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OREGON BUSINESS DEVELOPMENT DEPARTMENT

 

DIVISION 635

OREGON INVESTMENT ADVANTAGE

123-635-0000

Purpose and Scope

This division of administrative rules:

(1) Specifies procedures and criteria for certification under the Oregon Investment Advantage Act to exempt the business income of qualified facilities from State income or corporate excise taxation under ORS 316.778 or 317.391, in order to spur investments in new Oregon operations with new full-time employees (earning minimum compensation levels) at qualifying facilities in counties exhibiting the worst per capita incomes and unemployment rates statewide.

(2) Does not control or bind the county assessor or Department of Revenue and does not supersede OAR chapter 150, in matters related to tax administration.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.495, 285C.500 - 285C.506, 316.778 & 317.391
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; EDD 1-2009, f. 2-23-09, cert. ef. 2-24-09; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0000, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 4-2011, f. 8-31-11, cert. ef. 9-1-11; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0100

Definitions

As used in this division of administrative rules, in addition to definitions in OAR 123-001 (Procedural Rules), unless the context dictates otherwise:

(1) “Business firm” means a person operating or conducting one or more trades or businesses for profit, and does not include any governmental agency, municipal corporation or nonprofit corporation, other than a people’s utility district or a joint operating agency under ORS 262.005.

(2) “Facility” has the meaning under ORS 285C.500(4).

(3) “Municipal Corporation” means the following, with respect to the location of a Facility proposed by an application for preliminary certification in OAR 123-635-0200:

(a) The county government of the county, the territory of which contains the Facility, regardless of whether the location is incorporated or not;

(b) A city government, if the Facility will be located within the corporate limits or urban growth boundary of the city; and

(c) A Port for which the Facility will be located within the territorial limits of the port district.

(4) “Qualified Location” means a site for a Facility as described in OAR 123-635-0150.

(5) “Unique Operations” has the meaning described in OAR 123-635-0175.

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

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.500 & 285C.503
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0100, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 4-2011, f. 8-31-11, cert. ef. 9-1-11; OBDD 12-2012, f. & cert. ef. 8-15-12; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0150

Qualified Locations

A proposed Facility must be inside a county as determined according to section (1) of this rule, and located at a site satisfying the requirements of section (2) of this rule, at the time when the Department receives the application for preliminary certification:

(1) With respect to county eligibility under ORS 285C.500(5)(b):

(a) Effective May 1 of each year, the Department shall determine the counties fulfilling the criteria related to county annual unemployment rates and per capita personal income levels for the three most recent years for which data are then available.

(b) This determination remains in effect for any proposed Facility, for which the Department receives the application for preliminary certification on or after that May 1, until and including April 30 of the next year, except when the determination is modified to reflect official revisions in the data occurring during that annual period at least one full month before receipt of the application, and for the operative expiration of section 3(2), chapter 595, Oregon Laws 2005.

(c) Subsequent revisions to data described in this section do not affect the county eligibility for a preliminary certification application received when the county was eligible.

(2) The specific site of a proposed Facility must meet at least one of the following two requirements:

(a) The site is completely inside the urban growth boundary (UGB) of a city with a population of 15,000 or less (based on the most recent U.S. Census count or estimate available from the Portland State University Population Research Center); or

(b) Regardless of being inside or outside of any city's UGB, the site consists entirely of land zoned for industrial use:

(A) Pursuant to effective municipal zoning ordinances that expressively and generally permit permanent facilities and private operations for heavy or light manufacturing, energy production, fabrication, warehousing, distribution, mineral/agricultural processing or similarly intensive economic uses;

(B) In accordance with applicable state land-use laws, including but not limited to those for unincorporated communities, exceptions from state planning goals, or ORS 197.713, 197.714 or 197.719; and

(C) Such that the Facility's business operations must directly benefit a traded sector industry under ORS 285B.280, regardless of other uses permitted under the particular zoning code ordinance.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.500 & 285C.503
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0150, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 12-2012, f. & cert. ef. 8-15-12; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0175

Unique Operations

Under ORS 285C.503(5)(e), a business firm’s operations that comprise a Facility proposed for preliminary certification must be new business operations respective to the site of the Facility and to any other location in this state where the firm also operates, such that:

(1) In the case of the business firm itself, the business operations at the Facility must be categorically different from any operations in which that same firm has recently engaged. (As an example, a business firm may receive certification for a Facility that will manufacture or distribute certain products here for the first time, even if the firm’s products were already for sale in this state)

(2) In the case where the business firm has 100-percent common equity interest or is under common control (by way of corporate, familial or similar affiliations) with one or more other business firms operating in this state, the business operations at the Facility must be significantly dissimilar from the operations in which any other such firm has recently engaged. (As an example, a corporate subsidiary is certifiable for a new, first-in-Oregon facility fabricating a laminated wood product, even if another wholly owned subsidiary of the same parent company already makes a similar product in this state, but the new operations utilize an advanced generation of technology with which the product has higher performance standards or weight-bearing specifications)

(3) Irrespective of section (1) or (2) of this rule, the acquisition of a preexisting Facility does not qualify as new business operations, unless both of the following are satisfied:

(a) The business firm invests appreciably in real property or extensively in terms of installing personal property at the Facility after applying for preliminary certification; and

(b) The operations that the firm will undertake pursuant to the new investment are significantly dissimilar from operations recently performed at the Facility.

