of the payroll of the business firm
within the electronic commerce zone over total statewide payroll
of the business firm; and
(B) 50 percent of the ratio of the fair market value of the
property of the business firm in the electronic commerce zone
over the fair market value of the property of the business firm
statewide.
(c) The product computed under paragraph (b) of this subsection
shall be the amount of the taxpayer's tax liability that is
apportioned to the electronic commerce zone.
(4) No credit may be allowed under this section if the Economic
and Community Development Department has given notice to the
Department of Revenue that certification of the business firm has
been revoked under section 13 of this 2001 Act.
(5) A credit allowed under this section may not exceed the tax
liability of the taxpayer.
(6) 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.
(7) For purposes of this section, the payroll of the business
firm shall be calculated as an annual average for the tax year of
the taxpayer. The Department of Revenue may prescribe rules for
determining the payroll of the taxpayer and for determining the
fair market value of the property of the taxpayer. + } { +
(8) As used in this section, 'business firm,' 'electronic
commerce' and 'electronic commerce zone' have the meanings given
those terms in section 2 of this 2001 Act. + }
SECTION 18. 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) and ORS 317.115
(fueling stations necessary to operate an alternative fuel
vehicle) { + and section 17 of this 2001 Act (electronic
commerce zones) + }.
SECTION 19. 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 (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 { + , and section 17 of this 2001 Act + }.
SECTION 20. { + Section 17 of this 2001 Act and the amendments
to ORS 314.752 and 318.031 by sections 18 and 19 of this 2001 Act
apply to tax years beginning on or after January 1, 2002. + }
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