SUPERSEDED. Foreclosure of Property Tax Liens. Chapter 312

Transcription

1 Chapter EDITION Foreclosure of Property Tax Liens " District attorney" described When real property subject to tax foreclosure; listing other charges with taxes Supervision by Department of Revenue; enforcement Annual foreclosure list; interest on taxes in list Notice of proceeding; service Instituting foreclosure proceedings Application for judgment and decree foreclosing lien; effect and correction of irregularity, informality, omission or other error Answer and defense to application by per- son interested Summary hearing Judgment and decree; lien; interest Order for sale of properties to county; certified copy of judgment and decree as certificate of sale Removal of property from foreclosure pro- ceedings Period during which property held by county; redemption; assessment during redemption period; redemption of part of property Reduced redemption period when property subjected to waste or abandonment; hearing-, notice; reasonable inquiry Notice to owner or lienholder of expiration of period of redemption; contents; mailing Release of claims of county by redemption; entries by tax collector; certificate of redemption Notice of foreclosure list to lienholder Effect of failure to give notice to lienholder when requested Lienholder paying taxes or redeeming gets additional lien for amount paid Municipal or other public corporation removing property from foreclosure list or proceeding or redeeming; additional lien Possession during redemption period; forfeiture for waste General notice of expiration of redemption period Deed to county Appeal Public policy relating to title obtained by county by tax foreclosure Conclusive presumptions of notice resulting from tax foreclosure Constructive possession by county; notice; remedy of ejectment Judgment and decree as evidence and estoppel Limitations on proceedings affecting foreclosure sale; payments required with first pleading; effect as statute of prescription Vacation of judgment; determining value of improvements by purchaser and rendering judgment therefor Certain rights of municipal corporations not affected by ORS to and to Lands acquired by county by tax foreclosure where title fraudulently concealed from owner Title of county purchasing property; title of purchaser on resale Sale of property against which municipal corporation has lien Sale of property on which there are unpaid assessments applicable to defaulted bonds of a city or town Effect of irregularities and omissions on sales made pursuant to ORS or Accepting deed where timber fire reduces value of property; sale of timber or prop- erty acquired Tax sales to counties or other public cor- porations validated; effect of omissions or defects Certain tax sales validated Effect of failure to issue certificate of sale prior to Request by lienholder for notice of proposed sale for delinquent city assessments or liens Giving notice to lienholder Effect of failure to give notice when re- quested Application of ORS to to other than treasurer of city Penalties CROSS REFERENCES Administration of revenue laws generally, Ch. 305 Administrative appeals, to Appeal to tar court, small claims alternative, Authority of tax court to determine deficiency, Department of Revenue to exercise general supervision over property taxation, Fraudulent act of tax collector, recovery of damages due, General provisions relating to property taxation, Ch. 306 Interest on deficiency, delinquency or refund, Interest or penalties on taxes not affected by taking or pendency of appeal, Lien held by state, property subject to, acquisition, administration and disposal, to Procedure on appeal from order of Department of Revenue, effect of pendency of appeal, to Public officer failing to perform duty as to taxes, penalty,

2 REVENUE AND TAXATION Real property defined, , Real property, description, Release of tax liens by Department of Revenue, Tax Court, Oregon, Ch. 305 Verification of documents filed under tax laws, falsification prohibited, , When tax document deemed filed with tax official, Certificates of tax delinquency, foreclosure by drainage and irrigation districts, to Cities, foreclosing assessment liens, to Delinquent timber severance taxes, Personal property taxes as a lien on real property, , Rate of compensation for publication, Notation by voucher, Rate of compensation for publication, Reimbursement of state on tax- deferred property, Resale or disposal of land acquired by county through foreclosure, to to Suit in equity to quiet title to real property acquired by foreclosure of delinquent tax liens, Partition of property acquired by foreclosure of tax lien, Lien of local assessment, not extinguished by resale to record owner or assigns, Procedure for resale of lands acquired by county through foreclosure, to Taxes at time of acquisition of property by county, cancellation, Rate of compensation for publication,

3 FORECLOSURE OF PROPERTY TAX LIENS " District attorney" described. As used in this chapter, unless the context requires otherwise, " district attorney" shall include county counsel appointed pursuant to ORS c When real property subject to tax foreclosure; listing other charges with taxes. ( 1) Except as otherwise provided by law, real property within this state is subject to foreclosure for delinquent taxes whenever three years have elapsed from the earliest date of delinquency of taxes levied and charged thereon. 2) All special assessments, fees or other charges charged against the property subject to foreclosure which are due and unpaid for any year or years for which ad valorem taxes are delinquent and for which there. is no other provision of law for their payment out of the foreclosure proceeding, shall be listed with the delinquent ad valorem taxes in the foreclosure proceedings and foreclosed and collected as a part of such proceedings in the same manner as the delinquent ad valorem taxes. In any event, if three years have elapsed since the special assessment, fee or charge has been placed on the tax roll for collection and the assessment, fee or charge remains unpaid, it may be included in the next foreclosure proceeding and foreclosed and collected as part of such proceeding. Amended by 1965 c Supervision by Department of Revenue; enforcement. ( 1) The Department of Revenue shall have general supervision and control over tax foreclosure proceedings under ORS to and to to the end that such proceedings shall be conducted in a uniform and orderly manner in all counties of the state. 2) Whenever any district attorney fails to institute or complete foreclosure proceedings in the manner required by this chapter, the department may call upon the Attorney General to institute or complete such proceedings. For this purpose, the Attorney General shall have the same powers and authority as a district attorney under this chapter. All costs incurred by the Attorney General shall be borne by the county in which the foreclosure proceedings are undertaken. Upon presentation by the Attorney General to the county governing body of a certified, itemized statement of costs, the governing body shall order payment to the Attorney General out of any available funds of the county. If no payment is made within 30 days thereafter, the Attorney General shall submit to the Secretary of State a certified, itemized statement of such costs and the Attorney General shall be reimbursed upon the order of the Secretary of State to the State Mreasurer, from the county' s share of the state' s cigarette and liquor revenues. Amended by 197I c Annual foreclosure list; interest on taxes in list. (1) Within two months after the day of delinquency of taxes of each year the tax collector shall prepare a list of all real properties ' then subject to foreclosure. The list shall be known as the foreclosure list and shall contain: a) The names of the several persons appearing in the latest tax roll as the respective owners of tax - delinquent properties. b) A description of each such property as it appears in the latest tax roll. c) The year or years for which taxes are delirlquent on each property. d) The principal amount of the delin- quent taxes of each year and the amount of accrued and accruing interest thereon to the day of publication. 2) ' Thereafter, and until judgment is obtained pursuant to ORS , interest shall be charged and collected on each of the several amounts of taxes included in the foreclosure list at the rate provided in ORS ( 2). ( Amended by 1975 c 704 5; 1979 c ; 1987 c Notice of proceeding, service. 1) Notice of each foreclosure proceeding shall be given by publication and by both certified and regular first class mail as provided' in this section:, a) Notice shall be given by one publication of the foreclosure list in a newspaper of general circulation in the county, to be des - ignated by the county court or board of county commissioners. The price charged by the newspaper shall be at the legal rate as provided by law. A copy of the newspaper notice shall be mailed by the county to each incorporated city in the county. b) In addition, notice of the foreclosure proceeding shall be sent by certified and regular first class mail to the owner or owners, as shown in the county deed records, of each property included on the foreclosure list at the address or addresses as reflected in the,county records under ORS , of ) Each notice given under subsection 1) or ( 4) of this section shall identify the particular property or properties that is the subject of the notice. 3) All persons owning or claiming to own, or having or claiming to have, any interest in any property included in the foreclosure list are required to take notice of such proceeding and of all steps thereunder. 4) If it is deemed expedient to do so, notice of the institution of the foreclosure proceeding may be given by personal service.

4 REVENUE AND TAXATION Notice by personal service shall be in lieu of service by publication and certified and regular first class mail required by subsection ( 1) of this section as to the defendant or defendants so served, and it shall not be necessary to include in the publication of the foreclosure list the names of such defendants or the descriptions or other matters relating to their respective properties. [ Amended by 1957 c. 68 1; 1983 c.657 9; 1985 c ; 1987 c Instituting foreclosure proceedings. ( 1) On the day which is three months after the day of delinquency of taxes of the latest year, the tax collector, with the assistance of the district attorney, shall institute proceedings to foreclose the liens for all the delinquent taxes against each of the several properties included in the foreclosure list. 2) One general proceeding shall be brought on the part of the county to foreclose the tax liens against each of the properties included in the foreclosure list. The person whose name appears in the lastest tax roll as the owner of any property therein de- scribed shall be considered and treated as the owner of the property. Each such proceeding shall be a proceeding in rem against the property itself. If in any tax roll it appears that the owner of any property is un- known, then such property shall be proceeded against as belonging to an unknown owner. [ Amended by 1979 c , 1987 c Application for judgment and decree foreclosing lien; effect and correction of irregularity, informality, omission or other error. ( 1) Application for judgment and decree foreclosing any tax lien shall be in writing, shall be verified, and shall contain a succinct statement of the cause of suit. All amendments may be made which are permissible - in any civil' action. The application for judgment and decree, together with a certified copy of the foreclosure list, shall be filed with the clerk of the court on the day of the first publication of the foreclosure list. 2) No assessment of property or charge for taxes shall be considered invalid because of: a) An irregularity in an assessment roll. b) An assessment roll not having been made, completed or returned within the time prescribed by law. c) The property having been listed or charged in an assessment or tax roll without any name, or with a name other than that of the owner. 3) No error or informality on the part of any officer in connection with assessment, equalization, levy or collection shall vitiate or affect the assessment of the property or the taxes thereon. 4) Any such irregularity, informality, omission or other error may, in the discretion of the court, be corrected to conform to law. [ Amended by 1979 c ; 1989 c Answer and defense to application by person interested. Any person interested in any real property included in the foreclosure list may file an answer and defense to the application for judgment and decree within 30 days after the date of the first publication of the foreclosure list, exclusive of the day of the first publication. The answer and defense shall be in writing under oath and shall specify the particular cause of objection Summary hearing. The court shall examine the application for judgment and decree. If answer and defense is filed by any defendant or other interested person, the matter shall be heard in a summary manner without other pleading Judgment and decree; lien; interest. The court shall give judgment and decree for the delinquent taxes and interest appearing to be due on the several parcels of real property described in the application, and shall decree that the several liens of such taxes be foreclosed. The judgment shall be a several judgment against and a lien on each parcel of property included therein. The several judgment shall bear interest at the legal rate from the date of entry thereof Order for sale of properties to county; certified copy of judgment and decree as certificate of sale. The court shall order that the several properties, against which the judgment and decree is entered, shall be sold directly to the county for the respective amounts of taxes and interest for which the properties severally are liable. The clerk of the court shall deliver to the tax collector a certified copy of the judgment and decree, included in which shall be a list of the properties so ordered sold, with the several amounts due thereon. The certified copy shall constitute a certificate of sale to the county of the several properties described in the judgment and decree and no other certificate need be issued. ( Amended by 1989 c Removal of property from foreclosure proceedings. At any time prior to judgment and decree any parcel of real property may be removed from the foreclosure proceeding by payments such as would have prevented inclusion of the property in the foreclosure list, plus any additional in. terest or penalty accrued; except that after the first publication of the foreclosure list any person seeking to remove any property

5 FORECLOSURE OF PROPERTY TAX LIENS from the foreclosure proceeding shall pay, in addition to- the particular amounts of taxes and interest otherwise required, a penalty of five percent of the total amount of taxes and interest charged against the property. The penalty and fee shall be in lieu of all publication costs and other charges in connection with the foreclosure proceeding. On receipt of the payments as to a particular property, prior to the filing of the application for judgment and decree, the tax collector shall make the proper entries in the tax roll and shall remove the property from the foreclosure list and proceeding. Subsequent to filing of the application for judgment and decree, no property may be removed from the foreclosure list and proceeding except on order entered by the court. The removal of any property from the foreclosure list and proceeding, as provided in- this section, does not release the property from the lien of any un= paid tax thereon, but the unpaid taxes shall remain valid and subsisting liens as though the foreclosure proceeding had not been instituted. [ Amended by 1983 c ; 1987 c Period during which property held. by county; redemption; assessment during redemption period; redemption of part of property. ( 1) Except as provided in ORS , all real properties sold to the county under ORS , shall be held by the county for the period of two years from and after the date of the judgment and decree of foreclosure, unless sooner redeemed. 2) During the two -year period any person having an interest in the property at the date of the judgment and decree of foreclosure, or any heir or devisee of such person, or any person holding a lien of record on the property, or any municipal corporation having a lien on the property, may redeem the property by payment of the full -amount ap- plicable to the property under the judgment and decree, with interest thereon as provided by law, plus a penalty of five percent of the total amount applicable to the property under the judgment and decree and a fee of $50. The penalty of five percent and fee shall be in lieu of all costs chargeable against the property in connection with the foreclosure proceeding. The fee of $50 shall be used to defray the costs, among other costs, incurred by the- county to provide the notices of redemption period expiration to lienholders and others required under ORS ) Property so redeemed shall be subject to assessment for taxation during the period of redemption, as though it had continued in private ownership. 4) Any person holding a mortgage or other lien of record covering a part only of a particular parcel of real property included in the judgment and decree of foreclosure may redeem such part by payment of the proportionate amount applicable thereto under the judgment and decree. ( Amended by 1983 c.472 2; 1987 c.311 7; 1989 c provides: Note: Section 11, chapter 311, Oregon Laws 1987, Sec. 11. Section 2 of this Act and the amendments to ORS by section 7 of this Act that change the, period of redemption for property foreclosed for delinquent tax lien from one to two years apply to properties subject to judgment and decree of foreclosure entered on or after the effective date of this Act September 27, c ' Reduced redemption period when property subjected to waste or abandonment; hearing; notice; reasonable inquiry. ( 1) A county may by ordinance provide the means to require the tax collector of the county to deed to the county pursuant to ORS any real property sold to the county under ORS after the expiration of the 30 -day period provided in subsection ( 2) of this section if: a) The property is subjected to waste which results in a forfeiture to the county of the ' right to possession of the property under ORS ; or b) The property is not occupied by the owner or any person or entity that appears in, the records of the county to have a lien or other interest in the property for a period of six consecutive months, and the property has suffered a substantial depreciation in value or will suffer a substantial depreciation in value if not occupied. 2)( a) Upon determining that real property.sold to the county under ORS may. be subject to waste or abandonment as provided in subsection ( 1) of this section, the county shall set a date, time and place within the county for a hearing for the purpose of determining whether the property should be deeded to the county pursuant to subsection ( 1) of this section. b) The owner and any person or entity that appears in the records of the county to have a lien or other interest in the property shall be given an opportunity to be heard at the hearing provided in paragraph ( a) of this subsection. c) If the county determines after the hearing provided in paragraph ( a) of this subsection that the property is subject to waste" or abandonment as section ( 1) provided to sub- of this section, the county governing body shall provide that any rights of possession the owner may have in the property are forfeited and direct the property be deeded to the county by the tax collector of the county after expiration of a period of 30 days from the date of the action of the county governing body determining property subject to forfeiture unless it is sooner re

6 REVENUE AND TAXATION deemed by the owner or any person or entity that then appears in the records of the county to have a lien or other interest in the property. All rights of redemption with respect to the real property described in that deed shall terminate on the execution of the deed to the county. d) The county shall, in its ordinance, provide for procedures for the hearing re- quired under this subsection that are compatible with the requirements of due process of law. 3) Not less than 30 days prior to the hearing provided in subsection ( 2) of this section, the county shall notify the owner and any person or entity that then appears in the records of the county to have a lien or other interest in the property of the hearing. The notice shall contain: a) The date, time and place of the hearing provided for in subsection ( 2) of this section; b) The date of the judgment and decree; c) The normal date of expiration of the period of redemption under ORS ; d) Warning to the effect that if the county determines that the property is subject to waste or abandonment as provided in subsection ( 1) of this section,' the property will be deeded to the county immediately after the expiration of 30 days from the date of the county governing body action so determining and that every right or interest of any person in the property will be forfeited forever- to the county unless the property is redeemed within that 30 -day period; e) A legal description of the property and a tax account number; and f) The name of the owner as it appears on the latest tax roll. 4) The notice required to be given under subsection ( 3) of this section shall be given by both certified mail and by regular first class mail. 5)( a) If the notice required under subsection ( 3) of this section is to be given to an owner, the notice shall be addressed to the owner or owners, as reflected in the county records of deeds, at the true and correct address of the owner as appearing on the instrument of conveyance under ORS or as furnished under ORS r as otherwise ascertained by the tax collector of the county pursuant to ORS b) If the person or entity to whom the notice is required under subsection ( 3) of this section to be given is a lienholder, or person or entity other than the owner, having or appearing to have a lien or other interest in the property, the notice shall be addressed to the lienholder, person or entity at the ad- dress which the county knows or after reasonable inquiry, has reason to believe to be the address at which the lienholder, person or entity will most likely receive actual notice. 6) For purposes of paragraph ( b) of subsection ( 5) of this section, if the lienholder is a corporation or a limited partnership, the county shall be considered to have made reasonable inquiry if the notice is mailed to the registered agent or last registered office of the corporation or limited partnership, if any, as shown by the records on file in the office of the Corporation Commissioner, or if the corporation or limited partnership is not authorized to transact business to this state, to the principal office or place of business of the corporation or limited partnership. 7) As used in this section, " records of the county" has that meaning given in ORS ( 7) c.687 ll Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 312 or any series therein by legislative action See Preface to Oregon Revised Statutes for further explanation Notice to owner or lienholder of expiration of period of redemption; contents; mailing. ( 1) Not less than one year prior to the expiration of the period of redemption of any real property ordered sold to the county under a judgment and decree under ORS , the tax collector shall provide notice of the expiration of the period of redemption to any person or entity entitled to redeem the property under ORS ( 2) whose interest appears in the records of the county as of the date foreclosure proceedings were instituted. Any person or entity whose interest has terminated by any means other than a judgment and decree of foreclosure under ORS shall not be entitled to such notice. 2) The notice shall contain: a) The date of the judgment and decree; b) The date of expiration of the period of redemption; c) Warning to the effect that the property ordered sold under the judgment and decree, unless sooner redeemed, will be deeded to the county immediately on expira- tion of the period of redemption and that ev- ery right or interest of any person in the property will be forfeited forever to the county; d) A legal description of the property and a tax account number; and e) The name of the owner as it appears on the latest tax roll. 3) The notice required to be given under subsections ( 1) and ( 2) of this section shall be given by both certified mail and by regu-

7 FORECLOSURE OF PROPERTY TAX LIENS lar first class mail and subsections ( 4) and ( 5) of this section shall apply to both mailings. 4)( a) If the notice required under subsections ( 1) and ( 2) of this section is to be given to an owner, the notice shall be addressed to the owner or owners, as reflected in the county records of deeds, at the true and correct address of the owner. as appearing on the instrument of conveyance under ORS or as furnished under ORS or as otherwise ascertained by the tax collector pursuant to ORS b) If the person or entity to whom the notice is required under subsection ( 1) of this section to be given is a lienholder, or person or entity other than the owner, having or appearing to have a lien or other interest in the property, the notice shall be addressed to the lienholder, person or entity at the address which the tax collector knows or- after reasonable inquiry, has reason to believe to be the address at which the lienholder, person or entity will most likely receive actual notice: For the convenience of the county, any lien, instrument or other document, memorandum or writing, filed on or after September 27, 1987, that creates an interest with respect to which notice is required to be given under this paragraph, shall contain: A) The address of the person or entity holding lien or other interest created by the instrument or other document, memorandum or writing; and B) The tax account number, if any, and if known, of the property subject- to the lien or in which the interest is created. 5) Failure of a lien, instrument or other document, memorandum or other writing to contain the address and tax account number information required under paragraph ( b) of subsection ( 4) of this section does not invalidate the lien, instrument or other document, memorandum or writing, nor shall the failure of the writing to contain the information relieve the tax collector of the duty to obtain and mail the notice required under paragraph ( b) of subsection ( 4) of this section to the' address that the tax collector believes to be the address at which the lienholder, per- son or entity is most likely to receive actual notice. 6)' For purposes of paragraph ( b) pf subsection ( 4) of this section, if the lienholder is a corporation or a limited partnership, the tax collector shall be considered to have made reasonable inquiry if the notice is mailed to the registered agent or last registered office of the corporation or limited partnership, if any, as shown by the records on file in the office of the Corporation Commissioner, or if the corporation or limited partnership is not authorized to transact business in this state, to the principal office or place of business of the corporation or limited partnership. 7)( a) As used in this section, " records of the county" means the following: A) The grantor- grantee indexes. B) Other records of deeds, mortgages, powers of attorney, contracts and other instruments, documents or memorandum of conveyance or otherwise of real property that are described in ORS ( 1) and ( 2). C) The County Clerk Lien Record de- scribed in ORS ( 3). D) Records of federal tax liens and other liens, instruments or other documents or writings reflecting an interest in real prop- erty described in ORS , if those records are kept separately from the records described in paragraph ( b) of this subsection. E) Records of statutory liens on real property described in ORS F) Any other records of interests in real property required to be kept by the county clerk, if the records contain a legal description of the property and an address spe- cifically designated as indicated on the instrument, document or other memorandum or writing for purposes of mailing the notice required by this section. b) For purposes of this section only, records of the county" includes: A) The appropriate records of the courts described in ORS in the custody of the clerk of the appropriate court or court administrator under ORS ; and B) Probate records in the custody of the clerk of the appropriate court or court administrator under ORS and Not- withstanding any provision to the contrary in ORS chapter 7 or other law, the clerk of the appropriate court or the court adminis- trator shall make available to and assist the tax collector in the examination of the records described in this paragraph for purposes of carrying out the obligations of the tax collector under this section without charge c.311 2; 1989 c Release of claims of county by redemption; entries by tax collector; certificate of redemption. The receipt of redemption money by the tax collector shall operate to release all claims of the county, under the judgment and decree of foreclosure, to the property so redeemed. The tax collector, on receipt of the redemption money, immediately shall make the proper entries in the records of the office of the tax collector showing that the delinquent taxes, interest and penalty have been paid and that the property has been redeemed from the sale to the county, and the tax collector shall

8 REVENUE AND TAXATION deliver to the person redeeming the property a certificate of redemption. The certificate shall contain a description of the property so redeemed, the total amount of taxes, interest and penalty paid, and the date of entry of the judgment and decree of foreclosure. The certificate shall be signed by the tax collector or deputy and shall be filed by the redemptioner with the clerk of the court who, on payment of the recording fee, shall enter the certificate in the proper records of the office of the clerk of the court. The clerk then shall file the certificate of redemption as part of the judgment roll in the foreclo- sure proceeding. No fee shall be charged for the issuance of a certificate of redemption. Amended by 1989 c Notice of foreclosure list to lienholder. ( 1) A mortgagee or other holder of a recorded lien on real property may file with the tax collector a request that notice of any foreclosure list including such real property be given to such mortgagee or other lienholder. The request shall contain the name and address of the person filing it, the description of the property and the name of the owner or reputed owner thereof, and the date of expiration of the mortgage or lien. Notice need not be given after expiration of the mortgage or lien, unless a further request therefor is filed. If the mortgagee or lienholder furnishes a duplicate form of request for the,notice, the tax collector shall certify thereon to the filing and return the duplicate to the person making the request. All requests for notices of certificates of delinquency filed pursuant to previously existing laws have the force and effect of requests filed under this section. 2) Whenever any property described in the request for notice is included in a foreclosure list or in a certificate of delinquency issued to any irrigation or drainage district the tax collector shall send by registered mail written notice thereof to the mortgagee or other lienholder. At the time of mailing the notice the tax collector shall note that fact in ink in the latest tax roll opposite the description of the property. The notation in the tax roll is prima facie evidence that the notice was mailed. Where the same mortgagee or lienholder has filed requests for notices on two or more properties included in a foreclosure list, one general notice may be issued covering all such properties Effect of failure to give notice to lienholder when requested. If a tax collector, after receiving a request for notice of tax foreclosure as provided in ORS , fails to give the notice, the failure shall not invalidate the foreclosure, but the mortgagee' s or lienholder' s right to redeem the property shall not terminate until the expiration of 30 days after the mailing of the notice Lienholder paying taxes or redeeming gets additional lien for amount paid. Where any property included in a foreclosure list or proceeding is removed therefrom by payment of taxes or by redemption on the part of a mortgagee or other lienholder of record, the official receipt for payment of such taxes or redemption money shall constitute an additional lien on the property to the amount specified in the receipt. The amount so paid, with interest and other lawful charges thereon, shall be collectible with and in the same manner as the amount secured by the original mortgage or lien Municipal or other public cor- poration removing property from foreclosure list or proceeding or redeeming; additional lien. ( 1) The governing body of any municipal or other public corporation, having a lien on any real property included in a foreclosure list or proceeding, may use its funds to remove the property from the list or proceeding, or to redeem the property af- ter judgment and decree of foreclosure. Such corporation shall have the same right of re- demption as the owner of the property. 2) Where any municipal or other public corporation so removes or redeems any real property on which it claims a lien, or pays any taxes thereon, the corporation may add to its lien the amount so disbursed and cause that amount to be noted on its lien docket. The amount so disbursed shall be recoverable as part of the lien of the municipal or other public corporation. In case of foreclosure of the original lien claimed by such corporation, the amount so disbursed may be added to the original lien and recovered as part thereof. 3) Any county and municipal or other public corporation may enter into a cooperative agreement to facilitate foreclosure sales for the collection of delinquent prop - erty taxes and municipal liens. ( Amended by 1988 c Possession during redemption period; forfeiture for waste. The sale of property to the county on foreclosure for delinquent taxes does not affect the former owner' s right to possession of the property during the period of redemption. However, any waste of the property, committed by the former owner or by anyone acting under permission or control of the former owner, shall work a forfeiture to the county of the right to such possession and, in addition, shall be punished as provided in ORS General notice of expiration of redemption period. Not more than 30

9 FORECLOSURE OF PROPERTY TAX LIENS days nor less than 10 days prior to the expiration of the period of redemption of any real property ordered sold to the county under a judgment and decree under ORS , the tax collector shall publish a general notice relative to the expiration of the period of redemption. The notice shall contain the date of the judgment and decree, the date of expi- ration of the period of redemption, and warning to the effect that all the properties ordered sold under the judgment and decree, unless sooner redeemed, will be deeded to the county immediately on expiration of the period of redemption and that every right or interest of any person in the properties will be forfeited forever to the county. The notice shall be published in two weekly issues of a duly designated newspaper of general circulation in the county within the period of 20 days as specified in this section. Proof of publication shall be attached to and made a part of the deed issued to the county. The published notice may be a general notice and it shall not be necessary to include therein descriptions of the several properties or the names of the, respective owners. [ Amended by , Deed to county. The properties not redeemed within the two -year period prescribed by ORS shall be deeded to the county by the tax collector. All rights of redemption, with respect to the real prop- erties therein described, shall terminate on the execution of the deed to the county. No return or confirmation of the sale or deed to the county is required or necessary. [ Amended by 1987 c Appeal. Appeal from any judg- ment and decree under ORS to and to , or from any final order in the proceeding, may be taken to the Court of Appeals by giving notice thereof orally in open court at the time of the judgment and decree or final order, or by giving written notice thereof at any time within 30 days after the date of the judgment and decree or final order. The manner of perfecting appeals to the Court of Appeals and the proceedings thereon, and the determination and disposition thereof, shall be governed by the statutes on appeals in equitable cases. [ Amended by 1979 c Public policy relating to title obtained by county by tag foreclosure. ( 1) Notwithstanding any other provisions of law, and for all purposes of ORS to , it is hereby declared to have been and to be the public policy of this state that when a county has acquired or hereafter acquires real property by foreclosure for delinquent taxes, its title to such property shall have the utmost stability; and that once real property has become or hereafter shall be- come subject to foreclosure for taxes, there has been imposed and there hereafter shall be imposed upon all persons owning or claiming to own, or having or claiming to have, any interest in such real property, by reason of their delinquency, a continuing duty to investigate and ascertain whether such real property did become or hereafter shall become included in tax foreclosure proceedings, regardless of any defects, jurisdictional or otherwise, that may have appeared or shall hereafter appear in such foreclosure proceedings. 2) If any subsection, sentence, clause or word of ORS to shall be held to be unconstitutional, the invalidity of such subsection, sentence, clause or word shall not affect the validity of any other portion of ORS to , it being the intent of this Legislative Assembly to enact the remainder of ORS to , notwithsuch part so standing declared unconstitutional should or may be so declared. ( Formerly part of Conclusive presumptions of notice resulting from tax foreclosure. In order to accomplish and place into effect the public policy so declared in ORS ( 1), and notwithstanding any other provisions of law excepting those relating to persons under disability as provided in ORS , all persons owning or claiming to own, or having or claiming to have, any interest in any real property heretofore or hereafter subject to foreclosure for delinquent taxes indisputably and shall conclusively be deemed to have taken notice of the following: 1) That any real property which they owned or claimed to own, or in which they had or claim to have had any interest, and any real property which they hereafter may own or claim to own or in which they hereafter shall have or claim any interest has been assessed and hereafter will be assessed each year; 2) That the tax levied against such real property became and hereafter will become due and delinquent at a fixed time; 3) That the tax became and was, and hereafter will become and be a lien upon such real property; 4) That if such tax was not paid or hereafter shall not be paid within the time fixed by law, the lien has been or hereafter will be enforced by foreclosure proceedings at the time and in the manner provided by law; 5) That since the enactment of chapter 408, General Laws of Oregon 1919, and following its effective date ( May 29, 1919), such foreclosure proceedings have been and hereafter will be proceedings in rem; and

10 REVENUE AND TAXATION 6) That by reason of their delinquency in the matter of the payment of their taxes, there has been impressed upon and there hereafter shall be impressed upon them a continuing duty to investigate and ascertain whether or not such real property has been or hereafter shall become included in tax foreclosure proceedings, regardless of any defects, jurisdictional or otherwise, that may have appeared or hereafter shall appear in such foreclosure proceedings. ( Formerly part of Constructive possession by county; notice; remedy of ejectment. ( 1) In relation to or as against the claims of all persons owning or claiming to own, or having or claiming to have, any interest in real property heretofore or hereafter subject to foreclosure for delinquent taxes, excepting only such persons who were or hereafter shall be in the actual and physical possession of any such real property at the time of the execution of a deed thereto to a county pursuant to the provisions of ORS that was not and is not void upon its face, the following shall be presumed conclusively: a) That from and after the date of the execution of any such deed to a county, such county shall be deemed to have constructive possession of the real property therein described to the same extent and legal effect as if the county were in the actual, physical and exclusive possession of such property, and for all purposes such constructive possession shall be deemed the equivalent of ac- tual and physical possession of such property that is hostile, adverse, actual, visible, noto- rious and exclusive. b) That from and after the date of the execution of any such deed to a county, such county had, and hereafter shall be deemed to have had constructive possession of the real property therein described to the same extent and legal effect as if the county were in the actual, physical and exclusive possession of such property, and for all purposes such constructive possession shall be deemed the equivalent of actual and physical possession of such property that is hostile, adverse, ac- tual, visible, notorious and exclusive. c) That the recording of a deed to a county pursuant to ORS gave and hereafter shall be deemed to give notice to the world of such county' s constructive possession as provided and defined in ORS to ) In addition to all other remedies made available to the person by law, the remedy of ejectment is hereby made available to any person claiming to be the owner of any property as against the county which is in the constructive possession of the county as provided and defined in ORS to ( Formerly part of Judgment and decree as evidence and estoppel. Any- judgment and decree for the sale of real property to the county, on foreclosure for delinquent taxes, is conclusive evidence of its regularity and validity in all collateral proceedings, except where the taxes have been paid or the property was not liable to assessment and taxation. The judgment and decree is prima facie evidence that the taxes have not been paid and that the property was subject to taxation at the time it was assessed. The judgment and decree shall estop all persons raising objections thereto, or to the title based thereon, which existed at or before the date of the judgment and decree and could have been presented as an objection or defense to the application for the judgment and decree. Amended by 1961 c.718 l; part renumbered , and Limitations on proceedings affecting foreclosure sale;, payments required with first effect pleading, as statute of prescription. ( 1) Every action, suit or proceeding, commenced for the purpose of determining the validity of a sale of real property on foreclosure for delinquent taxes, or to quiet title against such sale, or to remove the cloud thereof, or to recover possession of the property, shall be commenced within two years from the date of the judgment and decree of foreclosure and sale to the county, or within six months from June 1, 1961, whichever is the later. 2) Notwithstanding any other provisions of law, in every such action, suit or proceeding any person claiming to be the owner of the property, as against the county or grantee, shall pay into court with the first pleading the amount charged against the property in the judgment and decree of fore- closure, plus the amount or amounts that would otherwise have been assessed and levied against said property as taxes from the date of the said judgment and decree to the time of the filing of such action, suit or proceeding, together with any penalties and interest that would have accrued thereon as by statute provided. In every such action, suit or proceeding any person claiming to be the owner of the property as against any person holding title from the county, shall pay into court with the first pleading the amount charged against the property in the judgment and decree of foreclosure, together with interest thereon at the rate of six percent per year from the date of the judgment and decree to the date of filing the pleading ) For all purposes this section shall be construed as a statute of prescription as well

11 FORECLOSURE OF PROPERTY TAX LIENS as a statute of limitation. [ Amended by 1961 c Vacation of judgment; determining value of improvements by purchaser and rendering judgment therefor. Whenever the court vacates or sets aside a judgment and decree of foreclosure with respect to any particular property, the court shall determine the value of any improvements placed on the property by the county or by any, purchaser from the county, and shall give judgment therefor and collect the same from the claimant before putting the claimant in possession Certain rights of municipal corporations not affected by ORS to and to No provision of ORS to and to shall impair or annul a right con- ferred upon municipal corporations by ORS or to Lands acquired by county by tax foreclosure where title fraudulently concealed from owner. ( 1) If the title to lands acquired by any county by tax foreclosure was fraudulently. concealed from the rightful owner, devisee, beneficiary, heir, creditor or other person having an interest therein, or was unlawfully obtained, held or controlled by or through fraudulent conveyance or other fraud, without knowledge on the part of such' person, such person shall be entitled to a conveyance of the lands by purchase from the county for cash or by agreement provided in ORS at a price equivalent to the delinquent taxes thereon, with interest and without personal property taxes charged against the land, including lands of, which the wrongdoer is owner of record or assignee of owners of record impressed with a trust for the benefit of such person or deeded or assigned to such person by the wrongdoer pursuant to any suit, action, proceeding or settlement respecting the fraudulent concealment or unlawful holding-or control. 2) Such person may cause to be filed with the county clerk of the county at any time while the title to any such lands is held by the county, written notice of intention to purchase the lands or any part thereof under this section, describing the lands. The notice shall- be acknowledged and recorded in the deed records and a copy thereof served upon the district attorney of the county. The purchase of the land shall be completed by cash or execution of the agreement within one year' from the filing of the notice or the final determination of the suit, action, or proceeding. 3) This section shall not apply to or affect the title to any such lands dedicated to public use or conveyed by the county prior to the filing of the notice, but shall apply to lands sold by the county to an innocent purchaser under contract, in which case such person succeeds to the interest of the county in the contract subject to the rights of the innocent contract purchaser Title of county purchasing property; title of purchaser on resale. ( 1) When a county acquires real property by foreclosure for delinquent taxes, the conveyance vests in the county title to the property, free from all liens and encumbrances except assessments levied by a municipal corporation for local improvements to the property. 2) Subject to ORS , a private purchaser at resale of such property by the county acquires title free and clear of all assessments for local improvements levied by any municipal corporation Sale of property against which municipal corporation has lien. ( 1) Before any real property acquired by the county on foreclosure for delinquent taxes is sold to a private purchaser, any municipal corporation which -has filed a claim of lien on the property for local improvements in accordance with ORS shall be given the notice required by ORS ) Thereupon, the- municipal corporation shall have the exclusive right for a period of 20 days from and after the date of the notice to purchase the property from the county for a sum equal to the total amount of the unpaid taxes and costs against the property to the date of its conveyance to the county, exclusive of any portion thereof levied by the municipal corporation, without interest or penalties, but in no case shall the municipal corporation be required to pay a price greater in amount than that at which the property may have been offered to any third party. However, if the county has quieted its title to the property, the municipal corporation also shall pay the proportionate share applicable to the property, as determined by the county court or board of county commis- sioners, of the costs and expenses of the suit or other proceeding to quiet title. Where a municipal corporation so purchases property without paying the amount of its own tax levies thereon, the municipal corporation shall not participate in the distribution of the proceeds of the sale of the property, as otherwise provided by law. 3) Forthwith after the purchase by a municipal corporation the county judge and commissioners, or the commissioners in counties having commissioners only, shall give a deed to the municipal corporation for the property so sold to it, without charges

12 REVENUE AND TAXATION other than the price paid. The deed shall vest in the municipal corporation title in fee to the property, and such title shall be superior to any lien, claim or charge against the property. 4) All such sales heretofore or hereafter made by counties to municipal corporations are declared legal and valid and shall pass good titles to the properties conveyed Sale of property on which there are unpaid assessments applicable to defaulted bonds of a city or town. If a city or town has defaulted in payment of its outstanding bonds or interest thereon, or has refunded any such defaulted bonds, and real property on which there are unpaid special assessments applicable to the defaulted or refunded bonds, has been acquired by the county through foreclosure for delinquent taxes, the county court or board of county commissioners may sell such property, with- out notice of any kind, to the city or town on payment in cash of the total amount of all taxes levied by the state and applying to the property at the time of its conveyance to the county on foreclosure for delinquent taxes. Each such sale to a city or town shall be within the discretionary authority of the county court or board of county commissioners and shall be in addition to all other provisions of law for the resale of property acquired by a county on foreclosure for delinquent taxes. In making any such sale to a city or town, the county court or board of county commissioners shall have full authority to act for all municipal corporations, taxing districts or political subdivisions of the county interested in such taxes Effect of irregularities and omissions on sales made pursuant to ORS or No proceedings subsequent to a judgment or decree foreclos- ing a tax lien or liens upon property pur- chased under ORS or , whether by a private purchaser or by a municipal corporation, shall be invalidated and no deed shall be declared void or set aside for irregularities, omissions or defects, unless the record owner of the property sold actually has been misled by the irregularities, omissions or defects to the injury of the re- cord owner Accepting deed where timber fire reduces value of property; sale of timber or property acquired. ( 1) The county court or board of county commissioners may accept deeds to any property in process of foreclosure for tax delinquencies, the chief value of which, when assessed for taxation, was in green standing timber, whenever it appears to the satisfaction of the court or board that, subsequent to any assessment of the property on which taxes are delinquent, its value has been reduced materially due to damage by fire and that it is necessary to expedite the harvesting of the fire- damaged timber. 2) The court or board may sell the timber from lands so acquired, in the manner and for the price the court or board deems for the best interest of the county, but if any lands so acquired are sold by the county, whether before or after sale of the timber thereon, the lands shall be sold in the manner provided by law for sale by a county of real property acquired through foreclosure of liens for delinquent taxes. 3) The proceeds from the sale of timber from the lands acquired under this section shall be distributed in the same manner as proceeds from the sale of property are distributed under ORS All payments received after May 16, 1955, in consideration for the use of roads made in connection with the sale of such timber, and any other payments received after that date whether by gift or otherwise made in connection with the sale of such timber, shall be considered proceeds from the sale of such timber and shall be distributed as provided in this sub- section. 4) This section applies only where the damage resulted from one fire and the area involved is in excess of 10,000 acres. ( Amended by 1955 c 546 1; 1969 c public [ Repealed by 1969 c [ Repealed by 1969 c [ Repealed by 1969 c [ Repealed by 1969 c Tax sales to counties or other corporations validated; effect of omissions or defects. ( 1) All sales of land for taxes made to counties or other public corporations are declared legal and valid and shall pass good title to the lands assessed. 2) No proceedings subsequent to a judgment or decree foreclosing a tax lien or liens shall be invalidated and no tax deed declared void or set aside for irregularities, omissions or defects unless the record owner of the land sold has been actually misled by the irregularities, omissions or defects to the injury of the record owner Certain tag sales validated. All sales of real property for delinquent taxes made before May 22, 1903, by the sheriff of any county where the notice of the sale as published or posted omitted to mention the place where the sale was to be made, shall have the same force and effect as though the notice had mentioned the place of sale Effect of failure to issue certificate of sale prior to The failure to issue a certificate of sale, as such, in any tax

13 FORECLOSURE OF PROPERTY TAX LIENS foreclosure proceeding before- June 14, 1939, shall not in any manner affect such proceedings Request by lienholder for notice of proposed sale for delinquent city assessments or liens. Any mortgagee or other holder of a recorded lien upon real property may file with the city treasurer of the city or town in which the property is situated a request that notice of a proposed sale of the property for delinquent city assessments or liens thereon be given to such mortgagee or other lienholder. The request shall contain the name and address of the person, firm or corporation filing it, the name of the owner or reputed owner of the property, the description of the property, and the date of the expiration of the mortgage or lien. Notice need not be given after the date of the expiration of the mortgage or lien unless a further request therefor is filed. If the mortgagee or lienholder furnishes a duplicate form of request for that purpose, the city treasurer shall certify thereon to the filing of the request and deliver or mail the duplicate to the party filing it Giving notice to lienholder. ( 1) Whenever the city treasurer posts or publishes notice of sale of any property described in the request made under ORS for any delinquent city assessment or lien thereon, the city treasurer shall give notice of the proposed sale to the mortgagee or other lienholder who filed the request by registered mail addressed to the mortgagee or other lienholder at the address given in the request. 2) At the time the notice is mailed, the city treasurer shall note the fact of the mailing in ink on the record of such assessment or lien in the possession of the city treasurer and shall make a certificate of the mailing and keep it on file in the office of the city treasurer. The certificate so filed is conclusive evidence that the notice was mailed. 3) The notice shall be mailed not less than 21 days prior to the date fixed for the sale and shall be addressed to the mortgagee or other lienholder specified in the request. 4) The notice shall contain: a) The name of the owner or reputed owner of the property. b) The description of the property. c) The date fixed for the sale. d) A description of the city assessment or lien and the amount unpaid thereon. e) The amount necessary to be paid to prevent the sale of the property Effect of failure to give notice when requested. If the city treasurer, after having received a request for notice as pro- vided in ORS , fails to give the notice in the manner provided in ORS , such failure shall render void any deed of the property until the city treasurer gives the notice by registered mail, addressed to the mortgagee or lienholder requesting the notice, and for 30 days thereafter, during which period the mortgagee or lienholder may redeem the property Application of ORS to to other than treasurer of city. If an officer other than the treasurer. is designated by the charter or ordinances of any city to collect delinquent city assessments or liens, or both, and make sales of the property upon which the assessments or liens, or both, are delinquent, then the provisions of ORS to apply to such other officer Penalties. The commission of waste on property described in ORS by the former owner or anyone acting under the permission or control of the former owner is punishable, upon conviction, by a fine of not less than twice the value so wasted. CHAPTER 313 Reserved for expansion]

14 t REVENUE AND TAXATION I,

15 CHAPTER RESERVED FOR EXPANSION

16 GENERAL PROVISIONS Chapter EDITION Income Taxation Generally Definitions; conformance with federal income tax law Application of chapter Evading requirements of law prohibited Venue on failure to comply with law Taxable year ADJUSTMENT OF RETURNS Definitions for ORS to Adjustment to correct effect of certain errors; use limited When adjustment may be made Computation; method of adjustment; credit or set -off limited; recovery after payment limited Adjustment of returns of related taxpayers after reallocation of income or deduction on federal return EXCLUSION FROM GROSS INCOME OF EXCESS PROFITS REPAID OR ELIMINATED IN RENEGOTIATION OF FEDERAL CONTRACT Exclusion from gross income of excess profits repaid or eliminated in renegotiation of federal contract Refund of excess tax paid Time for filing claim for credit or refund POLLUTION CONTROL FACILITIES LIABILITY OF TRANSFEREE OR OWNER OF TRUST Liability of transferee of taxpayer for taxes imposed on taxpayer Lien if grantor or other person determined to be owner of trust RETURNS Returns when tax year changed Information returns Filing return on magnetic media or other machine - readable form Department requiring return or supple- mentary return Furnishing copy of federal return or re- port; action required when federal return changed Form of returns; time for filing Time for payment of tax; interest on delayed return Manner of payment Penalty assessed for failure to file report or return or to pay tax when due; interest Understatement of taxable income; pen- alty;-waiver of penalty Assessment of taxes owing but not submitted with return; time of assessment; recording of warrant Collection of taxes due after revocation of certification of pollution control facility; Time limit for notice of deficiency exceptions to tax relief allowed for pol Issuing of notice of deficiency attributable lution control facility to involuntary conversion; time limit REAL ESTATE MORTGAGE INVESTMENT CONDUIT Taxation of real estate mortgage invest ment conduit METHODS OF ACCOUNTING AND REPORTING INCOME Method of accounting Allocation of income of financial organization or public utility from business within and without state Costs allocable to inventory Deferral of tax recognition of gain limited to cases where newly acquired property within Oregon' s jurisdiction Determination of net income where several taxpayers carry on business under common control Passive activity loss; determination; treatment Interest on deferred tax liabilities with respect to instalment obligations Refunds; interest; credits Foreclosure of lien When lien valid Status of lien Warrant for collection of taxes COLLECTING DELINQUENT TAXES; LIENS; IN' T' EREST AND ADDITIONS TO TAX; REFUNDS 7 Unpaid tax or withholding lien at time of assessment 425 Examining books, records or persons 2 Filing of warrants for unpaid withholding taxes; release, cancellation tion and satisfac- 434 Certificate of outstanding warrants; fee Tax as debt; termination of taxable period and immediate assessment of tax Audits, deficiencies, assessments, refunds and appeals governed by ORS chapter 305 ESTIMATED TAX PROCEDURE Estimate of tax liability by corporations Instalment schedule for payment of estimated tax 29 =261

17 REVENUE AND TAXATION Underpayment of estimated tax; interest; nonapplicability of penalties DIVISION OF INCOME FOR TAX PURPOSES General Provisions) Short title; construction Definitions for ORS to When allocation of income from business activity required When taxpayer is considered taxable in another state Allocation of Nonbusiness Income) Certain nonbusiness income to be allo- cated Allocation to this state of net rents and royalties Allocation to this state of capital gains and losses Allocation to this state of interest and dividends Allocation to this state of patent and cop- yright royalties TAXATION OF PARTNERSHIPS AND S CORPORATIONS Partnerships) Partnership not subject to income tax; ex- ception Character of partnership income Basis of partner' s interest; gain or loss on sale; election to adjust basis Treatment of contributions to partnership Treatment of distributions from partner- ship Publicly traded partnerships taxed as cor- porations Information return; penalty Application of ORS SS Corporations) Corporations) CC corporation" corporation" and and " " SS corporation" corporation" de- defined fined for for this this chapter chapter and and ORS ORS chapters chapters 316, 316, and and Taxation Taxation of of SS corporation; corporation; application application of of Internal Internal Revenue Revenue Code; Code; carryforward carryforward and and carryback carryback Taxation Taxation of of shareholder' shareholder' ss income; income; compu- computation; tation; character character of of income, income, gain, gain, loss loss or or deduction deduction Treatment Treatment of of distributions distributions by by SS corpo- corpo- ration ration Employee Employee fringe fringe benefits; benefits; foreign foreign income income Tax Tax on on built built - -inin gain gain Tax Tax on on excess excess net net passive passive income income SS corporation corporation or or shareholder shareholder elections elections Application Application of of sections sections and and of of Internal Internal Revenue Revenue Code Code Tax Tax treatment treatment of of item item determined determined at at cor- corporate porate level level Recapture Recapture of of LIFO LIFO benefits benefits Apportionment of net loss; net loss deduction; duction; limitations limitations ( ( Nonresident Nonresident Return Return by by Shareholder Shareholder or or Partner) Partner) Apportionment Apportionment of of Income Income of of Interstate Interstate Broadcasters) Broadcasters) Definitions Definitions for for ORS ORS to to Method Method of of apportionment apportionment of of interstate interstate broadcaster broadcaster income income Determination Determination of of sales sales factor factor Determination Determination of of net net income income attributable attributable to to business business done done in in state state Rules Rules Apportionment of Business Income) Formula for apportionment of business in come Determination of " property factor" 314, Determination of " payroll factor" Determination of " sales factor" Procedure Where Ordinary Determination Not Satisfactory) Scope Scope of of provisions provisions Shareholder Shareholder or or partner partner may may join join in in filing filing Application) Application) Application Application of of ORS ORS and and to to EFFECT EFFECT OF OF MULTISTATE MULTISTATE TAX TAX COMPACT COMPACT Computation Computation of of tax tax when when income income reported reported as as percentage percentage of of sales sales volume volume Additional methods to determine extent of business activity in this state Apportionment of Net Loss) Application Application to to allocation allocation and and apportion- apportion ment ment of of income income nonresident nonresident return return ADMINISTRATIVE ADMINISTRATIVE PROVISIONS PROVISIONS Department Department to to administer administer and and enforce enforce laws; laws; enforcement enforcement districts; districts; branch branch offices offices Administering Administering oaths oaths and and taking taking acknowl- acknowl- edgments edgments Rules Rules and and regulations regulations Divulging Divulging particulars particulars of of returns returns and and re- re- ports ports prohibited prohibited Persons Persons to to whom whom information information may may be be fur- fur- nished nished Certificate Certificate of of department department as as evidence evidence Statistics Statistics Rewards Rewards for for information information Disclosure Disclosure of of homeowner homeowner or or renter renter refund refund information information to to assist assist in in recovery recovery of of public public assistance assistance overpayments; overpayments; requests requests for for in- information formation public public record record Use Use of of certain certain information information for for private private benefit benefit prohibited prohibited

18 INCOME' TAXATION GENERALLY Penalties PENALTIES CROSS REFERENCES Administration of certain trusts to comply with federal income taxation provisions, to Administration of revenue laws generally, Ch. 305 Administrative appeals, to Appeal procedure, Appeal to tax court; small claims alternative, Applicability to Ch. 318, Authority of tax court to determine deficiency, Claim for refund of any tax paid, Deficiency procedure, Hospital facilities public authority, status as public body, certain property and income exempt from taxation, Indian reservation, exemption for income derived from sources therein, Indian tribal lands, exemption for amounts received for condemnation, Interest on deficiency, delinquency or refund, Interest or penalties on taxes not affected by taking on pendency of appeal, Oregon Mass Transportation' Financing Authority, ' income and property tax exempt status, Oregon Medical Insurance Pool, exempt from taxation, Payment of tax, penalty and interest required before filing complaint with Tax Court to appeal depart- ment order, Penalties, disposition, Procedure on appeal from order of Department of Revenue; effect of pendency of appeal, to Relief ordered by tax court, Tax Court, Oregon, to Tax Reform Act, federal,. application, Verification of documents_ filed under tax laws, falsification prohibited, , When tax document deemed filed with tax official, , Declaration in lieu' of oath, Refunds, } , Witness' fees and mileage, Actions in other states for Oregon takes, Department, as party to action involving property subject to lien, Reciprocal recognition of tax liability, Release of lien by department, Multistate Tax Compact, Declaratory rulings, ' Making and: filing rules, Ch. 183 y Disclosure of inheritanbe tax information,' Furnishing information to county, and relevant state agencies in public assistance cases,

19 REVENUE AND TAXATION

20 INCOME.TAXATION GENERALLY GENERAL PROVISIONS ( Repealed by 1953 c ( Repealed by 1953 c ( Repealed by 1953 c ( Repealed by 1953 c ( Repealed by 1953 c Definitions; conformance with federal income tax law. ( 1) As used in this chapter, unless the context requires otherwise, " department" means the Department of Revenue. 2) As used in ORS , , , to , and to , any term has the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes, unless a different meaning is clearly required or the term is specifically defined in this chapter. Any reference in this chapter to the laws of the United States or to the Internal Revenue Code means the laws of the United States relating to income taxes or the Internal Revenue Code as they are amended on or before December 31, 1988, even where the amendments take effect or become operative after that date. 3) Insofar as is practicable in the administration of this chapter, the department shall apply and follow the administrative and judicial interpretations of the federal income tax law. When a provision of the federal income tax law is the subject of conflicting opinions by two or more federal courts, the department shall follow the rule observed by the United States Commissioner of Internal Revenue until the conflict is resolved. Nothing contained in this section limits the right or duty of the department to audit the return of any taxpayer or to determine any fact relating to the tax liability of any taxpayer. 4) When portions of the Internal Revenue Code incorporated by reference as provided in subsection ( 2) of this section refer to rules or regulations prescribed by the Secretary of the Treasury, then such rules or regulations shall be regarded as rules adopted by the department under and in accordance with the provisions of this chapter, whenever they are prescribed or amended. 5) When portions of the Internal Revenue Code incorporated by reference as provided in subsection ( 2) of this section are later corrected by an Act, or a Title within an Act of the United States Congress designated as an Act or Title making technical corrections, then notwithstanding the date that the Act or Title becomes law, those portions of the Internal Revenue Code, as so corrected, shall be the portions of the Internal Revenue Code incorporated by ref- erence as provided in subsection ( 2) of this section and shall take effect, unless otherwise indicated by the Act or Title ( in which case the provisions shall take effect as indicated in. the Act or Title), as if originally included in the provisions of the Act being technically corrected. If, on account of this subsection, any adjustment is required to an Oregon return that would otherwise be prevented by operation of law or rule, the adjustment shall be made, notwithstanding any law or rule to the contrary, in the manner provided under ORS c ; 1965 c ; 1971 c.215 8; 1977 c ; 1987 c , 1989 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c Application of chapter. ORS to , , , , , , , , , , , , to , , , , , to , to , , to , to , , to , to and are applicable to all laws of this state imposing taxes upon or measured by net income c.632 2; 1961 c ; 1965 c ; 1971 c ; 1977 c ; 1987 c ; 1989 c Note: See note- under ( Repealed by 1953 c [ Repealed by 1953 c [ Repealed by [ Repealed by 1953 c ( Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c ( Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c ( Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c ( Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by 1953 c [ Repealed by [ Repealed by 1953 c [ Repealed by 1953 c ( Repealed by 1953 c [ Repealed by 1953 c

21 REVENUE AND TAXATION Evading requirements of law prohibited. No person, or officer or em- ployee of a corporation or a member or employee of a partnership, shall, with intent to evade any requirement of any law imposing taxes upon or measured by net income or any lawful requirement of the department there- under: 1) Fail to pay any tax or to make, sign or verify any return or to supply any infor- mation required; 2) Make, render, sign or verify any false or fraudulent return or statement; or 3) Supply any false or fraudulent infor- mation c ( enacted in lieu of , , and ) Venue on failure to comply with law. The failure to do any act required by or under any law imposing taxes upon or measured -by net income shall be deemed an act committed in part at the office of the department in Oregon c ( enacted in lieu of , , and ) Taxable year. ( 1) The taxable year, of a partnership, REMIC ( real estate mortgage investment conduit) or taxpayer shall be the same as its taxable year for federal income tax purposes. 2) If the taxable year of a partnership, REMIC or taxpayer is changed for federal income tax purposes, that change in taxable year shall also apply for purposes of state taxation. If a change in taxable year results in a taxable period of less than 12 months, the personal deductions and the personal exemption credits allowed by ORS chapter 316 shall be prorated under rules adopted by the department. 3) Notwithstanding subsections ( 1) and 2) of this section, if the department termi- nates the taxable year of a taxpayer under ORS , the tax shall be computed for the period determined by such action c provides- Note: Section 82, chapter 625, Oregon Laws 1989, Sec. 82. ( 1) Except as provided in subsections ( 2) to ( 4) of this section and sections 83 to 92 of this Act, the amendments by this Act apply to transactions or activities occurring on or after January 1, 1989, in tar years beginning on or after January 1, ) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P.L ) and other Acts, relative to those dates, contained in the Omnibus Budget Reconciliation Act of 1987 ( P. L ) shall apply for Oregon personal income and corporate excise and income tar purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law. 3) The effective and applicable dates, and the ex- ceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P.L ) and other Acts, relative to those dates, contained in the Family Support Act of 1988 ( P.L ) shall apply for Oregon personal income and corporate excise and income tar purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law. 4) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P.L ) and other Acts, relative to those dates, contained in the Technical and Miscellaneous Revenue Act of 1988 ( P. L ) shall apply for Oregon personal income and corporate excise and income tax purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law 5)( a) If a deficiency is assessed against any taxpayer for a tax year beginning before January 1, 1989, and the deficiency, or any portion thereof, is attributable to any retroactive treatment under this Act, then any interest or penalty assessed under ORS chapter 305, 314, 316, 317 or 318 with respect to the deficiency or portion thereof shall be canceled. b) If a refund is due any taxpayer for a tax year beginning before January 1, 1989, and the refund or any portion thereof is due the taxpayer on account of any retroactive treatment under' this Act, then notwithstanding ORS or other law, the refund shall be paid without interest. c) Any than &es required on account of this Act for a tar year beginning prior to January 1, 1989, shall be made by filing an amended return within the time prescribed by law. d) If a taxpayer fails to file an amended return under paragraph ( c) of this subsection, the Department of Revenue shall make any changes under paragraph ( c) of this subsection on the return to which the change or than &es relate within the period as specified for issuing a notice of deficiency or claiming a refund as otherwise provided by law with respect to that return, or within one year after a 1989 return is filed, whichever period expires later c ADJUSTMENT OF RETURNS Definitions for ORS to ( 1) For purposes of ORS to , the term " determination" means: a) A decision by the Oregon Tax Court which has become final; ; b) A closing agreement made under ORS c) A final disposition by the department of a claim for refund. For purposes of this paragraph a claim for refund shall be deemed finally disposed of by the department as to items with respect to which the claim was allowed, on the date of allowance of refund or credit or on the date of mailing notice of disallowance ( by reason of offsetting items) of the claim for refund, and as to items with respect to which the claim was disallowed, in whole or in part, or as to items applied by the department in reduction of the refund or credit, on expiration of the time for instituting suit with respect thereto ( unless suit is instituted before the expiration of such time); or

22 INCOME TAXATION GENERALLY d) Under regulations prescribed by the department, an agreement for purposes of ORS to signed by the department and by any person, relating to the liability of such person ( or the person for whom the person acts) in respect of a tax for any taxable period. 2) For purposes of ORS to , the term " taxpayer" means' any person or entity subject to a tax under the applicable revenue law. 3) For purposes of ORS to , the term " related taxpayer" means a taxpayer who, with the taxpayer with respect to whom a determination is made, stood, in the taxable year with respect to which the erroneous inclusion, exclusion, omission, allowance, or disallowance was made, in one of the following relationships: a) Husband and wife; b) Grantor and fiduciary; c) Grantor and beneficiary; d) Fiduciary and beneficiary, legatee, or heir; e) Decedent and decedent' s estate; f) Partner; g) Member of an affiliated group of cor- porations as defined in section 1504 of the Internal Revenue Code; or h) Shareholder of an S corporation, as defined in section 1361 of the Internal Revenue Code. [ 1971 c ; 1984 c. 1 15; 1985 c. 602 l; 1987 c c702 l; 1957 c.337 4; repealed by 1971 c Adjustment to correct effect of certain errors; use limited. ( 1) If a determination ( as defined in ORS ) is described in one or more of the paragraphs of ORS and, on the date of the determination, correction of the effect of the error referred to in the applicable subsection of ORS is prevented by the operation of any law or rule of law, other than ORS to and other than ORS , then the effect of the error shall be corrected by an adjustment made in the amount and in the manner specified in ORS ) Except in cases described in ORS ( 3)( b) and ( 4), an adjustment shall be made under this section only if: a) In case the amount of the adjustment would be credited or refunded in the same manner as an overpayment under ORS , there is adopted in the determination a position maintained by the department, or b) In case the 'amount of the adjustment would be assessed and collected in the same manner as a deficiency under ORS , there is adopted in the determination a position maintained by the taxpayer with respect to whom the determination is made, and the position maintained by the, department in the case described in paragraph ( a) of this subsection or maintained by the taxpayer in the case described in this paragraph is inconsistent with the erroneous inclusion, exclusion, omission, allowance, disallowance, recogni- tion, or nonrecognition, as the case may be. 3) In the case of a determination described in ORS ( 3)( b) ( relating to certain exclusions from income), adjustment shall be made under this section only if assessment of a deficiency for the taxable year in which the item is includable or against the related taxpayer was not barred, by any law or rule of law, at the time the department first maintained, in a notice of deficiency sent pursuant to ORS or before the Oregon Tax Court, that the item described in ORS ( 3)(b) should be included in the gross income of the taxpayer for the taxable year to which the determi- nation relates. 4) In the ' ease of a determination described in ORS ( 4) ( relating to disallowance' of certain deductions and credits), adjustment shall be made under ORS to only. if credit or refund of the overpayment attributable to -the deduction or credit described in ORS which should have been allowed to the taxpayer or related taxpayer was not barred, by any law or rule of law, at the time the taxpayer first maintained before the department or before the Oregon Tax Court, in writing, that the taxpayer was entitled to such deduction or credit for the taxable year to which the determination relates. 5) In case the amount of the adjustment would be assessed and collected in the same manner as a deficiency ( except for cases describe in ORS ( 3)( b)), the adjustment shall not be made with respect to a related taxpayer unless the related taxpayer stands in such relationship to the taxpayer at the time the latter first maintains the inconsistent position in a return, claim for refund, or complaint in the Oregon Tax Court for the taxable year with respect to which the determination is made, or if such position is not so maintained, then at the time of deter mination c ; 1979 c c.702 2; repealed by 1971 c When adjustment may be made. The circumstances under which the adjustment provided in ORS is authorized are as follows: 1) The determination requires the inclusion in gross income of an item which was erroneously included' in the gross income of

23 REVENUE AND TAXATION the taxpayer for another taxable year or in the gross income of a related taxpayer. 2) The determination allows a deduction or credit which was erroneously allowed to the taxpayer for another taxable year or to a related taxpayer. 3)( a) The determination requires the exclusion from gross income of an item included in a return filed by the taxpayer or with respect to which tax was paid and which was erroneously excluded or omitted from the gross income of the taxpayer for another taxable year, or from the gross in- come of a related taxpayer; or b) The determination requires the exclusion from gross income of an item not included in a return filed by the taxpayer and with respect to which the tax was not paid but which is includable in the gross income of the taxpayer for another taxable year or in the gross income of a related taxpayer. 4) The determination disallows a deduction or credit which should have been allowed to, but was not allowed to, the taxpayer for another taxable year, or to a related taxpayer. 5) The determination allows or disallows any of the additional deductions allowable in computing the taxable income of estates or trusts, or requires or denies any of the inclusions in the computation of taxable income of beneficiaries, heirs, or legatees, specified in subparts A to E, inclusive sections 641 and following, relating to estates, trusts, and beneficiaries) of part I of subchapter J of the Internal Revenue Code, or corresponding provisions of subsequent internal revenue laws, and the correlative inclusion or deduction, as the case may be, has been erroneously excluded, omitted, or included, or disallowed, omitted, or allowed, as the case may be in respect of the related taxpayer. 6) The determination allows or disallows a deduction ( including a credit) in computing the taxable income ( or, as the case may be, net income, normal tax net income, or surtax net income) of a corporation, and a correlative deduction or credit has been erroneously allowed, omitted, or disallowed, as the case may be, in respect of a related taxpayer described in ORS ( 3)( g). 7)( a) The determination determines the basis of property, and in respect of any transaction on which such basis depends, or in respect of any transaction which was erroneously treated as affecting such basis, there occurred, with respect to a taxpayer described in paragraph ( b) of this subsection, any of the errors described in paragraph ( c) of this subsection. b) The taxpayer with respect to whom the erroneous treatment occurred must be the taxpayer with respect to whom the determination is made; a taxpayer who acquired title to the property in the transaction and from whom, mediately or immediately, the taxpayer with respect to whom the determination is made derived title; or a taxpayer who had title to the property at the time of the transaction and from whom, mediately or immediately, the taxpayer with respect to whom the determination is made derived title, if the basis of the property in the hands of the taxpayer with respect to whom the determination is made is determined under section 1015( a) of the Internal Revenue Code. c) With respect to a taxpayer described in paragraph ( b) of this subsection there was an erroneous inclusion in, or omission from, gross income, there was an erroneous recognition, or nonrecognition, of gain or loss, or there was an erroneous deduction of an item properly chargeable to capital account or an erroneous charge to capital account of an item properly deductible c ; 1983 c ; 1987 c c , repealed by 1971 c Computation; method of adjustment; credit or set -off limited; recovery after payment limited. ( 1)( a) In computing the amount of an adjustment under ORS to there shall first be ascertained the tax previously determined for the taxable year with respect to which the error was made. The amount of the tax previously determined shall be the excess of: A) The sum of the amount shown as the tax by the taxpayer on the return of the taxpayer, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus the amounts previously assessed ( or collected without as- sessment) as a deficiency, over B) The amount of refunds ( as defined in ORS ) made. b) There shall then be ascertained the increase or decrease in tax previously determined which results solely from the correct treatment of the item in the computation of gross income, taxable income, and other matters under ORS or ORS chapter 317 or 318. A similar computation shall be made for any other taxable year affected, or treated as affected, by an Oregon net loss for prior years ( as provided by ORS or and section 45b, chapter 293, Oregon Laws 1987), by a net operating loss deduction as defined in the federal Internal Revenue Code) or by a capital loss carryback or carryover ( as defined in the federal Internal Revenue Code) determined with reference to

24 INCOME TAXATION GENERALLY the taxable year with respect to which the error was made. The amount so ascertained together with any amounts wrongfully collected as additions to the tax or interest, as a result of such error) for each taxable year shall be the amount of the adjustment for that taxable year. 2) The adjustment authorized in ORS ( 1) shall be made by assessing and collecting, or refunding or crediting, the amount thereof in the same manner as if it were a deficiency determined by the department with respect to the taxpayer as to whom the error was made or an overpayment claimed by such taxpayer, as the case may be, for the taxable year or years with respect to which an amount is ascertained under subsection ( 1) of this section and as if on the date of the determination one year remained before the expiration of the periods of limi- tation upon assessment or filing claim for refund for such taxable year or years. If, as a result of a determination described in ORS ( 1)( d), an adjustment has been made by the assessment and collection of a deficiency of the refund or credit of an overpayment, and subsequently such determination is altered or revoked, the amount of the ad- justment ascertained under subsection ( 1) of this section shall be redetermined on the ba- sis of such alteration or revocation and any overpayment or deficiency resulting from such redetermination shall be refunded or credited, or assessed and collected, as the case may be, as an adjustment under this part. In the case of an adjustment resulting from an increase or decrease in a net oper- ating loss or net capital loss which is carried back to the year of adjustment, interest shall not be collected or paid for any period prior to the close of the taxable year in which the net operating loss or net capital loss arises. 3) The amount to be assessed and col- lected in the same manner as a deficiency, or to be refunded or credited in the same manner as an overpayment, under ORS to , shall not be diminished by any credit or set-off based upon any item other than the one which was the subject of the adjustment. The amount of the adjustment under ORS to , if paid, shall not be recovered by a claim or suit for refund or suit for erroneous refund based upon any item other than the one which was the subject of the adjustment c ; 1983 c ; 1987 c al Adjustment of returns of related taxpayers after reallocation of income or deduction on federal return. ( 1) Whenever there has been an adjustment of federal income tax liability involving a reallocation of any item of income or deduction between related taxpayers, and when such adjustment results in the assessment of a tax deficiency or the issuance of a refund check or both, then for Oregon income tax purposes, whether or not the department effects a similar reallocation of income or deduction for the same tax year, said federal tax deficiency and additions thereto shall be deducted ( to the extent otherwise provided by law) by the taxpayer paying the same, and said federal tax refund, including interest thereon, shall be returned ( to the extent otherwise required by law) by the taxpayer receiving the same. 2) If, however, the related taxpayers in- volved ( or their authorized representatives) so elect in accordance with subsection ( 3), then the refund of one, with interest thereon, shall be treated as a reduction of the defi- ciency of the other, including additions thereto, so that only the net amount of deflciency shall be deducted or the net amount of refund shall be returned, as the case may be. 3) An election under subsection ( 2) shall be in writing, signed by each related taxpayer or authorized representative, and filed with the department prior to the expiration of the applicable period of limitation with respect to the adjustment of the last open state return of either related taxpayer af- fected by the federal tax deficiency or refund. Such election shall constitute a waiver of any statute of limitations to permit the adjustment of all returns of the related taxpayers for the purpose only of effecting a reallocation of income or deductions similar to that made by the federal tax authorities and to adjust the federal income tax deductions resulting therefrom c c ; 1969 c ; repealed by 1983 c [ 1965 c ; 1969 c ; repealed by 1983 c c ; 1969 c ; repealed by 1983 c c ; repealed by 1969 c c ; 1969 c ; repealed by 1983 c EXCLUSION FROM GROSS INCOME OF EXCESS PROFITS REPAID OR ELIMINATED IN RENEGOTIATION OF FEDERAL CONTRACT Exclusion from gross income of excess profits repaid or eliminated in renegotiation of federal contract. If a renegotiation or repricing has been or shall be made in respect to a contract with the United States or any agency thereof, or any subcontract thereunder, which was entered into by a taxpayer subject to a tax under any law of this state imposing a tax on or measured by net income and the amount of ex-

