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Oregon Bulletin

July 1, 2012

Oregon Business Development Department, Chapter 123

Rule Caption: These rules have been amended due to the passage of SB 57 in the 2011 Legislative Session and new requirements from the Security and Exchange Commission.

Adm. Order No.: OBDD 5-2012

Filed with Sec. of State: 6-1-2012

Certified to be Effective: 6-1-12

Notice Publication Date: 5-1-2012

Rules Amended: 123-011-0021, 123-011-0025, 123-011-0027, 123-011-0030, 123-011-0035, 123-011-0037, 123-011-0040, 123-011-0045, 123-011-0050

Rules Repealed: 123-011-0035(T), 123-011-0045(T)

Subject: In the 2011 Legislative Session, the passage of Oregon SB 57 eliminated the prohibition of facilities designed primarily for the generation, transmission, sale, or distribution of electrical energy as an eligible activity.

 Also in 2011, the U.S. Securities and Exchange Commission modified the continuing disclosure requirements. Due to the recent changes (and future possible changes) to reporting requirements, removal of the fee ceiling will ensure that the costs of reporting are offset.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-011-0021

Commission Powers

For the purposes of these rules, the Business Development Commission (the “Commission”) shall retain and possess, in addition to all authority reserved to it under OAR 123-011-0027, all rights and powers delegated to the Finance Committee. Upon written notice to the Finance Committee, the Commission may elect to exercise directly, either in a specific instance or generally, any right or power delegated to the Finance Committee under these rules and the Finance Committee shall not have the authority to exercise the right or power identified in the notice under the circumstances described in the notice.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 36-1988, f. & cert. ef. 12-15-88; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0025

Definitions

For the purposes of these rules, the following terms shall have the following meaning, unless the context clearly indicates otherwise:

(1) “Applicant” means any person, firm or public or private corporation or federal or state governmental subdivision or agency which submits an application for Oregon Economic Development Revenue Bonds.

(2) “Bonds” means Oregon Economic Development Revenue Bonds issued by the State of Oregon under ORS 285B.320 to 285B.371.

(3) “Capital Asset” means real or personal property that the Commission expects to be:

(a) Used in connection with a revenue-producing enterprise, an exempt, or a non-profit entity; and

(b) Located in Oregon.

(4) “Economic Development Project” means a Capital Asset and may also include one or more the following:

(a) Research and development conducted in Oregon; or

(b) Estimated operating expenses associated with a Capital Asset.

(5) “Eligible Project” means the portion of an Economic Development Project that the Commission:

(a) Has found in compliance with applicable standards of the Commission;

(b) Has found will produce benefits substantially in Oregon; and

(c) Has approved for financing with proceeds of Bonds authorized under ORS 285B.320 to 285B.371.

(6) “Exempt Facility” means any facility described in section 142(a) of the Internal Revenue Code of 1986, as amended and in effect as of July 1, 2011.

(7) “Finance Committee” means the Finance Committee for the Business Development Commission as allowed in ORS 285A.060.

(8) “Financial Institution” means any commercial bank, mutual savings bank, savings and loan association, insurance company, investment bank or NASD securities underwriter licensed or authorized to do business in the State of Oregon.

(9) “In-state Plant Relocation” means the relocation of an Applicant’s plant from one labor market area, as defined by the Oregon Employment Department, in Oregon to a different labor market area in Oregon.

(10) “Nonprofit Entity” means and institution, organization, or other entity exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986, as amended and in effect as of July 1, 2011.

(11) “Oregon Express Bond Program” means a department program that involves a method of sale for a single client purchase that includes, but is not limited to, direct placement of bonds with a bank. Such a purchase does not require the use of placement agents, underwriters, marketing agents or letters of credit. To utilize this program, use of a standardized departmental bond process is required.

(12) “Treasurer” means the Treasurer of the State of Oregon or the Treasurer’s designee.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 3-1985, f. & ef. 6-28-85; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988 (Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 14-1994(Temp), f. & cert. ef. 11-10-94; EDD 4-1995, f. 4-28-95, cert. ef. 5-3-95; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0027

Delegation

(1) Authority for the day-to-day operation of the Economic Development Revenue Bond Program, including determination of eligibility, authorization of the issuance of bonds, adoption of inducement and bond resolutions and amendments thereto, is delegated to the Finance Committee.

(2) The Finance Committee may adopt standards and procedures for the operation of the bond program. Such standards and procedures shall not be inconsistent with any part of this division.

(3) The Department may send to each member of the Commission a summary of each project to be considered by the Finance Committee. If so, Commissioners shall receive such summaries in sufficient time to comment on the projects and to attend each Finance Committee meeting, as each individual commissioner may in his or her sole discretion determine.

(4) The Commission shall review and evaluate the operation of the bond program as it may from time to time determine and may order any changes that it considers necessary or desirable.

(5) The Commission shall retain final authority over policies and administrative procedures governing the operation of the bond program.

(6) If at any time the Commission decides to take any action or make any decision, it may do so at any regular or special meeting or through any telephone conference call as the Commission in its sole discretion may determine.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 9-1988(Temp), f. & cert. ef. 3-18-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0030

Application

(1) An Applicant desiring issuance of Economic Development Revenue Bonds must submit a complete application to the Department in a form approved by the Department.

(2) The application shall be received by the Department at least 21 days prior to the Finance Committee meeting at which the application will be considered. The Department may waive this requirement at its sole discretion.

(3) A non-refundable application fee is to be submitted with the Application: The application fee is a non-refundable application fee of $500 and shall be paid by an Applicant seeking Economic Development Revenue Bond financing.

(4) Application materials may be obtained from the Oregon Business Development Department, 775 Summer Street N.E., Suite 200 Salem, OR 97301-1280.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 3-1985, f. & ef. 6-28-85; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988 (Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 13-1990, f. & cert. ef. 6-7-90; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 9-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0035

Determination of Eligibility

(1) The Department shall review the application.

(2) The Department shall make a recommendation to the Finance Committee to either approve or deny the application for eligibility for Economic Development Revenue Bonds. The review of the application will be based upon the standards set forth in this rule:

(a) The following Economic Development Projects are eligible for Economic Development Revenue Bonds, unless otherwise prohibited under this section:

(A) Manufacturing or other industrial production;

(B) Agricultural development or food processing;

(C) Aquaculture development or seafood processing;

(D) Development or improved utilization of natural resources;

(E) Research and development;

(F) Destination facilities other than retail or food service businesses;

(G) Convention and trade centers;

(H) Construction of buildings for corporate headquarters;

(I) Product distribution facilities;

(J) Transportation or freight facilities;

(K) Scientific testing including, but not limited to, medical, clinical or engineering testing services;

(L) Sports facilities not otherwise prohibited under paragraph (2)(b)(D) of this rule;

(M) Nonprofit entities organized under Section 501(c)(3) of the U.S. Internal Revenue Code ;

(N) Utilities, as allowed by ORS 285B.323(2);

(O) Management of waste;

(P) Other activities which represent a new technology or type of economic enterprise that the Finance Committee determines are needed to diversify the economic base of an area, or any other activities allowed by Federal law.

(b) Activities or projects that will not be considered for the issuance of Oregon Economic Development Revenue Bonds include:

(A) Retail businesses and shopping centers;

(B) Food service not part of a convention center or destination resort;

(C) Professional corporations for medicine, law, dentistry, or finance;

(D) Athletic, racquetball, handball clubs, amusement parks, or similar endeavors;

(E) Commercial office buildings except for corporate headquarters, unless the office building supports the eligible economic activities listed in (2)(a) of this section;

(F) Activities that maintain private memberships; are not open to the general public; or do not serve a broad cross section of the general public;

(c) The following serve as an elaboration and clarification of activities which qualify as Eligible Projects for Economic Development Revenue Bonds:

(A) “Destination Facility” means a project which has a significant impact on the regional tourism economy and has the capacity to be marketed to national or international markets. Incidental food service facilities may be included. Sleeping accommodations without unique attraction capabilities are not eligible;

(B) “Convention and Trade Centers” may include sleeping accommodations, but the majority of the total bond issue must be used for convention meeting facilities. Such facilities must have the capacity to seat a minimum of 300 people. However, the Finance Committee may approve financing for projects, as convention centers, consisting solely or primarily of sleeping accommodations, if the Applicant sufficiently demonstrates existing sleeping accommodations are inadequate for existing meeting facility space;

(C) “Corporate Headquarters” may qualify if a minimum of 75 percent of the floor space is allocated to the corporate headquarter function. Corporate headquarters do not include professional corporations for medicine, law, dentistry, or finance or office space to be leased to others;

(D) “Transportation” is not intended to include rolling stock or other highly moveable equipment operated by a carrier for hire;

(E) In deciding whether or not to approve economic development revenue bonding for a utility project, the Finance Committee may consider all relevant factors including but not limited to the utility company’s published tariff schedules and construction and extension procedures as filed with the Oregon Public Utility Commission;

(F) “Pollution Control” equipment may qualify as part of projects that otherwise qualifies under this rule. Where pollution control equipment costs are incidental to the total capital investment of the project, the Finance Committee may qualify such equipment, provided the Oregon Department of Environmental Quality concurs;

(G) “In-State Plant Relocations” not accompanied by an expansion of the Applicant’s business or employment, may be considered when the Applicant is able to demonstrate that:

(i) The relocation is caused by reasons beyond its control; or

(ii) The relocation will not cause a resulting loss of employment at the former site of the business; or

(iii) The relocation is necessary for the continued operation of the business.

(H) “Nonprofit entities” do not include religious or fraternal organizations;

(I) “Developer Project” may qualify. The Finance Committee shall have right of approval for each tenant occupying 25 percent or more of the leasable space. No more than 25 percent of the leasable space shall be leased to tenants relocating from another Oregon location, unless such relocation is accompanied by an expansion of the tenants’ labor force. These conditions shall be incorporated into bond documents, shall survive closing and shall be enforceable for the term of the bond.

(d) The following serves as an elaboration and clarification of the qualifications of an Eligible Project for which Economic Development Revenue Bond proceeds can be used:

(A) The Applicant shall provide detailed information on the proposed uses of Bond proceeds for research and development costs. Research and development costs shall not represent a significant portion of the total amount of the Bonds, at the discretion of the Finance Committee.

(B) The Applicant shall provide detailed information on how Bond proceeds will be used for operating expenses. Operating expenses shall not represent a significant portion of the total amount of the Bonds, at the discretion of the Finance Committee.

(C) Unless the Finance Committee determines otherwise, Bond proceeds shall not be used to refinance outstanding financing, but may be used to reimburse approved Applicants for short-term financing for costs of Capital Assets.

(D) Unless the Finance Committee determines otherwise, Bond proceeds may only be used for capitalized interest that accrued prior to completion of an Eligible Project and that is directly related to the financing of a Capital Asset.

(e) Public Purpose. The Applicant must demonstrate that a public purpose is served by the proposed Economic Development Project through economic diversification, creation of new jobs including construction activity, construction occurring before it otherwise could or would, economic activity occurring during economic slumps, tax dollars remaining in the state, increased productivity, or other public health benefit as determined by the Finance Committee. The Applicant is encouraged to demonstrate as many public purposes for the proposed project as can be prudently shown.; The Finance Committee shall consider these public purposes in determining whether a proposed project will produce benefits substantially in Oregon, pursuant to OAR 123-011-0025(5)(b).

(f) Prior to determining that an Economic Development Project is an Eligible Project, the Finance Committee shall:

(A) Determine that the action is cost effective, considering both major public expenses and major public benefits, unless the Economic Development Project involves an Exempt Facility;

(B) Find that the project involved is consistent with the Department’s comprehensive policy and programs;

(C) Find that the project will produce goods or services which are sold in markets for which national or international competition exists, unless the Economic Development Project involves an Exempt Facility;

(D) Determine that, if the project is to be constructed and operated by a Non-profit Entity, the project will not compete significantly with local for-profit businesses;

(E) Determine that the action is the best use of the moneys involved, considering other pending applications for those moneys; and

(F) Provide for public notice of, and public comment on, the action. The public hearing is not a contested case hearing. Members of the public are invited to present written or oral testimony. Only Finance Committee members and department staff will ask questions.

(G) Notify a senior official (such as mayor or city manager) of the city or county (if in unincorporated county property) in which the project will be located about the project and the potential use of Economic Development Revenue Bonds.

(g) The Finance Committee may deny an application if the Applicant does not demonstrate, to the satisfaction of the Finance Committee, that the project is financially feasible. When bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses, the determination of financial feasibility may include one or more of the following criterion:

(A) The adequacy of long-term equity investment in the project;

(B) Collateral value of assets as supported by appraisals; or

(C) Other valuations or factors determined to be necessary by the Finance Committee.

