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The Oregon Administrative Rules contain OARs filed through July 15, 2016
 
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OREGON BUSINESS DEVELOPMENT DEPARTMENT

 

DIVISION 662

ELECTRONIC COMMERCE ENTERPRISE ZONES

123-662-0001

Purpose and Scope

This division of administrative rules specifies matters related to areas designated for electronic commerce and the business tax incentives especially available in them, including but not limited to the electronic commerce overlay of an enterprise zone:

(1) In such areas businesses engaged in Electronic Commerce are not only eligible for the standard enterprise zone exemption, but they may also qualify for a state income tax credit based on their Electronic Commerce investment.

(2) These administrative rules:

(a) Have no bearing on any enterprise zone aside from its having electronic commerce status;

(b) Do not control or bind the county assessor or Department of Revenue, and they do not supersede OAR chapter 150, in matters related to tax administration.

Stat. Auth.: ORS 285A.075, 285C.050(5), 285C.060(1) & 285C.102(3)(c)
Stats. Implemented: ORS 285C.050, 285C.078, 285C.095, 285C.100, 285C.102, 285C.135, 285C.180, 285C.185, 315.507 & 315.508
Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10; OBDD 10-2015, f. & cert. ef. 10-5-15

123-662-0100

Definition of Electronic Commerce

OAR 123-001 (Procedural Rules) defines terms used in this division of administrative rules, unless the context clearly indicates otherwise; in addition, for purposes of Electronic Commerce as defined under ORS 285C.050(5):

(1) E-commerce zone means any of the enterprise zones designated for electronic commerce under ORS 285C.095 or a city so designated under ORS 285C.100 in accordance with OAR 123-662-1200(4) or (5) and 123-662-2000(2).

(2) “Predominantly” means that more than 50 percent of applicable transactional activity is Internet-based in terms of receipts, number of orders, clients served or like measures, as opposed to activity handled directly or primarily through other means such as by telephone or e-mail.

(3) Applicable business activity and related investments must:

(a) Locate and occur inside the E-commerce zone;

(b) Involve dealings with customers, suppliers, clients or other transactional entities that are external to the eligible business firm, predominantly over the Internet itself or on a computer network that utilizes the Internet as a platform; and

(c) Entail, support or relate to the sale or purchase of goods, property or services, whether conducted on a wholesale, commercial, business-to-business, retail or other basis.

(4) It also includes facilities, equipment, services, networks, software, broadband infrastructure, or the like that are produced or operated inside the E-commerce zone by a third party, who facilitates, fosters or makes possible business transactions by means consistent with sections (2) and (3) of this rule. Such a third party is eligible for purposes of tax abatement if other businesses or organizations represent 75 percent or more of its customers or gross receipts as opposed to households or the general public.

(5) Beyond the initiation or consummation of the sale, purchase or arms-length exchange, it also encompasses elements of the transaction’s overall completion or delivery, if that element:

(a) Is conducted in the E-commerce zone by means consistent with sections (2) and (3) of this rule, including but not limited to customer service, technical support, claims processing, client evaluation, performance measurement or the like, even if the actual sale, purchase or contract originated outside the zone or through other means; or

(b) Naturally serves, underpins or arises from the sale or purchase of goods, property or services inside the E-commerce zone by means consistent with sections (2) and (3) of this rule, including but not limited to distribution, made-to-order assemblage, direct after-sale support, shipping, warehousing, warranty service or any similar operation or order fulfillment-type activity.

(6) One way to understand subsection (5)(b) of this rule is by means of a flowchart representing the totality of Electronic Commerce operations in the zone, such that if a critical node in that flowchart is handled by means consistent with sections (2) and (3) of this rule, then:

(a) Substantially related activities both upstream and downstream of the node are also included for purposes of this rule; and

(b) Associated qualified property or investments in capital assets shall receive respective tax benefits subject to other applicable requirements.