25 REVENUE AND. TAXATION cessive profits received or accrued under the contract or subcontract during a taxable year or years ( hereafter referred to in this section as prior taxable year or years) has been eliminated, and 1) If in a taxable year ending after December 31, 1940, a taxpayer is required to pay or repay to the United States or any agency thereof the amount of profits so eliminated, or 2) If the amount of profits so eliminated is applied as an offset against any other amount due the taxpayer, then the profits so eliminated shall be excluded from gross income for the prior taxable year or years, if they were included in gross income for such prior taxable year or years under any law of this state imposing a tax on or measured by net income. [ Formerly Refund of excess tax paid. ( 1) If a final tax return has been filed by the taxpayer for a taxable year ending after De- cember 31, 1940, and if the tax return in- cluded excessive profits that were subsequently eliminated on renegotiation or repricing and paid or repaid or offset as provided in ORS , the_ taxpayer shall, upon the filing of a properly verified claim for refund under regulations prescribed by the department, be refunded an amount equal to the difference between the amount of tax paid by the taxpayer for such taxable year and the amount of the tax computed for such taxable year after the exclusion of the excessive profits which have been paid, repaid or offset. 2) If a taxpayer has paid any tax or interest or penalty because of the provisions of chapter 226, Oregon Laws.1945, then the taxpayer shall, upon the filing of a properly verified claim for refund under regulations prescribed by the department, be refunded such tax or interest or penalty so paid, without interest. No claim for any tax or interest or penalty under chapter 226, Oregon Laws 1945, shall be made or collected after July 16, ) The amount to be refunded to the taxpayer under subsections ( 1) and ( 2) of this section shall be reduced by the amount of any refund or credit allowed or received by the taxpayer under the provisions of chapter 226, Oregon Laws ) Notwithstanding any other provisions of ORS to , no refund shall be made of any tax allowed as a credit or otherwise taken into consideration in reducing the profits eliminated or the amount refunded - upon renegotiation, whether or not the renegotiation agreement contains a capture clause. re- 5) If a refund allowed under this section had been allowable under chapter 226, Oregon Laws 1945, and the taxpayer could not have received such refund under chapter 226, Oregon Laws 1945, without the imposition of federal excess profits taxes upon such refund, then the amount of the refund al- lowed under this section shall be reduced by the amount of excess profits taxes which would have been imposed upon such refund after deducting from such excess profits taxes the amount of federal corporation income taxes which would have been imposed upon such refund if such refund were subject only to such federal corporation income taxes. [ Formerly Time for filing claim for credit or refund. Notwithstanding the provisions of any statute of limitations, claim for any credit or refund provided for in ORS to shall be made within two years from July 16, 1949, or from the date of final determination of the amount of excessive profits under a contract or subcontract described in ORS , except that if ORS ( 4) is declared unconstitutional, no refund or credit resulting from such declaration shall be allowed unless a properly verified claim therefor is filed with the department under ORS or under chapter 226, Oregon Laws 1945, within two years from the date on which the excessive profits involved were finally determined. Formerly POLLUTION CONTROL FACILITIES c ; 1987 c ; repealed by 1989 c ( 1)] Note: Subsection ( 2), section 8, chapter 802, Oregon Laws 1989, provides: Sec. 8. The repeal of ORS by subsection 1) of this section applies to pollution control facilities or portions thereof certified under ORS on or after January 1, c ( 2) Collection of taxes due after revocation of certification of pollution control facility; exceptions to tax relief allowed for pollution control facility. ( 1) Upon receipt of notice of the revocation of a certification of a pollution control facility pursuant to ORS ( 1), the Department of Revenue immediately shall collect any taxes due by reason of such revocation, and shall have the benefit of all laws of this state pertaining to the collection of income and excise taxes. No assessment of such taxes shall be necessary and no statute df limitation shall preclude the collection of such taxes ) No tax relief shall be allowed under ORS , or for any pollution control facility constructed or used by or for the benefit of any governmental or quasi - governmental body or public corpo-

26 INCOME TAXATION GENERALLY ration or form thereof, except where such facilities are used for resource recovery c592 16, 17; 1969 c ; 1979 c REAL ESTATE MORTGAGE INVESTMENT CONDUIT Taxation of real estate mortgage investment conduit. ( 1)( a) An entity described in section 860D of the Internal Revenue Code ( a real estate mortgage investment conduit or REMIC) shall not be subject to a tax under ORS chapter 316, 317 or 318 and shall not be treated as a corporation, partnership or trust for purposes of ORS chapter 316, 317 or 318). b) If a REMIC engages in a prohibited transaction as defined in section 860F(a)( 2) of the Internal Revenue Code, the REMIC shall be subject to a tax equal to six and six- tenths percent of the net income derived from the prohibited transaction. The tax imposed under this paragraph shall be assessed and collected under the applicable provisions of this chapter and ORS chapter 305 and shall be credited to the General Fund to be made available for general governmental ex- penses. 2) The income of any REMIC shall be taxable to the holders of the interests in the REMIC under ORS chapter 316, 317 or 318, whichever is applicable. 3) Taxable income or loss, with respect to income received as the holder of any interest in a REMIC shall be determined under sections 860A to 860G of the Internal Revenue Code, as defined in ORS or and , as otherwise determined and modified under ORS chapter 316, 317 or 318, whichever is applicable, to the REMIC interest holder. 4) To determine that portion of the income of a REMIC which is taxable to a nonresident holder of an interest in the REMIC, there shall be included. only that part derived from or connected with sources in this state, as such part is determined under rules adopted by the department in accordance with the general rules in ORS ( 1987 Replacement Part) c METHODS OF ACCOUNTING AND REPORTING INCOME c.544 2; 1969 c ; 1983 c ; repealed by 1987 c Method of accounting. ( 1) The method of accounting of a partnership, REMIC ( real estate mortgage investment conduit) or taxpayer shall be the same as the method of accounting which the partnership, REMIC or taxpayer uses for federal income tax purposes for the taxable year. _ 2) Notwithstanding subsection ( 1) of this section, if the method of accounting used by the partnership, REMIC or taxpayer does not clearly reflect income, the computation of taxable income shall be made under such method as the department may prescribe. 3) If the method of accounting is changed for federal income tax purposes, the partnership, REMIC or taxpayer shall adopt the same method of accounting for purposes of ORS chapter 316, 317 or 318 and shall use that method beginning with the return filed which corresponds to the first federal return filed which is required to use the new method. Any adjustments required to prevent amounts from being duplicated or omitted shall be taken into account for state tax purposes in the same manner as for federal tax purposes: 4) Subsections ( 1) and ( 3) of this section shall not apply with respect to methods of accounting which are disallowed for purposes of ORS chapter 316, 317 or c ] c , 4; 1969 c ; repealed by 1987 c Allocation of income of financial organization or public utility from business within and without state. ( 1) If a taxpayer has income from business activity as a financial organization or as a public utility ( as defined respectively in ORS ( 4) and ( 6)) which is taxable both within and without this state ( as defined in ORS ( 8) and ), the determination of net income shall be based upon the business activity within the state, and the department shall have power to permit or require either the segregated method of re- porting or the apportionment method of reporting, under rules and regulations adopted y the department, so as fairly and accurately to reflect the net income of the business done within the state. 2) The provisions of subsection ( 1) of this section dealing with the apportionment of income earned from sources both within and without the State of Oregon are designed to allocate to the State of Oregon on a fair and equitable basis a proportion of such income earned from sources both within and without the state. Any taxpayer may submit an alternative basis of apportionment with respect to the income of the taxpayer and explain that basis in full in the return of the taxpayer. If approved by the department that method will be accepted as the basis of allocation c ( enacted in lieu of and ); 1963 c.319 0, 1965 c c ( enacted in lieu of and ); repealed by 1987 c Costs allocable to inventory. 1) In the computation of state taxable income, costs allocable to inventory shall be

27 REVENUE AND TAXATION the same as those allocable to inventory under section 263A of the Internal Revenue Code as of the close of the tax year for which a return is filed and shall not be adjusted for any addition, subtraction, modification or other adjustment contained in this chapter or ORS chapter 316, 317 or 318 or other law governing the imposition of state taxes imposed upon or measured by net income. 2) If any provision of ORS chapter 316, 317 or 318 appears to require an adjustment to inventory costs contrary to the provisions of this section, that adjustment shall not be made. 3) The additions, subtractions, modifications or other adjustments to federal taxable income required in determining Oregon taxable income under ORS chapter 316, 317 or 318 shall be made to federal taxable income notwithstanding that such adjustments are properly attributable to costs allocable to inventory c293 57bl Deferral of tax recognition of gain limited to cases where newly acquired property within Oregon' s jurisdiction. ( 1) For tax years beginning on and after January 1, 1957, where laws relating to taxes imposed upon or measured by net income make provision for deferral of tax recognition of gain upon the voluntary or involuntary conversion or exchange of tangible real or personal property, such provisions shall be limited to those conversions or exchanges where the property newly acquired by the taxpayer has a situs within the jurisdiction of the State of Oregon. 2) For tax years beginning on and after January 1, 1979, subsection ( 1) of this section shall not apply to the principal residence newly acquired by the taxpayer even if its situs is outside the jurisdiction of the State of Oregon c ; 1979 c Determination of net income where several taxpayers carry on business under common control. When the department has reason to believe that any taxpayer so conducts a trade or business as either directly or indirectly to distort its true net income and the net income properly attributable to the state, whether by the arbitrary shifting of income, through price fixing, charges for services, by selling the commodities or services in which it deals at less than the fair price for which they might have been obtained therefor, or buying commodities or services at more than the fair price for which they might have been obtained, or otherwise, whereby the net income is arbitrarily assigned to one or another unit in a group of taxpayers carrying on business under a substantially common control, it may require the facts it considers necessary for the proper computation of the entire net income and the net income properly attributable to the state, and in determining the same the department shall have regard to the fair profits which would normally arise from the conduct of the trade or business c ( enacted in lieu of and )) Passive activity loss; determination; treatment. For purposes of applying section 469 of the Internal Revenue Code to the laws of this state imposing taxes upon or measured by income: 1) Passive activity loss shall be deter- mined with respect to the activities of the taxpayer under section 469 of the Internal Revenue Code and then shall be' adjusted by the additions, subtractions, modifications and other adjustments as allocated to passive ac- tivity loss under subsection ( 2) of this sec- tion. 2) Those additions, subtractions, modifications and other adjustments required to be made to federal taxable income under this chapter or ORS chapters 316, 317 and 318, or other law governing the imposition of state taxes imposed upon or measured by income, shall be allocated to passive activity loss as provided by rule of the department. 3) Passive activity loss, as determined under subsections ( 1) and ( 2) of this section, shall not be allowed for the taxable year of the taxpayer. Passive activity loss shall be treated as a deduction allocable to passive activity in the next succeeding year, and ex- cept as otherwise adjusted under subsection 1) of this section, shall be treated in the same manner as passive activity loss is treated under section 469 of the Internal Revenue Code, and related sections. 4) For state personal income tax purposes, in the case of a nonresident, passive activity loss attributable to Oregon sources shall be treated in the same manner as described under subsections ( 1) to ( 3) of this section c Interest on deferred tax liabilities with respect to instalment obligations. ( 1) Subject to subsections ( 2) to ( 4) of this section, if interest on deferred tax liability with respect to an instalment obligation is required to be paid for federal income tax purposes under section 453A of the Internal Revenue Code,' then interest on that same deferred tax liability shall be paid in the same manner ( including the pledging iules under section 453A( d) of the Internal Revenue Code) for state tax purposes and shall, in the amount added, increase the tax imposed under ORS chapter 316, 317 or 318, whichever is appropriate.

28 INCOME TAXATION GENERALLY ) - Interest added to tax pursuant to subsection ( 1) of this section shall be determined in the same manner as interest is determined under section 453A( c) of the Internal Revenue Code except that in determining the interest to be added using section 453A( c) of the Internal Revenue Code: a) The interest rate in effect under ORS for deficiencies for the month with or within which the taxable year of the taxpayer ends shall be substituted for the underpayment rate referred to in section 453A( c)( 2)( B); and b) The maximum rate of tax in effect under ORS chapter 316, 317 or 318, whichever is appropriate, shall be substituted for the federal rates of tax referred to in section 453A( c)( 3)( B). 3) The department shall adopt rules consistent with those adopted under section 453A of the Internal Revenue Code and with laws of this state as may be necessary to carry out the provisions of-this section, including rules providing for the application of this subsection in the case of contingent payments, short taxable years, pass -thru entities and derivation, attribution or apportionment of instalment obligations or income from instalment obligations. 4) In the case of a nonresident subject to taxation under ORS chapter 316, in determining whether or not interest is to be added to tax under this section, and the amount of interest to be added, only those instalment obligations that arise from dispositions of property in this state shall be taken into consideration. 5) For purposes of determining interest urider ORS or penalties under ORS or other law, and for purposes of re- fund, estimated and other prepayments of tax, credits and all other purposes, the in- terest added under this section shall be considered as any other increase in the tax imposed under ORS* chapter 316, 317 or 318, whichever is appropriate. 6) The interest added to tax imposed under this section shall be assessed and collected under the applicable provisions of this chapter and ORS chapters 305, 316, 317 and 318 and shall be paid over to the State Treasurer and held in the General Fund as miscellaneous receipts available generally to meet any expense or obligation of the State of Oregon lawfully incurred c provides: Note: Section 90, chapter 625, Oregon Laws 1989, Sec. 90. Section 57 of this Act ( pertaining to interest on deferred tax liability with respect to an instalment obligation) applies to dispositions occurring on or after January 1, 1990, in tax years- beginning on or after January 1, c LIABILITY OF TRANSFEREE OR OWNER OF TRUST Liability of transferee of taxpayer for taxes imposed on taxpayer. ( 1) When a taxpayer ceases to exist or is no longer subject to the jurisdiction of this state although subject to the courts of a state having comity or reciprocity with the State of Oregon), being indebted for taxes upon or measured by net income, the transferee of the money or property of the taxpayer shall be liable for any such tax or deficiency in tax, including penalties and interest, imposed by law on the taxpayer and accruing or accrued upon the date of transfer, to the extent of the amount of money or value of the property received by the transferee. Property received by the transferee shall be valued at the fair market value of said property at the time of transfer to the initial transferee by the taxpayer. However, no heir, legatee, devisee or distributee of an estate of a deceased person shall be liable as a transferee of the decedent or of the decedent' s estate ( a) after the Department of Revenue' s certificate of release with respect to such decedent' s estate has been filed with the clerk of the probate court pursuant to ORS , or ( b) where no release has been filed but 90 days have elapsed following a request to the department by the decedent' s representative for such release, unless within that time the probate court, upon application by the department, finds reasonable grounds for extending the period and allows the department additional time in which to issue a release. 2) The amount for which a transferee of the property of a taxpayer is liable in respect of any such, tax or deficiency in tax, including penalties and interest, whether shown on the return of the taxpayer or determined as a deficiency in the tax, shall be assessed against such transferee and collected and paid in the same manner and subject to the same provisions and limitations as would apply to the taxpayer had the taxpayer or it continued subject to the jurisdiction of this state, except as provided in this section. 3) As used in this section, the term transferee" means one not a bona fide purchaser for value and includes an heir, legatee,, devisee, distributee of an estate of a deceased person, the shareholder of a dis- solved corporation, the assignee or donee of an insolvent person, the successor of a corporation which is a party to a corporate reorganization, and persons acting on behalf of such transferees in a fiduciary capacity. 4) The period of limitation for assessment of any such liability of a transferee shall be as follows:

29 REVENUE AND TAXATION a) In the case of the liability of an initial transferee of the property of the taxpayer, within one year after the expiration of the period of limitation for assessment against the taxpayer; b) In the case of the liability of a transferee of a transferee of the property of the taxpayer, within one year after the expiration of the period of limitation for assessment against the preceding transferee, but not more than three years after the expiration of the period of limitation for assess- ment against the taxpayer; c) If, before the expiration of the period of limitation for the assessment of the liability of the transferee, as set forth in paragraph ( a) or ( b) of this subsection, a court proceeding for the collection of the tax or liability in respect thereof has been filed against the taxpayer or last preceding transferee, then the period of limitation for assessment of the, liability of the transferee shall expire one year after final judgment has been rendered in the court proceedings; d) If, before the expiration of the time prescribed in paragraph ( a), ( b) or ( c) of this subsection for the assessment of the liability, both the Department of Revenue and the transferee have consented in writing to its assessment after such time, the liability may be assessed at any time prior to the expira- tion of the period of extension agreed upon. The period so agreed upon may be further extended by subsequent agreements in writing made before the expiration of the period of extension previously agreed upon. 5) For the purposes of this section, if the taxpayer is deceased, or in the case of a corporation, has terminated its existence, the period of limitation for assessment against the taxpayer shall be the period which would be in effect had death or termination of existence not occurred. 6) In the absence of notice to the Department of Revenue of the existence of a fiduciary relationship, notice of liability en- forceable under this section in respect of a tax or deficiency in tax, including penalties and interest thereon, imposed upon or measured by net income, if mailed to the last - known address of the person subject to the liability, shall be sufficient for the purposes of this section even if such person is de- ceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence c.367 2; 1969 c Lien if grantor or other person determined to be owner of trust. ( 1) If a final determination treats the grantor of a trust or any other person as the owner of any portion of a trust pursuant to sections 671 to 678 of the federal Internal Revenue Code or any other law, the lien of the State of Oregon imposed by ORS shall attach to all property and rights to property, whether real or personal, of that portion of the trust. The lien may be foreclosed pursuant to ORS or collected by warrant pursuant to ORS ) For the purposes of subsection ( 1) of this section, " final determination" means: a) An assessment which has become final due to failure to exercise or exhaust rights of appeal to the Director of the Department of Revenue. b) An order of the Director of the Department of Revenue which has become final. c) A decision of the Oregon Tax Court which has become final.. d) A decision of the Oregon Supreme Court c , 31 RETURNS Returns when tax year changed. If a taxpayer changes the tax year ori- the basis of which net income is computed, the taxpayer shall, at the time and in the manner the department prescribes, make a separate return of net income received during the period intervening between the end of the former income year of the taxpayer and the beginning of the new income year c ( enacted, in lieu of ), 1987 c Information returns. ( 1) Fiduciaries required to make returns under laws imposing tax upon or measured by net income, proprietorships, partnerships, corpo- rations, joint stock companies or associations or insurance companies, having places of business in this state, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, em- ployers, purchasers, of stumpage and all offi- cers and employees of the state or of any political subdivisions of the state, having the control, custody, disposal or payment of interest ( other than interest coupons payable to bearer), rent, dividends, salaries, fees, wages, the purchase price of stumpage, emoluments or other fixed or determinable annual or periodical gains, profits and in- come, paid or payable, during any year to any taxpayer, shall make return thereof, under oath, to the department, under such regulations and in such form and manner and to such extent as it may prescribe. 2)( a) Every person doing business as a broker shall, when required by the department, render a correct return duly verified under oath, under such rules and regulations as the department may prescribe, showing the names of customers for whom such per

30 INCOME TAXATION GENERALLY son has transacted any business, with such details as.-to the profits, losses, nor other information which the department may require, as to each of such customers, as will enable the department to determine whether all income tax due on profits or gains of such customers has been paid. b) Every person who is required tw file a return with respect to a real estate transaction under section 6045( e) of the Internal Revenue Code shall file a copy of that return with the department. 3) The department may prescribe circumstances under which the filing require- ments under this section are waived c ( enacted in lieu of ), 1959 c. 305 t, 1987 c ; 1987 c Filing return on magnetic media or other machine - readable form. ( 1) The information return and the employer' s annual return, described in ORS and ( 3) shall be filed on magnetic media or other machine- readable form if the corresponding federal return is required. to be filed on magnetic media or other machine- readable form by section 6011 ( e) of the Internal Revenue Code and the ' regulations, revenue rulings and revenue procedures adopted pur- suant to that section. 2) The department may, by administra- tive rule, adopt the regulations, revenue rulings or revenue procedures which are adopted pursuant to section 6011 ( e) of the Internal Revenue Code whenever such regulations, revenue rulings or revenue proce- dures may be adopted. 3) The department may require that the magnetic media or other machine - readable forms filed with it meet specifications pre- scribed by the department. The department may allow an alternative method ' of filing if the person filing the return is unable to' r eet the specifications prescribed by the depart- ment. 4) Any reference in this section to the Internal Revenue Code means the Internal Revenue Code as amended on or before De- cember 31, 1986, even where the amendments take effect or become operative after that date c c ; repealed by 1984 ss. c , c ( enacted in lieu of and ); 1961 c ; repealed by 1985 c Department. requiring return or supplementary return. If the depart- ment is of the opinion that a taxpayer has failed to file a return, or to include in a return filed, either intentionally or through error, items of taxable income, it may require from the taxpayer a return or supplementary return, under oath, in such form as it shall prescribe, of all the items of income which the taxpayer received during the year for which the return is made, whether nor not taxable under,the provisions of the applicable tax law. If from a supplementary return, or otherwise, the department finds that any items of taxable income have been omitted from the original return it may require the items so omitted to be disclosed under oath of-the taxpayer, and to be added to the original return. Such supplementary return and the correction of the original return shall not relieve the taxpayer from any of the, penalties to which the taxpayer may be liable under any provisions of law whether or not the department required a return or a supplementary return under this section c ( enacted in lieu of ) Furnishing copy of federal return ' or report; action required when federal' return changed. ( 1) Every taxpayer shall, upon request of the department, furnish a copy of the return for the corresponding year, which the taxpayer has filed or may file with the Federal Government, showing the taxpayer' s net income and how obtained and the several sources from which derived. Every taxpayer shall, upon request of the department, furnish a copy of any federal re- venue agent's report made upon any audit or adjustment of the taxpayer' s federal income tax return. 2) If the amount of a taxpayer' s federal taxable income reported on a federal income tax return for any taxable year is changed or corrected by the United States Internal Revenue Service or other competent author- ity, resulting in a change in the Taxpayer' s net income which is subject to tax by this state, the taxpayer shall report such change or correction ' in federal taxable income to the department. The taxpayer may file a report of a federal change or correction, and the report of the federal change or correction shall be treated by the department as a claim for refund pursuant to ORS and, notwithstanding the limitations of ORS , shall be deemed timely if filed with the department within two years after the federal correction was made. The report shall either concede the accuracy of such determination or state wherein the taxpayer believes it to be erroneous. Any taxpayer filing an amended federal income tax return reporting a change in the taxpayer' s taxable income which is subject to tax by this state shall also, file an amended return with the department within 90 days thereafter ) For purposes of this section, a change or correction of a taxpayer' s federal taxable income is deemed to be made on the date of the federal audit report. 4) The provisions of ORS shall constitute the exclusive remedy of a person

31 REVENUE AND TAXATION whose notice of deficiency or assessment is based upon a federal change or correction of the person' s taxable income under this sec- tion c ( enacted in lieu of and ); 1963 c , 1985 c , 1989 c Form of returns; time for filing. ( 1)( a) For purposes of ORS chapter 316, returns shall be filed with the department on or before the due date of the corresponding federal return for the tax year as prescribed under the Internal Revenue Code and the regulations adopted pursuant thereto, except that the final return of a decedent shall be filed at any time following the death of the decedent, to and including the 15th day of the fourth month after expiration of the reg- ular tax year of the decedent. b) For purposes of ORS chapters 317 and 318, returns shall be filed with the department on or before the 15th day of the month following the due date of the corresponding federal return for the tax year, as prescribed under the Internal Revenue Code and the regulations adopted pursuant thereto. c) The department may allow further time for filing returns equal in length to the extension periods allowed under the Internal Revenue Code and its regulations. d) If no return is required to be filed for federal income tax purposes, the due date or extension period for a return shall be the same as the due date, or extension period, would have been if the taxpayer had been required to file a return for federal income tax purposes for the tax year. However, the due date for returns filed for purposes of ORS chapter 317 or 318 shall be on or before the 15th day of the month following what would have been the federal return due date for the -tax year. e) As used in this section, " Internal Revenue Code" means the federal Internal Revenue Code, as amended and in effect on the date specified in ORS ( 2). 2) There shall be annexed to the return a statement verified by a written declaration of the taxpayer making the return to the effect that the statements contained therein are true. 3) Returns shall be in such form as the department may, from time to time, prescribe. The department shall prepare blank forms for the returns and distribute them throughout the state. Such forms shall be furnished the taxpayer upon request, but failure to receive or secure a form shall not relieve the taxpayer from the obligation of making any return required by law c ( enacted in lieu of and ); 1959 c ; last sentence of subsection ( 1) derived from 1959 c ; 1963 c ; 1987 c293 59a; 1989 c Note: See note under Time for payment of tax;, interest on delayed return. ( 1) The tax shall be paid to the department at the time fixed by ORS for filing the return without regard to extensions. 2) When the time for filing a return of income is extended at the request, of the' taxpayer, interest at the rate established under ORS for each month,or fraction of-a month from the time the return was originally required to be filed to the time of payment shall be added and paid c ; 1971 c.354-3, 1973 c , 1975 c , 1980 s: s. c , 1982 s s 1 c 16 6; 1987 c b Manner of payment. The tax may be paid with uncertified check under any rules as the department shall adopt, but if a check so received is not paid by the bank on which it is drawn, the taxpayer by whom the check is tendered remains liable for the payment of the tax and for all legal penalties the same as if the check had not been tendered c ( enacted in lieu of )] Penalty assessed for failure to file report or return or to pay -tax` ivhe"n' due; interest. ( 1) If a taxpayer ( a) fails` to file a report or return of tax or tax liability or of income at the time prescribed therefor, or ( b) fails to pay a tax at the time, the tax becomes due, there shall be added to the amount of tax required to be shown as tax on the report or return a delinquency penalty of five percent of the amount of such tax. 2) If the failure to file a report or return continues for a period in excess of three months after the due date: a) There shall be added to the amount of tax required to be shown on the return a failure to file penalty of 20 percent of the amount of such tax; and b) Thereafter the department may send a notice and demand to the person to file a report or return within 30 days of the mailing of the notice. If after such notice and demand no return or report is filed within the 30 days, the department may determine the tax according to the best of its information and belief, assess the tax with appropriate penalty and interest plus an additional penalty of 25 percent of the tax deficiency determined by the department and give written notice of the determination and assessment to the person required to make, the filing ) A penalty equal to 100 percent of any deficiency determined by the department shall be assessed and collected if: a) There is a failure to file a report or return with intent to evade the tax;

32 INCOME TAXATION GENERALLY b) A report or return was falsely prepared and filed with intent to evade the tax; or c) A false claim was intentionally filed under ORS to ) Interest shall be collected on the unpaid tax at the rate established under ORS for each month or fraction of a month, computed from the time the tax became due, during which the tax remains unpaid. 5) Each penalty imposed under this section is in addition to any other penalty imposed under this section. However, the total amount of penalty imposed under this section and ORS ( 13) with respect to any deficiency shall not exceed 100 percent of the deficiency. [ 1971 c.354 2; 1975 c ; 1977 c ; 1980 s.s. c.7 25; 1981 c.724 4; 1982 ss.l c. 16 7; 1985 c.602 4; 1987 c al Understatement of taxable income; penalty; waiver of penalty. ( 1) If the department determines that there is a substantial understatement of taxable income for any taxable year under any law imposing a tax on or measured by net income, there shall be added to the amount of tax required to be shown on the return a penalty equal to 20 percent of the amount of any underpayment of tax attributable to the understatement of taxable income. 2) A substantial understatement of taxa- ble income exists for any taxable year if the amount of the understatement for the taxable year exceeds: a) Except as provided in paragraph ( b) of this subsection, $ 1, 000. b) In the case of a corporation other than an S corporation, as defined in section 1361 of the Internal Revenue Code, or a per- sonal holding company, as defined in section 542 of the Internal Revenue Code, $ 25,000. 3) In the case of any item attributable to an abusive tax shelter: a) No reduction of the amount of the understatement shall be made with regard to that item regardless of the existence of substantial authority for the treatment of the item by the taxpayer. b) No reduction of the amount of the understatement shall be made with regard to that item regardless of the disclosure of the facts affecting the tax treatment of the item unless, in addition to the disclosure, the tax- payer reasonably believed that the tax treatment of the item was more likely than not the proper treatment. 4) As used in this section: a) " Abusive tax shelter" means any partnership, corporation or other organization or entity, any investment plan or ar- rangement or any -other plan or arrangement, which has as its principal purpose the evasion or improper avoidance of federal or state income tax. " Abusive tax shelter" in. cludes any investment or activity in connection with which tax benefits derived by investors are not clearly intended under the tax laws or any investment or activity that involves little or no economic reality, making use of unrealistic allocations of income or expenses, inflated appraisals of asset values, losses substantially in excess of investment, mismatching of income and expenses, financing techniques that do not conform to standard commercial business practice or mischaracterization of the substance of the investment or activity. b) " Understatement" means the excess of the amount of the taxable income required to be shown on the return for the taxable year over the amount of the taxable income which is shown on the return, reduced by any portion of the understatement that is at- tributable to: A) The tax treatment of any item by the taxpayer if there is or was substantial au- thority for such treatment; or B) Any item with respect to which the relevant facts affecting the item's tax treatment are adequately disclosed in the return or in a statement attached to the return. 5) The penalty imposed under this section is in addition to any other penalty imposed by law. A penalty imposed under this section shall be treated for all purposes as an additional deficiency subject to the pro- visions of ORS , but shall not bear interest. 6) The department may waive all or any part of the penalty imposed under this section on a showing by the taxpayer that there was reasonable cause for the understatement, or any portion thereof, and that the taxpayer acted in good faith c COLLECTING DELINQUENT TAXES; LIENS; INTEREST AND ADDITIONS TO TAX; REFUNDS c ( enacted in lieu of and ); 1959 c.212 l; subsection ( 8) derived from 1959 c.212 3; 1961 c ; 1965 c ; 1969 c ; 1969 c ; 1971 c.333 1; 1971 c ; 1973 c , 1975 c ; repealed by 1977 c ( enacted in lieu of ) Assessment of taxes owing but not submitted with return; time of assessment; recording of warrant. For the purposes of ORS , , and to : 1) In the case of a return submitted to the department with payment of less than the amount of tax computed to be due, the

33 REVENUE AND TAXATION difference between the tax computed to be owing by the taxpayer and the tax submitted with the return is considered as " assessed" on the due date of the return ( determined with regard to any extension of time granted for the filing of the return) or the date the return is filed, whichever is later. 2) The term " time of assessment" means: a) In the case of an assessment made under ORS and , 30 days after the date the notice of assessment is mailed to the taxpayer; b) In the case of an assessment made under ORS , five days after the date the notice of assessment is mailed to the taxpayer; or c) In the case of a tax assessed as described in subsection ( 1) of this section; the due date of the return ( determined with regard to any extension of time granted for the filing of the return) or the date, the return is filed, whichever is later. 3) Unless a warrant has been recorded in the County Clerk Lien Record in the county in which property is located, no warrant shall be considered as a lien with resppect to that property c215 2; 1977 C870 12, 1987 c Time limit for notice of deficiency. ( 1) At any time within three years after the return was filed, the department may give in ORS notice of deficiency as prescribed 2) If the department finds that gross income equal to 25 percent or more of ' the gross income reported has been omitted from the taxpayer' s return, notice of the defi- ciency may be given at any time within five years after the return was filed. 3) The limitations to the giving of notice of a deficiency provided in this section shall not apply to a deficiency resulting from false or fraudulent returns, or in cases where no return has been filed. If the Commissioner of Internal Revenue or other authorized officer of the Federal Government makes a correction resulting in a change in income tax for state income tax purposes, then notice of a deficiency under any law imposing tax upon or measured by income for the corresponding tax year may be mailed within two years after the department -is notified by the taxpayer or the commissioner of such federal correction, or within the applicable three - year or five -year period prescribed in sub- sections ( 1) and ( 2) of this section, respectively, later. whichever period expires the 4) The tax deficiency must be assessed and notice of tax assessment mailed to the taxpayer or authorized representative, who is authorized in writing, within one year from the date of the notice of deficiency unless an extension of time is agreed upon as prescribed in subsection ( 6) of this section. 5) Notwithstanding other provisions of this section, the period for the assessment of any deficiency attributable to any part of the gain realized upon the sale or exchange of the taxpayer' s principal residence, as provided in the federal Internal Revenue Code as applicable to the Persona) Income Tax Act of 1969, shall not expire prior to the expiration of three years from the date the depart- ment is notified by the taxpayer of: a) The cost of purchasing the new residence which the taxpayer claims results in nonrecognition of any part of such gain; or b) The taxpayer' s intention not to pur- chase a new residence; or c) A failure to purchase a new residence within the period prescribed in the federal Internal Revenue Code as applicable to the Personal Income Tax Act of ) If, prior to the expiration of any period of time prescribed in this section for. giving of notice of deficiency or of assessment, the department and the taxpayer consent in writing to the notice of deficiency being mailed or deficiency being assessed af- ter the expiration of such prescribed period, notice of such deficiency may be mailed or the deficiency assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period agreed upon. 7) In the case of a deficiency attribut- able to the application to the taxpayer of a net operating loss carryback, notice of such deficiency may be mailed at any time before the expiration of the period within which notice of a deficiency for the taxable year of the net operating loss which results in such carryback may be mailed. 8) Notwithstanding the other provisions of this section, if any taxpayer agreed with the United States Commissioner of Internal Revenue for an extension, or renewals thereof, of the period for giving notices of deficiencies and assessing deficiencies in federal income tax for any year, the period for mailing notices of deficiencies of tax for such years shall be within the limits expressed in subsections ( 1) to ( 7) of this section or six months after the date of the expiration of the agreed period for assessing deficiencies in federal income tax, whichever period expires the later ) Notwithstanding other provisions of this section, the period for giving notice of any deficiency attributable to any partnership or S corporation - related item shown on

34 INCOME TAXATION GENERALLY the taxpayer' s return shall not expire prior to the expiration of three years, from the date of filing of the partnership or S corporation return to which the item on the taxpayer' s return is related. ( 1957 c ( enacted in lieu of and ); 1959 c.212 2; 1959 c ; subsection ( 8) derived from 1959 c and 1959 c ; 1963 c.509 2; 1963 c ( referred and rejected); 1969 c.405 1, 1969 c , 88a; 1971 c.507 1; 1977 c ; 1983 c ; 1985 c Issuing of notice of deficiency attributable to involuntary conversion; time limit. Notwithstanding ORS , the period for issuing any notice of deficiency attributable to any part of the gain realized upon an involuntary conversion as provided in the federal Internal Revenue Code which applies to the Personal Income Tax Act of 1969 or as provided in the corporate excise tax or corporate income tax laws, shall not expire prior -to the expiration of three years from the date the department is notified by the taxpayer of- 1) The replacement of the converted property which the taxpayer claims results in nonrecognition of any part of such gains; or 2) The taxpayer' s intention not to re- place such property; or 3) A failure of the taxpayer to replace the property within the period prescribed in the federal Internal Revenue Code which applies to the Personal Income Tax Act of 1969, in the corporation excise tax laws or in the corporation income tax laws, whichever is applicable c.705 2; 1989 c Refunds; interest; credits. ( 1)( a) If the department determines pursuant to ORS that the amount of the tax due is less than the amount theretofore paid, the excess shall be refunded by the department with interest at the rate established under ORS , for each month or fraction of a month during a period beginning 45 days after the due date of the return or the date the tax was paid, whichever is the later, to the time the refund is made. b) No refund shall be allowed or made after three years from the time the return was filed, or two years from the time the tax or a portion thereof was paid, whichever period expires the later, unless before the expiration of such period a claim for refund is filed by the taxpayer in compliance with ORS , nor shall a refund claimed on an or- iginal return be allowed or made in any case unless the return is filed within three years of the due date, excluding extensions, of the return in respect of which the tax might have been credited. If a refund is disallowed for the tax year during which excess tax was paid for any reason set forth in this paragraph, the excess shall not be allowed as a credit against any tax occurring on a return filed for a subsequent year. If the tax owed is less than $ 1, no refund shall be made. c) No interest on a refund to an employee of a tax withheld by an employer shall be paid for any period prior to the time the employee filed a personal income tax return for the tax year involved, nor for any period prior to the day which is 45 days after the date when the employee' s annual return for that year was filed or was due, whichever is the later. d) No interest on a refund of estimated tax paid under ORS to or to shall be paid for any period prior to the time the taxpayer filed a tax return for the tax year involved, nor for any period prior to the day which is 45 days after the date when the tax return for that year was filed or was due, whichever is later. e) The amount of the refund, exclusive of interest thereon, shall nbt exceed the portion of the tax paid during such period preceding the filing of the claim or, if no claim is filed, then during the period preceding the allowance of the refund during which -a claim might have been filed. Where there has been an overpayment of any tax imposed, the amount of the overpayment and interest thereon shall be credited against any tax, penalty or interest then due from the taxpayer, and only the balance shall be refunded. f) Except as provided in ORS ), if, pursuant to a notice of deficiency or assessment, the taxpayer pays the amount specified in the notice, or any part thereof, and if, upon appeal, the department, the Oregon Tax Court or the Oregon Supreme Court orders that all or any part of the deficiency amount specified in the notice and paid by the taxpayer be refunded, the amount so ordered to be refunded shall bear interest at the rate established for refunds in ORS Interest shall be computed from the date of payment to the department. Nothing in this paragraph shall require that interest be paid upon any amount for any period for which interest upon the same amount for the same period is required to be paid under ORS ) Notwithstanding any provision to the contrary in ORS or or subsection ( 1) of this section, if, prior to the ex- piration of the period prescribed in paragraph ( b) of subsection ( 1) of this sec- tion, the department and the taxpayer consent in writing to the refund of tax after the expiration of the period prescribed, the refund shall be made at any time prior to the expiration of the period agreed upon and no refund shall be made or allowed after the expiration of the period agreed upon unless ihdiil ]

35 REVENUE AND TAXATION a :,claim_'for refund is filed by the taxpayer before the expiration, of the period agreed upon in compliance with the manner prescribed by the department. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. Me department shall have the, power. to, consent to such refund only where the 'taxpayer has consented -to assessment ' of additional tax,, if such :be determined upon audit, after the texpiration of the applicable three - year or five -year period prescribed in ORS ( 1) and ( 2). 3) If the claim for Credit -or refund' relates to' an overpayment on account of the deductibility by the taxpayer of the worthlessness of a share of stock in a corporation, of the right to subscribe for- or to re= ceive a share of stock in a corporation, or of a debt, in lieu of the three -year -period of limitation prescribed in subsection ( 1) of this section, the period shall be seven years from the, date - prescribed by law for the, filing of. the.return,for the year with respect to which, the. claim, is, made; provided, that if the claim is made in reliance upon this subsection af- ter the expiration of the three -year period prescribed in. paragraph ( b) of subsection ( 1) of this section, no interest shall be allowed with respect to any credit or refund deter - inined' to be due ' upon such claim for the pe riod' beginning at the close of the three -year period. prescribed in subsection ( 1) of this section and ending at the expiration of six mdnthi after the date' on which the claim is filed. 4)( a) If the claim for credit or refund relates to an overpayment attributable to a net operating loss carryback, in lieu of the three -year period of limitation prescribed in subsection. (1) of this section, the period shall be that period which ends with the expiration. of the 15th day of the 40th month following the end of the. taxable year of the net operating loss which results in such carryback; except that and with respect to an overpayment attributable to the creation QA or an increase in, net operating loss as a result of the elimination of excessive profits as defined in section by a renegotiation ( 1481( a) ( 1) ( A) of the Internal Revenue Code), the period sliall not expire before the expira- tion of the 12th month following the month in which the agreement or order for the elimination of such excessive profits becomes final,' whichever is the later. In the case of such, a claim, the amount of the credit or refund may exceed the portion of the tax paid within the period provided in paragraph a) or' (b) of subsection ( 1) of this section or subsection ( 2) of, this section, whichever is applicable, to the extent of the amount of the overpayment attributable to such carryback. If,the allowance of a credit or refund of an overpayment of tax attributable to a net operating loss carryback is otherwise prevented by the operation of any law or rule of law other than -ORS , relating to closing agreements, such credit or refund may be a]- loyved - or made, if claim therefor is filed within the period provided in this subsection. To the extent that the. net operating loss carryback was not an issue in any proceeding in which the determination of a court, including the Oregon Tax Court, has become final, the claimed credit or refund applicable to that net operating loss carryback may be allowed or made under this subsection. b) For purposes of subsection ( 1) of this section, if any overpayment of tax results from" a carryback of a net operating loss or net capital loss, such overpayment shall be deemed not to have been made prior to the later of.. A) The, due' date of the return for the taxable year, in which such net operating loss or net capital loss arises; B)- The date the return for the year in which the net' operating or net capital loss arises is filed; or C). The date of filing of the return for the year to which the net operating loss or net capital loss, is carried back. - 5) Notwithstanding any provision to the contrary in ORS or , or other provisions of this section, if the taxpayer has agreed with the United States Commissioner of Internal Revenue for an extension, or renewals thereof, of the period for proposing and assessing deficiencies in federal income tax for any year, the period within which a claim' for credit or refund may be filed or credit or irefund allowed or.made if no claim is filed ishall be the period provided within subsections ( 1) to ( 4) of this section or six months after-the date of the expiration of the agreed period for assessing deficiency in fed- eral income - tax, whichever period expires the later. 6) The department may make separate refunds of withheld taxes upon request by a husband or wife who has filed a joint return, the refund payable to each spouse being pro - portibned : to the gross earnings of each shown by the information returns filed by the employer or otherwise shown to the satisfaction of the department. 7) If a taxpayer entitled to a refund under subsection ( 1) of this section dies, the department may issue a draft for payment of such refund under the terms and conditions' set out in ORS to exercising the same powers and subject to the same restrictions pursuant to which the State

36 INCOME TAXATION GENERALLY Treasurer is authorized to pay the amounts of warrants, checks or orders under those statutes c ( enacted in lieu of and ); 1969 c ; 1969 c.405 2; 1971 c.354 5; 1971 c.507 2; 1975 c ; 1977 c ; 1982 s.s. 1 c. 16 8; 1983 c ; 1985 c.61 3; 1985 c.602 6; 1985 c.603 l; 1985 c ; 1987 c293 60; 1987 c.647 1; 1989 c provides: Note: Section 2, chapter 647, Oregon Laws 1987, Sec. 2. ( 1) The amendments to ORS by section 1 of this Act apply to all claims for refund related to the carryback of a net operating loss or net capital loss which are filed on or after the effective date of this Act ISeptember 27, ) Notwithstandin that prior to the effective date of this Act, refund has een made or the time for filing a claim for refund has expired under ORS , for tax years ending on or after December 31, 1983, interest on refunds shall be.computed as if the amendments to ORS by section 1 of this Act creating a new paragraph M of subsection ( 1) of ORS were in effect and the department shall pay any interest due in addition to interest already paid if: a) Prior to the effective date of this section, the taxpayer has asserted a basis for refund in a claim or tax return filed with the department within the time prescribed for asserting the claim or filing the returns; and b) The taxpayer files a claim for interest refund with the department on or before April 15, ) The Department of Revenue shall make a reasonable effort to identify and notify any taxpayer to whom subsection ( 2) of this section applies c Unpaid tax or withholding lien at time of assessment. If any person neglects or refuses to pay an income tax at the time of assessment, or fails to pay to the department any amount required to be withheld under ORS and , the amount of the unpaid tax including interest and penalty thereon shall be a lien in favor of the State of Oregon upon all property and rights to property, whether real or personal, belonging to the person. The lien shall arise at the time of assessment or the time the amount withheld is to be paid to the department and the lien shall continue until the liability for the taxes, with interest and penalty, is satisfied c.215 3; 1981 c Foreclosure of lien. In addition to any other remedy provided by law the lien created by ORS may be foreclosed in the following manner: 1) The Director of the Department of Revenue shall issue an order directed to the sheriff of the county in which the property or interest in property subject to the lien is located, describing the property subject. to the lien, and commanding the sheriff to seize the property specified and sell it to pay the amount shown on the order to be due. In the discretion of the director an order of like terms, force and effect may be issued and directed to any agent authorized to collect income taxes, and in the execution thereof the agent shall have all the powers conferred by law upon sheriffs but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty. 2) If the property seized by the sheriff is personal property the sheriff shall utilize the procedures under ORS to effect collection of the amount due. 3) If the property seized by the sheriff is real property the sheriff shall proceed to sell the real property in the same manner that real property is sold under a writ of exe- cution. 4) Any property which has been sold under this section may be redeemed from the purchaser by the taxpayer or any junior lienor within 120 days from the date of the sale by paying to the purchaser the full purchase price paid plus an additional 20 per- cent of the purchase price. 5) In any proceeding under this section to sell property to foreclose a lien, the taxpayer may claim any exemption to which the taxpayer is entitled under the laws of this state relating to property exempt from exe- cution c c ( enacted in lieu of , and ); 1969 c ; repealed by 1971 c When lien valid. The lien imposed by ORS shall not be valid as against any purchaser, holder of a interest, mechanic' s lienor or udgment security creditor until a warrant is issue and recorded under ORS c.215 5; 1987 c Status of lien. ( 1) After a warrant has been recorded under ORS , the lien imposed by ORS shall be subordinate to: same a) Any interest in real property to the extent that a judgment lien recorded at the same time the warrant was recorded would be subordinate to the interest, and b) Any interest in personal property to the same extent that a security agreement filed under the Uniform Commercial Code at the same time the warrant was filed would be subordinate to the interest. 2) After a warrant has been recorded under ORS , the lien imposed.by ORS shall not be valid as to a purchaser, security interest holder or lienholder in a sale, security agreement or lien arising out of the following types of property or property transactions unless the purchaser, security intbrest holder or lienholder had actual knowledge of the lien: a) Securities as defined in OILS ; b) Retail purchases in the ordinary course of business; ilm.111

37 REVENUE AND TAXATION 411 c) Casual sales of personal' property; d) Attorney' s liens; e) Insurance contract loans; or f) Passbook loans.' c , 7; 1987 c.586, Examining books, records or persons. ( 1) The department, for the purpose of ascertaining the correctness of any return or for the purpose of making. an - estimate of the- taxable income of any taxpayer, may examine or -cause to be examined' by. an agent or representative designated by it,, for the purpose, any books, papers, records or memoranda bearing upon the matter required to be included in the return, and may require the attendance of the taxpayer or officer or agent, or any other person having.knpwleage in the preinisesi and may take testimony and require proof material for the information, with power to administer oaths to such per- sons. The department shall have authority, by order or subpoena to be served with the same. force and effect and in the same manner. that a subpoena is served in, a, civil action in the circuit court, to require the production at any time and place it may designate of any books, papers, accounts or other information necessary to the carrying out of any law imposing tax on or measured by net income. 2) If any person fails to comply with any subpoena or order of the department or.to produce or permit the examination or inspection of any books, papers or documents pertinent to any investigation or inquiry under this section, or to testify to any matter regarding which the person may be lawfully interrogated, the department may apply to the circuit court for the county in which the' person resides for an order to the' person to attend and. testify, or otherwise comply with the ' demand or request of the department. The application to the court shall be by ex parte motion upon, which the court shall make an order requiring the person against whom it is directed to comply with the re- quest on demand of the department within 10 days after service of the order ( or such further time as the court may grant) or to justify the failure within that time. The order shall be served 'upon the person to whom, it is directed in the manner required by this state for service of process, which service shall be required to confer jurisdiction upon the court. Failure to obey any order issued, by the court under this section is contempt of court. The remedy provided by this section shall be in addition to other remedies, civil oi criminal, existing under the tax laws or other laws of this state. ' c.$32 17 ( enacted in lieu of and ) Warrant for collection of taxes. ( 1) If any tax imposed under ORS chapter 118, 119, 316, 317 or 318 or any portion of the tax is not paid within 30 days after the date that the written notice and demand for payment required under ORS is mailed ( or within five days after the tax becomes due, in the case of the termination of the tax year by the department under the provisions of ORS ) and no provision is made to secure the payment thereof by bond, deposit or otherwise, pursuant to regulations promulgated by the de- partment, the department may issue a warrant directed to the sheriff of any county of the state commanding the sheriff to levy upon and sell the real and personal property of the taxpayer found within that county, for the payment of the amount of the tax, with the ' added * penalties, interest, collection charge and the sheriffs cost of.executing the warrant, and to return such warrant to the department and pay to it the money collected by virtue thereof by a time to be therein specified, not less than 60 days from the date of the warrant. A copy of the warrant shall be' mailed or delivered to the taxpayer by the department at the taxpayer' s last - known ad- dress. 2) The sheriff shall, within five days after the receipt of the warrant, record with the clerk of the county a copy thereof, and thereupon the clerk shall enter in the County Clerk Lien Record the name of the taxpayer mentioned in the warrant, and the amount of the tax or portion thereof and penalties for which the warrant is issued and the date when such copy is recorded. Thereupon the amount of the warrant so recorded shall become a lien upon the title to and interest in property : of the taxpayer against whom it is issued in the same manner as a judgment duly recorded. The sheriff thereupon shall proceed upon the same in all respects, with like effect and in the same manner prescribed by law in respect 'to executions issued against property upon judgment of a court of record, and shall be entitled to the same fees for services in executing the warrant, to be added to and col- lected as a part of the warrant liability. 3) In the discretion of the department a warrant of like terms, force and effect may be issued and directed to any agent authorized to collect taxes, and in the execution thereof the agent shall have all. the powers conferred by law upon sheriffs, but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty. 4) If a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes 29 =282

38 INCOME TAXATION GENERALLY against the taxpayer, as if the people of the state had recovered judgment against the taxpayer for the amount of the tax, and shall balance the assessment record of the taxpayer by transferring the unpaid deficiency to the taxpayer' s delinquent record c ( enacted in lieu of $ 0 and ); 1959 c. 74 1; 1959 c.234 1; 1975 c ; 1983 c ; 1985 c ; 1985 c ; 1987 c , 1989 c Note: See note under Filing of warrants for unpaid withholding taxes; release, cancellation and satisfaction. ( 1) The department may file warrants issued against any taxpayer for unpaid withholding taxes in the Office of the Secretary of State as provided in this section. 2) Certification of warrants for unpaid withholding taxes by the Director of the De- partment of Revenue, or the representative of the director, entitles the warrants to be filed and no other certification or acknowledgment is necessary. 3) If a warrant described in subsection 1) of this section is presented to the Secre- tary of State for filing, the Secretary of State shall cause the warrant to be marked, held and indexed in accordance with the provisions of ORS ( 4) as if the warrant were a financing statement within the meaning of ORS to ) If a certificate of release, cancellation or satisfaction of any warrant is presented to the Secretary of State for filing, the Secretary of State shall: a) Cause a certificate of release to be marked, held and indexed as if the certificate were a termination statement within the meaning of ORS b) Cause a certificate of cancellation or satisfaction to be held, marked and indexed as if the certificate were a release of collat- eral within the meaning of ORS c Certificate of outstanding warrants; fee. ( 1) Upon request of any per- son, the Secretary of State shall issue a certificate showing whether there is on file in the Office of the Secretary of State, on the date and hour stated therein, any warrant described in ORS ( 1), or certificate or notice affecting any warrant naming a particular person, and if a notice or certif- icate is on file, giving the date and hour of its filing. All financing statements - and statements of assignment, if any, filed pursuant to ORS to for a particular debtor whose name is identical to the particular person named in the warrant shall be shown on this certificate. The uniform fee for such a certificate for a particular person shall be prescribed by the Secretary of State by rule. If the request for the certificate is in writing and not in the standard form prescribed by the Secretary of State, an addi- tional fee shall be prescribed. Upon request, the Secretary of State shall furnish a copy of any warrant or notice or certificate affecting a warrant for a fee per page, the fee to be as prescribed by the Secretary of State by rule. No fee prescribed under this sub- section shall exceed $ 5. 2) ' Notwithstanding the provisions of ORS , , or subsection 1) of this section, relating to the time and manner of the payment of fees to the Secre- tary of State,_ the fee for filing and indexing each warrant described in ORS ( 1) shall be charged and collected in the same manner as provided in ORS for pay- ment by a state agency of fees due to the county clerk for recording warrants c ' c ( enacted in lieu of and ); 1959 c. 147 l; repealed by 1961 c enacted in lieu of , and )) Tag as debt; termination of taxable period and immediate assessment of tax. ( 1) Every tax imposed by any law imposing' a tax, upon or measured by net in= come, and all increases, interest and penalties thereon shall become, from the time such liability is incurred, a personal debt; due the State of Oregon, from the person or persons liable therefor. 2) If the department finds that a tax- payer designs quickly to depart from the state or to remove the property of the taxpayer therefrom, or to do any other act tending to prejudice or to render wholly or partially ineffectual proceedings to collect the- tax for any past tax year or the tax year then current unless such proceedings be brought without delay, the department shall declare the current taxable period for such taxpayer immediately terminated and shall cause notice of such finding and declaration to be given the taxpayer. Simultaneously, the department, on the basis of the best information available to it, shall assess a tax for such terminated period and for the preceding tax year (if no return has been filed therefor, whether or not the time otherwise allowed by law for filing such return and paying the tax has expired), and shall assess additional tax for any years open to assessment under the provisions of the applicable law. The de- partment shall give notice to the taxpayer of all taxes so assessed. Such taxes shall thereupon become immediately due and payable as soon as the notice and findings are issued to the taxpayer or mailed to the last -known address of the taxpayer. In any proceeding in court brought to enforce payment of taxes made due and payable by virtue of the provisions of this section the findings of the de-

39 REVENUE AND TAXATION partment, made as provided in this section, whether made after notice to the taxpayer or not, shall be for all purposes presumptive evidence of the taxpayer' s design and the certificate of the department of the mailing or issuing of the notice and findings specified in this section is presumptive evidence that the notice and findings were ' mailed or issued ( enacted in lieu of , and ) [ ( enacted in lieu of and ), ; repealed by ISubsections ( 1) and ( 2) enacted as 1957 c ( enacted in lieu of 3166i5 and ), subsection ( 3) enacted as ; 1959 c 650 l, ; , repealed by c ( enacted in lieu of and ), 1971 c507 3, repealed by 1977 c enacted in lieu of ) ( enacted in lieu of and ); ; 1967 c 78 2, ; repealed by ( enacted in lieu of ) ( enacted in lieu of and ); ; repealed by enacted in lieu of ) 1 314A66 Audits, deficiencies, assessments, refunds and appeals governed by ORS chapter 305. The provisions of ORS chapter 305 as to the audit and examination of reports and returns, determination of deficiencies, assessments, claims for refund, conferences, appeals to the director of the department and appeals to the Oregon Tax Court, and the procedures relating thereto, shall apply to the determination of taxes, penalties and interest imposed under this chapter and ORS chapters 316, 317 and 318, except where the context requires otherwise ( enacted in lieu of , , and )] ( enacted in lieu of and ); repealed by 1961 c ESTIMATED TAX PROCEDURE Estimate of tax liability by corporations. ( 1) For tax years beginning on and after January 1, 1974, every corporation expecting to have a tax liability under either ORS chapter 317 or 318 of $500 or more shall make an estimate of tax liability for the corporation' s tax year and pay the amount of tax determined as provided in ORS ) The department shall by rule provide for the payment of estimated tax liability by a group of affiliated corporations filing a consolidated return. 3) For purposes of this section, estimated tax, liability means the tax computed under ORS chapter 317 or 318 less the credits allowed therein. [ ; 1984 ss. c. l Instalment schedule for payment of estimated tax. ( 1) A corporation required under ORS to make payments of estimated tax shall make the payments to the Department of Revenue in instalments as follows: a) One - quarter or more of the estimated tax shall be paid on or before the 15th day of the fourth month of the taxable year. b) One - quarter or more of the estimated tax shall be paid on or before the 15th day of the sixth month of the taxable year. c) One - quarter or more of the estimated tax shall be paid on or before the 15th day of the ninth month of the taxable year. d) The balance of the estimated tax shall be paid on or before the 15th day of the 12th month of the taxable year. 2) Any payment of estimated tax received by the department for which the corporation has made no designation of the quarterly instalment to which the payment is to be applied, shall first be applied to underpayments of estimated tax due for any prior quarter of the taxable year. Any excess amount shall be applied to the instalment that next becomes due after the payment was received ; ; Underpayment of estimated tax; interest; nonapplicability of penalties. ( 1) An underpayment of estimated tax under ORS to will be considered to have occurred if the estimated tax is not paid as required. 2) Notwithstanding subsection ( 1) of this section, there shall be no underpayment of estimated tax if the estimated tax paid equals or exceeds the amount described in any one of the following paragraphs: a) The amount which would be required to be paid if the estimated tax liability were equal to 90 percent of the tax shown on the return for the taxable year or, if no return was filed, 90 percent of the tax for such tax- able year. b) The amount which would be required to be paid if the estimated tax' liability were equal to 100 percent of the tax shown on the return for the preceding taxable year, and the preceding taxable year was a taxable year of 12 months. c)( A) An amount equal to 90 percent of the tax for the taxable year computed by placing on an annualized basis the taxable income: i) For the first three months of the taxable year, in the case of the instalment required to be paid in the fourth month; ii) For the first three months or for the first five months of the taxable year, in the case of the instalment required to be paid in the sixth month;

40 INCOME TAXATION GENERALLY iii) For the first six months or for the first eight months of the taxable year in the case of the instalment required to be paid in the ninth month; and iv) For the first nine months or for the first 11 months of the taxable year, in the case of the instalment required to be paid in the 12th month of the taxable year. B) For purposes of this paragraph the taxable income shall be placed on an annualized basis by: i) Multiplying by 12 the taxable income referred to in subparagraph ( A) of this para- graph; and ii) Dividing the resulting amount by the number of months in the taxable year ( 3, 5, 6, 8, 9 or 11, as the case may be) referred to in subparagraph ( A) of this paragraph. d) An amount equal to 90 percent of the amount obtained by applying section 6655(e) 3)( C) of the Internal Revenue Code to Oregon taxable income. 3) Interest shall accrue on the underpayment of estimated tax under ORS to at the rate established under ORS , for each month or fraction thereof during which period the estimated tax or any instalment thereof remains unpaid. The penalty provisions contained in this chapter and ORS chapters 317 and 318 for underpayment of tax shall not apply to underpayments of estimated tax under ORS to ) For purposes of subsection ( 3) of this section, the underpayment of estimated tax shall be the excess of- a) The amount of the instalment which would be required to be paid if the estimated tax were equal to 90 percent of the tax shown on the return for the taxable year or, if no return was filed, 90 percent of the tax for such year, over b) The amount, if any, of the instalment paid on or before the last date prescribed for payment. 5) In the case of a large corporation, paragraph ( b) of subsection ( 2) of this section shall apply only to determine the amount of the first required instalment for any taxable year. Any reduction in the first instalment by reason of this subsection shall be added to the amount of the next required instalment determined without regard to paragraph ( b) of subsection ( 2) of this sec- tion. For purposes of this subsection, a large corporation" is any corporation that had federal taxable income, determined with- out regard to any amount carried to any of the three taxable years under section 172 or 1212( a) of the Internal Revenue Code, of $1 million or more in any of the three taxable years immediately preceding the taxable year involved. 6) The application of this section to taxable years of less than 12 months shall be in accordance with rules adopted by the department c ; 1981 c.678 5; 1982 s. s. 1 c. 16 9, 1983 c , 1985 c603 3, 1987 c a; 1989 c provides: Note: See notes under and Note: Section 63a, chapter 625, Oregon Laws 1989, Sec. 63a. Interest accruing under ORS ( 3) or ( 1) shall not be imposed for any period before April 16, 1990, with respect to any underpayment of estimated tae attributable to income received during the calendar year 1988 or 1989, to the extent the taxpayer can establish that the underpayment was created or in- creased by any provision of this Act, including but not limited to, the adoption of the Omnibus Budget Reconciliation Act of 1987 ( P.L ), the Familv Support Act of 1988 ( P.L ) and the Technical and Miscellaneous Revenue Act of 1988 ( P L ) c al DIVISION OF INCOME FOR TAX PURPOSES General Provisions) Short title; construction. ( 1) ORS to may be cited as the Uniform Division of Income for Tax Purposes Act. 2) ORS to shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact it c , Definitions for ORS to As used in ORS to , unless the context otherwise requires: 1) " Business income" means income arising from transactions and activity in the regular course of the taxpayer' s trade or business and includes income from tangible and intangible property if the acquisition, the management, use or rental, and the disposi- tion of the property constitute integral parts of the taxpayer' s regular trade or business operations. 2) " Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or man aged. 3) " Compensation" means wages, sala- ries, commissions and any other form of remuneration paid to employees for personal services. 4) " Financial organization" means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, - cooperative bank, investment company, or any type of insurance company. 5) " Nonbusiness income" means all income other than business income.

