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The Oregon Administrative Rules contain OARs filed through June 15, 2014
 
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DEPARTMENT OF ENVIRONMENTAL QUALITY

 

DIVISION 16

POLLUTION CONTROL TAX CREDITS

340-016-0005

Purpose

The purpose of these rules is to prescribe procedures and criteria to be used by the Department and Commission for issuance of tax credit certificates for pollution control facilities. These rules are to be used in connection with ORS 468.150 to 468.190. These rules become effective upon filing with the Secretary of State or on February 1, 2001 whichever is the later date and apply to all applications received by the Department on or after that date except where otherwise noted herein. An applicant with an application pending Commission action on the date these rules become effective may elect to proceed under these rules by informing the Department in writing.

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - ORS 468.190
Hist.: DEQ 12-1984, f. & ef. 7-13-84; DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98; DEQ 1-2001, f. 1-30-01, cert. ef. 2-1-01

340-016-0007

Facilities certified under the 1999 Edition

For the purposes of ORS 468.173(1), a facility may be certified under the 1999 edition of 468.155 to 468.190 if the facility was substantially completed on or before December 31, 2001, and an application was filed with the Department within two years after the date of substantial completion.

Stat. Auth.: ORS 468.020 & 483.335(5)
Stats. Implemented: ORS 468.155-468.190
Hist.: DEQ 16-2002, f. 10-28-02 cert. ef. 11-1-02

340-016-0009

Certification of wood chippers

For the purpose of subdelegating authority to approve and issue final certification of pollution control facilities under OAR 340-016-0080(2):

(1) The Environmental Quality Commission authorizes the Director of the Department of Environmental Quality or the Director's delegate to certify wood chippers as provided in OAR 340-016-0060(4)(h)(C) if:

(a) The Department determines the facility is otherwise eligible under OAR 340-016-0060; and

(b) The claimed facility cost does not exceed $50,000 as set forth in OAR 340-016-0075(1).

(2) The Department may elect to defer certification of any facility to the Environmental Quality Commission.

(3) If the Department determines the facility cost, the percentage of the facility cost allocable to pollution control, or the applicable percentage under ORS 468.173 is less than the applicant claimed on the application then the Department shall:

(a) Notifying the applicant in writing; and

(b) Include a concise statement of the reasons for the proposed certification of a lesser amount or percentage; and

(c) Include a statement advising the applicant of their rights under section (4).

(4) Applicants that receive a notification under section (3) may elect to defer certification to the Environmental Quality Commission by notifying the Department within 30 days of the notification date.

(5) The Department shall defer certification to the Environmental Quality Commission according to sections (2) and (4).

(6) The Director or the Director's delegate shall certify facilities that otherwise qualify under this rule and have not been deferred according to sections (2) or (4).

Stat. Auth.: ORS 468.020 & 483.335(5)
Stats. Implemented: ORS 468.155-468.190
Hist.: DEQ 16-2002, f. 10-28-02 cert. ef. 11-1-02

340-016-0010

Definitions

The definitions in this rule give meaning to the term or phrase as used in OAR 340-016-0005 through OAR 340-016-0080.

(1) "Applicant" means any person who applies for a pollution control tax credit under these rules.

(2) "Circumstances Beyond the Control of the Applicant" means facts, conditions and circumstances which the applicant's due care and diligence would not have avoided.

(3) "Commission" means Environmental Quality Commission or the Commission's delegate.

(4) "Department" means Department of Environmental Quality.

(5) "Facility" as used in context means:

(a) A pollution control facility as set forth in ORS 468.150 and ORS 468.155; or

(b) The facility as claimed on the application.

(6) "Like-for-Like Replacement Cost" means the current price of providing a new facility of the same type, size and construction materials as the facility that is being replaced based upon the Consumer Price Index (CPI) - All Urban Consumers as published by the Bureau of Labor Statistics.

(7) "Material Recovery" means any process, such as pre- segregation, for obtaining materials from solid waste, hazardous waste or used oil. The recovered materials shall still have useful physical or chemical properties after serving a specific purpose and can, therefore, be reused or recycled for the same or other purpose. The recovered material shall have useful physical or chemical properties that yield a competitive end-product of real economic value. The material recovery process does not include processes:

(a) In which the major purpose is the production of fuel from solid waste, hazardous waste or used oil which can be utilized for heat content or other forms of energy; or

(b) That burns waste to produce energy or to reduce the amount of waste. However, it does not eliminate from eligibility a pollution control device associated with a process which burns waste if such device is otherwise eligible for pollution control tax credit under these rules.

(8) "Nonpoint Source Pollution" means pollution that comes from numerous, diverse, or widely scattered sources of pollution that together have an adverse effect on the environment. The meaning includes:

(a) The definition provided in OAR 340-041-0006(17); or

(b) Any sources of air pollution that are:

(A) Mobile sources that can move on or off roads; or

(B) Area sources.

(9) "Pollution Control" means the elimination, prevention, control or reduction of air, water or noise pollution; or the utilization of solid waste, hazardous waste, or the recycling or properly disposing of used oil except where otherwise noted herein.

(10) "Reconstruction or Replacement" means the provision of a new facility with qualities and pollution control characteristics equivalent to the facility that is being replaced. This does not include repairs or work done to maintain the facility in good working order.

(11) "Spill or Unauthorized Release" means

(a) The discharge, deposit, injection, dumping, spilling, emitting, releasing, leakage or placing of oil, hazardous materials or other polluting substances into the air or into or on any land or waters of the state, as defined in ORS 468.700, except as authorized by a permit issued under ORS Chapter 454, 459, 468 or 469, ORS 466.005 to 466.385, 466.880(1) and (2), 466.890 and 466.995(1) and (2) or federal law while being stored or used for its intended purpose; and

(b) For purposes of determining eligibility for tax credits under these rules, polluting substances released into the environment in conjunction with operation of a previously approved facility or activity where such facility or activity was operated in compliance with requirements imposed by the Department or the Federal Environmental Protection Agency, and where the polluting substances which must now be cleaned up are determined by the Department to have been an unanticipated result of the approved facility or activity and are not deemed to be a "spill or unauthorized release".

(12) "Substantial Completion" means the completion of the erection, installation, modification, or construction of all elements of the claimed facility which are essential to perform its purpose.

(13) "Useful Life" means the number of years the claimed facility is capable of operating before replacement or disposal. The applicant shall provide a statement of how the useful life of the facility was determined. The minimum useful life shall not be less than three years or the Asset Guideline Period used to report the depreciation of the facility to the Internal Revenue Service.

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - ORS 468.190
Hist.: DEQ 12-1984, f. & ef. 7-13-84; DEQ 5-1985, f. & ef. 3-12-85; DEQ 20-1987, f. & ef. 12-16-87; DEQ 6-1990, f. & cert. ef. 3-13-90; DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98; DEQ 1-2001, f. 1-30-01, cert. ef. 2-1-01

340-016-0055

Application Procedures

Any Oregon taxpayer may apply for the certification of a pollution control facility to take relief from their Oregon tax liability. The applicant and the facility shall be eligible under ORS 307.405, 315.304, and 468.150 to 468.190. The applicant shall submit the application to the Department on the application form provided by the Department.

