Chapter 80 Oregon Laws 2005

AN ACT

HB 2161

Relating to Oregon Capital Corporation; amending ORS 314.752, 317.267, 318.031, 708A.120, 716.588 and 722.304; and repealing ORS 284.750, 284.755, 284.760, 284.765, 284.770, 284.775, 284.780, 284.785, 284.790, 294.795, 315.504 and 317.084.

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

SECTION 1. 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 285C.309 (tribal taxes on reservation enterprise zones), 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 and 315.169 (farmworker housing), ORS 315.204 (dependent care assistance), ORS 315.208 (dependent care facilities), ORS 315.213 (contributions for child care), 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 315.507 (electronic commerce), ORS 315.511 (advanced telecommunications facilities), ORS 315.604 (bone marrow transplant expenses) and ORS 317.115 (fueling stations necessary to operate an alternative fuel vehicle).

SECTION 2. ORS 317.267 is amended to read:

317.267. (1) To derive Oregon taxable income, there shall be added to federal taxable income amounts received as dividends from corporations deducted for federal purposes pursuant to section 243 or 245 of the Internal Revenue Code, except 245(c) of the Internal Revenue Code, amounts paid as dividends by a public utility or telecommunications utility and deducted for federal purposes pursuant to section 247 of the Internal Revenue Code or dividends eliminated under Treasury Regulations adopted under section 1502 of the Internal Revenue Code that are paid by members of an affiliated group that are eliminated from a consolidated federal return pursuant to ORS 317.715 (2).

(2) To derive Oregon taxable income, after the modification prescribed under subsection (1) of this section, there shall be subtracted from federal taxable income an amount equal to 70 percent of dividends (determined without regard to section 78 of the Internal Revenue Code) received or deemed received from corporations if such dividends are included in federal taxable income. However:

(a) In the case of any dividend on debt-financed portfolio stock as described in section 246A of the Internal Revenue Code, the subtraction allowed under this subsection shall be reduced under the same conditions and in same amount as the dividends received deduction otherwise allowable for federal income tax purposes is reduced under section 246A of the Internal Revenue Code.

[(b) No subtraction shall be allowed under this subsection if the dividends received or deemed received are from the Oregon Capital Corporation established pursuant to ORS 284.750 to 284.770.]

[(c)] (b) In the case of any dividend received from a 20 percent owned corporation, as defined in section 243(c) of the Internal Revenue Code, this subsection shall be applied by substituting “80 percent” for “70 percent.”

(3) There shall be excluded from the sales factor of any apportionment formula employed to attribute income to this state any amount subtracted from federal taxable income under subsection (2) of this section.

SECTION 3. 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), ORS 305.140 and 305.150, ORS chapter 314 and the following sections are incorporated into and made a part of this chapter: ORS 315.104, 315.134, 315.156, 315.204, 315.208, 315.213, 315.234, 315.254, 315.304, [315.504,] 315.511 and 315.604 (all only to the extent applicable for a corporation) and ORS 285C.309, 315.507, 317.010, 317.013, 317.018 to 317.022, 317.030, 317.035, 317.038, 317.080, 317.124 to 317.131, 317.152 to 317.154, 317.259 to 317.303, 317.310 to 317.386, 317.476 to 317.485, 317.488, 317.510 to 317.635 and 317.705 to 317.725.

SECTION 4. ORS 708A.120 is amended to read:

708A.120. (1) An institution shall not invest any of its assets in the capital stock of any other corporation, except:

(a) In the capital stock of the Federal Reserve Bank.

(b) In stock acquired or purchased to save a loss on a preexisting debt. The stock shall be sold within two years of the date acquired or purchased. The Director of the Department of Consumer and Business Services may extend the time if the director finds that an extension will not be detrimental to the public interest and will not contravene any other law.

(c) In the capital stock of any safe deposit company doing an exclusive safe deposit business on premises owned or leased by the institution upon 30 days’ advance notice to the director subject to the same limitations applicable to a national bank.

(d) In the capital stock of agricultural and livestock finance companies, subject to the same limitations applicable to national banks and to the approval of the director.

(e) In the capital stock, eligible for purchase by national banks, of small business investment companies, but the aggregate investment in the stock shall not exceed two percent of the capital of the institution.

(f) In the common stock of any federally chartered corporation that is chartered for the purpose of providing secondary markets for the sale of mortgages by institutions.

(g) In the stock of the Federal Home Loan Bank.

(h) In the capital stock of a corporation exclusively engaged in a trust business or a banker’s bank, subject to the same limitations applicable to national banks.

(i) In the capital stock of bank service corporations as provided in ORS 708A.130 to 708A.145.

(j) In the capital stock of a community development corporation as provided in ORS 708A.150.