(h) The Finance Committee may deny an application if the Applicant (or any of the principals in the Applicant) is subject to any existing, pending or threatened litigation or unasserted claim, unless such litigation or claim is fully disclosed to the Finance Committee and the arrangements for the settlement thereof are acceptable to the Finance Committee. In any case where such litigation or claim is unknown to the Finance Committee at the time project eligibility is granted or if such litigation or claim arises subsequent to a grant of project eligibility, the Finance Committee may rescind the project eligibility;

(i) The Finance Committee may make any reasonable requirement of the Applicant related to the administration of the Oregon Economic Development Revenue Bond Program, including requirements that would survive closing and be enforceable for the term of the Bond.

(j) If Bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses, the Finance Committee may require, regardless of the method of sale, that the proposed Bond issuance receive an investment grade rating from a nationally recognized rating agency (Moody’s Investors Service, Fitch Ratings or Stand and Poor’s Corporation) or receive an equivalent rating through the use of credit enhancement. However, the investment grade rating requirement may be waived for Applicants who are listed on the New York Stock Exchange (NYSE) or the National Association of Securities Dealers Exchange (NASDAQ).

(k) If Bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses and research and development costs and operating expenses total more than 5% of the total amount of the Bonds, the Finance Committee shall approve the investment bankers, remarketing agents, and other finance team professionals, in addition to the approvals from Oregon State Treasury.

(l) If Bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses, the Finance Committee may impose requirements on the resale of the Bonds.

(3) The Finance Committee shall issue a Resolution for Project Eligibility for each economic development project determined to be an eligible project. The term of eligibility shall last 12 months unless extended by the department or the Finance Committee.

(4) Administrative rules in effect at the time the Finance Committee determines a project to be eligible shall continue to govern the project until the bonds have been redeemed, not withstanding any contrary provision in any subsequently adopted administrative rule.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 1-1985(Temp), f. & ef. 2-26-85; EDD 3-1985, f. & ef. 6-28-85; EDD 5-1985(Temp), f. & ef. 10-4-85; EDD 6-1985(Temp), f. & ef. 10-22-85; EDD 1-1986, f. 1-28-86, ef. 2-1-86; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988(Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 13-1990, f. & cert. ef. 6-7-90; EDD 14-1994(Temp), f. & cert. ef. 11-10-94; EDD 4-1995, f. 4-28-95, cert. ef. 5-3-95; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 9-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 7-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0037

Approval of Bond Closing Resolution

Prior to the approval of bond financing for an eligible project, as evidenced by the Commission’s approval of a bond closing resolution, the Commission shall:

(1) Determine that the project satisfies the applicable requirements of OAR chapter 123, division 8 (compliance with local land use planning requirements), as evidenced by documentation to be provided by the city or county (if in unincorporated county property) in which the project is located.

(2) Determine that the project involved is consistent with applicable adopted local economic development plans, as evidenced by documentation from the city or county.

Stat. Auth: ORS 285A.075
Stats. Implemented: ORS 285B.320 – 285B.371

Hist: EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0040

Extension

(1) The Department may extend the eligibility granted by the Finance Committee for up to six months if the Department determines that the project still constitutes an eligible activity and that there is a reasonable prospect of the Bonds being issued within the six-month extension period. The Applicant must provide updated financial information, and a project status report to the Department, in a form approved by the Department, at least 14 calendar days before eligibility expires. The Department may waive the 14 calendar day requirement at its sole discretion.

(2) The Finance Committee may extend eligibility if the Department denies extended eligibility or if the initial extension granted by the Department under section (1) of this rule has expired. The Finance Committee must determine that the project still constitutes an eligible activity, and that there is a reasonable prospect of the Bonds being issued within the extension period. The Applicant must provide updated financial information and a project status report, as well as a request for extension, in a form approved by the Department, at least one month prior to the expiration date of the original or extended eligibility period. The Finance Committee may waive this time period at its sole discretion.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 3-1985, f. & ef. 6-28-85; EDD 1-1986, f. 1-28-86, ef. 2-1-86; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988(Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 9-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0045

Fees

In addition to the application fee specified in OAR 123-011-0030(5):

(1) The Applicant shall pay to the Department at the time of initial bond closing a closing fee of 1/2 of one percent of the total Bonds issued for the project.

(2) For the Oregon Express Bond Program, the Applicant shall pay to the Department at the time of the initial Bond closing a closing fee of 1/4th of one percent of the total Bond Issuance for the project.

(3) An Applicant for a current refunding of an outstanding Bond shall pay to the Department a non-refundable processing fee of $500 that shall accompany the request for the refunding.

(4) The Applicant shall pay to the Department a closing fee of 1/10 of one percent of the amount of the refunding Bond or for any additional Bonds issued under a single project eligibility. This closing fee may be waived for any refunding Bond issued within 18 months of the closing date of the Bond issue to be refunded.

(5) The Department may charge any out-of-pocket expenses, including but not limited to legal expenses, incurred by the Department for processing any Bond request.

(6) The Commission may collect the above fees and expense reimbursements from an Applicant that seeks to have an Economic Development Project declared eligible for financing, even though the project has not been determined to be eligible for financing.

(7) An Applicant for the restructuring of existing Bonds shall pay to the Department an non-refundable processing fee of $1,000 that shall accompany the request for approval of the restructuring.

(8) The Department may charge the Applicant a closing fee of up to 1/10 of one percent of the amount of the restructured Bond.

(9) Applicants or beneficiaries of Bond financing shall pay directly to the Commission’s bond counsel their legal fees and direct expenses related to issuance, refunding, modifications, or restructuring of Bonds.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.326
Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 3-1985, f. & ef. 6-28-85; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988 (Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 15-1994, f. & cert. ef. 11-10-94; EDD 10-1996(Temp), f. & cert. ef. 12-4-96; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 14-2000(Temp), f. & cert. ef. 12-14-00 thru 6-12-01; Administrative correction 6-14-01; EDD 10-2001(Temp), f. & cert. ef. 12-13-01 thru 6-1-02; Administrative correction 11-29-02; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 9-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 7-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 5-2012, f. & cert. ef. 6-1-12

123-011-0050

Confidential Records

(1) Upon written request and within a reasonable time, the Director or his designee shall provide program records, for inspection in accordance with ORS Chapter 192.

(2) The person requesting records will be charged for preparing and mailing such records. Costs may include but not be limited to costs incurred in locating records, separating exempt and nonexempt records, having a custodian present during the inspection, preparing lists of data, making photocopies and telefaxing materials. Fees to be collected shall be set forth in the Department’s schedule of fees and may be amended from time to time as the Department may determine.

(3) Except as otherwise provided in ORS 192.410-192.595, records exempt from disclosure include but are not limited to:

(a) Reports and analyses of reports which bear on the Applicant’s character, finances, management ability and reliability, and which were obtained in confidence from persons or firms not required by law to submit them and the Department has obliged itself in good faith not to disclose the information;

(b) Financial statements, tax returns, business records, employment history and other personal data submitted by or for Applicants, or analysis of such data;

(c) Intra-departmental advisory memoranda preliminary to a decision;

(d) Formulas, plans, designs and related information that constitute trade secrets under ORS Chapter 192;

(e) Personal financial statement;

(f) Financial statements of Applicants;

(g) Customer lists;

(h) Information of an Applicant pertaining to litigation to which the Applicant is a party if the complaint has been filed, or if the complaint has not been filed, if the Applicant shows that such litigation is reasonably likely to occur. This exemption does not apply to concluded litigation and nothing in this section shall limit any right or opportunity granted by law to a party involved in litigation;

(i) Production, sales or cost data; and

(j) Marketing strategy information that relates to an Applicant’s plan to address specific markets and Applicant’s strategy regarding specific competitors.

Stat. Auth.: ORS 285A.075(5) & 285A.110
Stats. Implemented: ORS 285B.320 - 285B.371
Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 3-1985, f. & ef. 6-28-85; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88, EDD 9-1988 (Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; OBDD 5-2012, f. & cert. ef. 6-1-12


 

Rule Caption: Temporary rulemaking becomes permanent for reporting and loan eligibility requirements for the Capital Access Program.

Adm. Order No.: OBDD 6-2012

Filed with Sec. of State: 6-1-2012

Certified to be Effective: 6-1-12

Notice Publication Date: 5-1-2012

Rules Amended: 123-018-0010, 123-018-0065, 123-018-0140

Rules Repealed: 123-018-0010(T), 123-018-0065(T), 123-018-0140(T)

Subject: On September 27, 2010 The Small Business Jobs Act (Congressional HB 5297) was signed into law. One component of the Small Business Jobs Act was the creation of the State Small Business Credit Initiative (SSBCI). SSBCI will support at least $15 billion in small business lending by strengthening state small business programs that leverage private-sector lenders to extend additional credit. $1.5 billion has been allocated to provide capitalization for existing state loan and loan guarantee programs. As a result of the bill, Oregon has been allocated more than $16.5 million for the purpose of providing capitalization to state managed business finance programs (revolving loan programs, forgivable loan programs, loan guarantee programs, capital access programs and venture capital programs).

 The primary deliverable associated with the SSBCI program will be to demonstrate a 10:1 public/private leverage ratio. As a result, by December 31, 2016, to comply with the terms and intent of the program will need to demonstrate that over $165 million in private financing (debt and equity) result from the $16.5 million investment in the Business Finance programs outlined in the application. As a result, the Capital Access Program was identified as a fund to receive capitalization.

 In order to begin enrolling new loans using the SSBCI funds which will help Oregon begin to meet the $165 million private leverage requirement associated with the SSBCI funds, these rules have been amended to reflect the program changes and restrictions associated with the federal funding.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-018-0010

Definitions

For the purposes of these rules additional definitions may be found in Procedural Rules, OAR 123-001 as used in this division of administrative rules, the following definitions apply, unless the context requires otherwise:

(1) “Agreement” means a contract between a Financial Institution and the Department authorizing the Financial Institution to participate in the Program as required under ORS 285B.113.

(2) “Borrower” means a Qualified Business, including but not limited to a corporation, partnership, limited liability company, joint venture, sole proprietorship, cooperative, or non-profit corporation, that has received a Qualified Loan from a Participating Financial Institution. The borrower, or any principal of the borrower, may not be an executive officer, director, or principal shareholder of the financial institution lender; a member of the immediate family of such executive officer, director or principal shareholder; or a related interest to any of the above. The terms “executive officer”, “director”, “principal shareholder”, “immediate family”, and “related interest” are described in 12 C.F.R. part 215.

(3) “Brownfield” means any real property where expansion or redevelopment is complicated by actual or perceived environmental contamination.

(4) “Department” means the State of Oregon Business Development Department under ORS Chapter 285A.

(5) “Distressed Area” means a geographic area so designated as described in division 024 of these administrative rules.

(6) “Enrolled Loan” means a Qualified Loan enrolled in the Program as described in OAR 123-018-0080, including but not limited to a term loan or line of credit.

(7) “Environmental action” on a brownfield(s) means activities undertaken to:

(a) Determine if a release has occurred, or may occur, if the release or potential release poses a significant threat to human health or the environment, or if additional remedial actions may be required at the site;

(b) Conduct a remedial investigation and a feasibility study;

(c) Plan for remedial action or removal; or

(d) Conduct a remedial action or removal action at a site.

(8) “Fund” means the Capital Access Fund in the State Treasury under ORS 285B.109.

(9) “Loss” means any principal amount due and not paid, accrued interest due and not paid, and actual and necessary, documented out-of-pocket collection expenses at the time the Participating Financial Institution determines, in a manner consistent with its standard lending and loan loss criteria and normal method for making such determinations, that an Enrolled Loan is uncollectible and is to be charged off as a loss. The amount of principal and interest included in the Loss shall not exceed the principal amount of the Enrolled Loan, plus accrued and unpaid interest on covered principal amount from the date the Qualified Loan is made.

(10) “Loss Reserve Account” means an account in the State Treasury or any Financial Institution that is established and maintained by the Department for the benefit of a Financial Institution participating in Program.

(11) “Participating Financial Institution” means a Financial Institution that has executed an Agreement with the Department to participate in the Program, has enrolled one or more qualified loans, and has adequate capacity, as determined by the Department, to underwrite and monitor business-purpose loans.

(12) “Primary Economic Effect” means the majority of economic benefit resulting from a business activity. A business’s Primary Economic Effect is in a particular geographic location if either at least 51 percent of the business’s total revenues are generated, or at least 51 percent of the business’s total jobs are created or retained, in that location.

(13) “Principal” in regards to a Borrower is defined as:

(a) If a sole proprietorship, the proprietor;

(b) If a partnership, each managing partner and each partner who is a natural person and holds a twenty percent (20%) or more ownership interest in the partnership; and

(c) If a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives or officers of the entity, and each natural person who is a direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.

(14) “Principal” in regards to a Lender is defined as:

(a) If a sole proprietorship, the proprietor;

(b) If a partnership, each partner; and

(c) If a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives, officers or employees of the entity, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.

(15) “Program” means the Capital Access Program authorized by ORS 285B.109 to 285B.119.

(16) “Qualified Business” means any person, conducting business for profit or not for profit, which is authorized to conduct business in the State of Oregon.