(1) Application for Preliminary Certification. An applicant may apply for preliminary certification of a pollution control facility to determine if a future facility would meet the certification requirements as set forth in OAR 340-016-0060. The applicant may submit the optional preliminary application anytime before the construction of the pollution control facility is complete. If the Commission issues a preliminary certificate and if the applicant constructs the facility as represented on the preliminary application and the preliminary certificate then the facility shall meet the requirements as set forth in 340-016-0060. The preliminary certification of a facility does not exempt the applicant from submitting a timely application for final certification as set forth in section (2) of this rule.

(2) Application for Final Certification. The applicant shall submit all information, exhibits and substantiating documents requested on the application for final certification. The Department shall reject the application for final certification if the applicant fails to submit the application:

(a) After the construction of the facility is substantially complete and the facility is placed in service;

(b) Within one year after construction of the facility is substantially completed; and

(c) On or before December 31, 2008.

(3) Complete Application. The applicant shall submit to the Department an application as set forth in section (1) or section (2) that is complete and ready to process. For an application to be complete and ready to process, the applicant shall:

(a) Complete all required application fields;

(b) Provide all appropriate exhibits;

(c) Explain how the facility is eligible for a pollution control tax credit as set forth in OAR 340-016-0060. The applicant shall include supporting documentation if the facility is eligible for certification based upon orders or permit limitations;

(d) Include the appropriate fees established in OAR 340-016-0065;

(e) Provide documentation that substantiates the facility cost as claimed on the application for final certification and as set forth in OAR 340-016-0070;

(f) Contain a statement that the facility is in compliance with Department statutes, rules and standards, and any documentation regarding non-compliance;

(g) Sign the application certifying that all claims made on the application are true and accurate;

(h) Provide a copy of a written agreement between the lessor and lessee designating the party to receive the tax credit if the applicant is claiming a tax credit for a leased facility. The applicant shall provide a copy of the cover, first and signature pages of the complete and current lease agreement for the facility. The Department may request a copy of the complete agreement; and

(i) Provide a copy of a written and signed agreement between the owners designating the party or parties to receive the tax credit certificate if the applicant is claiming the tax credit for a facility with more than one owner.

(4) Department Notification. The Department shall notify the applicant in writing when:

(a) Rejecting an application for the applicant's failure to file a timely application as set forth in sections (1) and (2) of this rule or rejecting an application for failure to provide a timely response as set forth in subsection (5)(a) of this rule.

(b) Requiring additional information from the applicant. The Department shall request additional information within 60 days from the date the Department received the application if the Department is unable to complete the review;

(c) Requiring additional information, for applications for final certification only, if the Department is unable to determine the actual cost of the facility or the portion of the actual cost of the facility properly allocable to pollution control;

(d) Notifying the applicant of the date, time and place of the Commission meeting where the Commission shall take action on the application; and

(e) Notifying the applicant of the action taken by the Commission. If the Commission rejects an application for certification; certifies a lesser actual cost of the facility; or certifies a lesser portion of the actual cost properly allocable to pollution control, material recovery or recycling than the applicant claimed in the application for certification, the Commission shall cause written notice of its action, and a concise statement of the findings and reasons therefore, to be sent by registered or certified mail to the applicant.

(5) Applicant Response to Notification. The applicant:

(a) Shall respond to the Department within 60 days of receipt of the Department's written notification when the Department requests additional information as set forth in section (4) of this rule. The applicant shall respond by providing the additional information requested or by submitting a written estimate of the time needed to provide the information necessary to complete the application.

(b) May appeal from the rejection or reduction as provided in ORS 468.170(3) and 468.110.

(6) Extension of Time. The Commission may grant an extension of time to submit an application for final certification. An extension of time:

(a) Shall only be considered for applications that may exceed the time limits set forth in section (2) of this rule;

(b) Shall not extend the period for filing an application beyond December 31, 2008; and

(c) Shall only be granted for circumstances beyond the control of the applicant that would make filing a timely application unreasonable.

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

Stat. Auth.: ORS 468.020 
Stats. Implemented: ORS 468.165 & ORS 468.170 
Hist.: DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98; DEQ 4-2004(Temp), f. & cert. ef. 6-8-04 thru 12-5-04; DEQ 9-2004, f. & cert. ef. 11-19-04

340-016-0060

Eligibility

(1) Eligible Facilities. Facilities eligible for pollution control tax credit certification shall include any land, structure, building, installation, excavation, machinery, equipment or device, or alternative methods for field sanitation and straw utilization and disposal. An eligible facility shall be reasonably used, erected, constructed or installed as:

(a) A new facility;

(b) An addition or improvement to an existing facility; or

(c) The reconstruction or replacement of an existing facility.

(2) Purpose of Facility. The facility shall meet the principal purpose requirement to be eligible for a pollution control facility tax credit certification, or if the facility is unable to meet the principal purpose requirement, the facility shall meet the sole purpose requirement to be eligible for a pollution control tax credit:

(a) Principal Purpose Requirement. The principal purpose of the facility is the most important or primary purpose of the facility. Each facility shall have only one principal purpose. The facility shall be established to comply with environmental requirements imposed by the Department, the federal Environmental Protection Agency or a regional air pollution authority to control, reduce, or prevent air, water or noise pollution, or for the material recovery of solid waste, hazardous waste or used oil; or

(b) Sole Purpose Requirement. The sole purpose of the facility shall be the exclusive purpose of the facility. The only function or use of the facility shall be the control, reduction, or prevention of pollution; or for the material recovery of solid waste, hazardous waste or used oil.

(3) Facility Compliance. The facility shall achieve compliance with Department statutes and rules, or Commission orders or permit conditions before the Commission issues certification as a pollution control facility.

(4) Eligible Activities. The facility shall prevent, reduce, control, or eliminate:

(a) Air contamination by use of air cleaning devices as defined in ORS 468A.005 or through equipment designed to prevent, reduce or eliminate air contaminants prior to discharge to the outdoor atmosphere;

(b) Alternatives to Open Field Burning. The facility shall reduce or eliminate:

(A) Open field burning and may include equipment, facilities, and land for gathering, densifying, handling, storing, transporting and incorporating grass straw or straw based products;

(B) Air quality impacts from open field burning and may include propane burners or mobile field sanitizers; or

(C) Grass seed acreage that requires open field burning. The facility may include:

(i) Production of alternative crops that do not require open field burning;

(ii) Production of rotation crops that support grass seed production without open field burning; or

(iii) Drainage tile installations and new crop processing facilities.

(c) Hazardous Waste. The facility shall treat, substantially reduce or eliminate hazardous waste as defined in ORS 466.005 or utilize material as set forth in subsection (4)(e) of this rule;

(d) Industrial Waste. The facility shall dispose of, eliminate or be redesigned to eliminate industrial waste and the use of treatment works for industrial wastewater as defined in ORS 468B.005;

(e) Hazardous Waste, Solid Waste and Used Oil Material Recovery. The facility shall eliminate or obtain useful material from material that would otherwise be solid waste as defined in ORS 459.005, hazardous waste as defined in ORS 466.005, or used oil as defined in 468.850. The facility shall produce an end product of utilization that is an item of real economic value and is competitive with an end product produced in another state. The facility shall produce the end product by mechanical processing, chemical processing; or through the production, processing, pre-segregation, or use of materials which:

(A) Have useful chemical or physical properties and which may be used for the same or other purposes; or

(B) May be used in the same kind of application as its prior use without change in identity.