(4) For purposes of this rule:

(a) “Categorically different” means that the existing, in-state business operations produce, render, deliver or provide essentially another type of good or service for a distinct market segment or customer base.

(b) “Recently” means during the 12 months before the date, on which the Department received the application for preliminary certification.

(c) “Significantly dissimilar” means that the existing, in-state business operations, or the goods or services arising from them, utilize different technology, processes, delivery methods, points in supply chain, marketing, brand names or the like.

(5) How much a Facility’s proposed operations are like those of any other business (even one with partially shared ownership), anywhere in Oregon, does not matter, except as provided under ORS 285C.503(4)(b)(A) and (5)(f) to the extent that the operations will compete with other employers in the local area as addressed in OAR 123-635-0270(4)(b) and (5).

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.500 & 285C.503
Hist.: EDD 9-2005, f. & cert. ef. 11-4-05; EDD 1-2009, f. 2-23-09, cert. ef. 2-24-09; Renumbered from 123-155-0175, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 4-2011, f. 8-31-11, cert. ef. 9-1-11; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0200

Preliminary Certification Application

For purposes of ultimately seeking the exemption under ORS 316.778 or 317.391:

(1) A business firm must complete an application for preliminary certification and send it to the Department, as follows:

(a) Using the form prescribed by the Department; and

(b) Before the following:

(A) Commencement of construction, installation or similar activities with respect to any new property or improvements, which excludes site work or preparation other than appreciable improvements to the land, that constitute any part of the proposed Facility; and

(B) Hiring of any employee, who will constitute the five or more required employees at that location.

(2) The preliminary certification application must include a fee of $500 in the form of a check or money order payable to the Department.

(3) Applications are available at and shall be submitted to: Business Development, Business Oregon, State Lands Building Suite 200, 775 Summer Street NE, Salem OR 97301-1280, see www.oregon4biz.com.

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

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.503
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0200, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 4-2011, f. 8-31-11, cert. ef. 9-1-11; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0250

Determination of Preliminary Certification

Pursuant to a filing of a preliminary certification application as described in OAR 123-635-0200:

(1) The Department shall:

(a) Review the application for completeness; and

(b) Determine whether the business firm and the applicant's proposed Facility:

(A) Is at a Qualified Location;

(B) Represents Unique Operations; and

(C) May be reasonably expected to satisfy the employment and other applicable requirements under ORS 285C.503(5).

(2) After receipt of the application, the Department shall do the following:

(a) Notify the applicant in writing whether it is complete; and

(b) Send a copy of the application to the Municipal Corporations, in such a way that the date of sending is recorded, unless officials of the Municipal Corporation have already formally expressed support for the proposed Facility’s use of this program comparable to subsection (3)(b) of this rule.

(3)(a) The Department shall complete the determination described in subsection (1)(b) of this rule, after receiving any additional information requested from the applicant; but

(b) The determination shall not be final sooner than 60 days from the date, on which the Department sent the copy of the application to the Municipal Corporations, unless they all have provided sufficient response, such as a written confirmation of “no objection” from local officials based on communication with governing body members.

(4) After fulfillment of section (3) of this rule, the Department shall notify the applicant in writing of its decision, which shall include but is not limited to the following, in the event that the Department:

(a) Denies preliminary certification, it shall send the applicant either notice consistent with OAR 123-001-0725 or only a written statement of explanation if the denial results from an objection as described in OAR 123-635-0270(2).

(b) Approves the preliminary certification, it shall send a letter conferring preliminary certification.

(5) The Department shall send notification of the final determination on preliminary certification to relevant staff of the Department of Revenue.

(6) Subject again to the criteria and procedures in this rule, a preliminary certified business firm may refile in order to renew and advance the date of its preliminary certification for purposes of OAR 123-635-0350(3).

