Bill Text: OR SB817 | 2011 | Regular Session | Enrolled
Bill Title: Relating to tax credits for investments in low-income communities; and prescribing an effective date.
Spectrum: Bipartisan Bill
Status: (Passed) 2011-08-09 - Effective date, September 29, 2011. [SB817 Detail]
Download: Oregon-2011-SB817-Enrolled.html
76th OREGON LEGISLATIVE ASSEMBLY--2011 Regular Session
Enrolled
Senate Bill 817
Sponsored by Senators BURDICK, MORSE, HASS, TELFER,
Representatives BERGER, BAILEY, BENTZ, READ, BREWER, WAND;
Senator EDWARDS
CHAPTER ................
AN ACT
Relating to tax credits for investments in low-income
communities; creating new provisions; amending ORS 314.752 and
318.031; and prescribing an effective date.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 2 to 8 of this 2011 Act shall be known
and may be cited as the Oregon Low Income Community Jobs
Initiative. + }
SECTION 2. { + As used in sections 2 to 8 of this 2011 Act:
(1) 'Credit allowance date' means, with respect to any
qualified equity investment:
(a) The date on which the investment is initially made; and
(b) Each of the six yearly anniversary dates after that initial
date.
(2) 'Long-term debt security' means any debt instrument issued
by a qualified community development entity, at par value or at a
premium, with an original maturity date of at least seven years
from the date of its issuance, with no acceleration of repayment,
amortization or prepayment features prior to its original
maturity date.
(3) 'Purchase price' means the amount of cash paid to a
qualified community development entity for a qualified equity
investment.
(4) 'Qualified active low-income community business' has the
meaning given that term in section 45D of the Internal Revenue
Code. 'Qualified active low-income community business' does not
include a business that derives or projects to derive 15 percent
or more of its annual revenue from the rental or sale of real
estate, unless the business is controlled by, or under common
control with, another business that:
(a) Does not derive or project to derive 15 percent or more of
its annual gross revenues from the rental or sale of real estate;
and
(b) Is the primary tenant of real estate leased from the
controlled business.
(5) 'Qualified community development entity' has the meaning
given that term in section 45D of the Internal Revenue Code,
provided that the entity has entered into, or is controlled by an
entity that has entered into, an allocation agreement with the
Community Development Financial Institutions Fund of the United
States Department of the Treasury with respect to credits
Enrolled Senate Bill 817 (SB 817-A) Page 1
authorized by section 45D of the Internal Revenue Code, and the
State of Oregon is included within the service area set forth in
the allocation agreement.
(6) 'Qualified equity investment' means any equity investment
in, or long-term debt security issued by, a qualified community
development entity, that:
(a) Is acquired at its original issuance solely in exchange for
cash after July 1, 2012, unless it was a qualified equity
investment in the hands of a prior holder; and
(b) Has at least 85 percent of its cash purchase price used by
the issuer to make qualified low-income community investments in
qualified active low-income community businesses located in this
state.
(7) 'Qualified low-income community investment' means any
capital or equity investment in, or loan to, any qualified active
low-income community business made after July 1, 2012. + }
SECTION 3. { + Section 4 of this 2011 Act is added to and made
a part of ORS chapter 315. + }
SECTION 4. { + (1) As used in this section, 'applicable
percentage' means zero percent for each of the first two credit
allowance dates, seven percent for the third credit allowance
date and eight percent for the next four credit allowance dates.
(2) A person that makes a qualified equity investment shall, at
the time of investment, earn a vested credit against the taxes
otherwise due under ORS chapter 316 or, if the person is a
corporation, under ORS chapter 317 or 318.
(3)(a) The total amount of the tax credit available to a
taxpayer under this section shall equal 39 percent of the
purchase price of the qualified equity investment.
(b) The taxpayer that holds a qualified equity investment on a
particular credit allowance date of the qualified equity
investment may claim a portion of the tax credit against its tax
liability for the tax year that includes the credit allowance
date equal to the applicable percentage for that credit allowance
date multiplied by the purchase price of the qualified equity
investment.
(4) The credit allowed under this section may not exceed the
tax liability of the taxpayer for the tax year in which the
credit is claimed.
(5) Any tax credit otherwise allowable under this section that
is not used by the taxpayer in a particular tax year may be
carried forward and offset against the taxpayer's tax liability
in any succeeding tax year.
(6) The following conditions must exist for a taxpayer to be
eligible for the credit allowed under this section:
(a) A qualified community development entity that issues a debt
instrument may not make cash interest payments on the debt
instrument during the period commencing with its issuance and
ending on its final credit allowance date in excess of the sum of
the cash interest payments and the cumulative operating income,
as defined in the regulations promulgated under section 45D of
the Internal Revenue Code, of the qualified community development
entity for the same period. Neither this paragraph nor the
definition of 'long-term debt security' provided in section 2 of
this 2011 Act in any way limits the holder's ability to
accelerate payments on the debt instrument in situations where
the qualified community development entity has defaulted on
covenants designed to ensure compliance with this section or
section 45D of the Internal Revenue Code.