(f) Noise Pollution. The facility shall substantially reduce, eliminate or be redesigned to eliminate noise pollution or noise emission sources set forth in OAR 340-035-0005 through OAR 340-035-0100;

(g) Spills or Unauthorized Releases. The facility shall be used to detect, defer or prevent spills or unauthorized releases. This does not include any facility installed, constructed or used for cleanup after a spill or unauthorized release has occurred; or

(h) Nonpoint Source Pollution. Pursuant to ORS 468.155(2)(b), the EQC has determined that the following facilities reduce, or control significant amounts of nonpoint source pollution:

(A) Any facility that implements a plan, project, or strategy to reduce or control nonpoint source pollution as documented:

(i) By one or more partners listed in the Oregon Nonpoint Source Control Program Plan; or

(ii) In a Federal Clean Air Act State Implementation Plan for Oregon; or

(B) Any facility effective in reducing nonpoint source pollution as documented in supporting research by:

(i) Oregon State University, Agricultural Experiment Station; or

(ii) The United States Department of Agriculture, Agriculture Research Service; or

(iii) The Oregon Department of Agriculture; or

(C) Wood chippers used to reduce openly burned woody debris; or

(D) The retrofit of diesel engines with a diesel emission control device, certified by the U.S. Environmental Protection Agency.

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - ORS 468.190
Hist.: DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98; DEQ 1-2001, f. 1-30-01, cert. ef. 2-1-01

340-016-0065

Fees

The application fee shall be made payable to the Department of Environmental Quality and shall not be refunded to the applicant except as set forth in section (3) of this rule. The application fee shall be based upon the facility cost after any reductions as set forth ORS 340-016-0070(1).

(1) Application Fee for Preliminary Certification. If the applicant chooses to submit the optional application for preliminary certification as set forth in OAR 340-016-0055(1), the applicant shall submit the appropriate preliminary application fee of:

(a) One-half of one percent of the estimated facility cost as claimed on the preliminary application. The minimum fee shall be $50 and the maximum fee shall be $7,500; or

(b) $50 for preliminary applications claiming alternatives to open field burning.

(2) Application Fee for Final Certification. The applicant shall submit the appropriate final application fee:

(a) One percent of the estimated facility cost as claimed on the final application. The minimum fee shall be $50 and the maximum fee shall be $15,000. If the applicant received a preliminary certificate and the facility claimed on the final application:

(A) Was built substantially as represented on the preliminary certification, the applicant may subtract the amount of the preliminary application fee paid from the final application fee; or

(B) Was not built substantially as represented on the preliminary certification, the applicant shall not subtract the amount of the preliminary application fee paid from the final application fee.

(b) $50 for final applications claiming alternatives to open field burning.

(3) Refunds. The Department shall refund 50% of the preliminary and final application fee paid only if the preliminary or the final application is rejected or denied. The preliminary and final application fee for alternatives to open field burning shall not be refunded any amount under this rule.

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - ORS 468.190
Hist.: DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98

340-016-0070

Determining the Facility Cost

(1) Facility Cost. The applicant shall provide documentation sufficient to substantiate the facility cost. The facility cost shall be reduced by the:

(a) Salvage value of a pre-existing facility if the applicant is replacing a facility. The salvage value shall never be less than zero and shall be the value of the pre-existing facility at the end of its useful life minus the cost to remove it from service;

(b) Amount of any government grants received to pay part of the facility cost;

(c) Present value of any other state tax credits for which the investment is eligible; and

(d) Ineligible facility costs as set forth in section (3) and as determined by comparing the actual facility costs with eligible costs as set forth in section (2).

(2) Eligible Costs. For costs to be eligible, they shall make a significant contribution to pollution control and shall directly relate to the acquisition and installation of the facility. Eligible costs may include:

(a) Machinery, equipment and devices;

(b) Structures and buildings;

(c) Design or engineering;

(d) Employee or contractor labor;

(e) Indirect costs limited to employees of the applicant's business that directly performed the engineering, acquisition or installation work;

(f) Government fees associated with the installation of the equipment;

(g) Freight;

(h) Excavation;

(i) Materials and supplies needed for installation;

(j) Travel directly related to purchased equipment;

(k) For underground and aboveground storage tank systems holding petroleum, waste oil and hazardous substances:

(A) Modification and decommissioning of existing tank systems; and

(B) Ninety percent of any automatic tank gauging system.

(l) Essential backup systems;

(m) Replacement or reconstruction of all or a part of any facility for which a pollution control facility certificate has previously been issued under ORS 468.170, limited to:

(A) An amount equal to the difference between the cost the new facility and the like-for-like replacement cost of the original facility if the facility is being replaced due to a new requirement imposed by the Department, the federal Environmental Protection Agency or a regional air pollution authority; or

(B) The remainder of the tax credit certified to the facility being replaced if a facility is replaced or reconstructed before the end of its useful life; and

(n) Other costs directly related to the principal or sole purpose of the facility.

(3) Ineligible Costs. The applicant and the Department shall reduce the facility cost by any ineligible costs. Ineligible costs are any distinct portion of a pollution control facility that makes an insignificant contribution to the principal or sole purpose of the facility; or provides benefits of economic value; or where the costs are not directly related to the operation of the industry or enterprise seeking the tax credit but were installed as a result of the facility. Ineligible costs include but are not limited to:

(a) Office buildings and furnishings;

(b) Parking lots and road improvements;

(c) Automobiles;

(d) Landscaping;

(e) External lighting;

(f) Company or related signs;

(g) Air conditioners;

(h) Property installed, constructed or used for clean up of emergency spills or unauthorized releases, as defined by the Commission;

(i) Septic tanks or other facilities for human waste including property installed, constructed or used for moving sewage to the collecting facilities of a public or quasi-public sewerage system;

(j) Removal of equipment replaced by the facility except for tanks as set forth in paragraph (2)(k)(A) of this rule;

(k) Replacement or reconstruction of all or a part of any facility for which a pollution control facility certificate has previously been issued under ORS 468.170, except as set forth in subsection (2)(m) of this rule;

(l) Application fees for a pollution control tax credit;

(m) Start-up costs;

(n) Asbestos abatement;

(o) Purchased equipment used to install the facility;

(p) Maintenance, operation, or repair of a facility, including spare parts;

(q) Owner's time;

(r) Interest, warranty charges, financing costs, capitalized costs (property taxes, capitalized interest, etc.), insurance premiums, legal fees, court costs, patent searches and feasibility studies; and

(s) Travel for research purposes.

(4) Statement of Facility Cost. The applicant shall provide an auditor's statement that the facility cost claimed on the application for final certification is eligible and allocable as set forth in this rule and ORS 340-016-0070. The facility cost prior to any reductions, as set forth 340-016-0070(1), shall determine the degree of independence of the auditor:

(a) The applicant may prepare the auditor's statement when the facility cost:

(A) Does not exceed $50,000; or

(B) Exceeds $500,000. When the facility cost exceeds $500,000, the applicant shall also allow the Department to perform an independent accounting review to be paid by the Department.