(17) “Qualified Loan” means a loan or portion of a loan made by a Participating Financial Institution to a Qualified Business for any business activity that has its Primary Economic Effect in Oregon. The term does not include a loan or portion of a loan used for any of the following purposes:

(a) The purchase of owner-occupied residential housing or for the construction, improvement, or purchase of residential housing that is owned or to be owned by the Borrower;

(b) The purchase of real property that is intended for resale or not used for the business operations of the Borrower;

(c) Refinance of the balance of an existing loan that is not an Enrolled Loan. Any portion of the loan used for a qualified purpose (i.e., that is in excess of the balance of an existing loan that is not an Enrolled Loan) may be eligible to be enrolled.

(d) The purchase of securities;

(e) Lobbying activities;

(f) Repayment of delinquent federal or state income taxes unless the Borrower has a payment plan in place with the relevant taxing authority;

(g) Repayment of taxes held in trust or escrow;

(h) Reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business’ continuance;

(i) Purchase of any portion of the ownership interest of any owner of the business; or

(j) Refinance of any portion of a loan enrolled in another state or federal credit enhancement or credit insurance program.

(k) The term also does not include a loan where any Principal of the Borrower has been convicted of a sex offense against a minor as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911).

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 285A.075, 285B.115(3) & 285B.117(4)
Stats. Implemented: ORS 285B.109 - 285B.119
Hist.: EDD 27-1990(Temp), f. & cert. ef. 10-16-90; EDD 3-1991, f. & cert. ef. 4-17-91; EDD 15-1991(Temp), f. & cert. ef. 10-31-91; EDD 11-1992, f. & cert. ef. 8-18-92; EDD 1-1994(Temp), f. & cert. ef. 1-11-94; EDD 9-1994, f. 5-27-94, cert. ef. 6-1-94; EDD 10-1997(Temp), f. & cert. ef. 10-7-97; EDD 9-1998, f. & cert. ef. 5-22-98; EDD 8-2005, f. & cert. ef. 10-24-05; EDD 8-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 6-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 22-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 13-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 9-2011(Temp), f. & cert. ef. 12-19-11 thru 6-15-12; OBDD 6-2012, f. & cert. ef. 6-1-12

123-018-0065

Loan Eligibility

A Participating Financial Institution may determine that a Qualified Loan is eligible for the Department to enroll in the Program if the Participating Financial Institution determines the Qualified Loan meets the following conditions:

(1) The Qualified Loan is not for a business enterprise in which a person described in section (2) of this section has a shared ownership, investment or other significant pecuniary interest; and

(2) The Qualified Loan is provided to a Borrower, who is not an executive officer, director or principal shareholder of the Participating Financial Institution, or person with comparable official capacity with or significant ownership in the Participating Financial Institution, or a member of the immediate family of such a person.

(3) The Borrower may not be:

(a) A business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business; or

(b) A business that earn more than half of its annual net revenue from lending activities; or

(c) A business engaged in pyramid sales, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants; or

(d) A business engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; or

(E) A business engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from lottery sales.

Stat. Auth.: ORS 285A.075 & 285B.115(3)
Stats. Implemented: ORS 285B.115 & 285B.119
Hist.: EDD 8-2005, f. & cert. ef. 10-24-05; OBDD 9-2011(Temp), f. & cert. ef. 12-19-11 thru 6-15-12; OBDD 6-2012, f. & cert. ef. 6-1-12

123-018-0140

Reporting

(1) When a Loss Reserve Account is domiciled with the Participating Financial Institution, the Participating Financial Institution shall provide the Department with a monthly statement providing details of the balance and the payments and receipts activity in the Loss Reserve Account for the prior month.

(2) On or before January 15, April 15, July 15, and October 15 of each year, a Participating Financial Institution must file a quarterly report with the Department providing a complete list of Enrolled Loans and indicating the outstanding balance of each of its Enrolled Loans.

(3) When a Participating Financial Institution computes the aggregate outstanding balance of all its Enrolled Loans, it may only consider the balance of the portion of a loan enrolled in the Program.

Stat. Auth.: ORS 285A.075 & 285B.115(3)
Stats. Implemented: ORS 285B.115
Hist.: EDD 27-1990(Temp), f. & cert. ef. 10-16-90; EDD 3-1991, f. & cert. ef. 4-17-91; EDD 15-1991(Temp), f. & cert. ef. 10-31-91; EDD 11-1992, f. & cert. ef. 8-18-92; EDD 8-2005, f. & cert. ef. 10-24-05; OBDD 9-2011(Temp), f. & cert. ef. 12-19-11 thru 6-15-12; OBDD 6-2012, f. & cert. ef. 6-1-12


Rule Caption: This filing amends the language for eligibility requirements, loan insurance programs and insurance premiums relating to the Credit Enhancement Fund.

Adm. Order No.: OBDD 7-2012

Filed with Sec. of State: 6-1-2012

Certified to be Effective: 6-1-12

Notice Publication Date: 5-1-2012

Rules Amended: 123-021-0000, 123-021-0010, 123-021-0015, 123-021-0020, 123-021-0040, 123-021-0080, 123-021-0090, 123-021-0110, 123-021-0130

Rules Repealed: 123-021-0000(T), 123-021-0010(T), 123-021-0015(T), 123-021-0020(T), 123-021-0040(T), 123-021-0080(T), 123-021-0090(T), 123-021-0110(T), 123-021-0130(T)

Subject: On September 27, 2010 The Small Business Jobs Act (Congressional HB 5297) was signed into law. One component of the Small Business Jobs Act was the creation of the State Small Business Credit Initiative (SSBCI). SSBCI will support at least $15 billion in small business lending by strengthening state small business programs that leverage private-sector lenders to extend additional credit. $1.5 billion has been allocated to provide capitalization for existing state loan and loan guarantee programs. As a result of the bill, Oregon has been allocated more than $16.5 million for the purpose of providing capitalization to state managed business finance programs (revolving loan programs, forgivable loan programs, loan guarantee programs, capital access programs and venture capital programs).

 The primary deliverable associated with the SSBCI program will be to demonstrate a 10:1 public/private leverage ratio. As a result, by December 31, 2016, to comply with the terms and intent of the program will need to demonstrate that over $165 million in private financing (debt and equity) result from the $16.5 million investment in the Business Finance programs outlined in the application. As a result, the Credit Enhancement Fund was identified as a program to receive capitalization.

 In order to begin enrolling new loans using the SSBCI funds which will help Oregon begin to meet the $165 million private leverage requirement associated with the SSBCI funds, these rules have been amended to reflect the program changes and restrictions associated with the federal funding.

 The agency requests public comment on whether other options should be considered for achieving the rule’s substantive goals while reducing the negative economic impact of the rule on business.

 These rules were filed as temporary rules on December 8, 2011. The department is now making them permanent.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-021-0000

Purpose

The purpose of these rules is to provide procedures, standards, and criteria for providing loan insurance from the Oregon Credit Enhancement Fund.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0010

Definitions

For the purposes of these rules, additional definitions may be found in OAR chapter 123, division 1. The following terms shall have the following definitions, unless the context clearly indicates otherwise:

(1) “Authorized loan amount” means the amount of a loan authorized by the Department to be under the CEF Program pursuant to a loan insurance authorization issued by the Department to the financial institution making the loan.

(2) “Brownfield” means any real property where expansion or redevelopment is complicated by actual or perceived environmental contamination.

(3) “CEF Program” means the Credit Enhancement Fund Insurance Program established under ORS 285B.200 to 285B.218.

(4) The “deficiency” of a loan means the amount of principal outstanding upon default, accrued interest and the financial institution’s reasonable costs of collection, exclusive of costs attributable to environmental problems, remaining unpaid after liquidation of collateral and collection of guarantees.

(5) “Destination facilities other than retail or food service” means a qualified business which has a significant impact on the regional recreational or tourism economy. Incidental food service or retail facilities necessary to the operation of a destination facility are eligible. Sleeping accommodations without unique attraction capabilities are not qualified businesses.

(6) “Financial institution” has the meaning set forth in ORS 706.008.

(7) “Fund” means the Credit Enhancement Fund created by ORS 285B.215.

(8) “Loan insurance authorization” means a letter from the director or deputy director or designee to a financial institution agreeing to insure a loan to a borrower on the terms and conditions and subject to the requirements stated therein.

(9) “Loan insurance agreement” means the agreement between the financial institution and the Department required by OAR 123-021-0100.

(10) “Working capital loan” means any loan, the proceeds of which are to be used for operating, maintenance and other costs and expenses, or for purposes other than acquiring real property, production equipment, or other capital assets.

(11) “Principal” in regards to a borrower is defined as:

(a) If a sole proprietorship, the proprietor;

(b) If a partnership, each managing partner and each partner who is a natural person and holds a twenty percent (20%) or more ownership interest in the partnership; and,

(c) If a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives or officers of the entity, and each natural person who is a direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.

(12) “Principal” in regards to a financial institution is defined as:

(a) If a sole proprietorship, the proprietor;

(b) If a partnership, each partner; and

(c) If a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives, officers or employees of the entity, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.

(13) “SSBCI Funds” means U.S. Treasury funds allocated to the Department under the State Small Business Credit Initiative Act of 2010 (title III of the Small Business Jobs Act of 2010, P.L. 111-240, 124 Stat. 2568, 2582).

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 12-1997(Temp), f. & cert. ef. 10-7-97; EDD 11-1998, f. & cert. ef. 5-22-98; EDD 8-1999, f. & cert. ef. 10-1-99; EDD 4-2007(Temp), f & cert. ef. 8-28-07 thru 2-22-08; EDD 5-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0015

Qualified Business

In a distressed area, any existing or proposed business is a Qualified business. Any company that owns, occupies, operates, or has entered into an agreement to own, occupy or operate real property containing a brownfield is a Qualified business. Outside of a distressed area, a Qualified business is defined as any existing or proposed business that sells goods or services in markets for which national or international competition exists, and such sales of goods or services will result in or will aid, promote or facilitate the development of one or more of the following activities:

(1) Manufacturing or other industrial production;

(2) Food processing;

(3) Aquaculture development or seafood processing;

(4) Convention facilities or trade centers;

(5) Destination facilities other than retail or food service;

(6) Transportation or freight facilities;

(7) Distribution facilities; or

(8) Other activities, as approved by the Department that represent new technology or diversifying activity but not including:

(a) Construction of office buildings;

(b) Retail businesses, shopping centers or food service facilities;

(c) Motels or bed and breakfast hotels;

(d) Professional services for medicine, law, dentistry or finance;

(e) Athletic, racquetball, handball, or private membership clubs, or golf courses;

(f) Sand and gravel facilities;

(g) Newspapers;

(h) Lobbying activities (as defined in Section 3(7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended); or,

(i) Acquiring or holding passive investments such as commercial real estate ownership or the purchase of securities; this does not include acquisitions of businesses through 100% stock transfer.

(9) For the Evergreen Entrants Insurance, a Qualified business includes an existing or proposed business without, or about to be without, an existing line of credit. For the Evergreen Plus Insurance, a Qualified business includes an existing or proposed business with an existing line of credit

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0020

Eligibility

(1) In order for a Qualified business to be eligible, its project must meet one of the following purposes. Eligible purposes mean the acquisition, improvement, or rehabilitation of real or personal property, working capital for operations, export transactions, maintenance and other business costs and expenses which are used for purposes other than acquiring real or personal property. Eligible purposes do not include:

(a) An insured loan used for any personal, family, or household expenses of the Qualified business or any owner or guarantor;

(b) An insured loan used for construction financing; however, permanent financing after completion of construction may be insured;

(c) An insured loan for the purchase or construction of residential housing;

(d) An insured loan made primarily to pay off or refinance an existing debt to a creditor whose loan is inadequately secured or who is in danger of sustaining a loss;

(e) Repayment of delinquent federal or state income taxes unless the Qualified Business has a payment plan in place with the relevant taxing authority;

(f) Repayment of taxes held in trust or escrow;

(g) Reimbursement of funds owed to any owner, including any equity injection or injection of business capital for the business’ continuance;

(h) (For loans insured by SSBCI Funds) Purchase of any portion of the ownership interest of any owner of the business;

(i) An insured loan used to purchase an existing Qualified business, except for:

(A) Expansions where the majority of loan proceeds are used to support expansion improvements;

(B) Purchase of all or substantially all of the assets of a Qualified business,

(C) (For loans not insured by SSBCI Funds) Purchase of 100% of the stock of a Qualified business, including stock held by employee stock ownership plans, where jobs will be created or retained; provided that the Department’s liability for any loss resulting from a loan made for such purchase shall not exceed $500,000.

(2) The Department will consider refinancing requests on a case by case basis. In evaluating such requests, the Department will consider the financial benefits to the borrower, the prospects for success, public benefits such as jobs created or retained, the extent to which financial institutions agree to extend terms or provide other favorable financing to a borrower, and the extent to which collateral securing an insured loan is improved. The Department’s maximum liability for any loss resulting from a refinance that is insured under the CEF Program will be limited to no more than $500,000 and no more than 75% of the authorized loan amount, whichever is less. Unless specifically waived by the Department, all business and personal assets securing a refinance may require an appraisal or other third party valuation to determine liquidation values at the time of application. The Department reserves the right to set the enrollment terms at the time of approval for loan insurance, including but not limited to the Department’s maximum liability or the insured percentage and in its sole discretion may, when setting the Department’s maximum liability or the insured percentage or both, consider whether a loan is less than fully secured, as determined by the estimated liquidation value of the collateral.