(k) If a trust company is not engaged in a banking business and if the investment is first approved by the director, the trust company may invest an amount not to exceed 20 percent of the capital of the trust company:

(A) In the capital stock of a subsidiary investment company defined in the Investment Company Act of 1940, as amended; or

(B) In a company one of the purposes of which is to act as a federal covered investment adviser or a state investment adviser, as defined in ORS 59.015, with all the powers customarily exercised by a federal covered investment adviser or a state investment adviser.

(L) In adjustable rate preferred stock of the Student Loan Marketing Association established in 20 U.S.C. 1087-2, but the aggregate investment in the stock shall not exceed 15 percent of the capital of the institution.

(m) In the capital stock of a company acquired for the purpose of strengthening the institution’s capital structure or the elimination of undesirable assets as provided in ORS 708A.125.

(n) In the capital stock of banks and corporations engaged in international or foreign banking or foreign banking in a dependency or insular possession of the United States, as provided in ORS 708A.155.

(o) In the capital stock of a corporation created to establish ATMs as provided in ORS 708A.160.

(2) An institution may invest its assets in shares of any mutual fund, the assets of which are invested solely in obligations of the type described in and limited under ORS 708A.115.

(3) An institution may, subject to the approval of the director, acquire or continue to hold the fully paid stock of a corporation, one of the purposes of which is to assist the institution in handling real estate, claims, judgments or other assets or in holding title to the assets.

(4) An institution may acquire or continue to hold the fully paid stock of a corporation the purpose of which is to permit the institution to engage in any business in which a financial holding company, a bank holding company or a nonbank subsidiary of a financial holding company or a bank holding company is authorized to engage. This subsection does not apply unless the institution is the owner of at least 80 percent of the common stock of the subsidiary corporation, except qualifying shares of directors.

(5) An institution may, subject to the approval of the director and to rules promulgated by the director, acquire and continue to hold at least 80 percent of the fully paid stock of a corporation engaged in any business in which an institution is authorized to engage. Except as otherwise permitted by statute or rule, the investment limitations applicable to the institution apply to the subsidiary.

(6) An institution may, subject to the approval of the director and under rules promulgated by the director, acquire and continue to hold all the fully paid stock of a subsidiary corporation engaged in the business of purchasing the stock of the institution for purposes of holding that stock and making a market for that stock, if not more than 20 percent of the net profit of the banking institution is disbursed to the subsidiary in any one fiscal year. Except as otherwise permitted by statute or rule, the investment limitations applicable to the institution apply to the subsidiary. Acquisitions under this subsection shall not exceed 15 percent of the capital of the institution.

(7) An institution may acquire and hold all or part of the stock of a corporation that is or may thereafter be licensed as an insurance producer as required by ORS 744.053 to transact one or more of the classes of insurance described in ORS 744.062, except for title insurance, subject to the following requirements:

(a) The acquisition and holding of such stock shall be subject to the approval of the director. The director shall base consideration for approval on the condition of the institution, the adequacy of a formal business plan for the insurance activities, and the existence of satisfactory management for the corporation.

(b) The director may revoke or restrict the ongoing authority of the institution to hold stock in the corporation if the condition of the institution substantially deteriorates or if the insurance activities are adversely affecting the institution.

(c) For each calendar year during which an institution owns all or part of any corporation licensed as an insurance producer as required by ORS 744.053, the institution shall file a written report with the director. The report shall be filed no later than March 31 of the following year and shall disclose the insurance activities of the corporation. The required contents of the report shall be established by the director by rule. The reports filed with the director under this paragraph shall be available for public inspection in the office of the director.

(d) The corporation shall not in any manner use customer information obtained by the institution from another insurance producer to promote, develop or solicit insurance business for the corporation unless the other insurance producer consents to such use of the customer information.

(e) The corporation shall be subject to the limitations applicable to depository institutions under ORS 746.213 to 746.219. For the purpose of this paragraph, “depository institution” has the meaning given that term in ORS 746.213.

[(8) An institution may invest up to 15 percent of its capital in the stock of the Oregon Capital Corporation authorized to be created under ORS 284.750 to 284.795, 315.504, 317.084, 317.267 and 318.031.]

