Chapter 739 Oregon Laws 2003

AN ACT

HB 3183

Relating to taxation; creating new provisions; amending ORS 267.260, 267.385, 314.650, 317.152, 317.154 and section 6, chapter 911, Oregon Laws 1989; and prescribing an effective date.

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

SECTION 1. ORS 314.650, as amended by section 1, chapter 793, Oregon Laws 2001, is amended to read:

314.650. (1) All business income shall be apportioned to this state by multiplying the income by a multiplier equal to [80] 90 percent of the sales factor plus [10] five percent of the property factor plus [10] five percent of the payroll factor.

(2)(a) Notwithstanding subsection (1) of this section, the business income of a taxpayer that is in the forest products industry, that owns and manages 300,000 or more acres in this state, but less than 400,000 acres, and that processes at least 20 percent of the taxpayer’s total wood chip supply for papermaking from sawmill residue generated within this state, shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus two times the sales factor, and the denominator of which is four.

(b) If the denominator of the property factor, payroll factor or sales factor, as determined under ORS 314.650 to 314.665, is zero, then the denominator specified in paragraph (a) of this subsection shall be reduced by the number of factors with a denominator of zero.

SECTION 2. The amendments to ORS 314.650 by section 1 of this 2003 Act apply to tax years beginning on or after July 1, 2006.

NOTE: Sections 3 and 4 were deleted by amendment. Subsequent sections were not renumbered.

SECTION 5. ORS 314.650, as amended by section 1, chapter 793, Oregon Laws 2001, and section 1 of this 2003 Act, is amended to read:

314.650. (1) All business income shall be apportioned to this state by multiplying the income by [a multiplier equal to 90 percent of] the sales factor [plus five percent of the property factor plus five percent of the payroll factor].

SECTION 6. The amendments to ORS 314.650 by section 5 of this 2003 Act apply to tax years beginning on or after July 1, 2008.

SECTION 7. ORS 267.385 is amended to read:

267.385. (1) To carry out the powers granted by ORS 267.010 to 267.390, a district may by ordinance impose an excise tax on every employer equal to not more than [six-tenths] seven-tenths of one percent of the wages paid with respect to the employment of individuals. For the same purposes, a district may by ordinance impose a tax on each individual equal to not more than [six-tenths] seven-tenths of one percent of the individual’s net earnings from self-employment.

(2) No employer shall make a deduction from the wages of an employee to pay all or any portion of a tax imposed under this section.

(3) The provisions of ORS 305.620 are applicable to collection, enforcement, administration and distribution of a tax imposed under this section.

(4) At any time an employer or individual fails to remit the amount of taxes when due under an ordinance of the district board imposing a tax under this section, the Department of Revenue may enforce collection by the issuance of a distraint warrant for the collection of the delinquent amount and all penalties, interest and collection charges accrued thereon. Such warrant shall be issued, docketed and proceeded upon in the same manner and have the same force and effect as prescribed with respect to warrants for the collection of delinquent state income taxes.

(5) Any ordinance adopted under subsection (1) of this section shall require an individual having net earnings from self-employment from activity both within and without the district taxable by the State of Oregon to allocate and apportion such net earnings to the district in the manner required for allocation and apportionment of income under ORS 314.280 and 314.605 to 314.675. Such ordinance shall give the individual the option of apportioning income based on a single factor designated by the ordinance.

(6) Any ordinance adopted under subsection (1) of this section with respect to net earnings from self-employment may impose a tax for a taxable year measured by each individual’s net earnings from self-employment for the prior taxable year, whether such prior taxable year begins before or after November 1, 1981, or such ordinance.

(7) Any ordinance imposing a tax authorized by subsection (1) of this section shall not apply to any business, trade, occupation or profession upon which a tax is imposed under ORS 267.360.

(8) The district board may not adopt an ordinance increasing a tax authorized by subsection (1) of this section unless the board makes a finding that the economy in the district has recovered to an extent sufficient to warrant the increase in tax. In making the finding, the board shall consider regional employment and income growth.