(3) The maximum term for an eligible loan insurance per borrower project is the lesser of fifteen (15) years or the useful life of the assets being financed, or one year plus four annual renewals for the Evergreen Entrants Insurance or Evergreen Plus Insurance.

(4) Eligible borrowers are Qualified businesses as defined in OAR 123-021-0015.

(5) Eligible financial institutions are financial institutions as defined by ORS 706.008.

(6) Any loans insured by SSBCI Funds will be required to meet additional U.S. Treasury requirements including, but not limited to:

(a) The loan has not been made in order to place under the protection of the CEF Program prior debt that is not covered by the CEF Program and that is or was owed by the borrower to the financial institution or to an affiliate of the financial institution.

(b) The loan is not a refinancing of a loan previously made to that borrower by the financial institution or an affiliate of the financial institution.

(c) No Principal of the borrower or the financial institution has been convicted of a sex offense against a minor as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911).

(d) The borrower, or any principal of the borrower, is not:

(A) an executive officer, director, or principal shareholder of the financial institution, or

(B) a member of the immediate family of an executive officer, director or principal shareholder of the financial institution; or

(C) a related interest of any such executive officer, director, principal shareholder or member of the immediate family. For the purposes of this OAR 123-021-0002(6)(d), the terms “executive officer”, “director”, “principal shareholder”, “immediate family”, and “related interest” refer to the same relationship to the financial institution as the relationship described in 12 C.F.R. Part 215.2 (1990), whether or not the financial institution is a member bank of the Federal Reserve System.

(e) The activities of the borrower are not activities currently prohibited by U.S. Treasury, such as but not limited to:

(A) The borrower is not a business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade unless those activities are incidental to the regular activities of the business and are part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;

(B) The borrower is not a business that earns more than half of its annual net revenue from lending activities unless the business is a non-bank or non-bank holding company community development financial institution;

(C) The borrower is not a business engaged in pyramid sales, or engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; or,

(D) The borrower is not a business engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from lottery sales.

(f) The financial institution is in compliance with requirements of 31 C.F.R. ¦ 103.121.

(g) At the time of approval the borrower does not employ more than 750 employees in the United States.

(h) Total financing for the project is $20,000,000 or less.

(i) No Principal of the borrower is a current member or delegate to the United States Congress or resident U.S. Commissioner.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 8-1999, f. & cert. ef. 10-1-99; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 14-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0040

Application Contents

(1) Required Contents. Unless waived by the Department, the financial institution shall submit to the Department an application containing the following:

(a) A completed General Information Sheet provided by the Department;

(b) A written narrative by the financial institution analyzing the borrower’s application (i.e. credit analysis), including an identification of the proposed amount of the loan, the requested percentage of insurance and Department insurance program, the purpose, terms and conditions of the loan, a description of the collateral and basis for its valuation, a summary of the borrower’s credit standing, and a description of other sources of financing;

(c) Complete resumes of the borrower, all partners, owners, officers and guarantors, as applicable;

(d) Historical business financial statements for the prior three years, including income statements and balance sheets (income tax returns may also be required), as applicable, if an existing borrower. Income tax returns may be sufficient if accountant prepared statements are unavailable. Interim financial statements must also be included if the most recent statements are beyond 90 days;

(e) Signed current personal financial statement(s) of owners with a minimum 20% ownership interest in the borrower. Federal tax returns may be required. This information may also be required of guarantors;

(f) Pro forma balance sheet and income statement with supporting assumptions. In some instances, monthly cash flow statements may also be required. Cash flow statements are required in cases where loan repayment is dependent on projections, and for borrowers seeking working capital financing;

(g) Completion of the Department’s environmental questionnaire or a comparable one provided by the financial institution and approved by the Department for loans secured in whole or part by real property and for other insured loans, if requested by the Department;

(h) Other information as the Department may require including, but not limited to, projected jobs created or jobs retained by a borrower.

(2) Supplemental Information. The Department may require, at its discretion:

(a) Appraisals of collateral or the financial institution’s basis for determining collateral value;

(b) A business or marketing plan, including an analysis of competition;

(c) Certificates from the Oregon Department of Environmental Quality or any other governmental or regulatory agencies with jurisdiction, if applicable;

(d) Copies of leases or purchase agreements, as applicable;

(e) Any other information or certifications from the borrower or the financial institution deemed by the Department to be necessary or desirable in connection with an insured loan application.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0080

Loan and Insurance Terms and Conditions

(1) Interest rate and term. The rate of interest on the insured loan and the term of the loan shall be agreed between the financial institution and a borrower provided that no term may exceed the lesser of fifteen years or the useful life of the assets being financed or one year plus four annual renewals for the Evergreen Entrants or Evergreen Plus Programs.

(2) Collateral. Repayment of an insured loan shall be secured by such collateral as the Department deems prudent.

(a) Insured loans may, at the discretion of the Department, be secured by collateral valued for collateral purposes at less than the amount of the insured loan, provided the borrower, its principals, and the guarantors, to the satisfaction of the Department, are of good character, have good credit histories, and exhibit the ability to service the proposed and existing debt;

(b) Real estate or unmovable machinery or equipment constituting a significant portion of collateral for repayment of an insured loan shall be located within the state. Mobile machinery or equipment, including vessels, constituting a significant portion of collateral for repayment of an insured loan shall be registered with and taxed by the state or municipal authorities, if the State or municipal authorities register or tax machinery or equipment of a type similar to the collateral, and shall be stored or berthed in the state when not in use.

(c) The Department may, at its sole discretion, require independent collateral valuation and appraisal of the real property assets securing the loan.

(3) Covenants. The covenants and requirements of the loan shall be established by the financial institution in accordance with prudent lending practices. The Department may require such additional covenants and requirements as may be necessary, prudent or desirable. At a minimum, the loan documents should require the borrower to:

(a) Make periodic payments of principal and interest, with the exception of short term working capital loans or evergreen working capital loans or lines of credit where periodic interest payments with a balloon principal payment and/or term options may be acceptable, as determined by the Department;

(b) Make any lease payments;

(c) Maintain adequate insurance on collateral, and maintain books and records on the business;

(d) Pay any taxes or governmental charges assessed against the collateral and comply with all applicable laws and regulations;

(e) Keep the collateral free of liens and encumbrances except for as may be expressly accepted by the financial institution and Department;

(f) Provide for periodic financial reports to the financial institution;

(g) Pay advances necessary to protect the collateral and all expenses of protecting or enforcing the rights of the financial institution and Department.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0090

Loan Insurance Programs

The Department shall offer the following insurance programs:

(1) Conventional Insurance, under which the Department may insure (a) up to 80 percent of a loan in which case the Department’s maximum liability for any loss under the Conventional Insurance is the lesser of $2,000,000 or an amount equal to the insured percentage times the authorized loan amount, or (b) up to 90 percent of a loan in which case the Department’s maximum liability for any loss under the Conventional Insurance is the lesser of $500,000 or an amount equal to the insured percentage times the authorized loan amount. Should a borrower which receives an insured loan default or otherwise be unable to make loan payments, the Department will pay the financial institution the deficiency of a loan times the insured percentage, subject to the limitation set forth above. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Conventional Insurance and the uninsured portion of the loan.

(2)(a) Evergreen Entrants Insurance, under which the Department may insure up to 75 percent of a line of credit working capital loan. Should a borrower which receives an insured loan default or otherwise be unable to make loan payments, the Department will pay the financial institution the deficiency of the line of credit working capital loan times the insured percentage; provided that the Department’s maximum liability for any deficiency under the Evergreen Entrants Insurance is the lesser of $1,500,000 or an amount equal to the insured percentage of the authorized loan amount. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Evergreen Entrants Insurance and the uninsured portion of the loan.

(b) Eligible borrowers include persons or enterprises without or about to be without existing line of credit working capital loans.

(c) To obtain Evergreen Entrants Insurance, a financial institution must have the capacity to service the loan effectively, including monitoring compliance with any audit and control procedures prescribed by the Department or comparable procedures of the financial institution approved by the Department and must have in place and operating a lending program specializing in line of credit loans secured by or with advances based upon eligible accounts receivable and inventory or other assets. The Department must be satisfied that the financial institution is sufficiently experienced and capable of operating such a lending program effectively.

(3) First Loss Insurance, under which the Department will pay 100 percent of the deficiency of a loan, but the Department’s maximum liability under the First Loss Insurance shall be the lesser of (a) the insured percentage (which shall not exceed 25 percent) times the authorized loan amount, (b) the insured percentage (which shall not exceed 25 percent) times the outstanding balance of the loan, including accrued interest and reasonable costs and expenses of collection and liquidation of collateral exclusive of costs attributable to environmental problems, but not taking into account the proceeds of collateral liquidation and payments by guarantors, or (c) $300,000. Any recovery after payment of a deficiency is applied first to the uninsured portion of the loan and then to the portion of a loan insured through First Loss Insurance.

(4)(a) Evergreen Plus Insurance, under which the Department may insure up to 90 percent of a new increment of a line of credit; provided that the Department’s maximum liability under the Evergreen Plus Insurance is $1,500,000 and the aggregate amount of the line of credit insured under any program does not exceed 80% of the total line of credit. If a financial institution makes a payment request for any deficiency, the Department will pay to the financial institution the lesser of:

(A) A ratable share of the total default charges; or

(B) the deficiency times the insured percentage.

The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Evergreen Plus Insurance and the uninsured portion of the loan.

(b) The formula for calculating the Department’s ratable share of total default charges is:

R = (G÷T)*P

R represents the ratable share of total default charges.

G represents the amount of the new increment of the line of credit.

T represents the total credit facility made available.

P represents the principal outstanding upon default plus accrued unpaid interest and costs of collateral liquidation and collection of guarantees exclusive of costs attributable to environmental problems.

(c) To obtain the Evergreen Plus Insurance, a financial institution must have in place and operating a lending program specializing in line of credit loans secured by or with advances based upon eligible accounts receivable and inventory or other assets. The Department must be satisfied that the financial institution is sufficiently experienced and capable of operating such a lending program effectively.

(5) The Conventional Insurance and First Loss Insurance are available for all types of non-revolving loans with regular periodic payments of principal and interest no less often than annually for eligible purposes, including working capital loans that are secured by fixed assets.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 13-2002(Temp), f. & cert. ef. 6-18-02 thru 12-13-02; Administrative correction 4-15-03; EDD 6-2005(Temp), f. & cert. ef. 8-5-05 thru 1-31-06; EDD 1-2006, f. & cert. ef. 2-10-06; EDD 5-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

123-021-0110

Insurance Premiums

(1) The Department shall charge a one-time (up-front) insurance premium. Premiums are due at the time financial institutions originate loans and execute loan authorizations with the Department. The Department’s insurance is not effective until premiums are paid. It is expected that financial institutions will pass along the cost of premiums to borrowers. Premiums, expressed as a percentage of the Department’s maximum liability, shall be charged in accordance with the following schedule for the programs indicated: [Schedule not included. See ED. NOTE.]

(2) The fee for the Evergreen Entrants Insurance is 1.25 percent annually; the fee for the Evergreen Plus Insurance is 2.5 percent annually.

(3) For revolving lines of credit or evergreen facilities, the premium is based on the Department’s maximum liability in regard to the credit facility made available to a borrower, regardless of whether or not the line of credit is fully drawn down. Examples:

(a) The premium due on a $200,000, five year loan with 85% Conventional Insurance would be $3,400 ($200,000 x .85 x .02);

(b) The premium for a $200,000 loan with 75% Evergreen Entrants Insurance is $1,875 ($200,000 x .75 x .0125); this amount would be due every year thereafter for up to four additional years, assuming the loan and amount is renewed each year for the maximum term permitted under the Evergreen Entrants program (5 years);

(c) The premium for a $200,000, eight year loan with 25% First Loss Insurance is $2,500 ($200,000 x .25 x .05);

(d) The premium for a $700,000 increment to the line of credit with 25% Evergreen Plus Insurance is $4,375 ($700,000 x .25 x.025); this amount would be due every year thereafter for up to four additional years, assuming the loan and amount is renewed each year for the maximum term permitted under the program (5 years).

[ED. NOTE: Schedules referenced are available from the agency.]

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12

 

123-021-0130

Delegation

With the exception of appeals, the Department may authorize and approve loan insurance authorizations and require execution of any document necessary or convenient to make effective such insurance.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218
Stats. Implemented: ORS 285B.200 - 285B.218
Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-30-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12; OBDD 7-2012, f. & cert. ef. 6-1-12


Rule Caption: These new rules are being adopted to implement the Manufacturing Business Energy Tax Credit.