(7) The Department may issue an amended preliminary certification as appropriate, pursuant to revised information about the proposed Facility as formally received from the business firm before the end of the tax year, for which the first filing may be made according to OAR 123-635-0350(2). In determining whether to issue the amended preliminary certification, the Department shall consider:

(a) Issues described in OAR 123-635-0350(6); and

(b) Material implications in terms of ORS 285C.503(4)(b), consulting with the Municipal Corporations beforehand as warranted.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.503
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0250, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0270

Local Objection and Relevant Requirements

Respective to a proposed Facility:

(1) For purposes of section (2) of this rule, a Municipal Corporation may object to preliminary certification through a formal submission to the Department, but the Department must receive the objection, a copy of an adopted resolution, and any requisite information, within 60 days from the date the Department sent a copy of the application for preliminary certification to the governing body of the Municipal Corporation in OAR 123-635-0250(2)(b). Otherwise, the Municipal Corporation is deemed to agree to preliminary certification.

(2) In order for the objection to be automatic and not subject to appeal in a contested case, the objection must take the form of a resolution:

(a) Adopted by the governing body during the 60-day period, in accordance with applicable local laws, government charter and practices; and

(b) Containing a statement of the reason(s) for objection under ORS 285C.503(4)(b) and accompanied by information, as described in subsection (5)(b) or section (6) of this rule.

(3) Irrespective of sections (1) and (2) of this rule or the adoption of a resolution, every Municipal Corporation is encouraged and expected to furnish timely evidence to the Department, if local officials believe that the proposed Facility does not satisfy a requirement under ORS 285C.503(5).

(4) Besides entries in the application, the Department shall rely especially on the Municipal Corporations in determining whether:

(a) Health insurance coverage of all Facility employees will be at least equivalent to that of Municipal Corporation employees, if applicable under ORS 285C.503(5)(d)(B).

(b) Business operations will meaningfully compete with one or more existing businesses operating locally and employing persons, who reside in the city, port or county, including competition for:

(A) Local customers;

(B) Skilled workers or managers within the local labor pool;

(C) Other resources or inputs, for which local supplies and accessibility are critical but scarce or problematic; or

(D) Comparable circumstances, which always exclude general inter-firm rivalry within the broader marketplace.

(5) If local competition as described in subsection (4)(b) of this rule is indicated, then it must be either:

(a) Supported with clear evidence furnished by the Municipal Corporation, based on which the Department can independently make a determination under ORS 285C.503(5)(f); or

(b) Identified by type or basic nature in the formal statement of objection with a resolution in accordance with sections (1) and (2) of this rule.

(6) In order for the Department to deny an application for preliminary certification based on incompatibility with local growth or development standards, the Municipal Corporation must make a formal submission in accordance with sections (1) and (2) of this rule that includes a resolution and information documenting the relevant standards and showing that they were established in municipal ordinances already in effect when the business firm submitted the application to the Department.

Stat. Auth.: ORS 285A.075
Stats. Implemented: ORS 285C.503
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0270, OBDD 1-2011, f. & cert. ef. 1-3-111; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0300

Annual Certification

For purposes of annual certification of a Facility for each tax year of the business firm, as allowed under ORS 285C.506:

(1) A preliminarily certified business firm that owns or leases and operates the Facility must file the application for annual certification with the Department:

(a) On or before the 30th day after the end of the income or corporate excise tax year, for which it is seeking to claim or exercise the exemption under ORS 316.778 or 317.391; and

(b) Using the form prescribed by and available from the Department: Business Development, Business Oregon, State Lands Building Suite 200, 775 Summer Street NE, Salem OR 97301-1280, see www.oregon4biz.com.

(2) Each application must include a fee of $100 in the form of a check or money order payable to the Department.

(3) Within 30 days after the date of filing, Department staff shall review the application, consider potential fact-finding about the Facility under ORS 285C.506(5) to (8), as feasible and appropriate, and determine whether it satisfies the applicable requirements for annual certification, then if the Department:

(a) Denies annual certification, it shall send notice consistent with OAR 123-001-0725.

(b) Approves the annual certification, it shall send a letter conferring certification for the just concluded tax year.

(4) The Department shall also copy relevant staff at the Department of Revenue with items as described in section (3) of this rule.

(5) Requirements for annual compensation under ORS 285C.503(5)(d) apply only to a Facility that received preliminary certification on or after January 1, 2011.

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

Stat. Auth.: ORS 285A.075 & 285C.506(4)
Stats. Implemented: ORS 285C.506
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0300, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 12-2012, f. & cert. ef. 8-15-12; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0350

Issues of Initial and Subsequent Annual Certifications

For purposes of annual certification as described in OAR 123-635-0300:

(1) The preliminarily certified business firm may file the first such application for annual certification with the Department only after:(a) The business firm has fully acquired Facility property, and completed it in terms of the construction, reconstruction, modification and installation of proposed improvements for purposes of subsection (c) of this section;

(b) Relevant employees have been hired; and

(c) Business operations have commenced at the Facility.

(2) Relative to the date, during the income tax year of the business firm, on which operations commenced and so forth as described in section (1) of this rule, this first filing may occur:

(a) For and within 30 days following the end of that tax year, if the firm applied for preliminary certification on or before June 30, 2011.