Stat. Auth.: ORS 285A.075, 285C.050(5) & 285C.060(1)
Stats. Implemented: ORS 285C.050, 285C.135, 285C.180, 285C.185 & 315.507
Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10; OBDD 10-2015, f. & cert. ef. 10-5-15

123-662-1000

Electronic Commerce Status

(1) An E-commerce zone may be any enterprise zone, whether urban or rural, except as described in section (3) of this rule, provided that the enterprise zone is itself already designated in accordance with OAR 123-650 or 123-656 and has not terminated.

(2) Electronic commerce status fully overlays the entire area of the enterprise zone designated as an E-commerce zone inclusive of areas added by a subsequent change to the zone’s boundary.

(3) The sponsor of an enterprise zone may revoke its status as an E-commerce zone by resolution(s), at any time, pursuant to which the Department shall establish the effective date of revocation, and that that enterprise zone is never again eligible to be an E-commerce zone.

(4) To designate an E-commerce zone:

(a) The process begins with a zone sponsor’s sending a formal advisory to the Department of its intent to so designate, which must occur on or after an effective date in OAR 123-662-1200 and October 5, 2015;

(b) The Department shall respond promptly to such an advisory, consulting with the sponsor about the availability of any designation and other pertinent information;

(c) Not less than 31 days after advising the Department, the sponsor may submit its E-commerce designation, consisting of an executed copy of a resolution that designates the zone an E-commerce zone, as adopted after consultation with the Department by each governing body of the zone sponsor consistent with its charter, by-laws or ordinances; and

(d) Subject to the resolution(s) in subsection (c) of this section and other procedural matters being in order, as well as E-commerce zone availability under the law, the Department shall issue a notice of positive determination confirming the designation and establishing its effective date.

(5)(a) If the Department receives advisories per subsection (4)(a) of this rule from two or more zone sponsors within 15 days of one another that exceed the number of available electronic commerce designations, and the Department receives submissions in accordance with subsection (4)(c) of this rule from those sponsors within 45 days of the first advisory, then positive determination shall go to the zone with the earlier date of resolution adoption by any cosponsor.

(b) If subsection (a) of this section results in a tie, tiebreakers shall be employed in the following order:

(A) The enterprise zone that less recently had electronic commerce status;

(B) The formal advisory received on the earlier date;

(C) The zone with the greater number of cosponsors; or

(D) Special determination of the Director.

(c) If the Department receives fewer submissions than there are available E-commerce zone designations, despite excess advisories in subsection (a) of this section, then pursuant to advisories from other zone sponsors, the Department shall process additional submissions consistent with this section, until all available designations are positively determined to have been made.

(6) The Department shall promptly give written notification and explanation to any zone sponsor subject to a negative determination of its electronic commerce designation and shall counsel the sponsor about the viability and timing of resubmission.

(7) As otherwise permissible, the Department may allow a zone sponsor of an E-commerce zone to re-designate itself as an E-commerce zone at the time it re-designates the enterprise zone under ORS 285C.250, if the zone was designated for electronic commerce within one year of the enterprise zone’s termination date.

Stat. Auth.: ORS 285A.075, 285C.060(1) & 285C.102(3)(c)
Stats. Implemented: ORS 285C.078, 285C.095 & 285C.102
Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10; OBDD 10-2015, f. & cert. ef. 10-5-15

123-662-1200

Designated Areas

(1) If the Legislature allows additional electronic commerce designations under ORS 285C.095 for enterprise zones, which are currently limited to 15, the sponsor of any eligible existing enterprise zone that is not already an E-commerce zone may designate itself as an E-commerce zone in accordance with OAR 123-662-1000, pursuant to the date that the legislation took effect.

(2) The Department shall maintain and publicize information identifying which enterprise zones are currently E-commerce zones.

(3) If an enterprise zone that has been an E-commerce zone for more than one year terminates under ORS 285C.245, or if a zone sponsor revokes its electronic commerce designation, the sponsor of any eligible existing enterprise zone that is not already or is no longer an E-commerce zone may designate itself as an E-commerce zone in accordance with OAR 123-662-1000, pursuant to the date that the termination and revocation took effect.