41 REVENUE AND TAXATION 6) " Public utility" means any business entity whose principal business is ownership and operation for public use of any plant, equipment, property, franchise, or license for the transmission of communications, trans- portation of goods or persons, or the pro- duction, storage, transmission, sale, delivery, or furnishing of electricity, water, steam, oil, oil products or gas. 7) " Sales" means all gross receipts of the taxpayer not allocated under ORS to ) " State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof c When allocation of income from business activity required. Any taxpayer having income from business activity which is taxable both within and without this state, other than activity as a financial organization or public utility or the rendering of purely personal services by an individual, shall allocate and apportion the net income of the taxpayer as provided in ORS to Taxpayers engaged in activities as a financial organization or public utility shall report their income as provided in ORS and c When taxpayer is considered taxable in another state. For purposes of allocation and apportionment of income under ORS and to , a taxpayer is taxable in another state if: 1) In that state the taxpayer is subject to a net income tax, a franchise tax meas- ured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax; or 2) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not c Allocation of Nonbusiness Income) Certain nonbusiness income to be allocated. Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as pprovided in ORS to c Allocation to this state of net rents and royalties. ( 1) Net rents and royalties from real property located in this state are allocable to this state. 2) Net rents and royalties from tangible personal property are allocable to this state a) if and to the extent that the property is utilized in this state, or ( b) in their entirety if the taxpayer' s commercial domicile is in this state and the taxpayer is not organized under the laws of or taxable in the state in which the property is utilized. 3) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession c Allocation to this state of capital gains and losses. ( 1) Capital gains and losses from sales of real property located in this state are allocable to this state. 2) Capital gains and losses from sales of tangible personal property are allocable to this state if (a) the property had a situs in this state at the time of the sale, or ( b) the taxpayer' s commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs. 3) Except in the case of the sale of a partnership ' interest, capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer' s com- mercial domicile is in this state. 4) Gain or loss from the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in the state to the original cost of partnership tangible property everywhere, determined at the time of the sale. In the event that more than 50 percent of the value of a partnership' s assets consists of intangibles, gain or loss from the sale of the partnership interest shall be allocated to this state in accordance with the sales factor of the partnership for its first full tax year im mediately preceding its tax year during which the partnership interest was sold c ; 1989 c Note: See note under Allocation to this state of interest and dividends. Interest and dividends are allocable to this state if the taxpayer' s commercial domicile is in this state c Allocation to this state of patent and copyright royalties. ( 1) Patent and

42 INCOME TAXATION GENERALLY copyright royalties are allocable to this state a) if and to the extent that the patent or copyright is utilized by the payer in this state, or ( b) if and to the -extent that the patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer' s commercial domicile is in this state. 2) A patent is utilized in a state to the extent that it is employed in production, fab- rication, manufacturing, or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the account- ing procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer' s commercial domicile is located. 3) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer' s commercial domicile is located c Apportionment of Business Income) Formula for apportionment of business income. ( 1) All business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus two times the sales factor, and the denominator of which is four. 2) If the denominator of the property factor, payroll factor or sales factor, as determined under ORS to , is zero, then the denominator specified in subsection ( 1) of this section shall be reduced by the number of factors with a denominator of zero c ; 1989 c.626 5; 1989 c Note: The amendment to by section 1, chapter 1088, Oregon Laws 1989, applies to tax years beginning on or after January 1, , as amended by section 5, chapter 626, Oregon Laws 1989, is set forth for the user' s convenience ( 1) All business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is three. 2) If the denominator of the property factor, payroll factor or sales factor, as determined under ORS to , is zero, then the denominator specified in subsection ( 1) of this section shall be reduced by the number of factors with a denominator of zero provides: Note: Section 13, chapter 626, Oregon Laws 1989, Sec. 13. The amendment to ORS by section 5 of this Act first applies in determining the income taxable by this state for income earned in tax years beginning on or after January 1, c Determination of " property factor." ( 1) The property factor is a fraction, the numerator of which is the average value of the taxpayer' s real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the taxpayer' s real and tangible personal property owned or rented and used during the tax period. 2) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals. 3) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the department may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer' s property c , 12, Determination of "payroll' factor." ( 1) The payroll factor is a fraction, the numerator of which is the total amount paid in this state during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period. 2) Compensation is paid in this state if- a) The individual' s service is performed entirely within the state; or b) The individual' s service is performed both within and without the state, but the service performed without the state is incidental to the individual' s service within the state; or c) Some of the service is performed in the state and ( A) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the state, or ( B) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual' s residence is in this state c , Determination of " sales factor." ( 1) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. 2) Sales of tangible personal property are in this state if: a) The property is delivered or shipped to a purchaser, other than the United States

43 REVENUE AND TAXATION Government, within this state regardless of the ' f.o. b. point or other conditions of the sale; or b) The property is shipped from an office, store, warehouse, factory, or other place of storage in this state and ( A) the purchaser is the United States Government or ( B) the taxpayer is not taxable in the state of the purchaser. 3) Sales, other than sales of tangible personal property, are in this state if (a) the income- producing activity is performed in this state; or ( b) the income - producing activity is performed both in and outside this state and a greater proportion of the income - producing activity is performed in this state than in any other state, based on costs of performance c , 17, 181 Procedure Where Ordinary Determination Not Satisfactory) Additional methods to determine extent of business activity in this state. If the application of the allocation and apportionment provisions of ORS to do not fairly represent the extent of the taxpayer' s business activity in this state, and result in the violation of the taxpayer's rights under the Constitution of this state or of the United States, the taxpayer may petition for and the department may permit, or the department may require, in respect to all or any part of the taxpayer' s business activity: 1) Separate accounting; 2) The exclusion of any one or more of the factors; 3) The inclusion of one or more additional factors which will fairly represent the taxpayer' s business activity in this state-, or 4) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer' s income c , 1994 s.s. c Apportionment of Net Loss) Apportionment of net loss; net loss deduction; limitations. If the operations of a taxpayer subject to ORS or result in a net loss, that net loss shall be apportioned in the same manner as the net income so as fairly and accurately to reflect the net loss of the business done within this state. The net loss applicable to Oregon income pursuant to this section shall then become the net loss deduction for subsequent years which may be deducted from apportioned net income in the same manner as set forth in the Personal Income Tax Act of 1969, and in ORS chapters 317 and 318. The limitations as to the amount deductible and the time limitations in those statutes shall apply to the apportioned net loss deduction computed pursuant to this section c ; 1969 c ; 1983 c Apportionment of Income of Interstate Broadcasters) Definitions for ORS to As used in ORS to , unless the context requires otherwise: ' 1) " Broadcasting" means the activity of transmitting any one -way electronic signal by radio waves, microwaves, wires, coaxial cables, wave guides or other conduits of communications. 2) " Gross receipts from broadcasting" means all gross receipts of an interstate broadcaster fi-om transactions and activities in the regular course of its trade or business except receipts from sales of real or tangible personal property. 3) " Interstate broadcaster" means a taxpayer that engages in the for -profit business of broadcasting to subscribers or to an audience located both within and without this state. The audience or subscribers ratio shall be determined by department rule c provides: Note: Section 8, chapter 792, Oregon Laws 1989, Sec. 8. Sections 2 to 7 of this Act to shall first apply to tax years beginning after December 31, c Method of apportionment of interstate broadcaster income. ( 1) Not- withstanding any provisions of ORS and to the contrary, ORS , and shall apply to the appor- tionment of the income of an interstate broadcaster. 2) Except as provided in subsection ( 1) of this section, all other provisions of ORS to shall apply to the apportionment of the income of an interstate broadcaster c Note: See note under Determination of sales factor. 1) The sales factor* for an interstate broadcaster shall be determined as provided in this section. 2) The denominator of the sales factor shall include the total gross receipts derived by the interstate broadcaster from transactions and activities in the regular course of its trade or business, except receipts excluded under rules of the department. 3) The numerator of the sales factor shall include all gross receipts attributable to this state, with gross receipts from broadcasting to be included as specified in subsection ( 4) of this section

44 INCOME TAXATION GENERALLY ) Gross receipts from broadcasting of an interstate broadcaster which engages in income - producing activity in this state shall be included in the numerator of the sales factor in the ratio that the interstate broadcaster' s audience or subscribers located in this state bears to its total audience and subscribers located both within and without this state c Note: See note under Determination of net income attributable to business done in state. If an interstate broadcaster has gross receipts from broadcasting, the determination of net income taxable by this_ state shall be based upon the business activity within this state, and the department shall require either the segregated method of reporting or the apportionment method of reporting described in ORS to , under the rules adopted by the department, so as fairly and accurately to reflect the net income of the interstate broadcaster' s business done within this state Note: See note under Rules. The department may adopt such rules as it deems necessary for the administration and enforcement of ORS to c Note: See note under Scope of provisions. The provisions of ORS to are not in tended to change the meaning of the terms sources within income- producing activity," " this state," " business activity" taxable in this state or " doing business" in this state con- tained in this chapter or ORS chapter 317 or 318. [ Note: See note under Application) Application of ORS and to The provisions of ORS and to apply to the allocation and apportionment of the income of corporations and nonresident individuals, and do not apply to the income of resident individuals, resident estates, and resident trusts taxable as provided in the Personal Income Tax Act of [ 1967 c 60 2; 1969 c EFFECT OF MULTISTATE TAX COMPACT Computation of tax when in- come reported as percentage of sales volume. Any taxpayer electing in any year to report and pay an income tax on the basis of a percentage of sales volume, pursuant to Article III, section 2 of the Multistate Tax Compact, shall pay a tax computed at one- fourth of one percent of the dollar volume of gross sales in Oregon, except that if the taxpayer' s return on sales for its business is less than five percent, it shall pay a tax computed on the basis of one - eighth of one percent of such volume. [ 1967 c Application to allocation and apportionment of income. The provisions of Articles III and IV of the Multistate Tax Compact apply to the allocation and appor- tionment of the income of corporations and nonresident individuals and do not apply to income of resident individuals, resident es- tates and resident trusts, taxable as provided in the Personal Income Tax Act of c , 1969 c TAXATION OF PARTNERSHIPS AND S CORPORATIONS Partnerships) Partnerships not subject to income tag; exception. ( 1) Except as provided in ORS , a partnership as such is not subject to the tax imposed by ORS chapter 316, 317 or 318. Partnership income shall be computed pursuant to section 703 of the Internal Revenue Code, with the modifi- cations, additions and subtractions provided in this chapter and ORS chapter 316. Persons carrying on business as partners are liable for the tax imposed by ORS chapter 316, 317 or 318 on their distributive shares of partnership income only in their separate or individual capacities. 2) If a partner engages in a transaction with a partnership other than in the partner' s capacity as a member of the partnership, the transaction shall' be treated in the manner described in section 707 of the Internal Revenue Code c ( enacted in lieu of ) Character of partnership in- Each item of partnership income, come. ( 1) gain, loss or deduction has the same character for a partner as it has for federal income tax purposes. If an item is not characterized for federal income tax purposes, it has the same character for a partner as if realized directly from the source from which realized by the partnership or incurred in the same manner as incurred by the partnership. 2) A partner' s distributive share of an item of partnership income, gain, loss or deduction ( or item thereof) shall be that part- ner' s distributive share of partnership income, gain, loss or deduction ( or item thereof) for federal income tax purposes as determined under section 704 of the Internal Revenue Code and adjusted for the modifications, additions and subtractions provided in this chapter and ORS chapters 316, 317 and c ( enacted in lieu of )

45 REVENUE AND TAXATION Basis of partner' s interest; gain or loss on sale; election to adjust basis. ( 1) The adjusted basis of a partner' s interest in a partnership shall be determined pursuant to the method described in sections 705 and 733 of the Internal Revenue Code, and shall be increased or decreased as provided in this chapter and ORS chapter 316, 317 or 318, whichever is applicable. 2) Upon the sale or exchange of an interest in a partnership, gain or loss shall be recognized to the transferor partner pursuant to section 741 of the Internal Revenue Code. 3) If a partnership elects to adjust the basis of its assets under section 754 of the Internal Revenue Code, then upon a transfer of an interest in the partnership by sale or exchange or upon a death of a partner, that election shall also be effective for Oregon income tax purposes c Treatment of contributions to partnership. ( 1) Amounts paid or incurred to organize a partnership may be deducted in the manner provided in section 709(b) of the Internal Revenue Code. 2) No gain or loss shall be recognized upon a contribution of property to a partnership in exchange for an interest in a partnership, unless allowed pursuant to section 721( 6) of the Internal Revenue Code. 3) The partnership' s basis in property contributed to it by a partner is the adjusted basis of the property to that partner at the time of the contribution, plus the amount ( if any) of gain recognized by that partner as a result of the transfer of property to the partnership. The partnership' s holding period includes the period during which the property was held by the partner. 4) Any increase in a partner' s share of partnership liabilities shall be considered as a contribution of money by the partner to the partnership, pursuant to section 752 of the Internal Revenue Code. 5) Section 724 of the Internal Revenue Code shall be applied in determining the character of gain or loss recognized by a partnership upon the disposition of contrib- uted unrealized receivables, inventory items and capital loss property c Treatment of distributions from partnership. ( 1) Gain or loss shall not be recognized by a partner upon a distrib- ution by a partnership to that partner, except to the extent provided in section 731 of the Internal Revenue Code. 2) The character of gain or loss on the disposition by a distributee partner of unrealized receivables or inventory items shall be determined pursuant to section 735 of the Internal Revenue Code. 3) The basis of property ( other than money) distributed by a partnership to a partner shall be determined pursuant to section 732 of the Internal Revenue Code, and shall be increased or decreased as provided in ORS chapter ) If a partnership makes the election to adjust the basis of its assets under section 754 of the Internal Revenue Code, then upon a distribution of property to a partner, that section shall also be effective for Oregon in- come tax purposes. 5) Payments made by a partnership in liquidation of the interest of a retiring part- ner or a deceased partner shall be accorded the treatment provided under section 736 of the Internal Revenue Code. 6) Any decrease in a partner' s share of partnership liabilities or any decrease in a partner' s individual liabilities by reason of the assumption by the partnership of the partner' s individual liabilities, shall be considered to be a distribution of money to the partner by the partnership under section 752 of the Internal Revenue Code c Publicly traded partnerships As used in this taxed as corporations. ( 1) section, " publicly traded partnership" means a partnership treated as a corporation for federal income tax purposes under section 7704 of the Internal Revenue Code for the tax year. 2) Persons carrying on business as partners in a publicly traded partnership are not subject to tax under ORS chapter 316, 317 or 318 on their distributive shares of partnership income, but the publicly traded partnership is taxable as a corporation under ORS chapter 317 or 318 as provided under ORS chapter 317 or c Information return; penalty. 1) Every partnership having a resident partner or having any income derived from sources in this state, determined in accordance with the applicable rules as in the case of a nonresident individual, shall make a return for the taxable year setting forth all items of income, gain, loss and deduction, and the names and addresses of the individ- uals ( whether residents or nonresidents) who would be entitled to share in the net income, if distributed, and the amount of the distributive share of each individual, and such other pertinent information as the department may prescribe by regulations and instructions. Such return shall be filed on or before the 15th day of the fourth month following the close of each taxable year. For purposes of this section, " taxable year" means a year or period which would be a taxable year of the partnership if it were subject to tax under ORS chapter

46 INCOME TAXATION GENERALLY ) If a partnership transacting business in this state is required to make a return under subsection ( 1) of this section and fails to file the return or files a return which fails to show the information required under subsection ( 1) of this section, the department shall assess a penalty against the partnership in the amount specified in subsection ( 3) of this section for each month or part of a month during which the failure continues. 3) The amount of the penalty imposed under subsection ( 2) of this section shall be determined by the department by rule. However, the amount of the penalty imposed for each month shall not exceed the product of $50 multiplied by the number of persons who were partners in the partnership during any part of the taxable year, and the total amount of the penalty shall not exceed five times the monthly penalty. 4) The penalty imposed under this section is in addition to any other penalty provided by law. Any partnership against which a penalty is assessed under this section may appeal to the director as provided in ORS If the penalty is not paid within 10 days after the department' s order becomes final, the department may record the order and collect the amount assessed in the same manner as income tax deficiencies are recorded and collected under ORS ) The department may waive all or any part of the penalty imposed under this section if the failure was due to reasonable cause. ( Formerly Application of ORS ORS shall apply to both corporate and noncorporate partners c S Corporations) " C corporation" and " S corporation" defined for this chapter and ORS chapters 316, 317 and 318. For purposes of this chapter and ORS, chapters 316, 317 and 318: 1) " C corporation" means, with respect to any taxable year, a corporation which is not an S corporation for such year. 2) " S corporation" means, with respect to any taxable year, a corporation for which an election under section ( a) of the Internal Revenue Code is in effect for such year c Taxation of S corporation; application of Internal Revenue Code; carryforward and carryback. ( 1) Except as otherwise provided in ORS 314:740, and , an S corporation shall not be subject to the taxes imposed by ORS chapter 316, 317 or )( a) Subject to paragraphs ( b) to ( d) of this subsection, the taxable income of an S corporation shall be computed pursuant to section 1363(b) of the Internal Revenue Code, with the modifications, additions and subtractions provided in this chapter and ORS chapter 316. b) Except as otherwise provided under this chapter and ORS chapter 316, 317 or 318, and except as inconsistent with ORS to , subchapter C, chapter 1, Internal Revenue Code, shall. apply to an S corporation and its shareholders for Oregon tax purposes. For Oregon tax purposes, the provisions of section 1371 of the Internal Revenue Code shall apply, subject to the modifications, additions and subtractions un- der this chapter or ORS chapter 316, 317 or 318 and any provisions to the contrary in this chapter or ORS chapter 316, 317 or 318. c) Notwithstanding ORS , or , no carryforward, arising for a taxable year for which a corporation is a C corporation, may be carried to a taxable year for which such corporation is an S corpo- ration. d) Notwithstanding ORS or other law, no carryforward, and no carryback, shall arise at the corporate level for a taxable year for which a corporation is an S corporation c Taxation of shareholder' s income; computation; character of income, gain, loss or deduction. ( 1) The shareholder' s pro rata share of the income of an S corporation is subject to tax under ORS chapter 316. In determining the tax imposed under ORS chapter 316 of a shareholder for the shareholder' s taxable year in which the taxable year of the S corporation ends ( or for the final taxable year of a shareholder who dies before the end of the corporation' s taxable year), there shall be taken into account the shareholder' s pro rata share of the cor- poration' s separately stated items of income, loss or deduction and nonseparately com- puted income or loss, as determined under or for purposes of section 1366 of the Internal Revenue Code ( including but not limited to section 1366( d) and ( e) of the Internal Re venue Code), with the modifications, addi- tions and subtractions provided under this chapter and ORS chapter ) Each item of shareholder income; gain, loss or deduction has the same character for a shareholder under this chapter and ORS chapter 316 as it has for federal income tax purposes. If an item is not characterized for federal income tax purposes, it has the same character for a shareholder as if realized directly from the source from which realized by the S corporation or incurred in the

47 REVENUE AND TAXATION same manner as incurred by the S corporation. 3) In any case where it is necessary to determine the gross income of a shareholder for purposes of ORS chapter 316, such gross income shall include the shareholder's pro rata share of the gross income of the S cor- poration. 4) If any tax is imposed under ORS for any taxable year on an S corporation, for purposes of subsection.(1), of this section, the amount of each recognized built -in gain for such taxable year shall be reduced by its proportionate share of such tax. 5) If any tax is imposed under ORS on an S corporation, for purposes of subsection ( 1) of this section, each item of passive investment income shall be reduced by an amount which bears the same ratio to the amount of such tax as the amount of such item bears to the total passive investment income for the taxable year c Treatment of distributions by S corporation. A distribution of property made by an S corporation with respect to its stock shall be treated in the manner provided under section 1368 of the Internal Revenue Code, subject to modifications, additions and subtractions under ORS chapter 316, 317 or c Employee fringe benefits; foreign income. ( 1) For purposes of employee fringe benefits, and subject to this chapter and ORS chapters 305, 316, 317 and 318 and ORS to , and , section 1372 of the Internal Revenue Code shall apply to an S corporation and. its shareholders. 2) For purposes of foreign income, and subject to this chapter and ORS chapters 305, 316, 317 and 318 and ORS to , and , section 1373 of the Internal Revenue Code shall apply to an S corporation and its shareholders c Tax on built -in gain. ( 1) If, for any taxable year beginning in the recognition period, an S corporation has a net recognized built -in gain, there is hereby imposed a tax on the income of such corporation for such taxable year. 2) The amount of the tax imposed under subsection ( 1) of this section shall be computed by applying the rate of tax specified in ORS to the net recognized built -in gain of the S corporation for the taxable year. 3) The tax imposed under subsection ( 1) shall be considered a tax imposed under ORS chapter 317 or 318, whichever is applicable, and shall be returned, estimated, assessed and collected and otherwise treated in the same manner as the tax imposed under ORS chapter 317 or 318. The allocation and apportionment rules of this chapter and ORS chapter 305 apply to the income subject. to the tax imposed under this section. The proceeds from, the tax shall be distributed in the same manner as the tax imposed under ORS chapter 317 or 318, whichever is applicable. 4) ORS , and shall not apply to the tax imposed under this section. Notwithstanding ORS ( 2)( c), any net operating loss carryforward arising in a taxable year for which the corporation was a C corporation, shall be allowed for purposes of the tax imposed under this section as a deduction against the net recognized built -in gain of the S corporation for the taxable year. For purposes of determining the amount of any such loss which may be carried to any of the 15 subsequent taxable years, the amount of the net recognized built -in gain shall be treated as taxable in- come. 5)( a) Except for estimated and other ad- vance tax payments and except "as provided under paragraph ( b) of this subsection, rio credits shall be allowed against the tax imposed under this section. b) Notwithstanding ORS ( 2)( c), any credit carryforward under ORS chapter 317 or 318 arising in a taxable year for which the corporation was a C corporation shall be allowed as a credit against the tax imposed under this section in the same manner- as, if it were the tax imposed under ORS chapter 317 or ) To the extent applicable, the definitions, special rules and interpretations and other provisions of section 1374 of the Internal Revenue Code shall apply to the tax imposed under this section c Tax on excess net passive in- If for the taxable year an S corpo- come. ( 1) ration has the following,. then there is hereby imposed a tax on the income of such corporation for the taxable year: a) Subchapter C, chapter A, Internal Revenue Code, earnings and profits at the close of the taxable year; and b) Gross receipts more than 25 percent of which are passive investment income. 2) The tax imposed under subsection ( 1) of this section shall be computed by multiplying the excess net passive income by the rate specified under ORS ) The tax imposed under subsection ( 1) shall be considered a tax imposed under ORS chapter 317 or 318, whichever is applicable,

48 INCOME TAXATION GENERALLY and shall be returned, estimated, assessed and collected and otherwise treated in the same manner as the tax imposed under ORS chapter 317 or 318. The allocation and ap- portionment of income rules of this chapter and ORS chapter 305 apply to the income subject to the tax imposed under this section. The proceeds from the tax shall be distributed in the same manner as the tax imposed under ORS chapter 317 or 318, whichever is applicable. 4) Notwithstanding subsection ( 6) of this section, the amount of passive investment income shall be determined by not taking into account any recognized built -in gain or loss of the S corporation for any taxable year in the recognition period. Terms used in the - preceding sentence shall have the same respective meanings as when used in ORS ) Except for estimated and other advance tax payments, no credits shall be allowed against the tax imposed under this section. 6) To the extent applicable, the definitions, special rules and interpretations and other provisions of section 1375 of the Internal Revenue Code shall apply to the tax imposed under this section. 7) Section 1375( d) shall apply to the tax imposed under this section, except that " department" shall be substituted for the word secretary" wherever that word appears c S corporation or shareholder elections. ( 1) Subject to subsection ( 2) of this section, if the Internal Revenue Code requires or permits an election or revocation to be made by an S corporation, then that election or revocation shall apply for Oregon tax purposes. If the Internal Revenue Code requires or permits an election or revocation to be made by a shareholder or shareholders of an S corporation, then that election or revocation shall apply for Oregon tax pur- poses. 2) The department may adopt rules that contravene subsection ( 1) of this section if the election or revocation does not carry out the purposes of this chapter and ORS chapter 305, 316, 317 or c Application of sections 1377 and 1379 of Internal Revenue Code. Thedefinitions and special and transitional rules of sections 1377 and 1379 of the Internal Re- venue Code c apply for Oregon tax purposes Tag treatment of item determined at corporate level. ( 1) Except as otherwise provided in rules adopted by the department, the tax treatment of any S cor- poration item shall be determined at the corporate level. 2) A shareholder of an S corporation shall, on the shareholder' s return, treat an S corporation item in,a manner that is consistent with the treatment of the item on the S corporation return, unless the shareholder notifies the department, under rules adopted by the department, of the inconsistency. 3) In the manner and at the time adopted by rule, each shareholder in a cor- poration shall be given notice of, and the right to participate in, any administrative or judicial proceeding for the determination at the corporate level of any S corporation item. A shareholder of an S corporation may represent the corporation in any proceeding before the department as described under ORS c Recapture of LIFO benefits. ( 1) Any increase in tax by reason of section 1363( d) of the Internal Revenue Code ( recapture of LIFO benefits) shall be payable in four equal instalments. 2) The first instalment shall be paid on or before the due date ( determined without regard to extensions) for the return of the tax for the last taxable year for which the corporation was a C corporation and the three succeeding instalments shall be paid on or before the due date ( as so determined) for the corporation' s return for the three succeeding taxable years. 3) Notwithstanding ORS ( 4), for purposes of ORS ( 4), interest on each instalment that is not paid on or before the date prescribed under subsection ( 2) of this section for payment of that instalment shall accrue only from the due date for that instalment. 4) This section applies in the case of S corporation elections made after December 17, No refund or interest shall accrue to any taxpayer on account of the retroactive application under this subsection c Nonresident Return by Shareholder or Partner) Shareholder or partner may join in filing nonresident return. A non. resident shareholder of an S corporation or a nonresident partner may join in the filing of an Oregon multiple nonresident S corporation or partnership return, subject to rules adopted by the department. If a multiple nonresident return is filed, the S corporation or partnership as agent for the electing shareholders or partners shall make the payments of tax, including estimated tax, additions to tax, interest and penalties otherwise

49 REVENUE AND TAXATION required to be paid by the electing share -. holders or partners. [ 1989 c ADMINISTRATIVE PROVISIONS Department to administer and enforce laws; enforcement districts; branch offices. The department shall administer and enforce the tax imposed by any law imposing tax upon or measured by net income. For this purpose the 'department may divide the state into districts. In each- district a branch office may be established. The department may, from time to time, change the limits of such districts c ( enacted in lieu of and ) Administering oaths and taking acknowledgments. All officers empowered by law to administer oaths, the department, agents, auditors and such other employees as the department may designate, shall have the power to administer an oath to or take the acknowledgment of any person in respect of any return or re ort, required by statute or the rules and regulations of the department c ( enacted, in lieu of ) Rules and regulations. The department may, from time to time, make such rules and regulations, not inconsistent with legislative enactments, that it considers nec -, essary to enforce income tax laws c ( enacted in lieu of and ) c ( enacted in lieu of and ); 1969 c 97 2, repealed by 1973 c c ( enacted in lieu of and ), repealed by 1973 c [ 1957 c ( enacted in lieu of and ); repealed by 1965 c Divulging particulars of ' re- turns and reports prohibited. Except otherwise specifically provided by law, it shall be unlawful for the department or any officer or employee of the department' to divulge or make known in any manner the amount of income or any particulars set forth or disclosed in any report or return required in the administration of ORS to , required in the administration of any local tax pursuant to ORS , or required under a law imposing a tax upon or measured by net income. It shall be unlawful for any person or entity to whom information is disclosed or given by the department pursuant to ORS ( 2) or any - other provision of state law to divulge or use such information for any purpose other than that specified in the provisions of law authorizing the use or disclosure. No subpoena or judicial order shall be issued compelling the department or any of its officers or employees, or any person who has acquired information pursuant to ORS ( 2) or any other provision of state law to divulge or make as known the amount of income or any particulars set forth or disclosed in any report or return except where the taxpayer' s liability for income tax is to be adjudicated by the court from which such process issues. As used in this section, " officer," " employee" or person" includes an authorized represen- tative of the officer, employee or person, or any former officer, employee or person, or an authorized representative of such former officer, em toyee or person c ( enacted in lieu of and ), 1971 c682 l; 1975 c789 13,' 1979 c Persons to whom information may be furnished. ( 1) The department may: a) Furnish any taxpayer or authorized representative, upon request of the taxpayer or representative, with a copy of the taxpayer' s income tax return filed with the depart- ment for any year, or with a copy of any report filed by the taxpayer in connection with the return. b) Publish lists of taxpayers who are en- titled to unclaimed tax refunds. c) Publish statistics so classified as to prevent the identification of income or any particulars contained in any report or return. d) Disclose a taxpayer' s name, address and social security number or employer identification number to the extent necessary in connection with the processing and mailing of forms for any report or return required in the administration of ORS to , any local tax under ORS , or any law imposing a tax upon or measured by net -income. 2) The department also may disclose and give access to information described in ORS to: a) The Governor of the State of Oregon or the authorized representative of the Gov- ernor: A) With respect to an individual who is designated as being under consideration for appointment or reappointment to an office or for employment in the office of the Governor. The information disclosed shall be confined to whether the individual: i) Has filed returns with respect to the taxes imposed by ORS ' chapter 316 for those of not more than the three immediately preceding years for which the individual was required to file an Oregon individual income tax return. ii) Has failed to pay any tax within 30 days from the date of mailing of a deficiency notice or otherwise respond to a deficiency notice within 30 days of its mailing. iii) Has been assessed any penalty under the, Oregon personal income tax laws and the nature of the penalty.

50 INCOME TAXATION GENERALLY iv) Has been or is under investigation for possible criminal offenses under the Oregon personal income tax laws. Information disclosed pursuant to this paragraph shall be used only for the purpose of making the appointment, reappointment or decision to employ or not to employ the individual in the office of the Governor. B) For use by an officer or employee of the Executive Department duly authorized or employed to prepare revenue estimates, or a person contracting with the Executive De- partment to prepare revenue estimates, in the preparation of revenue estimates required for the Governor' s budget under ORS to , or required for submission to the Emergency Board, or if the Legislative Assembly is in session, to the Joint Committee on Ways and Means, and to the Legislative Revenue Officer under ORS to The information disclosed or to which access is given under this subpara- graph shall be confined to the identity of a corporate taxpayer, the amount of the corpo- rate tax liability of the corporate taxpayer and the amount of the payments made by the corporation to the Department of Revenue under the corporate excise and income tax laws of this state. Any officer, employee or person furnished or granted access to infor- mation under this subparagraph shall not remove the information from the premises of the Department of Revenue. b) The Commissioner of Internal Revenue- or authorized representative, for tax purposes only. c) The proper officer of any state or the District of Columbia, or their authorized representatives, for tax purposes only, if such state or district has a provision of law which meets the requirements of any applicable provision of the Internal Revenue Code as to confidentiality. d) The Multistate Tax Commission or its authorized representatives, for tax purposes only. However, the Multistate Tax Commission may make such information available to the Commissioner of Internal Revenue or the proper officer of any state or the District of Columbia, or their authorized representatives, for tax purposes only, if the state or district has a provision of law which meets the requirements of any applicable provision of the Internal Revenue Code as to confidentiality. e) The Attorney General, assistants and employees in the Department of Justice, or other legal representative of the State of Oregon, to the extent the department deems disclosure or access necessary for the performance of the duties of advising or representing the department pursuant to ORS to and the tax laws of this state. f) Employee of the State of Oregon, other than of the Department of Revenue or Department of Justice, to the extent the department deems disclosure or access necessary for such employees to perform their duties under contracts or agreements between the department and any other department, agency or subdivision of the State of Oregon, in the department' s administration of the tax laws. g) Other persons, partnerships, corporations and other legal entities, and their employees, to the extent the department deems disclosure or access necessary for the performance of such others' duties under contracts or agreements between the department and such legal entities, in the department' s administration of the tax laws. h) The Legislative Revenue Officer or authorized representatives upon compliance with ORS Such officer or representative shall not remove from the premises of the department any materials that would re- veal the identity of any taxpayer or any other person. i) The Department of Insurance and Finance, to the extent the department requires such information to determine whether it is appropriate to adjust those workers' compensation benefits the amount of which is based pursuant to ORS to on the amount of wages or earned income received by an individual. j) Any agency of the State of Oregon, or any person, or any officer or employee of such agency or person to whom disclosure or access is given by state law and not otherwise referred to in this section, including but not limited to the Secretary of State as Auditor of Public Accounts under section 2, Article VI of the Oregon Constitution; the Adult and Family Services Division of the Department of Human Resources pursuant to ORS and ; the Support Enforcement Division of the Department of Justice and district attorneys pursuant - to ORS ; the State Board of Tax Service Examiners, pursuant to ORS ; and the State Board of Accountancy, pursuant to ORS k) The Director of the Department of Insurance and Finance to determine that a person complies with ORS chapter 656 and the Assistant Director for Employment of the Department of Human Resources to determine that a person complies with ORS chapter 657, the following employer information: A) Identification numbers. B) Names and addresses.

51 REVENUE AND TAXATION C) Inception date as employer. D) Nature of business. E) Entity changes. F) Date of last payroll. L) The Assistant Director for Mental Health and Developmental Disability Services to determine that a person has the ability to pay for care that includes services provided by the state institutions as described in ORS or the Mental Health and Developmental Disability Services Division or to collect any unpaid cost of care as provided by ORS chapter 179. m) Employees of the Employment Division of the Department of Human, Resources to the extent the department deems disclo- sure or access to information on a combined tax report filed under ORS is neces- sary to performance of their duties in administering the tax imposed by ORS chapter ) Each officer or employee of the department and each person described or referred to in paragraph ( a), ( e) to ( k) or ( m) of subsection ( 2) of this section to whom disclosure or access to the tax information is given under subsection ( 2) of this section or any other provision of state law, prior to beginning employment or the performance of duties involving such disclosure or access, shall be advised in writing of the provisions of ORS and , relating to penalties for the violation of ORS , and shall as a condition of employment or per- formance of duties execute a certificate for the department, in a form prescribed by the department, stating in substance that the person has read these provisions of law, that the person has had them explained and that the person is aware of the penalties for the violation of ORS ) The Department of Revenue may recover the costs of furnishing the information described in paragraphs ( k) and ( L) of subsection ( 2) of this section from the respective agencies c ( enacted in lieu of and ); 1959 c , 1971 c.682 2; 1973 c ; 1975 c.368 9; 1975 c ; 1977 c430 3; 1979 c.69" c.827 1; 1985 c ; 1987 c ; 1987 c , 1987 c ; 1989 c ; 1989 c ] Note: The amendment to by section 6, chapter 901, Oregon Laws 1989, first applies to quarterly reports required to be filed on or after April 30, See section 9, chapter 901, Oregon Laws Certificate of department as evidence. The certificate of the department to the effect that a tax has not been paid, that a return has not been filed or that information has not been supplied, as required by or under any law imposing a tax upon or measured by net income, shall be prima facie evidence that the tax has not been paid, that the return has not been filed or that the in- formation has not been supplied c enacted in lieu of and )) Statistics. The department shall prepare and publish annually statistics, reasonably available, with respect to the operation of income tax laws, including amounts collected, classification of taxpayers and other facts considered pertinent and valuable c ( enacted in lieu of ) Rewards for information. The department may pay rewards to persons, other than officers or employees of the department, furnishing information that leads to the recovery of tax from. other persons guilty of violating the provisions of income tax laws. Such rewards shall not exceed 10 percent of the net amount of tax, penalty and interest recovered by suit or otherwise and shall be paid only in cases where such evasions of tax* would not be disclosed by the audit of returns or from other information available to the department c ( enacted in lieu of and )] Disclosure of homeowner or renter refund information to assist in re- covery of public assistance overpayments; requests for information public record. ( 1) The Department of Revenue may disclose certain information relative to ap- plicants for homeowner or renter refund, or' elderly rental assistance, to the Assistant Director for Adult and Family Services or to employees of the Adult and Family Services Division. The information disclosed by the Department of Revenue shall be confined to the names, addresses and social security numbers of applicants for refund under ORS to for the current and preceding calendar year. The information requested shall be confined to those names, addresses and social security numbers which will assist in the collection of debts due and owing to the State of Oregon arising from client - caused overpayments of public assist- ance and shall be used solely for such purpose and shall not be used or disclosed for any other purpose. Any person who violates this prohibition against disclosure, upon conviction, is punishable as provided in ORS ( 2). 2) Disclosure under this section shall be given only upon written request of the Assistant Director for Adult and Family Services. The form for the request shall be prescribed by the assistant director and approved by the Director of the Department of Revenue. 3) The Department of Revenue shall keep on file the requests for disclosure made pursuant to this section. The requests con- stitute a public record within the meaning of ORS to ( 1979 c

52 INCOME TAXATION GENERALLY Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 314 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation Use of certain information for private benefit prohibited. A person granted access to information described in ORS under ORS ( 2)( a)( B) for the purpose of preparing revenue estimates shall not knowingly or intentionally use the information disclosed or the information to which access is given for any purpose if the effect of the use is private pecuniary benefit for the person or for a member of the person' s household c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 314 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation. provides: Note: Section 4, chapter 934, Oregon Laws 1989, Sec. 4. ( 1) The Department of Revenue shall gather information that will allow preparation of a report detailing the total amount of the various sources of income and deductions on 1989 personal income tax returns, and their distribution among income groups, for each common school district and the city of resi- dency. used in this section " common school district has the meaning given the term in ORS ) The department may reqquest additional information on the tax forms, provide for more extensive processing of existing return data or use what other means it considers necessary to comply with subsection 1) of this section. ( 1989 c PENALTIES ( Repealed by 1953 c Penalties. ( 1) A person or an officer or employee of a corporation or a member or employee of a partnership who violates ORS is liable to a penalty of not more than $ 1, 000, to be recovered by the Attorney General, in the name of the state, by action in any court of competent jurisdiction, and is also guilty of a Class C felony. The penalties provided in this subsection shall be additional to all other penalties in this chapter. 2) Violation of ORS is a Class C felony. If the offender is an officer or employee of the state the offender shall be dismissed from office and shall be incapable of holding any public office in this state for a period of five years thereafter c enacted in lieu of and ; 1971 c ; 1973 c ; 1981 c

53 REVENUE AND TAXATION

54 Chapter EDITION Property Tax Relief Act of 1929 Note: ( enacted as 1953 c.308 1), enacted as 1953 c.308 2), ( enacted as 1953 c ), , ( amended by 1953 c.325 3), , , , , , , , , , , , , , , , , , ( amended by 1953 c 665 2), , ( amended by 1913 c ), ( enacted as 1953 c 197 2), , , , , , 31i 180, , , , , , , , i, 31i 260, 31i 265, 31i 270, 31i 275, ( amended by 1953 c 148 3), , , 31i 295, , , , , , , , , , , 31 i 355, amended by 1953 c ), , , , , , , , , , , , , , , , , , , , , , ( amended by 1953 c.366 3), ( amended by 1953 c ), , , , ( repealed by 1961 c.573 2), , , , , , amended by 1953 c.212 2), , ( amended by 1953 c ), , , , , , , , , , , , , , , , , , 31582i, , 3B835, , , , , , , , and were suspended and superseded in 1953 by ORS chapter 316 and were repealed by 1965 c 26 6 However, this repeal does not affect or impair the assessment, imposition and collection of the taxes, and all interest, penalty or forfeiture in relation to such taxes, for tax years prior to the repeal. See 1965 c =299

55 REVENUE AND TAXATION

56 Chapter EDITION Personal Income Tax Short title GENERAL PROVISIONS Policy Terms have same meaning as in federal laws Determination of federal adjusted gross income Determination of net operating loss, carryback and carryforward Application of Payment -in -kind Tax Treatment Act of Application of certain substantiation requirements of Internal Revenue Code; lux- ury automobiles and other mixed -use property Application of Deficit Reduction Act of General definitions Application of federal Tax Reform Act of Application of federal law to determination of taxable income " Resident" defined Department to administer law; policy as to federal conflicts and technical corrections Imposition and rate of tax Amount of tax where joint return used Transitional provision to prevent doubling income or deductions Taxable income of resident Social Security benefits to be subtracted from federal taxable income Interest or dividends on municipal obligations subtracted from federal taxable income Tax rebates Exemption for service in Vietnam on missing status Deduction for physician in medically dis- advantaged area CERTAIN RETIREMENT BENEFITS Temporary provisions relating to certain retirement benefits are compiled as notes following ) CREDITS Tax credit for employment related ex- penses Credit for certain disabilities Credit for taxes paid another state Exception to ORS Credit for fish habitat improvement Personal exemption credit; recomputing credit annually Credit for connection to geothermal heating system Federal income tax credit for the elderly or permanently and totally disabled Credit for weatherization Definitions for ORS Credit for crop gleaning Credit for reforestation of underproductive forest lands Credit for sewage treatment works con- nection costs Credit for certain employer - provided health insurance or care Credit for pollution control facility Credit for early intervention services for disabled child Credit for political contributions Credit for investment for recycling plastics Credit for Investment in Oregon Capital Corporation Federal tax credits allowable only as spec- ified Credit for tax by another jurisdiction on sale of residential property Credit for energy yield of alternative energy device CREDIT FOR FARM WORKER HOUSING Temporary provisions relating to credit for farm worker housing are compiled as notes following ) TAXATION OF NONRESIDENTS 3I Proration between Oregon income and other income for nonresidents, part -year residents and trusts Pro rata share of S corporation income of nonresident shareholder Separate or joint determination of income for husband and wife Determination of adjusted gross income of nonresident partner Income of nonresident from Oregon sources Determination of taxable income of full- year nonresident ADDITIONAL CREDITS Dependent Care) Credit for work on dependent care facility Credit for dependent care assistance Fish Protection) Credit for fish screening devices, bypass devices or fishways Energy Conservation Facilities) Credit for energy conservation facility Other grants or credits as offset to cost of facility Credit limited if facility financed in part by governmental body; ineligibility of r of other credits or tax relief '-

57 REVENUE AND TAXATION Rural Medical Practice) Credit available to person providing medical care in rural area Credit for provider not on hospital staff Credit for medical staff at type C hospital Costs in Lieu of Nursing Home Care) Definitions for ORS to Credit for expenses in lieu of nursing home care; limitation Evidence of eligibility for credit COLLECTION OF TAX AT SOURCE OF PAYMENT Definitions for ORS to When surety bond required of employer; enforcement Withholding of tax required; elective provisions for agricultural employees; liability of supplier of funds to employer for taxes Employer required to file combined quarterly tax report Application of tax and report to administration of tax laws Tax withholding tables to be prepared by department Reliance on withholding statement; penalty for statement without reasonable ba- sis Exemption certificate Amount withheld is in payment of employee' s tax Withholding of state income taxes from certain periodic payments Withholding taxes at time and in manner other than required by federal law Withholding of state income taxes from federal retired pay for members of uniformed services Withholding of state income taxes from federal retirement pay for civil service annuitant Payment to department by employer; interest on delinquent payments Reports by employer; effect of failure to report; waiver Liability for tax; warrant for collection; conference; appeal Applicability of ORS to when services performed by qualified real estate agent or direct seller Application of penalties, misdemeanors and jeopardy assessment; employer as taxpayer Alternate methods of riling, reporting and calculating liability for nonresident employer and employee in state temporarily ESTATES AND TRUSTS Generally) Application of chapter to estates and certain trusts Computation and payment on estate or trust Associations taxable as corporations exempt from chapter Treatment of business trusts and business trusts income Resident Estates and Trusts) Definitions for ORS to " Fiduciary adjustment" defined; shares proportioned Credit for taxes paid another state Accumulation distribution credit Nonresident Estates and Trusts) Definitions for ORS to Income of nonresident estate or trust Determination of Oregon share of income Credit to beneficiary for accumulation dis- tribution RETURNS; PAYMENTS; REFUNDS Persons required to make returns Returns; instructions ' Flesch reading ease score for instructions Joint return by husband and wife Relief from liability for erroneous items of one spouse Effect of relief from federal income tax li- ability of spouse Minor to rile return; unpaid tax assessable against parent; when parent may file for minor Individual under disability Returns by fiduciaries Final account of a fiduciary; tax settle- ment Notice of qualification of receiver and others Date return considered made or advance payment made Department may require copy of federal return Change of election Tax treatment of common trust fund; information return required Refund as contribution to Arts Development Fund Refund as contribution to designated political party Refund as contribution to Alzheimer' s Disease Research Fund Refund as contribution to Children' s Trust Fund Refund as contribution to Oregon Peace Institute DISTRIBUTION OF REVENUE Distribution of revenue to General Fund; working balance, PAYMENT OF ESTIMATED TAXES " Estimated tax" defined Application of ORS to to estates and trusts When declaration of estimated tax required; exception; effect of short tax year, content; amendment Joint declaration of husband and wife; li- ability; effect on nonjoint returns

58 PERSONAL INCOME TAX When declaration required of nonresident When individual not required to file declaration Date of filing declaration Amount of estimated tax to be paid with declaration; instalment schedule; prepayment of instalment Effect of payment of estimated tax or instalment; credit for overpayment of prior year taxes Effect of underpayment of estimated tax; computation of underpayment When interest on underpayment not im- posed Application to short tax years and tax years beginning on other than January 1 MODIFICATIONS TO TAXABLE INCOME GENERALLY Modification of taxable income Interest or dividends to- benefit self - employed or individual retirement ac- counts State exempt - interest dividends Federal income tax deductions; accrual method of accounting required Amount in excess of standard deduction for child; limitation Foreign income taxes Additional modification of taxable income Fiduciary adjustment Computation of depreciation of property under federal law; applicability Differences in basis on federal and state return Effect of discriminatory employee benefit plans Qualified reinvestment dividend from reinvestment in stock of public utilities Changing inventory valuation method; in- terest on tax exempt savings certificates; applicability of federal law Amount specially taxed under federal law to be included in computation of state taxable income Cash payments for energy conservation Definitions for ORS to Additional personal exemption credit for severely disabled persons Additional personal exemption credit for spouse of severely disabled person; conditions Proof of status for exemption credit Income derived from sources within federally recognized American Indian reservation exempt from tax Amounts received for condemnation of Indian tribal lands Income derived from exercise of Indian fishing rights PAYMENTS UNDER CIVIL LIBERTIES ACT OF 1988 Temporary provisions relating to payments under Civil Liberties Act of ISM are compiled as notes following ) MISCELLANEOUS Definitions for ORS to Certain traveling expenses Proof of expenses Definitions for ORS and Travel expenses for loggers Art object donation Special computation of gain or loss where farm use value used Income attributable to production of substitute fuel Effect of federal law changes on certain pension, profit - sharing or other retirement plans Effect of chapter 493, Oregon Laws 1969 PENALTIES Penalty for filing incorrect return that is based on frivolous position or is intended to delay or impede administration; appeal CROSS REFERENCES Administration of revenue laws generally, Ch. 305 Administrative appeals, to Appeal procedure, Appeal to tax court, small claims alternative, Authority of tax court to determine deficiency, Charitable checkoff program, to Claim for refund of any tax paid, Deferred compensation for state employees, effect, Deficiency procedure, to Duty to file amended return when federal return changed, Federal areas in state, application of tax laws, Federal tax, adoption, Const. Art. IV 32 General provisions relating to income taxation, Ch. 314 Interest on deficiency, delinquency or refund, Lottery sales and prizes, tax- exempt status, Metropolitan service district taxing authority, Oregon Mass Transportation Financing Authority, income and property tax exempt status, Payment of tax, penalty and interest required before riling complaint with Tax Court to appeal depart- ment order, Penalties, disposition, Procedure on appeal from order of Department of Revenue; effect of pendency of appeal, to Support payments, collection from tax refund, Tax Court, Oregon, to Verification of documents filed under tax laws, falsification prohibited, , When tax document deemed filed witfi tax official, Written interrogatories, procedures, Excess profits repaid or eliminated after renegotiation of government contract, exclusion,

59 REVENUE AND TAXATION Excluding benefits under: Public employees' retirement law, , Teachers' retirement law, Housing authority bonds and income exempt, State bonds, interest exempt in certain cases, Weatherization completed before December 31, 194 not to add to assessed value of owner - occupied, single - family dwelling, to Public facility, no relief, Waiver, reduction or compromise of certain tax liability resulting from wage withholding, Statement of intent, effect on claim or defense of taxpayer, Relocation assistance by condemnor, business or farm operation must submit copies of returns, Lien on property of person for unpaid - withholding, See generally chapter 503, Oregon Laws

60 PERSONAL INCOME TAX GENERAL PROVISIONS Short title. This chapter may be cited as the Personal Income Tax Act of As used in this chapter, the term " this chapter" refers only to the Personal Income Tax Act of c ' c.304 l; repealed by 1969 c Policy. It is the intent of the Legislative Assembly, by the adoption of this chapter, insofar as possible, to make the Oregon personal income tax law identical in effect to the provisions of the federal Internal Revenue Code relating to the measurement of taxable income of individuals, estates and trusts, modified as necessary by the state' s jurisdiction to tax and the revenue needs of the state; to achieve this result by the application of the various provisions of the federal Internal Revenue Code relating to the definition of income, exceptions and exclusions therefrom, deductions ( business and personal), accounting methods, taxation of trusts, estates and partnerships, basis, de- preciation and other pertinent provisions re- lating to gross income as defined therein, modified as provided in this chapter, resulting in a final amount called " taxable income "; and to impose a tax on residents of this state measured by taxable income wherever derived and to impose a tax on the income of nonresidents that is ascribable to sources within this state. [ 1969 c , 1971 s s. c. 4 1; 1987 c ; 1989 c c.304 2; 1953 c 552 1; repealed by 1969 c Terms have same meaning as in federal laws. Any term used in this chapter has the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes, unless a different meaning is clearly required or the term is specifically defined in this chapter. Any reference in this chapter to the laws of the United States or to the Internal Revenue Code means the laws of the United States relating to income taxes or the Internal Revenue Code as they are amended on or before December 31, 1988, even where the amendments take effect or become operative after that date, except where the Legislative Assembly has specifically, provided otherwise c.493 3; 1971 s. s. c.4 2; 1975 c c ; 1985 c.802 1; 1987 c.293 2; 1989 c.625 2j Determination of federal ad- justed gross income. Unless the context requires otherwise and notwithstanding ORS , whenever, in the calculation of Oregon taxable income, reference to the taxpayer' s federal adjusted gross income is required to be made, the taxpayer' s federal adjusted gross income shall be as determined under the provisions of the Internal Revenue Code as they may be in effect for the tax year of the taxpayer without any of the additions, subtractions or other modifications or adjustments required under this chapter c.802 Val Determination of net operating loss, carryback and carryforward. ( 1) Notwithstanding ORS , in the computation of state taxable income the net operating loss, net operating loss carryback and net operating loss carryforward shall be the same as that contained in the Internal Revenue Code as it exists at the close of the tax year for which the return is filed and shall not be adjusted for any changes or modifications contained in this chapter or by the case law of this state. 2) In the case of a nonresident, the, net operating loss deduction, net operating loss carryback and net operating loss carryforward shall be that described in subsection ( 1) of this section which is attributable to Oregon sources. 3) If any provision in ORS or appears to require an adjustment to a net operating loss, net operating loss carryback or net operating loss carryforward contrary to the provisions of this section, that adjustment shall not be made c [ 1953 c.304 3; 1953 c.552 2; 1959 c ; 1959 c593 1 ( referred and rejected); 1963 c ( referred and rejected); repealed by 1969 c ; amended by 1969 c [ 1973 c ; repealed by 1975 c [ 1969 c.493 3a; repealed by 1969 c.493 3b] Application of Payment -inkind Tax Treatment Act of The Payment -in -kind Tax Treatment Act of 1983 P.L. 984, as amended by section 1061 of P.L ) shall apply for purposes of determjning Oregon taxable income under this chapter, notwithstanding that the Act is not part of the Internal Revenue Code c Application of certain substantiation requirements of Internal Revenue Code; luxury automobiles and other mixed -use property. ( 1) Notwith- standing ORS and , Oregon taxable income shall be determined using section 274 ( d) of the Internal Revenue Code, and the regulations adopted thereunder, as that section and its regulations are in effect for the tax year of the taxpayer -for federal income tax purposes. 2) Notwithstanding ORS and , section 28OF of the Internal Revenue Code, and the regulations adopted thereunder, as that section and its regulations are in effect and applicable for the tax year of the taxpayer for federal income tax purposes, shall apply in determining Oregon taxable

61 REVENUE AND TAXATION income. This subsection shall apply to property placed in service on or after January 1, 1985, in tax years beginning on or after January 1, c c.304 4; repealed by 1969 c Application of Deficit Reduction Act of ( 1)( a) Notwithstanding ORS ( 1983 Replacement Part), and subject to all other provisions of this chapter in effect and applicable to transactions oc- curring on or after January 1, 1984, the Def- icit Reduction Act of 1984 ( P. L ) insofar as it applies to transactions occurring on or after January 1, 1984, shall apply to the same transactions for Oregon tax pur- poses. b) Notwithstanding ORS ( 1985 Replacement Part), and subject to all other provisions of this chapter in effect and applicable to transactions occurring on or after January 1, 1985, the Act described as the Simplification of Imputed Interest Rules of 1985 ( P. L ) insofar as it applies to transactions occurring on or after January 1, 1985, shall apply to the same transactions for Oregon tax purposes. The amendments by the Act described as the Simplification of Imputed Interest Rules of 1985 ( P.L ) to section 168 of the Internal Revenue Code apply to property placed in service after May 8, 1985, but do not apply to property to which section 105(b)( 2) and ( 3) of the Act ( P. L ) apply. 2)( a) If a deficiency is assessed against any taxpayer for a tax year for which sub- section ( 1) of this section applies and the deficiency, or any portion thereof, is attributable to any retroactive treatment for Oregon tax purposes given P. L or under subsection ( 1) of this section, then any interest or penalty assessed under ORS chapter 305, 314 or this chapter with respect to the deficiency or portion shall be canceled. b) If a refund is due any taxpayer for a tax year for which subsection ( 1) of this section applies and the refund or any portion thereof is due the taxpayer on account of any retroactive treatment given P. L or for Oregon tax purposes under sub- section ( 1) of this section, then notwith- standing ORS or other law, the refund shall be paid without interest. 3)( a)( A) At the election of the taxpayer and if the taxpayer is required to file an Oregon return for a tax year beginning in 1985, any changes required on account of paragraph ( a) of subsection ( 1) of this section for a tax year beginning prior to January 1, 1985, may be made either by filing an amended return or be made on a tax return filed for a tax year - beginning in 1985 in -the manner determined by the department by rule. An election made under this paragraph shall apply to all changes required on ac- count of paragraph ( a) of subsection ( 1) this section. B) Any changes required on account of paragraph ( b) of subsection ( 1) of this section for a tax year beginning prior to January 1, 1987, shall be made by filing an amended return within the time prescribed by law. b) Exercise of the election provided under subparagraph ( A) of paragraph ( a) of this subsection shall not operate to. modify any election made on the return to which the change relates or on the return in which the change is made unless otherwise provided by the department by rule. c) For purposes of subparagraph ( A) of paragraph ( a) of this subsection, if a taxpayer is not required to file an Oregon return for a tax year beginning in 1985, the taxpayer shall reflect the change in an amended return for the tax year to which the change relates. d)( A) If a taxpayer fails to make an election under subparagraph ( A) of paragraph a) of this subsection, the department shall make any changes under subparagraph ( A) of paragraph ( a) of this subsection on the return to which the change or changes relate within the period as specified for assessing a deficiency or claiming a refund as otherwise provided by law with respect to that return, or within one year after a 1985 return is filed, whichever period expires later. B) If a taxpayer fails to file an amended return under subparagraph ( B) of paragraph a) of this subsection, the department shall make any changes under subparagraph ( B) of paragraph ( a) of this subsection on the re- turn to which the change or changes relate within the period as specified for assessing a deficiency or claiming a- refund as otherwise provided by law with respect to that return, or within one year after a 1987 return is filed, whichever period expires later c ; 1987 c General definitions. As used in this chapter, unless the context requires otherwise: 1) " Department" means the Department of Revenue. 2) " Director" means the Director of the Department of Revenue. 3) " Individual" means a natural person, including aliens and minors. 4) A " nonresident" means an individual who is not a resident of this state. 5) " Part -year resident" means an individual taxpayer who changes status during a of

62 PERSONAL INCOME TAX tax year from resident to nonresident or from nonresident to resident. 6) " Taxable income" means the taxable income as defined in subsection ( a) or ( b), section 63 of the Internal Revenue Code, with such additions, subtractions and adjustments as are prescribed by this chapter. 7) " Taxpayer" means any natural person, estate, trust, or beneficiary whose income is in whole or in part subject to the taxes imposed by this chapter, or any employer required by this chapter to withhold personal income taxes from the compensation of employees for remittance to the state c , 5, 6, 7, 9 and 1969 c b, 1985 c ; 1987 c Application of federal Tax Reform Act of ( 1) For purposes of subsections ( 2) to ( 15) of this section, " TRA" means the federal Tax Reform Act of 1986 P. L ). 2) Unless the context requires otherwise, the amendments, repeals and new matter contained in chapter 293, Oregon Laws 1987, apply generally to tax years beginning on or after January 1, 1987, or to transactions occurring on or after January 1, 1987, in tax years beginning on or after January 1, However, certain changes made by the federal Tax Reform Act of 1986 ( P.L ) and adopted by the amendments to ORS , , , and by sections 1, 2 and 31 to 33, chapter 293, Oregon Laws 1987, apply for federal tax purposes as follows: a) To tax years beginning prior to January 1, 1987; b) To transactions occurring before, on or after December 31, 1986, in tax years endin after that date; or c) To transactions occurring prior to January 1, 1987, but with tax consequences for federal purposes only for tax years bennin after December 31, ) The changes described in paragraph a) of subsection ( 2) of this section, if otherwise applicable for Oregon tax purposes, shall apply to and are specifically adopted for tax years beginning prior to January 1, ) The changes described in paragraphs b) and ( c) of subsection ( 2) of this section if otherwise applicable for Oregon tax purposes, shall apply to and are specifically adopted for transactions occurring before, on or after December 31, 1986, in tax years ending after December 31, 1986, or beginning after December 31, 1986, whichever is appli- cable. 5) The changes described in subsections 3) and ( 4) of this section are exemplified by, but are specifically not limited to the following: a) The amendments made by section 122 of the TRA ( relating to charitable and employee achievement awards) which apply to prizes and awards granted after December 31, b) The amendments by section 123 of the TRA ( relating to scholarships and fellowships) which apply to tax years beginning after December 31, 1986, but only in the case of scholarships and fellowships granted after August 16, c) The amendments to the Internal Revenue Code relating to depreciation and the expensing of certain depreciable business assets by sections 201 and 202 of the TRA which apply generally for property placed in service on or after January 1, 1987, in tax years ending on or after that date. However, if an election is made under section 203( a)( 1)( B) of the TRA, that election shall be considered to be made for Oregon tax purposes. In addition, the transitional rules contained in sections 203 and 204 of the TRA shall apply for Oregon purposes to the extent they can be made applicable, in the same manner as for federal tax purposes. d) Section 611 of the TRA ( reducing the dividends received deduction for corporations) which applies to dividends received or accrued after December 31, 1986, in tax years ending after that date. In conjunction with this paragraph, the amendments to ORS by chapter 293, Oregon Laws 1987, apply to dividends received or accrued after December 31, 1986, in tax years ending after that date. e) Section 1103 of the TRA ( relating to the deduction for a spousal IRA), which ap- plies to tax years beginning before, on or after December 31, f) Section 1708( a) of the TRA ( relating to Vietnam MIA' s) which applies to tax years beginning after December 31, ) If the TRA allows or requires an adjustment to the federal tax return filed for a tax year beginning prior to January 1, 1987, and such an adjustment is made, the adjustment ( if adopted for Oregon tax purposes) shall also be made to the corresponding Oregon return notwithstanding any law or rule to the contrary, in the manner provided under ORS ) If certain transactions are grandfathered by the TRA or the changes in the federal law made by the TRA are otherwise made inapplicable to those transactions, the same treatment shall be given those transactions for Oregon tax purposes unless otherwise provided under this chapter and ORS chapter 317, 318 or other law governing the

63 REVENUE AND TAXATION determination of Oregon personal income and Oregon corporate excise and income taxes. 8) Subsections ( 2) to ( 6) of this section do not apply to the amendments to ORS and by chapter 293, Oregon Laws ) Subsections ( 2) to ( 6) of this section do not apply to the amendments to ORS , , , and made by sections 65 to 69, chapter 293, Oregon Laws ) The amendments to ORS by section 66, chapter 293, Oregon Laws 1987, apply to property taxes billed or rent constituting property taxes paid in calendar years beginning on or after January 1, ) Subsections ( 2) to ( 6) of this section do not apply to the amendments creating a new paragraph ( c) of subsection ( 3) of ORS The amendments to ORS by section 23, chapter 293, Oregon Laws 1987, creating a new paragraph ( c) of subsection 3) of ORS apply to tax years beginning on or after January 1, ) ORS and the amendments to ORS , and by sections 22, 22a and 61a, chapter 293, Oregon Laws 1987, first apply to estimated tax payments due for tax years beginning on or after January 1, ) ORS first applies to distributions made by regulated investment companies or fiduciaries, including banks, savings associations or credit unions, to the taxpayer for taxable years of the taxpayer beginning on or after January 1, ) Subsections ( 2) to ( 6) of this section do not apply to the amendments to ORS and by sections 59a and 59b, chapter 293, Oregon Laws The amendments to ORS and by sections 59a and 59b, chapter 293, Oregon Laws 1987, apply to tax years beginning on or after January 1, ) The amendments to ORS by section 45d, chapter 293, Oregon Laws 1987, first apply to losses occurring in tax years beginning on or after January 1, ( 1987 c , 72, 731 Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 316 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation Application of federal law to determination of taxable income. Section 243 of the Tax Reform Act of 1986 ( P.L ) shall not apply for purposes of determining taxable income under this chapter c a] c.304 5; repealed by 1957 c and enacted in lieu of , , and )] " Resident" defined. ( 1) " Resident" or " resident of this state" means: a) An individual who is domiciled in this state unless the individual: A) Maintains no permanent place of abode in this state; B) Does maintain a permanent place of abode elsewhere; and C) Spends in the aggregate not more than 30 days in the taxable year in this state; or b) An individual who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the ag- gregate more than 200 days of the taxable year in this state unless the individual proves that the individual is in the state only for a temporary or transitory purpose. 2) For purposes of paragraph ( b) of subsection ( 1) of this section, a fraction of a calendar day shall be counted as a whole day c.493 8; 1987 c c.304 6; repealed by 1957 c and enacted in lieu of , , and )] Department to administer law; policy as to federal conflicts,and technical corrections. ( 1) The department shall administer and enforce this chapter. 2) Insofar as is practicable in the administration of this chapter, the department shall apply and follow the administrative and judicial interpretations of the federal income tax law. When a provision of the federal income tax law is the subject of conflicting opinions by two or more federal courts, the department shall follow the rule observed by the United States Commissioner of Internal Revenue until the conflict is resolved. Nothing contained in this section limits the right or duty of the department to audit the return of any taxpayer or to determine any fact relating to the tax liability of any taxpayer. 3) When portions of the Internal Revenue Code incorporated by reference as provided in ORS or refer to rules or regulations prescribed by the Secretary of the Treasury, then such rules or regulations shall be regarded as rules adopted by the department under and in accordance with the provisions of this chapter, whenever they are prescribed or amended. 4) When portions of the Internal Revenue Code incorporated by reference as provided in ORS or are later corrected by an Act or a Title within an Act of the United States Congress designated as an Act or Title making technical corrections,

64 PERSONAL INCOME TAX then notwithstanding the date that the Act or Title becomes law, those portions of the Internal Revenue Code, as so corrected, shall be the portions of the Internal Revenue Code incorporated by reference as provided in ORS or and shall take effect, unless otherwise indicated by the Act or Title in which case the provisions shall take effect as indicated n the Act or Title), as if originally included in the provisions of the Act being technically corrected. If, on account of this suk section, any adjustment is required to an Pregon return that would otherwise be prevented by operation of law or rule, the adjustment shall be made, not- withstanding any law or rule to the contrary, in the manner provided under ORS c ; 1985 c.802 la, 1987 c c ; repealed by 1969 c and 1969 c Imposition and rate of tax. ( 1) A tax is imposed for each taxable year on the entire taxable income of every resident of this state. The amount of the tax shall be determined in accordance with the following table: If taxable income is: The tax is: Not over $2, % of taxable income Over S2,000 but not over $ 5, plus 7% of the excess over 52,000 Over $ 5, plus 9 % of the excess over $ 5,000 2) A tax is imposed for each taxable year upon the entire taxable income of every part -year resident of this state. The amount of the tax shall be computed under subsection ( 1) of this section as if the part -year resident were a full -year resident and shall be multiplied by the ratio provided under ORS to determine the tax on income derived from sources within this state. ' 3) A tax is imposed for each taxable year on the taxable income of every full -year nonresident that is derived from sources within this state. The amount of the tax shall be determined in accordance with the table set forth in subsection ( 1) of this section c ; 1975 c.674 1; 1977 c ; 1979 c ; 1983 c ; 1985 c. 141 l; 1987 c c ; repealed by 1969 c Amount of tax where joint return used. In the case of a joint return of husband and wife, pursuant to ORS or pursuant to ORS , the tax imposed by ORS shall be twice the tax which would be imposed if the taxable income were cut in half. For purposes of this section, a return of a head of household or a survivin spouse, as defined in subsections. (a) and ( b of section 2 of the Internal Revenue Code, shall be treated as a joint return of husband and wife c ; 1975 c.674 2, 1987 c.293 7; 1987 c Transitional provision to prevent doubling income or deductions. If any provision of the Internal Revenue Code or of this chapter requires that any amount be added to or deducted from federal gross income or the net income taxable under this chapter that previously had been added to or deducted from net income taxable under the Oregon law in effect prior to the taxpayer' s taxable year as to- which this chapter is first effective, then, in such event, appropriate adjustment shall be made to the net income for the year or years subject to this chapter so as to prohibit the double taxation or the double deduction of any such amount that previously had entered into the computation of taxable income. Differences such as the difference in basis of property used by the taxpayer for federal and Oregon income tax returns and on account of the treatment of operating losses shall be resolved by applica- tion of this principle. However, the department, in its audit of a return, shall not apply any adjustment under this section which, in its opinion, if applied would result in an increase or decrease of tax liability of less than c ; 1987 c Taxable income of resident. The entire taxable income of a resident of this state is the federal taxable income of the resident as defined in the laws of the United States, with the modifications, additions and subtractions provided in this chapter. Formerly Note: Sections 2 to 4, chapter 715, Oregon Laws 1985, as amended by section 9, chapter 293, Oregon Laws 1987, section 15, chapter 647, Oregon Laws 1987, and section 16, chapter 647, Oregon Laws 1981, provide: Sec. 2. As used in chapter 715, Oregon Laws 1985, unless the context requires otherwise: 1) " Consideration" includes money, property or securities.lf consideration is for other than money, consideration shall mean the amount equal to the adjusted basis to the corporation of the property received reduced by any liability to which the property was subject or which was assumed by the corporation as of the time the property was received ) " Security" means any security as defined in ORS )(a). 3) " Small business corporation" means a corporation that: a) Is organized in this state or authorized to transact business in this state under the Oregon Business Corporation Act and which has its primary pplace of business or commercial domicile in Oregon as determined under the administrative rule of the Department of Revenue. b) Had total employment of no more than 200 employees, as measured by the number of employees cov-

65 REVENUE AND TAXATION ered by federal unemployment insurance on December 31 of the year preceding issuance of the small business stock, a majority of which employees were covered by Oregon unemployment insurance on December 31 of the year preceding acquisition of the small business stock. However, if more than 50 percent of the outstanding equity securities of all classes are held by another corporation, the employment of the controlling corporation shall be counted as employment of the eligible corporation for purposes of this paragraph. c) Had gross receipts for its tax year ending in the calendar year previous to the calendar year in which the tax year of the taxpayer claiming the credit under section 3, chapter 715, Oregon Laws 1985, begins of which not more than 25 percent were obtained from royalties, rents, dividends, interest, annuities and sates and exchanges of property. However, this restriction does not apply to companies whose primary business is the sale or development of computer software. d) Is not engaged primarily in the business of managing, holding, buying or selling real property e) Has not issued small business securities for consideration in excess of $ 1 million. Any small business securities issued by affiliates of the corporation as defined in section 1504 of the Internal Revenue Code shall be aggregated with the small business securities issued by the corporation for purposes of the $ 1 million limit. 4) " Small business security" means a security issued. by, a small business corporation and purchased by a taxpayer directly from the same small business corporation, or purchased by a taxpayer from an underwriter which is selling the securities as part of a plan to raise new debt or equity capital for the small business corporation. The Department of Revenue shall, upon request, designate those small business security issues which fit the definition set forth in this paragraph , p.715 2; 1987 c Sec. 3. ( 1) if a small business security owned by a taxpayer is sold by the taxpayer, and within six months from the date of sale, another small business security is purchased by the taxpayer, gain from the sale shall only be recognized to the extent that the sales price of the small business security sold exceeds the cost of purchasing the new small business security. 2) Where the purchase of a new small business security results, under subsection ( 1) of this section, in the nonrecognition of gain on the sale of an old small business security, in determining the basis of the new small business security, the basis shall be reduced by an amount equal to the amount of the gain not so recognized on the sale of the old small business security. 3) Federal taxable income shall be modified to the extent necessary to carry out the provisions of this section c ; 1987 c Sec. 16. The amendments to section 3, chapter 715, Oregon Laws 1985, by section 15 of this Act apply to small business security acquired during tax years be- ginning on or after January 1, 1986, and prior to January 1, c Sec. 4. This Act applies to small business securities acquired during tar years beginning on or after January 1, 1986, and prior to January 1, c [ 1977 c ; renumbered [ 1977 c ; renumbered c.390 2; renumbered c.390 3; 1979 c ; renumbered [ 1977 c.390 4, renumbered Social Security benefits to be subtracted from federal taxable income. 1) In addition to the other modifications to federal taxable income contained in this chapter, there shall be subtracted from federal taxable income the amount of any social security benefits, as defined in section 86 of the Internal Revenue Code ( Title II social security or tier 1 railroad retirement bene- fits) included in gross income for federal income tax purposes under section 86 of the Internal Revenue Code. 2) Notwithstanding any provision to the contrary in ORS , for purposes of subsection ( 1) of this section, " Internal Revenue Code" means the Internal Revenue Code as it is amended and in effect or operative for the tax year of the taxpayer c [ c 304 8; 1953 c.552 3; 1957 s s. c. 15 1; 1963 c ( referred and rejected); repealed by 1969 c Interest or dividends on municipal obligations subtracted from federal taxable income. In addition to the modifications to federal taxable income contained in this chapter, there shall be subtracted from federal taxable income the interest or dividends on obligations of counties, cities, districts, ports or other public or municipal corporations or political subdi- visions of this state, to the extent includable in gross income for federal income tax purposes. However, the amount subtracted un- der this section shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this section, and by any expenses incurred in the production of interest or dividend income described in this section c b; 1989 C c.872 8; renumbered c.872 9; renumbered c ; renumbered c 304 9; 1955 c. 596 l; part derived from 1955 c.596 4; 1957 c. 586 l; 1957 s. s. c 15 2; 1959 c ( referred and rejected); 1963 c ( referred and rejected); 1963 c ( referred and rejected); repealed by 1969 c ; amended by 1969 c c.887 2; renumbered [ 1969 c ; renumbered c.887 3, 4; renumbered [ 1979 c ; renumbered c ; repealed by 1959 c referred and rejected); repealed by 1963 c ( referred and rejected); repealed by 1969 c [ 1973 c.753 2; repealed by 1979 c c ; 1971 c ; 1971 c.736 l; 1973 c. 1 1; 1973 c.88 1; 1973 c ; 1973 c.753 3; 1977 c 784 l; 1979 c ; 1979 c.436 1; 1979 c.579 7; 1983 c.381 l; renumbered c.672 2, 2a, 10b, 13; subsection ( 7) enacted as 1975 c.650 2; 1977 c ; 1977 c ; 1978 c.9 1; 1979 c ; 1979 c ; 1981 c ; 1981 c.896 l; 1983 c.684 6; renumbered c ; renumbered

66 PERSONAL INCOME TAX c ; repealed by 1969 c c.801 2; renumbered c.467 6; 1979 c.376 1; 1981 c.705 1; renumbered Tax rebates. The amount of any tax rebate, grant or other payment paid directly by the Federal Government to a taxpayer under section 6428 of the Internal Revenue Code of 1954 as amended by Public Law 94-12, March 29, 1975, shall be exempt from the tax imposed by this chapter c Exemption for service in Vietnam on missing status. ( 1) Any com- pensation or gratuity received from any source by any individual by reason of civilian or military service on and after February 28, 1961, during the Vietnam conflict, for any month during any part of which such individual is in a missing status as a result of that conflict, is exempt from tax under this chapter. Any such compensation or gratuity is exempt from tax without regard to: a) The identity of the recipient of the compensation or gratuity; b) The death of the individual whose service in a missing status results in payment of the compensation or the gratuity; or c) A date of death established for the individual whose service in a missing status results in payment of the compensation or the gratuity. 2) As used in this section; a) " Compensation" does not include any pension or retirement allowance. b) " Missing status" means the status of an individual who is carried or determined to be in a status of missing; missing in action; interned in a foreign country; captured, beleaguered or besieged by a hostile force; or detained in a foreign country against the will of the individual. " Missing status" does not include the status of an individual for a period during which the individual is officially determined to be absent from a post of duty without authority. 3) If income exempt from tax under this section has been included on a return re- sulting in a tax paid to the State of Oregon, the person who filed the return, a surviving spouse or the executor as defined in ORS , may apply for a refund of any tax paid on such income. Notwithstanding ORS , a claim for refund may be made any time prior to June 30, ) In addition to the income tax relief provided by subsections ( 1), ( 2) and ( 3) of this section, any provision in the laws of the United States or in the Internal Revenue Code of 1954 providing income tax relief for returning prisoners of war, persons in a missing status, their spouses; heirs, devisees or executors shall.apply to the measurement of the taxable income of individuals, estates and trusts under this chapter in the same taxable year as that provided in such federal laws c.475 2, 3; 1975 c c ; 1953 c ; 1959 c referred and rejected); 1963 c627 5 ( referred and rejected); repealed by 1969 c Deduction for physician in medically disadvantaged area. ( 1) Any person who becomes licensed under ORS chapter 677 on or after January 1, 1974, and prior to January 1, 1982, and enters the practice of medicine in any medically disad- vantaged area of this state may deduct as an expense from income earned from the prac- tice of medicine an amount equal to the annual expense incurred for each year in attending medical school, including tuition, fees, living expenses, and other actual and necessary expenses, but not to exceed $ 10,000 for any year. 2) In order to qualify for the exemption granted by subsection ( 1) of this' section, the person must apply to the department on or before April 15, following the first tax year for which the deduction is claimed on a form prescribed by the department and accompanied by evidence from the' Board of Medical Examiners for the State of Oregon that the area in which the person is practicing was medically disadvantaged when the physician entered practice there. 3) The deduction authorized by subsection ( 1) of this section shall be applicable for four tax years c.644 6; 1979 c CERTAIN RETIREMENT BENEFITS Note: Sections, 1, 5a, 7 and 10, chapter 906, Oregon Laws 1989, provide: Sec. 1. ( 1) The purpose of this Act is to equalize taxation of public retirement benefits. The Le * slative Assembly desires to reduce the impact of subjecting state and local pension benefits to taxation by increasing retirement benefits to offset the tax burden. 2) The Legislative Assembly finds that there is litigation pending on the issues which are the subject of this Act and is acting upon the advice of the Attorney General in addressing the issues only to the extent they are addressed in this Act. The Legislative Assembly further recognizes that the issue of equitable treatment of retirement benefits is a complex issue deserving of more extended study c Sec. 5a.. If there is any underpayment of estimated tax for the 1989 taxable year that is attributable to the change in taxability of the benefits, as defined in subsection ( 8) of section 5 of this Act, paid under ORS to , no interest shall be imposed on the underpayment under ORS c a1 Sec. 7. ( 1) It is the intent of the Legislative Assembly that each part of sections 1 to 6 of this Act be considered as essentially and inseparably connected with and dependent upon every other part. The Legislative Assembly does not intend that any part of sections 1 to 6 of this Act be the law if any other part is held unconstitutional. '

67 REVENUE AND TAXATION 2) If any part of sections 1 to 6 of this Act is held unconstitutional: a) ORS and shall remain in effect the same as if this Act had not been enacted. Any Oregon personal income taxes paid by a benefit recipient of the Public Employes' Retirement System on account of a benefit received pursuant to ORS to shall not be refunded if an additional benefit eeqqual to the taxes paid has been paid under section 5 of this Act or ORS b) Section 5 of this Act and the amendments to ORS by section 5b of this Act shall stand repealed. Any amounts paid to a benefit recipient by the Public Employes' Retirement Board, pursuant to section 5 of this Act or ORS , shall not be repaid. c) If a benefit recipient has paid tax for which the recipient has not received a benefit, under section 5 of this Act or ORS , the member may claim a refund of the tax paid. 3) Any finds remaining in the Public Employes' Tax Account shall revert to the General Fund. 4) No refund or income taxes shall be allowed or made under this section unless a claim therefor is filed within 90 days after the determination that the provisions of sections 1 to 6 of this Act are unconstitutional is final. 5) For the eurposes of this section, " benefit" and benefit recipient have those meanings given in section 5 of this Act c Sec. 10. Section 5 and the amendments to ORS , , and by sections 2, 3, 5b and 5c of this Act first apply to retirement benefits paid during the 1989 calendar year c Note: Section 82, chapter 625, Oregon Laws 1989, provides. Sec. 82e -(1) Except as provided in subsections ( 2) to ( 4) of this section and sections 83 to 92 of this Act, the amendments by this Act apply to transactions or activities occurring on or after January 1, 1989, in tax years beginning on or after January 1, ) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P. L ) and other Acts, relative to those dates, contained in the Omnibus Budget Reconciliation Act of 1987 ( P. L ) shall apply for Oregon personal income and corporate excise and income tax purposes, to the extent they can be made applicable, in the same manner as - they are applied under the federal Internal Revenue Code and related federal law. 3) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P. L ) and other Acts, relative to those dates, contained in the Family Support Act of 1988 ( P. L ) shall apply for Oregon personal income and corporate excise and income tax purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law. 4) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P. L ) and other Acts, relative to those dates, contained in the Technical and Miscellaneous Revenue Act of 1988 ( P. L ) shall apply for Oregon personal income and corporate excise and income tax purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law. 5)( a) If a deficiency is assessed against any taxpayer for a tax year beginning before January 1, 1989, and the deficiency, or any portion thereof, is attribut- able to any retroactive treatment under this Act, then any interest or penalty assessed under ORS chapter 305, 314, 316, 317 or 318 with respect to the deficiency or portion thereof shall be canceled. b) If a refund is due any taxpayer for a tax year beginning before January 1, 1989, and the refund or any portion thereof is due the taxpayer on account of any retroactive treatment under this Act, then notwithstanding ORS or other law, the refund shall be paid without interest. c) Any changes required on account of this Act for a tax year beginning prior to January 1, 1989, shall be made by filing an amended return within the time prescribed by law. d) If a taxpayer fails to file an amended return under ' paragraph ( c) of this subsection, the Department of Revenue shall make any changes under paragraph ( c) of this subsection on the return to which the change or changes relate within the period as specified for issuing a notice of deficiency or claiming a refund as otherwise pto%, ided by law with respect to that return, or within one year after a 1989 return is filed, whichever period expires later. ( 1989 c c493 16; renumbered CREDITS Tax credit for employment related expenses. ( 1) A resident individual shall be allowed a credit against the tax otherwise due under this chapter in an amount equal to a percentage of employment- related expenses allowable pur- suant to section 21 of the Internal Revenue Code as of December 31, 1988, notwithstanding the limitation imposed by section 26 of the Internal Revenue Code as of December 31, The percentage shall be determined on the basis of federal taxable income, as defined in section 63 of the Internal Revenue Code as of December 31, 1988, and as reflected on the federal return, whether or not a joint return, of the taxpayer for the taxable year, in accordance with the following table: If federal taxable income is. The percentage is- Not over $ 5, % Over $ 5, 000 but not over $ 10, % Over $ 10,000 but not over $ 15, % Over $ 15, 000 but not over $ 25, % Over $ 25, 000 but not. over $ 35, % Over S35,000 but not over $ 45, % Over $ 45, % ) A nonresident individual shall be al- lowed the credit computed in the same- manner and subject to the same limitations as the credit allowed a resident by subsection 1) of this section. However, the credit shall be prorated using the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS ,