(b) Not less than 24 months after that date, if the firm applied for preliminary certification on or after July 1, 2011, such that the exemption on taxable income may not begin at the earliest until:

(A) Two years later than it would as described in subsection (a) of this section (allowing no more than eight consecutive years of exemption); or

(B) Only one tax year later (with up to nine consecutive years of exemption), but only if that date lies within the first 30 days of the tax year.

(3) For purposes of this first filing, the application shall show that after the date, on which the Department approved the preliminary certification:

(a) Business operations commenced at the Facility within:

(A) Six months, if only acquiring existing buildings or structures; or

(B) Eighteen months, if involving substantial construction or reconstruction; and

(b) Facility property did not remain in an unfinished state of construction, reconstruction, modification or installation for more than six months without significant progress toward completion of such activities.

(4) In order for the Department to certify the Facility with the first filing:

(a) Information in the application needs to indicate satisfaction of section (3) of this rule, except as allowed by Department staff through a written finding that any delay or interruption was reasonable and not excessive, given the complexity or extent of the business firm’s investment in the Facility or of inadvertent circumstances.

(b) The location and nature of the Facility’s business operation need to conform to that represented in the application for preliminary certification, including but not limited to any amendment according to OAR 123-635-0250(7).

(5) For purposes of an application for annual certification:

(a) Its approval shall not depend on any current issue of actual competition with other local businesses, Qualified Location or Unique Operations.

(b) The Department may deny the application if discovering that at the time of application for preliminary certification, the Facility was not at a Qualified Location or did not represent Unique Operations, including but not limited to the case where the preliminary certification application contained false or incomplete information.

(c) The Department may approve the application, even if the nature of the Facility or the business firm/ownership changes after the first filing, including but not limited to changes in:

(A) The composition of Facility property or its exact location; or

(B) The corporate or ownership structure or organization of the business.

(6) To allow a change described in subsection (5)(c) of this rule depends on:

(a) Direct, ongoing continuity with the original facility;

(b) Business operations remaining materially the same; and

(c) Relative to the location identified in the application for preliminary certification, the Facility is located at what was likewise a Qualified Location inside the same urban growth boundary or at a similarly proximate location.

(7) The business firm does not need to make its first filing as soon as permissible according to section (2) of this rule, or it might miss or skip any subsequent opportunity, for which it is allowed to apply for annual certification, such that the firm may still use the exemption for any remaining, eligible tax year that is not more than nine consecutive tax years after the year, in which operations commenced and so forth as described in section (1) of this rule; however:

(a) Neither postponement of the first filing nor failure to apply in any subsequent tax year shall affect the period for which certification is otherwise allowed.

(b) The business firm may not claim or exercise the exemption under ORS 316.778 or 317.391 for any such tax year, pursuant to which it does not directly make application for annual certification as described in OAR 123-635-0300.

(8) If an application for annual certification is timely filed but denied by the Department, then the exemption is disallowed not only for that year, but also for all other remaining, eligible tax years (but without retroactive effect on any prior exemption).

Stat. Auth.: ORS 285A.075 & 285C.506(6) & (7)
Stats. Implemented: ORS 285C.506, 316.778 & 317.391
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0350, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 12-2012, f. & cert. ef. 8-15-12; OBDD 5-2016, f. & cert. ef. 3-28-16

123-635-0400

Application Fees, Waivers

With respect to application fees as described in this division of administrative rules:

(1) The Department may excuse the fee or reduce the required amount:

(a) If a business firm's Facility readily qualifies for certification, but as determined based on Department experience and expertise relative to general business activity in the county, region or statewide, it:

(A) Is very small in size;

(B) Has minimal employment; or

(C) Will likely have modest revenue prospects and little likelihood of effectively realizing much benefit from the exemption on taxable income; or

(b) If it can be demonstrated that such a waiver will further the goals and objectives of the program and other relevant public policies, for example, when partial or non-imposition of the fee might promote business investments in areas of the state where the exemption has not yet been used.

(2) The Department shall return or refund the amount collected to the applicant, if it rejects the application or denies the preliminary or annual certification, pending a final order to that effect.

(3) The moneys collected would defray administrative costs; in particular, they may be critical for offsetting legal expenses in the event of contested case appeal.

Stat. Auth.: ORS 285A.075, 285C.503(3) & 285C.506(4)
Stats. Implemented: ORS 285C.503 & 285C.506
Hist.: EDD 17-2002, f. 11-27-02, cert. ef. 12-2-02; EDD 9-2005, f. & cert. ef. 11-4-05; OBDD 5-2010, f. 1-29-10, cert. ef. 2-1-10; Renumbered from 123-155-0400, OBDD 1-2011, f. & cert. ef. 1-3-11; OBDD 4-2011, f. 8-31-11, cert. ef. 9-1-11

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