(4) The City of North Plains in Washington County is a city designated for electronic commerce under ORS 285C.100 effective on March 4, 2002, such that

(a) All areas then or later inside the city limits or urban growth boundary of the City of North Plains are the same as an “E-commerce zone,” as used in this division of administrative rules, but only for purposes of Electronic Commerce and business firms that are eligible on that basis under ORS 285C.050 to 285C.250 and 315.507.

(b) The city shall act as the effective zone sponsor and take responsibility for all duties of a zone sponsor as they apply to an Electronic Commerce business firm seeking to utilize areas of the city for special benefits.

(5) If the Legislature provides additional electronic commerce designations under ORS 285C.100 for cities, of which only one is currently allowed, the governing body of any city that is not already an E-commerce city may designate itself as an E-commerce city in a manner equivalent to OAR 123-662-1000(4) to (6), except as prescribed by the legislation, pursuant to the date that the legislation took effect.

Stat. Auth.: ORS 285A.075, 285C.050(5), 285C.060(1) & 285C.102(3)(c)
Stats. Implemented: ORS 285C.095, 285C.100, 285C.102 & 285C.135
Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10; OBDD 14-2012, f. & cert. ef. 8-15-12; OBDD 10-2015, f. & cert. ef. 10-5-15

123-662-2000

Enterprise Zone Business Eligibility

Respective to the standard exemption from property taxes under ORS 285C.175:

(1) A business firm engaged in Electronic Commerce will likely be eligible in other ways under ORS 285C.135, but it shall not be subject to the requirements or restrictions of those other ways once the enterprise zone is effectively an E-commerce zone.

(2) If an eligible business firm that originally sought eligibility based on Electronic Commerce does not satisfy that definition, it may still receive authorization and exemption subject to another way’s requirements or restrictions, except in an area described in OAR 123-662-1200(4) or (5).

(3) The following may occur only once the enterprise zone is effectively an E-commerce zone:

(a) Authorization and qualification of a firm that is eligible only by virtue of Electronic Commerce; or

(b) Exemption of personal property permissible only under ORS 285C.185(1)(b)(B).

(4) Property that due to section (3) of this rule does not qualify for exemption by January 1 of the first year, for which a business firm may claim the exemption, is not allowed to qualify later, even if the enterprise zone becomes an E-commerce zone.

(5) After an area’s status as an E-commerce zone effectively ceases, a business firm shall enjoy the following protection for exemption on qualified property respective to Electronic Commerce eligibility, notwithstanding that the firm might be eligible in another way:

(a) Under ORS 285C.245(1), consistent with applicable elements of OAR 123-674-8100 and 123-674-8200, if for whatever reason the underlying enterprise zone terminates and the location of the qualified property is outside of a subsequent enterprise zone.

(b) Only under ORS 285C.245(1)(a), consistent with OAR 123-674-8100(1)(b) regardless that the firm was already authorized or qualified, upon:

(A) Revocation of the zone’s electronic commerce designation; or

(B) Termination of the underlying enterprise zone and designation of the location of qualified property in another enterprise zone without electronic commerce status.

Stat. Auth.: ORS 285A.075, 285C.050(5) & 285C.060(1)
Stats. Implemented: ORS 285C.095, 285C.100, 285C.135, 285C.140, 285C.180, 285C.185 & 285C.245
Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10; OBDD 10-2015, f. & cert. ef. 10-5-15

123-662-2500

State Income Tax Credit for E-commerce Investment

For purposes of a business firm receiving and using the credit under ORS 315.507 to offset state personal or corporate income/excise tax liabilities:

(1) Respective to an enterprise zone’s designation as an E-commerce zone, relevant investments in Electronic Commerce capital assets under ORS 315.507(2) must be:

(a) Made in an income or corporate excise tax year, during or after which the designation took effect.

(b) In use, placed in service or completed in terms of construction or installation only on or after the effective date of designation.

(2) The business firm must make:

(a) Application for authorization before the effective date of revocation of the zone’s electronic commerce designation or termination of the underlying enterprise zone.