(b) The applicant shall have the auditor's statement prepared by an independent Certified Public Accountant when the facility cost exceeds $50,000 but does not exceed $500,000.

(5) Waiver of External CPA's Audit. The applicant may submit a written request and the Department may grant a waiver of the independent accounting review:

(a) If the facility cost can be thoroughly documented by less than twenty invoices or canceled checks;

(b) If the facility is not part of a larger construction project; and

(c) If the facility consists of a single pollution control component or a single pollution control process.

(6) More Than One Owner. If there is more than one owner applying for tax relief for the same facility, each owner may be required to obtain a separate certification of cost as set forth in this section. The facility cost claimed by each owner separately shall not exceed the total cost of the facility.

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - ORS 468.190
Hist.: DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98

340-016-0075

Determination of Portion of Facility Cost Allocable to Pollution Control

The applicant shall provide the information necessary for the Commission and the Department to determine the portion of the facility cost allocable to pollution control as set forth in ORS 468.190 and this rule. The portion of the facility cost properly allocable to pollution control shall be from zero to 100 percent in increments of one percent. If the portion is zero percent, the Commission shall issue an order denying the certification. The facility cost for this rule shall be the cost as set forth in OAR 340-016-0070(1) after the reduction of the salvage value.

(1) Facility Cost Does Not Exceed $50,000. The Commission shall only consider the percentage of time the facility is used for pollution control as opposed to any other purpose when determining the percentage of the facility cost allocable to pollution control for facilities with costs that do not exceed $50,000. The remaining sections in this rule shall not be applicable to these facilities.

(2) Facility Cost Exceeds $50,000. The Commission shall consider the five factors in this section when establishing the portion of the facility costs properly allocable to pollution control for facilities qualifying for certification under ORS 468.170. These five factors shall be considered only when the facility cost exceeds $50,000 under sections (3), (4) and (5) of this rule. In considering the five factors and their applicability to these rules, the Commission may determine in its findings that one or more factors are more important than others and may assign different weights to the factors when determining the portion of costs properly allocable to pollution control:

(a) The extent to which the facility is used to recover and convert waste products into a salable or usable commodity;

(b) The estimated annual percent return on the investment in the facility;

(c) The alternative methods, equipment and costs for achieving the same pollution control objective;

(d) Related savings or increases in costs which occur or may occur as a result of the installation of the facility; or

(e) Other factors which are relevant in establishing the portion of the actual cost of the facility properly allocable to the prevention, control or reduction of air, water or noise pollution, solid or hazardous waste or to recycling or properly disposing of used oil.

(3) Non-Integral Facilities. The Department shall determine the percentage of the facility cost allocable to pollution control as set forth in this section if the facility is not "integral to the operation of the applicant's business" as set forth in subsection (4)(a) of this rule. The applicant shall:

(a) Determine the Average Annual Cash Flow from the facility. The average annual cash flow is calculated by summing the five annual cash flows in this subsection as calculated through paragraph (3)(a)(C) and dividing the sum by five. Where the useful life of the facility is less than five years, sum the annual cash flows for the useful life of the facility and divide the sum by the useful life. The applicant shall:

(A) Estimate gross annual revenue for each of the first five full years of operation. Revenue includes the estimated total annual income directly related to the operation of the facility. Revenue includes income derived from sale or reuse of recovered materials or energy or any other means including savings that may occur as a result of the facility. The Department may require additional information or documentation regarding gross annual revenue estimates for evaluation purposes;

(B) Estimate the annual operating expenses for each of the first five full years of operation. Operating expenses shall be the estimated annual cost of operating the facility. Operating expenses may include labor, utilities, property taxes, insurance, and other cash expenses, less any savings in expenses attributable to installation of the facility. Operating expenses shall not include depreciation, interest expenses, and state and federal taxes; and

(C) Subtract the estimated annual operating expenses set forth in paragraph (3)(a)(B) from the estimated gross annual revenues set forth in paragraph (3)(a)(A) for each of the first five full years of operation.

(b) Determine the Return on Investment Factor (ROI Factor) by dividing the facility cost by the average annual cash flow as set forth in subsection (3)(a) of this rule.

(c) Determine the Facility Return on Investment (Facility ROI) by using the Facility ROI -Table 1 provided with the application. At the top of Table 1, find the number equal to the number of years of the useful life of the facility. In the column under the useful life, find the number closest to the ROI Factor as set forth in subsection (3)(b) of this rule. Follow this row to the leftmost column to find the Facility ROI. Table 1 shall be developed utilizing the following equation: [Equation not included. See ED. NOTE.]

(d) Determine the National Return on Investment (National ROI) from the National ROI - Table 2 provided with the application. Select the National ROI that corresponds with the year construction was completed on the facility. The National ROI Table 2 shall be developed by averaging the prior five years' rates of return before taxes on total assets for all United States manufacturing corporations as found in the Quarterly Financial Report for Manufacturing, Mining and Trade Corporations, published by the U.S. Department of Commerce, Bureau of the Census.

(e) Determine the Portion of Actual Costs Properly Allocable to Pollution Control. If the Facility ROI as set forth in subsection (3)(c) is:

(A) Greater than or equal to the National ROI as set forth in subsection (3)(d) then the percentage of the facility cost properly allocable to pollution control shall be zero percent.

(B) Less than the National ROI as set forth in subsection (3)(d) then the percentage of the facility cost properly allocable to pollution control shall be determined by the equation: [Equation not included. See ED. NOTE.]

(4) Facilities Integral to the Operation of the Applicant's Business. This section applies only to facilities costing over $50,000, to applications received by the Department on or after February 1, 1993, and to any facility that the Commission determines to be "integral to the operation of the applicant's business" as set forth in this section. The Department shall use the steps in this section to determine the portion of the facility cost that is allocable to pollution control for facilities determined to be "integral to the operation of the applicant's business."

(a) Determine if the Facility is Integral to the Operation of the Applicant's Business. A facility is integral to the operation of the applicant's business when the business is unable to operate or is only able to operate at reduced income levels, without the claimed pollution control facility as determined by the Commission. Such instances include, but are not limited to, commercial solid waste and hazardous waste landfills, solid and hazardous waste recycling businesses, and environmental service providers. A pollution control facility integral to the operation of the applicant's business does not include a facility that meets the principal purpose requirement as set forth in OAR 340-016-0060(3)(a) unless the pollution control facility meets one or more of the factors included in this definition. Factors that the Department may use to determine whether a pollution control facility is integral to the operation of the business include:

(A) The facility represent in excess of 25 percent of the total assets of the business; or

(B) The facility was erected, constructed, or installed in response to market demand for such pollution control facilities. This may occur as the result of requirements imposed by the Department, the Federal Environmental Protection Agency or regional air pollution authority, on parties unaffiliated with the applicant; or

(C) Erection, construction, or installation of the facility and any previously certified pollution control facilities, allows the applicant to generate gross revenues at least 50 percent greater than would have been generated in the absence of the claimed facility and any previously certified pollution control facilities; or

(D) The applicant's operating expenses related to operation of the facility and any previously certified pollution control facilities are at least 50 percent of the operating expenses of the applicant's business.

(b) Determine the National Return on Investment (National ROI) from National ROI Table 2 provided with the application. Select the National ROI that corresponds with the year construction was completed on the facility. Table 2 shall be developed as set forth in subsection (3)(d) of this rule.