SECTION 5. ORS 716.588 is amended to read:

716.588. (1) A savings bank may invest the funds mentioned in ORS 716.410 in the capital stock of a corporation organized under the laws of this state if:

(a) All of the capital stock of the corporation is owned by one or more savings banks organized under the laws of this state;

(b) The activities of the corporation are performed directly or through one or more wholly owned subsidiaries, and consist only of one or more of the following:

(A) Originating, purchasing, selling and servicing education loans and loans and participations in loans secured by first liens upon real estate and manufactured dwellings, including brokerage and warehousing of loans;

(B) Making any investment which would be an authorized investment of a savings bank organized under the laws of this state;

(D) Making investments in unimproved real estate for the purpose of prompt development and subdivision;

(c) The aggregate outstanding investment in the capital stock, obligations, or other securities of service corporations and subsidiaries thereof, including all loans, secured and unsecured, to the service corporations or any subsidiaries thereof and to joint ventures of the service corporation or subsidiaries, whether or not the savings bank is a stockholder in the service corporation, do not exceed three percent of the savings bank’s assets. For the purpose of this subsection the term “aggregate outstanding investment” means the sum of the amounts paid for the acquisition of capital stock or securities and amounts invested in obligations of service corporations, less amounts received from the sale of capital stock or securities of service corporations and amounts paid to the savings bank to retire obligations of service corporations; and

(d) The corporation executes and files with the Director of the Department of Consumer and Business Services a written agreement in the form prescribed by the Director that the corporation will permit and pay the cost of examinations and audits by the director as the director considers necessary.

(2) If one of the savings banks holds more than 40 percent of the stock, the corporation, including any subsidiary, shall not incur or have outstanding at any time debts in excess of the following limitations:

(a) In the case of an unsecured debt other than to a holder of its capital stock, the lesser of an amount equal to one percent of the assets of the holder or holders of its capital stock or to the investment in the stock, obligations or other securities of the corporation by the holder or holders of its capital stock, excluding secured debts owed by the corporation to the holder or holders; and

(b) In the case of a secured debt, other than to a holder of its capital stock, the lesser of an amount equal to four percent of the assets of the holder or holders of its capital stock or four times the investment in the stock obligations or other securities of the corporation by the holder or holders of its capital stock excluding secured debts owed by the corporation to the holder or holders.

[(3) A savings bank may invest up to one percent of its assets, in the case of a mutual savings bank, or up to 15 percent of its stockholders’ equity, in the case of a stock savings bank, in the stock of the Oregon Capital Corporation authorized to be created under ORS 284.750 to 284.795, 315.504, 317.084, 317.267 and 318.031.]

SECTION 6. ORS 722.304 is amended to read:

722.304. (1) A savings association may invest its assets without limit in:

(a) Assets readily convertible to cash, as defined under ORS 722.302, and deposits and accounts in and obligations of banks;

(b) Bonds and other obligations of the United States; and

(c) Bonds and other obligations that are guaranteed as to principal and interest by the United States and issued by any agency of the United States.

(2) A savings association may invest, and may have invested at any time, not to exceed 30 percent of its assets in:

(a) Bonds, other obligations and stock approved by the Director of the Department of Consumer and Business Services and issued by an agency of the United States or a federally sponsored instrumentality; and bonds and other obligations approved by the director and issued by a state, or by a city, county, municipal corporation, political subdivision or special district of any state; the preferred stock, bonds and obligations of a corporation domiciled in the United States, which are approved by the director and are rated at the time of purchase in one of the four highest grades by a recognized service organization that has been regularly engaged for a period of 10 years or more in rating or grading bonds; or loans secured by such obligations;

(b) Real and personal property interests as authorized by ORS 722.312 and 722.314;

(d) Other prudent investments as authorized by ORS 722.306;

(e) Loans as authorized by ORS 722.332 to 722.342; and

(f) Commercial paper, certificates of deposit, banker’s acceptances and similar commercial items commonly used in trade or business and issued or guaranteed by an insured institution, as defined in ORS 706.008.

(3) An association shall not invest any assets as described by subsection (2)(c) to (f) of this section unless the association on its last monthly closing date satisfied or could have satisfied its minimum general reserve and net worth requirements as determined under ORS 722.142.

(4) If the director finds that notwithstanding subsection (3) of this section, it is an unsafe or unsound practice for an association to exercise the powers granted by subsection (2)(c) to (f) of this section, the director may issue a cease and desist order directing the association to cease exercising such powers. An order issued under this subsection may be based on, but need not be limited to, a finding that the financial condition or management capability of the association is not adequate to exercise such powers and assume the risks involved in the exercise of such powers.

(5) A savings association may invest its assets in a service corporation as provided in ORS 722.309.

[(6) A savings association may invest up to one percent of its assets, in the case of a mutual association, or up to 15 percent of its paid-in capital and surplus, in the case of a stock association, in the stock of the Oregon Capital Corporation authorized to be created under ORS 284.750 to 284.795, 315.504, 317.084, 317.267 and 318.031.]

SECTION 7. ORS 284.750, 284.755, 284.760, 284.765, 284.770, 284.775, 284.780, 284.785, 284.790, 284.795, 315.504 and 317.084 are repealed.

Approved by the Governor May 25, 2005

Filed in the office of Secretary of State May 25, 2005

Effective date January 1, 2006

__________