Enrolled Senate Bill 817 (SB 817-A) Page 2
(b) A business shall be considered a qualified active
low-income community business for the duration of a qualified
community development entity's investment in or loan to the
business, if it is reasonable to expect that at the time of the
qualified community development entity's investment in or loan to
a qualified active low-income community business, the business
will continue to satisfy the requirements for being a qualified
active low-income community business throughout the entire period
of the investment or loan.
(c) A qualified equity investment must be designated by the
issuer as a qualified equity investment and be certified by the
Oregon Business Development Department as not exceeding the
limitation in section 7 of this 2011 Act. The qualified community
development entity must keep sufficiently detailed books and
records with respect to the investments made with the proceeds of
the qualified equity investments to allow the direct tracing of
proceeds into qualified low-income community investments in
qualified active low-income community businesses in this state.
(d) The qualified community development entity shall report
annually to the department:
(A) The number of employment positions created and retained as
a result of qualified low-income community investments by the
qualified community development entity;
(B) The average annual salary of positions described in
subparagraph (A) of this paragraph; and
(C) The number of positions described in subparagraph (A) of
this paragraph that provide health benefits.
(e) The maximum amount of qualified low-income community
investments that may be made in a qualified active low-income
community business and all of its affiliates, with the proceeds
of qualified equity investments that have been certified under
section 6 of this 2011 Act, shall be $4 million, whether made by
one or several qualified community development entities.
(f) A qualified equity investment must be made before July 1,
2016. Nothing in this paragraph precludes an entity that makes a
qualified equity investment prior to July 1, 2016, from claiming
a tax credit relating to that qualified equity investment for
each applicable credit allowance date.
(7) A taxpayer claiming a credit under this section may not
claim any other credit under this chapter or ORS chapter 285C
during the same tax year based on activities related to the same
qualified active low-income community business. + }
SECTION 5. { + A tax credit allowed under section 4 of this
2011 Act may not be sold or transferred, with the exception that
tax credits that a partnership, limited liability company, S
corporation or other pass-through entity is entitled to claim may
be allocated to the partners, members or shareholders of the
entity for their direct use in accordance with the provisions of
any agreement among the partners, members or shareholders. + }
SECTION 6. { + (1) A qualified community development entity
that seeks to have an equity investment or long-term debt
security certified as a qualified equity investment and eligible
for a tax credit under section 4 of this 2011 Act shall apply to
the Oregon Business Development Department. The department shall
establish by rule application procedures for applications for
certification. The entity must submit an application on a form
that the department provides that includes:
(a) The entity's name, address, tax identification number and
evidence of the entity's certification as a qualified community
development entity.
Enrolled Senate Bill 817 (SB 817-A) Page 3
(b) A copy of an allocation agreement executed by the entity,
or its controlling entity, and the Community Development
Financial Institutions Fund that includes the State of Oregon in
its service area.
(c) A certificate executed by an executive officer of the
entity attesting that the allocation agreement remains in effect
and has not been revoked or canceled by the Community Development
Financial Institutions Fund.
(d) A description of the proposed purchase price, structure and
purchaser of the equity investment or long-term debt security.
(e) The name and tax identification number of any person
eligible to claim a tax credit, under section 4 of this 2011 Act,
allowed as a result of the certification of the qualified equity
investment.
(f) Information regarding the proposed use of proceeds from the
issuance of the qualified equity investment.
(g) A nonrefundable application fee of $20,000. This fee shall
be paid to the department and shall be required for each
application submitted.
(2) Within 15 days after receipt of a completed application
containing the information necessary for the department to
certify a proposed equity investment, including the payment of
the application fee, the department shall grant or deny the
application in full or in part. If the department denies any part
of the application, the department shall inform the qualified
community development entity of the grounds for the denial. If
the qualified community development entity provides any
additional information required by the department or otherwise
completes its application within 15 days after the notice of
denial, the application shall be considered completed as of the
original date of submission. If the qualified community
development entity fails to provide the information or complete
its application within the 15-day period, the application remains
denied and must be resubmitted in full with a new submission
date.
(3) If the application is deemed complete, the department shall
certify the proposed equity investment or long-term debt security
as a qualified equity investment and eligible for a tax credit
under section 4 of this 2011 Act, subject to the limitations in
section 5 of this 2011 Act. The department shall provide written
notice of the certification to the qualified community
development entity. The notice shall include the names of those
taxpayers who are eligible to utilize the credits and their
respective credit amounts. If the names of the persons or
entities that are eligible to utilize the credits change due to a
transfer of a qualified equity investment or a change in an
allocation pursuant to section 5 of this 2011 Act, the qualified
community development entity shall notify the department of the
change.