68 PERSONAL INCOME TAX or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter c a; 1977 c.872 3, 1979 c: 691 4; 1983 c ; 1985 c , 1987 c ; 1989 c ; 1989 c provides: Note: Section 12, chapter 1047, Oregon Laws 1989, Sec. 12. The amendments to ORS by section 11 of this Act apply to tar years beginning on or after January 1, c Credit for certain disabilities. A $ 50 credit, against income taxes owed, shall, be allowed a taxpayer who as of the close of the taxable year has suffered a permanent and complete loss of function of both legs or both arms or one leg and one arm as certified to by a public health officer. The certificate shall be in a form prescribed by the department and shall be filed with the first return in which the credit is claimed c c ; renumbered c ; 1975 c ; 1981 c.502 1; renumbered Credit for taxes paid another state. ( 1) A resident individual shall be allowed a credit against the tax otherwise due under this chapter for the amount of any income tax imposed on the individual, or on an Oregon S corporation of which the individual is a member ( to the extent of the pro rata share of the individual of the S corporation), for the taxable year by another state of the United States or the District of Columbia on income derived from sources therein and that is also subject to tax under this chapter. 2) The credit provided under this section shall not exceed the proportion of the tax otherwise due under this chapter that the amount of the adjusted gross income of the taxpayer derived from sources in the other taxing jurisdiction bears to the entire adjusted gross income of the taxpayer as modified by this chapter. 3) The department shall provide by rule the procedure for obtaining credit provided by this section and the proof required. 4) No credit allowed under this section or ORS shall be applied in calculating tax due under this chapter if the tax upon which the credit is based has been claimed as a deduction, unless the tax is restored to income on the Oregon return. 5) For purposes of this section, " Oregon S corporation" means a corporation that has elected S corporation status for Oregon excise and income tax purposes c ; 1981 c.801 3, 1987 c Note: See note under Exception to ORS ORS shall not apply in any case in which a carryover basis for certain property acquired from a decedent dying after December 31, 1976, is provided by section 1023 of the Internal Revenue Code ( Tax Reform Act of 1976) c Credit for fish habitat improvement. ( 1) A resident individual shall be allowed a credit against the taxes otherwise due under this chapter, based upon the cost of a fish habitat improvement project certified under ORS The amount of the credit shall be 25 percent of the amount certified. section: 2) To qualify for the credit under this a) The fish habitat improvement project must have been given final certification by the State Department of Fish and Wildlife as provided in ORS b) The credit must be claimed for the year in which final certification for the project is granted c) The taxpayer who is allowed the credit must be the person who actually expended funds for construction or installation of the project. d) The fish habitat improverr)ent project must not be required by existing federal or state statute. 3) The credit allowed in any one year shall not exceed the tax liability of the taxpayer. 4) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried

69 REVENUE AND TAXATION forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 5) A nonresident shall be allowed the credit under this section in the proportion provided in ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) A husband and wife who file separate returns for a taxable year may each claim a share of the tax credit that would have been allowed on a joint return in proportion to the contribution of each. 8) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed under this section shall be prorated or computed in a manner consistent with ORS ) If the taxpayer is a shareholder of a Subchapter S corporation that has elected to take the credit on behalf of its shareholders as provided in ORS , the credit shall be computed and afterwards apportioned to each shareholder on the basis of the shareholder' s pro rata share of the corporation' s cost of the fish habitat improvement project. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 10) The tax claim for tax credit shall be substantiated by submission, with the tax return, of the State Department of Fish and Wildlife notice of final project certification ; 1983 c Personal exemption credit; recomputing credit annually. ( 1)( a) There shall be allowed a personal exemption credit against taxes otherwise due under this chapter. The credit shall equal $ 85 multiplied by the number of personal exemptions allowed under section 151 of the Internal Revenue Code. b) In the case of an individual with re- spect to whom a credit under paragraph ( a) of this subsection is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual' s taxable year begins, the credit amount applicable to such individual for such individual' s taxable year is zero. 2)( a) A nonresident shall be allowed the credit provided under subsection ( 1) of this section computed in the same manner and subject to the same limitations as the credit allowed to a resident of this state. However, the credit shall be prorated using the proportion provided in ORS b) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be pro- rated or computed in a manner consistent with ORS c) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) For each taxable year beginning on or after January 1, 1987, the Department of Revenue shall recompute the dollar amount of the personal exemption credit allowed for state personal income tax purposes. The computation shall be as follows: a) Divide the Portland Consumer Price Index for the average of the first six months of the current calendar year by the Portland Consumer Price Index for the average of the first six months of b) Recompute the dollar amount of the personal exemption credit by multiplying $85 y ' the appropriate indexing factor determined as provided in paragraph ( a) of this subsection. Round off the amount obtained under this paragraph to the nearest $ 1. 4) As used in subsection ( 3) of this section, " Portland Consumer Price Index" means the Consumer Price Index for All Urban Consumers ( Portland all items) as published by the Bureau of Labor Statistics of the United States Department of Labor. For purposes of this subsection, the revision of the Consumer Price Index which is the most consistent with the Portland Consumer Price Index for 1986 shall be used c , 3, 1987 c Credit for connection to 1) As used in geothermal heating system. ( this section: a) " Cost of connecting to a geothermal heating system" includes, but is not limited to, the cost of acquisition and installation of connecting pipe and other fixtures or equipment within a dwelling or between a dwell-

70 PERSONAL INCOME TAX ing and a trunk line necessary to allow a dwelling to utilize the services provided by a geothermal heating district. b) " means real or personal Dwelling" property within the state inhabited as the principal residence of an owner or renter and which is occupied at the time the dwelling is connected to a geothermal heating system provided by a geothermal heating district. 2) A resident individual shall be allowed a credit against taxes otherwise due under this chapter, based upon the cost of connect- ing to a geothermal heating system provided by a geothermal heating district. 3) To qualify for the credit under this section: a) The dwelling must be connected to a geothermal heating system provided by a geothermal heating district on or after Octo- ber 3, 1979; b) The taxpayer who is allowed the credit must be the owner or contract pur- chaser of the dwelling served by the geothermal heating system; and c) The taxpayer must claim the credit in the tax year during which the cost of connecting to the geothermal heating system provided by a geothermal heating district was incurred. 4) The taxpayer who is allowed the credit shall not be entitled to more than one credit under this section in any one taxable year. 5) The credit allowed under this section for any dwelling shall not exceed the lesser of: a) Twenty -five percent of the actual cost of connecting to a geothermal heating sys- tem; or b) $ 1, ) A credit under this section may be claimed by a taxpayer for connecting to a geothermal heating system in those tax years which begin on or after January 1, 1980, but prior to January 1, ) The credit allowed in any one year shall not exceed the tax liability of the tax- payer. 8) Any tax credit- otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 9) A nonresident shall be allowed the credit under this section in the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this- section shall be pro- rated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit al- lowed by this section shall be determined in a manner consistent with ORS ) A husband and wife who file separate returns for a taxable year may each claim a share of the tax credit that would have been allowed on a joint return in proportion to the contribution of each. However, a husband or wife living in his or her separate principal residence may claim the tax credit in the same amount as permitted a single person. 13) Any amount used as the basis for a tax credit under ORS shall not be used as a basis for a tax benefit under this section c.733 2; 1983 c ; 1989 c Federal income tag credit for the elderly or permanently and totally disabled. ( 1) A resident individual shall be allowed a credit against the tax otherwise due under this chapter in an amount equal to 40 percent of the credit for the elderly or the permanently and totally disabled allow- able pursuant to section 22 of the Internal Revenue Code as of December 31, 1988, notwithstanding the limitation imposed by section 26 of the Internal Revenue Code as of December 31, ) A nonresident individual shall be allowed the credit computed in the same manner and subject to the same limitations as the credit allowed a resident by subsection 1) of this section. However, the credit shall be prorated using the proportion. provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be. prorated or computed in a manner consistent with ORS

71 REVENUE AND TAXATION 4) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) No credit shall be allowed under this section for the taxable year if the taxpayer claims the subtraction under ORS 316:680 1)( c). [ 1969 c ; 1971 c.736 2; 1977 c ; 1979 c 691 5; 1983 c ; 1985 c.802 5; 1987 c , 1987 c.545 1; 1989 c 625 8; 1989 c.906 5cl Credit for weatherization. ( 1) As used in this section: a) " Dwelling" means real or personal property within the state inhabited as the principal residence of an owner or renter and which is occupied at the time weatherization materials are installed. " Dwelling" includes a manufactured dwelling as defined in ORS , a floating home as defined in ORS and an individual unit within multiple unit residential housing. It does not include a recreational vehicle as defined in ORS b) " Weatherization materials" means items primarily designed to improve the efficiency of space heating and energy utilization of a dwelling. Such items include, but are not limited to, caulking, weatherstripping and other infiltration preventative materials, ceiling and wall insulation, crawl space in- sulation, vapor barrier materials, timed thermostats, insulation of heating ducts and hot water pipes and water heaters in unheated spaces, storm doors * and windows, double glazed windows and dehumidifiers. " Weatherization materials" includes manufactured dwelling weatherization materials. c) " Manufactured dwelling weatherization materials" means items primarily designed to improve the efficiency of space heating and energy utilization of a dwelling. Such items include, but are not limited to, caulking, weatherstripping and other infiltration preventative materials, floor insulation, ground cover, timed thermostats, insulation of heating ducts, hot water pipes and water heaters in unheated spaces, storm doors and windows, double glazed windows and dehumidifiers. 2)( a) A resident individual shall be allowed a credit against the taxes otherwise due under this chapter, based upon the cost of purchasing and installing weatherization materials in the dwelling. b) The Department of Energy shall furnish to the department a specific list of items which qualify as " weatherization materials" under this section. Wherever necessary, the list shall include any qualifications as to quality, quantity or other relevant standards which are necessary requirements as to the item before it meets the test of improving the efficiency of space heating and energy utilization of a dwelling. In addition, the Department of Energy shall identify from time to time additional weatherization materials that qualify under this section. A list shall be provided to the department prior to January 1, 1980, and prior to January 1 of each year thereafter for purposes of determining what items qualify for the tax credit in the next calendar year. For purposes of the 1977, 1978 and 1979 tax years, the items previously listed in the rules of the Department of Revenue in effect for such years shall qualify as " weatherization materials." section: 3) To qualify for the credit under this a) The weatherization materials must be installed in a manufactured dwelling or floating home on or after January 1, 1979, and in other dwellings on or after October 4, The weatherization materials also must: A) In all cases other than that listed in subparagraph ( B) of this paragraph, be installed before January 1, 1981; or B) If the taxpayer owns a dwelling heated by fuel oil, be installed in that dwelling before September 1, b) A statement certifying compliance with the requirements of this section, in a form prescribed by the department, must accompany the tax return in which the credit is claimed. c) The taxpayer who is allowed the credit under this section must be the owner of the dwelling in which the weatherization materials are installed or the purchaser of the dwelling under a recorded instrument of sale at the time such materials are installed. 4) The taxpayer who is allowed the credit shall be entitled to a credit under this section for only one dwelling in any one taxable year. 5) The credit allowed under this section for any dwelling shall not exceed the lesser of: a) Twenty -five percent of the actual cost of the acquisition and installation of the weatherization materials; or b) $ )( a) A credit under this section may be claimed by a taxpayer for weatherization materials in those tax years which begin on or after January 1, 1977, but before: A) January 1, 1981, if the credit is claimed for the purchase of weatherization materials and the installation of those materials in a dwelling not heated by fuel oil; or

72 PERSONAL INCOME TAX B) January 1, 1982, if the credit is claimed for the purchase of weatherization materials and the installation of those materials in a dwelling heated by fuel oil. b) Notwithstanding paragraph ( a) of this subsection, a credit under this section may be carried forward as provided in subsection 9) of this section. 7) The credit allowed in any one taxable year shall not exceed the tax liability of the taxpayer. 8) The total amount of credits allowed under this section for any particular dwelling shall not exceed $ ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused on such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 10) A nonresident shall be allowed the credit computed in the same manner and subject to the same limitations as the credit allowed a resident by this section. However, the credit shall be prorated using the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORB , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit al- lowed by this section shall be determined in a manner consistent with ORS ) A husband and wife who file separate returns for a taxable year may each claim a share of the tax credit that would have been allowed on a joint return in proportion to the contribution of each. However, a husband or wife living in his or her separate principal residence may claim the tax credit in the same amount as permitted a single person. 14) The dollar amount of costs allowed as a credit under this section shall not be allowed as a deduction for purposes of computation of state taxable income, nor shall the dollar amount of the costs allowed as a credit be added to the basis of the property for purposes of depreciation or computation of gain or loss on sale or other disposition of the property. 15) Any amount of assistance, aid, grant, refund or subsidized loan for weatherization materials received under the laws or regulations of this state and any amount used as the basis for a tax benefit for weatherization materials for state income tax purposes under state law or regulation other than ORS and this section shall not be used as a basis for a tax benefit under this section c 811 2; 1979 c.534 1; 1981 c 894 1; 1983 c , 1989 c Definitions for ORS :, As used in ORS and section 2, chapter 521, Oregon Laws 1985: 1) " Gleaning" means the harvesting in Oregon of an agricultural crop or a portion of a crop grown primarily to be sold for cash that is donated by the grower of the crop to a gleaning cooperative at such a time that the crop is still usable as food for human beings and: a) The grower of the crop has supplied any crop contract quota with the wholesale or retail buyer; or b) If the grower of the crop is a party to a contingent supply contract, the wholesale or retail buyer reduces the crop quota that was reasonably anticipated to be supplied by the grower; or c) Harvesting the crop for sale in the normal course of business is no longer economically feasible; and d) The crop would otherwise go to waste. 2) " Gleaning cooperative" means a nonprofit federally tax exempt organization that is organized to provide and distribute produce to individuals who meet the low - income eligibility guidelines of the federal State Community Services Program established pursuant to the federal Community Services Act of 1974 ( Public Law ). 3) " Wholesale market price" means the market price for the produce determined ei- ther by: a) The amount paid to the grower by the last previous cash buyer of the particular crop; or b) In the event there is no previous cash buyer, a market price determined by the gleaning cooperative based upon the market price of the nearest regional wholesale buyer or the regional u -pick market price c.852 2; 1979 c.622 2; 1985 c

73 REVENUE AND TAXATION provides: Note: Section 6, chapter 521, Oregon Laws 1985, Sec. 6. Sections 2 and 5 and the amendments to ORS by section 3 of this Act apply to donations of crops made in tax years beginning on or after January 1, 1986, and prior to January 1, Credit for crop gleaning. ( 1) An individual who is a grower of a crop and who permits the gleaning of the crop shall be al- lowed a credit against the taxes otherwise due under this chapter: a) In the case of a donation made under circumstances described in ORS ( 1)( a) and ( b), the amount of the credit shall be 10 percent of the value of the quantity of the crop donated computed at the wholesale market price. b) In the case of a donation made under circumstances described in ORS ( 1)( c) and ( d), the amount of the credit shall be 10 percent of the value of the quantity of the crop donated computed at the wholesale market price that the grower would have received' had the quantity of the crop donated been,salable. 2) At the time of donation, the director, supervisor or other appropriate official of the gleaning cooperative to which a donation is made shall supply to the grower of the crop donated two copies of a form prescribed by the Department of Revenue. The forms shall contain: a) The name and address of the grower; b) The description and quantity of the donated crop; c) The signature of the director, super- visor or other appropriate official of' the cooperative gleaning verifying that the produce was or will be distributed to low - income individuals meeting the guidelines described in ORS ( 2); d) The wholesale market price determined by the gleaning cooperative, in the event there is no previous cash buyer of the crop; and e) Other information required by the Department of Revenue by rule. - 3) Tax claim for tax credit shall be substantiated by submission with the tax return, of the form described in subsection ( 2) of this section, a statement verified by the taxpayer that the donation was made under circumstances described in ORS ( 1) and a copy of an invoice or other statement identifying the price received by the grower for the crops of comparable grade or quality if there is a previous cash buyer. 4) Any tax credit otherwise allowable under this section for a tax year beginning on or after January 1, 1985, which is not used by the taxpayer in a particular tax year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that, second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter c 852 3, 1979 c.622 3; 1985 c c ; repealed by 1973 c c.839 8; 1979 c a, repealed by 1987 c Credit for reforestation of underproductive forest lands. ( 1) A credit against the taxes otherwise due under this chapter shall be allowed in an amount equal to 30 percent of reforestation project costs actually paid or incurred to reforest under - productive Oregon forest lands. Such costs include, but are not limited to site preparation, tree planting and- other silviculture treatments considered necessary by the State Forester to establish commercial; hardwood or softwood stands, on appropriate sites. Subject to subsection ( 5) of this section: - a) One -half of the credit' shall be taken in the tax year for which the State Forester, after physical inspection of the forest land, issues a preliminary certificate certifying that the land qualifies as underproductive Oregon forest land and that the reforestation project undertaken meets the requirements of this section and the specifications estab- lished by the State Forester and the costs appear to be reasonable; and b) One -half of the credit shall be -taken in the tax year for which the State Forester, after further physical inspection of the land and project, certifies that the new forest is established in accordance with the specifications of the State Forester. 2) No credit shall be allowed under either paragraph ( a) or ( b) of subsection ( 1) of this section unless written certification containing the following statements accompanies the claim for the credit or is otherwise filed with the department: a) A statement by the State Forester that the land and project meet the preliminary specifications established by the State Forester or that the new forest is established, whichever is applicable at the time. b) A statement by the landowner or person in possession of the land that the land within the project area will be used for the primary purpose of growing and harvesting trees of an acceptable species. c) A statement that the landowner or person in possession of the land is aware that maintenance practices, including re-

74 PERSONAL INCOME TAX lease, may be needed to insure that a new which the taxpayer otherwise may be enti- forest is established and will remain established. 3) For purposes of this section, reforestation project costs shall not include: a) Costs paid or incurred to reforest any forest land that has been commercially logged to the extent that reforestation is required under the Oregon Forest Practices Act, except costs paid or incurred to reforest forest land following a hardwood harvest, conducted for the purposes of converting underproductive forest lands, as by administrative rule. determined b) That portion of costs or expenses paid through a federal or state cost share pro- gram. c) Those costs paid or incurred to grow Christmas trees, ornamental trees, shrubs or plants, or, except as provided under ORS and except those costs paid or incurred to grow hardwood timber on land classified under ORS to , those costs paid or incurred to grow hardwood timber described under ORS ( 1)( e). d) Any costs paid or incurred to purchase or otherwise acquire the land. e) The cost of purchase or other acqui- sition of tools and equipment with a useful life of more than one year. 4) To qualify for the credit: a) The project must be completed to specifications approved by the State Forester. b) The taxpayer' s portion of the project costs must be $ 500 or more. c) The taxpayer. must be a private individual, group, Indian tribe or other native group, association or other nonpublic legal entity owning, purchasing under recorded contract of sale or leasing at least five acres of Oregon commercial forest land. 5) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. In all cases the taxpayer must be the person who made the investment into the project. 6)( a) The credit provided by this section shall be in addition to and not in lieu of any depreciation or amortization deduction to tled with respect to the reforestation project and the credit shall not affect the computa- tion of basis for the property. b) If the taxpayer is a shareholder of an small electing business corporation; the credit shall be computed using the shareholder' s pro rata share of the corporation' s certified reforestation project costs. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 7) In compliance with ORS to , the Department of Revenue and the State Forestry Department may adopt rules consistent with law for carrying out the provisions of this section. 8) As used in this section, " underproductive Oregon forest lands" means Oregon commercial forest lands not meeting the minimum stocking standards of the Oregon Forest Practices Act. 9) If, for any reason other than those specified in subsection ( 10) of this section, a new forest is not established by the last day of the second taxable year following the taxable year for which the preliminary certificate was issued, the State Forester shall so report to the Department of Revenue. The report filed under this subsection shall be the basis for the department to recover any credit granted under paragraph ( a) of sub- section ( 1) of this section. If, however, the new forest is not established within the time required by this subsection on account of the reasons specified in subsection ( 10) of this section, any credit allowed under paragraph a) of subsection ( 1) of this section and subsection ( 5) of this section shall not be recovered but no further credit as provided under paragraph ( b) of subsection ( 1) of this section and subsection ( 5) of this section shall be allowed. 10) Subject to requalification under this section in the manner applicable for the original claim, a taxpayer may claim an addi- tional credit or credits for reestablishing a new planting in the event that the new forest is destroyed by a natural disaster or is not established for reasons beyond the control of the taxpayer, if the measures taken in completing the original or earlier project would normally have resulted in establishing the minimum number of trees per acre anticipated by the project. 11) Any owner affected by a determination, regarding the reforestation tax credit made by: a) The State Forester, may appeal that determination in the manner provided for in ORS ( 1)

75 REVENUE AND TAXATION b) The Department of Revenue, may appeal that determination in the manner pro - vjded for in ORS ( 2) c.578 7, 1985 c ; 1987 c.605 1; 1989 c provides: Note: Section 3, chapter 887, Oregon Laws 1989, Sec. 3. The amendments to ORS ( 1), ( 3) and 4) and ( 1), ( 3) and ( 4) by sections 1 and 2 of this Act and apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for a tax year beginning on or after January 1, c Note: Sections 4 and 5, chapter 605, Oregon Laws 1987, as amended by chapter 887, Oregon Laws 1989, provide: Sec. 4. ( 1) The amendments to ORS ( 1)( a) and ( b) by section 1 of this Act and to ORS ( 1)( a) and ( b) by section 2 of this Act apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a prelim- inary certificate is issued for a tax year beginning on or after January 1, ) The amendments to ORS ( 1) and ) by sections 1 and 2 of this Act changing " 10" to 30" apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for a tar year beginning on or after January 1, ) The amendments to ORS ( 6) and ) by sections 1 and 2 of this Act allowing the reforestation tax credit to the shareholders of an S corporation apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for a tax year beginning on or after January 1, c Sec. 5. No tar credit shall be allowed under ORS or based upon reforestation project costs if the preliminary certificate is not issued prior to July 1, c.605 5; 1989 c Credit for sewage treatment works connection costs. ( 1) A resident individual shall be allowed a credit of $ 750 against the taxes otherwise due under this chapter, for installing or connecting to a sewage treatment works if- a) Required by an order issued, before July 1, 1989, under ORS to or ORS chapter 468; b) Required by a rule adopted,, before July 1, 1989, by the Environmental Quality Commission; c) Required by, installed or connected pursuant to the terms of an intergovernmental agreement, entered into before July 1, 1989, between a local governing body and the Environmental Quality Commission; or d) Required by an order from the Assistant Director for Health under ORS to or to issued after January 1, 1989, and before January 1, ) To qualify for the credit under this section: a) Subject to subsection ( 4) of this section, the credit must be claimed for the year in which the connection is made or the costs are incurred. The credit applies to installations or connections made on or after January 1, b) The taxpayer who is allowed the credit must be the person who actually expended funds for construction or installation of the project. c) The treatment works must be required by an order or rule of the Environmental Quality Commission or required by, installed or connected consistent with an intergovernmental agreement between a local governing body and the Environmental Quality Com- mission. d) The residence connected to the treatment works must be the principal residence of, and owned by, the taxpayer claiming the credit. 3) The credit allowed in any one year shall not exceed $ 150 per qualifying residence or the tax liability of the taxpayer. 4) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such - next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, and any credit not used in that fifth succeeding tax year may be carried forward and used in the sixth succeeding tax year, and any credit not used in that sixth succeeding tax year may be carried forward and used in the seventh succeeding tax year, and any credit not used in that seventh succeeding tax year may be carried forward and used in the eighth succeeding tax year, but may not be carried forward for any tax year thereafter. 5) A husband and wife who file separate returns for a taxable year may each claim a share of the tax credit that would have been allowed on a joint return in proportion to the contribution of each. 6) The tax claim for tax credit shall be substantiated by submission, with the tax return, of receipt of payment by the taxpayer. For purposes of this subsection, " receipt of payment" means a canceled check or an ac- tual receipt for payment issued by the installing or constructing entity and issued on the date the payment is or was actually acknowledged

76 PERSONAL INCOME TAX ) This section applies for costs actually incurred for installing or connecting to a sewage treatment works pursuant to an order, rule or intergovernmental agreement of the Environmental Quality Commission under ORS to or ORS chapter c.890 2, 3; 1989 c Credit for certain employer - provided health insurance or care. ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to a resident employer for amounts paid during the taxable year for purposes of this section and ORS , , to , and 653,785 on behalf of an eligible employee as defined in ORS to provide health insurance or care. 2) The amount of the credit allowed by subsection ( 1) of this section shall end on December 31, 1993, and shall be equal to the dollar amount specified in the following table or 50 percent of the total amount paid by the employer during the taxable year, whichever is the lesser: Year of Dollar Amount Per Participation Covered Employee Per Month ) As used in this section " employer" means an employer carrying on a business, trade, occupation or profession in this state who is an employer within the meaning of ORS ) If the credit allowed by this section is claimed, the amount of any deduction allowable under this chapter for expenses described in this section shall be reduced by the dollar amount of the credit. The election to claim the credit shall be made at the time of filing the tax return in accordance with rules adopted by the department. 5) Any amount of expenses paid by an employer under this section and ORS , , to, , and shall not be included as income to the employee for purposes of this chapter. If such expenses have been included in arriving at federal taxable income of the employee, the amount included shall be subtracted in arriving at state taxable income under this chapter. As used in ORS , with respect to the employee, " wages" does not in- clude expenses paid under this section and ORS , , to , and ) A nonresident shall be allowed the credit computed in the same manner and subject to the same limitations as the credit allowed a resident by this section. However, the credit shall be prorated using the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined - in a manner consistent with ORS ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may not be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. 10) If the taxpayer is a shareholder of an S corporation that has elected to take tax credit relief pursuant to ORS ( 7), the credit shall be computed using the shareholder' s pro rata share of the corporation' s expenses described in this section. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law c ; 1989 c Note: Sections 10, 11, 13 and 14, chapter 381, Oregon Laws 1989, provide: Sec. 10. Before January 1, 1992, the board shall report publicly on the number of employees provided health care benefits as described in section 7 of this Act on October 1, 1991, who did not receive such benefits before April 1, If the number exceeds 50, 000, ORS and are further amended as provided in sections 11 and 12 of this Act, effective January 1, In determining the minimum number for purposes of this section, the Insurance Pool Governing Board shall include the number of employees who are covered by the pool or who were covered by the pool during the period and whose coverage was withdrawn from the pool but continued by means described in and which has been reported to the board under section 7 of this Act c Sec. 11. ORS , as amended by section 8 of this Act, is further amended to read: ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to a resident employer for amounts paid during the taxable year for purposes of this section and ORS , , to , and on behalf of an eligible employee as defined in ORS to provide health insurance or care. 2) The amount of the credit allowed by subsection 1) of this- section shall end on December 31, 1993, and shall be equal to the dollar amount specified in the following table or 50 percent of the total amount paid by the employer during the taxable year, whichever is the lesser

77 REVENUE AND TAXATION Year of Dollar Amount Per Participation Covered Employee Per Month ) As used in this section, " employer" means an employer carrying on a business, trade, occupation or profession in this state who is an employer within the meaning of ORS ) If the credit allowed by this section is claimed, the amount of any deduction allowable under this chapter for expenses described in this section shall be reduced by the dollar amount of the credit. The election to claim the credit shall be made at the time of filing the tax return in accordance with rules adopted by the department. 5) Any amount of expenses paid by an employer under this section and ORS , , to , and ' shall not be included as income to the employee for purposes of this chapter. If such expenses have been included in arriving at federal taxable income of the employee, the amount included shall be subtracted in arriving at state taxable income under this chapter. As used in ORS , with respect to the employee, " wages" does not include expenses paid under this section and ORS , , to , and ) A nonresident shall be allowed the credit computed in the same manner and subject to the same limitations as the credit allowed a resident by this section. However, the credit shall be prorated using the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may not be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. 10) If the taxpayer is a shareholder of an S corporation that has elected to take- tax credit relief pursuant to ORS ( 7), the credit shall be computed using the shareholder' s pro rata share of the co 0- expenses described in this section In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. Sec. 13. Before January 1, 1993, the board shall report publicly on the number of employees provided health care benefits as described in section 7 of this Act on October 1, 1992, who did not receive such benefits before April 1, If the number exceeds 100,000, ORS and are further amended as provided in sections 14 and 15 of this Act, effective January 1, In determining the minimum number for purposes of this section, the Insurance Pool Governing Board shall include the number of employees who are covered by the pool or who were covered by the pool during the period and whose coverage was withdrawn from the pool but continued by means described in and which has been reported to the board under section 7 of this Act c See. 14. ORS , as amended by sections 8 and 11 of this Act, is further amended to read: ( 1) A credit against the tares otherwise due under this chapter shall be allowed to a resident employer for amounts paid during the taxable year for purposes of this section and ORS , , to , and on behalf of an eligible employee as defined in ORS to provide health insurance or care. 2) The amount of the credit allowed by subsection 1) of this section shall end on December 31, 1993, and shall be equal to the dollar amount specified in the following table or 50 percent of the total amount paid by the employer during the taxable year, whichever is the lesser. Year of Dollar Amount Per Participation Covered Employee Per Month ) As used in this section, " employer" means an employer carrying on a business, trade, occupation or profession in this state who is an employer within the meaning of ORS ) If the credit allowed by this section is claimed, the amount of any deduction allowable under this chapter for expenses described in this section shall be reduced by the dollar amount of the credit. The election to claim the credit shall be made at the time of filing the tax return in accordance with rules adopted by the department. 5) Any amount of expenses paid by an employer under this section and ORS , , to , and shall not be included as income to the employee for purposes of this chapter. If such expenses have been included in arriving at federal taxable income of the employee, the amount included shall be subtracted in arriving at state taxable income under this chapter. As used in ORS , with respect to the employee, " wages" does not include expenses paid under this section and ORS , , to , and ) A nonresident shall be allowed the credit computed in the same manner and subject to the same limitations as the credit allowed a resident by this section. However, the credit shall be prorated using the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may not be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. 10) If the taxpayer is a shareholder of an S corporation that has elected to take tax credit relief pursuant to ORS ( 7), the credit shall be computed

78 PERSONAL INCOME TAX' using the shareholder' s pro rata share of the corporation' s expenses described in this section. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law Credit for pollution control fa- cility. (1) A credit against taxes imposed by this chapter for a pollution control facility or facilities certified under ORS shall be allowed if the taxpayer qualifies =under subsection ( 4) of this section. 2) For a facility certified under ORS , the maximum credit allowed in any one tax year shall be the lesser of the tax liability of the taxpayer or one -half, of the certified cost of the facility multiplied by the - certified percentage allocable to pollution control, divided by the number of years of the facility' s useful life. The number of years of the facility' s useful life used in this calculation shall be the remaining number of years of useful life at the time,the facility is certified but not less than one year or more than 10 years. 3) To qualify for the credit the pollution control facility must be erected, constructed or installed in accordance with the pro -, visions of ORS ( 1) and must be issued certification under ORS prior to De- cember 31, )( a) The taxpayer who is allowed the credit must be: A) The owner of the trade or business that utilizes Oregon property requiring a pollution control facility to prevent or mini- mize pollution; B) A person who, as a lessee or pursuant to an agreement, conducts the trade or busi- ness that operates or utilizes such property; or C) A person who, as an owner or lessee owns or leases a pollution control facility used for resource recovery as defined in ORS Such person may, but need not, op -, erate such facility or conduct a trade or business that utilizes property requiring such a facility. If more than one person has an interest under this subparagraph_ in a resource recovery facility, only one may claim the credit allowed under this section. The person claiming the credit as between an owner and lessee under this subparagraph shall be designated in a written statement signed by both the lessor and lessee of the facility; this statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which a tax credit is claimed. As used in this paragraph, owner" includes a contract purchaser; and b) The facility must be owned or leased during the tax year by the taxpayer claiming the credit and must have been in use and operation during the tax year for which the credit is claimed. 5) Regardless of when the facility is erected, constructed or installed, a credit under this section may be claimed by a taxpayer: a) For a facility qualifying under ORS ( 1)( a) or ( b), only in those tax years which begin on or after January 1, b), For a facility qualifying under ORS ( 1)( c), in those tax years which begin on or after January 1, c) For a facility qualifying under ORS ( 1)( d), in those tax years which begin on or after January 1, ) For a facility certified under ORS , the maximum total credit allowable shall not exceed one -half of the certified cost of the facility multiplied by the certified per- centage allocable to pollution control. 7). The credit provided by this section is not in lieu of any depreciation or amortization deduction for the facility to which the taxpayer otherwise may be entitled under this chapter for such year. 8) Upon any sale, exchange, or other disposition of a facility, notice thereof shall be given to the Environmental Quality Com- mission who shall revoke the certification covering such facility as of the date of such' disposition. The transferee may apply for a new certificate under ORS , but the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor. The sale, exchange or other disposition of shares in an electing small business corporation as defined in section 1361 of the Internal Revenue Code or of a, partner' s interest in a partnership shall not be deemed a sale, exchange or other disposition of a facility for purposes of this sub- section. 9) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in ORS ' 10) The taxpayer' s adjusted basis for determining gain or loss shall not be further decreased by any tax credits allowed under this section.

79 REVENUE AND TAXATION 11) If the taxpayer is a shareholder of an electing small business corporation, the credit shall be computed using the shareholder' s pro rata share of the corporation's certified cost of the facility. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. [ See ; 1973 c ; 1977 c ; 1977 c ; 1979 c.691 6; 1981 c.408 l; 1983 c637 6, 1987 c.596 2, c Note: Subsection ( 2) of section 9, chapter 802, Oregon Laws 1989, provides:, Sec. 9. ( 2) The amendments to ORS and by sections 2 and 3 of this Act relating to the amount of cost upon which income or excise tax credit for certain pollution control facilities is based apply to facilities certified on or after September 27, 1987 For all prior certifications, the law applicable for those certifications shall remain applicable c802 9 ( 2) Credit for early intervention services for disabled child.' (1) As used in this section, unless the context requires oth- erwise: a) " Early intervention services" means programs of treatment and habilitation designed to address a child' s developmental deficits in sensory, motor, communication, self -help and socialization areas. b) " Disabled child" means a child from the age of identification of the disability to the age of 18 who has been determined eligi- ble for early intervention services or is diag- nosed for the purposes of special education as being autistic, trainable mentally re- tarded, multidisabled, visually impaired, hearing impaired, deaf blind, - orthopedically impaired or other health impaired, to accordance with State Board of Education rules. c) " Special education" means specially designed instruction to meet the unique needs of a disabled child, including regular classroom instruction, instruction in physical education, home instruction and instruction in hospitals, institutions and special schools. 2) The State Board of Education shall adopt rules further defining " disabled child" for purposes of this section. A diagnosis obtained for the purposes of entitlement to special education or early intervention services shall serve as the basis for a claim for the additional credit allowed under subsection ( 3) of this section. 3) In addition to the personal exemption credit allowed by this chapter for state personal income tax purposes for a dependent child of the taxpayer, there shall be allowed an additional personal exemption credit for a disabled child if the child is' a disabled child at the close of the tax year. The amount of the credit shall be equal to the amount allowed as the personal exemption credit for the dependent child for state personal income tax purposes for the tax year. 4) Each taxpayer qualifying for the additional personal exemption credit allowed by this section may claim the credit on the personal income tax return. However, the claim shall be substantiated by any proof of entitlement to the credit as may be required by the state board by rule c ; 1987 c ; 1989 c a; 1989 c Credit for political contrib- A credit against taxes shall be utions. ( 1) allowed for voluntary contributions in money made in the taxable year: a) To a national political party or to a committee thereof or to a minor political party as defined in ORS b) To or for the use of a person who must be a candidate for nomination or election to a federal, state or local elective general or special office in any primary, election in this state. The person must, in the calendar year in which the contribution is made, either be listed on a primary, general or special election ballot in this state or have filed in this state one of the following: A) A prospective petition; B) A declaration of candidacy; C) A certificate of nomination; or D) A designation of a principal campaign committee. c) To any trust, committee, association or organization (whether or not incorporated) organized and operated exclusively for any part or all of the following purposes: A) Influencing, or attempting to influ- ence, the nomination or election of one or more individuals who are candidates for nomination or election to any federal, state or local elective public office to be voted upon within this state if-used by the trust, committee, association or organization to further the candidacy of an individual or individuals for nomination or election to such office; or B) Supporting or opposing ballot meas- ures or questions to be voted upon within this state if the trust, committee, association or organization has certified the name of its political treasurer to the filing officer in the manner provided by law. 2) The credit allowed by subsection ( 1) of this section shall be the lesser of: a) The total contribution, not to exceed 50 on a separate return; the total contribution, not to exceed $ 100 on a joint return; or b) The tax liability of the taxpayer. 3) The claim for tax credit shall be substantiated by submission, with the tax return, of official receipts of the candidate,

80 PERSONAL INCOME TAX agent, trust, committee, association or organization to whom contribution was made. 4) A credit against taxes for a contribution to a national political party or to a committee thereof shall be allowed under this section only if the state central committee of the national political party, that is also a major political party under ORS , is organized in compliance with ORS The Department of Revenue shall allow no credit against taxes for contributions to a national political party or to a committee thereof if the department receives notice from the Secretary of State under ORS ) As used in this section, " national pol- itical party" means: a) In the case of contributions made during a taxable year of the taxpayer in which the electors of President and Vice President are chosen, a political party presenting candidates or electors for such offices on the official election ballot of 10 or more states; or b) In the case of contributions made during any other taxable year of the taxpayer, a political party which met the qualifications described in paragraph ( a) of this subsection in the last preceding election of a President and Vice President c432 2; 1973 c ; 1975 c ; 1977 c , 1979 c ; 1985 c.802 6, 1987 c , 1989 c Note: See note under Credit for investment for recycling plastics. ( 1) A credit against taxes imposed by this chapter for the investments certified under ORS shall be allowed if the taxpayer qualifies under subsection ( 4) of this section.. 2) A taxpayer. shall be allowed a tax credit under this section each year for five years beginning in the year the investment receives final certification under ORS The maximum credit allowed in any one tax year shall be the lesser of the tax liability of the taxpayer, or 10 percent of the certified cost of the taxpayer' s investment. 3) To qualify for the credit the investment must be made in accordance with the provisions of ORS )( a) The taxpayer who is allowed the credit must be: A) The owner of the business that collects, transports or processes reclaimed plas- tic' or manufactures a reclaimed plastic product; B) A person who, as a lessee or pursuant to an agreement, conducts the business that collects, transports or processes reclaimed plastic or manufactures a reclaimed plastic product; or C) A person who, as an owner, lessee or pursuant to an agreement, owns, leases or has a beneficial interest in a business that collects, transports or processes reclaimed plastic or manufactures a reclaimed plastic product. Such person may, but need not, op- erate or conduct such a business that collects, transports or processes reclaimed plastic or manufactures a reclaimed plastic product. If more than one person has an interest under this subparagraph in a qualifying business and one or more persons receive a certificate, such person or persons may allocate all or any part of the certified investment cost among any persons and their successors or assigns having an interest under this subparagraph. Such allocation shall be evidenced by a written statement signed by the person or persons receiving the certificate and designating the persons to whom the certified investment costs have been allocated and the amount of certified investment cost allocated to each. This statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which a tax credit is claimed pursuant to such agreement. In no event shall the aggregate certified investment costs allocated between or among more than one person exceed the amount of the total certified cost of the investment. As used in this paragraph, " owner" includes a contract pur- chaser; b) The business must be owned or leased during the tax year by the taxpayer claiming the credit, except as otherwise provided in subparagraph ( C) of paragraph ( a) of this subsection, and must have been collecting, transporting or processing reclaimed plastic or manufacturing a reclaimed plastic product during the tax year for which the credit is claimed; and c) The reclaimed plastic collected, transported, processed or used to manufac- ture the reclaimed plastic product must not be an industrial waste generated by the person claiming the tax credit, but must be purchased from a plastic recycler other than the person claiming the tax credit. 5) A credit under this section may be claimed by a taxpayer for a business receiving final certification of an investment under ORS only if the investment is made on or after January 1, 1986, but before July 1, ) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the investment to which the taxpayer otherwise may be entitled under this chapter for such year. 7) Upon any sale, exchange, or other disposition of a qualifying business, notice thereof shall be given to the Environmental

81 REVENUE AND TAXATION Quality Commission who shall revoke the certification covering the investment of such business as of the date of such disposition. The transferee may apply for a new certificate under ORS , but the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor. The sale, exchange or other disposition of shares in an electing small business corporation as defined in section 1361 of the Internal Revenue Code or of a partner' s interest in a partnership shall not be deemed a sale, exchange or other disposition of a business for purposes of this subsection. 8) Any tax credit otherwise allowable under this section which is not used by the taxpaver in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in ORS ) The taxpayer' s adjusted basis for de- termining gain or loss shall not be further decreased by any tax credits allowed under this section. 10) If the taxpayer is a shareholder of an electing small business corporation, the credit shall - be computed using the shareholder' s pro rata share of the corporation' s certified cost of investing in equipment necessary to collect, transport or process re- claimed plastic or manufacture a reclaimed plastic product. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 11) A nonresident shall be allowed the credit under this section in the proportion provided in ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer's taxable year under ORS , the credit allowed under this section shall be prorated or computed in a manner consistent with ORS ) No credit shall be allowed under this section and under ORS to for any portion of a facility for which the taxpayer claims a tax credit or ad valorem tax relief under ORS , , or to and to c ; 1989 c ; 1989 c Credit for investment in Oregon Capital Corporation. ( 1) A resident individual shall be allowed a credit against the taxes otherwise due under this chapter, based upon the amount of the taxpayer' s direct cash investment in the certified capitalization of the Oregon Capital Corporation. The amount of the credit shall be 20 percent of the amount of the cash investment. section: 2) To qualify for the credit under this a) The Oregon Capital Corporation must have been certified by the Financial Insti- tutions Division under section 7, chapter 911, Oregon Laws b) Not more than 50 percent of the tax credit provided for in this section may be claimed in the tax year in which the investment is made in the Oregon Capital Corpo- ration. c) No taxpayer shall claim more than 50 percent of the tax credit provided for in this section: A) Before July 1, 1989; and B) Before the Oregon Capital Corporation is certified by the division as having met the investment requirements of ORS ( 1)( a). 3) The credit allowed in any one year shall not exceed the tax liability of the tax- payer. 4) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. i11 SYT 1-

82 PERSONAL INCOME TAX ) A nonresident shall be allowed the credit under this section in the proportion provided in ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) A husband and wife who file separate returns for a taxable year may each claim a share of the tax credit that would have been allowed on a joint return in proportion to the contribution of each. 8) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS ; the credit allowed under this section shall be prorated or computed in a manner consistent with ORS ) If the taxpayer is a shareholder of an S corporation that has elected to take the credit on behalf of its shareholders as provided in ORS , the credit shall be computed and afterwards apportioned to each shareholder on the basis of the shareholder' s pro rata share of the corporation' s investment in the Oregon Capital. Corporation. In all other respects, the allowance and effect of the tax credit shall apply to the corpo- ration as otherwise provided by law. 10) The amount of any tax credit allowed under this section shall be used to reduce the basis of the taxpayer' s investment in the Oregon Capital Corporation. Federal taxable income shall be modified to the extent necessary to carry out the provisions of this subsection c b c304 14; 1953 c.552 5; repealed by 1969 c c ; repealed' by 1969 c Federal tax credits allowable only as specified. No credits applied di- rectly to the income tax calculated for fed- eral purposes pursuant to the, Internal Revenue Code shall be applied in calculating the tax due under this chapter except those prescribed in this chapter. [ 1969 c ; 1973 c , 1985 c c 118 2; repealed by 1969 c Credit for tax by another ju- risdiction on sale of residential property. 1) For taxable years beginning on and after January 1, 1879, if gain on the sale of residential property is taxed under this chapter the adjusted basis of the property for purposes of this chapter shall be the same as its adjusted basis for federal income tax pur- poses. 2) A credit against the tax otherwise due under this chapter shall be allowed to the taxpayer for the amount of any taxes imposed on the taxpayer by another state of the United States, a foreign country or the District of Columbia which tax is attributable to gain which is subject to tax as described in subsection ( 1) of this section. 3) The amount of the credit allowed under subsection ( 2) of this section shall not exceed the amount of the gain taxed by the other taxing jurisdiction multiplied by eight percent. 4) The Department of Revenue shall provide by rule the procedure for obtaining credit provided by subsection ( 2) of this sec- tion and the proof required. 5) No credit allowed under subsection ( 2) of this section shall be applied in calculating tax due under this chapter if the tax upon Which the credit is based has been claimed as a deduction for Oregon personal income tax purposes, unless the tax is restored to income on the Oregon return c ; 1981 c c , 1953 c.552 6; 1957 c. 582 l; 1961 c.506 1; 1963 c , repealed by 1969 c c.360 2; repealed by 1969 c c.211 2; 1963 c627 5 ( referred and rejected); repealed by 1969 c c. 61 2; repealed by 1969 c c.449 2; repealed by 1969 c c ; 1959 c ; subsection ( 4) derived from 1959 c.555 2; repealed by 1969 c ' Credit for energy yield of alternative energy device. ( 1) A resident individual shall be allowed a credit against the taxes otherwise due under this chapter, based upon the first year energy yield of the alternative energy device that qualifies under ORS to For collective or noncollective investment, the credit allowed under this section for each dwelling shall not exceed the lesser of- a) $ 1, 500 or the first year energy yield in kilowatt hours per year multiplied by 60 cents per dwelling utilizing the alternative energy device used for space heating, cooling, electrical, energy or domestic water heating for tax years beginning on or after January 1, 1990, but before January 1, b) For an alternative energy device used for swimming pool, spa or hot tub heating, 50 percent of the cost of the device or the first year' s energy yield in kilowatt hours per year multiplied by 15 cents, whichever is lower, up to $ 1, 500 for tax years beginning on or after January 1, 1990, but before January 1, )( a) To qualify for the credit under this section: A) The alternative energy device must be constructed, installed and operated in accordance with the provisions of ORS

83 REVENUE AND TAXATION to and a certificate issued there- under; B) The taxpayer who is allowed the credit must be the owner or contract purchaser of the dwelling or dwellings served by the alternative energy device or the tenant of the owner or of the contract purchaser; C) Except as provided in paragraph ( b) of this subsection, the taxpayer who is allowed the credit must use the dwelling or dwellings served by the alternative energy device as a principal or secondary residence; and D) The credit must be claimed for the tax year during which the alternative energy device which has been certified under ORS to first is placed in service. However, for tax years beginning on or after January 1, 1990, the credit may be claimed for the tax year in which the alternative energy device was purchased if the system is operational by April 1 of the next following tax year. b) Notwithstanding the requirements of subparagraph ( C) of paragraph ( a) of this subsection, a taxpayer who otherwise qualifies for the credit allowed under this section but who does not use the dwelling or dwellings served by the alternative energy device as a principal or secondary residence, shall be allowed the credit if the taxpayer rents or leases the dwelling or dwellings to a tenant who uses the dwelling or dwellings as a principal or secondary residence. 3) The taxpayer who is allowed the credit shall not be entitled to more than one credit under this section for any one taxable year. 4) Except as provided under subsection 7) of this section, a credit under this section may be claimed by a taxpayer for an alternative energy device for those tax years which begin on or after January 1, 1990, but before January 1, ) The credit provided by this section shall not affect the computation of basis for the dwelling or dwellings under this chapter. 6) The credit allowed in any one year shall not exceed the tax liability of the tax- payer. 7) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 8) A nonresident shall be allowed the credit under this section in the proportion provided in ORS ) If a change in the taxable year of a taxpayer occurs as described in ORB , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit al- lowed by this section shall be determined in a manner consistent with ORS ) A husband and wife who file separate returns for a taxable year may each claim a share of the tax credit that would have been allowed on a joint return in proportion to the contribution of each. However, a husband or wife living in his or her separate principal residence may claim the tax credit in the same amount as permitted a single person. 12) As used in this section, unless the context requires otherwise: a) " Collective investment" means an investment by two or more taxpayers for the acquisition, construction and installation of an alternative energy device for one or more dwellings. b) " Dwelling" has the meaning given in ORS c) " First year energy yield" has the meaning given in ORS d) " Noncollective investment" means an investment by an individual taxpayer for the acquisition, construction and installation of an alternative energy device for one or more dwellings ) As used in this section, " taxpayer" includes a transferee of a verification form under ORS ( 5). 14) Notwithstanding any provision of subsection ( 1) of this section, the sum of the credit allowed under this section plus any similar credit allowed for federal income tax purposes shall not exceed the cost to the taxpayer for the acquisition, construction and installation of the alternative energy device c , 1979 c.670 2; 1981 c.894 3; 1983 c ;' 1983 c.768 1; 1987 c.492 1; 1989 c.626 6; 1989 c 880 9, 111

84 PERSONAL INCOME TAX provides Note: Section 14, chapter 626, Oregon Laws 1989, Sec. 14. The amendments to ORS by section 6 of this Act apply to taxable years beginning on or after January 1, c provides: Note: Section 10, chapter 880, Oregon Laws 1989, Sec. 10. Amendments to ORS by section 9 of this Act first apply to tax years beginning on or after January 1, c Note: Sections 2 and 7, chapter 438, Oregon Laws 1985, provide: Sec. 2. ( 1) As used in this section a) " Commercial fisherman" means a person licensed to take fish commerciall) under the laws of this or another state. b) " Fair market value" means the purchase price actually paid for fish of the same species on the date the weigh -backs are landed. c) " Fish" means fish or shellfish for use for human consumption. d) " Weigh - backs" means fish taken by a commercial fisherman that are too small or uneconomical to process or are cosmetically imperfect so as to be unacceptable for purchase by a wholesaler, canner or other fish processor. 2) A credit is allowed against the taxes otherwise due under this chapter to: a) A commercial fisherman who contributes or aids, assists or causes to be contributed througgh a person described in paragraph ( b) of this subsection, weigh -backs to a gleaningg cooperative, as defined in OR , or to an officially designated recipient member of Oregon Food Share, a private nonprofit cor- poration. b) A wholesaler, canner or other fish processor who accepts weigh -backs from a commercial fisherman or agent of a commercial fisherman and delivers or causes the weigh -backs to be delivered to a gleanin cooperative, as defined in ORS , or to an off - cially designated recipient member of Oregon Food Share, a private nonprofit corporation. 3) The amount of the credit allowed to each taxpayer described under subsection ( 2) of this section is five percent of the fair market value of the weigh -backs contributed during the tae year of the taxpayer. 4) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tar liability for the next succeeding tax year. Any credit remaining unused on such next succeeding tax year may be carried forward and used in the second succeeding tae year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tart year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tar year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 5) If the taxpayer is a shareholder of an S corporation that has elected the tax credit relief under section 4 of this 1985 Act, the tax credit shall be computed using the shareholder' s pro rata share of the credit. In all other respects the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 6) At the time of a contribution made as described under subsection ( 2) of this section, the director, supervisor or other appropriate official of the gleaning co- operative or Oregon Food Share to which the contribution is made shall supply to the commercial fisherman or wholesaler, canner or other fish processor, two copies of a form prescribed by the Department of Revenue. The form shall: a) Contain the name and address of the commercial fisherman,wholesaler, canner or other fish processor. b) Describe the species of the weigh -backs contributed and specify the amount or quantity contributed c) Specify the purchase price actually paid for fish of the same species as the weigh -backs on the date the weigh -backs were landed. d) Contain any other information required by the Department of Revenue by rule. e) Be signed by the director, supervisor or other appropriate official of the gleaning cooperative or Oregon Food Share. 7) Tax claim for tax credit under this section shall be substantiated by submission with the tae return, of the form described in subsection ( 6) of this section, a statement verified by the taxpayer that the contribution was made as described in subsection ( 2) of this section and a copy of a receipt or other statement identifying the price paid for fish of the same species as the weigh -backs on the date the weigh -backs were landed c See. 7. This Act applies to tax years beginning on or after January 1, 1985, and prior to January 1, c CREDIT FOR FARM WORKER HOUSING Note: Sections 2 and 6, chapter 963, Oregon Laws 1989, provide - Sec. 2. ( 1) As used in this section: a) " Condition of habitability" means a condition that is in compliance with: A) The applicable provisions of the state building code under ORS chapter 455 and the rules adopted thereunder; or B) If determined on or before December 31, 1995, sections 12 and 13, chapter 964, Oregon Laws b) " Division" means the Accident Prevention Division of the Department of Insurance and Finance. c) " Rehabilitation" means to restore and reinstate a building to a condition of habitability d) " Seasonal farm worker" means any person who, for an agreed remuneration or rate of pay, performs temporary labor for another in the production of farm products or in the planting, cultivating or harvesting of seasonal agricultural crops or in the forestation or reforestation of lands, including but not limited to the planting, transplanting, tubing precommercial thinning and thinning of trees and seedlings, the clearing, piling and disposal of brush and slash and other related activities. e) " Seasonal farm- worker housing" means housing limited to occupancy by seasonal farm workers and their immediate families which is occupied no more than nine months of the year. f) " Seasonal farm - worker housing project" means construction or rehabilitation of seasonal farm - worker housing. g) " Year-round farm - worker housing" means housing limited to occupancy by farm workers and their immediate families. h) " Year -round farm- worker housing project" means construction or rehabilitation of farm - worker housing

85 REVENUE AND TAXATION 2) There is allowed a credit against the taxes otherwise due under this chapter to a resident individual. The amount of the credit shall be equal to 50 percent of the costs actually paid or incurred by the taxpayer to complete a seasonal or year-round farm - worker housing project. 3) The credit allowed under subsection ( 2) of this section shall be taken in five equal instalments over a period of five consecutive tax years beginning in the tax year of the taxpayer during which the project is completed. 4) The credit shall apply only to a seasonal or a year -round farm - worker housing project that is physically begun on or after the January 1 immediately following the date that both chapter 962, Oregon Laws 1989, and chapter 964, Oregon Laws 1989, have become both effective and operative 5) Except as provided under subsection ( 6) of this section, the credit allowed in any one year shall not exceed the tae liability of the taxpayer. 6) Any tar credit otherwise allowable under this section which is not used by the taxpayer in a particular tax year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in- such next succeeding tar year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tar year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 7) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the project to which the taxpayer otherwise may be entitled under this chapter for such year 8) The taxpayer' s adjusted basis for determining gain or loss shall not be further decreased by any tax credits allowed under this section. 9) To qualify for the credit allowed under this section, the seasonal or year -round farm- worker housing project must. a) Be inspected by the division prior to occupancy and must comply with all occupational safety or health laws, regulations, rules and standards; b) If registration is required, be registered as a farm- worker camp with the Bureau of Labor and Industries under section 6, chapter 962, Oregon Laws ; and c) Upon occupancy and if an indorsement is required, be operated by a person who holds a valid indorsement as a farm- worker camp operator under section 4, chapter 962, Oregon Laws )( a) Pursuant to the procedures for a contested case under ORS to , the department may order the disallowance of the credit allowed under this section if it finds, by order, that: A) The credit was obtained by fraud or misrepre -. sentation; B) The taxpayer who claims or claimed the credit has failed substantially to comply with the occupational safety or health laws, rules, regulations or standards; C) After occupancy and if registration is required, the seasonal or year -round farm - worker housing is not registered as a farm - worker camp with the Bureau of Labor and Industries under section 6, chapter 962, Oregon Laws 1989; or D) After occupancy and if an indorsement is required, the seasonal or year -round farm - worker housing is not operated by a person who holds a valid indorsement as a farm - worker camp operator under section 4, chapter 962, Oregon Laws b) If the tax credit is disallowed pursuant to this subsection, notwithstanding ORS or other law, all prior tax relief provided to the taxpayer shall be forfeited and the department shall proceed to collect those taxes not paid by the taxpayer as a result of the prior granting of the credit. c) If the tax credit is disallowed pursuant to this subsection, the taxpayer shall be denied any further credit provided under this section and section 4 of this 1989 Act in connection with the seasonal or year -round farm- worker housing project, as the case may be, from and after the date that the order of disallowance becomes final. 11) In the event that the farm - worker housing is destroyed by fire, flood, natural disaster or act of God before all of the credit has been used, the taxpaver may nevertheless claim the credit as if no destruction had taken place In the event of fire, if the fire chief of the fire protection district or unit determines that the fire was caused by arson, as defined in ORS and , by the taxpayer or by another at the taxpayer' s direction, then the fire chief shall notify the department. Upon conviction of arson, the department shall disallow the credit in accordance with subsection ( 10) of this section. 12) If the taxpayer is an S corporation, as defined in section 1361 of the Internal Revenue Code, that has elected to take the credit on behalf of its shareholders as provided in section 4 of this 1989 Act, the credit shall be computed and afterwards apportioned to each shareholder on the basis of the shareholder' s pro rata share of the corporation' s certified cost of the seasonal or year -round farm - worker housing project. In all other respects the allowance of and effect of the tax credit shall apply to the corporation as otherwise provided by I aw. 13)( a) A nonresident individual shall be allowed the credit computed in the same manner and subject to the same limitations as the credit allowed a resident by this section. However, the credit shall be prorated using the proportion provided in ORS b) If a change in the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS c) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) The department may adopt rules for carrying out the provisions of this section c Sec. 6. ( 1) Sections 2 and 4 of this Act shall apply to seasonal or year -round farm - worker housing projects completed in tax years that begin on or after the January 1 immediately following the date that both chapter 962, Oregon Laws 1989, and chapter 964, Oregon Laws 1989, have become both effective and operative laugust 2, and which are completed before January 1, ) Section 5 of this Act applies to loans made in tax years that begin on or after the January 1 immediately following the date that both chapter 962, Oregon Laws 1989, and chapter 964, Oregon Laws 1989, have become both effective and operative and which are made before January 1, c TAXATION OF NONRESIDENTS Proration between Oregon income and other income for nonresidents, part -year residents and trusts. ( 1) Except

86 PERSONAL INCOME TAX as provided under subsection ( 2) of this section, the proportion for making a proration for nonresident taxpayers of the standard deduction or itemized deductions, the personal exemption credits and any accrued federal or foreign income taxes, or for part -year resident taxpayers of the amount of the tax, between Oregon source income and income from all other sources is the federal adjusted gross income of the taxpayer from Oregon sources divided by the taxpayer' s federal adjusted gross income from all sources. If. the numerator of the fraction described in this subsection is greater than the denominator, the proportion of 100 percent shall be used in the proration required by this section.. As used in this subsection, " federal adjusted gross income" means the federal adjusted gross income of the taxpayer with the addi- tions, subtractions and other modifications to federal taxable income contained in this chapter that relate to adjusted gross income. 2) For part -year resident trusts, the proration made under this section shall be made by reference to the taxable income of the fiduciary c ; 1971 c. 672 l; 1973 c ; 1975 c ; 1977 c.872 5; 1981 c 801 4; 1983 c ; 1985 c ; 1987 c Pro rata share of S corpo- ration income of nonresident share- holder. ( 1) The pro rata share of S corporation income of a nonresident shareholder constitutes income or loss derived from or connected with sources in this state as provided in ORS ( 5). 2) In determining the pro rata share of S corporation income of a nonresident shareholder, there shall be included only that part derived from or connected with sources in this state of the shareholder' s distributive share of items of S corporation income, gain, loss and deduction ( or item thereof) entering into the federal adjusted gross income of the shareholder, as such part is determined under rules adopted by the department in accordance with the general rules under ORS 316, ) Any modifications, additions or subtractions to federal taxable income described in ORS chapter 316 that relates to an item of S corporation income, gain, loss or deduction ( or item thereof) shall be made in accordance with the shareholder' s pro rata share, for federal income 'tax purposes of the item to which the modification, addition or subtraction relates, but limited to the portion of such item derived from or connected with sources in this state. 4) A nonresident shareholder' s pro rata share of items of income, gain, loss or deduction ( or item thereof) shall be determined under ORS ( 2). The character of shareholder items for a nonresident shareholder shall be determined under ORS ( 2) c Separate or joint determination of income for husband and wife. 1) If the federal taxable income of husband and wife ( one being a part -year resident and the other a nonresident) is determined on a joint federal return, their taxable income in this state shall be separately determined, unless they elect to file a joint return, in which case their tax on their joint income shall be determined in this state pursuant to ORS ( 3). 2) If the federal taxable income of husband and wife ( one being a full -year resident and the other a part -year resident) is deter - mined, on a joint federal return, their taxable income in this state shall be separately determined, unless they elect to file a joint re- turn, in which case their tax on their joint income shall be determined in this state pursuant to ORS ( 2). 3) If the federal taxable income of husband and wife ( one being a full -year resident and the other a nonresident) is determined on a joint federal return, their taxable income in the state shall be separately determined, unless they elect to file a joint return, in which case their tax on their joint income shall be determined in this state pursuant to ORS ( 3). 4) For purposes of computing the tax of a husband and wife under this section, if one of the spouses is a full -year resident individ- ual, then as used in ORS ( 2) or ( 3), that spouse' s taxable income derived from Oregon sources is that spouse' s entire federal taxable income, defined in the laws of the United States, with the modifications, addi- tions and subtractions provided in this chap- ter. 5) The provisions of ORS with, respect to joint returns apply if both husband and wife are part -year residents or full -year nonresidents c , 1985 c.802 8; 1987 c Determination of adjusted gross income of nonresident partner. ( 1) In determining the adjusted gross income of a nonresident partner of any partnership, there shall be included only that part derived from or connected with sources in this state of the partner' s distributive share of items of partnership income, gain, loss and deduction ( or item thereof) entering into the federal adjusted gross income of the partner, as such part is determined under rules adopted by the department in accordance with the general rules in ORS ) In determining the sources of a nonresident partner' s income, no effect shall be

87 REVENUE AND TAXATION given to a provision in the partnership agreement which: a) Characterizes payments to the partner as being for services or for the use of capital, or allocated to the partner, as income or gain from sources outside this state, a greater proportion of the partner' s distributive share of partnership income or gain than the ratio of partnership income or gain from sources outside this state to partnership income or gain from all sources, except as authorized in subsection ( 4) of this section; or b) Allocates to the partner a greater proportion of a partnership item of loss or deduction connected with sources in this state than the proportionate share of the partner, for federal income tax purposes, of partnership loss or deduction generally, ex- cept as authorized in subsection ( 4) of this section. 3) Any modification to federal taxable income described in this chapter that relates to an item of partnership income, gain, loss or deduction ( or item thereof) shall be made in accordance with the partner' s distributive share, for federal income tax purposes of the item to which the modification relates, but limited to the portion of such item derived from or connected with sources in this state. 4) The department may, on application, authorize the use of such other methods of determining a nonresident partner' s portion of partnership items derived from or connected with sources in this state, and the modifications related thereto, as may be ap- propriate and equitable, on such terms and conditions as it may require. 5) A nonresident partner' s distributive share of items of income, gain, loss or deduction ( or item thereof) shall be determined under ORS ( 2). The character of partnership items for a nonresident partner shall be determined under ORS ( 1) c c ; repealed by 1969 c Income of nonresident from Oregon sources. ( 1) The adjusted gross income of a nonresident derived from sources within this state is the sum of the following: a) The net amount of items of income, gain, loss and deduction entering into the nonresident' s federal adjusted gross income that are derived from or connected with sources in this state including ( A) any distributive share of partnership' income and deductions and ( B) any share of estate or trust income and deductions; and b) The portion of the modifications, additions or subtractions to federal taxable income provided in this chapter that relate to adjusted gross income derived from sources in this state, including any modifications attributable to the nonresident as a partner. 2) Items of income, gain, loss and deduction derived from or connected with sources within this state are those items at- tributable to: a) The ownership or disposition of any interest in real or tangible personal property in this state; and b) A business, trade, profession or occupation carried on in this state. 3) Income from intangible personal property, including annuities, dividends, interest and gains from the disposition of in- tangible personal property, constitutes income derived from sources within this state only to the extent that such income is from property employed in a business, trade, profession or occupation carried on state. in this 4) Deductions with respect to capital losses, net long -term capital gains, and net operating losses shall be based solely on income, gains, losses and deductions derived from or connected with sources in this state, under regulations to be prescribed by the department, but otherwise shall be determined in the same manner as the corresponding federal deductions. 5) Notwithstanding subsection ( 3) of this section, the income of an S corporation for federal income tax purposes derived from or connected with sources in this state does constitute income derived from sources within this state for a nonresident individual who is a shareholder of such a corporation, and a net operating loss of such corporation derived from or connected with sources in this state does constitute a loss or deduction connected with sources in this state for such a nonresident individual. 6) If a business, trade, profession or oc- cupation is carried on partly within and partly without this state, the determination of net income derived from or connected with sources within this state shall be made by apportionment and allocation under ORS to ) Compensation paid by the United States for service in the Armed Forces of the United States performed by a nonresident does not constitute income derived from sources within this state c ; 1971 c 672 2; 1973 c ; 1975 c.705 4; 1983 c a; 1989 c Determination of taxable income of full -year nonresident. ( 1) The tax- able income for a full -year nonresident individual is adjusted gross income attributable to sources within this state determined under ORS , with the modifications except those provided under subsection ( 2)

88 PERSONAL INCOME TAX of this section) as otherwise provided under this chapter, less the deductions allowed under subsection ( 2) of this section. 2)( a) A full -year nonresident individual shall be allowed the deduction for a standard deduction or itemized deductions allowable to a resident under ORS ( 1) in the proportion provided in ORS b) A full -year nonresident individual shall be allowed to deduct the amount of any accrued federal income taxes and foreign country income taxes as provided in ORS in the proportion provided in ORS c)( A) A full -year nonresident individual shall be allowed to deduct the amount of any alimony or separate maintenance payments paid during such individual' s taxable year in the proportion provided in ORS except that in determining the. proportion the taxpayer' s adjusted gross income shall not include a deduction for alimony. For purposes of this paragraph, " alimony or separate maintenance payment" has the meaning given the phrase in section 215 of the Internal Revenue Code. B) No deduction shall be allowed under this paragraph if the alimony or separate maintenance payment is not includible in the gross income of the nonresident individual for federal income tax purposes under section 682 of the Internal Revenue Code. 3)( a) A full -year nonresident who is a self employed - individual shall be allowed to deduct that individual' s contributions to a qualified plan, deductible on that individual' s federal income tax return pursuant to section 401 of the Internal Revenue Code, in the proportion that the individual' s earned income from Oregon- sources bears to the individual' s earned income from all sources. Earned income" has the meaning given in section 401( c)( 2) of the - Internal Revenue Code. If the numerator of the fraction described in this paragraph is greater than the denominator, the- proration of 100 percent shall be used. b) A full -year nonresident shall be allowed to deduct that individual' s qualified retirement contributions, deductible on that individual' s federal income tax return pursuant to section 219 of the Internal Revenue Code, in the proportion- that the individual' s compensation from Oregon sources bears to the individual' s compensation from all sources. " Compensation" has the meaning given in section 219(f)(1) of the Internal Revenue Code. [ 1985 c ; 1987 c ; 1987 c ; 1989 c provides: Note: See note under Note: Section 15, chapter* 626, Oregon Laws 1989, Sec. 15. The amendments to ORS by section 7 of this Act apply to taxable years beginning on or after January 1, c ADDITIONAL CREDITS Dependent Care) Credit for work on dependent care facility. ( 1) A credit against the taxes otherwise due under this chapter is allowed to an employer, based upon costs actually paid or incurred by the employer, to acquire, construct, reconstruct, renovate or otherwise improve real property so that the property may be used primarily as a dependent care facility. 2) The credit allowed under this section shall be the lesser of: a) $ 2, 500, times the number of full -time equivalent employees employed by the employer ( on the property or within such proximity to the property that any dependents of the employees may be cared for in the facility) on any date within the two years imme- diately preceding the end of the first tax year for which credit is first claimed; or b) Fifty percent of the cost of the acqui- sition, construction, reconstruction reno- vation or other improvement; or c) $ 100,000. 3) To qualify for the credit allowed un- der subsection ( 1) of this section: a) The amounts paid or incurred by the employer for the acquisition, construction, reconstruction, renovation or other improvement to real property may be paid or in- curred either: A) To another to be used to acquire, construct, reconstruct, renovate or otherwise improve real property to the end that it may be used as a dependent care facility with which the employer contracts to make dependent care assistance payments which payments are wholly or partially entitled to exclusion from income for federal tax purposes under section 129 of the Internal Revenue Code; or B) To acquire, construct, reconstruct, renovate or otherwise impprove real property to the end that it may be operated by the employer, or a combination of employers, to provide dependent care assistance to the employees of the employer under a program or programs under which the assistance is, under section 129 of the Internal Revenue Code, wholly or partially excluded from the income of the employee. b) The property must be in actual use as a dependent care facility on the last day of the tax year for which credit is claimed and dependent care services assisted by the