Adm. Order No.: OBDD 8-2012

Filed with Sec. of State: 6-1-2012

Certified to be Effective: 6-1-12

Notice Publication Date: 5-1-2012

Rules Adopted: 123-600-0100, 123-600-0105, 123-600-0110, 123-600-0120, 123-600-0130, 123-600-0135, 123-600-0140, 123-600-0150, 123-600-0250

Subject: In the 2011 Special Legislative Session, the passage of Oregon HB 2523 transferred the duties of the Business Energy Tax Credit for renewable energy resource equipment manufacturing program (Manufacturing BETC) from the Oregon Department of Energy to the Oregon Business Development Department (Business Oregon). In the 2012 Regular Legislative Session, the passage of Oregon HB 4079 made changes relating to the Manufacturing BETC and other energy incentives programs. This serves as a re-notice and these rules implement the Manufacturing BETC program and replace the ones previous posted on the agency’s website in February 2012.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-600-0100

Purpose and Scope

This division of administrative rules applies to all applicants for the Business Energy Tax Credit for Renewable Energy Resource Equipment Manufacturing (“Manufacturing BETC”) as provided under Oregon Revised Statutes ORS 285C.540 through 285C.559, and ORS 315.341,.356, Oregon Law 2011 CH. 474 HB2523 and 2012 CH. 45 HB4079. These rules apply to all applications pending as of the effective date of these rules.

(1) Amount of Tax Credit. Qualified Oregon facilities that manufacture renewable energy resource equipment may be eligible for a tax credit equal to 50% of maximum eligible cost. Costs are limited up to $2.5 million for a facility used to manufacture electric vehicles or component parts of electric vehicles and up to $40 million in the case of any other eligible facility.

(2) Application Review. Application for the Manufacturing BETC is subject to detailed technical and financial review of the project. The Applicant is also required to sign a performance contract with measures that include job creation requirements, job retention requirements and other economic or operational benchmarks as determined by the Department.

(3) Certification of Cost for Tax Credit. The Director shall issue a final certificate pursuant to ORS 285C.553 before the tax credit can be claimed. The Director shall determine the dollar amount certified for any facility and the priority between applications for certification based upon the criteria contained in ORS 285C.540 to 285C.559 and applicable rules and standards adopted under ORS 285C.540 to 285C.559. The Director may consider the status of a facility as a research, development or demonstration facility of new renewable resource generating and conservation technologies in the determination.

(4) Use of Tax Credit. The tax credit may be offset against Oregon income and corporation excise taxes owed pursuant to ORS 315.341. An Applicant qualifying for the tax credit may transfer the tax credit through the pass-through option in return for a discounted cash payment from a qualified pass-through partner.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0105

Definitions

The following definitions apply unless the context requires otherwise:

(1) “Applicant” means a person who applies for preliminary certification of a Manufacturing BETC facility under this section including individuals, corporations, associations, firms, partnerships, limited liability companies and joint stock companies.

(2) “Cost” means the capital costs and expenses necessarily incurred in the erection, construction, installation and acquisition of a facility.

(3) “Completed application” means receipt of payments under OAR 123-600-0140 and all information required in the application form to demonstrate substantive compliance with the provisions of ORS 285C.540 to 285C.559 and any applicable rules or standards adopted by the Director, and all supplemental attachments, exhibits and so forth that the Applicant furnishes at the Department’s request under these rules for the Manufacturing BETC.

(4) “Completed Facility” means a manufacturing facility that is operating in accordance with requirements in the Preliminary Certificate and performance agreement between the Department and the Applicant for which all costs have been paid or committed by a binding contract or agreement.

(5) “Component parts of electric vehicles” means component parts that are for exclusive use in electric vehicles and may not be used in both electric and conventional vehicles. A component part of electric vehicles does not include batteries.

(6) “Director” means the Director of the Oregon Business Development Department or designees.

(7) “Department” means the Oregon Business Development Department, aka: Business Oregon.

(8) “Electric vehicles” means vehicles that are designed for use as Class I or Class II all-terrain vehicles, as those terms are defined in ORS 801.190 and 801.193, and that are used for agricultural, commercial, industrial or governmental purposes, or vehicles that are designed for use as modes of transportation on public roads and highways. The Director of the Oregon Business Development Department may further define “agricultural, commercial, industrial or governmental purposes” of electric vehicles.

(9) “Facility operator” means the person or people to whom the Applicant gives authority to manage a facility. Such person or people shall be the Applicant’s agent for all reasons related to the facility once its development begins.

(10) “Facility start” means the earliest date on or after the date the application for preliminary certification is received by the Department where a non-refundable deposit will be placed on the facility equipment or; a purchase order will be placed for the equipment or; a contract for the design of the facility will be executed or; a document that obligates the Applicant to proceed with a facility will be executed; or any other type of financial commitment towards the erection, construction, installation or acquisition of the facility.

(11) “Federal grant” means any grant received from the federal government in connection with a facility.

(12) “Final certification” means the review and approval of the application for final certification leading to issuance of a final certificate for a completed facility under ORS 285C.551.

(13) “Lease contract” means a lease-purchase contract in which the lessee owns the facility at the end of the lease and is eligible for the Manufacturing BETC, or a lease or lease-option contract in which the lessor owns the facility through the life of the contract and is eligible for the Manufacturing BETC.

(14) “Pass-through payment” means a minimum cash payment equivalent to the net present value of the Manufacturing BETC as determined under OAR 123-600-0135. This is also referred to as the “pass-through rate.”

(15) “Pass-through option” means the option that allows an Applicant a one time only transfer of all or a portion of the facility’s tax credit eligibility to certain persons or businesses in return for a cash payment.

(16) “Pass-through partner” means a personal income tax payer, individual, C corporation or S corporation that is transferred a tax credit certificate in return for a cash payment to an Applicant.

(17) “Preliminary certification” means the review and approval of the application for preliminary certification leading to issuance of a preliminary certificate for an eligible facility under ORS 285C.551.

(18) “Renewable energy resource” means energy derived from sources including but not limited to: straw, forest slash, wood waste or other wastes from farm or forest land, nonpetroleum plant or animal based biomass, ocean wave energy, solar energy, wind power, water power or geothermal energy.

(19) “Renewable energy resource equipment manufacturing facility” means any structure, building, installation, excavation, device, machinery or equipment, or an addition, reconstruction or improvement to land, to an existing structure, building, installation, excavation or device or to existing machinery or equipment, that is necessarily acquired, constructed or installed by a person in connection with the conduct of a trade or business and that is used primarily to manufacture:

(a) Component parts of electric vehicles.

(b) Electric vehicles.

(c) Equipment, machinery or other products designed to use a renewable energy resource and that meets the criteria established under ORS 285C.543 and these rules.

(d) Renewable energy storage devices. [2011 c.474 ¦5]

(20) “Renewable energy storage device” means a device that enables the storage of energy derived from renewable energy resources. A renewable energy storage device a facility does not need to be directly connected to a renewable energy resource, but a beneficial relationship shall be demonstrated between the energy output of the resource or resources and the charge and discharge capabilities of the facility. The storage device may be designed to store energy for transmission lines provided that the transmission lines serve, at least in part, renewable energy resources. A renewable energy storage device includes, but is not limited to, batteries or similar devices used to provide propulsive energy in electric vehicles.

(21) “Research, development, or demonstration facility (RDD)” means a facility under ORS 285C.545 (3) and subject to standards adopted by the Director in these rules that is not standard practice and produces or is likely to produce new renewable resource generating and conservation technologies or products in Oregon when commercialized.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0110

Process Overview

(1) Application Stages. The Department reviews an application for a Manufacturing BETC in two stages.

(a) The first stage is called preliminary certification. Prior to submitting an application and fee payment, the Applicant must contact the Department to initiate a pre-screening process. Once accepted, the application is subject to in-depth review of the manufacturer’s technology, financial model and plan, which may be conducted by a third party contractor selected by the Department for the purpose of determining if a preliminary certificate shall be issued. If the Department determines that the Applicant qualifies for a Manufacturing BETC, the Department may issue a preliminary certificate. The preliminary certificate may contain specific criteria and conditions for the facility to meet in order to complete final certification based on the information provided in the application for the BETC and type of facility that is described in the application. In addition, the Department shall require the Applicant to enter into a performance agreement or other similar agreement as a condition of approval.

(b) The second stage is called final certification. During this stage the application is subject to verification of completion of the facility in accordance with conditions and criteria imposed in the preliminary certificate and performance agreement, and the determination of final eligible costs for purpose of issuing the final tax certificate.

(2) Application. To begin the review process for each stage as described in 123-600-0120 and 123-600-0130, or to change the facility during the review process, an Applicant shall submit the information on the application form approved by the Department and additional information as requested by the Department.

(3) Receipt of Applications. Applications shall be considered received on the date marked received by the Department, unless the application is determined to be incomplete.

(4) Pass-through Option Commitment. An Applicant planning to use a pass-through partner should indicate their intention on the application for preliminary certification and shall select the pass-through option on the application for final certification.

(5) Conditions for Approval. The Director may impose conditions in approving a preliminary or final certificate that the facility shall operate in accordance with the representations made by the Applicant, and any applicable rules or standards adopted by the Director in accordance with the provisions of ORS 285C.540 to 285C.559.

(6) Separate and Distinct Facilities. The Director may issue only one Manufacturing BETC for each separate and distinct facility under these rules. To determine if a facility is separate and distinct, the Director will consider such factors as phases of development, expansion of or additions to existing facilities or product lines, increased production and number of jobs created or maintained by an Applicant.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0120

Preliminary Certification

(1) Pre Screening. Persons interested in applying for a Manufacturing BETC shall first contact the Department to initiate a pre-screening process.

(2) Submission of Application. Persons determined by the Department to have projects for proposed facilities eligible for a Manufacturing BETC shall submit the application form approved by the Department for application for preliminary certification along with the appropriate fee under OAR 123-600-0140. The Applicant shall also provide additional information the Director considers necessary to determine whether the proposed facility is in accordance with the provisions of ORS 285C.540 to 285C.559 and these rules, including but not limited to:

(a) The type of equipment, machinery or other products being manufactured meet related performance and efficiency standards applicable to the manufactured products;

(b) The economic viability of the facility and any other information for consideration of such factors as phases of development, expansion of or additions to existing facilities or product lines, increased production and number of jobs created or maintained by the Applicant;

(c) The minimum levels of increased employment in Oregon for the facility are proportionate to industry standards;

(d) The compensation paid and benefits provided to employees meet or exceed the national average in annual compensation for comparable employment;

(e) Details related to the technology and financial plan that can be independently reviewed by a third party;

(f) The credit worthiness of the Applicant and the likelihood of long-term operation and success of the facility; and

(g) The Applicant’s decision to locate or expand a facility in Oregon is based on the allowance of a tax credit under ORS 315.341.

(3) Qualified Applicant. A qualified Applicant shall meet one of the following criteria:

(a) The Applicant is a person to whom a tax credit for the facility has been transferred; or

(b) The Applicant shall be the owner, contract purchaser or lessee of the facility at the time of erection, construction, installation or acquisition of the proposed facility, and:

(A) The Applicant is the owner, contract purchaser or lessee of a trade or business that plans to utilize the facility in connection with Oregon property; or

(B) The Applicant is the owner, contract purchaser or lessee of a trade or business that plans to lease the facility to a person that will utilize the facility in connection with Oregon property.

(C) The Applicant is the owner, contract purchaser or lessee of a trade or business that plans to lease the facility to a person that will utilize the facility in connection with Oregon property.

(4) Eligible Costs. Subject to the facility cost limitations of OAR 123-600-0100(1) and the criteria established under ORS 285C.543:

(a) Eligible costs include land purchase costs, structures, buildings, installations, excavations, machinery, equipment or devices, or any addition, reconstruction or improvements to land or existing structures, buildings, installations, excavations, machinery, equipment or devices, necessarily acquired, constructed or installed by a person in connection with the conduct of a trade or business, that is used to manufacture the equipment, machinery or other products used primarily for:

(A) Component parts of electric vehicles; or

(B) Electric vehicles; or

(C) Renewable energy storage devices; or

(D) Equipment, machinery or other products designed to use a renewable energy resource.

(b) An application shall demonstrate compliance with these provisions to be accepted, including clearly describing the specific characteristics of the equipment, machinery or other products that demonstrate why such equipment, machinery or other products will be used primarily for component parts of electric vehicles or; electric vehicles; renewable energy storage devices or; equipment, machinery or other products designed to use a renewable energy resource that meets the criteria established under ORS 285C.543 and not for other commercial purposes and therefore why the costs of such of such equipment, machinery or other products are eligible costs.

(c) The Department may conduct inspections to verify eligible costs.

(d) Eligible facility costs are limited by costs for a facility, or portion thereof, that has previously received a Business Energy Tax Credit.

(e) The sum of any payments from federal grants and the Manufacturing BETC may not exceed total costs.

(f) Eligible costs do not include fees or costs associated with the review of the application.

(g) Eligible costs cannot be incurred prior to submitting an application for preliminary certification, except as provided for under OAR 123-600-0120(7).

