OREGON HOUSE REPUBLICANS

Research Briefing

April 9, 2009

New or Expedited Income Tax Credit Sunsets Under HB 2067

Tax Increase

Senior Citizens

*Long-Term Care Insurance

A credit based upon premiums paid for long-term care insurance as defined in ORS 743.652 is allowed against personal and corporate income tax. The credit is available for individuals purchasing long-term care insurance policies on or after January 1, 2000 that provide coverage for the taxpayer, dependents, or parents of the taxpayer. The credit is also available to employers who provide long-term care insurance on behalf of their Oregon-based employees. Typically, fewer than 10 corporations claim this credit. Almost 29,000 individuals claimed it in 2006.

$15,200,000

*Costs in-lieu of Nursing Home Care

A tax credit is allowed against personal income taxes for expenses incurred for the care of an individual who otherwise would be placed in a nursing home. Presumably, the purpose is to provide tax relief for low-income taxpayers who incur expenses caring for individuals who would otherwise be placed in a nursing home.

“Less than $50,000”

*Retirement Income

Certain low-income seniors who are 62 or older and receiving taxable retirement income are allowed a credit against personal income taxes of up to 9 percent of their net pension income. 5,700 taxpayers claimed the credit in 2006.

$1,200,000

Oregonians with Disabilities

*Disabled Child

An additional personal exemption credit allowed for each dependent child who is disabled. “Disabled child” is defined as your dependent child who is eligible for early intervention services, or who is diagnosed for special education purposes as being autistic, mentally retarded, multi-disabled, visually impaired, hearing impaired, deaf-blind, orthopedically impaired, other health impaired, or as having serious emotional disturbance or traumatic brain injury, in accordance with State Board of Education rules.

$7,000,000

*Elderly or Permanently Disabled

Taxpayers are allowed a credit against Oregon personal income taxes of up to 40 percent of the federal elderly or disabled credit. The credit is intended to provide tax relief for lower income seniors and disabled persons with little tax-exempt retirement or disability income.

$100,000

*Loss of Limbs

A personal income tax credit of $50 is allowed for taxpayers with permanent and complete loss of function of at least two limbs. If both taxpayers on a joint return meet the criteria, the credit is $100. 500 taxpayers in 2006 claimed the credit.

“Less than $50,000”

*Severe Disability

An additional personal exemption credit for taxpayers with severe disabilities. The credit is intended to provide tax relief to severely disabled taxpayers and their spouses. 30,500 taxpayers claimed the credit in 2006.

$8,100,000

Child Care

*Child and Dependent Care

A personal income tax credit for employment-related dependent care expenses is allowed to taxpayers who qualify for the federal child and dependent care credit. The tax credit is intended to provide tax relief to working taxpayers who must incur dependent care expenses to stay in the workforce. 44,266 taxpayers claimed the credit in 2006.

$16,900,000

Affordable Housing

Affordable Housing Lender’s Credit

This provision allows a credit against corporation taxes for lending institutions that make loans at below-market interest rates for the construction, development, acquisition, or rehabilitation of a manufactured dwelling park, a preservation project, or low-income housing.

$20,600,000

IDA Account Withdrawal

A personal income tax credit is available for withdrawals from individual development accounts (IDAs) that are used to fund closing costs associated with the purchase of a primary residence. The credit is intended to assist low-income Oregonians to achieve homeownership, by allowing low income families to recover some of the closing costs of purchasing a first home.

“Less than $50,000”

Rural Health Care

*Rural Medical Practice

For the 2007 tax year, 1,130 physicians, 390 nurse practitioners, 158 physician assistants, 64 nurse anesthetists, 54 dentists, 20 optometrists, and 17 podiatrists qualified for the credit, for a total of 1,833 practitioners. The ultimate beneficiaries of this program are rural Oregonians who might otherwise have no health care available to them.

$13,000,000

Businesses, Charitable Giving

*Electronic Commerce Enterprise Zone (Income Tax)

Qualified business firms may claim an income tax credit for investment in electronic commerce (E-commerce) operations.

$1,200,000

*Crop Gleaning (to benefit charitable organizations)

A credit is allowed against personal or corporation income taxes for crop donations to

gleaning cooperatives, food banks, or qualifying charitable organizations located in

Oregon. Beginning in 2001, the credit includes donations to food banks or other

charitable organizations that distribute food at no charge to children or homeless,

unemployed, elderly, or low-income individuals.