89 REVENUE AND TAXATION employer must take place on the acquired, constructed, reconstructed, renovated or improved property and must be entitled to an exclusion ( whole or partial) from the income of the employee for federal tax purposes under section 129 of the Internal Revenue Code on the last day of the tax year for which credit is claimed. c) The person or persons operating the dependent care facility on the property ac- quired, constructed, reconstructed, renovated or improved must hold a certificate of approval ( temporary or not) issued under ORS to by the Children' s Services Division to operate the facility on the property on the last day of the tax year of any tax year in which credit under this section is claimed. d) The dependent care facility acquired, constructed, reconstructed, renovated or oth- erwise improved must be located in Oregon. No credit shall be allowed under this section if the dependent care facility is not acquired, constructed, reconstructed, renovated or improved to accommodate six or more. children. e) The employer must meet any other requirements or furnish any information, including information furnished by the employees or person operating the dependent care facility, to the department that the department requires under its rules to carry out the purposes of this section. f) The dependent care facility, the costs of the acquisition, construction, recon- struction, renovation or improvement upon which the credit granted under this section is based, must be placed in operation before January 1, ) The total amount of the costs upon which the credit allowable under this section is based, and the total amount of the credit, shall be determined by the employer, subject to any rules adopted by the department, during the tax year in which the property ac- quired, constructed, reconstructed, renovated or otherwise improved is first placed in operation as a dependent care facility certified by the Children' s Services Division under ORS to One -tenth of the total credit is allowable in that tax year and one -tenth of the total credit is allowable in each succeeding tax year, not to exceed nine tax years, thereafter. No credit shall be allowed under this section for any tax year at the end of which the dependent care facility is not in actual operation under a current certificate of approval ( temporary or not) issued by the Children' s Services Division nor shall any credit be allowed for any tax year at the end of which the employer is not providing dependent care assistance entitled to exclusion ( whole or partial) from employee income for federal tax purposes under section 129 of the Internal Revenue Code for dependent care on the property. Any tax credit allowable under this section in a tax year ma be carried forward in the same manner and to the same tax years as if it were a tax credit described in ORS ) Nothing in this section shall affect the computation of depreciation or basis of a dependent care facility. If a deduction is allowed for purposes of this chapter for the amounts paid or incurred upon which the credit under this section is based, the de- duction shall be reduced by the dollar amount of the credit granted under this sec- tion. 6) If the taxpayer is a shareholder of an S corporation, as defined in section 1361 of the Internal Revenue Code, which S corporation has elected to take tax credit relief under ORS , the credit shall be computed using the shareholder' s pro rata share of the corporation' s costs that qualify for the credit allowed under ORS In all other respects, the allowance and effect of the tax credit shall apply to the" corporation as otherwise provided by law. 7) For purposes of the credit allowed under this section: a) The definitions and special rules contained in section 129 ( e) of the Internal Re- venue Code shall apply to the extent applicable. b) " Employer" means a resident, part - year resident or full -year nonresident em- ployer carrying on a business, trade, occupation or profession in this state. c) " Internal Revenue Code" has the meaning given the term in ORS ) The department shall require that ev- idence that the person operating the dependent care - facility on the date that the taxpayer's tax year ends holds a current certificate of approval ( temporary or otherwise) to operate the facility accompany the tax return on which any amount of tax credit granted under this section is claimed, or that such evidence be separately furnished. If the evidence is not so furnished, no credit shall be allowed for the tax year for which the evidence is not furnished. The Children' s Services Division shall cooperate by making such evidence, in an appropriate form, available to the person operating the facility, if the person is currently entitled to a certificate of approval ( temporary or not) so that, if necessary, it may be made available to the taxpayer c Credit for dependent care assistance. ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to a resident employer for amounts paid or incurred during the taxable year by

90 PERSONAL INCOME TAX ' the employer for dependent care assistance actually provided to an employee if the assistance is furnished pursuant to a program which meets the requirements of - sections 89( k) and 129(d)( 2) to ( 6) of the Internal Revenue Code. 2) The amount of the credit allowed under subsection ( 1) of this section shall be 50 percent of the amount so paid or incurred by the- employer during the taxable year but shall not exceed $ 2, 500 of day care assistance actually provided to the employee. 3)( a) A credit, against the taxes otherwise due under this chapter shall be allowed to a resident employer based upon amounts paid or incurred' by the employer during the taxable year, to provide information and referral services to assist employees of the em- ployer employed within this state to obtain dependent care. b) The amount of the credit, allowed under this subsection shall be 50 percent of the amounts paid or,incurred during the taxable year. 4) No amount paid or incurred during the taxable year of an employer in providing dependent care assistance to any employee shall qualify for the credit allowed - under subsection ( 1) ' of this section if the amount was paid or incurred to an individual described in section 129( c)( 1) or ( 2) of the Internal Revenue Code. 5) No amount paid or incurred by an employer to provide dependent care assist- ance to an employee shall qualify for the credit allowed under subsection ( 1) of this section if the amount paid or' incurred is paid or incurred' pursuant to a salary reduction plan or is not paid or incurred for services performed within this state. 6) If the credit allowed under subsection 1) of this 'section is claimed; the amount of any ' deduction allowed or allowable under this chapter for the amount that qualifies for the credit ( or upon which the credit is based) shall be reduced by the dollar amount of the credit allowed. The 'election to claim a credit allowed under this section shall be made at the time of filing the tax return in accordance with any rules adopted by the depart- ment. ' 7) The amount upon which ' the credit allowed under subsection ( 1), of this section is based shall not be included in the gross income of the employee to whom the dependent care assistance is provided. However, the amount excluded from the income of an employee under this section shall not exceed the limitations provided in section 129(b) of the Internal Revenue Code. For purposes of ORS , with respect to an employee to ẁhom dependent care assistance is provided, " wages" does not include any amount excluded under this subsection. Amounts excluded under this subsection shall not qualify as expenses for which a credit is allowed to the employee under ORS ) A nonresident shall be allowed the credit allowed under subsection ( 1) or ( 3) of this section. The credit shall be computed in the same manner and be subject to the same limitations as the credit granted to a resident. 9) If a change in the taxable year of the taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under ORS , the credit allowed by this section shall be pro- rated or computed in a manner consistent with ORS ) If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit al- lowed by this section shall be determined in a manner consistent with ORS ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax, liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second' succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward' and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 12) If the taxpayer is a shareholder of an S corporation, as defined in section 1361 of the Internal Revenue Code, that has elected to take tax credit relief pursuant to section 5, chapter 682, Oregon Lawrp 1987,,, the credit shall be computed using the, shareholder' s pro rata share of the corpo- ration''s costs that qualify for the credit allowed under subsection ( 1) or ( 3) of section 5, chapter 682, Oregon Laws In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 13) For purposes of the credit allowed under subsection ( 1) or (3) of this section: a) The definitions and special rules contained in section 129( e) of the Internal Re- venue Code shall apply to the extent applicable

91 REVENUE AND TAXATION b) " Employer" means an employer carrying on a business, trade, occupation or profession in this state. c) " Internal Revenue Code" means the federal Internal Revenue Code as amended and in effect on December 31, ) In the case of an onsite facility, in accordance with any rules adopted by the department, the amount upon - which the credit allowed under subsection ( 1) of this section is based, with respect to any depend- ent, shall be based upon utilization and the value of the services provided c682 2, 1989 c provides Note: Section 87, chapter 625, Oregon Laws 1989, Sec. 87. The amendments to ORS and section 5, chapter 682, Oregon Laws 1987, by sections 10 and 20 of this Act ( relating to dependent care' assistance credit) apply to tax years beginning on or after January 1, 1988, and prior to January 1, c c.554 2; renumbered c.554 3; renumbered [ 1979 c.554 4; renumbered c.554 5; renumbered Fish Protection) Credit for fish screening devices, by -pass devices or fishways. ( 1) There shall be allowed a credit against tax due under this chapter for taxpayers that install fish screening devices, by -pass devices or fishways, when required to do so by ORS ( 1), ( 1), ( 1) or ) and the diversion is not part of a hydroelectric project required to be licensed under the Federal Energy Regulatory Commission. Except as allowed in subsection ( 4) of this section, the credit shall be taken in the. tax year in which the final' certification is issued under subsection ( 11) of this section. 2) The credit shall be equal to 50 percent of the certified costs of installing a fish screening device, by -pass device or fishway. The total credit allowed shall not exceed 5,000. 3) The credit allowed in any one year shall not exceed the tax liability of the tax- payer. 4) Any tax credit otherwise. allowable under this section which is not used by the taxpayer in a particular tax year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be car- ried forward and used in the second suc- ceeding tax year. Any credit remaining unused in such second succeeding tax year may be carried forward and used in the third succeeding tax year. Any credit remaining unused in such third succeeding tax year may be carried forward and used in the fourth succeeding tax year.- Any credit remaining unused in such fourth succeeding tax year may be carried forward and used in the fifth succeeding tax, year., but may not be used in any tax year thereafter. 5) The credit provided ' by" this section shall be in addition to and not in lieu of any depreciation or amortization' deduction to which the taxpayer otherwise ' may be entitled with respect to the installation of a fish screening device, by -pass device or fishway. The taxpayer' s adjusted basis for determining gain or loss shall not- be further' decreased by any tax credits allowed under this section. 6)( a) A nonresident shall be allowed the credit in the same manner and subject to the same limitations as a resident. However; the credit shall be prorated using the proportion provided in ORS b) If a' change in,the taxable year of a taxpayer occurs as described in ORS , or if the department terminates the taxpayer' s taxable year under, ORS , the credit allowed by this section shall be prorated or computed in a manner consistent with ORS c) If,a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) If the taxpayer is an S corporation, as defined in section 1361 of the Internal Revenue Code, that has elected to take the credit on behalf of its shareholders as provided in ORS , the, credit shall be computed and afterwards apportioned to each shareholder on the basis of the shareholder' s pro rata share of the corporation' s, certified costs of installing a fish screening device, by -pass device or fishway. ' In- all other re- spects the allowance of and effect of,the tax credit shall apply' to the corporation as otherwise provided by law. 8) To qualify for the credit the taxpayer must be issued a certificate by -the State De- partment of Fish and Wildlife ) To obtain credit under subsection ( 1) of this section, any person proposing to apply for certification of a' fish screening device, by -pass device' or fishway, before installing the fish screening device, by -pass device or fishway, shall file a request for preliminary certification with the State Department of Fish and Wildlife. The request 'shall be in a form prescribed by the State Department of Fish and Wildlife. The following conditions shall apply:, a) Within 30 days of the receipt of a request for preliminary certification, the State Department of Fish, and Wildlife may require,

92 PERSONAL INCOME TAX as a condition precedent to issuance of a preliminary certificate of approval, the submission of plans and specifications. After examination thereof, the State Department of Fish and Wildlife may request corrections and revisions to the plans and specifications. The State Department of Fish and Wildlife may also require any pertinent information necessary to determine whether the proposed fish screening device, by -pass device or fishway is in accordance with State Department of Fish and Wildlife requirements. b) If the State Department of Fish and Wildlife detern-unes that the proposed fish screening device, by -pass device or fishway is in accordance with State Department of Fish and Wildlife requirements, it shall issue a preliminary certificate approving the fish screening device, by -pass device or fishway. If the State Department of Fish and Wildlife determines that the fish screening device, by -pass device or fishway does not comply with State Department of Fish and Wildlife requirements, the State Department of Fish and Wildlife shall issue an order denying certification. c) If within 90 days of the receipt of plans, specifications or any subsequently requested revisions or corrections to the plans and specifications or any other information required, pursuant to this section, the State Department of Fish and Wildlife fails to issue a preliminary certificate of approval and the State Department of Fish and Wildlife fails to issue an order denying certification, the preliminary certificate shall be considered to have been issued. The capital investment must comply with the plans, specifications and any corrections or revisions thereto, if any, previously submitted. d) Within 30 days from the date of mailing of the order, any person against whom an order is directed pursuant to paragraph b) of this subsection may demand a hearing. The demand shall be in writing, shall state the grounds for hearing and shall be mailed to the State Fish and Wildlife Director. The hearing shall be conducted in accordance with the applicable provisions of ORS to ) Any fish screening device, by -pass device or fishway that is installed pursuant to ORS ( 2) or alterations made pursuant to ORS ( 2) to ( 6) shall not be eligible for,the credit provided in subsection 1) of this section. 11) Upon completion and pursuant to application for final certification, final certification shall be issued by the State Department of Fish and Wildlife if the fish screening device, by -pass device or fishway was constructed and installed in accordance with State Department of Fish and Wildlife requirements. Final certification shall include a statement of the costs of installation as verified by the State Department of Fish and Wildlife. The credit allowed under this section shall be claimed first for the tax year of the taxpayer in which final certification is issued. 12) Pursuant to the procedures for a contested case under ORS to , the State Department of Fish and Wildlife may order the revocation of the certificate issued under this section of any taxpayer, if it finds that: a) The certificate was obtained by fraud or misrepresentation; or b) The holder of the certificate fails to meet State Department of Fish and Wildlife requirements. 13) As. soon as the order of revocation under this section has become final the State Department of Fish and Wildlife shall notify the Department of Revenue of such order. 14) If the certificate of a fish screening device, by -pass device or fishway is ordered revoked pursuant to subsection ( 12) of this section, all prior tax relief provided to the holder of the certificate by virtue of the certificate shall be forfeited and the Department of Revenue shall proceed to collect those taxes not paid by the certificate holder as a result of the tax relief provided to the holder. 15) If the certificate of a fish screening device, by -pass device or fishway is ordered revoked pursuant to subsection ( 12) of this section, the certificate holder shall be denied any further relief provided under this section and ORS in connection with the fish screening device, by -pass device or fishway, as the case may, be, from and after the date that the order of revocation becomes final. 16) In the event that the fish screening device, by -pass device or fishway is destroyed by flood, natural disaster or act of God before all of the credit has been used, the tax - payer may nevertheless claim the credit as if no destruction had taken place. 17) Fish screening devices, by -pass devices or fishways which are financed by funds obtained from the Water Development Fund, pursuant to ORS to , shall not be eligible for the credit under any circumstances. 18) The State Department of Fish and Wildlife shall adopt rules for carrying out the provisions of this section and report to the interim committee created under ORS to to make studies of and in- iries into state revenue matters c.924 qui 3 Note: Section 5, chapter 924, Oregon Laws 1989, provides:

93 REVENUE AND TAXATION Sec. 5. Sections 2 and 4 of this Act apply to installations that occur in tax years that begin on or after January 1, c Energy Conservation Facilities) Credit for energy conservation facility. ( 1) A credit is allowed against the taxes otherwise due under this chapter, based upon the certified cost of the facility during the period for which that facility is certified under ORS to The credit allowed in each of the first two tax years in which the credit is claimed shall be 10 percent of the certified cost of the facility, but shall not exceed the tax liability of the taxpayer. The credit allowed in each of the succeeding three- years shall be five percent of the certified cost, but shall not exceed the tax liability of the taxpayer. 2) The facility must be in Oregon and owned during the tax year by the taxpayer claiming the credit. 3) A credit under this section may be claimed by a taxpayer for a facility only in those tax years which begin on and after January 1, ) The maximum total credit or credits allowed for a facility under this section to eligible taxpayers shall not.exceed 35 percent of the certified cost of such facility. 5) Upon any sale, termination of the lease, exchange or other disposition of the facility, notice thereof shall be given to the Director of the Department of Energy who shall revoke the certificate covering the facility as of the date of such disposition. The transferee, or upon re- leasing of the facility, the lessor, may apply for a new certificate under ORS , but the tax credit available to that transferee shall be limited to the amount of credit not claimed by the transferor or,, for a lessor, the amount of credit not claimed by the previous leases. lessor under all 6) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in that next, succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in subsection ( 1) of this section only as provided in this subsection. 7) The credit provided by this section is not in lieu of any depreciation or amorti- zation deduction for the facility to which the taxpayer otherwise. may be entitled under this -chapter for such year. 8) The taxpayer' s adjusted basis for determining gain or loss shall not be decreased by any tax credits allowed under this section., 9) If the taxpayer is a shareholder of a Subchapter S corporation, the credit shall be computed using the sharehbldei 's pro rata share of the corporation' s certified cost of the facility. In,all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 10) A credit under the provisions of this section shall not be allowed to: a) A public utility, as defined in ORS , that retails electricity or natural gas to more than 100 customers; b) A people' s utility district, as defined in ORS , a municipal utility or a co- operative utility, that retails electricity or natural gas to more than 100 customers; or c) A subsidiary or an affiliated interest, as defined in ORS , of a public utility described in paragraph ( a) of this subsection c ; 1981 c , Other grants or credits as off- set to cost of facility. If a:' taxpayer obtains a grant or tax credit from. the Federal Government other than an investment credit granted under section 46 of the Internal Revenue Code of 1986 as it reads on October 3, 1989, or a low, income housing tax ' credit. granted under section 42 of the Internal Revenue Code as it reads on October' 3, 1989, in connection with a facility which has been certified by the Director of the Department of Energy, the certified cost of the facility shall be reduced on a dollar for dollar basis. Any income tax credits which such taxpayer would be entitled to under ORS to and to after any such reduction shall not be reduced by such federal grants or tax credits. Taxpayers apply- ing for federal grants or credits shall `notify the Department of Revenue by certified mail within 30 days of each such application, and of the receipt of any such grant c ; 1981 c ; 1989 c Credit' limited if facility financed in part by governmental body; ineligibility of recipients of other credits or tax relief. (1) If a facility eligible for a credit under ORS is financed in part by any governmental or quasi - governmental body or municipal corporation, as defined in ORS , a tax credit may be claimed only on the portion of the cost that is privately financed. -

94 PERSONAL INCOME TAX ) A taxpayer is eligible, to participate in both this tax credit program and low interest, government- sponsored - loads. 3) A taxpayer who receives a tax credit or ad valorem tax relief on a pollution con- trol facility or an alternate energy device under ORS , or is not eligible for a tax credit on the same facility or device under ORS to and to ) No credit shall be 'allowed under ORS if the taxpayer has received a tax credit on the same facility or device under ORS c , 17; 1981 c ; 1989 c Rural Medical Practice) Credit available to person providing medical care in rural area. ( 1) In addition to any other modification to federal taxable income contained in this chapter, a person certified as eligible under section 7, chapter 893," Oregon Laws 1989; licensed,under ORS chapter 677, who is engaged in the practice of medicine, and who has a rural practice that amounts to 60 percent of the person' s practice, shall be allowed' as an annual credit against taxes otherwise due under this chapter in the sum of $5, 000, not to exceed 10 tax years, during which the person retains such practice and membership if the person is actively practicing in and is a member of the medical staff of a type B. hospital not located within the boundaries of a metropolitan statistical area, or a type A hospital or a type C hospital, if the Office of Rural Health makes the' finding required by ORS ) A nonresident shall be allowed. the credit under this section in the proportion provided in ORS If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS ) If the taxpayer is a shareholder of a Subchapter S corporation that has elected to take the credit on behalf of its shareholders as provided in ORS , the credit shall be computed and afterwards apportioned to each shareholder or{ the basis of the shareholder' s pro rata share of the shareholder' s tax liability. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 4) As used in this section, " type A hospital," " type B hospital" and " type C hospital" have the meaning for those terms provided in ORS c Credit for provider not on hospital staff. A' person certified as eligible under section 7, chapter 893, Oregon Laws 1989, licensed as a physician under ORS chapter 677, registered as a physician assistant -or licensed as a nurse practitioner is entitled to the tax credit described in ORS even if not a_ member of the hospital medical staff if the Office of Rural Health certifies that the person: 1) Can cause a patient to be admitted to the hospital; and 2) Has a rural practice that amounts to 0 percent of the person' s practice. 1i989 c c.561 4, renumbered Credit for medical staff at type C hospital. A member of the medical staff of a type C hospital who meets the requirements of ORS ( 1) and ( 2) or ) and ( 2) is entitled to the tax credit described in ORS or if- 6) The hospital is isolated due to ge- ographic conditions, complies with rules re- lating to emergency response and is subject to such other special factors as the Office of Rural Health by rule may prescribe; and 2) The hospital is designated by the Office of Rural Health as being subject to particular problems in recruiting and retaining medical staff and is located in an area that is medically underserved c 893 6al Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 316 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation. Costs in Lieu of Nursing Home Care) Definitions for ORS to As used in ORS to , unless the context requires otherwise: 1) " Eligible taxpayer" includes any individual who must pay taxes otherwise imposed by this chapter and: a), Who pays or incurs expenses for the care of a " qualified individual,' as defined in subsection ( 2) of this section, through a pay ment method determined by rule of the Department of Revenue; and 0 Who has a " household income," as defined by ORS , for the taxable year, not to exceed the maximum amount of household income allowed in ORS for a homeowner or renter refund. 2) " Qualified individual" includes an individual at least 60 years of age on the date that the expenses described in paragraph ( a) of subsection ( 1) of this section are paid or incurred by the eligible taxpayer:

95 REVENUE AND TAXATION a) Whose household income, as defined by ORS ( 7) and ( 8), does not exceed 7, 500 for the calendar year in which the taxable year of the taxpayer begins; b) Who is eligible for home care services under Oregon Project Independence provided by the Department of Human Resources; c) Who is certified by the Department of Human Resources; and d) Whose care or any portion thereof is not paid for under ORS chapter c Credit for expenses in lieu of nursing home care; limitation. ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to an eligible taxpayer with respect to food, clothing, medical care and transportation expenses paid or incurred by the taxpayer during the taxable year on behalf of a qualified individual in order that the qualified individual is not placed or maintained in a nursing home unnecessarily. The amount of the credit shall be $ 250 or eight percent of the expenses paid or incurred during the taxable year, whichever is less. 2) No credit shall be allowed under this section for expenses paid or incurred for any period of time in which the qualified individual is a resident in a nursing home or is reaid ceiving from Oregon Project Independence c Evidence of eligibility for credit. Evidence of payments made or expenses incurred that form the basis of the credit allowed under ORS to shall be submitted to the Department of Re- venue in accordance with any rules adopted by the department relative to the submission of evidence of such payments c c.414 2; renumbered COLLECTION OF TAX AT SOURCE OF PAYMENT c ; 1965 c 26 3; repealed by 1969 c Definitions for ORS to As used in ORS to : 1) " Number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under ORS , except that if no such certificate is in effect, the number of withholding exemptions claimed is considered to be zero. 2) " Wages" means remuneration for ser- vices performed by an employee for an employer, including the cash value of all remuneration paid in any medium other than cash, except that " wages" does not include remuneration paid: a) For active service in the Armed Forces of the United States as to which no withholding is required by the Internal Revenue Code. b) To an employee of a common carrier to the extent that sections 1512 and 11504, title 49, United States Code prohibits the remuneration from withholding for state income taxes. c) For domestic service - in a private home, a local college club or a local chapter of a college fraternity or sorority. d) For casual labor not in the course of the employer' s trade or business. e) To an employee whose services to the employer consist solely of labor in connection with the planting, cultivating or harvesting of seasonal agricultural crops if the total amount paid to such employee is less than $ 300 annually. f) To seamen who are exempt from garnishment, attachment or execution under title 46 of the United States Code. g) To persons temporarily employed as emergency forest fire fighters. h) To employees' trusts exempt from tax under provisions of the federal Internal Re- venue Code. i) For services performed by a duly or- dained, commissioned or licensed minister of a church in the exercise of the minister' s ministry or by a member of a religious order in the exercise of religious duties required by such order, which duties are not commer- cial in nature. 0) For services performed by an independent contractor, as that term is defined in ORS ) " Employer" means: a) A person who is in such relation to another person that the person may control the work of that other person and direct the manner in which it is to be done; or b) An officer or employee of a corpo- ration, or a member or employee of a part- nership, who as such officer, employee or member is under a duty to perform the acts required of employers by ORS , , , and c ; 1971 c ; 1973 c.229 1; 1977 c 604 1; 1981 c ; 1985 c.87 3; 1989 c.762, When surety bond required of employer; enforcement. ( 1) Except as provided in subsection ( 3) of this section, if the department. makes the findings required under subsection ( 2) of this section, the department may require any employer subject to ORS to , except the state or its political subdivisions, to post a surety bond with the department, to secure future

96 PERSONAL INCOME TAX payment of amounts required to be withheld and paid over to the department under ORS to The bond shall be in an amount equal to the amounts required to be withheld upon the wages paid or estimated to be paid by the employer for a period of four calendar quarters. The bond shall be in a form acceptable to the department. Posting of the bond shall not relieve the employer from withholding and paying over amounts based on wages paid by the employer under any provision of ORS to The department may, in ' its discretion, at any time apply such bond or part thereof to the delinquencies or indebtedness of the employer arising under any provision of ORS to and accruing after the date the bond was posted. Appeal of an action of the department under this section shall not relieve an employer of the requirement during the pendency of the appeal. 2) Before requiring an employer to post a bond under subsection ( 1) of this section, the department shall determine that the employer has failed to make payment to the department of amounts required to be withheld and paid over under any provision of ORS to for at least three calendar quarters, and the total amount of delinquent payments exceeds $ 2, 500, exclusive of interest or penalties. For purposes of this subsection, a payment shall not be considered delinquent if the employer' s liability to withhold is subject to appeal to the director.. 3) The department shall not require a bond to be posted under this section if the employer elects to notify the department of the times of payment of wages to the em- ployees of the employer, and, notwith- standing ORS , to pay over amounts withheld within three banking days after the dates the wages were paid. 4) Before requiring an employer to post a bond or make payment of amounts required to be withheld in the manner prescribed in subsection ( 3) of this section, the department shall attempt to obtain payment of delin- quent amounts through other methods of collection, however, the department is not required to seize or sell real,,or personal property in order to comply with the re- quirements of this subsection., 5) Any bond required under subsection 1) of this section shall become the sole property of the department and shall be held by the department to guarantee payment of withholding taxes by the employer. The bond shall be held for the benefit of the State of Oregon, subject only to the provisions of subsection ( 6) of this section. The bond shall be prior to all other liens, claims or encumbrances and shall- be exempt from any process, attachment, garnishment or exe- cution. 6) If an employer ceases to be an employer subject to ORS to , the department shall, upon receipt of all payments - due from the employer for withheld amounts, cancel any bond given under this section. Such bonds held for the benefit of the State of Oregon shall first be applied to any indebtedness or deficiencies due from the employer under ORS to and accruing After the date the bond was posted before- any return is made to the employer. The employer shall have no interest in such bond prior to full compliance with this section and all provisions of ORS to ) If an employer required to post a bond or make payment of amounts withheld in the manner prescribed under this section makes full payment of all delinquent amounts due and owing at the time the bond or acceler- ated payment schedule was required and makes payment of ainounts due under ORS to and files returns required in connection with those payments in a timely manner for the succeeding four calen- dar quarters, the department shall release the employer from the requirement to post the bond or make accelerated payments of amounts withheld. 8) If any employer fails to comply with subsections ( 1) to ( 7) of this section, the Oregon Tax Court, upon commencement of an action by the department for that purpose, may order the employer to post the required bond or make accelerated payments of amounts withheld. The employer' s failure to obey an order of the court is punishable by contempt. If the Oregon Tax Court deter- mines that an order of compliance enforcea- ble by contempt proceedings will not assure the payment of withheld taxes by the employer, the court may enjoin the employer from further employing individuals in this state or continuing in business therein until the employer has complied with subsection 1) to ( 7) of this section c.406 2, c ; repealed by 1969 c Withholding of tax required; elective provisions for agricultural employees; liability of supplier of funds to employer for taxes. ( 1) Every employer at the time of the payment of wages to any employee shall deduct and retain from such wages an amount determined, at the employ- er' s election, either ( a) by a " percentage method" withholding table or ( b) by " wage bracket" withholding tables, prepared and furnished under the rules and regulations of the department. However, in the case of wages paid to -an employee whose services to the employer consist solely of labor in con-

97 REVENUE AND TAXATION nection with the planting, cultivating - or harvesting of seasonal. agricultural crops, the employer may elect to withhold. two percent of the total wages paid without regard to any withholding exemptions. 2) Except in the case of*an agricultural employee, the amount withheld shall be, computed on the basis of the total amount of the wages and the number of withholding exemptions claimed by the employee, without deduction for any amount withheld. 3) If a lender, surety '-or other person who supplies funds to or for the ' accodnt of an employer for the purpose of'paying wages of the employees of such employer has actual notice or knowledge that such 'employer does not intend to or will not be able to make timely payment or deposit of the tax required to be deducted and withheld, such lender, surety or other person shall be liable to the State of Oregon in a sum equal to the taxes together with interest which are not timely' paid over to the department. Such liability shall be limited to the principal amount supplied by such lender, surety or other person, and any amounts so paid to the department shall be credited against the liability of the employer. 4) With the approval of the Executive Department, the department may.enter into contracts with banking institutions including but not limited to Federal Reserve Banks, incorporated banks, trust companies, domestic building and loan associations, savings and loan associations or credit unions authorizing them to receive as financial, agents of the department any tax required to be withheld and paid to' the department c ; 1975 c 394 1, 1977 c ; 1982 s. s. I ' c. I I I Employer required to. file combined quarterly fax report. ( 1) Except as otherwise provided by law, every employer subject to the provisions of ORS to , ORS chapter 657, or a payroll -based tax imposed by a mass transit district and administered by the Department of Revenue under ORS , shall make and file a combined quarterly tax report.upon,, a form prescribed by the department. ' 2) The report shall be filed with the Department of Revenue on' - before the last day of the month *following the quarter. to; which the report relates and shall -be - deemed' received on the date of mailing, as provided in ORS a) The report shall be accompanied by payment of any tax due and a combined tax payment coupon prescribed by the department. ment. The employer shall ' indicate on the art - coupon the amount of the total payment and the portions of the payment to be. paid. to each of the tax programs. b) The Department of Revenue shall credit the payment to the tax programs in the amounts indicated by the employer on the coupon and shall promptly remit the payments to the appropriate taxing body. c) If the employer fails to allocate the payment on the coupon, the department shall allocate the payment to the- proper tax programs: on the basis of -the percentage the. payment. bears -to the total amount due. d)' The Department of Revenue shall distribute copies of the combined quarterly tax report and the necessary tax payment Information to each of the agencies charged with the, adminlstratlon of a tax covered by the report. e) The Department of Revenue and the Employment Division of the Department of Human Resources shall develop a system of account numbers and assign to each em- ployer a single account number representing all of the tax programs included in the com- bined quarterly tax report c c ; repealed by 1969 c Application of tax and report to administration of tag laws. Except as provided in this section and ORS , ,1' 316: 197, and , the statutes and regulations applicable to each agency,' requiring a report -and imposing a tax, shall govern the audits "and examination of reports and returns, dewrmination of deficiencies, assessments, claims- for refund, penalties, interest, administrative and judicial appeals and the procedures relating thereto c provides. Note: Section 9, chapter 901, Oregon Laws 1989, Sec. 9. Sections 2, 3 and 5 of this Act and the amendments to ORS , and by sections 6, 7 and 8 of this Act ' shall first apply to quarterly reports required to be filed on or after April 30, c.901, Tax withholding tables to- be prepared by department: ( 1) The depart- ment shall ' prepare a table for use with the percentage method that provides for the de- duction and withholding of,a tax equal to a specific percent ( to be determined by the department) of the amount by which the wages for a given' payroll period ( daily, weekly, bi weekly, semimonthly, monthly, quarterly, semiannually or annually, as the case may W exceed the number of withholding exemptions claimed, multiplied by the amount of one such exemption for each payroll period ( such amount being determined by the department for each such period). The determinations of the department shall result, so far as is practicable, in withholding from the employee a sum substantially equivalent to the amount of the tax that the employee will be. required to- pay under this chapter upon

98 PERSONAL INCOME TAX such wages. To accomplish this purpose, the department may make special provision for employees who are in the state for limited periods of time. 2) The department shall prepare tables for use in computing withholding of tax by wage brackets. The wage brackets shall be graduated so that the amount withheld is, as far as practicable, substantially equivalent to the amount of the tax that the employee will be required to pay under this chapter upon such wages c ; 1973 c c304 21; repealed by 1969 c Reliance on withholding statement; penalty for statement without reasonable basis. ( 1) If an employee does not claim a different number of withholding exemptions for state withholding purposes, the employee shall be entitled to the same number of withholding exemptions as the number of withholding exemptions to which the em- ployee is entitled for federal income tax withholding purposes. If an employee does not claim a different number of withholding exemptions for state withholding purposes, the employer may rely upon the number of federal withholding exemptions claimed by the employee, or authorized or specified under the Internal Revenue Code. If the employee does claim a different number of withholding exemptions for state withholding purposes, the employer shall rely on the number specified on that claim. 2) If any employee makes a statement for federal income tax withholding purposes which claims more than 10 withholding exemptions, or claims exemption from withholding and the employee' s income is expected to exceed $ 200 per week for both federal and state purposes, or claims exemption from withholding for 'state purposes but not for federal purposes, and as of the time the statement was made there was no reasonable basis for the statement, the department shall assess and collect from the employee a penalty of $500. 3) The penalty imposed under this section is in addition to any other penalty imposed by law. Any employee against whom a penalty is assessed under this section may appeal to the director as provided in. ORS If the penalty is not paid within 10 days after the order of the department be- comes final, the department may record the order and collect the amount assessed without interest in the same manner as income tax deficiencies are recorded and collected under ORS ) The department may waive all or any part of the penalty imposed under subsection 2) of this section if the income tax liability of the employee for the taxable year is equal to or less than the sum of a) The credits against taxes allowed under this chapter; and b) The payments of estimated tax which are considered payments on account of the tax liability of the employee under ORS and c ; 1987 c ; 1987 c c ; repealed by 1969 c Exemption certificate. ( 1) Subject to subsection ( 2) or ( 3) of this section and if the employee does not claim a different number of withholding exemptions for purposes of this chapter, an employer shall use the exemption certificate filed by the employee with the employer under the in- come tax withholding provisions of the Internal Revenue Code for determining the number of withholding exemptions to be used in computing the tax to be withheld under ORS and If a new exemption certificate is not filed as provided under section 1581 of the Tax Reform Act of 1986 ( P.L ) for federal purposes, the employer shall - use the same number of withholding exemptions as used for purposes of the Internal Revenue Code for determining the amount of tax to be withheld under ORS and ) The department may require an exemption certificate to be filed on a form pre- scribed by the ' department in any circumstance where the department finds that an exemption certificate filed for purposes of the Internal Revenue Code does not properly reflect the number of withholding exemptions allowable under this chapter. 3) No exemption certificate need be procured from an employee whose wages consist of wages as defined in ORS ( 2)( e) c ; 1987 c c ; 1955 c ; subsection ( 5) derived from 1955 c ; 1965 c. 26 4; repealed by 1969 c ) Amount withheld is in payment of employee' s tag. The amounts deducted from the wages of an employee during any calendar year in accordance with ORS and shall be considered to be in part payment of the tax on such employee' s income for the taxable year which be gins within such calendar year, and the return made by the employer pursuant to ORS shall be accepted by the department as evidence in favor of the employee of the amounts so deducted from the employee' s wages c Withholding of state income taxes from certain periodic payments. ( 1) As used in this section:

99 REVENUE AND TAXATION a) " Commercial annuity" means an annuity, endowment or life insurance contract issued by an insurance company authorized to transact insurance in the State of Oregon. b) " Department" means the Oregon Department of Revenue. c) " Designated distribution" means any distribution or payment from or under an employer deferred compensation plan, an individual retirement plan or a commercial annuity. " Designated distribution" does not include any amount treated as wages as defined in ORS , the portion of any distribution or payment that is not includable in the gross income of the recipient or any distribution or payment made under section 404 ( k)(2) of the Internal Revenue Code. d) " Employer deferred compensation plan" means any pension, annuity, profit - sharing or stock bonus plan or other plan deferring the receipt of compensation. e) " Individual retirement plan",means an individual retirement account, described in section 408 ( a) of the Internal Revenue Code or an individual retirement annuity described in section 408 ( b) of the Internal Revenue Code. f) " Nonperiodic distribution" means any designated distribution which is not a peri- odic payment. g) " Payor" means any payor of a designated distribution doing business in or making payments or distributions from sources in this state. h) " Periodic payment" means. a designated distribution which is an annuity or similar periodic payment. i) " Plan administrator" means. a plan administrator as described in section 414 ( g) of the Internal Revenue Code, who is the administrator of a plan created by an Oregon employer. 0) " Qualified total distribution" means any designated distribution made under a retirement or annuity plan described in section 401 ( a) or 403 ( a) of the Internal Revenue Code, which consists of the balance to the credit of the employee, exclusive of accumulated deductible employee contributions, made within one taxable year of, the recipi- ent. 2)( a) The payor of any periodic payment shall withhold from such payment the amount which would be required to be withheld from such payment under ORS if the payment were wages paid by an employer to an employee. The time and manner of payment of withheld amounts to the department shall be the same as that required under ORS for withholding of income taxes from wages. b) The payor of any nonperiodic distribution shall withhold from such distribution an amount determined under tables prescribed by the department. c) The maximum amount to be withheld under this section on any designated distribution shall not exceed 10 percent of the amount of money and the fair market value of other property received in the distribution. If the distribution is not subject to withholding for federal income tax purposes under section 3405 of the Internal Revenue Code, it shall not be subject to withholding under this section. 3)( a) Except as provided in paragraph ( b) of this subsection, the payor of a designated distribution shall withhold and be liable for payment of amounts required to be withheld under this section. b) In the case of any plan described in section 401 ( a) or section 403 ( a) of the Internal Revenue Code, or section 301 ( d) of the Tax Reduction Act of 1975, the plan ad- ministrator shall withhold and be liable for payment of amounts required to be withheld under this section, unless the plan administrator has directed the payor to withhold the tax and has provided the payor with the information required by rule of the department. 4)( a) An individual may elect to have no withholding by a payor under subsection ( 2) of this section. If an individual has elected to have no federal withholding from payments or distributions described in this section the individual shall be deemed to have elected no - withholding for state purposes, unless the individual notifies the payor oth- erwise. b) An election made under this subsection shall be effective as provided under rules promulgated by the department. The rules required under this paragraph shall provide the manner in which an election may be revoked and when such revocation shall be effective. 5) The payor of any periodic payment or nonperiodic distribution shall give notice to the payee of the right to make an election to have no state withholding from the payment or distribution. The department shall provide by rule for the time and manner of giving the notice required under this subsection. 6) Any rules permitted or required to be promulgated by the department under this section shall, insofar as is practicable, be consistent with corresponding provisions of section 3405 of the Internal Revenue Code and regulations promulgated thereunder. 7) Any designated distribution shall be treated as if it were wages paid by an employer to an employee within the meaning of ORS to for all other purposes

100 PERSONAL INCOME TAX of ORS to In the case of any designated distribution not subject to withholding by reason of an election under subsection ( 4) of this section, the amount withheld shall be treated as zero: c Note: was added to and made a part of ORS chapter 316 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation ( Amended by 1953 c ; 1955 c92 l; subsection ( 3) derived from 1955 c.92 2; repealed by 1969 c Withholding taxes at time and in manner other than required by federal law. Notwithstanding the provisions of ORS : 1) When adherence to the federal with- holding system creates an undue burden on an employer, the - employer may request and the department may permit that taxes be withheld and paid over within a time and in a manner other than that required under federal law. 2) If the department permits.the modification of the time and manner of withholding and payment of taxes under this section the method of withholding and payment permitted shall, whenever possible, provide. for withholding and payment in a manner similar to that required for other employers required to deduct and retain similar amounts of income taxes from wages paid to. their employees in Oregon. 3) The department shall adopt rules establishing the manner in which an employer may request a modification under this section, and may by rule prescribe a modification of the time and manner of withholding and payment of taxes in such instances as it considers necessary. The department may adopt by rule any exceptions to federal withholding requirements that have been adopted by the Internal Revenue Service c c ; 1971 c ; repealed ' by 1985 c , Withholding of state income taxes from federal retired pay for members of uniformed services. ( 1) The Department of Revenue may. enter- into an agreement with the appropriate United States agency or instrumentality for,the voluntary withholding of state income taxes from the retired pay of members of the uni- formed services under the provisions of sec- tion 654, Public Law The department is hereby authorized to do all acts and comply with any requirements necessary to enable retired members of the uniformed services to elect voluntary withholding of state income taxes from their retired pay. 2) The department may establish by rule a minimum monthly amount to be withheld and paid over for any member electing vol- untar_y withholding of state income taxes under an agreement entered into under subsection ( 1) of this section. 3) Notwithstanding ORS or , the department may disclose to the Department of Defense the name, address or social security number of any member elect- ing voluntary withholding of state income taxes whenever necessary to enable the De- partment of Defense to implement such withholding under the terms of an agreement entered into under subsection ( 1) of this section. 4) As used in this section: a) " Member" means any person retired from a regular or reserve component of one of the uniformed services, who has Oregon personal income tax liability in connection with the receipt of retired pay. b) " Retired pay" means pay and benefits received based on conditions of the federal retirement law, pay grade, years of service, date of retirement, transfer to Fleet Reserve or Fleet Marine Corps Reserve or disability. c) " Uniformed services" means the Army, Navy, Air Force, Marine Corps, Coast Guard, commissioned corps of the United States Public Health Service and the commissioned corps of the National Oceanic and Atmospheric Administration c Note: was added to and made a part of ORS chapter 316 by legislative action but was not added to any smaller series. therein. See Preface to Oregon Revised Statutes for further explanation [ 1953 c ; repealed by 1969 c Withholding of state income taxes from federal retirement pay for civil service annuitant. (1) The Department of Revenue may enter into an agreement with the United States Office of Personnel Management for the voluntary withholding of state - income taxes from the retirement pay of United States civil service annuitants under the provisions of section 1705 of Public Law The department is hereby authorized to do. all acts and comply with any re- quirements necessary to enable - retired United States civil servants to elect volun- tary withholding of state income taxes from their retirement pay. 2) The department shall establish by rule a procedure under which a United States civil service annuitant may request voluntary withholding under an agreement entered into under subsection ( 1) of this section. The procedure may include a minimum monthly amount to be withheld and paid over to the state. 3) Notwithstanding ORS or , the department may disclose to the United States Office of Personnel Management the name, address or social security

101 REVENUE AND TAXATION number of any United States civil service annuitant electing voluntary withholding of state income taxes whenever necessary to enable the United States Office of Personnel Management to implement such withholding under the terms of an agreement entered into under subsection ( 1) of this section. 4) As used in this section: a) " Civil service annuitant" means any person retired from the federal civil service who has Oregon personal income tax liability in connection with the receipt of retirement pay. " Civil service annuitant" includes a survivor annuitant within the meaning of Title 5, United States Code, section b) " Retirement pay" means regular, re- curring monthly annuity payments received based on conditions of federal retirement law, but does not include retired pay as' de- fined in ORS c Note: was added to and made a part of ORS chapter 316 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation Payment to department by employer; interest on delinquent payments. '(1)( a) Except as provided under ORS or paragraph ( b) of this subsection, within the time that each employer is required to pay over taxes withheld for federal income tai, purposes for any period,. the employer shall pay over to the department or to a financial agent of the department the amounts required to be withheld under ORS and for the same period. Any employer not required to withhold federal income taxes for any period but who is, required to deduct and retain amounts fom wages paid to an employee under ORS and for the same period shall pay over to the department or financial agent of the department, taxes withheld' for, the period, within the time and in the manner, as if the employer were required to withhold taxes for the period under federal law. b) Notwithstanding the provisions of paragraph ( a) of this subsection;. any employer of agricultural employees who is not required to withhold federal income.'taxes for any period but who is' required to deduct and retain amounts from wages paid to those employees under ORS and shall pay over to the department, or financial agent of the department, taxes so withheld at the same time and for the same period for which the employer is required to pay over employer and employee taxes under chapter 21 of the Internal Revenue Code ( Federal Insurance Contributions Act). 2) Every amount so paid over shall be accounted for as part of the collections under this chapter. No employee has any right of action against an employer in respect of any moneys deducted from wages and paid over in compliance or intended compliance with this section. 3) If any amount required to be withheld and paid over to the department is delinquent, interest shall accrue at the rate prescribed under ORS on that amount from the' last day of the month following the end of the calendar quarter within which the amount was required to be paid _to the department to the date of payment. The pro- visions of this subsection shall any employer from liability for a not relieve late pay- ment penalty under any other provision of law c , 1975 c ; 1982 s. s I c. 1 2, 1983 c 697 l; 1985 c. 87 4; 1989 c c ; 1965 c.26 5; repealed by 1969 c Reports by employer; effect of failure to report; waiver. ( 1) With each payment made to the department, every employer shall deliver to the department, on a form prescribed by the department showing the total amount of withheld taxes in accordance with ORS and , and supply such other information as the department may require. The employer is charged with the duty of advising the employee of the amount of moneys withheld, in accordance with such regulations as the department may prescribe, using printed forms furnished or approved by the department for such pur- pose. 2) Except as provided in subsection ( 4) of this section, every employer shall submit a - combined quarterly return to the department on a form provided by it showing the number of payments made, the withheld taxes paid' during the quarter and an explanation of federal withholding taxes as computed by the employer. The report shall be filed with the department on or before the last day of the month following the end of the quarter. 3) The employer shall make an annual return to the department on forms provided or approved by it, summarizing the total compensation paid and the tax withheld for each employee during the calendar year and shall file the same with the department be fore February 16 of the year following that for which report is made. Failure to file the annual report without reasonable excuse on or before the 30th day after notice has been given to the employer of failure subjects the employer to a penalty of $100. The department may prescribe circumstances under which the filing requirement imposed by this subsection is waived. 4) Notwithstanding the provisions of subsection ( 2) of this section, employers of agricultural employees may submit returns annually showing the number of payments

102 PERSONAL: iincome TAX made and the withheld taxes paid. However, such employers shall make and file a combined quarterly tax report with. respect to other tax programs, as required by ORS c ; 1973 c.83 1; 1982 ss_ 1. c. 1 3; 1983 c ; 1987 c.366 4; 1989 c c ; repealed by 1957 c enacted in lieu of and ) Liability for tax; ' warrant for Every collection; conference; appeal. ( 1) employer who deducts. and retains ; any amount under ORS to shall hold the same in trust for the State of Oregon and for the payment thereof.to the department in the manner and at the time provided in ORS to ) At any time the employer fails to remit any amount withheld, the department may enforce collection by the issuance' of a distraint warrant for the collection of, the delinquent amount, and all penalties,' interest and collection charges accrued thereon. Such warrant shall be issued, recorded and proceeded upon in the same manner and shall have the--same force and effect as is prescribed with respect,.ta warrants, for the. col- lection of delinquent income taxes.. 3)( a) In the case ' of an employer that is assessed pursuant to the provisions of ORS ( 12) and, ( 1), the' department may issue a notice of liability to' any officer, employee or member described in ORS ( 3)( b) of such employer within three years from the time of assessment. Within 30 days from the date the notice of liability is mailed to the officer, employee or member, such officer, employee or -member shall'i pay the assessment, plus penalties- and interest, or advise the department in writing. of objections to the - liability and, if desired, re- quest a conference. Any conference shall. be governed by the provisions of ORS pertaining to a conference requested from a notice of deficiency. b) After a conference or, if no conference is requested, a determination of the issues considering the written objections, the department shall mail the officer,, employee or member a ' conference letter affirming, canceling or adjusting- the notice of liability. Within 90 days from the date the -conference letter is mailed to the officer, employee or member, such officer, employee, or member shall pay the assessment, plus penalties- and interest, or appeal to the director in the manner provided in this chapter for- an -appeal from a notice of assessment. c) If neither payment nor written objection to the notice of liability is received by the department within 30 days' after the notice of liability has been mailed, the notice of liability becomes final.- In such event, the officer, employee or member may appeal the notice of liability to the director within 90 days. after it became final in the manner provided.in this chapter for an appeal from a notice- of assessment. 4)( a)* In ' the case ' of a failure to file a withliolding''tax report on the due date, governed _ by ' t' ie provisions of ORS ( 10) and , the, department, in addition to the. ; provisions of ORS ( 10) and , may : send notices of. determination ancf assessment to any officer, employee or member described ' in ORS ( 3)( b) any time within three years after the assessment of an employer described in ORS )( a). The, time of assessment against such officer, employee or member shall be 30 days after the dale the notice of determination and assessmente is mailed. Within 30 days from the da`te the notice of 'determination and assessment is mailed to the officer, employee or member, such' officer, employee or member shall pay' the assessment, plus pen- alties and,interest, or advise the department in writing of. objections to the assessment, and cif desired, request a conference. Any conference shall be governed by the provisions 'of ORS pertaining to a con - fere_nce` requested' from a notice of deficiency. b) +After a conference or, if no conference is - requested, a determination of the issues considering the written objections, the department shall mail the officer, employee or member a conference letter affirming, canceling or adjusting,.the notice of determination and assessment. Within 90 days from the date the conference letter is mailed to the officer, employee or member, such officer, employee or member shall pay the assessment, plus penalties and interest, or hppeal to the.'director in the manner provided in this, ' chapter for an appeal from a notice of assessment. c)' If neither payment nor written' objection to, the ' notice of determination and assessment is' received by the department within 30 days after the notice of determi- nation and assessment has been mailed, the notice of determination and assessment becomes final. In such event, the officer, employee or member. may- appeal the notice of determination and assessment to the director within 90 days after it became final in the manner- provided in this chapter for an appeal from a notice of assessment )('a) Notwithstanding the provisions of ORS , or , if more than one officer or employee of a corporation or more than one member or employee of a partnership may be held liable for payment of withheld taxes, the department may require any ' or all of the officers, members or employees' who may be held liable to appear before ' the department for a joint determi-

103 REVENUE AND TAXATION nation of liability. The department shall notify each officer, member or employee of the time and place set for the determination of liability. b) Each person notified of a joint deter- mination under this subsection shall appear and present such information as is necessary to establish that person' s liability. or nonliability for payment of withheld taxes to the department. If any person notified fails to appear, the department shall make its determination on the basis of all the information and evidence presented. The department' s determination shall be binding on all persons notified and subsection. required to appear under this c) If an appeal is taken to the Oregon Tax Court pursuant to ORS by any person determined to be liable for unpaid withholding taxes under this subsection, each person required to, appear before the department under this subsection shall be impleaded by the plaintiff and made a party to the action before the tax court and shall make available to the Oregon Tax Court such information as was presented before the department, as well as such other information as may be presented to the court. If any person required to appear before the court under this subsection fails or refuses to appear or btdmg such information in part or in whole, or is outside the jurisdiction of the tax court, the court shall make its determination on the basis of all the evidence introduced. All such evidence shall constitute a public record and shall be available to the parties and the court notwithstanding ORS , or The determination of the tax court shall be binding on all persons made parties to the action under this subsection. d) Nothing in this section shall be construed to preclude a determination by the department or the Oregon Tax Court that more than one officer, employee or member are jointly liable for unpaid withholding taxes c ; 1985 c.406 4; 1989 c.423 3i provides: Note: Section 4, chapter 423, Oregon Laws 1989, Sec. 4. The amendments to ORS by section 3 of this Act first apply to withholding tax reports due after December 31, c Applicability of ORS to when services performed by qualified real estate agent or direct seller. ( 1) For purposes of ORS to , in the case of services performed as a qualified real estate agent or as a direct seller: a) The individual performing the services shall not be treated as an employee; and b) The person for whom the services are performed shall not be treated as an em- ployer., 2) As used in this section, " qualified real estate agent" means any individual if: a) The individual is a real estate licensee under ORS to ; b) Substantially all of the remuneration whether or not paid in cash) for the services performed by the individual as a real estate licensee is directly related to sales or other output ( including the performance of ser- vices) rather than to the number of hours worked; and c) The services performed by the indi- vidual are performed pursuant to a written contract between the individual and the real estate broker, real estate appraiser or real estate organization for whom the services are performed and the contract provides that the individual will not be treated as an employee with respect to the services for Oregon tax purposes. 3) As used in this section, " direct seller" means any individual if a) The individual is: A) Engaged in the trade or business of selling, or soliciting the sale of, consumer products to any buyer on a buy -sell basis, a deposit - commission basis or any similar basis, which the department prescribes by rule, for resale by the buyer or any other person, in the home or otherwise than in a nent retail establishment; or perma- B) Engaged in the trade or business of selling, or soliciting the sale of, consumer products in the home or otherwise than in a permanent retail establishment; b) Substantially all the remuneration whether or -not paid in cash) for the performance of the services described in paragraph ( a) of this subsection is directly related to,sale's or other output ( including the per- formance of services) rather than to the number of hours worked; and c) The services performed by the indi- vidual are performed pursuant to a written contract between the individual and the person for whom the services are performed and the contract provides that the individual will not be treated as an employee with respect to the services for Oregon tax purposes c c ; repealed by 1957 c enacted in lieu of and ) Application of penalties, misdemeanors and jeopardy assessment; employer as taxpayer. The provisions of the income tax laws in ORS chapters 305 and 314 and this chapter, relating to penalties, misdemeanors and jeopardy assessments, ap-

104 PERSONAL INCOME TAX ply to employers subject to the provisions of ORS to , and for these purposes any amount deducted or required to be deducted and remitted to the department under ORS to is considered the tax of the employer and with respect to such amount the employer is considered as a tax- payer. [ 1969 c ; 1982 s. s. c ; 1985 c c ; 1975 c.672 6; 1978 c9 2; 1985 c.345 5; repealed by 1987 c Alternate methods of filing, reporting and calculating liability for nonresident employer and employee in state temporarily. ( 1) As used in this sec- tion: a) '' Nonresident employer" means an employer who: A) Has no permanent place of business within this state; and B)' Employs qualifying nonresident employees to perform temporary services in this state. ' b) " Qualifying nonresident employee" means an employee or independent contrac- tor who: A) Is not a resident or part -year resident of this state; B) Performs temporary services in this state for one or more nonresident employers; and C) Has no income from Oregon sources other than income earned in connection with the performance of temporary services for one or more nonresident employers. c) " means services Temporary services" performed during a limited period of time, not to exceed 200 days in one calendar year. 2) The department shall provide for alternate methods of filing, reporting or calculating tax liability, to be used by nonresident employers and qualifying nonresident employees to report and pay Oregon personal income tax on income earned in connection with the employees' performance of tempo- rary services in this state. In providing for an alternate filing, reporting or calculating method, the department shall have the power to: a) Prescribe forms to be filed by nonresident employers to satisfy withholding regis- tration, quarterly filing and account termination filing requirements under ORS to , or employee estimated tax requirements under ORS to b) Prescribe forms to be filed by qualifying nonresident employees to satisfy annual personal income tax return requirements under ORS c) Determine, based upon the circumstances, the amount of withholding or esti- mated tax payments necessary to result in a sum substantially equivalent to the amount of tax that a qualifying nonresident employee will be required to pay under this chapter. d) Enter into agreements pursuant to ORS for the purpose of finally determining the Oregon personal income tax li- ability of qualifying nonresident employees. e) Determine whether and to what extent other provisions of this chapter shall be applied to nonresident employers or qualifying nonresident employees. 3)( a). Except as provided in paragraph ( b) of this subsection, a nonresident employer shall comply with the requirements of ORS to in the same manner as any other employer. b) A nonresident employer may elect to employ an alternate method established by the department pursuant to this section by notifying the department in the time and manner established by rule of the department. Any nonresident employer giving no- tice of election under this paragraph shall not be required to comply with the requirements of ORS to )( a) Notwithstanding the election of a nonresident employer to employ the alternate method established by the department under this section, a qualifying nonresident em- ployee may elect to report and pay Oregon personal income tax on income earned by the employee in connection with the employee' s performance of temporary services in this state in the same manner as any other non- resident. b) If a nonresident employer does not make the election permitted under sub- section ( 3) of this section, the qualifying nonresident employees of the employer shall report and pay Oregon personal income tax on income earned in connection with their performance of temporary services within this state in the same manner as any other nonresident. 5) The department may adopt any rules it considers necessary to carry out the provisions of this section c ; formerly c ; repealed by 1987 c [ 1969 c ; repealed by 1987 c c ; repealed by 1987 c ESTATES AND TRUSTS Generally) c ; repealed by 1959 c enacted in lieu of ) c ( enacted in lieu of ); subsection ( 4) derived from 1959 c ; repealed by 1969 c c ; repealed by 1969 c

105 REVENUE AND TAXATION c.225 2; repealed by 1969 c c ; repealed by 1969 c ) c 304' 31; 1953 c 552 7; repealed by 1959 c ( enacted in lieu of ) c ( enacted in lieu of ); last sentence derived from 1959 c ; last sentence of subsection ( 6) enacted as 1961 c.225 3; 1969 c ; repealed by 1969 c Application of chapter to estates and certain trusts. The tax imposed by this chapter on individuals applies to the taxable income of estates and trusts, except for trusts taxed as corporations under ORS chapter 317 or c , 1973 c c , repealed by 1969 c Computation and payment on estate or trust. The taxable income of an estate or trust shall be computed in the same manner as in the case of an individual except as otherwise provided by this chapter. The tax shall be paid by the fiduciary c ; 1983 c c ; 1959 c ; subsection ( 2) derived from 1959 c ; repeated by 1969 c Associations taxable as corporations exempt from chapter. ( 1) An asso- ciation, trust or other unincorporated organization that is taxable as a corporation for federal income tax purposes is not subject to tax under this chapter, but is taxable as a corporation under ORS chapter 317 or 318, or both, as provided therein. 2) An association, trust or other unincorporated organization that is not taxa- ble as a corporation for federal income tax purposes but by reason of its purposes or activities is exempt from federal income tax except with respect to its unrelated business taxable income, is taxable under this chapter on such federally taxable income c ; 1973 c Treatment of business trusts and business trusts income. A domestic or foreign business trust of the type defined in ORS is subject to tax under ORS chapter 317 or 318 and amounts distributed by it to its shareholders shall be treated as distributions by a corporation for the pur- poses of ORS chapters 316, 317 and c c304 34; 1953 c.552 8; 1955 c.256 1; paragraph ( d) of subsection ( 6) of 1957 Replacement Part derived from 1955 c.256 2; repealed by 1959 c enacted in lieu of ) c ( enacted in lieu of ); subsection ( 8) derived from 1959 c ; 1965 c.99 1; repeated by 1969 c Resident Estates and Trusts) Definitions for ORS to ( 1) A " resident trust" means a trust of which the fiduciary is a resident of Oregon, or a trust the administration of which is carried on in Oregon. 2) " Resident estate" means an estate of which the fiduciary was appointed by an Oregon court or the administration of which is carried on in Oregon. 3) The " taxable income" of a resident estate or trust means ' its federal taxable income modified by the addition or subtraction. as the case may be, of its share of the fiduciary adjustment determined under ORS c , c ; repealed by 1959 c enacted in lieu of ) c ( enacted in lieu of ); subsection ( 6) derived from 1959 c ; repealed by 1969 c " Fiduciary adjustment" defined; shares proportioned. ( 1) The fiduciary, adjustment" is the net amount of the modifications to federal taxable income described in this chapter ( ORS being applicable if the estate or trust is a beneficiary of another estate or trust) that relates to its items of income or' deduction of an estate or trust. 2) The respective shares of an estate or trust and its beneficiaries ( including solely for the purpose of this allocation, nonresident beneficiaries) in the fiduciary adjustment shall - be in proportion to their respective shares of federal distributable net income of the estate or trust. If the estate or trust has no federal distributable net income for the taxable year, the share of each beneficiary in the fiduciary adjustment shall be in proportion to the share of the estate or trust income of the beneficiary for such year, under state law or the terms of the instrument, that is required to be distributed currently and any other amounts of such income distributed in such year. Any balance of the fiduciary adjustment shall be allocated to the estate or trust. 3) The department may by regulation authorize the use of such other methods of determining to whom the- items comprising the fiduciary adjustment shall be attributed, as may be appropriate and equitable, on such terms and conditions as the department may require c ; 1975 c c ; repealed by 1959 c enacted in lieu of ) c ( enacted in lieu of ); subsection ( 4) derived from 1959 c ; repealed by 1969 c Credit for taxes paid another state. A resident estate or trust shall be al

106 PERSONAL INCOME TAX lowed the " credit provided in ORS relating to an income tax, imposed by another state) except that, the limitation shall be computed, by reference to the taxable income of the,estate or trust. ( 1969 c ; 1985 c _ [ 1953 c304 37; 1965 c.202 l; repealed by 1969 c c ; repealed by 1969 c c.343 2; repealed by 1969 c Accumulation distribution credit. ( 1) A resident beneficiary of a trust whose adjusted gross income includes all or part of an accumulation distribution by such trust, as defined in section 665 of the Internal Revenue Code, shall be allowed a credit against the tax otherwise due under this chapter for all or a proportionate part of any tax, paid ' by the trust under this chapter for any preceding taxable year, that Would not have been payable if the trust had in fact made distribution to its beneficiaries at the times and in the amounts specified in section 666 of the Internal Revenue Code. 2) The credit under this section shall not reduce the tax otherwise due from the beneficiary under this ' chapter to an amount less than would have been due if the accumulation distribution or part thereof were excluded from the adjusted gross income of the beneficiary c c, 17? 2; repealed by 1969 c; Nonresident Estates and Trusts) Definitions for ORS to A " nonresident estate or trust" means an estate or trust that is not a resident. [ 1969' c c304 38; 1963 c ; 1963 c referred and rejected); repealed by 1969 c c608 2; repealed by 1969 c Income of nonresident estate or trust. For purposes of ORS to : 1) Items of income, gain, loss and deduction mean those derived from or connected with sources in this state. 2) Items of income, gain, loss and deduction entering into the definition of federal distributable net income include, such items from another estate or trust of which the first 'estate or trust is a beneficiary. 3) The source of items of income, gain, loss or deduction shall be determined under regulations prescribed by the department in accordance with the general rules in ORS as if the estate or trust were a nonresident individual.., 4) The income of a nonresident estate or trust consists of: a) Its share of items of income, gain, loss and deduction that enter into the federal definition of distributable net income; b) Increased or reduced by the amount of any items of. income, gain, loss or deduction that are recognized for federal income tax purposes but excluded from the federal definition of distributable net income of the estate or trust; c) Less the amount of the deduction for its federal exemption c , 1983 c ; 3 c ; 1957 c. 18 l, repealed by 1969 c _ Determination of Oregon share of income. ( 1) The share of a nonresident estate or trust of items of income, gain, loss and deduction entering into the definition of distributable net income and the share for purpose of ORS of a nonresident beneficiary of any estate or trust- in estate or trust income, gain, loss and deduction shall be determined as follows: a) To the amount of.items of income, gain, loss and deduction that enter into the definition of distributable net income there shall be added or subtracted, as the case may be, the- modifications to federal taxable income described in this chapter to the extent they relate to items of income, gain, loss and deduction that also enter into the definition of distributable net income. No modification shall be made under this section that has the effect of duplicating an item already reflected in the definition of distributable net income. b) The amount determined under paragraph ( a) of this subsection shall be allocated among the estate or trust and its beneficiaries ( including, solely for the purpose of this allocation, resident beneficiaries) in propor- tion to their respective shares of federal dis- tributable net income. The amounts so allocated have the saine character as for federal income tax purposes. If an item entering into the computation of such amounts is not characterized for federal income tax purposes, it has the same character as if realized directly from the source from which realized by the estate or trust, or incurred in the same manner as incurred by the estate or trust. c) If the estate or trust has no federal distributable net income for the taxable year, the share of each beneficiary in the net amount determined under paragraph ( a) of this subsection shall be in proportion to the beneficiary' s share of the estate or trust income for such year, under state law or the terms of -the instrument, that is required to be distributed currently and other any amounts of such income distributed in such

107 REVENUE AND TAXATION year. Any balance of such net amount shall be allocated to the estate or trust. 2) The department may by regulation establish such other method or methods of determining the respective shares of the beneficiaries and of the estate or trust in its income derived from sources in this state, and in the modifications related thereto, as may be a pro riate and equitable c ; 1975 c 7K c ; 1955 c ; subsection ( 4) of 1955 Replacement Part derived from 1955 c.285 2; 1957 c i40 1, 1939 c. i93 4 ( referred and rejected); 1963 c ( referred and rejected); 1967 c ; repealed by 1969 c Credit to beneficiary for accumulation distribution. A nonresident beneadjusted gross ficiary of a trust whose income derived from sources in this state includes all or part of an accumulation distribution by such trust, as defined in section 665 of the Internal Revenue Code, shall be allowed a credit against the tax otherwise due under this chapter, computed in the same manner and subject to the same limi- tation as provided by ORS with respect to a resident beneficiary c c ; 1957 c. 73 1; 1965 c.410 5; repealed by 1969 c [ 1953 c304 42; repealed by 1969 c c ; 1955 c.580 1; repealed by 1969 c % c ; 1957 s.s. c. 15 3; repealed by 1969 c c.608 2; repealed by 1969 c c. 16 2; repealed by 1969 c c ; 1953 c 552 9; 1955 c.589 1; repealed by 1969 c c493 51; repealed by 1989 c c ; 1953 c ; 1959 c referred and rejected); 1963 c ( referred and rejected); 1965 c.337 1; repealed by 1969 c c ; repealed by 1989 c c ; repealed by 1969 c c ; 1975 c.705 8; repealed by 1989 c s.s. c.15 6, subsection ( 6) derived from 1957 s. s. c. 15 8; 1959 c.92 1; 1963 c ( referred and rejected); 1965 c410 6; repealed by 1969 c c ; repealed by 1969 c c ; repealed by 1969 c RETURNS; PAYMENTS; REFUNDS Persons required to make returns. ( 1) An income tax return with respect to the tax imposed by this chapter shall be made by the following: a) Every resident individual: A) Who is required to file a federal income tax return for the taxable year; or B) Who has federal net income of more than $ 600 if single or more than $ 1, 200 if married; or C) Who, having attained the age of 65 before the close of a taxable year, has federal net income of more than $ 1, 200 if single, more than $ 1, 800 if married.and the spouse of the individual has not attained the age of 65, or more than $2,400, if both have attained the age of 65, before the close of the taxable year. b) Every nonresident individual: A) who has federal gross income from sources in this state of more than $ 600 if single and $ 1, 200 if married; or B) Who, having attained the age of 65 before the close of a taxable year, has federal gross income from sources within this state of more than $ 1, 200 if single, more than 1, 800 if married and the spouse of the individual has not yet attained the age of 65, or more than $ 2, 400 if both have attained the age of 65, before the close of the taxable year; or C) Who has any taxable income. c) Every resident estate or trust that is required to file a federal income tax return. d) Every nonresident estate that has federal gross income of $600 or more for the taxable year from sources within this state.' e) Every nonresident trust that for the taxable year has from sources within this state any taxable income, or gross income of 600 or more regardless of the amount of taxable income. 2) Nothing contained in this section shall preclude the department from requiring any individual, estate or trust to file a return when, in the judgment of the department, a return should be filed. [ 1969 c ; 1983 c Returns; instructions. The instructions to the individual state income tax return form required to be filed by this chapter shall: 1) Be written in simple words used in their commonly understood senses that con- vey meanings clearly and directly; 2) Be written in primarily simple, rather than compound or complex, sentences that are as short as possible; 3) Limit the use of definitions to definitions of words that cannot be properly explained or qualified in the text; 4) Include an index at the beginning of the instructions to provide a useful guide to the use of the form. The index shall give a comprehensive listing of return form parts in a logical sequence, and the index listings shall clearly state the contents of each section;