(4) Within 60 days after receiving notice of certification, the
qualified community development entity shall issue the qualified
equity investment and receive cash in the amount of the certified
purchase price. The qualified community development entity must
provide the department with evidence of the receipt of the cash
investment within 10 business days after receipt. If the
qualified community development entity does not receive the cash
investment and issue the qualified equity investment within 60
days following receipt of the certification notice, the
certification shall lapse and the entity may not issue the
qualified equity investment without reapplying to the department
Enrolled Senate Bill 817 (SB 817-A) Page 4
for certification. A certification that lapses reverts to the
department and may be reissued only in accordance with the
application process outlined in this section.
(5) The department shall certify qualified equity investments
in the order applications are received by the department.
Applications received on the same day shall be deemed to have
been received simultaneously. For applications received on the
same day and deemed complete, the department shall certify,
consistent with remaining tax credit capacity, qualified equity
investments in proportionate percentages based upon the ratio of
the amount of qualified equity investment requested in an
application to the total amount of qualified equity investments
requested in all applications received on the same day. If a
pending request cannot be fully certified because of the
limitation in section 7 of this 2011 Act, the department shall
certify the portion that may be certified unless the qualified
community development entity elects to withdraw its request
rather than receive partial credit.
(6) A qualified community development entity that is certified
under this section shall pay an annual evaluation fee of $1,000
to the department.
(7) The department shall establish by rule procedures to
administer the provisions of this section, including the
allocation of tax credits issued for qualified equity
investments. + }
SECTION 7. { + (1) Once the Oregon Business Development
Department has certified a cumulative amount of qualified equity
investments that can result in the utilization of $16 million of
tax credits in any tax year, the department may not certify any
more qualified equity investments under section 6 of this 2011
Act. This limitation shall be based on the scheduled utilization
of tax credits without regard to the potential for taxpayers to
carry forward tax credits to later tax years.
(2) The department shall reserve 15 percent of the total amount
of qualified equity investments that receive certification under
section 6 of this 2011 Act for investments in qualified active
low-income community businesses that:
(a) Have a primary purpose of improving the environment or
reducing emissions of greenhouse gases; or
(b) Produce goods that directly reduce emissions of greenhouse
gases or are designed as environmentally sensitive replacements
for products in current use.
(3) The department shall establish by rule procedures and
criteria for implementing the provisions of this section. + }
SECTION 8. { + (1) The Department of Revenue may recapture any
portion of a tax credit allowed under section 4 of this 2011 Act
if:
(a) Any amount of federal tax credit that might be available
with respect to the qualified equity investment that generated
the tax credit under section 4 of this 2011 Act is recaptured
under section 45D of the Internal Revenue Code. The department's
recapture shall be proportionate to the federal recapture with
respect to the qualified equity investment.
(b) The qualified community development entity redeems or makes
a principal repayment with respect to the qualified equity
investment that generated the tax credit prior to the final
credit allowance date of the qualified equity investment. The
department's recapture shall be proportionate to the amount of
the redemption or repayment with respect to the qualified equity
investment.
Enrolled Senate Bill 817 (SB 817-A) Page 5
(c) The qualified community development entity fails to invest
at least 85 percent of the purchase price of the qualified equity
investment in qualified low-income community investments within
12 months of the issuance of the qualified equity investment and
maintain the same level of investment in qualified low-income
community investments until the last credit allowance date for
the qualified equity investment. For purposes of calculating the
amount of qualified low-income community investments held by a
qualified community development entity, an investment shall be
considered held by the entity even if the investment has been
sold or repaid provided that the entity reinvests an amount equal
to the capital returned to or recovered from the original
investment, exclusive of any profits realized, in another
qualified active low-income community business in this state
within 12 months of the receipt of the capital. A qualified
community development entity may not be required to reinvest
capital returned from qualified low-income community investments
after the sixth anniversary of the issuance of the qualified
equity investment, the proceeds of which were used to make the
qualified low-income community investment, and the qualified
low-income community investment shall be considered held by the
issuer through the qualified equity investment's final credit
allowance date.
(2) The department shall provide notice to the qualified
community development entity of any proposed recapture of tax
credits pursuant to this section. The entity shall have 90 days
to cure any deficiency indicated in the department's original
recapture notice and avoid the recapture. If the entity fails or
is unable to cure the deficiency within the 90-day period, the
department shall provide the entity and the taxpayer from whom
the credit is to be recaptured with a final order of recapture.