(c) Determine the Industry Average Profit (Industry AP) by summing the "industry median profit before taxes as a percent of total assets" for the five years prior to the year the facility was completed as found in Robert Morris Associates, Annual Statement Studies under the applicant's primary four digit Standard Industrial Classification (SIC) and dividing the sum obtained by five. Where five years are not available, sum the number of years that are available and divide by the number of years available. If the Annual Statement Studies do not list the "industry median profit before taxes as a percent of total assets" for the applicant's SIC, the applicant and the Department shall determine whether an alternate SIC is appropriate for the applicant's business. If no alternate SIC is appropriate for the applicant's business or if an applicant is dissatisfied with the percent allocable determination made using the procedures in this section, the percent allocable shall be determined using the procedures set forth in section (5) of this rule;

(d) Determine the Portion of Actual Costs Properly Allocable to Pollution Control. If the Industry AP as set forth in paragraph (4)(c) is:

(A) Greater than or equal to the National ROI as set forth in subsection (4)(b), the percentage of the facility cost allocable to pollution control shall be zero percent;

(B) Less than the National ROI as set forth in paragraph (4)(b), the percentage of the facility cost allocable to pollution control shall be determined by the equation: [Equation not included. See ED. NOTE.]

(5) Alternate for Facilities Integral to Applicant's Business. If the applicant and the Department determine that no alternate Standard Industrial Classification (SIC) is appropriate for the applicant's business as set forth in subsection (4)(c) of this rule, the percent allocable to pollution control shall be determined using the procedures set forth in this section.

(a) Definitions. The following definitions shall be used in this section:

(A) "Annual Incremental Cash Flow" means the estimated annual cash flow for each year of the useful life of the claimed pollution control facility that is integral to the operation of applicant's business calculated as follows:

(i) Calculate the applicant's annual cash flow including the claimed facility by subtracting the annual operating expenses for the applicant's business from the gross annual income for the applicant's business for each year of the useful life of the claimed facility; and

(ii) Calculate the applicant's annual cash flow assuming that the claimed facility was not erected, constructed, or installed by subtracting the annual operating expenses for the applicant's business using this assumption from the gross annual income for the applicant's business using this assumption for each year of the useful life of the claimed facility; and

(iii) Subtract the applicant's annual cash flow assuming that the claimed facility was not erected, constructed, or installed from the annual cash flow with the claimed facility for each year of the useful life of the claimed facility.

(B) "Annual Operating Expenses" means the estimated costs of operating the applicant's business including labor, utilities, property taxes, insurance, and other cash expenses, less any savings in expenses. Depreciation, interest expenses, and state and federal taxes are not included;

(C) "Gross Annual Income" means the estimated total annual income from the applicant's business including savings that may occur;

(D) "Internal Rate of Return" means the rate of return that will equate the present value of the annual incremental cash flows over the useful life of the claimed facility with the present value of the claimed facility cost.

(b) The applicant shall furnish the following information to the Department:

(A) An income statement, balance sheet, statement of cash flows, and federal and state tax returns (if applicable) for the applicant's business for the applicant's three fiscal years prior to the date of submission of the application. If three years of such statements are not available, the applicant shall submit information for the years that are available;

(B) Revenue and expense projections, and cash flow projections for the applicant's business beginning with the year the application is submitted and continuing for the entire useful life of the pollution control facility. The level of detail of these projections shall be substantially equivalent to the level of detail of information submitted in paragraph (A) of this subsection. The Department may elect to provide the applicant with a worksheet for this purpose;

(C) Revenue and expense projections, and cash flow projections for the applicant's business for the entire useful life of the claimed facility assuming that the claimed pollution control facility was not erected, constructed or installed;

(D) A projection of the applicant's future capital expenditures for the pollution control facility;

(E) A letter signed by the applicant authorizing the Department to contract with an independent certified public accountant to review the financial information provided by the applicant. The applicant shall agree to reimburse the Department for the cost of this review;

(F) Using the information submitted in paragraphs (A) through (D) of this subsection, the Department shall calculate an Internal Rate of Return for the claimed facility by considering the claimed facility cost and annual incremental cash flow. The Internal Rate of Return shall be compared to the National ROI from Table 2 as set forth in subsection (4)(b) of this rule;

(G) If the applicant's Internal Rate of Return is greater than the reference rate, the percent allocable shall be zero percent;

(H) If the applicant's Internal Rate of Return is less than the reference rate, the percent allocable shall be determined by the following formula:

[ED. NOTE: The Tables and equations referenced in this rule are available from the agency.]

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - ORS 468.190
Hist.: DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98

340-016-0080

Certification

(1) The Preliminary Certificate. The Commission shall pre-certify the eligibility of a facility if the Commission determines the facility is eligible for a pollution control tax credit certificate as set forth in OAR 340-016-0060. The certificate shall be prima facie evidence that the facility is qualified for certification for tax relief under ORS 468.167. Preliminary certification shall not ensure that the facility constructed will receive certification under ORS 468.167 or tax relief under ORS 307.405 or 315.304.

(2) The Final Certificate. The Commission shall certify the actual cost of a pollution control facility as set forth in OAR 340-016-0070 and the portion of the cost properly allocable to pollution control as set forth in ORS 468.190 and OAR 340-016-0075 if the Department determines the facility is eligible for pollution control tax credit certification as set forth in 340-016-0060. The certificate:

(a) Shall bear a separate serial number for each such facility;

(b) May certify two or more facilities which constitute an operational unit under one certificate;

(c) Is effective for purposes of tax relief according to the provisions of ORS 307.405 or ORS 315.304;

(d) Shall be granted:

(A) For 10 consecutive years beginning with tax year of the person taking the tax credit; or

(B) For 20 consecutive years for corporations organized under ORS Chapters 62 or 65 that utilize ad valorem tax-relief. The portion of the facility allocable to pollution control shall be exempt from ad valorem taxation.

(e) Shall be limited to that portion of the eligible and allocable facility costs, as set forth in OAR 340-016-0070 and OAR 340-016-0075 representing the taxpayer's investment in the pollution control facility.

(f) May certify portions of a facility qualifying under ORS 468.165(1)(c) separately under this section if portions of the facility are owned by more than one person. The actual cost certified for all portions of a facility separately certified under this subsection shall not exceed the total cost of the facility that would have been certified under one certificate. The provisions of ORS 307.405 or ORS 315.304, whichever is applicable, shall apply to any sale, exchange or other disposition of a certified portion of a facility.

(g) May certify a lesser actual cost of the facility or a lesser portion of the actual cost properly allocable to pollution control, material recovery or recycling than was claimed in the application for certification.

(3) Revocation. The Department may order the revocation of the final tax credit certification as set forth in ORS 468.185. The Department shall notify the Department of Revenue and the county assessor of the county in which the facility is located as soon as the order of revocation or reinstatement under this section has become final.

