Chapter 473 Oregon Laws 2003

AN ACT

HB 3184

Relating to taxation; creating new provisions; and amending ORS 315.213, 315.262, 316.502, 657A.700, 657A.703, 657A.706, 657A.709, 657A.712, 657A.715 and 657A.718 and section 13, chapter 674, Oregon Laws 2001.

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

SECTION 1. ORS 657A.700 is amended to read:

657A.700. As used in ORS 657A.700 to 657A.718:

(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 ORS 657A.706, in which it] Provides services related to child care, children and families, community development or similar services; and

(b) Is eligible to receive contributions that qualify as deductions under section 170 of the Internal Revenue Code.

(3) “High quality child care” means child care that meets standards for high quality child care established or approved by the Commission for Child Care.

[(3)] (4) “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] the taxpayer will receive a tax credit certificate under ORS 657A.706.

[(4)] (5) “Tax credit certificate” means a certificate issued by the Child Care Division to a taxpayer to qualify the taxpayer for a tax credit under ORS 315.213.

(6) “Tax credit marketer” means an individual or entity selected by the Child Care Division to market tax credits to taxpayers.

SECTION 2. ORS 657A.703 is amended to read:

657A.703. (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].

(d) Strengthen the viability and continuity of child care providers while making child care more affordable for low and moderate income families.

SECTION 3. ORS 657A.706 is amended to read:

657A.706. (1) For the purpose of implementing the program established under ORS 657A.703, 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.]

(a) Adopt rules.

(b) Select a tax credit marketer who agrees to market tax credits to taxpayers.

[(b)] (c) Identify [for each region contribution and] child care goals that are consistent with the purposes provided in ORS 657A.703 (2). The goals identified under this paragraph shall take into account [the resources and needs of the region] state resources and needs.

[(c)] (d) Develop by rule the application process [a community agency] an entity must complete to [represent a region] be designated as a community agency under ORS 657A.700 to 657A.718, and any process for the renewal of [such representation] that designation.

[(d)] (e) Select [a community agency in each region] one or more community agencies.

[(e)] (f) Enter into an agreement with each selected community agency [selected to represent a region to have the community agency] to perform the functions specified in ORS 657A.715.

[(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)] (c) of this subsection, and distribute those moneys in the manner provided in ORS 657A.712 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 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 ORS 315.213, 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.]

(2) The Child Care Division may adopt rules that establish a fixed percentage that is less than 100 percent by which the amount contributed by a taxpayer will be certified for a tax credit by the division. The purpose of the grant of rulemaking authority under this subsection is to permit the division to calibrate the amount of the tax credit to interpretations of the deductibility of qualified contributions under section 170 of the Internal Revenue Code for federal tax purposes.

[(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 ORS 315.213, 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.]

(3)(a) The Child Care Division shall issue tax credit certificates in the chronological order in which the contributions are received by the division. The division shall issue tax credit certificates to contributors until the total value of all certificates issued by the division for the calendar year equals $500,000. Each issued certificate shall state the value of the contribution being certified as eligible for the tax credit allowed under ORS 315.213. Except as provided in rules adopted under subsection (2) of this section, the certified value shall equal the amount of the contribution.

[(d)] (b) The Child Care Division may not issue a tax credit certificate to a taxpayer to the extent the [claim for] credit [in the application] value to be certified, when added to the total [amount of claims for] credit value 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] under paragraph (a) of this subsection for the calendar year exceeds $500,000.

[(e)] (c) The Child Care Division shall send a copy of all tax credit certificates issued under this section to the Department of Revenue.

[(f)] (d) Qualified 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 ORS 657A.700 to 657A.718.

SECTION 4. ORS 657A.709 is amended to read:

657A.709. (1) In selecting a community agency [for a region] under ORS 657A.706, 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] community in which the agency is 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] community for which it is selected.

SECTION 5. ORS 657A.712 is amended to read:

657A.712. (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 ORS 657A.706 (4) and to cover expenses of the Child Care Division in administering ORS 657A.700 to 657A.718.