Any tax credit for which a final recapture order has been issued
shall be recaptured by the department from the taxpayer who
claimed the tax credit on a tax return. + }
SECTION 9. ORS 314.752, as amended by section 26, chapter 76,
Oregon Laws 2010, is amended to read:
314.752. (1) Except as provided in ORS 314.740 (5)(b), the tax
credits allowed or allowable to a C corporation for purposes of
ORS chapter 317 or 318 shall not be allowed to an S corporation.
The business tax credits allowed or allowable for purposes of ORS
chapter 316 shall be allowed or are allowable to the shareholders
of the S corporation.
(2) In determining the tax imposed under ORS chapter 316, as
provided under ORS 314.734, on income of the shareholder of an S
corporation, there shall be taken into account the shareholder's
pro rata share of business tax credit (or item thereof) that
would be allowed to the corporation (but for subsection (1) of
this section) or recapture or recovery thereof. The credit (or
item thereof), recapture or recovery shall be passed through to
shareholders in pro rata shares as determined in the manner
prescribed under section 1377(a) of the Internal Revenue Code.
(3) The character of any item included in a shareholder's pro
rata share under subsection (2) of this section shall be
determined as if such item were realized directly from the source
from which realized by the corporation, or incurred in the same
manner as incurred by the corporation.
(4) If the shareholder is a nonresident and there is a
requirement applicable for the business tax credit that in the
case of a nonresident the credit be allowed in the proportion
Enrolled Senate Bill 817 (SB 817-A) Page 6
provided in ORS 316.117, then that provision shall apply to the
nonresident shareholder.
(5) As used in this section, 'business tax credit' means a tax
credit granted to personal income taxpayers to encourage certain
investment, to create employment, economic opportunity or
incentive or for charitable, educational, scientific, literary or
public purposes that is listed under this subsection as a
business tax credit or is designated as a business tax credit by
law or by the Department of Revenue by rule and includes but is
not limited to the following credits: ORS 285C.309 (tribal taxes
on reservation enterprise zones and reservation partnership
zones), ORS 315.104 (forestation and reforestation), { - ORS
315.134 (fish habitat improvement), - } ORS 315.138 (fish
screening, by-pass devices, fishways), ORS 315.156 (crop
gleaning), ORS 315.164 and 315.169 (farmworker housing), ORS
315.204 (dependent care assistance), ORS 315.208 (dependent care
facilities), ORS 315.213 (contributions for child care), ORS
315.304 (pollution control facility), { - ORS 315.324 (plastics
recycling), - } ORS 315.354 and 469.207 (energy conservation
facilities), ORS 315.507 (electronic commerce), { - ORS 315.511
(advanced telecommunications facilities), ORS 315.604 (bone
marrow transplant expenses), - } ORS 317.115 (fueling stations
necessary to operate an alternative fuel vehicle) and ORS 315.141
(biomass production for biofuel) { + and section 4 of this 2011
Act (low income community jobs initiative) + }.
SECTION 10. ORS 318.031 is amended to read:
318.031. It being the intention of the Legislative Assembly
that this chapter and ORS chapter 317 shall be administered as
uniformly as possible (allowance being made for the difference in
imposition of the taxes), ORS 305.140 and 305.150, ORS chapter
314 and the following sections are incorporated into and made a
part of this chapter: ORS 285C.309, 315.104, { - 315.134, - }
315.141, 315.156, 315.204, 315.208, 315.213, 315.304 { - , - }
{ + and + } 315.507 { - , 315.511 and 315.604 - } { + and
section 4 of this 2011 Act + } (all only to the extent applicable
to a corporation) and ORS chapter 317.
SECTION 11. { + Sections 2 to 8 of this 2011 Act and the
amendments to ORS 314.752 and 318.031 by sections 9 and 10 of
this 2011 Act apply to qualified equity investments made on or
after July 1, 2012. + }
SECTION 12. { + This 2011 Act takes effect on the 91st day
after the date on which the 2011 session of the Seventy-sixth
Legislative Assembly adjourns sine die. + }
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Enrolled Senate Bill 817 (SB 817-A) Page 7
Passed by Senate June 24, 2011
.............................................................
Robert Taylor, Secretary of Senate
.............................................................
Peter Courtney, President of Senate
Passed by House June 28, 2011
.............................................................
Bruce Hanna, Speaker of House
.............................................................
Arnie Roblan, Speaker of House
Enrolled Senate Bill 817 (SB 817-A) Page 8
Received by Governor:
......M.,............., 2011
Approved:
......M.,............., 2011
.............................................................
John Kitzhaber, Governor
Filed in Office of Secretary of State:
......M.,............., 2011
.............................................................
Kate Brown, Secretary of State
Enrolled Senate Bill 817 (SB 817-A) Page 9
