Chapter 1101 Oregon Laws 1999

Session Law

AN ACT

HB 3606

Relating to pollution control tax credits; creating new provisions; and amending ORS 315.304 and 468.190.

Whereas environmental requirements imposed by the federal and state governments promote the health and well-being of the citizens, fish and wildlife of the state; and

Whereas new environmental requirements can impose substantial costs on existing businesses; and

Whereas Oregon's current program of pollution control tax credits has encouraged the construction of pollution control facilities and has promoted the economic growth and environmental well-being of the state; and

Whereas current pollution control tax credit statutes limit the alternatives available for existing businesses to finance the costs of complying with new environmental requirements while qualifying for the credits; and

Whereas expanding the available methods of financing pollution control facilities will benefit the economy and the environment of the state into the future; now, therefore,

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

SECTION 1. ORS 315.304 is amended to read:

315.304. (1) A credit against taxes imposed by ORS chapter 316 (or, if the taxpayer is a corporation, under ORS chapter 317 or 318) for a pollution control facility or facilities certified under ORS 468.170 shall be allowed if the taxpayer qualifies under subsection (4) of this section.

(2) For a facility certified under ORS 468.170, the maximum credit allowed in any one tax year shall be the lesser of the tax liability of the taxpayer or one-half of the certified cost of the facility multiplied by the certified percentage allocable to pollution control, divided by the number of years of the facility's useful life. The number of years of the facility's useful life used in this calculation shall be the remaining number of years of useful life at the time the facility is certified but not less than one year nor more than 10 years.

(3) To qualify for the credit the pollution control facility must be erected, constructed or installed in accordance with the provisions of ORS 468.165 (1) and must be certified for tax relief under ORS 468.155 to 468.190.

(4) To qualify for a tax credit under this section:

(a) The taxpayer who is allowed the credit must be:

(A) The owner, including a contract purchaser, of the trade or business that utilizes Oregon property requiring a pollution control facility to prevent or minimize pollution;

(B) A person who, as a lessee or pursuant to an agreement, conducts the trade or business that operates or utilizes such property; or

(C) A person who, as an owner, including a contract purchaser, or lessee, owns or leases a pollution control facility that is used:

(i) In a business that is engaged in a production activity described in 40 C.F.R. 430.20 (as of July 1, 1998); or

(ii) For recycling, material recovery or energy recovery as defined in ORS 459.005[. Such person may, but need not, operate such facility or conduct a trade or business that utilizes property requiring such a facility. If more than one person has an interest under this subparagraph in a recycling, material recovery or energy recovery facility, only one may claim the credit allowed under this section. The person claiming the credit as between an owner and lessee under this subparagraph shall be designated in a written statement signed by both the lessor and lessee of the facility; this statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which a tax credit is claimed. As used in this paragraph, "owner" includes a contract purchaser]; and

(b) The facility must be owned or leased during the tax year by the taxpayer claiming the credit and must have been in use and operation during the tax year for which the credit is claimed.

(5) Regardless of when the facility is erected, constructed or installed, a credit under this section may be claimed by a taxpayer:

(a) For a facility qualifying under ORS 468.165 (1)(a) or (b), only in those tax years which begin on or after January 1, 1967.

(b) For a facility qualifying under ORS 468.165 (1)(c), in those tax years which begin on or after January 1, 1973.

(6) For a facility certified under ORS 468.170, the maximum total credit allowable shall not exceed one-half of the certified cost of the facility multiplied by the certified percentage allocable to pollution control.

(7) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the facility to which the taxpayer otherwise may be entitled under ORS chapter 316, 317 or 318 for such year.

(8) Upon any sale, exchange or other disposition of a facility, notice thereof shall be given to the Environmental Quality Commission who shall revoke the certification covering such facility as of the date of such disposition. Notwithstanding ORS 468.170 (4)(c), the transferee may apply for a new certificate under ORS 468.170, but the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor. The sale, exchange or other disposition of shares in an S corporation as defined in section 1361 of the Internal Revenue Code or of a partner's interest in a partnership shall not be deemed a sale, exchange or other disposition of a facility for purposes of this subsection.

(9) Any tax credit otherwise allowable under this section which 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 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, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in ORS 468.170.

(10) The taxpayer's adjusted basis for determining gain or loss shall not be further decreased by any tax credits allowed under this section.

(11) A person described in subsection (4)(a)(C) of this section may, but need not, operate the facility or conduct a trade or business that utilizes property requiring the facility. If more than one person has an interest under subsection (4)(a)(C) of this section in the facility, only one person may claim the credit allowed under this section. However, portions of the facility may be certified separately in the same manner as provided in ORS 468.170 (8) if ownership of the portions is in more than one person. The person claiming the credit as between an owner, including a contract purchaser, and lessee under this subsection shall be designated in a written statement signed by both the lessor and lessee of the facility. This statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which a tax credit is claimed.

SECTION 2. ORS 468.190 is amended to read:

468.190. (1) Subject to subsections (2) [and], (3) and (4) of this section, in establishing the portion of costs properly allocable to the prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil for facilities qualifying for certification under ORS 468.170, the Environmental Quality Commission shall consider the following factors:

(a) If applicable, the extent to which the facility is used to recover and convert waste products into a salable or usable commodity.

(b) The estimated annual percent return on the investment in the facility.

(d) Any related savings or increase in costs which occur or may occur as a result of the installation of the facility.

(e) Any other factors which are relevant in establishing the portion of the actual cost of the facility properly allocable to the prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil.

(2) The portion of actual costs properly allocable shall be from zero to 100 percent in increments of one percent. If zero percent, the commission shall issue an order denying certification.

(3) If the cost of the facility (or facilities certified under one certificate) does not exceed $50,000, the portion of the actual costs properly allocable shall be in the proportion that the ratio of the time the facility is used for prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil bears to the entire time the facility is used for any purpose.

(4) In the case of a business described in ORS 315.304 (4)(a)(C)(i), the Environmental Quality Commission shall consider the factors listed in subsection (1) of this section as if the person operating the facility or conducting the trade or business that utilizes property requiring such a facility were the applicant for the credit, regardless of whether the person is the lessee or lessor of the facility.

[(4)] (5) The commission may adopt rules establishing methods to be used to determine the portion of costs properly allocable to the prevention, control or reduction of air, water or noise pollution or solid or hazardous waste or to recycling or appropriately disposing of used oil.

SECTION 3. The amendments to ORS 315.304 and 468.190 made by sections 1 and 2 of this 1999 Act apply to applications for pollution control facility certification filed with the Environmental Quality Commission on or after January 1, 1999.

Approved by the Governor September 3, 1999

Filed in the office of the Secretary of State September 3, 1999

Effective date October 23, 1999

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