(h) Cost can include payments for:

(A) Fees to finance, design or engineer the facility, including but not limited to debt fees and equity fees;

(B) Title searches, escrow fees, government fees, excluding fees required by OAR 330-091-0150, and shipping;

(C) All materials and supplies needed for the erection, construction, installation or acquisition of the proposed facility; and

(D) Work performed by employees or independent contractors of the applicant based on the following conditions:

(i) Employees or contractors must be certified, accredited, licensed, or otherwise qualified to do the work;

(ii) The work must be associated with the erection, construction, installation or acquisition of the proposed facility or in the case of a research development and demonstration facility, the work shall be directly related to the research, development, demonstration, facility design, monitoring, assessment, evaluation and reporting related to the product or technology;

(iii) Project management and other similar costs may only account for up to 15 percent of the total eligible costs; and

(iv) Costs for employee’s or contractor’s work on the facility must be detailed and documented as to specific tasks, hours worked, and compensation costs. Donated, in-kind or volunteer labor is not eligible;

(E) Costs for legal counsel that is directly related to the development of a qualifying facility (non-litigation related) or directly linked to the research, development or demonstration facility; and

(F) Other costs the Director includes.

(i) Cost may not include:

(A) Interest;

(B) Litigation or other operational-related legal fees and court costs;

(C) Costs to maintain and operate a facility;

(D) Administrative costs to apply for grants, loans, tax credits or other similar funding for a facility including, but not limited to, the BETC charge, costs associated with the creation and development of the CPA verification letter and costs associated with securing a pass-through partner for the facility;

(E) Routine operational or maintenance costs associated with the facility, including services, supplies and labor;

(F) Expenses that are directly or indirectly offset with federal fee waivers; and

(G) Other costs the Director excludes.

(j) If a facility is built under a lease, lease-option or lease-purchase contract, the lessee’s cost to acquire the facility is the value paid for the facility. If that amount is not known, the cost is the sum of:

(A) Tax credits passed-through by the lessor to the lessee;

(B) The amount paid when the facility is transferred; and (C) The lease payments not including taxes, insurance, interest, and operating costs.

(C) Payments to be made in the future must be discounted to present value.

(5) Preliminary Certification Review Process. Except as provided in OAR 123-600-0120(7), an application for preliminary certification shall be received by the Department on or prior to the facility start for the erection, construction, installation or acquisition of a facility.

(a) The application for preliminary certification shall be considered received on the date marked received by the Department, unless the application does not contain all information required in the application form and the payment as required in OAR 123-600-0140.

(b) An application is incomplete if it does not include information needed to demonstrate substantive compliance with the provisions of ORS 285C.540 to 285C.559 and any applicable rules or standards adopted by the Director. The Department shall provide the Applicant a written notice relating to the incomplete application and the information needed to make the application complete. If no action is taken within 30 days by the Applicant, the application shall expire.

(c) After a completed application is received, the Department shall notify the Applicant of the procedures for the Department’s due diligence review.

(d) If the application complies with the provisions of ORS 285C.540 to 285C.559, the Director may approve the preliminary certificate. The preliminary certificate shall state the amount of eligible costs for a Manufacturing BETC up to the maximum amount of certifiable costs under ORS 285C.545. It may differ from the amount requested for reasons explained and based on these rules. Also, it shall state any conditions that shall be met before development, final certification, or some other event can occur. The Director shall explain why each condition is needed to comply with these rules.

(e) If it does not comply, the Director may deny the application. No later than 60 days after the Director issues an order denying the application, the Applicant may request reconsideration as provided in these rules.

(f) An Applicant can re-submit an application that is denied if features of the facility change, the Applicant provides data the absence of which resulted in the denial, or other changes warrant. An application for preliminary certification can be amended or withdrawn by the Applicant before the Director issues a preliminary certificate. The Applicant may be required to pay additional fee for expenses incurred by the Department in connection with the additional review of the application for preliminary certification or amendment to the preliminary certificate.

(6) Preliminary Certification for Less than Total Eligible Costs. If under the provisions of ORS 285C.545(2), the Department intends to certify less than the total or no amount of eligible costs of renewable energy resource equipment Manufacturing BETC facility, the Department shall notify the Applicant in writing of that intent before approving the preliminary certificate.

(a) The Applicant shall have 30 calendar days from the date notification was issued to inform the Department in writing whether it wishes to withdraw the application or suspend further consideration of the application until a future date specified or submit additional information in support of the application.

(b) If the Department has not received notification or additional information in support of the application within that period of time, the Director may certify less than the total or no amount of eligible costs of the Manufacturing BETC facility.

(c) Once eligible costs are certified and a preliminary certificate is issued under this section, the certified eligible costs may be revised if conditions under ORS 285C.545 (2) change or upon notification from the Applicant or other information indicating that the scope of the project or the facility has changed in such a way to impact the preliminary certificate.

(7) Eligibility of Costs Before Facility Start. The Director may approve a preliminary certificate for costs incurred prior to the Department’s receipt of the application for preliminary certification if the Applicant files a written request for a waiver in accordance with these rules.

(a) Special circumstances beyond the Applicant’s control made application for preliminary certification before facility start impracticable. Such circumstances include process delays, facility funding and energy supplies or markets; and

(b) The Department is in receipt of the application for preliminary certification and receives a waiver request from the Applicant within 90 days of the facility start. Under extraordinary circumstances the Department may extend the waiver period provided the facility serves the aims of the program.

(c) Failing to submit an application for preliminary certification before signing contracts for the facility does not constitute special circumstances supporting a waiver.

(8) Preliminary Certificate. If the Department determines that the application for preliminary certification qualifies the Applicant and the facility for a Manufacturing BETC, the Director may issue a preliminary certificate.

(a) The preliminary certificate may contain specific criteria and conditions for the facility to meet in order to complete final certification based on the information provided in the application for the BETC and type of facility that is described in the application. In addition, the Department shall require the Applicant to enter into a performance agreement or other similar agreement as a condition of approval. The Director may consider a broad range of comparative data sources in determining criteria and conditions for job creation, job maintenance and compensation in the preliminary certificate or performance agreement, including but not limited to:

(A) National Compensation Survey (NCS), US Department of Labor Bureau of Labor Statistics

(B) Quarterly Census of Employment and Wages, US Department of Labor Bureau of Labor Statistics

(C) Oregon Labor Market Information System including the Oregon Employment Department’s most current Covered Employment and Wages Summary Report for Total Private Coverage.

(b) If the facility does not proceed the Applicant shall inform the Department in writing if it does not proceed with the facility or intends to proceed without the tax credit. In that case, the Director shall cancel the preliminary certificate.

(9) Applicant’s Request to Amend a Preliminary Certificate. An Applicant shall file a written request with the Department prior to the completion of the facility to amend a preliminary certificate.

(a) The request shall describe the change to the facility and reasons for the change. It may include changes in cost, tax credit amount, facility design, and materials. The request may also include changes in the jobs created, project financing, the Applicant, the location, or other matters that demonstrate substantial change in the project’s scope. The request shall be accompanied by the appropriate fee.

(b) If a request does not include information needed to demonstrate substantive compliance with the provisions of ORS 285C.540 to 285C.559 and any applicable rules or standards adopted by the Director shall provide the Applicant a written notice relating to the information needed to make the request complete. If the Applicant does not provide all of the requested information to the Department within 30 days, the request shall expire and no changes shall be made to the preliminary certificate.

(c) After the Applicant files the change request, the Department shall decide if the facility as modified complies with ORS 285C.540 to 285C.559 and these rules.

(A) If it complies, the Director may issue an amended preliminary certificate which may contain new or amended criteria, conditions and requirements.

(B) If it does not comply, the Director shall issue an order that denies the change and provide written reasons for the denial.

(10) Director’s Amendment or Revocation of a Preliminary Certificate. The Director may issue an order altering, conditioning, suspending or denying preliminary certification if the Director determines that:

(a) The erection, construction, installation or acquisition does not comply with the provisions of ORS 285C.540 to 285C.559 and applicable rules and standards; or

(b) The Applicant has previously received preliminary or final certification for the same costs; or

(c) The Applicant is unable to demonstrate that the facility would be economically viable without the allowance of additional credits under ORS 315.341; or

(d) The Applicant was directly involved in an act for which the Director has levied civil penalties or revoked, canceled or suspended any certification under ORS 285C.540 to 285C.559; or

(e) The Applicant or the principal, director, officer, owner, majority shareholder or member of the Applicant, or the manager of the Applicant if the Applicant is a limited liability company, is in arrears for payments owed to any government agency while in any capacity with direct or indirect control over a business; or

(f) The facility undergoes changes without the changes being approved under these rules;

(g) Any other reason allowed by the amendments to ORS 285C.551(3) in Oregon Laws, 2011, Chapter 474, Section 11.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0130

Final Certification

(1) Facility Completion. To qualify for a final certificate, the facility shall be completed as described in the preliminary certificate, and in accordance with the performance agreement and these rules. Any changes to the preliminary certificate and/or application for preliminary certification shall be made through the amendment process outlined in these rules and shall be completed prior to the project completion date. Failure to obtain approval through the amendment process may result in denial of the application for final certification.

(2) Application and Review.

(a) Applicants with completed facilities must have a valid preliminary certificate for a Manufacturing BETC in accordance with ORS 285C.547(5) in order to complete final certification including all transactions associated with the pass-through option described in 123-600-0135.

(b) The application shall be considered received for the purposes of ORS 285C.557 on the date marked received by the Department, unless the application is incomplete. If the application for final certification is not complete, the date marked received by the Department on the complete application containing all of the required information shall be considered the received date.

(c) Review of the application for final certification shall include a determination by the Director that the proposed erection, construction, installation or acquisition is technically feasible and should operate in accordance with the representations made by the Applicant, and is in accordance with the provisions of ORS 285C.540 to 285C.559 and any applicable rules or standards adopted by the Director, including but not limited to:

(A) Evidence in a form acceptable to the Department that the conditions of the preliminary certification and performance agreement have been complied with;

(B) Evidence of the costs of the facility. If the actual cost of the facility is less than $50,000, copies of receipts for purchase and installation of the facility; or if the actual cost of the facility is $50,000 or more, certified to by a certified public accountant who is not an employee of the Applicant. The certified public accountant shall:

(i) Complete a written review of costs paid or incurred to be reported in the Final Application, related to the facility as described in the Preliminary Application and Preliminary Certificate, based on canceled checks, invoices, or receipts, a binding contract or agreement, or other documentation as may be required under these rules and certify that such costs were properly paid or incurred and represent eligible costs under these rules indicating exceptions as applicable.

(ii) Conduct the review in the form of an agreed-upon procedures engagement that is in accordance with AT Section 201, Agreed-Upon Procedure Engagements (Statements on Standards for Attestation Engagements 10, as amended) of the American Institute of Certified Public Accountants.

(iii) Conduct any sampling of costs in accordance with procedures in the Statement on Auditing Standards in the AICPA Guidelines.

(iv) Review sufficient information if an applicant has an outstanding binding contract or loan agreement, to become satisfied that accounts directly related to the facility are not in default in order to include such costs as eligible costs.

(C) The amount of the credit under ORS 315.341 that is to be claimed and that the costs have not previously received preliminary or final certification;

(D) Information sufficient to demonstrate the number and type of jobs created and maintained by the operation and maintenance of the facility over the five-year period beginning with the year of preliminary certification under ORS 285C.551 and information on the benefits of the facility with regard to overall economic activity in this state will be met;

(E) Information sufficient to demonstrate that the facility shall remain in operation for at least five years, unless the Director by rule specifies a shorter period of operation;

(F) Documentation of compliance with applicable state and local laws and regulations and licensing and permitting requirements as defined by the Department; and

(G) A statement that the Applicant or the principal, director, officer, owner, majority shareholder or member of the Applicant, or the manager of the Applicant if the Applicant is a limited liability company, is not in arrears for payments owed to any government agency while in any capacity with direct or indirect control over a business.

(H) Any other information determined by the Department to be necessary prior to issuance of a final certificate, including inspection of the facility by the Department.

(b) After an application for final certification is received, the Department shall determine whether the application is complete. An application is incomplete if it does not include information needed to demonstrate substantive compliance with the provisions of ORS 285C.540 to 285C.559 and any applicable rules or standards and preliminary certification conditions adopted by the Director. If it is not complete, the Applicant shall be provided a written explanation describing deficiencies. If it is complete, the Department shall process the application. Within 60 days after a completed application for final certification is received the Department shall either approve or deny the application.

(c) If the Department approves the application; the Director shall issue a certified amount letter, which shall state the amount of certified costs, reduced as applicable by any federal grants received, and the amount of the tax credit approved. The certified amount letter may contain additional criteria and conditions that shall be met in order to retain tax credit benefits or the tax credit certificate issued to the Applicant may be subject to revocation. If the facility fails to meet any of the criteria, conditions and requirements established in final certification, the Applicant shall notify the Department within 30 days.