(a) Cause for Revocation. Pursuant to the procedures for a contested case under ORS 183.310 to 183.550, the Department may order revocation of a tax credit for:

(A) Fraud or Misrepresentation, if the certificate was obtained by fraud or misrepresentation. All prior tax relief provided to the certificate holder by virtue of such certificate shall be forfeited. The Department of Revenue or the proper county officers shall proceed to collect taxes not paid by the certificate holder as a result of the tax relief provided to the holder under any provision of ORS 307.405 and 315.304; or

(B) Failure to Operate Facility, if the certificate holder has failed substantially to operate the facility for the purpose of, and to the extent necessary to meet the specifications of the certificate; or in compliance with the applicable Department or Commission statutes, rules, orders or permit conditions. The certificate holder shall be denied any further relief provided under ORS 307.405 or 315.304 in connection with such facility from and after the date that the order of revocation becomes final.

(b) Suspended Revocation. The Department may suspend the revocation of a certificate when operation of a facility ceases if the certificate holder indicates in writing that the facility will be returned to operation within five years time. In the event that the facility is not returned to operation as indicated, the Department shall revoke the certificate.

(c) Impact on Adjacent Facilities. The Department may revoke tax credits held for any facility or piece of equipment which is for the purpose of preventing, controlling, reducing, or eliminating pollution to the same media and which is at a location adjacent to the non-complying facility.

(d) Reinstatement. The Department may reinstate any revoked tax credit certification if the Department finds the non-complying facility has been brought into compliance. The tax credit certification shall be reinstated for the remaining period of the tax credit, less the period beginning on the date the Department revokes the certificate and ending on the date the Department reinstates the certificate.

(4) Sale, Exchange or Disposition of Facility. The certificate holder shall provide the Department with written notice upon any sale, exchange or other disposition of the certified pollution control facility. Upon request, the taxpayer shall provide a copy of the contract or other evidence of disposition of the property to the Department of Environmental Quality. Upon sale or exchange of the facility, the certificate holder may request that the Department transfer a tax credit from one holder to another, the Department shall reissue the certificate to the new holder, and report the transfer of the certificate to the Department of Revenue as set forth in ORS 307.405 and 315.304.

Stat. Auth.: ORS 468.150
Stats. Implemented: ORS 468.150 - 468.190
Hist.: DEQ 5-1998, f. 4-24-98, cert. ef. 5-1-98; DEQ 15-2010, f. & cert. ef. 12-20-10

340-016-0088

Subdelegation of Certificate Administration

(1) The Environmental Quality Commission subdelegates authority to the Director of the Department of Environmental Quality to:

(a) Transfer the tax credit certificate upon sale or exchange of the certified facility under OAR 340-016-0080(4) if:

(A) The new facility owner submits a complete Tax Credit Transfer Request form provided by the Department; and

(B) The Department determines the new facility owner continues to operate the facility according to the conditions of certification under ORS 468.170.

(b) Revoke a certificate under OAR 340-016-0080(3).

(2) The Director may subdelegate the authority provided in section (1) of this rule to the Administrator of the Management Services Division.

Stat. Auth.: ORS 468.020, ORS 468.150
Stats. Implemented: ORS 468.150 - 468.19
Hist.: DEQ 15-2010, f. & cert. ef. 12-20-10

Truck Engine Tax Credits

340-016-0210

Purpose

This rule establishes Department of Environmental Quality policies and procedures for issuing tax credits to Oregon taxpayers that purchase qualifying truck engines in accordance with Oregon Law 2003, Chapter 618, Sections 28 through 32. These rules apply only to purchases made on or after September 27, 2007, and certificates issued on or before December 31, 2013.

Stat. Auth.: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Hist.: DEQ 8-2004, f. & cert. ef. 9-17-04; DEQ 9-2008, f. & cert. ef. 7-11-08; DEQ 15-2010, f. & cert. ef. 12-20-10

340-016-0220

Definitions

(1) "DEQ" means the Department of Environmental Quality.

(2) "The 2003 Laws" means Oregon Laws 2003, Chapter 618, Sections 28 through 32 as reprinted in a note following ORS 315.356.

(3) "Program limitation" means the maximum amount of $500,000 that DEQ may approve in tax credits for all taxpayers in any one calendar year as provided by Section 29(3) of the 2003 Laws.

(4) "Tax credit" or "credit" means the truck engine tax credit or the amount of the truck engine tax credit.

(5) "Taxpayer limitation" means the maximum amount of $80,000 in tax credits that DEQ may approve for one taxpayer in any one calendar year as provided by Section 28(3) of the 2003 Laws.

Stat. Auth.: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Hist.: DEQ 8-2004, f. & cert. ef. 9-17-04; DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0230

Application Procedures

(1) Any Oregon taxpayer may submit an application to the DEQ after purchasing a qualifying engine and within the eligibility period provided by OAR 340-016-0210.

(2) The taxpayer must apply for the tax credit on the form prescribed by DEQ.

(3) The taxpayer may submit more than one application in a calendar year.

(4) A single application may include more than one truck engine.

(5) The taxpayer must file a complete application that includes all of the following elements:

(a) The taxpayer's name, contact information, and taxpayer identification number;

(b) The number of trucks owned prior to purchasing the engines claimed on the application;

(c) Proof of purchase for each truck engine claimed on the application. The proof of purchase must include the:

(A) Purchase date;

(B) Seller's name, address, location of the sale, and contact information;

(C) Taxpayer's name that is identical to the name on the application; and

(D) Vehicle identification number of the truck with the claimed engine;

(d) A copy of the Oregon Department of Transportation registration cab card;

(e) The engine manufacturer, the engine serial number, and the federal Environmental Protection Agency diesel engine family number;

(f) The taxpayer's signature;

(g) Other information as requested; and

(h) The nonrefundable application fee of $50 for each engine claimed on the application; and

(i) Other information required on the application form.

(6) An incomplete application is not eligible for an allocation of the limitation provided by ORS 340-016-0240 until the date that the taxpayer completes the application.

(7) The DEQ will notify the taxpayer within 14 days after receiving the application if the application is incomplete. The notification will:

(a) Request the missing information;

(b) Provide the taxpayer with the opportunity to submit additional information or make corrections; and

(c) Inform the taxpayer of the filing and allocation status provided by ORS 340-016-0240.

(8) DEQ may request other information to determine if the engine, the truck, and the applicant qualify for the credit according to the 2003 Laws.

(9) DEQ will file, but will not process, applications that exceed the program limitation and the taxpayer limitation.

(10) DEQ may not accept an application for a truck engine that has previously been issued a truck engine tax credit.

Stat. Auth.: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Hist.: DEQ 8-2004, f. & cert. ef. 9-17-04; DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0240

Allocating the Limitations

(1) The DEQ will first allocate the program limitation to the earliest application date based on the date that the DEQ receives a complete application according to OAR 340-016-0230(5).

(2) If the DEQ receives several applications on the same day and the total of the tax credits requested on these applications would exceed the program limitation then DEQ will allocate the remaining limitation by the following method.

(a) The DEQ will allocate the remaining program limitation by the earliest postmarked date.

(b) If there is a tie for the earliest postmarked date then the DEQ will allocate the remaining program limitation by the earliest invoice date.

(c) If there is a tie for the earliest invoiced date then the DEQ will allocate the remaining program limitation by drawing.

(3) When the program limitation has expired for the calendar year, the DEQ will retain all completed applications for processing in the following calendar year up to the taxpayer limitation for the current calendar year. The DEQ will process retained applications according to sections 1 and 2 of this rule. The tax credit claimed on a retained application will not increase the taxpayer limitation for the following calendar year.