(2) Distributions shall be made to community agencies selected under ORS 657A.706 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 ORS 657A.715 [(3)(h)] (2)(h) when adopting rules under this subsection.

SECTION 6. ORS 657A.715 is amended to read:

657A.715. (1) Each community agency selected under ORS 657A.706 [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 ORS 657A.712 and rules adopted thereunder.

[(2) A selected community agency shall encourage taxpayers to make contributions for child care by promoting the program established under ORS 657A.703 and by soliciting other contributions.]

[(3)] (2) 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;

(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 ORS 657A.718 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 ORS 657A.718 [(1)(h)] (1)(g); and

(h) Determine, consistently with rules adopted by the Child Care Division, the amount of moneys to be disbursed to a 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)] (3)(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 ORS 657A.706 (1)(g). 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] community for which distributions are being made, including training costs, operating costs and wages.

[(5)] (4) For the purpose of making distributions to child care providers, a selected community agency shall identify child care providers in the [region it represents] community that meet the requirements of ORS 657A.718. 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 7. ORS 657A.718 is amended to read:

657A.718. (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] 85 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] 85 percent or less of the median income for the region.

(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] comply with Child Care Division rules and requirements for registration or certification.

(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)] (g) For care provided to children of families whose income does not exceed the level established by the selected community agency under ORS 657A.715 [(3)(g)] (2)(g), 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 8. ORS 315.213 is amended to read:

315.213. (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 is allowed to a taxpayer for certified contributions made to the Child Care Division [or a selected community agency] under ORS 657A.706.

(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 ORS 657A.706.

(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 ORS 657A.706 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.]

(4) If the amount claimed as a credit under this section is allowed as a deduction for federal tax purposes, the amount allowed as a credit under this section shall be added to federal taxable income for Oregon tax purposes.

[(6)] (5) A credit under this section may be claimed by a nonresident or part-year resident without proration.

[(7)] (6) 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)] (7) The definitions in ORS 657A.700 apply to this section.

SECTION 9. Section 13, chapter 674, Oregon Laws 2001, is amended to read:

Sec. 13. [Section 10 of this 2001 Act] ORS 315.213 applies to tax years beginning on or after January 1, 2002, and before January 1, [2007] 2009.

SECTION 10. The amendments to ORS 315.213 by section 8 of this 2003 Act apply to tax years beginning on or after January 1, 2004.

SECTION 11. ORS 315.262, as amended by section 1, chapter 867, Oregon Laws 2001, is amended to read:

315.262. (1) As used in this section:

(a) “Child care” means care provided to a qualifying child of the taxpayer for the purpose of allowing the taxpayer to be gainfully employed, to seek employment or to attend school on a full-time or part-time basis, except that the term does not include care provided by:

(A) The child’s parent or guardian, unless the care is provided by the parent in a licensed or registered child care facility; or

(B) A child of the taxpayer who has not yet attained 19 years of age at the close of the tax year.

(b) “Child care expenses” means the costs associated with providing child care to a qualifying child of a qualified taxpayer.

(d) “Qualified taxpayer” means a taxpayer:

(A) With at least $6,000 of earned income for the tax year;

(B) With federal adjusted gross income for the tax year that does not exceed 250 percent of the federal poverty level; and

(C) Who does not have more than the maximum amount of disqualified income under section 32(i) of the Internal Revenue Code that is allowed to a taxpayer entitled to the earned income tax credit for federal tax purposes.

(e) “Qualifying child” means a child of the taxpayer who is under 13 years of age, or who is a disabled child, as that term is defined in ORS 316.099.

(2) A qualified taxpayer shall be allowed a credit against the taxes otherwise due under ORS chapter 316 equal to the applicable percentage of the qualified taxpayer’s child care expenses (rounded to the nearest $50).