$200,000

*Workers’ Compensation Assessments

Workers’ compensation insurers pay both the corporation income tax and a workers’ compensation assessment that provides funding to administer the Oregon Workers’ Compensation system. This tax expenditure entitles them to a credit against corporation income taxes equal to the lesser of assessments paid on workers’ compensation premiums under ORS 656.612 or the total profit attributable to the workers’ compensation line of business, up to their tax liability. For tax year 2005, about 70 corporate taxpayers benefited from this credit.

$1,800,000

*Fire Insurance

Property and casualty insurers who write fire insurance policies pay both the corporation income tax and the fire insurance gross premiums tax (Fire Marshal Tax). These insurers are then allowed a credit against the corporation income tax for the fire insurance premium taxes paid under ORS 731.820. For tax year 2005, about 240 property and casualty insurers that write fire insurance policies benefited from this credit.

$10,200,000

Education

*Employer-Provided Scholarships

Qualifying employers may claim a credit against their income tax for 50 percent of the amount of scholarships funded for their employees or their employees’ dependents, with a maximum credit of $50,000 per tax year. According to the Oregon University System, while the tax expenditure is not widely used, "it has attracted funding from some businesses to assist students in the funding of their education, thus it achieves its purpose.

“Less than $50,000”

*Public University Development Fund

Oregon universities may establish “university venture development funds” in order to provide capital for affiliate research and development of commercially viable products and services. Individuals and corporations that make donations to the funds. As of June 16, 2008, 68 tax credit certificates had been issued to taxpayers.

$600,000

Environment, Sustainability

*Riparian Lands Removed from Farm Production

A credit is allowed against personal or corporate income taxes for riparian farmland that is voluntarily taken out of agricultural production for conservation purposes. In 2006, 11 personal income tax payers saved an average of approximately $425 in Oregon tax using this credit.

“Less than $50,000”

Diesel Truck Engine (Retrofit and Repower)

Beginning with tax year 2008, taxpayers may claim a credit for certified costs incurred in repowering or retrofitting certain diesel engines. Statutory purpose is to “reduce excess lifetime risk of cancer due to exposure to diesel engine emissions to no more than one case per million individuals by 2017. … To substantially reduce the risk to school children from diesel engine emissions produced by Oregon school buses by the end of 2013.” (ORS 468A.793).

$3,800,000

Alternative Fuel Stations

A credit against corporate income tax and personal income tax is allowed for construction or installation of a fueling station in a dwelling, necessary to operate an alternative fuel vehicle.

“Less than $50,000”

Business Energy Facilities

This credit, commonly known as BETC (Business Energy Tax Credit), is allowed against corporation or personal income taxes for investments made by businesses to use renewable energy resources, to conserve energy, for recycling projects if the recycling projects are not otherwise required, or to use less-polluting transportation fuels. Car-sharing expenses, research development and demonstration projects (RD&D), and sustainable building practices qualify for the credit. In tax year 2005, 200 businesses benefited from this credit.

$143,800,000

*Energy Conservation Lender’s Credit

Commercial lending institutions are allowed a credit against corporate income taxes for financing energy conservation measures of residential fuel oil customers or woodheating residents.

“Less than $50,000”

Political Tax Credit

*Political Contributions

A credit may be claimed against personal income taxes for the amount of qualified political contributions, not to exceed $50 (or $100 on a joint return). In tax year 2006, almost 93,000 taxpayers claimed this credit.

$15,800,000

Agriculture

*Farmworker Housing Construction

About 10 corporations and 40 individuals benefit from this credit each year. Since 1992 the credit has been used to provide safe, affordable housing for more than 3,000 farm workers and family members, who are the indirect beneficiaries of the credit.

$2,200,000

*Farmworker Housing Lender’s Credit

A credit against corporation income taxes is allowed for lending institutions financing construction or rehabilitation of farmworker housing projects. The credit equals 50 percent of the interest on loans to finance the direct costs associated with constructing or rehabilitating farmworker housing.

$800,000

SOURCE: 2009-11 Tax Expenditure Report

*New Sunset in HB 2067