(d) When an Applicant chooses to transfer the tax credit under ORS 285C.549, the Department may hold the application for final certification until pass-through partner(s) information is received by the Department.

(3) Final Certificate. A certificate issued under ORS 285C.553 is required for purposes of obtaining tax credits in accordance with ORS 315.341. Such certification shall be granted for a period not to exceed five years. Unless transferred to a pass-through partner under ORS 285C.549, the five-year period shall begin with the tax year of the Applicant during which the completed application for final certification of the facility under ORS 285C.553 is received by the Department.

(a) If the original owner of the certificate uses any portion of the credit, the certificate becomes nontransferable.

(b) After the Director issues a final certificate, an Applicant shall notify the Department in writing within 30 days of any of the following conditions:

(A) The facility has been moved;

(B) Title to the facility has been conveyed;

(C) The facility is subject to or part of a bankruptcy proceeding;

(D) The facility is not operating; or

(E) The term of a leased facility has ended.

(4)(a) Basis for Denying Tax Credit Benefits. The Department may deny final certification if any of the following conditions exist:

(A) Final certification is not complete before 1,825 days (5 years) after the preliminary certificate was issued.

(B) The Applicant does not provide information about the facility in a reasonable time after the Department requests it;

(C) The facility is significantly different than the proposed facility for which the preliminary certificate was issued;

(D) The Applicant misrepresents or fails to construct or operate the facility;

(E) The Applicant fails to demonstrate that the facility described in the application is separate and distinct from previous or current applications reviewed by the Department;

(F) The facility does not meet all of the conditions and requirements contained in the preliminary certificate or performance agreement; or

(G) The Applicant is unable to demonstrate that the facility complies with all applicable provisions of ORS Chapter 285C.540 to 285C.559 and these rules.

(b) If the Department does not approve the application, the Department shall provide written notice of the action, including a statement of the findings and reasons for the denial by regular and certified mail.

(c) An application for final certification that is denied can be submitted again. An application for final certification can be amended or withdrawn by the Applicant. If an application is submitted again or amended, the time for review of the application for final certification starts over.

(d) If the Director does not issue a certified amount letter for final certified cost or a final certificate within 60 days after an application is filed, the application is denied pursuant to ORS 285C.553(4).

(5)(a) Basis for Revoking Tax Credit Benefits. The Director shall revoke certificates as provided in ORS 285C.559 and 315.341 (4) (a) if the Director finds that:

(A) The certification was obtained by fraud or misrepresentation. For the purposes of this section, “fraud or misrepresentation” means any misrepresentation made by an Applicant for a preliminary or final certification, including but not limited to, misrepresentations as to the Applicant’s financial viability, facility construction and operation, or any other information provided as part of an application for a preliminary or final certification;

(B) The holder of the certificate or the operator of the facility has failed to construct or operate the facility in compliance with the plans, specifications and procedures in the certificate or the performance agreement; or

(C) The facility is no longer in operation.

(b) If all or a part of the tax credit certificate has been transferred to a pass-through partner under ORS 285C.549, the certificate is not considered revoked as to the pass-through partner, but the Applicant is liable for the amount of tax credits claimed or that could be claimed.

(6)(a) Sale or Disposition of the Facility After Final Certification. Pursuant to ORS 315.341 (4)(a), upon receiving notice that the facility has been sold or otherwise transferred, the Director shall revoke the final certificate, as of the date of the disposition of the facility, unless the Manufacturing BETC for the facility has already been transferred under ORS 285C.549.

(b) The new owner or new or renewed lessee of a facility may apply for a final certificate. The request shall comply with ORS 285C.540 through 285C.559 and these rules and include information to allow the Department to determine the amount of tax credit not claimed by the former owner or former lessee. If the facility continues to comply with the requirements set out in these rules and any applicable conditions imposed by the Department, the Director shall issue a new final certificate consistent with the provisions of ORS 315.341 (4)(a).

(7) Request for Reconsideration. No later than 60 days after the Director issues an order on preliminary certification, final certification, or canceling or revoking a preliminary or final certificate under these rules, the Applicant may request reconsideration in writing.

(8) Inspections. After an application is filed under ORS 285C.547 or 285C.553 or a tax credit is claimed under these rules, the Department may inspect the facility. The Department shall schedule the inspection during normal working hours, following reasonable notice to the facility operator.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0135

Pass-through Transfer of the Tax Credit

For purposes of ORS 285C.549 and the pass-through rate for discounting the face value of a certified Business Energy Tax Credit to the Net Present Value that is the minimum amount the Applicant shall receive as a cash payment from the Pass-through Partner(s) in exchange for the Credit:

(1) Rate Formula. As set forth by the Department on the first business day of each calendar quarter, the pass-through rate, to be multiplied by the credit amount, equals “1 ÷ (1 + R + S + P)^5,” where:

(a) “R” is the U.S. Prime Rate as published by The Wall Street Journal newspaper;

(b) “S” is a spread factor greater than zero to account for special transactional and risk elements, and initially set at 3.25 percentage points, but subject to adjustment by the Department based on experience and changing circumstances;

(c) “P” is an estimate of projected price inflation, as determined by the Department, but to be not less than the average of the lower central tendency for core price inflation in the succeeding two years from the latest economic projections of the Federal Reserve Board members and Federal Reserve Bank presidents; and

(d) “5” means to exponentially raise the preceding sum to the fifth power in accordance with the five years over which the credit may be claimed.

(2) Modification of Formula. In addition to modifications of the variables “R” and “S” in subsection (1)(a) of this rule, the Department may alter the formula for purposes of this rule, as announced at the start of the calendar quarter, in response to any greatly changing situation with prevailing market rates of return or projected price inflation, potentially pending a temporary or permanent rulemaking.

(3) Rate Option. The Applicant may elect to use the quarterly pass-through rate as set in section (1) of this rule for the calendar quarter, during which occurs either:

(a) Preliminary Certification, or

(b) Transaction of the pass-through payment.

(4) For the Department to issue a tax credit certificate to a pass through partner the Applicant must be in compliance with the conditions and requirements of the Preliminary Certificate, the performance agreement and these rules.

(5) A tax credit may be transferred one time only, from the Applicant to an eligible pass through partner.

(6) Finding Pass-through Partners. The Applicant is responsible for seeking a pass-through partner. The Department cannot guarantee a pass-through partner for any completed project.

(a) The Applicant will notify the Department if a third-party intermediary will be used to assist the Applicant in seeking a pass-through partner.

(b) The Applicant will notify the Department when a pass-through partner(s) is identified. The Department will provide the necessary instructions and forms needed to complete verification of the pass-through payment transaction in order to issue a tax credit certificate.

(7) Transferee’s Certification Period. For a transferee holding a credit that has been transferred under ORS 285C.549, the five-year period begins with the tax year of the transferee in which the transferee pays for the credit.

(8) Expiration of Transferability. The Director may issue a final certificate in the name of the Applicant for any tax credit balance remaining sixty days prior to the expiration of the Preliminary Certificate under ORS 285C.547(5).

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0140

Budget Limits and Payments

(1) Amount of Credits Allowed for a Facility. During any calendar year, a Manufacturing BETC preliminary certificate shall not be issued for more than:

(a) $40 million in maximum eligible facility costs for a renewable energy resource equipment facility, not including those used to manufacture electric vehicles;

(b) $2.5 million in maximum eligible facility costs for a facility used to manufacture electric vehicles;

(2) Fees for Certification. The Department has established the following schedule for payments to accompany an application as required under 285C.555.

(a) Included with each application for preliminary certification shall be an initial payment payable to the Department. The payment is 0.0060 multiplied by the facility eligible cost and not to exceed a payment amount of $75,000, and subject to additional expenses incurred by the Department as described in this section.

(A) A refund shall not be granted for any reduced eligible costs that are included in an amended certificate.

(B) An additional application payment shall be paid as specified in (3)(a) of this rule if a request to amend a certificate to increase the eligible cost.

(C) No facilities shall be exempt from these requirements.

(b) Applications for preliminary certification shall not be reviewed or considered complete if not accompanied by the fee payment. Preliminary certificates shall only be issued if the application is complete. In addition, the Applicant may be required to pay for expenses incurred by the Department in connection with the application that exceed these payments and which the Department determines are incurred in connection with processing the application. The Applicant shall be advised of any additional application expenses the Applicant shall pay before the expenses are incurred by the Department.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0150

Prioritization System for Manufacturing BETC Facilities

Applications in Excess of Biennial Limits. In the event that the Department receives applications for preliminary certification with a total amount of potential tax credits in excess of the limitations in ORS 285C.545, the Department shall allocate the potential tax credits according to the order in which the applications are complete.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12

123-600-0250

Research, Development, or Demonstration Facility (RDD)

(1) Criteria. Eligible RDD facilities shall comply with one or more of the following criteria:

(a) Research facilities that include a test bench research, prototype or pilot scale construction of a theoretically proved or primary researched new renewable resource generating or conservation technology;

(b) Development facilities that include the manufacture or initiation of the capability to manufacture new products for renewable resource generating or energy conservation in Oregon;

(c) Demonstration facilities that are likely to resolve questions on how to apply new renewable resource generating or more efficient energy technologies through pilot or production scale applications of technology; and

(d) Facilities that are likely to achieve Department’s goals as determined by the Director and shall demonstrate a reasonable potential to result in benefits in Oregon for which the value is likely to exceed the value of the tax credit, based on information filed with the application for preliminary certification.

(2) Eligible costs. Eligible costs for a RDD facility may include:

(a) Engineering, design and administrative costs

(b) Costs inherent in a research, development or demonstration facility that may not result directly in saved or produced energy. Such costs may include:

(A) Facility design, monitoring, assessment, evaluation and reporting. This includes but is not limited to: the development of standards, specifications, policies and procedures facilitating technology transfer; instruments, and controls.

(B) Other equipment needed to monitor, assess or evaluate the facility and the impacts of the facility.

(c) The following costs related to demonstration model(s) may be considered eligible:

(A) Materials for the demonstration model(s).

(B) The manufacturing, construction, assembly, and/or installation of the demonstration model(s).

(C) Testing and monitoring the demonstration model(s).

(d) Other eligible costs as determined by the Director.

Stat. Auth.: ORS 285C.540 - 285C.559, ORS 315.341, OL 2011, Ch. 474 HB2523
Stats. Implemented: ORS 285C.540-559, 315.341, OL 2011, Ch. 474 HB2523, OL 2012, Ch. 45 HB 4079
Hist.: OBDD 8-2012, f. & cert. ef. 6-1-12


 

Rule Caption: This new rules division implements the Oregon Low Income Community Jobs Initiative.

Adm. Order No.: OBDD 9-2012

Filed with Sec. of State: 6-1-2012

Certified to be Effective: 6-1-12

Notice Publication Date: 5-1-2012

Rules Adopted: 123-630-0000, 123-630-0010, 123-630-0020, 123-630-0030, 123-630-0040, 123-630-0050, 123-630-0060, 123-630-0070, 123-630-0080, 123-630-0090, 123-630-0100

Subject: The Oregon Low Income Community Jobs Initiative was brought forth in the 2011 Legislative Session through SB 817. These rules implement the program which includes criteria for eligibility, as well as fees associated with the program.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-630-0000

Purpose

This division of administrative rules specifies procedures and criteria necessary to administer processes under the Oregon Low Income Community Jobs Initiative for the certification of a qualified equity investment in order to receive a credit allowance for taxes otherwise due under ORS 316, 317 or 318.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536, 316, 317, 318
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0010

Definitions

For the purposes of this division of administrative rules, additional definitions are found in Procedural Rules, OAR 123-001. As used in OAR 123 division 630 the following terms have the meanings set forth below, unless the context clearly indicates otherwise.

(1) “Applicable percentage” means zero percent for each of the first two credit allowance dates, seven percent for the third credit allowance date and eight percent for the next four credit allowance dates.

(2) “Credit allowance date” means, with respect to any qualified equity investment:

(a) The date on which the investment is initially made; and

(b) Each of the six yearly anniversary dates after that initial date.

(3) “Long-term debt security” means any debt instrument issued by a qualified community development entity, at par value or at a premium, with an original maturity date of at least seven years from the date of its issuance, with no acceleration of repayment, amortization or prepayment features prior to its original maturity date.

(4) “Purchase price” means the amount of cash paid to a qualified community development entity for a qualified equity investment.

(5) “Qualified active low-income community business” has the meaning given that term in section 45D of the Internal Revenue Code and the rules and regulations adopted thereunder. “Qualified active low-income community business” does not include, a business that derives or projects to derive 15 percent or more of its annual revenue from the rental or sale of real estate, unless the business is controlled by, or under common control with, another business that:

(a) Does not derive or project to derive 15 percent or more of its annual gross revenues from the rental or sale of real estate; and

(b) Is the primary tenant of real estate leased from the controlled business.

(6) “Qualified community development entity” has the meaning given that term in section 45D of the Internal Revenue Code, provided that the entity has entered into, or is controlled by an entity that has entered into, an allocation agreement with the Community Development Financial Institutions Fund of the United States Department of the Treasury with respect to credits authorized by section 45D of the Internal Revenue Code, and the State of Oregon is included within the service area set forth in the allocation agreement.