108 PERSONAL INCOME TAX ) Have the text of the instructions printed in roman. type, at least. as large as 10 -point modern type, two points leaded; 6) Have-'margiris that' are adequate for purposes of readability, and have a line length of the text not exceeding four inches for a column; 7) Have section headings printed in a contrasting color, typeface or size; and 8) Be printed- so that the contrast' and legibility 'of the ink and paper used is substantially the - equivalent of black ' ink bn white paper c736, Flesch reading ease score for The instructions to an in- instructions. ( 1) dividual state income tax return form shall have a total Flesch Reading Ease Score of 60 or higher. 2) ' As used in this section: a) " Flesch Reading Ease Score" means ( x + y) where x equals average sentence - length multiplied by and y equals average word length multiplied by , b) " Average sentence length" means the total number of words in the instructions to the state income tax return form divided, by the total number of sentences in. the in- structions. c) " Average word length" means the total number of- syllables in the instructions to the state income tax return form divided by the total number of words in the in- striictions ; 1953 c ; ' 15; ( referred and rejected); l; 1963 c 627, 13 lreferred and rejected),; repealed. by Joint return by husband and wife. A husband and wife may make a joint return with respect to the tax imposed by this chapter even though one of the spouses has neither gross income nor deductions, ex- cept that: 1) No joint return shall be made under this chapter if the spouses are not permitted to file a joint federal income tax return; 2) If the federal income tax liability of either spouse is deterrined' on ' a ' separate federal return, their income tax ' liabilities under -this chapter shall be ' determined on separate returns; 3) If the federal income tax liabilities of husband and wife are determined on a joint federal return, they shall file a joint return under this chapter and their tax liabilities shall be joint and several; and 4) If neither spouse is required' to file a federal income tax return and either or both are required to file an income tax return under this chapter, they may elect to file separate or joint returns and pursuant to such election their liabilities shall be separate or joint and several c ; Relief from liability for erroneous items of one spouse. ( 1) If a joint return has been made under this chapter for a taxable year and on the return there is a substantial understatement of tax attribut- able to grossly erroneous items of one spouse, upon compliance with subsection ( 2) of this section, the other spouse shall be re- lieved of liability for tax, including interest, penalties and other amounts, for the taxable year and to the extent that the liability is attributable to the grossly erroneous items. 2) To qualify for relief from liability for tax under subsection ( 1) of this section, the other spouse must establish: a)' If the Internal Revenue Service has made a determination under section 6013( e) of the Internal Revenue Code, for the same taxable year, that the determination relieved the spouse from liability for federal taxes; or b) If the Internal- Revenue Service has not made a ' determination under section 6013( e) of the Internal Revenue Code with respect to the spouse, the spouse would be qualified to be relieved of liability for federal taxes for the same taxable year under section 6013( e) of the Internal Revenue Code and the regulations issued thereunder , 3; al ; repealed by Effect of relief from federal income tax liability of spouse. ( 1) Not - withstanding any law or rule to the contrary, if, pursuant to section 6004 of the Technical and Miscellaneous Revenue Act of 1988 ( P.L ), the Internal Revenue Service determines that a spouse is relieved of liability for federal income tax upon a joint return filed for a taxable year, then and to the same extent the spouse shall be relieved of liability for tax,. including interest, penalties and other amounts, imposed under this chapter for the s e taxable year. 2) If t ( including interest, penalties or other amou ts) attributable to the disallowed deductions, as modified under this chapter, has been paid, by the spouse, the tax shall be credited or refunded to the spouse but only if claim for refund is made to the department within one year after October 3, No interest on the credit or refund shall be allowed for any period before October 3, Minor to file return; unpaid tax assessable against parent; when parent may file for minor. ( 1) Except as provided in subsection ( 2) of this section, a

109 REVENUE AND TAXATION minor shall file a return and include therein all items of income, including income attributable to personal services, and such income shall not be included on the return of' the parent. All expenditures by the parent or the minor attributable to such income are considered to have been paid or incurred by the minor. However, any tax assessed against the minor, to the extent, attributable to income from personal services, if not paid by the minor, for all purposes shall be considered as having also been properly assessed against the parent. For the purposes of this section the term " parent" includes an individual who is entitled to. the services of a minor by reason of having parental rights and duties in respect of such minor. 2) If a parent is eligible to elect and elects to include the interest and dividend income of a child on the parent's federal income tax return under section 1( i)( 7)( B) of the Internal Revenue Code, the parent shall be considered to have elected to include the interest and dividend income of the child on the return filed by the parent for the same taxable period for purposes of this chapter. The child need not in such case file a return for purposes of this.chapter for the taxable period to which the election applies c ; 1989 c al c ; 1957 c. 16 3; repealed by 1969 c Individual under disability. An income tax return for an individual who is unable to make a return by reason of minority or other disability shall be made and filed by a duly authorized agent of the individual, guardian, conservator, fiduciary or other person charged with the care of the person or property of the individual other than a receiver in possession of only a part of the individual' s property c ; 1985 c c ; repealed by 1969 c Returns by fiduciaries. ( 1) An income tax return, in the name of the decedent, for any deceased individual shall be made and filed by a personal represen- tative or other person charged with the care of the property, and this duty extends to any unfiled return prior to decedent' s death. The tax shall be levied upon and collected from the estate. A final return of a decedent shall be due when it would have been due if the decedent had not died. 2) The income tax return of an estate or trust shall be made and filed by the fiduciary thereof, whether the income is taxable to the estate or trust or to the beneficiaries thereof. If two or more fiduciaries are acting jointly, the return may be made by any one of them c ; 1975 c c ; repealed by 1969 c Final account of a fiduciary; tax settlement. ( 1) No final, account of a fiduciary shall be allowed by any court un- less the account shows, and the judge of the court finds, that all taxes imposed by this chapter upon the fiduciary that have been payable have been paid, and that all taxes that may become due are secured by bond, deposit or other security acceptable to the department. No order closing, an estate shall be entered unless the fiduciary files with the clerk of the court the department' s certificate of release, or shows that 60 days have elapsed since the mailing to the department of a request for such release and that the department has not filed any objection to the final account. 2) For the purpose of facilitating the settlement and distribution of estates held by fiduciaries, the department; on behalf of the state, may agree upon the amount of taxes at any time due or to become due from such fiduciaries under this chapter with respect to a tax return or 'returns of or fora decedent individual or an estate' or trust', and 'payment in accordance with such agreement shall be in full satisfaction of the taxes to which the agreement relates c ; 1971 c c.435 3; repealed by c.493, Notice of qualification of re- ceiver and others. Every receiver trustee in bankruptcy, assignee for benefit of creditors or other like fiduciary, shall give notice of qualification as such -to the department, as may be required by regulation. [ 1969 c [ 1969 c ; 1971 c332 1; 1975 c.672 7; 1978 c. 9 3; 1981 c.801 5; repealed by 1983 c ( 1969 c. 493 * 62; repeated by 1971 c c 410 2; 1967 c ; repealed by 1969 c c ; repealed' by 1965 c c ; 1971 c.354 6; 1975 c ; 1979 c 470 1; 1980 s.s c. 7 23; repealed by 1989 c c 591 2; 1963 c 388 3; 1963 c referred and rejected); repealed by 1965 c c ; repealed by 1965 c c , 4; repealed by 1965 c c 591 4; repealed by 1963 c referred and rejected); repealed by 1965 c c , repealed by 1963 c 627, 23 referred and rejected); repealed by 1965 c c.410 3; repealed by 1969 c Date return considered made or advance payment made. ( 1) A return filed before the last day prescribed by law for the filing thereof is considered as filed on the last day. An advance payment of any portion of the tax made at the time the return was filed is considered as made on the last day prescribed by law for the payment of the tax or, if the taxpayer elected to pay the tax in instalments, on the last day prescribed for

110 PERSONAL INCOME TAX the payment of the first instalment. The last day prescribed by law for filing the return or paying the tax shall be determined without regard to any extension of time granted the taxpayer by the department. 2) ORS applies to returns filed by mail and to due dates that fall on a Saturday, Sunday or legal holiday c c.591 6; repealed by 1963 c referred and rejected); repealed by 1965 c c ; repealed by 1971 c c , repealed by 1969 c c 591 7, repealed by 1963 c referred and rejected), repealed by 1965 c ( 1959 c. 591 N, repealed by 1963 c i eferred and rejected), repealed by 196; L c , repealed by 1963 c referred and rejected); repealed by 1965 c c , repealed by 1963 c referred and rejected); repealed by 1965 c c ; repealed by 1963 c referred and rejected); repealed by 1965 c c ; repealed by 1963 c referred and rejected), repealed by 1965 c c ; repealed by 1965 c c ; repealed by 1965 c c ; repealed by 1965 c c ; repealed by 1965 c.410 7) c ; repealed by 1965 c c ; repealed by 1965 c ( 1965 c 248 3; repealed by 1969 c c ; 1953 c ; 1955 c ; 1957 c 586 2; 1957 s. s. c. 15 4; 1963 c486 l; 1963 c ( referred and rejected); 1965 c 248 1; repealed by 1969 c Department may require copy of federal return. If directed to do so by the department, through regulations or instructions upon the state income tax return form, every taxpayer required by this chapter to file an income tax return with the department shall also file with such return a true copy of the federal tax return filed by the taxpayer pursuant to the requirements of the Internal Revenue Code for the same taxable year. The department may, in its discretion, promulgate regulations or instructions that permit taxpayers to submit specified excerpts from federal returns in lieu of submitting copies of the entire federal return. The federal return or any part thereof required to be filed with the state income tax return is incorporated in and shall be a part of the state income tax return c , 1977 c Change of election. Any election expressly authorized by this chapter may be changed on such terms and conditions as the department may prescribe by regulation c c ; 1985 c ; renumbered in Tax treatment of common trust fund; information return required. 1) The tax treatment of common trust funds and participants therein, under this chapter, is governed by the provisions of the Internal Revenue Code. 2) Every bank or trust company maintaining a common trust fund shall make a return to the department for each tax year, stating specifically, with respect to such fund, the items of gross income and deductions, and shall include in the return information sufficient to identify the trusts and estates entitled to share in the net income of the common trust fund and the amount of the proportionate share of each such participant. The return shall be made at such time as is designated by the department c ( Formerly , amended by 1961 c.218 1; repealed by 1969 c ( 1967 c.592 7; 1969 c ; repealed by 1969 c ; see Refund as contribution to Arts Development Fund. ( 1) Individual taxpayers who file an Oregon income tax return and who will receive a tax refund from the Department of Revenue may designate that a contribution be made to the Arts Develop- ment Fund by marking the appropriate box printed on the return pursuant to subsection 2) of this section. 2) The Department of Revenue shall print on the face of the Oregon income tax form for residents a space for taxpayers to designate that a contribution be made to the Arts Development Fund from their income tax refund. The space for designating the contribution shall provide for checkoff boxes as indicated under ORS call 1; 1989 c, provides: Note: Section 29, chapter 987, Oregon Laws 1989, See. 29. The amendments to ORS renumbered , , , , , , and section 3, chapter 902, Oregon Laws 1987, by sections 17 to 23 and 25 of this Act apply first to contributions made by checkoff for tax years beginning on or after January 1, c Refund as contribution to designated political party. ( 1) Resident individual taxpayers who file an Oregon income tax return and who will receive a tax refund from the Department of Revenue may designate that a contribution be made to the political party designated. An individual resident taxpayer shall make the designation by marking the appropriate box printed on the return pursuant to subsection ( 2) of this sec- tion. 2) The Department of Revenue, on the face of the Oregon income tax form for individuals, shall provide a place for resident individual taxpayers to make the designation

111 REVENUE AND TAXATION provided by this section next to the name of a major political party. A space also shall be provided for the taxpayer to make a written designation of a minor political party to receive the contribution. The space for making the designation shall provide for checkoff boxes in the amount of $1, $ 5, $ 10 or other dollar amount. 3) If a person filing an individual tax return'- designates more than one political party to receive the contribution, the designation shall be void and no contribution shall be made. 4) If a joint return is filed and only one political party is designated, that party shall receive a contribution in the total amount designated. If two political parties are designated on a joint return, each political party shall receive a contribution in the amount designated by each spouse. If more than two parties are designated, the designations shall be void and no contribution shall be made. 5) If an organization which is not a political party is designated under this section, the designation is void and no contribution shall be made. 6) As used in this section: a) " Major political party" means an af- filiation of electors described in ORS b) " Wrlor political party" means an af- filiation of electors described in ORS c) " Political party" means any major or minor political party c Note: Sections 12 and 13, chapter 902, Oregon Laws 1987, provide: Sec. 12. ( 1) If, as of the close of each of the two fiscal years immediately preceding the January 1 of the calendar year in which the taxable year of the taxpayer begins, it is determined by the State ' Measurer that the amount transferred by the Department of Revenue under subsection ( 1) of section 9 of this Act [ ( 1)] during the fiscal year is $ 50,000 or less, no checkoff shall be provided for political parties under section 7 of this Act for the tax years of taxpayers beginning in the calendar years following the second year determination. 2) Determinations under subsection ( 1) of this section shall first be made for the fiscal years beginning July 1, 1987, and July 1, 1988, to apply for the tax- years beginning in the calendar year c Sec. 13. Section 7 of this Act [ ORS shall apply to taxable years beginning on or after January 1, c Refund as contribution to Alzheimer' s Disease Research Fund. ( 1) Individual taxpayers who file an Oregon income tax return for purposes of this chapter and who will receive a tax refund from the Department of Revenue may designate that a contribution be made to the Alzheimer' s Disease Research Fund by marking the appropriate box printed on the return pursuant to subsection ( 2) of this section. 2) The Department of Revenue shall print on the face of the Oregon income tax form a space for taxpayers to designate that a contribution be made to the Alzheimer' s Disease Research Fund from their income tax refund. The space for designating the contribution shall provide for checkoff boxes as indicated under ORS ) A designation under subsection ( 1) of this section shall be made with respect to any taxable year on the returns for that tax- able year, and once made shall be irrev- ocable c , 1989 c Refund as contribution to Children' s Trust Fund. ( 1) Recognizing again the policy set forth in ORS , that children are Oregon' s most valuable resource and that child abuse and neglect is a threat to the physical, mental and emotional health of children; and further recognizing that the incidence of validated cases of reported child abuse and neglect has been increasing at an alarming rate in Oregon and represents an enormous threat to the welfare of our community, the Legislative Assembly hereby provides an additional opportunity to taxpayers to assist in child abuse and neglect prevention under ORS to by means of an income tax checkoff. 2) Any individual taxpayer who files an Oregon income tax return and who will receive a tax refund from the Department of Revenue may designate that a contribution be made to the Children' s Trust Fund established under ORS by marking the appropriate box printed on the return pursu- ant to subsection ( 3) of this section. 3) The department shall print on the face of the Oregon income tax form a space for taxpayers to designate that a contribution be made to the Children' s Trust Fund from their income tax refund. The space for designating the contribution shall provide for checkoff boxes as indicated under ORS ) The Department of Revenue shall transfer to the Children' s Bust Fund established under ORS an amount as credited to the Children' s ' Dust Fund under ORS c.771 2; 1989 c Refund as contribution to Oregon Peace Institute. ( 1) Individual taxpayers who file an Oregon income tax return for purposes of ORS chapter 316 and who will receive a tax refund from the Department of Revenue may designate that a contribution be made to the Oregon Peace Institute, a nonprofit corporation, by marking the appropriate' box printed on the return pursuant to subsection ( 2) of this section. 2) The Department of Revenue shall print on the face of the Oregon income tax

112 PERSONAL INCOME TAX form a space for taxpayers to designate that a contribution be made to the Oregon Peace Institute from their income tax refund. The space for designating the contribution shall provide for checkoff boxes as indicated under ORS ) There is established as a separate and distinct fund in the State Treasury, the Oregon Peace Institute Fund. The fund shall consist of: a) An amount credited to the fund under ORS , which shall be transferred by the Department of Revenue to the fund. b) Gifts, grants and donations, in money or otherwise, for use as described in subsection ( 2) of this section, which the State Treasurer may solicit and accept from private and public sources and shall cause to be deposited and credited to the Oregon Peace Institute Fund. c) Interest or other earnings on the amounts described in paragraphs ( a) and ( b) of this subsection which shall inure to the benefit of the Oregon Peace Institute Fund. 4) The Oregon Peace Institute shall report to the Oregon Senate and Oregon House Committees on Human Resources, appointed to serve at the Sixty -sixth Legislative Assembly, the amount of money received and Oregon programs to which funds were distributed, from the checkoff program established under subsection ( 1) of this section. 5) If the State Treasurer determines that a member of the Oregon Senate and a member of the Oregon House of Representatives are not serving on the board of directors of the Oregon Peace Institute, the State Treasurer shall notify the department and no checkoff shall be provided for the checkoff program established under subsection ( 1) of this section for the tax years of taxpayers beginning in the calendar years following the calendar year of determination. 6) The Department of Revenue shall have access to and control of the moneys held in the fund established in subsection ( 3) of this section, but shall use such moneys only for the purpose of payment to the Oregon Peace Institute. The moneys in the fund are continuously appropriated to the department for that purpose. The department shall determine the procedure for payment by administrative rule. provides: c Note: Section 33, chapter 987, Oregon Laws 1989, See. 33. Section 32 of this Act shall apply to tax years that begin on or after January 1, c DISTRIBUTION OF REVENUE Distribution of revenue to General Fund; working balance. ( 1) The net revenue from the tax imposed by this chapter, after deducting refunds, shall be paid over to the State. Treasurer and held in the General Fund as miscellaneous receipts available generally to meet any expense or obligation of the State of Oregon lawfully incurred. 2) A working balance of unreceipted revenue from the tax imposed by this chapter may be retained for the payment of refunds, but such working balance shall not at the close of any fiscal year exceed the sum of $1 million. 3) Moneys are continuously appropriated to the Department of Revenue to make the refunds authorized under subsection ( 2) of this section c ; 1977 c c ; 1953 c ; 1955 c.596 3; subsection ( 3) derivied from 1955 c596 4; 1957 c.586 3; 1963 c ( referred and rejected); repealed by 1969 c c ; 1957 c , repealed by 1969 c c 592 2; repealed by 1969 c [ 1965 c 592 3; repealed by 1969 c [ 1953 c , repealed by 1969 c c , repealed by 1957 c enacted in lieu of ) c , repealed by 1969 c [ 1953 c , repealed by 1969 c c ; repealed by 1957 c enacted in lieu of ) c ; repealed by 1969 c c ; repealed by 1957 c enacted in lieu of and ) l c ; repealed by 1957 c enacted in lieu of and ) [ 1953 c304 65; repealed by 1957 c enacted in lieu of ) 1 PAYMENT OF ESTIMATED TAXES " Estimated tax" defined. As used in ORS to , " estimated tax" means the amount of income tax imposed under this chapter for the taxable year, as estimated by the individual, minus the sum of any credits, as estimated by the individual against tax provided by this chapter s. s. c.7 4, 1985 c Application of ORS to to estates and trusts. ORS to do not apply to an estate or trust s.s. c [ 1953 c ; repealed by 1957 c enacted in lieu of and )] When declaration of estimated tax required; exception; effect of short tax year; content; amendment. ( 1) Except as provided in subsection ( 2) of this section, every individual shall declare an estimated tax for the taxable year if:

113 REVENUE AND TAXATION a) The gross income for the taxable year can be reasonably expected to include more than $ 1, 000 from sources other than wages as defined in ORS ( 2); or b), The gross income for the taxable year can be reasonably expected to exceed: A) $ 20, 000 in the case of: i) A single individual, including a head of household as defined in section 2 ( b) of the Internal Revenue Code, or a surviving spouse as defined in section 2 ( a) of the Internal Revenue Code; or ii) A married individual entitled under ORS to file a joint declaration with a spouse, but only if the spouse has not received wages, as defined in ORS ( 2) for the taxable year; or B) $ 10,000 in the case of a married individual entitled under ORS to file a joint declaration with a spouse, but only if each spouse has received wages as defined in ORS ( 2) for the taxable year; or C) $ 5, 000 in the case of a married individual not entitled under ORB to file a joint declaration with a spouse. 2) No declaration is required if the estimated tax as defined in ORS is less than $ ) An individual with a taxable year of less than 1 2 months shall make a declaration in accordance with rules adopted by the de- partment. 4) An individual may amend the declaration filed during the taxable year under rules prescribed by the department. 5) The declaration shall contain information required by the department by rule ss. c.7 2, 2a, 5, 8; 1981 c.6 8 la; 1987 c c ; repealed by 1957 c enacted in lieu of and ) Joint declaration of husband and wife; liability; effect on nonjoint returns. ( 1) Except as provided in subsection 2) of this section, a husband and wife may make a single declaration jointly under ORS to The liability of the husband and wife making such a declaration shall be joint and several. 2) A husband and wife may not make a joint declaration: a) If either the husband or the wife is a nonresident alien; b) If they are separated under a decree of divorce or of separate maintenance; or c) If they have different taxable years. 3) If a husband and wife make a joint declaration but not - a joint- return for the taxable year, the husband and wife may, in such manner as they may agree, and after giving notice of the agreement to the department: a) Treat the estimated tax for the year as the estimated tax of either the husband or of the wife; or them. b) Divide the estimated tax between 4) If a husband and wife fail to agree, or fail to notify the department of the manner in which they agree, to the treatment of estimated tax for a taxable year for which they make a joint declaration but not a joint return, the payments shall be allocated between them according to rules adopted by the department. Notwithstanding ORS , or , the department may disclose to either the husband or the wife, the information upon which an allo- cation of estimated tax was made under this section s. s. c.7 3, 1985 c Note: See note under When declaration required of nonresident. No declaration shall be required of a nonresident individual under ORS to unless: 1) Withholding under this chapter is made applicable to the wages, as defined in ORS , of the nonresident individual; or 2) The nonresident individual has income, other than compensation for personal services subject to deduction and withhold- ing under ORS , which is effectively connected with the conduct of a trade or business within this state s s. c. 7 10; 1985 c ( 1953 c ; 1957 c ; 1959 c 632 1; 1961 c.504 2; 1969 c ; repealed by 1969 c When individual not required to file declaration. ( 1) An individual need not file a declaration of estimated tax required by ORS ( 1), if a) The estimated gross income of the in- dividual from farming or fishing, including oyster farming, for the taxable year is at least two - thirds of the total estimated gross income from all sources for the taxable year; or b) The gross income of the individual from farming or fishing, including oyster farming, shown on the return of the individual in the preceding taxable year is at least two - thirds of the total gross income from all sources shown on such return. 2) For purposes of computing gross income under this section, an individual who is a stockholder of one or more electing small business corporations for federal income tax purposes shall consider his or her share of the gross income of the electing small business corporation as his or her in-

114 PERSONAL- INCOME TAX dividual income. The electing small business corporation gross income shall be classed as farming, fishing, nonfarming or nonfishing as the case may be in carrying out the' provisions of this section ss. c c , c595 1;. repealed by 1957 c Date of filing declaration. Ex- cept as provided in ORS , declarations of estimated tax required by ORS '( 1.) from individuals who are neither farmers nor fishermen for the purpose of that section shall be filed for tax years beginning on or after January 1, 1982, on or before April 15 of the taxable year,. except that if the requirements of ORS ( 1) are first met:' 1) After April 1 and before June 2 of the taxable year, the declaration shall be filed on or before June 15 of the taxable year; 2) After June 1 and before September, 2 of the taxable year, the declaration shall be filed on or before September 15 of the taxable year; or 3) After September 1 of the taxable year, the declaration shall be filed on or before January 15 of the succeeding year s. s. 0 11, 1981 c , 1983 c Amount of estimated tax to, be paid with declaration; instalment schedule; prepayment of instalment. ( 1) For taxable years beginning on or after January 1, 1982, an individual shall pay the estimated tax, with respect to which a declaration is required under ORS ( 1), as provided in subsections ( 2) to ( 6) of this section. 2) If the declaration is filed on or before April 15 of the taxable year, the estimated tax shall be paid in four equal instalments. The first instalment shall be paid at the time of the filing of the declaration, the second and third on June 15 and September 15 of the taxable year, and the fourth on January 15 of the succeeding year. 3) If the declaration is filed after April 15 and not after June 15 of the taxable year, and is not required by ORS to be filed on or before April 15 of the taxable year, the estimated tax shall be paid in three equal instalments. The first instalment shall be paid at the time of the filing of the declaration, the second on September 15 of the calendar year, and the third on January 15 of the succeeding taxable year.- 4) If the declaration is filed after June 15 and not after September 15 of the taxable year, and is not required by ORS to be filed on or before June 15 of the taxable year, the estimated tax shall be. paid in two equal instalments. The first instalment shall be paid at the time of filing of the declaration, and the second on January 15 of, the succeeding taxable year. 5) If the declaration is filed after September 15 of the taxable year, and is not required by, ORS to be filed on or before September, 15, of the taxable year, the estimated tax shall be paid in full at the time of filing of the declaration. 6) If the declaration is filed after the time prescribed in ORS , subsections 3) to (5) of this section shall not apply. Instead,' therekshall be- paid at the time bft' filing all instalments of estimated tax, which would have been payable on or before such time if the declaration had been filed within the time prescribed in ORS , and the remaining instalments shall be paid at the times at which, and in the amounts in which, they would have been payable if the declaration had been so filed.., 7) If a- taxpayer does not file a declaration but files a return on -or before January 31 of the succeeding year and pays in full the amount stated as due on the return: a) If the' declaration is not 'required to be, filed during 'the taxable year, but is required to be, filed on -or before January 15, the return shall be cbnsidered as the decla- ration; and b) If the tax shown on the return, as re- duced by the sum of the credits against the tax provided by this chapter, is greater than the estimated tax shown in an earlier declaration, or in the last amendment thereof,. the return shall be considered as the amendment of the declaration permitted by ORS ) to be filed on or before January 15. 8) In the application of this section to a taxable year beginning on any date other than January 1, there shall be substituted for the 15th or last day of the' month specified in this section, the 15th or last day of the corresponding month. '. 9) An individual may pay an instalment of 'the estimated tax before the date" prescribed for its' payment. 10) Any payment of estimated z, tax received by the department shall first be applied -to. underpayments of estimated tax due for any prior instalment due for the taxable year. Any excess amount shall be applied to the instalment, that next becomes due after the payment was received. ( 1980 ss. c.7 16, 20; 1981 c 678 3; 1985 c 603 7, 1987 c c.304 ' 70; 1955 c.595 2; 1957 c ; renumbered Effect of payment of estimated tax or instalment; credit for overpayment of prior year taxes. ( 1) Payment of the estimated income tax or any instalment shall be considered payment on account of the income, taxes,imposed by this chapter for the taxable year.

115 REVENUE AND TAXATION 2). The department may adopt rules which enable the taxpayer or department to credit against -the, estimated income tax the amount the" taxpayer or the, department determines to be- an' overpayment of the income tax for a preceding taxable year ' s.s: c.7 19, ,11953 c ;, 1955 c ; 1957 c ; renumbert s, 316:587 Effect, of underpayment of estimated tax; computation of underpayment. ( 1),Except as provided in subsection 5) of this section, if an individual makes -an underpayment of estimated tax, interest shall accrue at.. the rqite established under QRS 305, 220 for each month}., or fraction thereof, on ' the amount underpaid for the period the estimated tax or, any instalment remains unpaid. The. penalty prpvisions contained in OHS, chapter, 314 for underpayment of tax shall not apply to, underpaymepts of estimated, 6m, under ORS;, to ) For,purposes of subsection ( 1) of this section, the amount, of underpayment shall beythe excess of the required instalment over the amount (if any) of the instalment paid on of before -the due date for. the instalment. 3) The period of underpayment shall run fnrri the, date the instalment was due to the earlier of the' following dates:' " a) The 1,5th day, of,the fourth month following the close of the taxable year; or b) With respect to any portion of the underpayment, the date on. vhlch the portion As paid, 4) For.purposes of,paragraph ( b) of subsection ( 3) of this section, a- payment of estimated tax shall be credited against unpaid required instalments' in the order, in which such,instalments are required to be paid. 5)( a) Interest accruing under subsection L) of this section shall.not be imposed if -the individual was a resident. of this state throughout the preceding taxable, year and had no tax liability for that year, and the preceding taxable year~ -was a taxable year of 12. months. % - b)--iriterest accruing under subsection ( 1) of this section shall not be -imposed with respect to any uriderpaymeiit' of estimated tax attributable to the pro rata share of at shareholder of the income of an S corporation if: W The income' is taxable income for an initial year for which 'S corporation status is eldctdd fdr' the corporeation; and B) The shareholder, is, a', nonresident or for. the preceding table year was a part - year resident for Oregon: tax purposes.. 1 f '( 6). For pul oses of this: section, the estimated tax shall be computed without any reduction for the amount of credit estimated to be allowed to the- individual for the taxable year under ORS The amount of the credit allowed under ORS for the taxable year shall be considered a payment of estimated tax. An equal 'part of the credit s,ball- be considered paid on each instalment date for the taxable year, unless the taxpayer establishes the date on, which all amounts were actually withheld, in which case the amount so withheld shall be considered payment of estimated tax on the dates on which the amounts were 'actually withheld. 7) For purposes of subsections ( 5) and ( 8) of this section, the term " tax" means the tax imposed by this chapter minus any credits against tae allowed for purposes of this chapter, other than. the provided by ORS credit - against tax 8) For purposes of subsections ( 2) and ( 4) of this' section, the term " required instalment" means the amount of the instalment which would be due if the estimated tax were equal to the lesser of: a) Ninety percent df the tax shown on the return for the taxable year ( or, if no return is filed, 90 percent of the tax for such year); or b) One hundred percent of the tax shown on the return filed by the individual for the preceding taxable year, and the preceding taxable year was a taxable year of 12 months; or c) Ninety percent of the tax for the tax- able year computed, by placing on an annualized basis the taxable income for the months in the taxable year ending before the month in which the instalment is required to be paid s.s. c.7 22; 1982 s.s -1 c ; 1985 c.603 8; 1987 c a; 1989 c625 13b1 provides: Note: Section 92, chapter 625, Oregon Laws 1989, Sec. 92. The amendments to ORS by section 13b- of this Act apply to tax years beginning on or after January -1, Notwithstanding any law to the contrary, any interest assessed upon an underpayment of tax for a tax year beginning on or after January 1, 1987, that would not have been assessed had the amendmerlts' to ORS been in effect and operative, and that renfains unpaid, is canceled. However, no refund of interest shall be made pursuant to this section c When interest on underpayment not imposed. Interest accruing under ORS ( 1) shall not be imposed for any taxable year if the ' tax shown on the return for the taxable year'( or, if no return is filed, the tax), minus the sum of any credits allowable for purposes of this chapter, including the credit allawable under ORS , is less than $ c293 22c1 316: 589 Application to short tax years and tax years beginning on other ' than January 1. ( 1) The application of ORS

116 PERSONAL INCOME TAX to to taxable years of less than 12 months shall be in accordance with rules adopted by the Department of Revenue. 2) In the application of ORS to to a taxable year beginning on any date other than January 1 there shall be substituted, for the months specified in ORS to , the months which correspond thereto s. s. c.7 14, 15;, 1985 c c ; repealed by 1969 c ( 1953 c ; 1955 c ; repealed by 1957 c ( enacted in lieu of and ) c ; 1953 c , 1957 c. 17 1, repealed by 1957 c ( enacted in lieu of and ) l c304 73; 1953 c ; 1955 c 583 1; 1957 c23 1; repealed by 1957 c ( enacted in lieu of and ) c ; 1955 c ; repealed by 1957 c ( enacted in lieu of , and ) c ; repealed by 1957 c enacted in lieu of and ) c ; repealed by 1957 c enacted in lieu of and ) [ 1953 c ; repealed by 1957 c enacted in lieu of and )) c ; repealed by 1957 c enacted in lieu of , and ) [ 1953 c ; 1961 c.504 3; repealed by 1969 c and 1969 c c ; 1953 c ; repealed by 1957 c ( enacted in lieu of and ) c ; 1953 c ; repealed by 1957 c ( subsections ( 1) and ( 2) of enacted in lieu of and ) [ 1953 c ; repealed by 1957 c enacted in lieu of and ) c ; 1953 c ; 1955 c.588 1, repealed by 1957 c ( enacted in lieu of and ) c ; repealed by 1957 c enacted in lieu of and ) c ; 1953 c ; repealed by 1957 c ( enacted in lieu of and ) 1 MODIFICATIONS TO TAXABLE INCOME GENERALLY Modification of taxable income. ( 1) There shall be subtracted from federal taxable income: a) The interest or dividends on obligations of the United States and its territo- ries and possessions or of any authority, commission or instrumentality of the United States to the extent includable in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States. However, the amount subtracted under this paragraph shall -be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph, and by any expenses incurred in the production of interest or dividend income described in this paragraph to the extent that such expenses, including amortizable bond premiums, are deductible in determining federal taxable income. b) The amount of any federal income taxes accrued by the taxpayer during the taxable year as described in ORS ' , less the amount of any refunds of federal taxes previously accrued for which a tax benefit was received. c) Amounts received by a retiree, or the surviving spouse of a retiree in the taxable year in compensation for or on account of personal services rendered in prior years, from a pension, annuity, retirement or similar fund under a public retirement system established by the United States, including the retirement system for the performance of service in the Armed Forces of the United States, or by this state or any municipal corporation or political subdivision of this state. The maximum amount excludable from taxable income under this paragraph from such pensions or annuities shall be in the amount of $5, 000. If the taxpayer receives 30,000 or more of household income, as defined in ORS , the subtraction shall be reduced one dollar for each one dollar, or fraction thereof, that the household income of the taxpayer exceeds $ 30,000. the d)( A) If the taxpayer does not' qualify for subtraction under subparagraph ( B) of this paragraph, compensation ( other than pension or retirement pay) received for active service performed by a member of the Armed Forces of the United States in an amount not to exceed $ 3,000 per annum. B) For the tax year of initial draft or enlistment into the Armed Forces of the United States or for the tax pear of discharge from or termination of full -time active duty for the Armed Forces of the United States, compensation ( other than pension or retirement pay or pay for service when on military reserve duty) paid by the Armed Forces of the United States for services performed outside this state, if the taxpayer is on active duty as a full -time officer, enlistee or draftee, with the Armed Forces of the United States. e) For taxable years open to audit on October 5; 1973, the amount of any deferred income which was added to federal taxable income for state tax purposes under paragraph ( e) of subsection ( 2) of this section in a prior taxable, year and which is now added to federal taxable income. For purposes of this paragraph, the amount subtracted shall not exceed the amount of gain now reported on the federal return. If the gain is a capital

117 REVENUE AND TAXATION gain- or subject to, capital gain treatment, the adjustments under this, - paragraph shall be similar to the adjustments made under paragraph ( e) of subsection ( 2) ' of this section- in the prior year. f) For taxable years beginning - on and after January, 1, 1972, any expenses under ORS 118:070 ( 6) that have not been deducted in computing federal taxable income and have not been and will not be claimed, as dedtictions for Oregon inheritance tax purposes under ORS ) There shall be added to federal taxable income: a) Interest or dividends, exempt from federal income tax, on obligations or securi- ties of any, foreign state or of a political subdivision or authority of any foreign, statel However, the amount added under this parapraph shall be reduced by any interest ' on indebtedness incurred to carry the obligations or securities described in this paragraph and by any expenses, incurred in the production of interest or dividend. income described in this paragraph. b) Interest or dividends on obligations of _ any authority, commission, sinstrumentality and territorial possession of the, United States which by- the laws of the United, States. are exempt from federal income tax 'but not from state income taxes: However, the amount added under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph and by. any expenses incurred in the production of interest or dividend income described in this paragraph. c) The amount of any federal estate taxes allocable to income, in respect of a decedent not taxable by Oregon. d) The amount of any allowance for depletion in excess of 'the taxpayer' s adjusted basis in the ' property depleted, deducted on the taxpayer-'s federal income tax return for the taxable year, pursuant to sections 613, 613A, 614,' 616 and. 617 of the Internal Revenue Code. e) For taxable years beginning on and after January 1, 1969, the. amount of any gain which is deferred for tax recognition pur- poses. upon the voluntary or involuntary conversion or exchange of tangible real or personal property where the property newly acquired by the taxpayer has a situs outside the jurisdiction of the State of Oregon. However, f6r taxable years beginning on and after January 1,' 1979, this paragraph shall not, apply to the principal - residence newly acquired by the, taxpayer even if its sites is outside the jurisdiction" of the State of Oregon. f) For taxable years beginning on and after January 1, 1972, any expenses under ORS ( 6) that have been or will be claimed as deductions, for Oregon inheritance tax purposes in an amount not to exceed the deductions actually claimed by the taxpayer on the federal income tax return for the same taxable year. g) For taxable' years beginning on or after January 1, 1985, the dollar amount de- ducted under section 151 of- the Internal Revenue Code for personal exemptions for the taxable year. 3)( a) In the case of amounts received from a retirement system as described in para aph ( c) of subsection ( 1) of this section the $ 5, 000 exclusion shall be granted only to taxpayers age 62 or older. b) For purposes of paragraph ( c) of subsection ( 1) of this section, benefits received under the federal Social Security Act or section- 3( a), 4( a) or 4( f) of the federal Railroad Retirement Act of 1974, as amended, or their successors, shall not be included in household income. 4) As used in paragraph ( c) of subsection 1) of this section, " surviving spouse" means any, person to whom the retiree was married at' the time of death and who is a recipient of compensation from the pension, annuity, retirement or similar fund on account of the marriage. ` 5) Discount and gain or loss on retirement or disposition of obligations described under paragraph ( a) of subsection ( 2) of this section issued on or after January 1, 1985, shall be treated for purposes of this chapter in the same manner as under sections 1271 to 1283 and other pertinent sections of the Internal Revenue Code as if the obligations, although issued by a foreign state or a political subdivision -of a foreign state, were not tax exempt under the Internal Revenue Code. Formerly ; 1985 c.345 7; 1985 c ; 1987 c , 1987 c ; 1989 c Note: See note under Interest or dividends to benefit self employed - or ' individual retirement accounts. ORS ( 1)( a) shall apply to the interest or dividends described under ORS ( 1)( a) to the' extent such interest or dividends are - includable in arriving at federal taxable income as distributions from plans to benefit the self employed - or from individual retirement, accounts described' under sections 401 to -408 of the Internal Revenue Code. [ 1985 c :683 State exempt- interest dividends. ( 1)' A regulated investment company, or a pool of assets managed by, a fiduciary, including a 'bank, a savings association or a credit, union, shall be qualified to pay state

118 1( PERSONAL INCOME TAX exempt- interest dividends, as defined in subsection ( 2) of this section, to its shareholders or beneficiaries. 2) The term " state exempt - interest divi- dend" means any dividend or part thereof other than a capital gain dividend, as- defined in section 852(b) of the Internal Re- venue Code) paid by a regulated investment company, or any pool of assets managed by a fiduciary, including but not limited to a bank, a savings association or a credit union, and designated by it as a state. exempt - interest dividend in a written notice mailed to its shareholders or beneficiaries not later than 60 days after the close of its taxable year. If the aggregate amount so designated with respect to a taxable year ( including state exempt- interest dividends paid after 'the close of the taxable year in the manner described in section 855 of the Internal Revenue Code) is greater than the excess of (a) the amount of interest and dividends, ' received on obligations described in ORS ( 1)( a), over (b) the sum of the amount of any deductible interest on' indebtedness incurred to carry such obligations and the amount of any deductible expenses incurred in' the production of interest and dividend income from such obligations, the,portion of such distribution which shall constitute a state' exempt - interest dividend shall be only that' proportion of the amount so designated as the amount of such excess for such taxable year bears to the amount so designated. The exemption created. by this, section shall not exceed the portion of the dividend which is attributable to items of interest described in ORS ( 1)( a). 3) A state, exempt - interest dividend shall be treated by a shareholder or beneficiary for all purposes as- an item of interest described in ORS ( 1)( a). The shareholder or beneficiary shall subtract from federal taxable income the state exempt - interest dividends received with respect' to the shares of a regulated investment company or any pool of assets managed by a fiduciary, including but not limited to a bank, a savings, association or a credit union. However, the amount subtracted under this section shall, be re- duced ( but not below zero) by an amount equal to any deductible interest on indebtedness incurred to carry such - shares multiplied by the state exempt- interest dividends and divided, by the total dividends on. such shares for the taxable year. 4) If a shareholder of a regulated invedtment company, or a beneficiary of a pool of assets managed by a fiduciary, including.a bank, a savings association or a credit union, receives a state exempt- interest dividend with respect to any share, and the share is held by the taxpayer for six months or less, then any loss on the sale or exchange of the share,shall;, to the extent of the amount the state exempt- interest dividend, be disallowed. The, department may adopt rules that reduce the holding period requirements to less than six months. 5) As used in this section:, a) " Bank" means a banking institution, as' defined in ORS 706:005 ( 6), or a national bank, `as "defined in ORS ( 16): b) " Credit union` means a credit union as defined in ORS or a federal credit union., c) " Savings association" means a. savings association as defined in ORS ( 16) or a - federal association, as defined in ORS 722'.004 ( 8) c b; 1989 c provides: Note: ' Section 3, chapter 988, Oregon Laws 1989, Sec, 3. The amendments to ORS, by section 2 of this Act first apply to taxable years beginning on or after January 1, ( 1989 c :685 Federal income tax deductions; accrual method of accounting required. 1) The federal ` income tax deduction pro - vided' by -ORS shall be as reported on the taxpayer' s original return and shall ' be computed on the accrual method of accounting: Any adjustments -to the federal income tax deduction now or hereafter required by Oregon law, including but not limited to the elimination of the self employment - tax, also shall be computed and eliminated according to the accrual method of accounting. 2) If refunds or additional assessments result from an adjustment whether initiated by the federal or state government or the taxpayer after the.filing of -the original return by the- taxpayer, any additional federal taxes shall be deductible by the Oregon tax- payer under this section in the year in which the adjustment is. finally determined or paid whichever is later. In the case of a refund the tax,reduction, shall be added to the taxpayer' s income in the year in which the refund is redeived. 3)- For purposes of this chapter, federal income tai does not include the following: a) Taxes, contributions or other pay- ments paid by employees in pursuance of federal laws relating to social security, rail- road retirement, unemployment compen- sation or old age benefits. b) Taxes paid pursuant to the Self - Employment Contribution Act, subtitle A, chapter 2, Internal Revenue Code. ( Formerly ; 1987 c Amount in excess of standard deduction for child; limitation. There shall be added to. federal taxable income of a par- ent who makes an election under section

119 REVENUE AND TAXATION. 1( i)( 7)( B) of the Internal Revenue Code any amount in excess of the standard deduction allowed for a child under ORS ( 8)( a) but not in excess of $1, 000. The addition under this section shall be made for each child whose income is included in the taxable income of the parent under section 1( i)( 7)( B) of the Internal Revenue Code c Foreign income taxes. ( 1) Subject to subsection ( 2) of this section, in addition to other modifications provided in this chapter, and if a taxpayer elects to take foreign income taxes imposed for the taxable year by a foreign country as a credit on the federal income tax return or does not itemize personal deductions on the federal income tax return, there shall be subtracted from federal taxable income in the computation of state taxable income the amount of foreign income taxes imposed for the taxable year by a foreign country. 2) The deduction for foreign country income taxes provided by this section shall be limited as follows: a) Except as provided in paragraph ( b) of this subsection, the sum of foreign country income taxes deducted in computing state taxable income and the modification for federal income taxes authorized by ORS )( 4) as limited by ORS ( 3) shall not exceed $ 3, 600. b) In the case of a husband and wife filing separate tax returns, the sum described in paragraph ( a) of this subsection shall be limited to $ 1, 500. [ Formerly ; 1985 c.345 8; 1987 c a] Additional modification of taxable income. ( 1) In addition to the mod - ifications to federal taxable income contained in this chapter, there shall be added to or subtracted from federal taxable income: a) If, in computing federal income tax for a taxable year, the taxpayer deducted itemized deductions, as defined in section 63( d) of the Internal Revenue Code, the. taxpayer shall add the itemized deductions. b) If, in computing federal income tax for a taxable year, the taxpayer deducted the standard deduction, as defined in section 63( c) of the Internal Revenue Code, the taxpayer shall add the amount of the standard deduction deducted. c)( A) From federal taxable income there shall be subtracted the larger of the taxpayer' s itemized deductions as defined in section 63( d) of the Internal Revenue Code exclusive of his or her Oregon income tax or a standard deduction. Except as provided in subsection ( 9) of this section, for purposes of this subparagraph, " standard deduction" means the sum of the basic standard de- duction and the ' additional standard. de-' duction. B) For purposes of subparagraph ( A) of this paragraph; the ba "sic standard deduction is: i) $ 3,000, in the case of joint return filers or -a surviving spouse; ii) $ 1, 800, in the case of an individual who is not,a married individual and is not a surviving spouse; iii) $1, 500, in the case of a married individual who files a separate return; or iv) $ 2, 640, in the case of a head of household. C) For purposes of subparagraph ( A) of this paragraph, the additional standard deduction is the sum of each additional amount to which the taxpayer is entitled -under subsection ( 8) of this section. D) As used in subparagraph ( B) of this paragraph, " surviving spouse "' and " head -of household" have the meaning given those terms in ' section 2, bf the' Internal Revenue Code. E) In the case of the following, the standard deduction referred to in subpara- graph ( A) of this paragraph shall be zero: i) A husband or wife filing a separate return where the other. spouse, has claimed itemized deductions under subparagraph ( A) of this paragraph; ii) A nonresident alien individual; iii) An individual making a return for a period of less than 12 months on account of a change in his or her' annual accounting period; iv) An estate or trust; v) A common trust fund; or vi) A partnership. 2)( a) There shall be subtracted from federal taxable income any portion of the distribution of a pension, profit - sharing, stock bonus or other retirement plan, representing that portion of contributions which were taxed by the State of Oregon but not taxed by the Federal Government' under ' laws in effect for tax years beginning' prior to January 1, 1969, or for any subsequent year in which the amount that' was contributed to the plan under the Internal Revenue Code was greater than the amount allowed under this chapter. b) Interest or other earnings on any excess contributions of a pension, profit - sharing, stock bonus or other ' retirement plan not permitted to be deducted under paragraph ( a) of this subsection shall not be added to federal taxable income in the year earned by the plan and - shall not be sub-

120 PERSONAL INCOME TAX tracted. from federal taxable income in the year received by the taxpayer. 3)( a) Except as provided in paragraph ( b) of this subsection and subsections ( 4) and ( 5) of this section, in addition to the adjustments to federal taxable income required by ORS , there shall be added to federal taxable income the amount of any federal income taxes in excess of $ 3, 000, accrued by the taxpayer during the taxable year as described in ORS , less the amount of any refund of federal taxes previously accrued for which a tax benefit was received. b) In the case of a husband and wife filing separate tax returns, the amount added shall be in the amount of any federal income taxes in excess of $1, 500, less the amount of any refund of federal taxes previously accrued for which a tax benefit was received. 4)( a) If federal income taxes are paid or determined, due to additional assessments as described in ORS ( 2), on income for a taxable year, beginning on or before December 31, 1986, there shall be added to federal taxable income that portion of the federal income tax due to additional assessments which, when added to federal income tax previously paid and deducted for that prior taxable year on the taxpayer' s Oregon return, exceeds $ 7,000. b) In the case of a husband and wife filing separate tax returns, the amount to be added to federal taxable income under this subsection shall be that portion of the federal income tax due to additional assessments which, when added to federal income tax previously paid and deducted for that prior year on the taxpayer' s Oregon return, exceeds $ 3,500. 5)( a) In addition to the adjustments re- quired by ORS , a full -year nonresi- dent individual shall add to taxable income a proportion of any accrued federal income taxes as computed under ORS in ex- cess of $3,000, or $ 7, 000 if paragraph ( a) of subsection ( 4) of this section is applicable, in the proportion provided in ORS b) In the case of a husband and wife filing separate tax returns, the amount added under this subsection shall be computed in a manner consistent with the computation of the amount to be' added in the case of a husband and wife filing separate returns under subsection ( 3) or ( 4) of this section, whichever is applicable. The method of computatidn shall be determined by the Department of Revenue by rule. 6) Paragraph ( b) of subsection ( 3), paragraph ( b) of subsection ( 4) and paragraph ( b) of subsection ( 5) of this section shall not apply to married individuals living apart as de- fined - in section 7703( b) of the Internal Revenue Code. 7)( a) For tax years beginning on or after January 1, 1981, and prior to January 1, 1983, income or loss taken into account in determining federal taxable income by a shareholder of an S corporation pursuant to sections 1373 to 1375 of the Internal Revenue Code shall be adjusted for purposes of deter - minink "Oregon taxable income, to the extent that as income or loss of the S corporation, they were required to be adjusted under the provisions of ORS chapter 317. b) For tax years beginning on or after January 1, 1983, items of income, loss or deduction taken into account in determining federal taxable income by a shareholder of an S corporation pursuant to sections 1366 to 1368 of the Internal Revenue Code shall be adjusted for purposes of determining Oregon taxable income, to the extent that as items of income, loss or deduction of the shareholder the items are required to be ad- justed under the provisions of this chapter. c) The tax years referred to in para- graphs ( a) and ( b) of this subsection are those of the S corporation. d), As used in paragraph ( a) of this subsection, :an S corporation refers to an electing small business corporation. 8)( a) The taxpayer shall be entitled to an additional amount, as referred to in subparagraphs ( A) and ( C) of paragraph ( c) of subsection ( 1) of this section, of $1, 000: A) For himself or herself if he or she has attained age 65 before the close of his or her taxable year; and B) For the spouse of the taxpayer if the spouse has attained age 65 before the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse for federal income tax purposes under section 151( b) of the Internal Revenue Code. b) The taxpayer shall be entitled to an additional amount, as referred to in subparagraphs ( A) and ( C) of paragraph ( c) of subsection ( 1) of this section, of $1, 000: A) For himself or herself if he or she is blind at the close of the taxable year; and B) For the spouse of the taxpayer if the spouse is' blind as of the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse for fed- eral income - tax purposes under section 151( b) of the Internal Revenue Code. For purposes of this subparagraph, if the spouse dies during the taxable year, the determination of whether such spouse is blind shall be made immediately prior to death. c) In the case of an individual who is not married and is not a surviving spouse,

121 REVENUE AND TAXATION paragraphs ( a) and ( b) of this subsection shall be applied by substituting 11,200" for 1, 000." d) For purposes bf this subsection, an individual is blind only if his or her central visual acuity does not exceed 20/ 200 in' the better eye with correcting lenses, or if his or her visual acuity is greater than 20/ 200 but is accompanied by a limitation in 'the fields di'vi'sion 'such that the widest diameter of tr visual field subtends an angle no greater than 20 degrees. 9) In the case of an individual with respect to whom a deduction under section 151 of the Internal Revenue Code is allowable for federal income tax purposes to another taxpayer ' for a taxable year beginning in the calendar year in which the individual' s taxable year begins, the basic standard deduction referred to in subparagraph ($) of paragraph c) of subsection ( 1) of this section) applicable to such individual for' such individual' s taxable year shall not exceed the greater of: a) $ 500; or b) The individual' s earned income. Formerly '; 1985 c ; 1985 c.345 9; 1985 c ; 1987 c ; 1989 c ; 1989 c Note: (4) and ( 5) [ renumbered were enacfed' into law by the Legislative Assembly but were not added to or made a part of ORS chapter 316 or any series therein by legislative action See Preface to Oregon Revised Statutes for further explanation. provides: Note: Section 86, chapter 625, Oregon Laws 1989, Sec. 86. The amendments to ORS ( 8) ( relating to standard deduction for elderly and blind de- Pendents) by section 14 of this Act apply to tax years beginning on or after January 1, c Note: Section 16, chapter 626, Oregon Laws 1989, provides: Sec. 16. The amendment to ORS by section 8 of this Act applies to federal income tax paid or determined for -tax years beginning on or before December 31, 1986, but deducted on the Oregon return in tax years beginning on or after January 1, c Fiduciary adjustment. There shall be added to or subtracted from federal taxable income,' as the case may be, the taxpayer' s share of the fiduciary adjustment determined under ORS [ Formerly [ 1983 c ; repealed by 1987 c c ; repealed by 1957 c enacted in lieu of and )] c ; 1959 c.76 1; 1961 c.506 2; 1961 c.623 1; repealed by 1969 c Computation ' of depreciation of-property under federal law; applicability. ( 1) To the extent that the amount allowed as a deduction under section 168 of the Internal Revenue Code ( Accelerated Cost Recovery System) exceeds, or is less than, the amount that would be allowed as- a de- duction for depreciation for the properttyy un- der the federal Internal Revenue Code as amended and in effect on December 31, 1980, the difference shall be added to, or subtracted. from federal taxable, income, which - ever, is applicable. _ 2) - The modifications required by subsection ( 1) of this section apply only to the differences in the computation of depreciation ( reasonable allowance for exhaustion, wear, tear and obsolescence) under the Ac- celerated Oost Recovery System and the other methods of depreciation. Nothing in this section shall be construed to govern the eligibility of property for depreciation, or other provisions of the Internal Revenue Code which do not directly govern the computation of the deduction amount for recov- ery property. 3) There shall be added, to federal taxa- ble income any amount. deducted under sec- tion 179 of the Internal Revenue Code election to expense certain depreciable busi- ness assets). However, any asset with respect to which this section applies may be depre- ciated as otherwise provided under this chapter. 4) Income included in federal taxable income by a shareholder of an S corporation pursuant to. sections 1366 to 1368 of the Internal Revenue Code shall be adjusted for purposes of determining Oregon taxable income as required by the,' provisions of this section. 5) This section shall not apply to property placed in service in taxable years beginning on or after January 1, c ;' 1985 c c ; repealed by 1957 c subsections ( 2), ( 3) and ( 4) of enacted in lieu of ) ( 1957 c ; 1959 c ( referred' and rejected); 1961 c623 2; repealed, by 1969 c c ; 1959 c.593, 8 ( referred and rejected); 1963 c ( referred and rejected), repealed by 1969 c c ; repealed by 1957 c enacted in lieu of ) Differences in basis on federal and state return. ( 1) Upon the taxable sale, exchange or disposition of any asset in a tax year beginning on or after January 1, 1983, federal taxable income shall be increased or decreased by an amount ' which will reflect one or more of the following: a) The difference in basis which results from the difference in depreciation or cost recovery, or expense claimed under section 179 of the Internal Revenue Code, allowed or allowable on the Oregon return and that allowed or allowable on the federal return for that asset; b) The difference in basis which results when a taxpayer has taken a federal credit, which requires' as a condition of the use of

122 PERSONAL INCOME TAX the federal credit the reduction of the basis of an asset, and the federal credit is not allowable for Oregon tax purposes; c) The difference in basis as a result of any deferral of gain which has been granted under federal tax law but not under Oregon tax law or granted under Oregon law but not granted under federal law; d) The difference in basis under federal and Oregon tax law at the time the asset was acquired; or e) Any other differences in the basis of the asset which are due to differences between federal and Oregon tax law. 2) There shall be added to or subtracted from federal taxable income any amount necessary to carry out the purposes of subsection ( 1) of this section. 3) If a taxpayer has taken a federal credit, which requires as a condition of the use of the federal credit the reduction of a corresponding deduction, and the federal credit is not allowable for Oregon purposes, the taxpayer shall be allowed the deduction for Oregon tax purposes c ; 1985 c Effect of discriminatory employee benefit plans. Notwithstanding ORS and , section 89 of the Internal Revenue Code ( relating to discriminatory employee benefit plans - and other matters), and the regulations adopted thereunder, shall apply as appropriate to the determination of the taxes imposed under this chapter for a taxable year in the same manner that the section and regulations are applied in determining federal income tax for the same taxable year c Note: was added to and made a part of ORS chapter 316 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation ( 1953 c ; repealed by 1957 c.632 I enacted in lieu of and )) c ; repealed by 1969 c Qualified reinvestment dividend from reinvestment in' stock of public utilities. Section 305(e) of the Internal Revenue Code ( dividend reinvestment in stock of public utilities) shall not apply in determining Oregon taxable income. Taxpayers selling stock, on or after -January 1, 1982, of public utilities the basis of which is determined by section 305( e)( 7) of the Internal Revenue Code shall subtract from federal taxable income the qualified reinvestment dividend as defined in section 305 ( e)( 2) of the Internal Revenue Code for which the stock was received and which was included in Oregon taxable income c ; 1985 c ; 1987 c [ 1953 c ; repealed by 1957 c enacted in lieu of and ) Changing inventory valuation method; interest on tax exempt savings certificates; applicability of federal law. 1) Taxpayers taking advantage of the special provisions in sections 472( d) and ( f) and 474 of the Internal Revenue Code to change to a last in, first out inventory valuation method during the period of time sections 2 and 3, chapter 613, Oregon Laws 1981, were in effect, shall add to or subtract from federal taxable income the difference between the 1983 beginning inventory for federal income tax purposes and the 1982 ending inventory for Oregon tax purposes. 2) In addition to the modifications to federal taxable income contained in ORS chapter 316, for tax years beginning before January 1, 1984, there shall be subtracted from federal taxable income interest on certain tax exempt savings certificates which is required to be restored to federal taxable income. pursuant to section 128( e) of the Internal Revenue Code and which has already been included in Oregon taxable income in a previous year. 3) For taxable years that begin on or after January 1, 1981, section 2, chapter 613, Oregon Laws 1981, shall not apply to the provisions of the Internal Revenue Code relating to: a) Sections 1371 and 1372 of the Internal Revenue Code ( pertaining to subchapter S corporations). b) Sections 421 and 422A of the Internal Revenue Code ( concerning incentive stock options). c) Section 1034 of the Internal Revenue Code ( pertaining to the sale of a personal residence). d) Section 121 of the Internal Revenue Code ( pertaining to the one time exclusion of a gain from the sale of a personal residence by an individual who has attained age 55). [ 1983 c c , repealed by 1957 c enacted in lieu of and ) c ; repealed by 1969 c c ; repealed by 1957 c enacted in lieu of and ) Amount specially. taxed under federal law to be included in computation of state taxable income. If a taxpayer has taken a deduction to arrive at federal taxable income for the purpose of having that income taxed in a manner different from the taxation of federal taxable income, the amount which was deducted and specially taxed shall be added to federal taxable income in the computation of state taxable income. However, if any portion of the amount added was treated as capital gain in arriving at federal

123 REVENUE AND TAXATION taxable income, that portion shall be treated as capital gain in the computation of state taxable income c ; 1987 c c. 304' 95, 1957 c.75 l, repealed by 1957 c ( enacted in lieu of and )] c , repealed by 1969 c Cash payments for energy conservation. Any amount received as a cash payment for energy conservation measures under ORS to is exempt from the tax imposed under this chapter. IFormerly , 1985 c c , repealed by 1957 c.632 l enacted in lieu of and ) l c , repealed by 1957 c enac Led in lieu of and ) l IFormerly ; repealed by 1969 c Definitions for ORS to For purposes of ORS to : person: 1) A person is " severely disabled" if the a) Has lost the use of one or more lower extremities; b) Has lost the use of both hands; or c) Has a physical or mental condition that limits the abilities of the person to earn a living, maintain a household or provide personal tf''ansportation for the person with- out employing special orthopedic or medical equipment or outside help. 2) " Orthopedic or medical equipment" includes, but is not limited to, wheelchairs, braces, prostheses or special crutches. 3) " Outside help" includes, but is not limited to, unrelated individuals whom the severely disabled taxpayer employs to keep house, maintain the house or yard, or to transport the taxpayer. [ Formerly ; 1987 c ; 1989 c c , repealed by 1957 c enacted in lieu of )] Additional personal exemption credit for severely disabled persons. In addition to the personal exemption credit al- lowed by this chapter for state personal income tax purposes, there shall be allowed an additional personal exemption credit for the taxpayer if the taxpayer is severely disabled at the close of the taxable year. The amount of the credit shall be equal to the amount allowed as the personal exemption credit for the taxpayer for state personal income tax purposes for the taxable year. [ Formerly ; 1985 c ; 1987 c c ; repealed by 1957 c enacted in lieu of and )] c 586 9; 1963 c ( referred and rejected); 1963 s.s. c 3 1, repealed by 1969 c Additional personal exemption credit for spouse of severely disabled person; conditions. ( 1) An additional personal exemption credit in the same amount as allowed under ORS for a severely disabled taxpayer shall be allowed for the spouse of the taxpayer if a separate return is made by the taxpayer, and if the spouse: a) Is severely disabled; b) Has no gross income for the calendar year in which the taxable year of the taxpayer begins; and payer. c) Is not the dependent of another tax- 2) In the case of a joint return, each spouse who is severely disabled shall be allowed the additional credit in the amount provided under ORS if the spouse otherwise qualifies under this section. 3) For purposes of this section, the determination of whether the spouse is severely disabled shall be made as of the close of the taxable year of the taxpayer except that if the spouse dies during such taxable year such determination shall be made as of the time of the death of the spouse. [ Formerly , 1985 c ; 1987 c ( Formerly ; 1963 c.83 l; repealed by 1969 c Proof of status for exemption credit. Each person qualifying for the additional personal exemption credit allowed in ORS and may claim the credit on the personal income tax return. However, the claim shall be substantiated by a letter from a licensed physician or osteopath describing the nature and extent of the physical disability. ( Formerly ; 1985 c345 12; 1987 c c ; 1959 c.234 3; repealed by 1969 c Income derived from sources within federally recognized American Indian reservation exempt from tax. (1) Any income derived from sources within the boundaries of an active Indian reservation in Oregon by any enrolled member of a federally recognized American Indian tribe residing on an Oregon Indian reservation at the time the income is earned, is exempt from tax under this chapter. 2) An extract from the tribal rolls or other documentary proof of the taxpayer' s enrolled status and other additional proofs as may be required by the Department of Revenue, shall be attached to or accompany any return for any year for which exemption under subsection ( 1) of this section is claimed. ] Formerly ; 1985 c c ; repealed by 1969 c ]

124 PERSONAL INCOME TAX $3 Amounts received for condemnation of Indian tribal lands. Amounts re- ceived as condemnation awards as a result of condemnation by the Federal Government of Indian tribal lands are exempt from the tax imposed by this chapter. [ Formerly Income derived from exercise of Indian fishing rights. Income derived from the exercise of rights of any Indian tribe to fish secured by treaty, Executive or- der or Act of Congress is exempt from the tax imposed by this chapter if section 7873 of the Internal Revenue Code does not per- mit a like federal tax- to be imposed on such income c provides Note: Section 84, chapter b25, Oregon Laws 1989, Sec. 84. Sections 5 and 18 of this Act and ( relating to Indian fishing rights) apply to all periods beginning before, on or after the effective date of this Act ' c PAYMENTS UNDER CIVIL LIBERTIES ACT OF 1988 Note: Sections 4 and 83, chapter 625, Oregon Laws 1989, provide: Sec. 4. Amounts paid to an eligible individual persons of Japanese ancestry and Aleut civilian residents of the Pribilof Islands and the Aleutian Islands) under section 1989b -4, Title 1, or 1989c -5, Title 11, of the Civil Liberties Act of 1988 ( P L ) shall be treated for purposes of this chapter as damages for human suffering and shall be exempt from the taxes imposed under this chapter c Sec. 83. Section 4 of this Act ( relating to reparations paid to persons of Japanese ancestry and Aleut civilian residents,of the Pribilof Islands and the Aleutian Islands) applies to taxable years beginning on or after January 1, c IFormerly ; repealed by 1987 c c , 1957 c.528 3; repealed by 1969 c [ Formerly ,. repealed by 1987 c [ Formerly ; repealed by 1987 c 293 MISCELLANEOUS [ 1969 c ; renumbered c ; repealed by 1969 c Definitions for ORS to As used in ORS to : 1) " Construction job site" means the specific location of a construction project. 2) " Construction project" means the construction, alteration, repair,. improvement, moving or demolition of a structure and appurtenances thereto. ' 3) " Construction worker" means a person who is a member of a recognized con- struction trade, craft, union or industrial occupation and who is lawfully engaged in the performance of labor, pursuant to contract or subcontract, at a construction project. 4) "' Raveling expenses" means daily transportation expenses that: a) Are not otherwise deductible under the federal Internal Revenue Code. b) Are incurred by a construction worker in job - related travel between a construction job site located more than 50 miles from the principal residence of the con- struction worker. 5) "' Raveling expenses" includes gas, oil and automobile repairs and maintenance, but does not include meals unless the con- struction worker is required by the employer to stay overni ht at the construction job site. Formerly c ; repealed by 1969 c Certain traveling expenses. In addition to the modifications to federal taxable income contained in this chapter, there shall be subtracted from federal taxable income traveling expenses, as defined in ORS , incurred by a construction worker during the first year of continuous employment on the same construction job site. However, if employment on the same construction job site is temporarily interrupted for any reason whatsoever, the period of interruption shall not be taken into account iri determining the one -year period. ( Formerly '[ 1953 c; ; 1955 c.582 l; repealed by 1969 c Proof of expenses. The modification to federal taxable income by ORS shall be substantiated by any proof required by the Department of Revenue by rule. [ Formerly c ; 1963 c ( referred and rejected); repealed by 1969 c Definitions for ORS and As used in ORS and : 1) " Forest products" means any merchantable form including but not limited to logs, poles and piling, into which a fallen tree may be cut before it undergoes manufacturing ) " Logger" means a person commonly known as a faller or bucker who furnishes and. maintains personal equipment, in the commercial harvesting of forest products and who is paid on a per -unit cut basis. 3) " Logging operation site" means the specific location of the commercial harvesting of forest products. 4) " Traveling expenses" means daily transportation expenses that:

125 REVENUE AND TAXATION a) Are not otherwise deductible under the federal Internal Revenue Code. b) Are incurred by a logger in jobrelated, travel between a logging operation site located more than 50 miles from the principal residence of the logger. 5) " Traveling expenses" includes gas, oil and automobile repairs and maintenance but does not include meals or lodging.,[ Formerly c , repealed by 1969 c s s c 15 7, last sentence derived from 1957 s. s c c ( referred and rejected), repealed by 1969 c [ 1953 c , repealed by 1969 c Travel expenses for loggers. ( 1) In addition to the modifications to federal taxable income contained in this chapter, there shall be subtracted from federal taxable income traveling expenses, as defined in ORS , incurred by a logger in job - related travel. 2) The modification to federal taxable income by subsection ( 1) of this section shall be substantiated by any proof required by the Department of Revenue by rule. [ Formerly c , repealed by 1969 c Art object donation. ( 1) If an art object has not been previously sold or otherwise transferred by its creator and the creator makes a charitable contribution of the art object that qualifies for the deduction allowed by section 170 of the Internal Revenue Code for the taxable year, there shall be subtracted from federal taxable income any positive amount obtained by subtracting: a) The amount otherwise deductible on the Oregon tax return of the taxpayer - creator for the taxable year as charitable contributions from b) The amount that would have been deductible. by the taxpayer- creator if the deduction for charitable contributions had been computed without reduction in amount under section 170 ( e) of the Internal Revenue Code for the art object charitably contributed by its creator. 2) As used in this section, " art object" sculpture, photograph, means a painting, graphic or craft art, industrial design, costume or fashion design, tape or sound re- cording or film. 3) No additional subtraction shall be al- lowed to the taxpayer- creator under this sec- tion unless the tax return is accompanied by a copy of an appraisal report showing the fair market value of the art object at the time the contribution was made. [ Formerly ; 1989 c provides: Note: Section 3, chapter 938, Oregon Laws 1989, Sec. 3. The amendments to ORS by section 1 of this Act and the repeal by section 2 of this Act apply to tax years beginning on or after January 1, For all prior tax years the law applicable for those years shall continue to apply c c ; 1961 c.506 3; repealed by 1969 c Special computation of gain or loss where farm use value used. ( 1) Notwithstanding any other provision of this chapter, when gain or loss is included in federal taxable income: a) From property, the gain or loss from the disposition of which is 'taxable under this chapter, and which was valued for inheritance tax purposes under ORS , or b) From property, the basis of which is computed in whole or in part with respect to property that was. valued for inheritance tax purposes under ORS , there shall be added to federal taxable income the difference between the taxable gain or loss that would otherwise be determined under this chapter and the gain or loss that would be taxable had the basis for federal tax purposes been computed using the forest or farm use value provided for under ORS instead of the basis computed pursuant to section 1014 of the Internal Revenue Code. 2) This section applies to gains and losses from dispositions of property acquired from a decedent, or from property the basis of which is computed in whole or in part with respect to property acquired - from a decedent, whose death occurred before January 1, [ Formerly ; 1987 c Income attributable to production of substitute fuel. If a commercial plant produces methanol, ethanol or other substitute fuel and 75 percent of the pro- duction is used in making gasohol in any tax year, that portion of the taxable net income attributable to the production of methanol, ethanol or other substitute fuel for such tax year is exempt from any tax imposed under this chapter. To qualify for the exemption authorized by this section, there shall be filed with the tax return of the taxpayer claiming the exemption a certificate furnished by the Department of Energy that the plant produced a commercially marketable grade of methanol, ethanol or other substitute fuel and that 75 percent of the production during the tax year was used or committed for use in making gasohol. Formerly [ Formerly ; 1985 c a; repealed by 1987 c c ; 1963 c.305 1; repealed by 1969 c

126 PERSONAL INCOME TAX c 352 2; renumbered in c ; repealed by 1969 c Effect of federal law changes, on certain pension, profit - sharing other retirement plans. For tax years beginning after the date specified in ORS for the recognition of the Internal Revenue Code for Oregon tax purposes, if part I of subchapter D of chapter 1 of Subtitle A of the Internal Revenue Code is- amended to allow greater contributions to or to require or permit any other provision in any of the pension, profit- sharing, stock bonus or other retirement plans, mentioned in part I of subchapter D of chapter 1 of Subtitle A of the Internal Revenue Code, amendments to those plans and contributions to those plans in conformity with those new federal amendments shall not disqualify those plans,' for Oregon tax purposes and shall not increase or diminish the deductions otherwise allowable on the Oregon return based on the Internal Revenue Code as amended on the date specified in ORS c or , c ; repealed by 1969 c c ; repealed by 1969 c c ; repealed by 1969 c c ; repealed by 1969, c.493, 991_ c ; repealed by 1969 c Effect of chapter 493, Oregon Laws This chapter is intended to supersede any conflicting provisions of law in effect on August 22, 1969, to the extent of such conflict. [ Formerly c ; repealed by 1957 c enacted in lieu of and ) 1 PENALTIES Penalty for filing incorrect return that is based on frivolous position or is intended to delay or impede admin- istration; appeal, ( 1) The department shall assess a penalty of $250 against any individ- ual who files what purports to be a return of the tax imposed by this chapter but which: a) Does not contain information on which the substantial correctness of the self-'assessment may be judged; or b) Contains information that on,its face indicates that the self assessment - is substantially incorrect. 2) A penalty may be imposed under, subsection ( 1) of this section only if the conduct referred to in subsection ( 1) of this section is due to: _ a) A position which is frivolous; or b) An intention, apparent on the face,.of the purported return, to delay or impede the administration of the income tax laws of this state.' 3) The penalty imposed under this section is in addition to any other penalty imposed by- law. Any person against whom a penalty is assessed under this section may appeal to the director as provided in ORS If the penalty is not paid within 10 days after the order of the department becomes final, the department may record the order and collect the amount assessed in the same manner as income tax deficiencies are recorded- and collected under ORS ) If an assessment of tax due, for the taxable year with respect to which 'a penalty is 'imposed under this section is under appeal at the same time that an appeal is filed under this subsection, the department may consolidate the appeals into a single' pro- ceeding. 5) As used in this section, " a position which is frivolous" includes, but is not limited to: a) Reference to a spurious constitutional argument; b) Reliance on a " gold standard" or " war tax" deduction; c) An argument that wages or salary are not includable in taxable income;. d) An argument that the Sixteenth Amendment, to the United States Constitution was not properly adopted; or e) - An argument that " unenfranchised, sovereign, freemen or natural persons" are not subject to the tax laws. [ 1987 c