(3) The applicable percentage to be used in calculating the amount of the credit provided in this section shall be determined in accordance with the following table:

______________________________________________________________________________

Applicable Federal Adjusted

Percentage Gross Income as Percent

of Federal Poverty Level

40 200 or less

36 Greater than 200 and less than

or equal to 210

32 Greater than 210 and less than

or equal to 220

24 Greater than 220 and less than

or equal to 230

16 Greater than 230 and less than

or equal to 240

8 Greater than 240 and less than

or equal to 250

0 Greater than 250 percent

of federal poverty level

______________________________________________________________________________

(4) The credit shall be claimed on such form and containing such information as may be prescribed by the Department of Revenue.

(5) In the case of a credit allowed under this section:

(a) A nonresident shall be allowed the credit under this section in the proportion provided in ORS 316.117.

(b) 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.

(c) 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.

(d) In the case of a qualified taxpayer who is married, a credit shall be allowed under this section only if:

(A) The taxpayer files a joint return;

(B) The taxpayer files a separate return and is legally separated or subject to a separate maintenance agreement; or

(C) The taxpayer files a separate return and the taxpayer and the taxpayer’s spouse reside in separate households on the last day of the tax year with the intent of remaining in separate households in the future.

(6)[(a)] If the amount allowable as a credit under this section, when added to the sum of the amounts allowable as payment of tax under ORS 316.187 (withholding), ORS 316.583 (estimated tax), other tax prepayment amounts and other refundable credit amounts, exceeds the taxes imposed by ORS chapters 314 and 316 for the tax year (reduced by any nonrefundable credits allowable for purposes of ORS chapter 316 for the tax year), the amount of the excess shall be refunded to the taxpayer as provided in [this subsection] ORS 316.502.

[(b) Except that refunds attributable to the child care tax credit shall be made from the moneys transferred under paragraph (c) of this subsection, any refund described in paragraph (a) of this subsection shall be paid from the Department of Revenue suspense account established under ORS 293.445.]

[(c) Moneys necessary to make refunds attributable to the child care tax credit shall be transferred from and are continuously appropriated from the General Fund to the Department of Revenue suspense account established under ORS 293.445 for the purpose of making the refunds required under this section.]

(7)(a) The minimum amount of earned income a taxpayer must earn in order to be a qualified taxpayer shall be adjusted for tax years beginning in each calendar year by multiplying $6,000 by the ratio of the monthly averaged U.S. City Average Consumer Price Index for the 12 consecutive months ending August 31 of the prior calendar year over the monthly averaged index for the second quarter of the calendar year 1998.

(b) As used in this subsection, “U.S. City Average Consumer Price Index” means the U.S. City Average Consumer Price Index for All Urban Consumers (All Items) as published by the Bureau of Labor Statistics of the United States Department of Labor.

(c) If any adjustment determined under paragraph (a) of this subsection is not a multiple of $50, the adjustment shall be rounded to the nearest multiple of $50.

(d) Notwithstanding paragraphs (a) to (c) of this subsection, the adjusted minimum amount of earned income a taxpayer must earn may not exceed the amount an individual would earn if the individual worked 1,040 hours at the minimum wage established under ORS 653.025 and in effect on January 1 of the calendar year in which begins the tax year of the taxpayer, rounded to the next lower multiple of $50.

SECTION 12. ORS 316.502 is amended to read:

316.502. (1) The net revenue from the tax imposed by this chapter, after deducting refunds, shall be paid over to the State Treasurer and held in the General Fund as miscellaneous receipts available generally to meet any expense or obligation of the State of Oregon lawfully incurred.

(2) A working balance of unreceipted revenue from the tax imposed by this chapter may be retained for the payment of refunds, but such working balance shall not at the close of any fiscal year exceed the sum of $1 million.

(3) Moneys are continuously appropriated to the Department of Revenue to make:

(a) The refunds authorized under subsection (2) of this section; and

(b) The refund payments in excess of tax liability authorized under ORS 315.262.

SECTION 13. The amendments to ORS 315.262 and 316.502 by sections 11 and 12 of this 2003 Act apply to tax years beginning on or after January 1, 2003.

Approved by the Governor June 24, 2003

Filed in the office of Secretary of State June 24, 2003

Effective date January 1, 2004

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