(7) “Qualified equity investment” means any equity investment in, or long-term debt security issued by, a qualified community development entity, that:

(a) Is acquired at its original issuance solely in exchange for cash after July 1, 2012, unless it was a qualified equity investment in the hands of a prior holder; and

(b) Has at least 85 percent of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in this state.

(8) “Qualified low-income community investment” means any capital or equity investment in, or loan to, any qualified active low-income community business made after July 1, 2012.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0020

Credit Allowance

(1) A person or entity that makes a qualified equity investment shall, at the time of investment, earn a vested credit against the taxes otherwise due under ORS chapter 316, 317 or 318.

(2) The total amount of the tax credit available to a taxpayer under this section shall equal 39 percent of the purchase price of the qualified equity investment. The tax credit structure is over the course of seven years. The total tax credit value will be 39 percent of the total purchase price of the qualified equity investment. The applicable percentage is zero percent for years 1 and 2, seven percent for year 3 and eight percent for years 4, 5, 6 and 7. A tax credit allowed under this section may not be sold or transferred, with the exception that tax credits that a partnership, limited liability company, S corporation or other pass-through entity is entitled to claim may be allocated to the partners, members or shareholders of the entity for their direct use in accordance with the provisions of any agreement among the partners, members or shareholders.

(3) The holder of a qualified equity investment or any partner, member or shareholder of such holder pursuant to subparagraph 2 above on a particular credit allowance date of the qualified equity investment may claim a portion of the tax credit against its tax liability for the tax year that includes the credit allowance date equal to the applicable percentage for that credit allowance date multiplied by the purchase price of the qualified equity investment.

(4) The credit allowed under this section may not exceed the tax liability of the taxpayer claiming the credit for the tax year in which the credit is claimed.

(5) 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 in any succeeding tax year.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536, 316, 317 or 318
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0030

Eligibility

(1) The following conditions and/or criteria must exist for a taxpayer to be eligible for the credit:

(a) A qualified community development entity that issues a debt instrument may not make cash interest payments on the debt instrument during the period commencing with its issuance and ending on its final credit allowance date in excess of the sum of the cash interest payments and the cumulative operating income, as defined in the regulations promulgated under section 45D of the Internal Revenue Code, of the qualified community development entity for the same period. This limitation shall only apply to long-term debt securities issued by a qualified community development entity that are designated as qualified equity investments and shall not apply to other debt of the qualified community development entity. Neither this paragraph nor the definition of “long-term debt security” provided in 123-630-0010 in any way limits the holder’s ability to accelerate payments on the debt instrument in situations where the qualified community development entity has defaulted on covenants designed to ensure compliance with this section or section 45D of the Internal Revenue Code.

(b) A business is considered a qualified active low-income community business for the duration of a qualified community development entity’s investment in or loan to the business if it is reasonable to expect that at the time of the qualified community development entity’s investment in or loan to a qualified active low-income community business, the business will continue throughout the duration of the investment in or loan to the business.

(c) A qualified equity investment must be designated a qualified equity investment by the qualified community development entity and be certified by the department.

(d) The maximum amount of qualified low-income community investments made in a qualified active low-income community business, together with all of its affiliates, that may count towards the requirement that a qualified community development entity invest at least 85 percent of the qualified equity investment in qualified active low-income community businesses in this state is $4 million, whether made by one or several qualified community development entities.

(e) A qualified equity investment must be made before July 1, 2016. Nothing in this paragraph precludes an entity that makes a qualified equity investment prior to July 1, 2016, from claiming a tax credit relating to that qualified equity investment for each applicable credit allowance date.

(2) A taxpayer claiming a credit may not claim any other credit under ORS 315 or 285C during the same tax year based on activities related to the same qualified active low-income community business.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0040

Ineligible Activities

(1) Not all projects or businesses will qualify for the Oregon Low Income Community Jobs Initiative. Example businesses that are ineligible include but are not limited to:

(a) Residential rental;

(b) Owner occupied housing;

(c) Farming operations;

(d) Private or commercial golf courses;

(e) Country clubs;

(f) Massage parlors;

(g) Hot tub facilities;

(h) Suntan facilities;

(i) Racetracks or other facilities used for gambling; and

(j) Any store of which the principal business is the sale of alcoholic beverages for consumption off premises.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536, 285C
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0050

Application and Fees

(1) An applicant seeking to have an equity investment or long-term debt security certified as a qualified equity investment and eligible for a tax credit under 123-630-0020 must submit an application to the department on a form that the department provides. A complete application must include all of the following:

(a) The entity’s name, address, tax identification number and evidence of certification as a qualified community development entity.

(b) A copy of an allocation agreement executed by the entity, or its controlling entity, and the Community Development Financial Institutions Fund that includes the State of Oregon in its service area.

(c) A certificate executed by an executive officer of the entity attesting that the allocation agreement remains in effect and has not been revoked or canceled by the Community Development Financial Institutions Fund.

(d) A description of the proposed purchase price, structure and purchaser of the equity investment or long-term debt security.

(e) The name and tax identification number of any person eligible to claim a tax credit, under 123-630-0020, allowed as a result of the certification of the qualified equity investment.

(f) Information regarding the proposed use of proceeds from the issuance of the qualified equity investment on a form provided by the department. The information will include but is not limited to the following for each proposed qualified low-income community investment:

(A) Location;

(B) Sources and uses of funds;

(C) Impacts to communities;

(D) Revenues;

(E) Number of jobs created and/or retained; and

(F) Economic impacts

(g) A nonrefundable application fee of $20,000. This fee shall be paid to the department and shall be required for each application submitted.

(2) In addition to what is required by the application or in this division of administrative rules, the applicant will submit any information requested by the Department for purposes of evaluating the application.

(3) A qualified community development entity that is certified under 123-630-0080 shall pay an annual evaluation fee of $1,000 to the department with the submission of each report set forth in 123-630-0070.

(4) Applications will be processed on a first come, first serve basis. The department will begin accepting applications on July 2, 2012. Any application received by the department before July 2, 2012 shall be considered received by the department on July 2, 2012.

Stat. Auth.: ORS 285C.650 , 315.526 – 315.536
Stats. Implemented: ORS 285C.650 & 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0060

Preference

The department may give preference to applications for projects in traded sectors as identified by the Commission in the Strategic Plan and that demonstrates overall community benefit and have one or more of the following characteristics:

(1) Produce goods that directly reduce emissions of greenhouse gases or are designed as environmentally sensitive replacements for products in current use;

(2) Have a primary purpose of improving the environment or reducing emissions of greenhouse gases;

(3) Are operated by businesses with 100 or fewer employees;

(4) Are located in rural or distressed areas of the state;

(5) Employ displaced workers in the area;

(6) Assist in the economic diversification of the area;

(7) Contain a significant amount of owner equity capital. At least ten percent of the project costs for established companies and 30 percent of project costs for start-ups should come from equity or subordinated loans from the owners;

(8) Encourage the flow of capital from outside the local area; or

(9) Do not cause adverse competitive disadvantages to existing businesses.

Stat. Auth.: ORS 285A, 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0070

Reporting Requirements

(1) The qualified community development entity will submit a report by the first anniversary of the initial credit allowance date that provides proof that at least 85 percent of the cash purchase price of its qualified equity investment was used to make qualified low-income community investments in qualified active low-income community businesses located in this state.

(2) Thereafter, the qualified community development entity will submit an annual report within 45 days of the beginning of the state’s fiscal year during the compliance period on a form provided by the department. No annual report shall be due prior to the first anniversary of the initial credit allowance date. The form shall be remitted to the department both in electronic and hard copy formats. The report will include but is not limited to the following:

(a) Number of employment positions created and retained as a result of qualified low-income community investments;

(b) Annual salary of each position described in subparagraph (a) of this paragraph; and

(c) Number of positions described in subparagraph (a) of this paragraph that provide health benefits as described in ORS 743.730.

(3) The qualified community development entity is not required to provide the annual report information set forth in 123-630-0070(2) for qualified low-income community investments that have been redeemed or repaid.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0080

Certification

(1) Within 15 days after having received a complete application, the Department will grant or deny the application in full or in part and notify the applicant of the decision.

(2) If the application is deemed complete, the department will certify the proposed equity investment or long-term debt security as a qualified equity investment and eligible for a tax credit under 123-630-0020, and subject to the limitations stated in 123-630-0020. The department shall provide written notice of the certification to the qualified community development entity. The notice shall include the names of those taxpayers who are eligible to utilize the credits and their respective credit amounts. If the names of the persons or entities that are eligible to utilize the credits change due to a transfer of a qualified equity investment or a change in an allocation pursuant to 123-630-0020(2), the qualified community development entity shall notify the department of the change.

(3) Within 60 days after receiving notice of certification, the qualified community development entity shall issue the qualified equity investment and receive cash in the amount of the certified purchase price. The qualified community development entity must provide the department with evidence of the receipt of the cash investment within 10 business days after receipt. If the qualified community development entity does not receive the cash investment and issue the qualified equity investment within 60 days following receipt of the certification notice, the certification shall lapse and the entity may not issue the qualified equity investment without reapplying to the department for certification. A certification that lapses reverts to the department and may be reissued only in accordance with the application process outlined in this section.

(4) The department shall certify qualified equity investments in the order applications are received by the department. Applications received on the same day shall be deemed to have been received simultaneously. For applications received on the same day and deemed complete, the department shall certify, consistent with remaining tax credit capacity, qualified equity investments in proportionate percentages based upon the ratio of the amount of qualified equity investment requested in an application to the total amount of qualified equity investments requested in all applications received on the same day. If a pending request cannot be fully certified because of the limitation in 123-630-0090, the department shall certify the portion that may be certified unless the qualified community development entity elects to withdraw its request rather than receive partial credit.

(5) If the department denies any part of the application, the notification to the applicant will include the grounds for denial. The applicant will have 15 days of receipt of the notification to provide additional information to mediate the denial. Within 15 days after the department receives any such additional information, the department will reconsider the application. If the department grants the application upon reconsideration, the approval will be effective as of the original date of submission. If the applicant fails to provide additional information within 15 days of receipt of the denial, the application remains denied.

Stat. Auth.: ORS 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0090

Limitations for Certification

(1) Once the department has certified a cumulative amount of qualified equity investments that can result in the utilization of $16 million of tax credits in any tax year, the department may not certify any more qualified equity investments under 123-630-0080. This limitation shall be based on the scheduled utilization of tax credits without regard to the potential for taxpayers to carry forward tax credits to later tax years.

(2) The department will reserve $30 million of qualified equity investment authority for qualified low-income community investments in qualified active low-income community businesses that:

(a) Have a primary purpose of improving the environment or reducing emissions of greenhouse gases; or

(b) Produce goods that directly reduce emissions of greenhouse gases or are designed as environmentally sensitive replacements for products in current use.

(3) The department will reserve $170 million of qualified equity investment authority for all other qualified active low-income community investments (which may include the types of investments set forth in 123-630-0090(2)).

(4) All applications will indicate the amount of qualified equity investment authority sought by the applicant under 123-630-0090(2) and 123-630-0090(3). The maximum amount of qualified equity investment authority for which an applicant may apply under 123-630-0090(2) is $30 million and under 123-630-0090(3) is $170 million.

Stat. Auth.: ORS 285C.650 – 653, 315.526 – 315.536
Stats. Implemented: ORS 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

123-630-0100

Recapture of Tax Credit

(1) The Department of Revenue may recapture any portion of a tax credit per ORS 285C.656 and 315.533.

(2) The Department of Revenue may recapture any portion of a tax credit if the qualified community development entity applies for and receives qualified equity investment authority under 123-630-0090(2) and fails to invest at least 85 percent of the cash purchase price of the QEI in qualified active low-income community businesses that satisfy the requirements of 123-630-0090(2) within 12 months of the issuance of the qualified equity investment and maintain such level of investment in qualified active low-income community businesses satisfying such requirements until the last credit allowance date for such qualified equity investment.

(3) The department shall pre-screen a qualified community development entity’s proposed investment in a qualified active low-income community business for purposes of determining if the business satisfies the requirements of 123-630-0090(2). The department shall, not later than 15 business days after the date of receipt of all relevant documentation, determine whether the qualified active low-income community business satisfies the requirements of 123-630-0090(2) and notify the qualified community development entity in writing of the determination and an explanation of its determination. If the department fails to notify the qualified community development entity with respect to the proposed investment within the period specified in this paragraph, the business in which the qualified community development entity proposes to invest is considered to satisfy the requirements of 123-630-0090(2).

Stat. Auth.: ORS 285C.656 & 315.526 – 315.536
Stats. Implemented: ORS 285C.656 & 315.526 – 315.536
Hist.: OBDD 9-2012, f. & cert. ef. 6-1-12

 

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2011.

2.) Copyright 2012 Oregon Secretary of State: Terms and Conditions of Use

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