127 REVENUE AND TAXATION

128 Chapter ,EDITION Corporation Excise Tax ' I GENERAL PROVISIONS Short title Definitions Adoption of parts of Internal Revenue Code and application of federal laws and regulations and technical corrections pertaining to corporate taxpayers Application of certain substantiation requirements of Internal Revenue Code; lux- ury automobiles and other mixed -use property Statement of purpose Application of Payment -in -kind Tax Treatment Act of 1983 Application of Deficit Reduction Act of and Simplification of Imputed Interest Rules of 1985 Certain provisions of ORS construed as continuation of existing law Omission of previously enacted savings clauses not intended as repeal License fees not repealed Effect of subsequent repeal of chapter Corporation not required to include' income or permitted to deduct expense more than once Application of federal law relating to discriminatory employee benefit plans IMPOSIT ION OF TAX Financial corporations; applicable taxes - Tax rate Tax on homeowners association income Tax on centrally assessed, mercantile, manufacturing and business corporations Exempt corporations Oregon Capital Corporation exempted from certain taxes Minimum tax CREDITS Commercial lending institution loans housing rehabilitation Commercial lending institution loans for for underground storage tanks or soil remediation; reimbursement of General Fund Reforestation of underproductive forest lands Reduction of certified energy conservation facility costs by grant or credit; eligibility for credit Energy conservation facility costs Investment in plastics recycling Weatherization loan interest; commercial lending institutions Employer payments to Insurance Pool Governing Board Employer costs in acquiring or constructing dependent care facility Pollution control facility; unused credit Domestic insurers Fish habitat improvement Cash investment in capitalization of Oregon Capital Corporation Credit for rural medical practice Fish screening devices, by -pass devices or fishways Tax Credit for Certain Research Expenses and Payments) Temporary provisions relating to tax credits for certain research expenses and payments are compiled as notes following ) Credit for Farm- worker Housing) Temporary provisions relating to credit for farm - worker housing are compiled as notes following ) DISSOLUTION OF TAXPAYER Effect on reporting income Effect on deductions allowed MODIFICATIONS TO TAXABLE INCOME Modifications generally Dividends from corporation subject to corporate excise tax Dividend income received by domestic corporation from certain foreign corpo. rations Nonrecognition of transactions- with related domestic international sales corpo- ration Nonrecognition of transactions with related foreign sales corporation Deduction or adjustment for certain fed- eral credits Interest and dividends received from obli- gations of state or political subdivision Balance in bad debt reserve of financial institution which has changed from reserve method to specific charge -off method of accounting Application of section 243 of' Tax Reform Act of Federal depreciation expenses of certain health care service contractors Taxes on net income or profits- imposed by any state or foreign country; nondeductible taxes and license fees; taxes paid to foreign country for certain income Capital Construction Fund; deferred inpome; nonqualified withdrawals Gain on conversion or exchange of prop- erty Basis for stock acquisition

129 REVENUE AND TAXATION Effect of change in federal law on pension, profit- sharing, stock bonus or other retirement plans Net operating loss carryback and carryover Transaction treated as lease purchase under federal law ORS not applicable to finance leases Difference in cost recovery or claimed expense allowed on Oregon and federal re- turns Reversal of effect of gain or loss in case of timber, coal, domestic iron ore Depreciation; date of repeal Depletion Limitation on use of preacquisition losses to offset built -in gains Exemption of income from exercise of Indian fishing rights Energy conservation payments exempt Exemption for income attributable to substitute fuel production Net losses of prior years Pre - change and built -in losses RETURNS AND PAYMENT OF TAX Date return considered filed or advance payment considered made Requiring additional reports and informa- tion FOREIGN INCOME; DOMESTIC INTERNATIONAL SALES CORPORATIONS; DOMESTIC INSURERS Income from sources without the United States Domestic international sales corporation Application of certain provisions of this chapter to domestic insurers Taxable income of domestic insurer, items excluded Allocation of net income where domestic insurer does business in other states Oregon net losses of domestic insurer in prior years UNITARY TAX Definitions for ORS to Corporation tax return requirements Tax return of corporation in affiliated group making consolidated federal return Computation of taxable income: excess loss accounts Adjustments to prevent double taxation or deduction DISPOSITION OF REVENUE Disposition of revenue UNRELATED BUSINESS INCOME OF CERTAIN EXEMPT CORPORATIONS Tax imposed on unrelated business income of certain exempt corporations 317.9M Exceptions and limitations Assessment of deficiency CROSS REFERENCES Administration of revenue laws generally, Ch. 305 Administrative appeals, to Appeal procedure, Appeal to tax court; small claims alternative, Applicability to Ch. 318, Assessment of designated utilities and companies by Department of Revenue, to , to Associations, trusts or other unincorporated organization, income tax liability, Authority of tax court to determine deficiency, Business trusts, distributions subject to personal income and corporate excise and income tax provisions, Clann for refund of any tax paid, Corporation income tae, Ch. 318 Deficiency procedure, Estimated tax procedure for corporate and income tae, to Federal areas in state, application of tax laws, General provisions relating to income taxation, Ch. 314 Intangible personal property" or " intangibles" defined, Interest on deficiency, delinquency or refund, Interest or penalties on taxes, effect of taking or pendency of appeal, Metropolitan service district taxing authority, Oregon Medical Insurance Pool, exempt from taxation, Procedure on appeal from order of Department of Revenue, effect of pendency of appeal, to Revenue, Department of, Ch. 305 Tax Court, Oregon, to Verification of documents filed under tax laws, falsification prohibited, , When tax document deemed filed with tax official, Written interrogatories, procedure, Credit unions, taxation, Insurers, premium tax in lieu of other taxes, Nonprofit district improvement companies, exemption, Nonprofit mutual or cooperative electric distribution systems, gross earnings tae, Rural telephone exchanges, gross earnings tax in lieu of property tax, to Public utility, energy conservation measures for rental housing, eligibility for tax credit, Public facility, no relief, Offset for insurance guaranty assessments, Date of receipt of payment or return, etc., determination,

130 CORPORATION EXCISE TAX Duty to rile report and amended return when federal return changed, i 29=375

131 REVENUE AND TAXATION

132 CORPORATION EXCISE TAX GENERAL PROVISIONS Short title. This chapter may be cited as the Corporation Excise Tax Law of Definitions. As used in this chapter, unless the context requires other- wise: 1) " Centrally assessed corporation" means every corporation the property of which is assessed by the Department of Revenue under ORS to and to ) " Department" means the Department of Revenue. 3)( a) " Consolidated federal return" means the return permitted or required to be filed by a group of affiliated corporations under section 1501 of the Internal Revenue Code. b) " Consolidated state return" means the return required to be filed under ORS ). 4) " Doing business" means any transaction or transactions in the course of its activities conducted within the state by a national banking association, or any other corporation; provided, however, that a for- eign corporation whose activities in this state are confined to purchases of personal property, and the storage thereof incident to shipment outside the state, shall not be deemed to be doing business unless such foreign corporation is an affiliate of another foreign or domestic corporation which is doing business in Oregon. Whether or not corporations are affiliated shall be determined as provided in section 1504 of the Internal Revenue Code. 5) " Excise tax" means a tax measured by or according to net income imposed upon national banking associations, all other banks, and financial, centrally assessed, mercantile, manufacturing and business corporations for the privilege of carrying on or doing business in this state. 6) " Financial institution" or " financial corporation" means a bank or trust company organized under ORS chapter 707, national banking association or production credit association organized under federal statute, building and loan association, savings and loan association, mutual savings bank, and any other' corporation whose principal busi- ness is in direct competition with national and state banks. 7) " Internal Revenue Code" means the laws of the United States relating to income taxes as they may be amended on or before December 31, 1988, even where the amendments take effect or become operative after that date. 8) " Oregon taxable income" means taxable income, less the deduction allowed under ORS , except as otherwise provided with respect to domestic insurers in subsection ( 11) of this section and ORS to ) " Oregon net loss" means taxable loss, except as otherwise provided with respect to domestic insurers in subsection ( 11) of this section and ORS to ) " Taxable income or loss" means the taxable income or loss determined, or in the case of a corporation for which no federal taxable income or loss is determined, as would be determined, under chapter 1, Subtitle A of the Internal Revenue Code and any other laws of the United States relating to the determination of taxable income or loss of corporate taxpayers, with the additions, subtractions, adjustments and other modifi- cations as are specifically prescribed by this chapter except that in determining taxable income or loss for any year, no deduction under ORS or and section 45b, chapter 293, Oregon Laws 1987, shall be allowed. If the corporation is a corporation to which ORS or to requiring or permitting apportionment of in- come from transactions or activities carried on both within and without the state) applies, to derive taxable income or loss, the following shall occur: a) From the amount otherwise determined under this subsection, subtract non - business income, or add nonbusiness loss, whichever is applicable. b) Multiply the amount determined under paragraph ( a) of this subsection by the Oregon apportionment percentage defined under ORS , or , whichever is applicable. The resulting product shall be Oregon apportioned income or loss. c) To the amount determined as Oregon apportioned income or loss under paragraph b) of this subsection, add nonbusiness income allocable entirely to Oregon under ORS or to , or subtract nonbusiness loss allocable entirely to Oregon under ORS or to The resulting figure is " taxable income or. loss" for those corporations carrying on taxable transactions or activities both within and without Oregon. 290,77 11) As used in ORS and to , " domestic insurer" has the meaning defined by ORS ( 1) and ( 1) and ( 2) but does not include title insurers or health care service contractors operating ppursuant to ORS to [ Amended by 1953 c.385 9; 1959 c.631 l; 1963 c.571 l; subsection 18) enacted as 1969 c.600 2; 1975 c.368 4; 1977 c. 866

133 _ REVENUE AND TAXATION 2; 1983' c 162 3, 1984 c. l 5; 1985 c ; 198T c ; 19891c Adoption of parts.of Internal Revenue Code and application of federal laws and regulations and technical corrections pertaining to corporate taxpay -' ers. ( 1) Those portions of chapter 1, and subchapter ' A, chapter 6, Subtitle A and chapter 79, Subtitle F, Internal Revenue Code, and any other laws of the United States pertaining to the defermination of taxable income of corporate taxpayers, are adopted by reference as a part of, this chap- ter. Those portions of the Internal Revenue Code and other laws - of the United States have full force and effect under this chapter unless modified by other provisions of this chapter. ' 2) Insofar as is practicable in the administration of this chapter, the department shall apply And follow the administrative and judicial interpretations of the federal income tax law' When a provision of the federal income talc- law is ' the subject- of conflicting opinions by two or more federal courts, the department shall follow, the rule observed bye the United States Commissioner of Internal Revenue until the conflict is resolved. Nothing contained in this section limits the right or duty, of the department to audit the return of,any taxpayer or to determine any fact re lating to the tax liability of any taxpayer. 3) When portions of the Internal Re- venue Code incorporated by reference as provided in subsection ( 1) of this section refer to rules or regulations prescribed by the Secretary of the Treasury, they are regarded as rules adopted, by the department under. and in accord with the provisions. of this chapter, whenever they are prescribed or amended. 4) When portions of the Internal Revenue Code incorporated by reference as provided in subsection ( 1) of this section are. later corrected by an Act or Title within an Act of the United States Congress designated as an Act or Title, making technical corrections, then notwithstanding the date that the Act or Title becomes law, those,portions of the Internal Revenue Code, as so corrected, shall be the portions of the Internal Revenue Code incorporated by reference as provided in this.section or ORS 317,0J0 or and shall take effect, unless gther- wise indicated by the Act or Title ( in which case the provisions shall take effect as indicated in the Act or Title) as if originally included in the Act being technically corrected. If, on account of this subsection, any adjustment is required to an Oregon return that would otherwise be prevented by operation of law or rule, the adjustment shall be made, notwithstanding any law or rule to the contrary, in the manner provided under ORS c ; 1984 c 1 6; 1985 c , 1987 c , [ Repealed by 1957 c ( and enacted in lieu of , , and ) c , 3, 5; 1975 c ; repealed by 1983 c Application of certain substantiation requirements of Internal Rer venue. Code; luxury automobiles and other mixed -use property. ( 1) Notwithstanding ORS , and , Oregon taxable income shall be determined using section 274 ( d) of the Internal Revenue Code, and any regulations adopted thereunder, as that section and its regulations are in', effect for the tax year of the taxpayer for federal income tax purposes. 2) Notwithstanding ORS , gnd , section 28OF of the Internal Revenue Code, and any. regulations adopted thereunder, as that section and its regulations are in, effect and applicable for the tax year of. the taxpayer for federal income tax purposes, shall apply in deriving Oregon taxable income. This subsection shall apply to property placed in service on or after January 1, 1985, in tax years beginning on or after January 1, c Statement of purpose. It is the intent of the Legislative Assembly: 1) To make the Oregon corporate excise tax law, insofar as it relates to the measurement of taxable income, identical to the provisions of the federal Internal Revenue Code, as- amended on or before December 31, 1988, even where the amendments take effect or become operative after that date, to the end that, taxable income of a corporation for Oregon purposes is the same as it is for federal income tax purposes, subject to Oregon' s jurisdiction to tax, and subject to the additions, subtractions, adjustments and modifications contained in this chapter. 2) To achieve the results desired under subsection ( 1) of this section by application of the various provisions of the federal Internal Revenue Code relating to the defi- nitions for corporations, of income, deductions, accounting methods, accounting periods, taxation of corporations, basis and other pertinent provisions relating to gross income. It is not the intent of the Legislative Assembly to adopt federal Internal Revenue Code provisions dealing with the computation of tax, tax credits or any other pro- visions designed tax due. to mitigate the amount of 3) To impose on each corporation doing business within this state an excise tax for the privilege of carrying on or doing that business measured by its federal taxable in-

134 CORPORATION EXCISE TAX come as adjusted in this chapter c 162 2; 1984 c. 1 7; 1985 c ; 1987 c ; 1989 c Application of Payment -inkind Tax Treatment Act of The Payment -in -kind Tax Treatment Act of 1983 P.L. 984, as amended by section 1061 of P.L ) shall apply in deriving Oregon taxable income under this chapter, notwithstanding that the Act is not part of the Internal Revenue Code c ( Repealed by 1957 c ( and enacted in lieu of , , and ) Application of Deficit Reduction Act of 1984 and Simplification of Imputed Interest Rules of ( 1)( a) Not- withstanding ORS , and ( all 1983 Replacement Part), and subject to all other provisions of this chapter in effect and applicable to transactions occur- ring on or after January 1, 1984, the Deficit Reduction Act of 1984 ( P. L ) insofar as it applies to transactions occurring on or after January 1, 1984, shall apply to the same transactions for Oregon tax purposes. b) Notwithstanding ORS , and ( all 1985 Replacement Part), and subject to all other provisions of this chapter in effect and applicable to transactions oc- curring on or after January 1, 1985, the Act described as the Simplification of Imputed Interest Rules of 1985 ( P. L ) insofar as it applies to transactions occurring on or after January 1, 1985, shall apply to the same transactions for Oregon tax purposes. The amendments by the Act described as the Simplification of Imputed Interest Rules of 1985 ( P. L ) to section 168 of the Internal Revenue Code apply to property placed in service after May 8, 1985, but do not apply to property to which section 105 b)( 2) and ( 3) of the Act ( P. L ) apply. 2)( a) If a deficiency is assessed against any taxpayer for a tax year for which subsection ( 1) of this section applies and the deficiency, or any portion thereof, is attributable to any retroactive treatment for Oregon tax purposes given P. L or under subsection ( 1) of this section, then any interest or penalty assessed under ORS chapter 305, 314 or this chapter with respect to the deficiency or portion shall be canceled. b) If a refund is due any taxpayer for a tax year for which subsection ( 1) of this section applies and the refund or any portion thereof is due the taxpayer on account of any retroactive treatment given P. L or for Oregon tax purposes under sub- section ( 1) of this section, then notwith- standing ORS or other law, the refund shall be paid without interest. 3)( a)( A) At the election of the taxpayer and if the taxpayer is required to file an Oregon return for a tax year beginning in 1985, any changes required on account of paragraph ( a) of subsection ( 1) of this section for a tax year beginning prior to January 1, 1985, may be made either by filing an amended return or be made on a tax return filed for a tax year beginning in 1985 in the manner determined by the department by rule. An election made under this paragraph shall apply to all changes required on acof count of paragraph ( a). of subsection ( 1) this section. B) Any changes required on account of paragraph ( b) of subsection ( 1) of this section for a tax year beginning prior to January 1, 1987, shall be made by filing an amended return within the time prescribed by law. b) Exercise of the election provided under subparagraph ( A) of paragraph ( a) of this subsection shall not operate to modify any election made on the return to which the change relates or on the return in which the change is made unless otherwise provided by the department by rule. c) For purposes of subparagraph ( A) of paragraph ( a) of this subsection, if a taxpayer is not required to file an Oregon return for a tax year beginning in 1985, the taxpayer shall reflect the change in an amended return for the tax year to which the change relates. d)( A) If a taxpayer fails to make an election under subparagraph ( A) of paragraph a) of this subsection, the department shall make any changes under subparagraph ( A) of paragraph ( a) of this subsection on the re- turn to which the change or changes relate within the period as specified for assessing a deficiency or claiming a refund as otherwise provided by law with respect to that return, or within one year after a 1985 return is filed, whichever period expires later. B) If a taxpayer fails to file an amended return under subparagraph ( B) of paragraph a) of this subsection, the department shall make any changes under subparagraph ( B) of paragraph ( a) of this subsection on the re turn to which the change or changes relate within the period as specified for assessing a deficiency or claiming a refund as otherwise provided by law with respect' to that return, or within one year after a 1987 return is filed, whichever period expires later c ; 1987 c Certain provisions of ORS construed as continuation of effisting law. Insofar as the provisions of this section and ORS , , , to , and are substantially the same as existing law relating to the tax-

135 REVENUE AND TAXATION ation of corporations, they shall be construed as restatements and continuations, and not as new enactments c ; 1984 c. l Omission of previously enacted savings clauses not intended as repeal. The omission from the Oregon Revised Statutes of those statutes which were part of Acts amending the statutes that constitute the source of this chapter and which pro- vided savings clauses for the statutes amended, is not intended as a repeal of them. Such statutes shall, in so far as they are applicable, continue to be so applicable License fees not repealed. Nothing in this chapter shall be construed to repeal the present capital stock tax or annual corporation license fee otherwise provided for by law Effect of subsequent repeal of chapter. In the event of repeal of this chapter, unless otherwise specifically provided in the repeal, this chapter shall remain in full force for the assessment, imposition and collection of the tax and all interest, penalty or forfeitures which have accrued or may accrue in relation to any such tax for the calendar year in which the tax is repealed Corporation not required to include income or permitted to deduct expense more than once. ( 1) Nothing contained in this chapter shall be construed to require a corporation to include an item of income, or to permit a corporation to deduct an expense item, more than once in comput- ing Oregon taxable income. 2) The changes to the corporate excise and income tax laws by chapter 162, Oregon Laws 1983, shall not be applied to preclude a corporation from taking into account a deduction or a loss to which it otherwise would be entitled. 3) The changes to the corporate excise and income tax laws by chapter 162, Oregon Laws 1983, shall not be applied to preclude a corporation from including income which it otherwise would be required to include c , 1985 c e Application. of federal law relating to discriminatory employee benefit plans. Notwithstanding ORS , and , section 89 of the Internal Re- venue Code ( relating to discriminatory em- ployee benefit plans and other matters), and the regulations adopted thereunder, shall ap- ply as appropriate to the determination of the taxes imposed under this chapter for a taxable year in the same manner that the section and regulations are applied in determining federal income tax for the same taxable year c provides: Note: Section 82, chapter 625, Oregon Laws 1989, Sec. 82. ( 3) Except as provided in subsections ( 2) to ( 4) of this section and sections 83 to 92 of this Act, the amendments by this Act apply to transactions or activities occurring on or after January 1, 1989, in tax years beginning on or after January 1, ) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P L ) and other Acts, relative to those dates, contained in the Omnibus Budget Reconciliation Act of 1987 ( P.L ) shall apply for Oregon personal income and corporate excise and income tax purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law 3) The effective and applicable dates, and the ex- ceptions, special rules and coordination with the Internal Revenue Code, as runended by the Tax Reform Act of 1986 ( P L ) and other Arts, ielauve to those dates. contained to the Family Support Act of 1988 ( P L ) shall apply for Oregon pcisonal uuome and corporate excise and income tax purposes, to the extent they can be made applicable, in the same manner as they are applied under the federal Internal Revenue Code and related federal law. 4) The effective and applicable dates, and the exceptions, special rules and coordination with the Internal Revenue Code, as amended by the Tax Reform Act of 1986 ( P. L ) and other Acts, relative to those dates, contained in the Technical and Miscellaneous Revenue Act of 1988 ( PL ) shall apply for Oregon personal income and corporate excise and income tax purposes, to the extent they can be made applicable, to the same manner as they are applied under the federal Internal Revenue Code and related federal law. 5)( a) If a deficiency is assessed a ainst any taxpayer for a tax year beginning before January 1, 1989, and the deficiency, or any portion thereof, is attributable to any retroactive treatment under this Act, then any interest or penalty assessed under ORS chapter 305, 314, 316, 317 or 318 with respect to the deficiency or portion thereof shall be canceled. b) If a refund is due any taxpayer for a tae year beginning before January 1, 1989, and the refund or any portion thereof is due the taxpayer on account of any retroactive treatment under this Act, then notwithstanding ORS or other law, the refund shall be paid without interest. c) Any changes required on account of this Act for a tax year beginning prior to January 1, 19,89, shall be made by riling an amended return within the time prescribed by law. d) If a taxpayer fails to file an amended return under paragraph ( c) of this subsection, the Department of Revenue shall make any changes under paragraph ( c) of this subsection on the return to which the change or changes relate within the period as specified for issuing a notice of deficiency or claiming a refund as otherwise provided by law with respect to that return, or within one year after a 1989 return is filed, whichever period expires later c IMPOSITION OF TAX ( Amended by 1957 c.607 1; subsection ( 2) of 1961 Replacement Part derived from 1957 c and 1957 s.s. c. 5 1; 1963 c.571 2; repealed by 1975 c Financial corporations; applicable taxes. Except as otherwise required by federal law, every financial corporation located within this state shall be subject to county, city, district, political subdivision

136 CORPORATION' EXCISE TAX and all other local taxes imposed generally on a nondiscriminatory basis throughout the jurisdiction of the taxing authority, at the same rates and in all respects in the same manner and to the same extent as are mercantile, manufacturing and business corporations, and shall pay annually to the state an excise tax according to or measured by its Oregon taxable income, to be computed in the manner provided by this chapter at the rates provided in ORS c368 3; 1983 c [ Amended by 195'7 c 607 2, subsection ( 2) of 1961 Replacement Part derived from 1957 c and 1957 s s c5 l; 1963 c 571 3, repealed by 1973 c Tax rate. The rate of the tax imposed by and computed under this chapter is six and six - tenths percent c368 2; 1983 c ; 1987 c al ( Repealed by 1975 c c.597 2; repealed by 1983 c Tax on homeowners associ- ation income. A tax is hereby imposed for each taxable year on the homeowners association taxable income of every homeowners association at the rates provided in ORS and as though the homeowners asso- ciation were a corporation c ; 1983 c Tax on centrally assessed, mercantile, manufacturing and business corporations. Every centrally assessed corporation, the property of which is assessed by the Department of Revenue under ORS to and to and every mercantile, manufacturing and business corporation doing or authorized to do business within this state, except as provided in ORS and , shall annually pay to this state, for the privilege of carrying on or doing business by it within this state, an excise tax according to or measured by its Oregon taxable income, to be computed in the manner provided by this chapter, at the rates provided in ORS [ Amended by 1957 c.607 3; 1957 c.709 1; subsection ( 3) of 1963 Re placement Part derived from 1957 c.607 I1; 1957 c and 1957 s. s c 5 1; 1959 c 631 2; 1963 c ( referred and rejected); 1965 c ; 1965 c ; 1971 c ; 1975 c.368 5; 1977 c.866 3; c ; 1983 c 162 7; 1985 c c.887 8; 1981 c ; 1981 c ; renumbered c.592 9; 1969 c ; 1973 c ; 1977 c ; 1977 c ; 1981 c , 1983 c.637 7; renumbered c , repealed by 1969 c c.592 2; 1957 c.607 4; subsection ( 5) derived from 1957 c and 1957 s. s c.5 l; repealed by 1969 c [ Repealed by 1955 c c.600 9; renumbered c ; 1979 c ; renumbered c.600 5; 1983 c ; renumbered Exempt corporations. The following corporations are exempt from the taxes imposed by this chapter: 1) Organizations described in subsection c) and subsection ( j) of section 501 of the Internal Revenue Code unless the exemption is denied under subsection ( h), ( i) or ( m) of section 501 or under section 502, 503 or 505 of the Internal Revenue Code. 2) Organizations described in section 501( d) of the Internal Revenue Code, unless the exemption is denied under section 502 or 503 of the Internal Revenue Code. 3) Organizations described in section 501( e) of the Internal Revenue Code. 4) Organizations described in section 501(f) of the Internal Revenue Code. 5) Organizations described in section 521 of the Internal Revenue Code. 6) Foreign or alien insurance companies, domestic insurance companies described under ORS ( 2) and foreign or alien interinsurance and reciprocal exchanges, upon which a tax on premiums is levied; and with respect to its income as a corporate at- torney in fact for a reciprocal or interinsur- ance exchange, corporations acting as attorneys in compliance with ORS , , and ) Corporations, organized and operated primarily for the purpose of furnishing per- manent residential, recreational and social facilities primarily for persons, elderly which: a) Are corporations not for profit, authorized to transact business in this state pursuant to ORS chapter 61 ( 1987 Replace- ment Part) or any statute repealed by chap- ter 580, Oregon Laws 1959; b) Receive not less than 95 percent of their operating gross income ( excluding any investment income) solely from payments for living, medical, recreational, and social services and facilities, paid by or on behalf of the elderly persons using the facilities of such corporation; c) Permit no part of their net earnings to inure to the benefit of any private stockholder or individual; and d) Provide in their articles or other governing instrument that, upon dissolution, the assets remaining after satisfying all lawful debts and liabilities shall be distributed to one or more corporations exempt from taxa- tion under this chapter as corporations or- ganized and operated exclusively for religious, charitable, scientific, literary or educational purposes

137 REVENUE AND TAXATION 8) People' s utility districts established under ORS chapter 261. [ Amended by 1953 c.207 1; 1953 c 653 3; 1955 c.592 5; last sentence of 1959 Replacement Part derived from 1955 c.592 6; 1957 c. 553 l; 1959 c ; 1961 c.473 1; subsection ( 17) enacted as 1961 c.473 2; 1963 c.286 1; 1967 c ; 1969 c ; 1971 c , 1985 c a; 1987 c ; 1987 c ; 1989 c provides. Note: Section 17, chapter 626, Oregon Laws 1989, Sec. 17. The amendments to ORS by section 9 of this Act first apply to taxable years beginning on or after January 1, c c , renumbered Oregon Capital Corporation exempted from certain taxes. The Oregon Capital Corporation is exempt from the taxes imposed by this chapter c 911 Sel ( Repealed by 1957 c c720 18, renumbered Minimum tax. Each taxpayer named in ORS or shall pay annually to the state, for the privilege of carrying on or doing business by it within this state, a minimum tax of $10. The minimum tax shall not be apportionable ( except in the case of a change of accounting periods), but shall be payable to full for any part of the year during which a corporation is subject to tax. [ Amended by 1975 c c 592 3, 6, repealed by 1965 c enacted in lieu of ) c ( enacted in lieu of ); repealed by 1983 c CREDITS Commercial lending institution loans for housing rehabilitation. ( 1) A credit against taxes otherwise due under this chapter for the taxable year shall be allowed to a commercial lending institution in an amount equal to the difference between: a) The amount of finance charge charged during the taxable year including interest on the loan and any loan fee financed at an an- nual rate less than the market rate for a loan made on or after January 1, 1990, and before January 1, 2000, by the lending institution to a project that is certified by the Housing Agency, and is sponsored by a nonprofit corporation or local government entity, or a loan made after January 1, 1990, and before January 1, 2000, that is made to a household participating in a community rehabilitation program; and b) The amount of finance charge that would have been charged during the taxable year by the lending institution for the loan for housing development or rehabilitation measures at the annual rate charged by the commercial lending institution for nonsubsidized loans made under like terms and conditions at the time the loan for housing development or rehabilitation measures is made. 2) The maximum difference between the amounts described in paragraphs ( a) and ( b) of subsection ( 1) of this section shall not exceed four percent of the average unpaid.balance of the loan during the tax year for which the credit is claimed. 3) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise until the 15th succeeding tax year. The credit may not be carried forward beyond the 15th succeeding tax year. 4) The credit allowed in this section shall be allowed for the term' of the loan or for 10 years, whichever time period is shorter. 5) In order to be eligible for the tax credit allowed under subsection ( 1) of this section, the loan shall: a) Be made to a project sponsored by a nonprofit or governmental entity including, but not limited to, a housing authority. The project shall demonstrate that the reduced interest rate provided by the- commercial lender will be passed on to tenants in the form of reduced housing payments to households earning less than 80 percent of the area median income; or b) Be made to a household participating in a community rehabilitation program. Par- ticipants in such programs shall be certified by the local government or its designated agent as having an income level at the time the loan is made of less than 80 percent of the area median income. 6) As used in this section, the following definitions shall apply: a) " Annual rate" means the yearly in- terest rate specified on the note, and not the annual percentage rate, if any, disclosed to the applicant to comply with the federal Truth in Lending Act. b) " Commercial lending institution" means any bank, mortgage banking company, federal savings bank, savings bank, stock savings bank, savings and loan association, national bank or federal savings and loan association maintaining an office in this state. c) " Finance charge" means the total of all interests, loan fees and other charges related to the cost of obtaining credit and includes any interest on any loan fees financed by the lending institution.

138 CORPORATION EXCISE TAX ) The commercial lending institution shall file an annual statement with,' the Housing Agency, specifying that it has conformed with all requirements imposed by law to qualify for this tax 'credit., 8) The Housing Agency and the Department of Revenue may adopt rules to carry out the provisions of this section c c.561 6; 1983 c 162, 8;, renumbered Commercial lending - institution loans for ' underground storage tanks or soil remediation; reimbursement of General Fund. ( 1) A credit against taxes otherwise. due under this chapter for the taxable year shall be allowed to a commercial lending,institution in an amount. equal. to the difference between: a). The amount of finance charge charged during the taxable year including interest on the - loan and" interest l - on any loan fee financed at a rate of seven and one -half percent for a loan. made on or after September 1, , and before August 31, 1992, by the lending institution to a person who is up- grading or replacing an underground storage tank facility, or conducting soi'1 remediation at the site of an underground storage tank facility; and b) The amount of finance I charge that have been charged during the taxable year, including interest on the loan and interest on any loan' fee financed by the lending institution for the loan for underground storage tank upgrading, replacement or soil remediation -measures at an annual rate that is the lesser of the- following: A)' The annual cite 'charged. by the `commerbial lending institution for nonsubsidized loans made under, like t'erms- and conditions at the time the loan for underground storage tank upgrading, replacement or soil remedi- ation "measures is made; or 1 ' B) An upper limit established by rule of the Environmental Quality Commission. 2)" In' order to be eligible for the tax credii` allowed under subsection ( 1) section, the loan' shall: and ' of this a), Be made before September 1, 1992; b) Have a, term not exceeding 10 years. 3) The- credit allowed- under this section shall be, allowed to a commercial lending institution for any.taxable year during which a loan is outstanding. 4) Once each quarter the Department of Revenue shall -send the Department of' Environmental Quality an invoice for an amount equal to the tax credit- allowed under subsections ( 1) to ( 3) of this, section. The De- partment of Environmental Quality shall reimburse the General Fund for the amount of credit allowed each quarter from' moneys in the Underground Storage Tank Compliance and Corrective Action Fund established under ORS ) As used in this section, " commercial lending institution," " facility," " soil remediation" and " underground storage tank" have the meaning given those terms in ORS c , 10al Note: Sections 4 and 7, chapter 438, Oregon Laws 1985, provide Sec. 4. ( l) As used in this section a) " Commercial fisherman" means a person licensed to take fish commercially under the laws of this o" another state. b) " Fair market value" means the purchase price actually paid for fish of the same species on the date the weigh -backs are landed. c), "Fish" means fish or shellfish for use for human consumption. d) " Weigh- backs" means fish taken by a commercial fisherman that are too small or uneconomical to process or are cosmetically imperfect so as to be unacceptable for purchase by a wholesaler, canner or other fish processor. 2) A credit is allowed against the taxes otherwise due under this chapter to. a) A commercial fisherman who contributes or aids, assists or causes to be contributed through a person described in paragraph ( b) of this subsection, weigh -backs to a gleaning cooperative, as defined in ORS , or to an officially designated recipient member of Oregon Food Share, a private nonprofit cor- poration. b) A wholesaler, canner or other fish processor who accepts weigh -backs from a commercial fisherman or agent of a commercial fisherman and delivers or causes the weigh -backs to be delivered to a gleaning cooperative, as defined in ORS , or to an officially designated recipient member of Oregon' Food Share, a private nonprofit corporation. 3) The amount of the credit allowed to each taxpayer described under subsection ( 2) of this section is five percent of the fair market value of the weigh -backs contributed during the tax year of the taxpayer. 4) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused on such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year- may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 5) If the taxpayer qualifying for the credit under this section is an electing S corporation, as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax ' credit relief as provided in section 2 of this 1985 Act based- on the shareholders' pro rata share of the credit

139 REVENUE AND TAXATION 6) At the time of a contribution made as described under subsection ( 2) of this section, the director, supervisor or other appropriate official of the gleaning cooperative or Oregon Food Share to which the contribution is made shall supply to the commercial fisherman or wholesaler, canner or other fish processor, two copies of a form prescribed by the Department of Revenue. The form shall: a) Contain the name and address of the commercial fisherman, wholesaler, canner or other fish processor. b) Describe the species of the weigh -backs contributed and specify the amount or quantity contributed c) Specify the purchase price actually paid for fish of the same species as the weigh -backs on the date the weigh -backs were landed. d) Contain any other infoimation required by the Department of Rey enue by rule e) Be signed by the director, supervisor or other appropriate official of the gleaning cooperative or Oregon Food Share 7) Tax claim for tax credit under this section shall be substantiated by submission with the tar return, of the form described in subsection ( 6) of this section, a statement verified by the taxpayer that the contribution was made as described in subsection ( 2) of this section and a copy of a receipt or other statement identifying the price paid for fish of the same species as the weigh -backs on the date the weigh-backs were landed c Sec. 7. This Act applies to tax years beginning on or after January 1, 1985, and prior to January 1, c c.483 2; repealed by 1989 c Note: Section 28, chapter 894, Oregon Laws 1981, as amended by section 1, chapter 749, Oregon Laws 1987, provides: Sec. 28. ( 1) A credit against taxes otherwise due under this chapter for the taxable year shall be allowed to a commercial lending institution in an amount equal to the difference between: a) The amount of finance charge charged during the taxable year including interest on the loan and interest on any loan fee financed at an annual rate of six and one -half percent for a loan made on or after January 1, 1982, and before January 1, 1992, by the lending institution to a dwelling owner who is or who rents to a residential fuel oil customer, or who is or who rents to a wood heating resident for the purpose of financing energy conservation measures; and b) The amount of finance charge that would have been charged during the taxable year, including interest on the loan and interest on any loan fee financed by the lending institution for the loan for energy conservation measures at an annual rate which is the lesser of the following. A) The annual rate charged by the commercial lending institution for nonsubsidized loans made under like terms and conditions at the time the loan for energy conservation measures is made; or B) An upper limit established by rule by the Director of the Department of Energy. 2) If the credit allowed under this section exceeds the tax liability of the commercial lending institution for the taxable year, the Department of Revenue shall refund the difference to the taxpayer. Payment made by the Department of Revenue under this subsection shall be considered a refund for the purposes of ORS Moneys are continuously appropriated to the Department of Revenue to make the refunds authorized by this subsection. 3) In order to be eligible for the tax credit allowed under subsection ( 1) of this section, the loan shall a) Be made only, to an owner of an oil - heated or wood - heated dwelling who presents the results of an energy audit pursuant to chapter 887, Oregon Laws 1977, chapter 889, Oregon Laws 1977,, or. under chapter 778, Oregon Laws 1981, conducted by a fuel oil dealer, investor -owned utility, publicly owned utility or through the Oregon Department of Energy; regardless of whether that fuel oil dealer or utility provides the dwelling' s space heating energy. b) Be subject to an annual rate not to exceed six and one-hal f 'percent and have a term not exceeding 10 years c) Be made before January 1, d) Not finance any materials installed in the construction of a new dwelling, additions to existing structures or remodeling that adds li<ing space I ' e) Finance only those energy conservation measures that are recommended as cost-effective in the energy audit, and any loan ' fee that is included in the body of the loan. The requirement for cost effectiveness - shall not apply in the case of a dwelling owner who hm obtained assistance and, technical advice under chapter 887, Oregon Laws 1977, or chapter 889, Oregon Laws ' - I 4) The credit allowed under this section shall not be- allowed to the extent that, the loan exceeds &5, 000 for a single dwelling unit, or, if the dwelling owner is a corporation described in ORS , to the extent that the loan exceeds $ 2, 000 for a single dwelling unit. 5) A commercial lending institution may charge, finance and collect a nonrefundable front -end loan fee, and such a fee shall not affect the eligibility of the loan for a tax credit under this section. The fee, if any, shall not exceed that charged by the lending institution for nonsubsidized loans made under like terms and conditions at the time the loan for energy conservation measures is made 6) Nothing in this section or in rules adopted un- der this section shall be construed to cause a loan to violate the usury laws of this state. 7) As used in this section, " annual rate," " commercial lending institution," " cost-effective," " dwell ing," dwelling owner," " energy audit," " energy conservation measures," " fuel oil dealer," " residen- Finance charges" " tial fuel oil ' customer," and " wood space heating" heating resident" have the meaning given those terms in section 22, chapter 894, Oregon Laws c , 1987 c Reforestation of underproductive forest lands. ( 1) A, credit against the taxes otherwise due under this chapter shall be allowed in an amount equal to 30 percent of reforestation project costs actually paid or incurred to reforest underproductive Oregon forest lands. Such costs include, but are not limited to site preparation, tree planting and other silviculture treatments considered nec- essary by the State Forester to establish commercial, hardwood or softwood stands on appropriate sites. Subject to subsection ( 5) of this section: a) One -half of the credit shall be taken in the tax year for which the State Forester, after physical inspection of the forest land, issues a preliminary certificate certifying that the land qualifies as underproductive Oregon forest land and that the reforestation project undertaken meets the requirements

140 CORPORATION EXCISE TAX of this section and the specifications established by the State Forester and the costs appear to be reasonable; and b) One -half of the credit shall be taken in the tax year for which the State Forester, after further physical inspection of the land and project, certifies that the new forest is established in accordance with the specifications of the State Forester. 2) No credit shall be allowed under either paragraph ( a) or ( b) of subsection ( 1) of this section unless written certification con- taining the following statements accompanies the claim for the credit or is otherwise filed with the department: a) A statement by the State Forester that the land and project meet the preliminary specifications established by the State Forester or that the new forest is established, whichever is applicable at the time. b) A statement by the landowner or person in possession of the land that the land within the project area will be used for the primary purpose of growing and harvesting trees of an acceptable species. c) A statement that the landowner or person in possession of the land is aware that maintenance practices, including re- lease, may be needed to insure that a new forest is established and will remain established. 3) For purposes of this section, reforestation project costs shall not include: a) Costs paid or incurred to reforest any forest land that has been commercially logged to the extent that reforestation is required under the Oregon Forest Practices Act, except costs paid or incurred to reforest forest land following a hardwood harvest, conducted for the purposes of converting underproductive forest lands, as determined by administrative rule. b) That portion of costs or expenses paid through a federal or state cost share pro- gram. c) Those costs paid or incurred to grow Christmas trees, ornamental trees, shrubs or plants, or, except as provided in ORS and except those costs paid or incurred to grow hardwood timber on land classified under ORS to , those costs paid or incurred to grow hardwood timber described under ORS ( 1)( e). d) Any costs paid or incurred to purchase or otherwise acquire the land. e) The cost of purchase or other acqui- sition of tools and equipment with a useful life of more than one year. 4) To qualify for the ci edit: a) The project must be completed to specifications approved by the State Forester. b) The taxpayer' s portion of the project costs must be $ 500 or more. c) The taxpayer must be a legal entity owning, purchasing under recorded contract of sale or leasing at least five acres of Oregon commercial forest land. 5) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. In all cases the taxpayer must be the corporation that made the investment into the project. 6)( a) The credit provided by this section shall be in addition to and not in lieu of any depreciation or amortization deduction to which the taxpayer otherwise may be enti- tled with respect to the reforestation project and the credit shall not affect the computa- tion of basis for the property. b) If the taxpayer qualifying for the credit under this section is an electing small business corporation as defined in section 1361 of the Internal Revenue Code, the credit allowed under this section shall be allowed to the corporation' s shareholders and shall be computed for each shareholder in the manner provided under ORS ) In compliance with ORS to , the Department of Revenue and the State _Forestry Department may adopt rules consistent with law for carrying out the provisions of this section. 8) As used in this section, " underproductive Oregon forest lands" means Oregon commercial forest lands not meeting the minimum stocking standards of the Oregon Forest Practices Act ) If, for any reason other than those specified in subsection ( 10) of this section, a new forest is not established by the last day of the second taxable year following the taxable year for which the preliminary certificate was issued, the State Forester shall so report to the Department of Revenue. The report filed under this subsection shall be the basis for the department to recover any credit granted under paragraph ( a) of sub- section ( 1) of this section. If, however, the new forest is not established within the time required by this subsection on account of the reasons specified in subsection ( 10) of this

141 REVENUE AND TAXATION section, any credit allowed under paragraph a) of subsection ( 1) of this section and subsection ( 5) of this section shall not be recovered but no further credit as provided under paragraph ( b) of subsection ( 1) of this section and subsection ( 5) of this section shall be allowed. 10) Subject to requalification under this section in the manner applicable for the original claim, a taxpayer may claim an additional credit or credits for reestablishing a new planting in the event that the new forest is destroyed by a natural disaster or is not established for reasons bevond the control of the taxpayer, if the measures taken in com- pleting the original or earlier project would normally have resulted in establishing the minimum number of trees per acre anticipated by the project. 11) Any owner affected by a determination regarding the reforestation tax credit made by: a) The State Forester, may appeal that determination in the manner provided for in ORS ( 1). b) The Department of Revenue, may appeal that determination in the manner provided for in ORS ( 2) c.578 9; 1985 c ; 1987 c.605 2; 1989 c provides: Note: See note under Note: Section 3, chapter 887, Oregon Laws 1989, See. 3. Tho' amendments to ORS ( 1), ( 3) and 4) and ( 1), ( 3) and ( 4) by sections 1 and 2 of this Act apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for a tae year beginning on or after January 1, c Note: Sections 4 and 5, chapter 605, Oregon Laws 1987, as amended by chapter 887, Oregon Laws 1989, provide: Sec. 4. ( 1) The amendments to ORS ( 1)( a) and ( b) by section 1 of this Act and to ORS ( 1)( a) and ( b) by section 2 of this Act, apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for a tax year beginning on or after January 1, ) The amendments to ORS ( 1) and ) by sections I and 2 of this Act changing " 10" to 30" apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for a tax year beginning on or after January 1, 1987., 3) The amendments to ORS ( 6) and ) by sections I and 2 of this Act allowing the reforestation tax credit to the shareholders of an S corporation apply to all reforestation project costs paid or incurred in connection with a reforestation project for which a preliminary certificate is issued for at tax year beginning on or after January 1, c Sec. 5. No tax credit shall be allowed under ORS or based upon reforestation project costs if the preliminary certificate is not issued prior to July 1, c.605 5; 1989 c Note: Sections 2 and 5, chapter 695, Oregon Laws 1985, as amended' by chapter 989, Oregon Laws 1989, provide: Sec. 2. ( 1) A credit is allowed against the taxes otherwise due under this chapter. The amount of the credit shall equal 10 percent of the fair market value of certain qualified charitable contributions, as described in this section. section ( 1) must - 2) To qualify for the credit allowed under sub- of this section, the, charitable contribution a)( A) Be a charitable contribution made duringg the tax year for which the credit is claimed to an educa. tional organization' described in section 170 ( b)( 1)( A)( ii) of the Internal Revenue Code which is an institution of higher education or a post - secondary school, and which has its place where its educational activities are regularly carried on in this state; and B) Be a charitable contribution of tangible personal property described in section 1'' 21( 1) of the Internal Revenue Code which has as its original use, use by the donee for education of students in this state, and which is a. computer or other scientific equipment or apparatus; or b) Be a charitable contribution that would otherwise qualify for the credit under paragraph ( a) of this subsection except that the charitable contribution is of a contract or agreement for the maintenance of the computer or other scientific equipment or apparatus; or c) Be a contribution of moneys made under a contract or agreement during the taxable year for scientificf or engineeri ng research to an educational organization described in section 170 ( b)( 1)( A)( ii) of the internal Revenue Code which is an institution of higher education or a post- secondary school, and which has its place where its educational activities are regularly carried on in this state. 3) The credit allowed under this section is in lieu of any deduction otherwise allowable under this chap. ter. No deduction shall be allowed under this chapter for any amount upon which the credit allowed under this section is based. However, nothing in this section shall affect the basis of the property in the hands of the donee or any other taxpayer. The basis of the property in the hands of the donee or other person shall be determined as if this section did not exist 4) The credit allowed under this section shall not exceed the tax liability of the taxpayer and shall not be allowed against the tax imposed under ORS To qualify for a credit under this section, the charitable contribution must be made after January 1, 1956, be made without consideration and be accepted by the donee institution or school. 5) For purposes of this section, " fair market value" shall be determined at the time the property or services are contributed and shall be substantiated by whatever information the department requires c Sec. 5. ( 1) Except as provided in subsection ( 2) of this section, sections 2 and 4, chapter 695, Oregon Laws 1985, apply to contributions made in tae years beginning on or after January 1, 1986, and prior to January 1, ) With respect to the credit allowed for a contribution as described in paragraph ( c) of subsection ( 2) of section 2, chapter 695, Oregon Laws 1985, if a written contract or other written agreement to make the contribution is entered into prior to January 1, 1998, and the moneys contributed after that date are contributed pursuant to the contract or agreement, then notwithstanding subsection ( 1) of this section, the credit allowed as described in paragraph ( c) of' subsection ( 2) of section 2, chapter 695, Oregon Laws 1985, shall be allowed for those contributions made pursuant to the

142 CORPORATION EXCISE TAX written contract or other written agreement entered into prior to January 1, c.695 5, 1989 c Reduction of certified energy conservation facility costs by grant or credit; eligibility for credit. ( 1) If a taxpayer obtains a grant or tax credit from the Federal Government other than an investment credit granted under section 46 of the Internal Revenue Code of 1986 as it reads on October 3, 1989, or a low income housing tax credit granted under section 42 of the Internal Revenue Code as it reads on October 3, 1989, in connection with a facility, as defined by ORS , that has been certified by the Director of the Department of Energy, the certified cost of the facility shall be reduced on a dollar for dollar basis. Any income or excise tax credit to which the taxpayer is entitled under ORS after the reduction shall not be reduced by the federal grant or tax credit. A taxpayer applying for a federal grant or credit shall notify the Department of Revenue by certified mail within 30 days of the application and the receipt of the grant. 2) If a facility eligible for a credit under ORS is financed in part by any governmental or quasi - governmental body or municipal corporation, as defined in ORS , a tax credit may be claimed only on the portion of the cost that is privately fi- nanced. 3) A taxpayer is eligible to participate in both this tax credit program and low interest, government- sponsored loans. 4) A taxpayer who receives a tax credit or ad valorem tax relief on a pollution con- trol facility or an alternate energy device under ORS or is not eligible for a tax credit on the same facility or device under ORS and to c , 16, 1989 c Energy conservation facility costs. ( 1) A credit is allowed against the taxes otherwise due under this chapter, based upon the certified cost of a facility during the period for which that facility is certified under ORS to The credit allowed in each of the first two tax years in which the credit is claimed shall be 10 percent of the certified cost of the facility, but shall not exceed the tax liability of the taxpayer. The credit allowed in each of the succeeding three years shall be five percent of the certified cost, but shall not exceed the tax liability of the taxpayer. 2) The facility must be in Oregon, and: a) Owned during the tax year. by the taxpayer claiming the credit; or b) Financed by a public utility described in ORS ( 1)( c)( B), that has been issued a certificate under ORS ) A credit under this section may be claimed by a taxpayer for a facility only in those tax years which begin on and after January 1, ) The maximum total credit or credits allowed for a facility under this section to eligible taxpayers shall not exceed 35 percent of the certified cost of such facility. 5) Upon any sale, termination of the lease, exchange or other disposition of a facility, notice thereof shall be given to the Director of the Department of Energy who shall revoke the certificate covering the facility as of the date of such disposition. The transferee, or upon re- leasing the facility, the lessor, may apply for a new certificate under ORS , but the tax credit available to that transferee shall be limited to the amount of credit not claimed by the transferor or, for a lessor, the amount of credit not claimed by the lessor previous leases. under all 6) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in that next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. Credits may be carried forward, to and used in a tax year beyond the years specified in subsection ( 1) of this section only as provided in this subsection. 7) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the facility to which the taxpayer otherwise may be entitled under this chapter for such year. 8) The taxpayer' s adjusted basis for determining gain or loss shall not be decreased by any tax credits allowed under this section. 9) Except as provided in paragraph ( b) of subsection ( 2) of this section, a credit under the provisions of this section shall not be allowed to: a) A public -utility, as defined in ORS , that retails electricity or natural gas to more than 100 customers; b) A people' s utility district, as defined in ORS , a municipal utility or a cooperative utility that retails electricity or natural gas to more than 100 customers; or c) A subsidiary or an affiliated interest, as defined in ORS , of a public utility described in paragraph ( a) of this subsection

143 REVENUE AND TAXATION 10) No credit shall be allowed under this section if the taxpayer has received a tax credit on the same facility or device under ORS c ; 1981 c ; 1989 c Note: Section 10, chapter 765, Oregon Laws 1989, provides - Sec. 10. The amendments to ORS by section 5 of this Act first apply to taxable years beginning on or after January 1, c [ Repealed by 1983 c Investment in plastics recycling. ( 1) A credit against taxes imposed by this chapter for the investments certified under ORS shall be allowed if the taxpayer qualifies under subsection ( 4) of this section. 2) A taxpayer shall be allowed a tax credit under this section each year for five years beginning in the year the investment receives final certification under ORS The maximum credit allowed in any one taxable year shall be the lesser of the tax liability of the taxpayer or 10 percent of the certified cost of the taxpayer' s invest- ment. 3) To qualify for the credit the investment must be made in accordance with the provisions of ORS )( a) The taxpayer who is allowed the credit must be: A) The owner of the business that collects, transports or processes reclaimed plas- tic or manufactures a reclaimed plastic product; B) A person who, as a lessee or pursuant to an agreement, conducts the business that collects, transports or processes reclaimed plastic or manufactures a product; or reclaimed plastic C) A person who, as an owner, lessee or pursuant to an agreement, owns, leases or has a beneficial interest in a business that collects, transports or processes reclaimed plastic or manufactures a reclaimed plastic product. Such person may, but need not, operate or conduct such a business that col- lects, transports or processes reclaimed plastic or manufactures a reclaimed plastic product. If more than one person has an interest under this subparagraph in a qualifying business, and one or more persons receive a certificate, such person or persons may allocate all or any part of the certified investment cost among any persons and their successors or assigns having an interest under this subparagraph. Such allocation shall be evidenced by a written statement signed by the person or persons receiving certification and designating the persons to whom the certified investment costs have been allocated and the amount of certified invest- ment cost allocated to each. This statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which a tax credit is claimed pursuant to such agreement. In no event shall the aggregate certified investment costs allocated between or among more than one person exceed the amount of the total certified cost of the investment. As used in this paragraph, " owner" includes a contract pur- chaser; b) The business must be owned or leased during the tax year by the taxpayer claiming the credit except as provided in subparagraph ( C) of paragraph ( a) of this subsection, and must have been collecting, transporting or processing reclaimed plastic or manufacturing a reclaimed plastic product during the tax year for which the credit is claimed; and c) The reclaimed plastic collected, transported, processed or used to manufac- ture the reclaimed plastic product must not be an industrial waste generated by the person claiming the tax credit, but must be purchased from a plastic recycler other than the person claiming the tax credit. 5) A credit under this section may be claimed by a taxpayer for a business receiving final certification of an investment under ORS , only if the investment is made on or after January 1, 1986, but before July 1, ) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the investment to which the taxpayer otherwise may be entitled under this chapter for such year. 7) Upon any sale, exchange, or other disposition of qualifying business, notice thereof shall be given to the Environmental Quality Commission who shall revoke the certification covering the investment of such business as of the date of such disposition. The transferee may apply for a new certificate under ORS , but the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor. The sale, exchange or other disposition of a partner's interest in a partnership shall not be deemed a sale, exchange or other disposition of a business for purposes of this subsection. 8) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried

144 CORPORATION EXCISE TAX forward and used in the third succeeding tax year and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in ORS ) The taxpayer' s adjusted basis for determining gain or loss shall not be further decreased' by any tax credits allowed under this section. 10) No credit shall be allowed under this section and under ORS to for any portion of a facility for which the taxpayer claims a tax credit or ad valorem tax relief under ORS , and to or c ; 1989' c765 6; 1989 c [ Amended by 1953 c 385 9; 1973 c.233 1; repealed by 1983 c Weatherization loan interest; commercial lending institutions. ( 1) ' A credit against taxes otherwise due under this chapter for the taxable year shall be allowed commercial lending institutions in an amount equal to the difference between: a) The maximum amount of interest allowed to be charged during the taxable year under section 6b, chapter 887, Oregon Laws 1977, for loans made before November 1, 1981, by the lending institution to space - heating customers for the purpose of financing weatherization services; and b) The amount of interest which would have been charged during the taxable year by the lending institution for such loans at an annual interest rate which is the lesser of the following: A) The average interest rate charged by the commercial lending institution for home improvement loans made during the calendar year immediately preceding the year in which the loans for weatherization services are made; or B) Twelve percent. 2) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and used in each of the 15 years following the unused tax credit year. How- ever, the entire amount of the unused credit for an unused credit year shall be carried forward to the earliest of the 15 years to which it may be carried. 3) No credit shall be allowed under this section for loans made on or after November 1, [ Formerly ; 1985 c Employer payments to Insurance Pool Governing Board. ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to an employer for amounts paid during the taxable year for purposes of ORS , , , to , and on behalf of an eligible employee as defined in ORS to provide care for a qualified individual. 2) The amount of the credit allowed by subsection ( 1) of this section shall end on December 31, 1993, and shall be equal to the dollar amount specified in the following table or 50 percent of the total amount paid by the employer during the taxable year, whichever is the lesser: Year of Dollar Amount Per Participation Covered Employee Per Month S S S ) As used in this section, " employer" means a taxpayer subject to the tax imposed by this chapter paying compensation in this state. 4) If the credit allowed by this section is claimed, the amount of any deduction allowable under this chapter for expenses described in this section shall be reduced ' by the dollar amount of the credit. The election to claim the credit shall be made at the time of filing the tax return in accordance with rules *adopted by the department. 5) Any amount of expenses paid by an employer under ORS , , , to , and ' shall not be included as income to the employee for purposes of the Personal Income Tax Act of If such expenses have been included in arriving at federal taxable income of the employee, the amount included shall be subtracted in arriving at state taxable income under the Personal Income Tax Act of As used in ORS , with respect to the employee, wages" does not include expenses paid under ORS , , , to , and ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may not be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. 7) If the taxpayer is an electing small business corporation as defined in section

145 REVENUE AND TAXATION 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in ORS , balled on that shareholder' s pro rata share of the expenses described in this section c ; 1989 c Note: Section 12, chapter 381, Oregon Laws 1989, makes further amendment to ORS , effective January 1, 1992, if certain conditions regarding health care coverage are satisfied. Seb section 10, chapter - 381, Oregon Laws 1989 ' rhe text of the further inendment is set forth below for the user' s convenience ( 1) A credit against the taxes otherwise due under this chapter shall- bey allowed to an employer for amounts paid during the taxable year for purposes of ORS , , , to , and on behalf of an eligible employee as defined in ORS to provide care for a qualified individual. 2) The amount of the credit allowed by subsection 1) of this section shall end on December 31, 1093, and shall be equal to the dollar amount specified in the following table or 50 percent of the total amount paid by the employer during "the taxable year, whichever is the lesser: Year of Dollar Amount Per Participation Covered Employee Per Month' 1989 S S S S S ) As used in this section, " employgrk means taxpayer subject to the tax imposed by this - chapter paving compensation in this stale. 4) If the credit allowed by this section is claimed, the amount of any deduction allowable under this chapter for expenses described in this ection shall be reduced by the dollar amount of the credit. The election to claim the credit shall be rpade at the time of filing the tax return in accordance with rules adopted, by thb department. I 5) Any amount of expenses paid by an employer under ORS , , , to , and shall not be' included as income to the employee for purposes of the Personal Income To); Act of If such expenses have been included in arriving at federal taxable income of the employee, the amount included shall be subtracted in arriving at state taxable income under the Personat Income- Tax Act of As used in ORS , with respect to the employee, " wages" does not include expen es paid under ORS , , , to , and ) Any tax credit otherwise allowable undeq this section which is not used by the taxpayer in a particular year may not be carried forward and offset against the taxpayer' s tax liability for the next sutceeding" tay year 7) If the taxpayer is an electing small business corporation as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit relief, the election may be made -on behalf of the 'corporation' s shareholders. Each shareholder ;shall be entitled to take tax credit relief as provided, ir) ORS , based on that shareholder' s pro rata share of the expenses described in this section. Nov, Section 15, chapter 381, Oregon Laws 1989, makes further amendment to ORS , effective January 1, 1993, if certain conditions regarding health care coverage are satisfied. The text of the further amendment,is set forth below for the user' s convenience ' ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to an employer for amounts paid during the taxable year for purposes of ORS, , , , to , and on behalf of an eligible employee as defined in ORS to provide care for a qualified individual. 2) The mount of the credit allowed by subsection 1) of this section shall end on December 31, 1993, and shall be equal to the dollar amount specified to the following table or 50 percent of the total amount paid by the employer during the taxable year, whichever is the lesser- Year of Dollar Amount Per Participation Covered Employee Per Month 1989 S S S S S ) As used in this section, " employer" means a taxpayer subject to the tax imposed by this chapter paying compensation in this state 4) if the credit allowed by this section is claimed, the amount of any deduction allowable under this chapter for expenses described in this section shall be reduced by the dollar amount of the credit. The election to claim the credit shall be made at the time of filing the tax return in accordance with rules adopted by the department. 5) Any amount of expenses paid by an employer under. ORS , , , to , and shall not be included as income to the employee rot purposes of the Personal Income Tax Act of if such expenses have been included in arriving at federal taxable income of the employee, the amount included shall be subtracted in arriving at state taxable income under the Personal Income Tax Act of As used in ORS , with respect to the emplovee, " wages" does not include expenses paid under ORS , , , to , and ) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may not be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. 7) If the taxpayer is an electing small business corporation as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit rblief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in ORS , based on that shareholder' s pro rata share of the expenses described in this section Employer costs in acquiring or constructing dependent care facility. 1) A credit against the taxes otherwise due under this chapter is allowed to an employer, based upon costs actually paid or incurred by the employer, to acquire, construct, re

146 CORPORATION EXCISE TAX construct, renovate or otherwise improve real property so that the property may be used primarily as a dependent care facility. 2) The credit allowed under this section shall be the lesser of a) $ 2, 500, times the number of full -time equivalent employees employed by the employer ( on the property or within such proximity to the property that any dependents of the employees may be cared for in the facility) on any date within the two years immediately preceding the end of the first tax year for which credit is first claimed; or b) Fifty percent of the cost of the acqui- sition, construction, reconstruction, reno- vation or other improvement; or c) $ 100, ) To qualify for the credit allowed under subsection ( 1) of this section: a) The amounts paid or incurred by the employer for the acquisition, construction, reconstruction, renovation or other improve- ment to real property may be paid or in- curred either: A) To another to be used to acquire, construct, reconstruct, renovate or otherwise improve real property,to the end that it may be used as a dependent care facility with which the employer contracts to make de- pendent care assistance payments which payments are wholly or partially entitled to exclusion from the income of the employee for federal tax purposes under section 129 of the Internal Revenue Code. B) To acquire, construct, reconstruct, renovate or otherwise improve real property to the end that it may be operated by the employer, or a combination of employers, to provide dependent care assistance to the em- ployees of the employer under a program or programs under which the assistance is, under section 129 of the Internal Revenue Code, wholly or partially excluded from the income of the employee. b) The property must be in actual use as a dependent care facility on the last day of the tax year for which credit is claimed and dependent care services assisted by the employer must take place on the acquired, constructed, reconstructed, renovated or im- proved property and must be entitled to an exclusion ( whole or partial) from the income of the employee for. federal tax purposes under section 129 of the Internal Revenue Code on the last day of the tax year for which credit is claimed. c) The person or persons operating the dependent care facility on the property ac- quired, constructed, reconstructed, renovated or improved must hold a certificate of approval ( temporary or not) issued under ORS to by the Children' s Services Division to operate the facility on the property on the last day of the tax year of any tax year in which credit under this section is claimed. d) The dependent care facility acquired, constructed, reconstructed, renovated or otherwise improved must be located in Oregon. No credit shall be allowed under this section if the dependent care facility is not acquired, constructed, reconstructed, renovated or im- proved to accommodate six or more children. e) The employer must meet any other requirements or furnish any information, including information furnished by the employees or person operating the dependent care facility, to the department that the department requires under its rules to carry out the purposes of this section. f) The dependent_ care facility, the costs of the acquisition, construction, recon- struction, renovation or improvement of which the credit granted under this section is based, must be placed in operation before January 1, ) The total amount of the costs upon which the credit allowable under this section is based, and the. total amount of the credit, shall be determined by the employer, subject to any rules adopted by the department, during the tax year in which the property ac- quired, constructed, reconstructed, renovated or otherwise. improved is first placed in operation as a dependent care facility certified by the Children' s Services Division under ORS to One -tenth of the total credit is allowable in that tax year and one -tenth of the total credit is allowable in each succeeding tax year, not to exceed nine tax years, thereafter. No credit shall be allowed under this section for any tax year at the end of which the dependent care facility is not in actual operation under a current certificate of approval ( temporary or not) issued by the Children' s Services Division nor shall any credit be allowed for any tax year at the end of which the employer is not providing dependent care assistance entitled to exclusion ( whole or partial) from employee income for federal tax purposes under section 129 of the Internal Revenue Code for dependent care on the property. Any credit allowable for a tax year under this section may be carried forward in the same manner and to the same tax years as if it were a tax credit described in section 5, chapter 682, Oregon Laws ) Nothing in this section shall affect the computation of depreciation or basis of a dependent care facility. If a deduction is allowed for purposes of this chapter for the amounts paid or incurred upon which the credit under this section is based, the de-

147 REVENUE- AND TAXATION duction shall be reduced by the dollar amount of the credit granted under this- see - tion. 6) If the taxpayer is an S corporation, as defined in section 1361 of the Internal Revenue Code, and the taxpayer - elects to take tax credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit 'relief as provided in ORS , based upon that shareholder' s pro rata share of the costs upon which the credit is based. 7) For purposes of the credit allowed under this section: a) The definitions and special rules contained in section 129 ( e) of the Internal -Re- venue Code shall apply to the extent applicable. b) " Employer" means an employer car- rying on a business, trade, occupation or profession in this state. c) " Internal Revenue Code" has the meaning given the term in section 5, chapter 682, Oregon Laws ) The department shall require that- ev- idence that the person operating the dependent care facility on the date that the taxpayer' s tax year ends holds a current certificate of approval ( temporary- or otherwise) to operate the facility accompany the tax return on which any amount of tax credit granted under this section is claimed, or that such evidence be separately furnished. If the evidence is not so furnished, no credit shall be - allowed for the tax year for which the evidence is not furnished. The Children' s Services Division shall cooperate by making such evidence, in an appropriate form, -available to the person operating the facility, if the person is currently entitled to a certificate of approval ( temporary or not) so that, if necessary, it may be made available to the taxpayer c Pollution control, facility; un- used credit. ( 1) A credit against taxes imposed by this chapter for a pollution control facility or facilities certified under ORS shall be allowed if the taxpayer qualifies under subsection ( 4) of this section. 2) For a facility certified under ORS , the maximum credit allowed in any one taxable year shall be the lesser of the tax liability of the taxpayer or one -half of the certified cost of the facility multiplied by the certified percentage allocable to pollution control, divided by the number of years- of the facility' s useful life. The number of years of the facility' s useful life used in this,calculation shall be the remaining number of years of useful life at the time the facility is certified but not less than one year or more than 10 years. 3) To qualify for the credit the pollution control facility must be erected, constructed or installed in accordance with the provisions of ORS ( 1) and must be issued certification under ORS prior to December 31, )( a) The taxpayer who is allowed the credit must be: A) The owner of the trade or business that utilizes Oregon property requiring a pollution control facility to prevent or mini- mize pollution; B) A person who, as a lessee or pursuant to an agreement, conducts the trade or busi- ness that operates or utilizes such property; or C) A person who, as an owner or lessee owns or leases a pollution control facility used for resource recovery as defined in ORS Such person may, but need not, operate ' such facility or conduct a trade or business that utilizes property requiring such a facility. If more than one person has an interest under this subparagraph in a resource recovery facility, only one may claim the credit allowed under this section. The person claiming the credit as between an owner and lessee under this subparagraph shall be designated in a written statement signed by both the lessor and lessee of the facility; this statement shall be filed with the Department of Revenue not later than the final day of the first tax year for which 'a tax credit is claimed. As used in this paragraph, owner" includes a contract purchaser; and b) The facility must be owned or leased during the tax year by the taxpayer claiming the credit and must have been in use and operation during the tax year for which the credit is claimed. 5) Regardless of when the facility is erected, constructed or installed, a credit under this section may be claimed by a tax- payer: a) For a facility qualifying under ORS ( 1)( a) or ( b), only in those tax years which begin on or after January 1, b) For a facility qualifying under ORS ( 1)( c), only in those tax years which begin on or after January 1, c) For a facility qualifying under ORS ( 1)( d), in those tax years which begin on or after January 1, ) For a facility certified under ORS , the maximum total credit allowable shall not exceed one -half of the certified cost of the facility multiplied by the certified percentage allocable to pollution control.