Stat. Auth.: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 8-2004, f. & cert. ef. 9-17-04

340-016-0250

Approval or Rejection Procedures

(1) The DEQ will approve all qualifying truck engines within 45 days of the date that the taxpayer submits an application under the following conditions:

(a) The applicant filed the application within the eligibility period provided by OAR 340-016-0210; and

(b) The taxpayer filed a complete application according to OAR 340-015-0230; and

(c) The taxpayer purchased the truck from a dealer licensed with the Oregon Department of Motor Vehicles as a vehicle dealer on the date of purchase, or from a private party that is an Oregon resident.

(d) The engine, the truck, and the applicant qualify for the credit according to the 2003 Laws; and

(e) The engine has not previously been awarded a tax credit under OAR 340-016-0210 through 0260; and

(f) The program limitation has not expired for the current calendar year; and

(g) The taxpayer limitation has not expired for the current calendar year.

(2) The DEQ will:

(a) Reject all truck engines that do not qualify for approval under section 1 of this rule; and

(b) Provide the taxpayer with a written notice of the reason for the rejection within 45 days of the date that the taxpayer filed a complete application according to OAR 340-015-0230.

Stat. Auth.: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28-32, reprinted in a note following ORS 315.356
Hist.: DEQ 8-2004, f. & cert. ef. 9-17-04; DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0260

Procedures for Reconsideration and Review

If, for any reason, the taxpayer is dissatisfied with DEQ's rejection of a truck engine for the credit according to OAR 340-016-050(2), the taxpayer may appeal the rejection.

(1) The taxpayer may request within 45 days of the date on the rejection notice that:

(a) The DEQ re-evaluate the rejection. The taxpayer must provide additional information in writing for the DEQ to re-evaluate the rejection; or

(b) The Environmental Quality Commission hears the taxpayer's case at one of its regularly scheduled meetings. The Environmental Quality Commission will issue an order providing the taxpayer with written notice of its action and a concise statement of the findings and reasons by registered or certified mail within 45 days of the decision.

(2) If the taxpayer is dissatisfied with the Environmental Quality Commission's order under section (1)(b) of this rule then the taxpayer may appeal from the order as provided in ORS 468.110 and 183.384 as an order in other than a contested case.

Stat. Auth.: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 8-2004, f. & cert. ef. 9-17-04

Clean Diesel Repower And Retrofit Tax Credits

340-016-0270

Purpose and Scope

(1) The purpose of the Clean Diesel Repower and Retrofit Tax Credits rule is to provide an incentive for making investments in qualifying projects that reduce diesel emissions from engines used in Oregon by 25 percent or more.

(2) OAR 340-016-0270 through 340-016-0340 apply only to a repower or retrofit that occurs between September 28, 2007 and January 1, 2018.

(3) OAR 340-016-0270 through 340-016-0340 establish the Department’s requirements, standards and procedures used to approve tax credits for the certified costs necessary to perform qualified repowers of nonroad Oregon diesel engines and qualified retrofits of Oregon diesel engines.

Stat. Auth.: OL 2007, chapter 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0280

Definitions

As used in OAR 340-016-0270 through 340-016-0340, unless specifically defined otherwise:

(1) "Applicable local, state or federal pollution or emissions law" means a regulation that requires a diesel engine to meet pollution or emissions standards and has a compliance date before the installation of a repower or retrofit is completed.

(2) “Applicant” means a person that submits a Repower Tax Credit Application or a Retrofit Tax Credit Application.

(3) “Clean Diesel Service Provider” means a person that the Department has certified under OAR 340-259-0065 to install qualifying repowers or retrofits under the Clean Diesel Repower and Retrofit Tax Credit regulations, 340-016-0270 through 340-016-0340, or the Clean Diesel Grant and Loan regulations, 340-259-0005 through 340-259-0065.

(4) “Cost-effectiveness threshold” means the cost, in dollars, per ton of diesel particulate matter reduced determined pursuant to OAR 340-259-0025.

(5) “Department” means the Department of Environmental Quality.

(6) “Motor vehicle” has the meaning given that term in ORS 825.005.

(7) “Nonroad Oregon diesel engine” means any Oregon diesel engine that was not designed primarily to propel a motor vehicle on public highways of this state.

(8) “Oregon diesel engine” means an engine at least 50 percent of the use of which, as measured by miles driven or hours operated, will occur in Oregon for the three years following the repowering or retrofitting of the engine.

(9) “Program limitation” means the maximum amount that the Department may certify in tax credits during any one calendar year as authorized by the legislature.

(10) “Public highway” has the meaning given that term in ORS 825.005.

(11) “Qualified Installer” means the person that installs the repower or retrofit and is:

(a) A Clean Diesel Service Provider; or

(b) An employee of the applicant, if the applicant and vendor verify that the employee:

(A) Installed or will install the repower or retrofit to meet the warranty conditions; and

(B) Possesses the necessary skill to install the repower or retrofit.

(12) “Repower” means to scrap an old diesel engine and replace it with a new engine, a used engine or a remanufactured engine, or with electric motors, drives or fuel cells, with a minimum useful life of seven years.

(13) “Retrofit” means to equip a diesel engine with new emissions-reducing parts or technology after the manufacture of the original engine. A retrofit must use the greatest degree of emissions reduction available for the particular application of the equipment retrofitted that meets the cost-effectiveness threshold specified in OAR 340-259-0025.

(14) “Scrap” means to destroy and render inoperable.

Stat. Auth.: OL 2007, chapter 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0290

Standards for a Qualifying Repower or Retrofit

(1) To qualify for the Clean Diesel Repower and Retrofit Tax Credit, the repower or retrofit must:

(a) Be either a repower of a nonroad Oregon diesel engine or a retrofit of an Oregon diesel engine;

(b) For a retrofit, use technologies:

(A) Verified by the United States Environmental Protection Agency pursuant to its February 2002 Final Draft Testing Protocol “Generic Verification Protocol for Diesel Catalysts, Particulate Filters and Engine Modifications” or its September 2003 “Generic Verification Protocol for Determination of Emissions Reductions Obtained by Use of Alternative or Reformulated Liquid Fuels, Fuel Additives, Fuel Emulsions, and Lubricants for Highway and Nonroad Use Diesel Engines and Light Duty Gasoline Engines;”

(B) Verified by the California Air Resources Board pursuant to Title 13, California Code of Regulations, Chapter 14, "Verification Procedure, Warranty and In-Use Compliance Requirements for In-Use Strategies to Control Emissions from Diesel Engines," as in effect on June 18, 2008; or

(C) Determined by the Department to have been verified through an equivalent emission testing program;

(c) Reduce diesel particulate matter emissions by at least 25 percent compared to baseline emissions for the engine year and specific installation; and

(d) Be installed by a Qualified Installer.

(2) If the Department approved a Clean Diesel Repower and Retrofit Tax Credit application under OAR 340-016-0330 or a grant or loan application under OAR 340-259-0055 to repower or retrofit a vehicle or engine, a subsequent Clean Diesel Repower and Retrofit Tax Credit for the same vehicle or engine is available if the new repower or retrofit reduces diesel particulate matter emissions below the emissions achieved by the previous repower or retrofit.