(b) The relevant investment on or before the date, on which the enterprise zone terminates, irrespective of:

(A) Prior revocation of the zone’s electronic commerce status; or

(B) Any continuing receipt or access to the standard property tax exemption after termination.

(3) The business firm engaged or preparing to engage in Electronic Commerce may make relevant investments only:

(a) During or after an income/excise tax year, in which the firm applies for authorization by submission of its application to the zone sponsor, that ends before July 1 of the first property tax year of exemption; or

(b) In an income/excise tax year that begins on or within less than a year’s time preceding July 1 of any property tax year, in which the business firm remains qualified and associated qualified property is subject to exemption under ORS 285C.175.

(4) The third year after a credit was claimed for a year described in subsection (3)(a) of this rule must be a year described in subsection (3)(b) of this rule, in order for the firm to receive and keep the tax credit.

(5) Aside from their relation to Electronic Commerce and other requirements, the capital assets that generate the tax credit:

(a) Comprise new acquisitions, investments or costs of the business firm that are depreciable for purposes of federal income taxation, even if they are allowed to be and are, in fact, expensed on the corresponding tax return.

(b) Must, consistent with sections (3) and (4) of this rule, be associated concurrently with qualified property that is successfully claimed for exemption from property taxes under ORS 285C.175, and inasmuch as such assets are qualified property and are actually used to earn the credit, they must in general (aside from incidental oversights) also subsequently qualify for the exemption; nevertheless:

(A) Such assets may consist entirely or partially of items or costs that are not qualified property or otherwise not allowed for exemption, including but not limited to property exempt under another law such as certain intangible personal property (though not ORS 307.123 or 285C.409), as well as property previously used inside the E-commerce zone, or items located elsewhere in the zone apart from the site identified in the authorization application but connected to on-site Electronic Commerce activities; and

(B) Associated qualified property may consist entirely or partially of items or costs that are unusable for the credit, including but not limited to property distinct from Electronic Commerce activities, in excess of the annual limit in subsection (7)(c) of this rule, or subject to use and occupancy by the qualified business firm through a (non-capitalized) lease.

(6) The business firm will claim the credit as an amount entered with “other credits” on the taxpayer’s state tax return for an income/excise tax year, in which it makes the Electronic Commerce investment (there is no prescribed form or worksheet). That tax year must begin before the date prescribed under section 3, chapter 913, Oregon Laws 2009, as amended in 2011 [c.730 ¦5] and in the future.

(7) The firm shall be responsible for maintaining tax records under ORS 315.508, including but not limited to:

(a) Annual qualification for exemption under ORS 285C.175, such as copies of forms filed with the county assessor and evidence of avoided property taxes, sufficient zone employment, and so forth;

(b) Methods used to determine the basis and extent, by which the firm/taxpayer attributes capital assets to Electronic Commerce for purposes of calculating the credit; and

(c) The actual cost of investments in terms of such calculations, as well as the annual limit under ORS 315.507(4) of effectively up to $8 million in relevant costs in any one income/excise tax year.

(8) The tax credit is inapplicable with the exemption under ORS 285C.409 (Long-Term Rural Tax Enterprise Zone Facility Incentives).

(9) In terms of capital assets for Electronic Commerce (in contrast to property taxes, which typically relate to new physical vesting), to “make an investment” means:

(a) As a matter of timing, to financially incur costs or binding liability in payment for the asset, for example, by entering into a construction contract or by having booked an order to buy equipment.

(b) Not only capital that is new to the E-commerce zone, but it may also include the firm’s acquisition of assets already existing and previously subject to use and occupancy in the enterprise zone.

Stat. Auth.: ORS 285A.075, 285C.050(5) & 285C.060(1)
Stats. Implemented: ORS 285C.060, 285C.095, 285C.100, 315.507 & 315.508
Hist.: OBDD 25-2010, f. & cert. ef. 6-14-10; OBDD 10-2015, f. & cert. ef. 10-5-15

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