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OREGON BUSINESS DEVELOPMENT DEPARTMENT

 

DIVISION 635

OREGON INVESTMENT ADVANTAGE

123-635-0000

Purpose and Scope

These administrative rules specify procedures and criteria necessary to guide certification under the Oregon Investment Advantage Act for the exemption of qualified facilities from State of Oregon business income or corporate excise taxation, as allowed under ORS 316.778 or 317.391. These exemptions of taxable income/profits encourage businesses to invest 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.

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

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 given 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:

(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

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:

(a) Effective July 1 of each year, the Department shall determine the counties fulfilling the criteria under ORS 285C.500 (or section 3, chapter 595, Oregon Laws 2005, when applicable) based on 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 application for preliminary certification on or after that July 1, until and including June 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.

(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 population estimates 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, ORS 197.713, 197.714 & 197.719; OL 2005, ch. 595, ¦3
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

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 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 any 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 subsidiary of the same parent company already makes essentially the same 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 that is also 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 existing anywhere in Oregon does not matter, except as provided under ORS 285C.503(4)(b)(A) and (5)(f), to the extent the operations will compete with local business(es), see 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

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 comprising 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 shall be submitted to: Business Development, Business Oregon, State Lands Building Suite 200, 775 Summer Street NE, Salem OR 97301-1280.

[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

123-635-0250

Determination of Preliminary Certification

Pursuant to a filing as described in OAR 123-635-0200

(1) The Department shall:

(a) Review the application for preliminary certification 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) Not more than 30 days after receipt of the application for preliminary certification, the Department shall do the following:

(a) Notify the applicant in writing whether the application 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.

(3)(a) The Department shall complete the determination described in subsection (1)(b) of this rule, after receiving any:

(A) Additional information requested from the applicant; and

(B) Timely responses from the Municipal Corporations.

(b) This 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, for example, written confirmation of “no objection” from local officials based on communication with governing body members..

(4) Within 30 days after fulfillment of the steps in 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:

(a) In the event that the Department 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) In the event that the Department approves the preliminary certification it shall send a letter conferring preliminary certification.

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

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

123-635-0270

Local Objection and Relevant Requirements

Respective the preliminary certification:

(1) A Municipal Corporation may through a formal submission to the Department; however:

(a) The Department must receive the objection and evidence within 60 days from the date the Department sent a copy of the application for preliminary certification to the governing body of a Municipal Corporation in OAR 123-635-0250(2)(b).

(b) If the Department does not receive the objection and any necessary evidence/copy of an adopted resolution, 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 under section (1) of this rule must:

(a) Take the form of a resolution that is adopted by the governing body during the 60-day period, in accordance with applicable local laws, government charter and practices;

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

(3) If local officials believe that the proposed Facility does not satisfy a requirement under ORS 285C.503(5), the Municipal Corporation is encouraged and expected to timely furnish relevant information to the Department even if it does not adopt a resolution.

(4) In addition to information in the application, the Department shall rely primarily on the Municipal Corporations in determining whether:

(a) Health insurance coverage will be at least equal to that of Municipal Corporation employees, if applicable.

(b) Business operations will meaningfully compete with one or more existing local businesses operating in or employing persons from the city or county, including competition for:

(A) Local customers;

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

(C) Other resources or input, 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 larger marketplace.

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

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

(b) Formally stated as an objection in the resolution adopted by the governing body of a Municipal Corporation that at a minimum identifies the type and basic nature of local competition that would arise.

(6) In order for the Department to deny an application for preliminary certification based on local growth or development standards, the Municipal Corporation's adopted resolution must include information showing that the relevant standards were contained in municipal ordinances effective 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. 1-3-11

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.

(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), and determine whether it satisfies the applicable requirements for annual certification then:

(a) If the Department denies annual certification, it shall send notice consistent with OAR 123-001-0725.

(b) If the Department 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 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

123-635-0350

Issues of Initial and Subsequent Annual Certifications

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

(1) The preliminary certified business firm may not file the first such application for annual certification with the Department until after:

(a) Business operations have commenced at the Facility;

(b) Relevant employees have been hired; and

(c) The business firm has fully:

(A) Acquired Facility property; and

(B) Completed it in terms of the construction, reconstruction, modification and installation of proposed improvements for purposes of subsection (a) of this section.

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

(a) For and immediately following the tax year of such commencement, if the firm effectively applied for preliminary certification on or before June 30, 2011.

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

(A) One tax year later, if such commencement occurs within the first 30 days of the tax year; or

(B) Otherwise, two tax years later.

(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 major 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) The location and nature of the Facility’s business operation need to conform to that indicated in the application for preliminary certification, for which the Department may issue an amended preliminary certification as appropriate, pursuant to formal receipt of revised information from the business before the end of the tax year, in which operations commence. In determining the appropriateness of issuing an amended preliminary certification, the Department shall consider:

(A) Such criteria as described in section (6) of this rule; and

(B) Material implication for issues described under ORS 285C.503(4)(b), consulting with the Municipal Corporations beforehand as warranted.

(b) Subsection (3)(a) or (b) of this rule must be satisfied, except as allowed by Department staff through a written finding that the delay or interruption is reasonable and not excessive, given the nature and extent of the business firm’s investment in the Facility or of inadvertent circumstances.

(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 as described in sections (4)(a) or (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 need not make its first such filing as soon as is permissible according to in sections (1) and (2) of this rule, and the business firm may miss or skip any subsequent opportunity, for which it is allowed to apply for annual certification; 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 did not directly make application for annual certification as described in OAR 123-635-0300. 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, subject to annual certification.

(c) If an application for annual certification is timely filed but denied by the Department, then the exemption is disallowed for not only 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

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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