SECTION 8. Notwithstanding ORS 267.385 (1) and subject to ORS 267.260 (3) and (6), an increase in any tax imposed on wages or on net earnings from self-employment that is authorized by a mass transit district under ORS 267.385 (1) on or after January 1, 2004, must be phased in over a 10-year period. The district shall by ordinance set forth the increments by which the increase in tax is phased in. Subject to ORS 267.260 (3) and (6), each increment may not increase the rate of tax by more than 0.02 percent.

SECTION 9. Section 8 of this 2003 Act is repealed on January 2, 2014.

SECTION 10. ORS 267.260 is amended to read:

267.260. (1) As used in this section, “withdrawal date” means the effective date of an ordinance approving withdrawal of an affected area under ORS 267.250 to 267.263.

(2) An ordinance approving the withdrawal of an affected area under ORS 267.250 to 267.263 shall take effect on the first day of January next following the date which is 30 days after the adoption of the ordinance.

(3) Commencing immediately upon the withdrawal date and notwithstanding any other provision of law, the rate of each tax imposed by the district shall automatically be increased to a rate equal to the rate determined by dividing the rate at which such tax was levied immediately prior to the withdrawal date by a fraction, not more than one, which is equal to the total revenue derived from such tax by the district for the calendar year preceding the year in which the withdrawal ordinance is adopted attributable to the area of the district other than the withdrawn affected area divided by the total revenue derived from such tax by the district for the same period.

(4) If the tax rates required under subsection (3) of this section do not produce tax revenues sufficient to enable the district to make the annual or semiannual payments, when due, and otherwise satisfy the requirements of the bonded or other indebtedness of the district incurred prior to the withdrawal, the district may increase the rate of each tax to a rate that produces revenues sufficient to enable the district to make the annual or semiannual payments, when due, and otherwise satisfy the requirements of such indebtedness.

(5) The district board shall determine rates in accordance with the formula prescribed by subsection (3) of this section and adopt [it] the rates as part of the ordinance approving the withdrawal of the affected area. Any such determination and adoption shall be final and conclusive unless it is shown to be arbitrary and capricious.

(6) If a district adopts an ordinance that increases the rate of an excise tax described in ORS 267.385, the increase shall be adjusted as prescribed in subsection (3) of this section to take into account the withdrawal of an affected area that occurred or occurs at any time after the date the district first imposed any taxes pursuant to ORS 267.385.

SECTION 11. The amendments to ORS 267.260 and 267.385 by sections 7 and 10 of this 2003 Act apply to payroll and self-employment tax reporting periods beginning on or after January 1, 2004.

SECTION 12. ORS 317.152 is amended to read:

317.152. (1) A credit against taxes otherwise due under this chapter 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) “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.

(A) Section 41(c)(4) of the Internal Revenue Code (relating to the alternative incremental credit).

(B) 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, “eligible taxpayer” means a corporation, other than [corporations] a corporation 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].

[(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 [$500,000] $750,000.

[(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 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 13. 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) “Oregon sales” shall be computed using the laws and administrative rules for calculating the numerator of the Oregon sales factor under ORS 314.665.

(b) “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.

(5) The maximum credit under this section [shall] may not exceed [$500,000] $750,000.

(6) 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 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 14. The amendments to ORS 317.152 and 317.154 by sections 12 and 13 of this 2003 Act apply to tax years beginning on or after January 1, 2006.

SECTION 15. Section 6, chapter 911, Oregon Laws 1989, as amended by section 14, chapter 746, Oregon Laws 1995, and section 1, chapter 548, Oregon Laws 2001, is amended to read:

Sec. 6. ORS 317.152 to 317.154 and the amendments to ORS 318.031 by section 5, chapter 911, Oregon Laws 1989, apply to amounts paid or incurred in tax years beginning on or after January 1, 1989, and before January 1, [2008] 2012.

SECTION 16. This 2003 Act takes effect on the 91st day after the date on which the regular session of the Seventy-second Legislative Assembly adjourns sine die.

Approved by the Governor August 29, 2003

Filed in the office of Secretary of State September 2, 2003

Effective date November 26, 2003

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