Stat. Auth.: OL 2007, ch. 855 (HB 2172 (2007)), OL 2007, ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0300

Application Procedures

(1) Any person may submit an application to the Department for a Clean Diesel Repower and Retrofit Tax Credit after completing a qualifying repower or retrofit that occurred between September 28, 2007 and January 1, 2018, and within one year following the invoice date of the qualifying repower or retrofit. The applicant:

(a) Must apply for the tax credit on the Repower Tax Credit Application or Retrofit Tax Credit Application published by the Department;

(b) May submit more than one application in a calendar year; and

(c) May include more than one repower or retrofit on one application.

(2) For Repower Tax Credit Applications, the applicant must file a complete application including:

(a) Documentation that the repower meets the standards of a qualifying repower pursuant to OAR 340-016-0290;

(b) An invoice for the scrapped engine that includes the name of the scrap yard, scrapping price and date, scrapped engine manufacturer and serial number, and, if available, EPA engine family number;

(c) Documentation that the engine block of the engine scrapped has had a hole drilled in it, or is otherwise destroyed or rendered inoperable; and

(d) The manufacturer name and serial number of the newly installed engine, electric motors, drives or fuel cells.

(3) For Retrofit Tax Credit Applications, the applicant must file a complete application including:

(a) Documentation that the retrofit meets the standards of a qualifying retrofit pursuant to OAR 340-016-0290;

(b) Documentation that the retrofit uses the greatest degree of emissions reduction available for the particular application of the equipment retrofitted that meets the cost-effectiveness threshold specified in OAR 340-259-0025; and

(c) The manufacturer name and serial number of the engine.

(4) For Repower Tax Credit Applications and Retrofit Tax Credit Applications, the applicant must include:

(a) The name, address and taxpayer identification number of the applicant;

(b) The nonrefundable application fee of $50 plus one percent of the potential tax credit;

(c) An itemized invoice for each repower or retrofit claimed on the application that includes:

(A) Installation date;

(B) Qualified Installer name and address;

(C) Location of the sale of the repower or retrofit and contact information for the vendor;

(D) The purchaser’s name (which must be identical to the applicant);

(E) The vehicle identification number or serial number for each piece of equipment that is claimed as repowered or retrofitted on the application; and

(F) The plate number for each licensed motor vehicle on which the repower or retrofit was installed.

(d) A statement that the applicant agrees to audits of relevant records and inspection of the repower or retrofit, and will maintain the installed engine or technology in working condition to meet warranty requirements for three years;

(e) A statement by the applicant that at least 50 percent of the use of the engine, as measured by miles driven or hours operated, will occur in Oregon for the three years following the repowering or retrofitting of the engine;

(f) A statement of the amount and source of any existing financial incentives from public funds that directly reduce the cost of the repower or retrofit, including tax credits, grants, loans or any other public financial assistance;

(g) A statement by the Qualified Installer that the repower or retrofit qualifies for the tax credit pursuant to OAR 340-016-0290;

(h) A statement by the applicant that the engine on which the repower or retrofit was performed is owned by the applicant;

(i) The applicant’s signature attesting that the application is true and correct; and

(j) Any additional information the Department may require.

(5) Upon determining that it does not require any additional information and that the application is complete, the Department will review the application pursuant to OAR 340-016-0320.

(6) If the Department determines that it requires additional information or that the application is incomplete, the Department will request additional information no later than 60 days after receiving the application.

(7) The applicant must submit the information requested under OAR 340-016-0300(6) within 30 days of the date of the Department’s request, or the Department may deny the application.

Stat. Auth.: OL 2007, ch. 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0310

Tax Credit Cost Certification Letter

(1) If the Department approves an application pursuant to OAR 340-016-0330, it will issue a letter certifying the cost of a repower or retrofit according to 340-259-0020. The letter may:

(a) Certify costs in a different amount than claimed in the application pursuant to OAR 340-259-0020; and

(b) Impose recordkeeping requirements, or other terms on the applicant and a tax credit transferee.

(2) The applicant must meet the requirements of the letter of certification regardless of any tax credit transfers.

(3) The Department will notify the Oregon Department of Revenue in writing if a certification letter has been revoked or modified.

Stat. Auth.: OL 2007, ch. 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0320

Allocating the Limitations

(1) The Department will allocate the program limitation among applicants according to the order in which the Department receives applications that it determines to be complete and do not require any additional information pursuant to OAR 340-016-0300.

(2) If the Department receives multiple applications on the same day that it determines to be complete and do not require any additional information, and the total of the Clean Diesel Repower and Retrofit Tax Credits requested on these applications would exceed the program limitation, the Department will allocate the remaining limitation using the following method:

(a) The Department will allocate the remaining program limitation to the application with the earliest postmarked date.

(b) If multiple applications share the earliest postmarked date, the Department will allocate the remaining program limitation to the application with the earliest invoice date.

(c) If multiple applications share the earliest invoiced date, the Department will allocate the remaining program limitation by random selection.

(3) Once the program limitation has been met, the Department will process applications as follows:

(a) If the Department determines that it requires additional information or that the application is incomplete, the Department will request additional information pursuant to OAR 340-016-0300(6); and

(b) Upon determining that it does not require any additional information and that the application is complete, the Department will review the application pursuant to OAR 340-016-0320 during the next calendar year.

Stat. Auth.: OL 2007, ch. 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0330

Application Approval or Denial Procedures

(1) Within 60 days of determining that it does not require any additional information and that the application is complete pursuant to OAR 340-016-0300, the Department must provide written notice to the applicant of the approval or denial of the application.

(2) The Department will approve an application if:

(a) The repower or retrofit occurred between September 28, 2007 and January 1, 2018;

(b) The applicant filed the application within one year following the date of the invoice for the qualifying repower or retrofit; and

(c) The repower or retrofit meets the standards of a qualifying repower or retrofit pursuant to OAR 340-016-0290.

(3) If the Department approves an application, the Department must issue a tax credit cost certification letter pursuant to OAR 340-016-0310.

(4) If the Department denies an application, the Department must provide the applicant with written notice of the reasons for the denial. The notification will include procedures for reconsideration and review under OAR 340-016-340.

(5) If the Department approves a cost certification in a lesser amount than claimed on the application, the Department must provide the applicant with written notice of the reasons for the different amount. The notification will include procedures for reconsideration and review under OAR 340-016-340.

Stat. Auth.: OL 2007, ch. 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

340-016-0340

Procedures for Reconsideration and Review of Denial

The applicant may appeal the Department’s denial of an application or approval of a cost certification in a lesser amount than claimed on the application under OAR 340-016-0330(4)-(5) as follows:

(1) The applicant may request that the Department reconsider the denial if it provides additional information in writing to assist the Department in reconsidering the application, within 60 days of the date of the Department’s notice of denial; or

(2) Appeal the denial as a contested case under ORS Chapter 183.

Stat. Auth.: OL 2007, ch. 855 (HB 2172 (2007)), OL 2007, Ch. 843 (HB 3201 (2007)).OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Stats. Implemented: OL 2003, Sec. 28 - 32, reprinted in a note following ORS 315.356
Hist.: DEQ 9-2008, f. & cert. ef. 7-11-08

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