148 CORPORATION EXCISE TAX ) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the facility to which the taxpayer otherwise may be entitled under this chapter for such year. 8) Upon any sale, exchange, or other disposition of facility, notice thereof shall' be given to the Environmental Quality Commission who shall revoke the certification covering such facility as of the date of such disposition. The transferee may apply for a new certificate under ORS , but the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor. The sale, exchange or other disposition of a partner' s interest in a partnership shall not be deemed a sale, exchange or other disposition of a facility for purposes of this subsection. 9) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. Credits may be carried forward to and used in a tax year beyond the years specified in ORS ) The taxpayer' s adjusted basis for determining gain or loss shall, not be further decreased by any tax credits allowed under this section. ( Formerly , 1987 c , 1989 c provides: Note: Section 9, chapter 802, Oregon Laws 1939, Sec. 9. ( 1) The amendments to ORS " by section 1 of this Act relating to the period of property tae exemption for certain pollution control facilities apply to facilities certified on or after September 27, ) The amendments to ORS and by sections 2 and 3 of this Act relating to the amount of cost upon which income or excise tax credit for certain pollution control facilities is based apply to facilities certified on or after September 27, For all prior certifications, the law applicable for those certifications shall remain applicable c c681 5; repealed by 1983 c Domestic insurers. A credit against taxes imposed by this chapter shall be allowed domestic insurers for the gross premium tax paid on fire insurance premiums in accordance with ORS ( Formerly lformerly ; repealed by 1987 c Fish habitat improvement. ( 1) Any person shall be allowed a credit against the tastes otherwise due under this chapter, based upon the cost of a fish habitat im. provement project certified under ORS The amount of the credit shall be 25 percent of the amount certified. 2) To qualify for the credit allowed under this section: a) The fish habitat improvement project must have been given final certification by the State Department of Fish and Wildlife as provided in ORS b) The credit must be claimed for the year in which final certification for the project is granted. c) The taxpayer that. is allowed the credit must be the entity that actually expended funds for construction or installation of the project. d) The fish habitat improvement project must not be required by existing federal or state statute. 3) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused on such next succeeding.tax year may be carried forward and used -in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may, be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding; year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 4) If the taxpayer. qualifying for the credit under this section is an S corporation as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit relief, the election may be made on behalf of the, corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in ORS , based on that shareholder' s pro rata share of the corporation' s cost of the fish habitat improvement project ) The tax claim for tax credit shall be substantiated by submission, with the tax return, of the State Department of Fish and Wildlife notice of final project certification. Formerly ; 1985 c Note: Sections 2 and 6, chapter 521, Oregon Laws 1985, provide: Sec. 2. ( 1) Any taxpayer that is a grower of a crop and permits the gleaning of the crop shall be allowed a credit against the taxes otherwise due under this chapter:

149 REVENUE AND TAXATION a) In the case of a donation 'made under circumstances described in ORS ( 1)( a) and ( b), the amount of the credit shall be 10 percent of the value of the quantity of the crop donated computed at the wholesale market price. b) In the case of a donation made under circumstances described in ORS ( 1)( c) and ( d), the amount of the credit shall be 10 percent of the value of the quantity of the crop donated computed at the wholesale market price that the grower would have received had the quantity of the crop donated been salable. 2) At the time of donation, the director, supervisor or other appropriate official of the gleaning cooperative to which a donation is made shall supply to the grower of the crop donated two copies of a form prescribed by the Department of Revenue The forms shall contain- crop; a) The nvne and address 'of the grower, b) The description and quantity of the donated c) The signature of the director, supervisor or other appropriate official of the gleaning cooperative verifying that the produce was or will be distributed to low- income individuals meeting the guidelines described in ORS ( 2); d) The wholesale market price determined by the gleaning cooperative, in the event there is no previous cash buyer of the crop; and e) Other information required by the Department of Revenue by rule. 3) Tax claim for tax credit shall be substantiated by submission with the tax return, of the form described I subsection ( 2) of this section, a statement verified by the taxpayer that the donation was made under circumstances described in ORS ( 1) and a copy of an invoice os other statement identifying the price received by the grower for the crops of comparable grade or quality if there is a previous cash buyer. 4) In the case of an S corporation, any credit au. thorized under this section shall be allowed against the taxes otherwise imposed under ORS chapter 316 to the shareholder in the proportion of the shareholder' s share in the S corporation. In all other respects, the allowance and effect of the tax credit shall apply to the corporation as otherwise provided by law. 5) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular tax year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tar year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise, any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, but may not be carried forward for any tax year thereafter. [ 1985 c See. 6. Sections 2 and 5 and the amendments to ORS by section 3 of this Act apply to donations of crops made in tae years beginning on or after January 1, 1986, and prior to January 1, ( 1985 c Note: Sections 5 and 10, chapter 682, Oregon Laws 1987, as amended by chapter 625, Oregon Laws 1989, provide: See. 5. ( 1) A credit against the taxes otherwise due under this chapter shall be allowed to an employer for amounts paid or incurred during the taxable year by the employer for dependent care assistance actually provided to an employee if the assistance is furnished pursuant to a program which meets the requirements of sections 89( k) and 129(d)( 2) to ( 6) of. the Internal Revenue Code. 2) The amount of the credit allowed under subsection ( 1) of this section shall be 50 percent of the amount so paid or incurred by the employer during the taxable year but shall not exceed $ 2,500 of day care assistance actually provided to the employee. 3)( a) A credit against the taxes otherwise due under this chapter shall be allowed to an employer based upon amounts paid or incurred by the employer during the taxable year to provide information and referral services to assist employees of the employer employed within this state to obtain dependent care. b) The amount of the credit allowed under this subsection shall be 50 percent of the amounts paid or incurred during the taxable year. 4) No amount paid or incurred during the taxable year of an employer in providing dependent care assistance to any employee shall qualify for the credit allowed under subsection ( 1) of this section if the amount was paid or incurred to an individual described in section 129( c)( 1) or ( 2) of the Internal Revenue Code 5) No mnount paid or incurred by an employer to provide dependent care assistance to an employee shall qualify for the credit allowed under subsection ( 1) of this section if the amount paid or incurred is paid or incurred pursuant to a salary reduction plan or is not paid or incurred for services performed within this state. 6) If the credit allowed under subsection ( 1) of this section is claimed, the amount of any deduction allowed or allowable under this chapter for the amount that qualifies for the credit ( or upon which the credit is based) shall be reduced by the dollar amount of the credit allowed. The election to claim a credit allowed under this section shall be made at the time of filing the tax return in accordance with any rules adopted by the department. 7) The amount upon which the credit allowed under subsection ( 1) of this section is based shall not be included in the gross income of the employee to whom the dependent care assistance is provided. However, the amount excluded from the income of an employee under this section shall not exceed the limitations provided in section 129( b) of the Internal Revenue Code. For purposes of ORS , with respect to an employee to whom dependent care assistance is provided, " wages" does not include any amount excluded under this subsection. Amounts excluded under this subsection shall not qualify as expenses for which a credit is allowed to the employee under ORS ) Any tae credit otherwise allowable under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tae liability for the next succeeding tar year. Any credit remaining unused in such next succeeding tae year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tax year, and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tar year, but may not be carried forward for any tax year thereafter. 9) If the taxpayer is an S corporation, as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in ORS , based upon that shareholder' s pro rata share of the costs upon which the credit is based. 10) For purposes of the credit allowed under subsection ( 1) or ( 3) of this section: a) The definitions and special rules contained ' in section 129( e) of the Internal Revenue Code shall apply to the extent applicable

150 CORPORATION. EXCISE TAX b) " Employer" means an employer carrying on a business, trade, occupation or profession in this state. c) " Internal Revenue Code" means the federal Internal Revenue Code as amended and in effect on December 31, ) In the case of an onsite facility, in accordance with any rules adopted by the department, the amount upon which the credit allowed under subsection ( 1) of this section is based, with respect to any dependent, shall be based upon utilization and the value of the services provided c 682 5, 1989 c Sec. 10. Sections , 5 and 8 [ note following of this Act apply to tax years -beginning on or after January 1, 1988, and prior to January 1, Foi all prior taxable years, the law in effect' and applicable for those } ears shall continue to apply. ( 1987 c pi ov ides. Note: Section 85, chapter 625, Oregon Laws 1989 Sec. 87. The amendments to ORS, and section 5, chapter 682, Oregon Laws 1987, by sections 10 and 20 of this Act ( relating to dependent care assistance credit) apply to tax years beginning on or after January, 1, 1988, and prior to January 1, c Cash investment in capitalization of Oregon Capital Corporation. ( 1) A taxpayer shall be allowed a credit against the taxes otherwise due under this chapter for the taxable year, based upon the- taxpayer' s direct cash investment in the certified capitalization of the Oregon Capital Corporation. The amount of the credit shall be 20 percent of the amount of the cash invest- ment. section: 2) To qualify for the credit under this a) The Oregon Capital Corporation must have been certified by the Financial Insti- tutions Division under section 7, ch4pter 911, Oregon Laws b) Not more than 50 percent of the tax credit provided for in this section may be claimed in the tax year in which the investment is made in the Oregon Capital Corpo- ration. c) No taxpayer shall claim more than 50 percent of the tax credit provided for in this section: A) Before July 1, 1989; and B) Before the Oregon Capital Corporation is certified by the division as having met the investment requirements of ORS ( 1)( a). 3) The credit allowed in any one year shall not exceed tax liability of the taxpayer. 4) Any tax credit otherwise allowablb under this section which is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in' that sec- and succeeding tax year may be carried forward and used in the third succeeding tax year and any credit not used in that third succeeding tax year may be carried forward and used in the fourth succeeding tax year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 5) If the taxpayer qualifying for the credit under this section is an S corporation, as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take tax credit relief, the election mad- be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in ORS , based on the shareholders' pro rata share of the corporation' s investment in the Oregon Capital Corporation. 6) The amount of any credit allowed under this section shall be used to reduce the basis of the taxpayer' s investment in the Oregon.Capital Corporation. Federal taxable income shall be modified to the extent necessary to carry out the provisions of this subsection c.911 8d1 Note: See note under Credit for rural medical practice. ( 1) In addition to any other modification to federal taxable income contained in this chapter, a, person certified as eligible under section 7, chapter 893, Oregon Laws 1989, licensed under ORS chapter 677, who is engaged in the practice of medicine, and who has a rural practice that amounts to 60 percent of the person' s practice shall be allowed as credit against taxes otherwise due under this chapter in the sum of $5, 000, not to ex- ceed 10 tax- 'years, during which the person retains such practice and membership if- a) The person i's actively practicing in and is a, member of the medical staff of a type B hospital not located within the boundaries of a metropolitan statistical area, or a type A hospital. b) The person is actively practicing in and is a member of the medical staff of a type C hospital, if the Office of Rural Health makes the finding required by ORS ) If the taxpayer qualifying for the credit under this section is an S- corporation as defined in section 1361 of the Internal Revenue Code; and the taxpayer elects to take tax ' credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in ORS , based on, that shareholder' s pro rata share of the shareholder' s tax liability.

151 REVENUE AND TAXATION 3) A person certified as eligible under section 7, chapter 893, Oregon Laws 1989, licensed as a physician under ORS chapter 677, registered as a physician assistant or licensed as a nurse practitioner is entitled to the tax credit described in ORS even if not a member of the hospital medical staff if the Office of Rural Health certifies that the person: a) Can cause a patient to be admitted to the hospital; and b) Has a rural practice that amounts to 60 percent of the person' s practice. 4) As used in this section. " type A hospital," " type B hospital" and " type C hospital" have the meaning for those terms provided in ORS c893 5, Fish screening devices, by -pass There. shall be al- devices or fishways. ( 1) lowed a credit against tax due under this chapter for taxpayers that install fish screening devices, by -pass, devices or fishways, when required to do so by, ORS ( 1), ( 1), ( 1) or, and the diversion is not part of a hydroelectric project required to be licensed under the Federal Energy Regulatory Commission. Except as allowed in subsection ( 4) of this section, the credit shall be taken in the tax year in which the final certification is issued under subsection ( 10) of this section. 2) The credit shall be equal to 50 percent of the certified costs of installing a fish screening device, by -pass device or fishway. The total credit allowed shall not exceed 5, ) The credit allowed in any one year shall not exceed the tax liability of the tax- payer. 4) Any tax credit otherwise allowable under this section which is not used by the taxpayer in a particular tax year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year. Any credit remaining unused in such second succeeding tax year may be carried forward and used in the third succeeding tax year. Any credit remaining unused in such third succeeding tax year may be carried forward and used in the fourth succeeding tax year. Any credit remaining unused in such fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be used in any tax year thereafter. 5) The credit provided by this section shall be in addition to and not in lieu of any depreciation or amortization deduction to which the taxpayer otherwise may be entitled with respect to the installation of a fish screening device, by -pass device or fishway. The taxpayer' s adjusted basis for determining gain or loss shall not be further decreased by any tax credits allowed under this section. 6) If the taxpayer qualifying for the credit under this section is an S corporation as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take the tax credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be en- titled to take tax credit relief as provided in ORS , based on that shareholder' s pro rata share of the corporation' s certified cost of installation of the fish screening device, by -pass device or fishway. 7) To qualify for the credit the taxpayer must be issued a certificate by the, State Department of Fish and Wildlife. 8) To obtain credit under subsection ( 1) of this section, any person proposing to apply for certification of a fish screening device, by -pass device or fishway, before installing the fish screening device, by -pass device or fishway, shall file a request for preliminary certification with the State Department of Fish and Wildlife. The request shall be in a form prescribed by the State Department of Fish and Wildlife and shall include a cost estimate for the installation. The following conditions shall apply: a) Within 30 days of the receipt of a request for preliminary certification, the State Department of Fish and Wildlife may require, as a condition precedent to issuance of a preliminary certificate of approval, the submission of plans and specifications. After examination thereof, the State Department of Fish and Wildlife may request corrections and revisions to the plans and specifications. The State Department of Fish and Wildlife may also require any other information necessary to determine whether the proposed fish screening device, by -pass device or fishway is in accordance with State Department of Fish and Wildlife requirements. b) If the State Department of Fish and Wildlife determines that the. proposed fish screening device, by -pass device or fishway is in accordance with State Department of Fish and Wildlife requirements, it shall issue a preliminary certificate approving the fish screening device, by -pass device or fishway. If the State Department of Fish and Wildlife determines that the fish screening device, by -pass device or fishway does not comply with State Department of Fish and Wildlife requirements, the State Department of Fish and Wildlife shall issue an order denying certification

152 CORPORATION EXCISE TAX c) If within 90 days of the receipt of plans, specifications or any subsequently requested revisions or corrections to the plans and specifications or any other information required pursuant to this section, the State Department of Fish and Wildlife fails to issue a preliminary certificate of approval and the State Department of Fish and Wildlife fails to issue an order denying certification, the preliminary certificate shall be considered to have been issued. The capital investment must comply with the plans, specifications and any corrections or revisions thereto, if any, previously submitted. d) Within 30 days from the date of mailing of the order, any person against whom an order is pursuant to paragraph b) of this subsection may demand a hearing. The demand shall be in writing, shall state the grounds for hearing and shall be mailed to the State Fish and Wildlife Director. The hearing shall be conducted in accordance with the applicable provisions of ORS to ) Any fish screening device, by -pass device or fishway that is installed pursuant to ORS ( 2) or alterations made pursuant to ORS ( 2) to ( 6) shall not be eligible for the credit provided in subsection ( 1) of this section. 10) Upon completion and pursuant to application for final certification, final certification shall be issued by the State Department of Fish and Wildlife if the fish screening device, by -pass device or fishway was constructed and installed in accordance with State Department of Fish and Wildlife requirements. Final certification shall include a statement of the costs of installation as verified by the State Department of Fish and Wildlife. The credit allowed under this section shall be claimed first for the tax year of the taxpayer in which final certification is issued. 11) Pursuant to the procedures for a contested case under ORS to , the State Department of Fish and Wildlife may order the revocation of the certificate issued under this section of any taxpayer, if it finds that: a) The certificate was obtained by fraud or misrepresentation; or b) The holder of the certificate fails to meet State Department of Fish and Wildlife requirements. 12) As soon as the order of revocation under this section has become final the State Department of Fish and Wildlife shall notify the Department of Revenue of such order. 13) If the certificate of a fish screening device, by -pass device or fishway is ordered revoked pursuant to subsection ( 11) of this section, all prior tax relief provided to the holder of the certificate by virtue of the certificate shall be forfeited and the Department of Revenue shall proceed to collect those taxes not paid by the certificate holder as a result of the tax relief provided to the holder. 14) If the certificate of a fish screening device, by -pass device or fishway is ordered revoked pursuant to subsection ( 11) of this section, the certificate holder shall be denied any further relief provided under this section and ORS in connection with the fish screening device, by -pass device or fishway, as the case may be, from and after the date that the order of revocation becomes final. 15) In the event that the fish screening device, by -pass device or fishway is destroyed by flood, natural disaster or act of God before all of the credit has been used, the taxpayer may nevertheless claim the credit as if no destruction had taken place. 16) Fish screening devices, by -pass devices or fishways which are financed by funds obtained from the Water Development Fund, pursuant to ORS to , shall not be eligible for the credit under any circumstances. 17) The State Department of Fish and Wildlife shall adopt rules for carrying out the provisions of this section and report to the interim committee created under ORS to to make studies of and inquiries into state revenue matters c provides: Note: Section 5, chapter 924, Oregon Laws 1989, Sec. S. Sections 2 and 4 of this Act and apply to installations that occur in tax years that begin on or after January 1, c Tax Credit for Certain Research Expenses and Payments) Note: Sections 2 to 4 and 6, chapter 911, Oregon Laws 1989, provide: Sec. 2. ( 1) A credit against tares otherwise due under this chapter shall be allowed to eligible taxpayers for increases in qualified research expenses and basic research payments. The credit shall be determined in accordance with section 41 of the Internal Revenue Code, except as follows: a) The applicable percentage specified in section 41( a) of the Internal Revenue Code shall be five percent b) " Qualified research" and " basic research" shall consist of research in the fields of advanced computing, advanced materials, biotechnology, electronic device technology or environmental technology, but only to the extent that such research is conducted in Oregon. 2) As used in this section: a) " Advanced computing" means leading edge technologies used in the design and development of computing hardware and software. This includes innovations in design of the full spectrum of hardware from hand -held calculators to super computers, including all peripheral equipment. It also includes innovations in design and development software executing on all computing hardware for any purpose

153 REVENUE AND TAXATION b) " Advanced materials" means high value metals and new and improved wood -based materials. c) " Biotechnology" means' biochemistry, molecular biology, genetics and engineering dealing with the transformation of biological systems into useful proc- esses and products. d) " Electronic device technology" means the design and development of electronic materials and devices such as advances in integrated circuits and superconductivity. e) " Environmental technology" means environ- mental assessment, cleanup and alternative energy sources. 3) For purposes of this section a) " Eligible t xpaver" means a corporation, other than corporations excluded under Internal Revenue ode section 41( e)( 7)( E). that is engagged in research in the fields of advanced unnputing,. iilv.inr.ed materials, hiotechnolop-, electronic device technology or environmental technology. b) " Internal Revenue Code" means the Internal Revenue Code as amended and in effect on December 31, ) The income Tax Regulations as prescribed by the Secretary of the Internal Revenue Service under authority of section 41 of the Internal Revenue Code shall also apply for purposes of this section, except as modified by this section or as provided in rules adopted by the department. 5) The maximum credit under this section shall not exceed S50, 000 or one -third of the excise tar liability before credits under this chapter, whichever is less. 6) Any credit otherwise allowable under this section which is not used in the tart year shall not be carried forward to any tax year thereafter. [ 1959 c Sec. 3. A taxpayer may elect to claim the credit allowed under section 2 of this 1989 Act or the credit allowed under section 4 of this 1989 Act, but may not claim both credits in the same tae year The election shall be made in the manner and within the time adopted by the department by rule c See. 4. ( 1) A credit against taxes otherwise due under this chapter shall be allowed for qualified research expenses that exceed 10 percent of Oregon sales. 2) For purposes of this section- a) " Oregon sales" shall be computed using the laws and administrative rules for calculating the numerator of the Oregon sales factor under ORS b) " Qualified research" shall consist of research in the fields of advanced computing, advanced materials, biotechnology, electronic device technology or environmental technology, all as defined under section 2 of this 1989 Act, but only to the extent that such research is conducted in Oregon. 3) The credit under this section is equal to five percent of the amount by which the qualified research expenses exceed 10 percent of Oregon sales. 4) The credit under this section shall not exceed S10,000 times the number of percentage points by which the qualifying research expenses exceed 10 percent of Oregon sales. 5) The maximum credit under this section shall not exceed $ 50, 000 or one-third of the excise tax liability before credits under this chapter, whichever is less. 6) Any credit otherwise allowable under this section which is not used in the tar year shall not be carried forward to any tae year thereafter c See. 6. Sections 2 to 4 of this Act and the amendments to ORS by section 5 of this Act apply to amounts paid or incurred in tax years beginning on or after January 1, 1989, and before January 1, [ 1989 c Credit for Farm - worker Housing) Note: Sections 4 to 6, chapter 963, Oregon Laws 1989, provide. See. 4. ( 1) As used in this section a) " Condition of habitability" means a condition that is in compliance with. A) The applicable provisions of the state building code under ORS chapter 455 and the rules adopted thereunder; or B) If determined on or before Dei.emher 31, 1995, sections 12 and 13, chapter 964, Oregon Laws 1939 b) " Division" means the Accident Prevention Division of the Department of Insurance and FlnanLe c) " Rehabilitation" means to restore and reinstate a building to a condition of habitability. d) " Seasonal farm worker" means any person who, for an agreed remuneration or rate of pay, performs temporary labor for another in the production of farm products or in the planting, cultivating or harvesting of seasonal agricultural crops or in the forestation or reforestation of lands, including but not limited to the planting, transplanting, tubing precommercial thinning and thinning of trees and seedlings, the clearing, piling and disposal of brush and slash and other related ac- tivities. e) " Seasonal farm worker - housing" means housing limited to occupancy by seasonal farm workers and their immediate families which is occupied no more than nine months of the year. Seasonal farm - worker housing project" means construction or rehabilitation of seasonal farm- worker housing. g) " Year -round farm - worker housing" means housing limited to occupancy by farm workers and their immediate families. h) " Year -round farm - worker housing project" means construction or rehabilitation of farm - worker housing. 2) There is allowed a credit against the taxes otherwise due under this chapter. The amount of the credit shall be equal to 50 percent of the costs actually paid or incurred by the taxpayer to complete a seasonal or a year -round farm worker - housing project. 3) The credit allowed under subsection ( 2) of this section shall be taken in five equal instalments over a period of five consecutive tax years beginning in the tax year of the taxpayer during which the project is com- pleted. 4) The credit shall apply only to a seasonal or a year -round farm- worker housing project that is physically begun on or after the January 1 immediately following the date that both chapter 964, Oregon Laws 1989, and chapter 962, Oregon Laws 1989, have become both effective and operative. 5) Except as provided under subsection ( 6) of this section, the credit allowed in any one -year shall not exceed the tax liability of the taxpayer. 6) Any tar credit otherwise allowable under this section which is not used by the taxpayer in a particular tar year may be carried forward and offset against the taxpayer' s tax liability for the next succeeding tax year. Any credit remaining unused in such next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise any credit not used in that second succeeding tax year may be carried forward and used in the third succeeding tar year, and any credit not used in that third succeeding

154 CORPORATION EXCISE TAX tae year may be carried forward and used in the fourth succeeding tar year, and any credit not used in that fourth succeeding tax year may be carried forward and used in the fifth succeeding tax year, but may not be carried forward for any tax year thereafter. 7) The credit provided by this section is not in lieu of any depreciation or amortization deduction for the project to which the taxpayer otherwise may be entitled under this chapter for such year. 8) The taxpayer' s adjusted basis for determining gain or loss shall not be further decreased by any tar credits allowed under this section. 9) To qualify for the credit allowed under this section, the seasonal or year -round farm - worker housing project must a) Be inspected by the di%ision prior to occupancy and must comply with all occupational safety or health laws, regulations, rules and standards; b) If registration is required, be registered as a farm - worker camp with the Bureau of Labor and Industries under section 6, chapter 962, Oregon Laws 1989, and c) Upon occupancy and if an indorsement is required, be operated by a person who holds a valid indorsement as a farm - worker camp operator under section 4, chapter 962, Oregon Laws )( a) Pursuant to the procedures for a contested case under ORS to , the department may order the disallowance of the credit allowed under this section if it finds, by order, that: A) The credit was obtained by fraud or misrepre- sentation; B) The taxpayer who claims or claimed the credit has failed substantially to comply with the occupational safety or health laws, rules, regulations or standards; C) After occupancy and if registration is required, the seasonal or year -round farm - worker housing is not registered as a farm - worker camp with the Bureau of Labor and Industries under section 6, chapter 962, Oregon Laws 1989; or D) After occupancy and if an indorsement is required, the seasonal or year -round farm - worker housing is not operated by a person who holds a valid indorsement as a farm- worker camp operator under section 4, chapter 962, Oregon Laws b) If the tae credit is disallowed pursuant to this subsection, notwithstanding ORS or other law, all prior tax relief provided to the taxpayer shall be forfeited and the department shall proceed to collect those taxes not paid by the taxpayer as a result of the prior granting of the credit. c) If the tax credit is disallowed pursuant to this subsection, the taxpayer shall be denied any further credit provided under this section and section 2 of this 1989 Act in connection with the seasonal or year -round farm - worker housing project, as the case may be, from and after the date that the order of disallowance becomes final 11) In the event that the farm - worker housing is destroyed by fire, flood, natural disaster or act of God before all of the credit has been used, the taxpayer may nevertheless claim the credit as if no destruction had taken place. In the event of lire, if the fire chief of the fire protection district or unit determines that the fire was caused by arson, as defined In ORS and , by the taxpayer or by another at the taxpayer' s direction, then the fire chief shall notify the department. Upon conviction of arson, the department shall disallow the credit in accordance with subsection ( 10) of this section. 12) If the taxpayer qualifying for the credit under this section is an S. corporation as defined in section 1361 of the Internal Revenue Code, and the taxpayer elects to take the tax credit relief, the election may be made on behalf of the corporation' s shareholders. Each shareholder shall be entitled to take tax credit relief as provided in section 2 of this 1989 Act, based on that shareholder' s pro rata share of the corporation' s certified costs of the seasonal or year-round farm - worker housing project. 13) The department may adopt rules for carrying out the provisions of this section c Sec. 5. ( 1) As used in this section: a) " Commercial lending institution" means a bank, mortgage bankin company, trust company, savings bank, savings and loan association, credit union, na tional banking association, federal savings and loan association or federal credit union maintaining an office in this state b) " Seasonal farm-worker housing" has the meaning given the term under section 4 of this 1989 Act c) " Year round farm- worker housing" has the meaning given the term under section 4 of this 1989 Act 2) A commercial lending institution shall be allowed a credit against the taxes otherwise due under this chapter for the tae year equal to 50 percent of the interest income earned during the tax year on loans to finance only costs directly associated with construction or rehabilitation of seasonal or year -round farm-worker housing that, at the close of the tax year of the tax- payer. a) Is not in violation of any occupational safety or health law, rule, regulation or standard; b) If required, is registered with the Bureau of Labor and Industries under section 6, chapter 962, Oregon Laws 1989, and c) Is operated, if required, by a person who holds a valid indorsement as a farm-worker camp operator under section 4, chapter 962, Oregon Laws ) The credit allowed under this section shall apply only to loans to construct or rehabilitate seasonal or year -round farm - worker housing located within the state. 4) This credit shall apply only to loans made on or after the January 1 immediately following the date upon which chapter 964, Oregon Laws 1989, and chapter 962, Oregon Laws 1989, have become both effective and operative. 5) The credit allowed in any one year shall not exceed the tax liability of the taxpayer. 6) If the loan has a term of longer than 10 years, then the credit shall be allowed only for the tax year of the taxpayer during which the loan is made and the nine tae years immediately following. 7) The credit allowed under this section shall not apply to loans in which the interest rate charged exceeds 13. 1/ 2 percent per annum. 8) The credit allowed under this section shall apply only to interest income from the loan and shall not apply to any other loan fees or other charges collected by the commercial lending institution with respect to the loan ) The credit allowed under this section shall only apply to interest income actually collected by the commercial lending institution during the tax year. 10) If the commercial lend ns institution sells the loan to another commercial lending institution as defined in subsection ( 1) of this section, then the credit shall pass to the assignee or transferee of the loan, subject to the same conditions and limitations as set forth in this section c Sec. 6. ( 1) Sections 2 and 4 of this Act shall apply to seasonal or year -round farm - worker housing projects completed in tax years that begin on or after the January 1 immediately following the date that both chapter

155 REVENUE AND TAXATION 964, Oregon Laws 1989, and chapter 962, Oregon Laws 1989, have become both effective and operative and which are completed before January 1, ) Section 5 of this Act applies to loans made in tax years that begin on or after the January 1 immediately following the date that both chapter 964, Oregon Laws 1989, and chapter 962, Oregon Laws 1989, have become both effective and operative and which are made before January 1, c [ Amended by 1969 c ; repealed by 1983 c [ 1967 c 274 4; repealed by 1983 c ( Repealed by 1983 c [ Amended by 1981 c 812 2; repealed by 1933 c ( Amended by 1955 c99 1, subsection ( 3) derived from 1955 c 99 2, 1941 c ; repealed br Se [ Amended by 1955 c , subsection ( 4) derived from 1955 c ; repealed by 1983 c ( Repealed by 1957 c ( enacted in lieu of and ) [ Repealed by 1957 c ( enacted in lieu of and ) 1 DISSOLUTION OF TAXPAYER Effect on reporting income. In the case of the dissolution of a taxpayer, gains, profits and income are to be returned for the tax year in which they are received by the taxpayer, unless they have been re- ported at an earlier period in accordance with the approved method of accounting followed by the taxpayer. If a taxpayer is dissolved, there shall also be included in computing Oregon taxable income of the taxpayer for the taxable period in which it is dissolved amounts accrued up to the date of dissolution if not otherwise properly includable in respect of such period or a prior period, regardless of the fact that the taxpayer may have kept its books and made its returns on the basis of cash receipts and disbursements. This section shall not apply with respect to crops not harvested within said taxable eriod or to livestock c.205 2; 1983 c. 162 OF Effect on deductions allowed. In the case of the dissolution of a taxpayer there shall be allowed as deductions for the taxable period in which the taxpayer dissolved, regardless of the fact that the taxpayer may have kept its books and made its returns on the basis of cash receipts and disbursements, amounts accrued up to the date of dissolution if not otherwise properly allowable in respect of such period or a prior period under this chapter c c.600 3, 4, 6; 1973 c ; 1981 c.705 4; 1983 c , renumbered c ; 1983 c ; renumbered [ Repealed by 1959 c ( enacted in lieu of ) c ( enacted in lieu of ); subsection ( 4) derived from 1959 c ; 1971 c ; repealed by 1983 c [ Repealed by 1983 c [ Amended by 1953 c.385 9; 1957 c.338 1; part of subsections ( 10) and ( 11) of 1957 Replacement Part derived from 1957 c.338 3; repealed by 1959 c ( enacted in lieu of ) c ( enacted in lieu of ); last sentence derived from 1959 c ; 1969 c ; 1969 c , 1971 c ; 1977 c.866 5; repealed by 1983 c [ Amended by 1953 c.385 9, 1975 c , 1977 c , repealed by 1983 c [ Amended by 1981 c.705 5; repealed by 1983 c c 681 6, repealed by 1983 c [ Amended by 1953 c ; repealed br 1959 c ( enacted in lieu of ) c ( enacted in lieu of ); subsection ( 9) derived from 1959 c ; repealed by 1983 c [ Repealed by 1959 c ( enacted in lieu of and ) c ( enacted in lieu of and ), subsection ( 7) derived from 1959 c389 11; repealed by 1983 c c.460 2; 1981 c.812 3; repealed by 1983 c c.460 3, 4; repealed by 1981 c ( Repealed by 1959 c ( enacted in lieu of and ) c ( enacted in lieu of ); subsection ( 4) derived from 1959 c ; 1969 c ; repealed by 1983 c c.385 9; repealed by 1959 c enacted in lieu of ) [ Repealed by 1983 c c.354 2; 1957 c ; part of sub - section ( 4) derived from 1957 c ; subsection ( 5) enacted as 1963 c ; 1969 c ; repealed by 1983 c c ; repealed by 1983 c c , 1975 c.705 5; repealed by 1983 c [ Amended by 1953 c.385 9; repealed by 1975 c c ; 1969 c ; 1979 c.580 1; repealed by 1983 c c ; repealed by 1983 c [ Amended by 1953 c.385 9; 1979 c.517 1; repealed' by 1983 c c ; 1979 c.517 2; repealed by 1983 c MODIFICATIONS TO TAXABLE INCOME Modifications generally. Federal taxable income, adopted under ORS and , except as specifically otherwise provided by law, shall be modified only pursuant to the provisions contained in- ORS to , , to and and no others. Each modification authorized under law shall be allowed only to the extent that the modifica=

156 CORPORATION EXCISE TAX tion is allocated and apportioned to Oregon income c ; 1987 c lrepealed by 1983 c , c.385 9; repealed by 1983 c lamended by c.422 l; subsection ( 4) derived from 1955 c422 2; c607 5; subsection ( 5) derived from 1957 c and, 1957 ss. c. 5 1; repealed by 1983 c Dividends from corporation subject to corporate excise tax. ( 1) To derive Oregon taxable income, there shall be added to federal taxable' income amounts received as dividends from '' corporations deducted for federal purposes pursuant to section 243 or 245, except 245( c), amounts paid as ' dividends by a public utility or telecommunications utility, and deducted for federal purposes pursuant tq section 247 of the Internal Revenue Code ' or dividends elimi- nated under Treasury Regulations adopted under section 1502 of the Internal Revenue Code that are `paid by members of an affiliated group that are eliminated from a con- solidated federal return pursuant to - ORS ( 2). 2) To derive Oregon taxable income, af- ter the modification prescribed under subsection ( 1) of this section, there shall be subtracted from-.federal taxable income an amount equal to 70 percent of dividends ( determined without' regard to section 78 of the Internal Revenue Code) received or deemed received from corporations if such dividends are included in federal taxable income. How- ever: a) In the case of any dividend on debt - financed portfolio stock as described in sec- tion 246A of the Internal Revenue Code, the subtraction allowed under this subsection shall be reduced under,the- same conditions and in same amount as, the dividends received deduction otherwise allowable for federal income. tax purposes is- reduced under section 246A of the Internal Revenue Code. b) No subtraction' shall 'be allowed under this subsection if the dividends received or deemed received are from the Oregon Capital Corporation established pursuant to ORS to c) In the casd of any dividend received from a 20 percent owned corporation, as defined in section 243 ( c) of,the, Internal Revenue Code, this subsectign shall be applied by substituting " 90 percent" for " 70 percent." 3) There shall be excluded from the sales factor of any apportionment formula' employed to attribute 'income to this state any amount subtracted ''from ' federal taxable in- come under subsection ( 2) of this section c ; 1984 c. 1 9; 1985 d802 33; 1987 c ; 1987c ; 1987 c.911 8i; 1989 c Note: See note under 316: 104: provides: Note: Section 88, chapter 625, Oregon Laws 1989, Sec. 88. The amendments to ORS ( relating to corporation dividend exclusion) by section 21 of this Act apply to dividends received or accrued after December 31, 1987, in tax years ending after December 31, 1987: c [ Amended by 1957 c.88 1; repealed by 1983 c Dividend income received by domestic corporation from certain foreign corporations. To derive Oregon taxable income, there shall be subtracted from federal taxable income dividend income with respect to the " gross -up" provisions of section 78 of the Internal Revenue Code. 1198: 3 c [ Repealed by 1983 c c ; repealed by 1983 c ( Amended by 1953 c385 9, 1955 c. 584 l; repealed by 1983 c c a; 1985 c a; repealed by 1989 c Nonrecognition of transactions with related domestic international sales corporation. ( 1) To derive Oregon taxable income, federal taxable income shall be modified to the extent necessary to not recognize for Oregon tax purposes any transaction between the taxpayer and a related domestic international sales corporation. The taxpayer shall be considered to have entered directly into any transactions with third parties that are treated for federal income tax purposes as having been entered into by a related domestic international sales corporation. To satisfy the requirements of this section: a) No deduction shall be allowed to any taxpayer for any payment to a related domestic international sales corporation; b) No income or, expense that would be attributed to a taxpayer but for the pro - visions, of sections 991 to 996 of the Internal Revenue Code shall be treated as attributable to a related domestic international sales corporation; and c) No deduction shall be allowed to a taxpayer for interest on DISC - related deferred tax liability paid pursuant to section 995 ( f) of the Internal Revenue Code ) As used in this section, " domestic international sales corporation" means a domestic international sales corporation as defined in section 992 of the Internal Revenue Code c d [ Amended by 1957 s. s. c. 15 9; 1971 c.724 1; 1977 c89 1; 1981 c.613 4; 1983 c ; renumbered Nonrecognition of transactions with related foreign sales corporation. ( 1) To derive Oregon taxable income, federal taxable,income shall be modified to the extent necessary to not recognize for Oregon

157 REVENUE AND TAXATION tax purposes any transaction between the taxpayer and a related foreign sales corporation. The taxpayer shall be considered to have entered directly into any transactions with third parties that are treated for federal income tax purposes as having been entered into by a related foreign sales corporation. To satisfy the requirements of this section: a) No deduction shall be allowed to a taxpayer for any payment to a related foreign sales corporation; and b) No income or expense that would be attributed to a taxpayer but for the provisions of sections 921 to 927 of the Internal Revenue Code shall be treated as attributable to a related foreign sales corporation. 2) As used in this section, " foreign sales corporation" means a foreign sales corporation as defined in section 922 of the Internal Revenue Code c e c.608 4; repealed by 1975 c c ; repealed by 1984 c. l ( Amended by 1983 c ; renumbered 317: c. 19 2; repealed by 1983 c [ Amended by 1953 c ; 1955 c 722 l; 1961 c ; subsection ( 4) enacted as 1961 c 565 2, 1971 c.246 1, repealed by 1983 c c ; repealed by 1984 c. l s s. c 15 11, 12; 1959 c.92 2; 1983 c ; renumbered c , 3; 1969 c ; 1979 c 580 2, repealed by 1983 c c 600 8; 1983 c ; renumbered [ Amended by 1953 c 385 9; repealed by 1983 c Deduction or adjustment for certain federal credits. If a taxpayer has taken a federal credit, which requires as a condition of the use of the federal credit the reduction of a corresponding deduction or basis, and the federal credit is not allowable for Oregon purposes, the taxpayer shall be allowed the deduction or appropriate adjustment to basis to derive Oregon taxable income c c.74 2; repealed by 1983 c Interest and dividends received from obligations of state or political subdivision. ( 1) To derive Oregon taxable income, there shall be added to federal taxable income the amount of any interest or dividends received during the taxable year from obligations of a state or any political subdivisiori of a state ( including Oregon), exempt from federal taxation under the Internal Revenue Code. However, the amount added under this subsection shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this subsection, and by any expenses incurred in the production of interest or dividend income described in this subsection. 2) A regulated investment' company as defined in section 851 of the Internal Revenue Code which' distributes dividends in excess of those deducted in the computation of federal taxable income, shall to the extent of the amount added under subsection ( 1) of this section, deduct such distributed excess in arriving at Oregon taxable income.,' ' 3) To derive Oregon taxable income, and subject to the other provisions of this chapter, discount and gain or loss oh ' retirement or disposition of obligations described under subsection ( 1) of this section issued on or after January 1, 1985" shall be treated in the same ' manner ' as under sections 1271 to 1283 and other pertinent sections of the Internal Revenue Code as if the obligations, although issued by' a state or a political subdivision 'of a state, were not tax exempt under ' the Internal Revenue Code. [ 1983' c ; 1985 c ;' 1987 c Balance in bad debt reserve of financial institution which has changed from reserve method to specific charge - off method of accounting. ( 1) To derive Oregon taxable income of a financial institution which has changed from the reserve method of accounting to the specific charge - off method of accounting fo'r federal tax' purposes, -there shall be subtracted from federal taxable income amounts which the financial institution recognized pursuant to section 585( c)( 3) of the Internal Revenue Code. 2) To derive Oregon taxable income,' after the modification prescribed in subsection 1) of this section, the balance in the reserve for bad' debts, as determined under ORS ( 2) ( 1985 Replacement Part), shall be taken into income using the same method as the financial ' institution used for federal tax purposes pursuant to section 585( c)( 3) of the Internal Revenue Code. ' 3) Subsections ( 1) and ( 2) of this section shall not apply to bad debt reserves for which an election under section 585( c)( 4) of the Internal Revenue Code has been made. A financial institution which uses the method described in - section 585( c)( 4) of the Internal Revenue Code shall apply that same method to the balance in the reserve for bad debts, as determined under ORS 317,333 ( 2} 1985 Replacement Part), - and adjust its Oregon taxable income accordingly c Application of section 243 of Tax Reform Act of Section 243 of the Tax Reform Act of 1986 ( P.L ) shall not apply for purposes of determining taxable income under this chapter c a)

158 CORPORATION EXCISE TAX Federal depreciation expenses of certain health care service contractors. To derive Oregon taxable income, for certain health care service contractors for which federal tax exempt status was denied by section 501( m) of the Internal Revenue Code, and for which all assets owned by the health care service contractor prior to the effective date of the denial of exempt status are treated as placed in service on such effective date for federal tax purposes, no adjustment shall be made to federal depreciation expense c Taxes on net income or profits imposed by any state or foreign country; nondeductible taxes and license fees; taxes paid to foreign country for certain income. ( 1) To derive Oregon taxable income, there shall be added to federal taxable income taxes upon or measured by net income or profits imposed by any foreign country ( including withholding taxes upon the payment of dividends arising from sources within such foreign country), this state or any state or territory deducted in computing federal taxable income. 2) There shall be subtracted from federal taxable income the taxes and license fees imposed by counties, cities and other political subdivisions of this state and other states, if such taxes and fees are not deductible in arriving at federal taxable income. 3) There shall be subtracted from federal taxable income the taxes paid to a foreign country upon the payment of interest or royalties arising from sources within such foreign country, if such taxes are not deductible in arriving at federal taxable income and if the interest or royalties are included in arriving at Oregon taxable income c ; 1984 c Capital Construction Fund; deferred income; nonqualified withdrawals. To derive Oregon taxable income: 1) There shall be added to federal taxable income an amount equal to the amount of income which the taxpayer defers under section 607 of the Merchant Marine Act of Capital Construction Fund ( 46 U.S. C. 1177), as amended, or under section 7518 of the Internal Revenue Code. 2) There shall be subtracted from federal taxable income all nonqualified withdrawals considered to be ordinary income or capital gain under section 607 of the Merchant Marine Act of Capital Construction Fund 46 U.S. C. 1177), as amended, or under section 7518 of the Internal Revenue Code, and included in income for federal income tax purposes. 3) No adjustments to basis shall be made for Oregon tax purposes to property on ac- count of section 607 of the Merchant Marine Act of Capital Construction Fund ( 46 U.S. C. 1177), as amended, or under section 7518 of the Internal Revenue Code. There shall be added to or subtracted from federal taxable income those amounts necessary to carry out the purposes of this subsection c ; 1987 c c ; 1973 c ; repealed by 1983 c [ 1973 c ; repealed by 1983 c Gain on conversion or exchange of property. ( 1) To derive Oregon taxable income, there shall be added to federal taxable income any gain recognized pursuant to ORS ) To the extent gain is recognized pursuant to subsection ( 1) of this section, an additional basis adjustment shall be made for Oregon tax purposes c c ; 1983 c ; renumbered Basis for stock acquisition. A corporation which engages in a qualified stock purchase on or after August 31, 1982, and which elects ( or is treated as having elected) section 338 of the Internal Revenue Code shall have the same basis for Oregon as for federal purposes for the assets acquired by reason of the stock acquisition c b; 1987 c Note: was added to and made a part of ORS chapter 317 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation [ 1973 c.753 5; repealed by 1979 c [ 1983 c ; repealed by 1987 c c.753 6; repealed by 1979 c c ; repealed by 1984 c Effect of change in federal law on pension, profit- sharing, stock bonus or other retirement plans. For tax years beginning after the date specified in ORS ( 7) for the recognition of the Internal Revenue Code for Oregon tax purposes, if part I of subchapter D of chapter 1 of Subtitle A of the Internal Revenue Code is amended to allow greater contributions to or to require or permit any other provisions in any of the pension, profit - sharing, stock bonus or other retirement plans, mentioned in part I of subchapter D of chapter 1 of Subtitle A of the Internal Revenue Code, amendments to those plans and contributions to those plans in conformity with those new federal amendments shall not disqualify those plans for Oregon tax purposes and shall not increase or diminish the deductions otherwise allowable on the Oregon return based on the Internal Revenue Code as amended on the date specified in ORS ( 7). [ 1985 c

159 REVENUE AND TAXATION Note: was added to and made a part of ORS to by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation Net operating loss carryback and carryover. There shall be added to federal taxable income the amount of any net operating loss carryback or carryover allowed in arriving at federal taxable income c ; 1984 c Transaction treated as lease purchase under federal law. To derive Oregon taxable income, federal taxable income shall be modified to the extent necessary to not treat as a lease purchase or in any other way recognize for Oregon tax purposes a transaction entered into pursuant to section 168( f) ( 8) of the Internal Revenue Code c c , 5; repealed by 1983 c ORS not applicable to finance leases. Notwithstanding ORS , finance leases as described in section 168( f)(8) of the Internal Revenue Code shall be accorded the same treatment for Oregon tax purposes as they are for federal tax purposes c Note: was added to and made a part of ORS chapter 317 but was not added to any smaller series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation ( Repealed by 1957 c632 1 ( enacted in lieu of and ) Difference in cost recovery or claimed expense allowed on Oregon and federal returns. ( 1) Upon the taxable sale, exchange or disposition of any asset in a tax year beginning on or after January 1, 1983, federal taxable income shall be increased or decreased by an amount which will reflect one or more of the following: a) The difference in basis which results from the difference in depreciation, depletion or other cost recovery, or expense claimed under section 179 of the Internal Revenue Code, allowed or allowable on the Oregon return and that allowed or allowable on the federal return for that asset; b) The difference in basis which- results when a taxpayer has taken a federal credit, which requires as a condition of the use of the federal credit the reduction of the basis of an asset, and the federal credit is not allowable for Oregon purposes; c) The difference in basis as a result of any deferral of gain which has been granted under federal tax law but not under Oregon law or granted under Oregon law but not granted under federal law; d) The difference in basis under federal and Oregon tax law at the time the asset was acquired; e) Any other differences in the basis of the asset which are due to differences between federal and Oregon tax law; or f) For certain health care service coritractors for which federal tax exempt status was denied by section 501( m) of the Internal Revenue Code, any adjustment to the basis of an asset for purposes of calculating federal taxable gain or loss on sale, exchange or other disposition as permitted by the Tax Reform Act of ) There shall be added to or subtracted from federal taxable income any amount necessary to carry out the purposes of subsection ( 1) of this section c ; 1985 c ; 1987 c e [ Repealed by 1975 c Reversal of effect of gain or loss in case of timber, coal, domestic iron ore. To derive Oregon taxable income, federal taxable income shall be modified to reverse the effect of section 631 of the Internal Revenue Code c [ Repealed by 1957 c ( enacted in lieu of and )] Depreciation; date of repeal. 1) To the extent that the amount allowed as a deduction under section 167, 168 or 179 of the Internal Revenue Code for depreciation or cost recovery for any property exceeds, or is less than, the amount that would be allowed as a deduction for depreciation under the method of depreciation available under the Oregon tax law in effect for the tax year in which the property for which depreciation or cost recovery is claimed was placed in service, to derive Oregon taxable income, the difference shall be added to or subtracted from federal taxable income. 2) In computing Oregon taxable income there shall be allowed as a deduction a reasonable allowance for the depreciation, exhaustion, wear and tear and obsolescence of property used in the business. In no case shall the total amount recoverable through the depreciation allowance over the life of the property be in excess of the basis of the property as computed under subsection ( 6) of this section.' 3) " Reasonable allowance," as used in subsection ( 2) of this section, includes an allowance computed in accordance with subsection ( 7) of this section and with rules adopted by the department under any of the following methods: a) The straight -line method; b) The declining balance method, using a rate not exceeding twice the rate which would have applied had the annual allowance been computed under paragraph ( a) of this subsection;

160 COR.POR.ATION EXCISE TAX and c) The sum- of-the -years digits method; d) Any other consistent method approved by the department. 4) The rules adopted by the department pursuant to this section shall be designed to permit the adoption and use by the taxpayer of a uniform method of computing its allowance for depreciation for the purposes of this chapter and for federal income tax purposes, except that, for those taxable years that begin on or after January 1, 1981, any federal law changes or changes in federal regulations regarding the deduction for depreciation which become operative after December 31, 1980, shall not be given consideration by the department. 5) Paragraphs ( b), ( c) and ( d) of subsection ( 3) of this section shall apply only in the case of property ( other than intangible property) described in subsection ( 2) of this section with a useful life of three years or more: a) The construction, reconstruction or erection of which is completed after Decem- ber 31, 1956, and then only to that portion of the basis which is properly attributable to such construction, reconstruction or erection after December 31, 1956; or b) Acquired after December 31, 1956, if the original use of such property commences with the taxpayer and commences after such date. 6) The basis recoverable through depreciation allowance in respect of any property shall be: a) In the case of property acquired before January 1, 1929, the cost of the property or, in the case of property acquired other than by purchase, the fair market value of the property at the date of acquisition) less depreciation properly chargeable against the property prior to January 1, b) In the case of property acquired after December 31, 1928, the same basis as for gain or loss upon the disposition of such property as provided in ORS to ( 1981 Replacement Part). 7) For tax years beginning on and after January 1, 1977, the first year depreciation allowance provided by section 179 of the Internal Revenue Code, as amended and in effect on December 30, 1980, shall be allowed for that property described in subsection ( d) of section 179, under the restrictions and limitations described in section 179, including the initial deduction of such first year allowance from basis before the computation of any other depreciation deduction. 8) For taxable years beginning on or after January 1, 1983, to the extent that the amount allowed as a deduction under section 168 of the Internal Revenue Code ( Accelerated Cost Recovery System) exceeds, or is less than, the amount that would be allowed as a deduction for depreciation for the property under subsections ( 2) to ( 7) of this sec- tion, to derive Oregon taxable income, the difference shall be added to or subtracted from federal taxable income. 9) The modifications required by subsection ( 8) of this section apply only to the differences in the computation of depreciation ( reasonable allowance for exhaustion, wear, tear and obsolescence) under the Ac- celerated Cost Recovery System and the other methods of depreciation. Nothing in this section shall be construed to govern the eligibility of property for depreciation, the expensing of costs or other provisions of the Internal Revenue Code which do not directly govern the computation of the deduction amount for recovery property. 10) Subsections ( 2) to ( 9) of this section shall not apply to property placed in service in taxable years beginning on or after Januar 1, [ Formerly ; 1984 c. 1 12; 1985 c.802 UZ ( Repealed by 1957 c ( enacted in lieu of , and )] Depletion. ( 1) To the extent that the amount allowed as a deduction for depletion under section 611 of the Internal Revenue Code exceeds,' or is less than, the amount determined as the Oregon depletion allowance under subsection ( 2) or ( 3) of this section, to derive Oregon taxable income, the difference shall be added - to or subtracted from federal taxable income. 2) For purposes of subsection ( 1) of this section, in the case of timber, mines, oil and gas wells, and other natural deposits, except in the case of metal mines as provided in subsection ( 3) of this section, the Oregon depletion allowance shall be a reasonable allowance according to the peculiar conditions in each case. The reasonable allowance in all cases shall be computed on the cost of the property. 3) In the case of metal mines, the Oregon depletion allowance may be the amount allowed under subsection ( 2) of this section or an amount equal to 15 percent of the gross income from the property during the taxable year, not to exceed 50 percent of the net income of the taxpayer ( computed without allowance for depletion) from the property. In its first return made under this chapter, the taxpayer must state as to each property with respect to which the taxpayer has any item of income or deduction ( in case of metal mines), whether it elects to have depletion allowance for each such property for the taxable year computed with or with-

161 REVENUE AND TAXATION out reference to percentage depletion. An election once exercised under this section cannot thereafter be changed by the taxpayer, and the depletion allowance in respect to each such property will for all succeeding taxable years' be computed in accordance with the election so made. [ Formerly [ Repealed by 1957 c ( enacted in lieu of and ) Limitation on use of preacquisition losses to offset built -in gain. ( 1) Preacquisition losses, as described under section 384 of the Internal Revenue Code, of a gain corporation, to the extent allocated or apportioned to Oregon, with the additions, subtractions, modifications and other adjust- ments required for purposes of this chapter, shall not be considered in determining the taxable income or loss under ORS ) If any preacquisition loss, as described in subsection ( 1) of this section, may not offset a recognized built -in gain by reason of section 384 of the Internal Revenue Code, such gain shall not be taken into account in determining under ORS the amount of such loss which may be carried to other taxable years. 3) In any case in which a preacquisition loss, as described in subsection ( 1) of this section, for any taxable year is subject to limitation under subsection ( 1) of this section and a taxable loss from such taxable year is not subject to such limitation, taxable income shall be, treated as having been offset first by the loss subject to such limitation. 4) The definitions contained in section 384( c) of the Internal Revenue Code shall apply for purposes of this section, except that where appropriate, gain, loss and items of income shall be determined as allocated or apportioned to Oregon and with the addi- tions, subtractions, modifications and other adjustments contained in this chapter. 5) Section 384(b) and ( c)( 5) and ( 6) of the Internal Revenue Code shall be applied for purposes of this section in a manner consistent with ORS to c provides: Note: Section 89, chapter 625, Oregon Laws 1989, Sec. 89. Section 23 of this Act ( relating to use of preacquisition losses to offset built -in gains) shall apply in cases where the acquisition date is after December 15, However, section 23 of this Act shall not apply: 1) In the case of any transaction pursuant to a binding written contract in effect on or before December 15, 1987, or a letter of intent or agreement or merger signed on or before December 15, 1987; or ' 2) If the' acquisition date, as defined in section 384( c)( 2) of the Internal Revenue Code, is before March 31, 1988, and the acquiring corporation makes the election described under section 2004( m)( 5) of the Technical and Miscellaneous Revenue Act of 1988 ( P L ) c Exemption of income from exercise of Indian fishing rights. Income derived from the exercise of rights of any Indian tribe to fish secured by treaty, Executive order or Act of Congress is exempt from the tax imposed by this chapter if section 7873 of the Internal Revenue Code does not permit a like federal tax to be imposed on such income c Note: was added to and made a part of ORS chapter 317 by legislative action but was not added to any smaller series therein See Preface to Oregon Revised Statutes for further explanation. provides Note: Section 84, chapter 625, Oregon Laws 1989, Sec. 84. Sections 5 and 18 of this Act and ( relating to Indian fishing rights) apply to all periods beginning before, on or after the effective date of this Act [ October 3, c [ Repealed by 1957 c.632 I ( enacted in lieu of and ) [ Formerly ; 1985 c ; repealed by 1987 c Energy conservation payments exempt. Any amount received as a cash payment for energy conservation measures under ORS to is exempt from the tax imposed under this chapter. [ Formerly ; 1985 c [ Amended by 1957 c ; 1959 c 156 2; subsection ( 3) derived from 1959 c , repealed by 1969 c Exemption for income attributable to substitute fuel production. If a commercial plant produces methanol, ethanol or other substitute fuel and 75 percent of the production is used in making gasohol in any tax year, that portion of the Oregon taxable income attributable to the production of methanol, ethanol or other substitute fuel for such- tax year is exempt from any tax imposed under this chapter. To qualify for the exemption authorized by this section, there shall be filed with the tax return of the taxpayer claiming the exemption a certificate furnished by the Department of Energy that the plant - produced a commercially marketable grade of methanol, ethanol or other substitute fuel and that 75 percent of the production during the tax year was used or committed for use in making gasohol. Formerly [ Amended by 1957 c.607 7; renumbered ( Amended by 1955 c.587 l; repealed by 1957 c ( enacted in lieu of and )] [ Amended by 1953 c.385 9; 1955 c ; 1957 c.20 l; repealed by 1957 c ( enacted in lieu of and ) ( Amended by 1953 c.385 9; 1955 c. 581 l; repealed by 1957 c ( enacted in lieu of and )) [ Amended by 1955 c.356 1; repealed by 1957 c ( enacted in lieu of , and )

162 CORPORATION EXCISE TAX [ Repealed by 1957 c ( enacted in lieu of and ) [ Repealed by 1957 c ( enacted in lieu of and ) ( Repealed by 1957 c ( enacted in lieu of and ) [ Repealed by 1957 c ( enacted in lieu of , and ) [ Repealed by 1957 c ( enacted in lieu of , and )) [ Amended by 1957 c.607 8, 1961 c ; repealed by 1969 c [ Repealed by 1957 c ( enacted in lieu of and ) ( Repealed by 1957 c ( subsections ( 1) and ( 2) of enacted in lieu of and ) ( Repealed by 1957 c ( enacted in lieu of and ) ( Amended by 1953 c ; 1955 c 585 l; repealed by 1957 c ( enacted in lieu of and ) ( Repealed by 1957 c ( enacted in lieu of and ) Net losses of prior years. ( 1) In computing Oregon taxable income there shall be allowed as a deduction an amount equal to the aggregate of the Oregon net losses of prior years to the extent provided in this section. 2) As used in this section, " Oregon net loss" means Oregon net loss as defined in ORS ( 9). 3) In computing Oregon net loss for any taxable year the Oregon net loss for a prior year shall not be allowed as a deduction. 4)( a) The Oregon net loss in any taxable year shall be allowed as a deduction in any of the 15 succeeding taxable years. b) The amount of the Oregon net loss deductible in any taxable year shall be the Oregon net loss of a prior year reduced by the net income ( computed without the Oregon net loss deduction) of any intervening taxable year or years between the, year of loss and the succeeding taxable year in which the Oregon net loss deduction is claimed. c) The Oregon net loss of the earliest taxable year shall be exhausted before an Oregon net loss from a later year may be deducted. 5) No deduction shall be allowed under this section to a business trust which qualifies as a " real estate investment trust" under sections 856, 857 and 858 of the Internal Revenue Code. ( Formerly ; 1987 c d1. provides- Note: Section 45b, chapter 293, Oregon Laws 1987, See. 45b. ( 1) In the case of a savings association, those net losses that have occurred for tax years beg rining on or after January 1, 1982,.and prior to Janu ary 1, 1987, and have not already been used to reduce net income in a year beginning prior to January 1, 1987, shall be aggregated together into one sum. Thereafter, the sum so aggregated shall be carried forward and allowed as a deduction under ORS , as if the sum so aggregated were an Oregon net loss occurring in the tax year of the savings association beginning in 1986, except that in applying ORS ( 4)( a), " eight" shall be substituted for " five " 2) As used in this section, " savings association" means a savings association, as defined in ORS ), or a federal association, as defined in ORS ) c bl Pre - change and built -in losses. 1) That portion, of the pre- change and built -in losses which the taxpayer deducted pursuant to section 382 of the Internal Revenue Code shall be added to federal taxable income under ORS or otherwise. 2) Pre - change losses and recognized built -in losses, subject to the limitation under section 382 of the Internal Revenue Code, shall not be considered in determining the, taxable; loss. and taxable loss carry forward under, ORS and ) The losses described in subsection ( 1) of this section; to the extent apportioned or allocated to Oregon, with the additions, subtractions, modifications and - other adjustments required for purposes of this chapter, shall be carried forward and subtracted in computing Oregon taxable income as provided under.subsections ( 4) to ( 6) of this sec- tion. 4) The amount of loss allowable under subsection ( 3) of this section in any tax year shall not exceed the lesser of the Oregon source taxable income of the new loss corporation or the Oregon percentage of the section 382 limitation as determined under section 382 ( b) of the Internal Revenue Code. The Oregon percentage for purposes of the subtraction under subsection ( 3) of this section shall be computed with reference to the Oregon apportionment factors of the new loss corporation existing as of the time of change in ownership.. 5) In computing Oregon taxable income, the amount of loss allowed as a subtraction under subsection ( 3) of this section shall be subtracted ' in any one of the 15, years, succeeding the year of the loss. Subject to the limitation under subsection ( 4) of this section, the amount of the loss subtracted in any taxable year shall be the loss allowed as a subtraction under subsection ( 3) of this section reduced by the amount subtracted or subtractible under subsection ( 3). of this sec- tion for any intervening year between the year of loss and the tax year in which the subtraction under this section is claimed. The loss of the earliest tax year shall be exhausted before a loss under this section from a later year may be subtracted. 6) Oregon net losses deductible under ORS shall be determined and carried

163 REVENUE AND TAXATION forward before the amount subtractible under this section is determined c cl [ Repealed by 1957 c ( enacted in lieu of and ) RETURNS AND PAYMENT OF TAX Date return considered filed or advance payment considered made. A return filed before the last day prescribed by law for the filing thereof shall be considered as filed on the last day. An advance payment of any portion of the tax made at the time the return was filed shall be considered as made on the last day prescribed by law for the payment of the tax. The last day prescribed by law for filing the return or paying the tax shall be determined without regard to any extension of time granted the taxpayer by the department. ( Formerly [ Repealed by 1957 c ( enacted in lieu of and ; and enacted in lieu of and )[ Requiring additional reports and information. The department may order additional reports or such other information it deems necessary in addition to the regular reports provided in this chapter. All reports and returns, as provided in this chapter, shall be upon standard forms, adopted by the department, with no more detailed information relating to the taxpayer' s business than is necessary to enable the department to administer fully the provisions of this chapter c ; repealed by 1984 c [ Renumbered [ Repealed by 1957 c ( enacted in lieu of and )] ( Repealed by 1957 c ( enacted in lieu of and ) [ Repealed by 1957 c ( enacted in lieu of and )] [ Amended by 1957 c.76 1; repealed by 1957 c ( enacted in lieu of and ) l [ Repealed by 1957 c632 1 ( enacted in lieu of and ) [ Repealed by 1957 c ( enacted in lieu of and )] ( Repealed by 1957 c ( enacted in lieu of and ) [ Amended by 1953 c.309 2; 1955 c.35 1; 1957 c.528 4; renumbered [ Amended by 1953 c ; renumbered ( Renumbered [ Renumbered FOREIGN INCOME; DOMESTIC INTERNATIONAL SALES CORPORATIONS; DOMESTIC INSURERS Income from sources without the United States. Income from sources without the United States, as defined in sec- tion 862 of the Internal Revenue Code, shall be accounted for in the computation of Oregon taxable income as required by ORS chapters 305, 314 and this chapter without regard to sections 861 to 864 of the Internal Revenue Code. [ 1983 c Domestic international sales corporation. Except as provided in ORS , a domestic international sales corporation, commonly referred to as " DISC," as defined in section 992 of the Internal Revenue Code, shall be taxed in the manner provided for other corporations under this chapter and without regard to sections 991 to 996 of the Internal Revenue Code c ; 1985 c b Application of certain provisions of this chapter to domestic insurers. ORS and , relating to depreciation and basis, shall be applicable to every domestic insurer. [ Formerly Taxable income of domestic insurer; items excluded. ( 1) For purposes of the tax imposed under ORS , the Oregon taxable income of a domestic insurer shall be the insurer' s " net gain from operations" or " net income" determined in the manner prescribed by the Department of In- surance and Finance on its Annual Statement Form for the taxable year, as adjusted pursuant to ORS ( 11), and to ) The Oregon taxable income of a do- mestic insurer shall be computed by adding or subtracting, to the insurer' s net gain from operations as determined under subsection 1) of this section, such of the following items as apply to the insurer: a) Add the amount of federal and state income taxes deducted by the insurer in computing its net gain from operations. b) Add penalty interest received by the insurer arising out of prepayment of loans made by the insurer. c) Add realized gains and losses on sales or exchanges by the insurer of property. d) Subtract, if the insurer so elects, additional or accelerated depreciation on real and personal property that is in excess of the depreciation deducted by the method used in computing the insurer' s net gain from oper- ations. e) Subtract that amortized portion of the contribution for past service credits made to qualified plans and exempt trusts for employees allowed as a deduction. f) Add or subtract, as appropriate, increases or decreases in mandatory reserves that the insurer is required to maintain by law or by rules or directives of the Director of the Department of Insurance and Finance,

164 CORPORATION EXCISE TAX other than increases or decreases that ( A) are deducted in arriving at the insurer' s net gain from operations, or ( B) result from net gains or losses, realized or unrealized, in the value of the insurer's property and investments. g) Add or subtract, as appropriate, increases or decreases in reserves for policies and obligations outstanding before the beginning of the taxable year resulting from changes in the bases and methods of computing such reserves that are justified by ac- counting and actuarial practices applicable to or accepted by the insurance industry, commonly known as " reserve strengthening" or " reserve weakening." 3) Income, expenses, gains, losses, exclusions, deductions, assets, reserves, liabilities and other items properly attributable to one or more separate accounts authorized under ORS shall not be taken into account in determining taxable income of a domestic insurer under ORS ( 11), and to until such amounts or items are returned to and reflected on the general accounts of such insurer so as to be available generally to or for the benefit of contract and policyholders of the insurer. Formerly Allocation of net income where domestic insurer does business in other states. In lieu of the provisions of ORS , if the income of a domestic insurer is derived from business done both within and without this state, the determination of Oregon taxable income shall be ar- rived at by apportionment based upon an averaging of the following three factors: 1) Insurance sales factor: The percentage obtained by dividing ( a) the direct premiums excluding reinsurance accepted and without deduction of reinsurance ceded) received by the insurer during the taxable year on policies and contracts which are allocated to this state and to other jurisdictions in which the insurer is not authorized to do business by ( b) the total of such premiums received by the insurer during the taxable year on policies and contracts that had been sold within and without this state. For purposes of this subsection, " premiums" means sums properly included in appropriate schedules of the annual statement filed by the insurer with the Director of the Department of In- surance and Finance, which allocate premi- ums by jurisdiction. 2) Wage and commission factor: The percentage obtained by dividing ( a) the total of wages, salaries, commissions and other compensation for personal services paid in this state during the tax period to employees and insurance salesmen in connection with the business of the insurer, by ( b) the total wages, salaries, commissions and other compensation for personal services paid everywhere during the tax period to employees and insurance salesmen in connection with the business of the insurer. For determining the place of payment, the procedure set forth in ORS ( 2) shall apply. 3) Real estate income and interest factor: The percentage obtained by dividing ( a) the total net income ( after deducting from gross rental income real estate expenses, property taxes and depreciation attributable thereto, which are included in appropriate schedules of the annual statement filed by the insurer with the Department of Insurance and Finance) received from real property within this state plus gross interest received on loans secured by real property within this state during the taxable year, by b) the total net income received from real property within and without this state plus gross interest received on loans secured by real property within and without this state during the taxable year. ( Formerly Oregon net losses of domestic insurer in prior years. In computing Oregon taxable income, a domestic insurer shall be allowed as a deduction an amount equal to the aggregate Oregon net losses of prior years as defined in ORS Formerly UNITARY TAX Definitions for ORS to As used in this section and ORS and : 1) " Affiliated group" means an affiliated group of corporations as defined in section 1504 of the Internal Revenue Code. 2) " Unitary group" means a corporation or group of corporations engaged in business activities that constitute a business. single trade or 3)( a) " Single trade or business" means a business enterprise in which there exists directly or indirectly between the members or parts of the enterprise a sharing or exchange of value as demonstrated by: A) Centralized management or a common executive force; B) Centralized administrative, services or functions resulting in economies of scale; and C) Flow of goods, capital resources or services demonstrating functional inte- gration. b) " Single trade or business" may include, but is not limited to, a business en- terprise the activities of which:

165 REVENUE AND TAXATION A) Are in the same general line of busi- ness ( such as manufacturing, wholesaling or retailing); or B) Constitute steps in a vertically integrated process ( such as the steps involved in the production of natural resources, which might include exploration, mining, refining and marketing). c) Whether two or more corporations that are included in the same federal consolidated return are engaged in a single trade or business may be determined by making reference to corporations that are doing business in the United States and are subject to federal income taxation, whether or not those corporations are includable in the con- solidated return. No other corporations may be taken into consideration in making such a determination, except in a case in which the transactions or relationships between such corporations are made in an attempt to evade or avoid taxation. [ 1984 c. 1 4; 1985 c a Corporation tax return requirements. ( 1) A corporation shall make a return with respect to the tax imposed by this chapter as provided in this section. 2) If the corporation is a member of an affiliated group of corporations making a consolidated federal return, it shall file a return and determine its Oregon taxable income as provided in ORS The corporation' s tax liability shall be joint and several with any other corporation that is included in a consolidated state return with the corporation under subsection ( 5) of this section. 3) If the corporation makes a separate return for federal income tax purposes, it shall file a separate return under this chapter. The corporation shall determine its Oregon taxable income and tax liability separately from any other corporation. 4) For purposes of subsection ( 3) of this section, if the corporation is not subject to taxation under the Internal Revenue Code a return for federal income tax purposes in- cludes any form of return required to be made in lieu of an income tax return under the Internal Revenue Code or regulations thereunder. 5)( a) If two or more corporations subject to taxation under this chapter are members of the same affiliated group making a consolidated federal return and are members of the same unitary group, they shall file a consolidated state return. The department shall prescribe by rule the method by which a consolidated state return shall be filed. b) If any corporation that is a member of an affiliated group is permitted or required to determine its Oregon taxable income on a separate basis under ORS , or if any corporation is permitted or required by statute or rule to use different apportionment factors than a corporation with which it is affiliated, the corporation shall not be included in a consolidated state return under paragraph ( a) of this subsection. c) Whenever two or more corporations are required to file a consolidated state re- turn under paragraph ( a) of this subsection, any reference in this chapter to a corporation for purposes of deriving Oregon taxable income shall be treated as a reference to all corporations that are included in the consolidated state return. 6) If so directed by the department, by rule or instructions on the state tax return form, every corporation required to make a return under this chapter shall also file with the return a true copy of the corporation' s federal income tax return for the same taxable year. For purposes of this subsection, the corporation' s federal income tax return includes a consolidated federal return for an affiliated group of which the corporation is a member. The department may, by rule or instructions, permit a corporation to submit specified excerpts from its federal return in lieu of submitting a copy of the entire federal return. The federal return or any, part thereof required to be filed with the state return is incorporated in and shall be a part of the state return. [ 1984 c 1 2; 1985 c Tax return of corporation in affiliated group making consolidated federal return. ( 1) If a corporation required to make a return under this chapter is a member of an affiliated group of corporations making a consolidated federal return under sections 1501 to 1505 of the Internal Revenue Code, the corporation' s Oregon taxable income shall be determined beginning with federal consolidated taxable income of the affiliated group as provided in this section. 2) If the affiliated group, of which the corporation subject to taxation under this chapter is a member, consists of more than one unitary group, before the additions, sub- tractions, adjustments and modifications to federal taxable income provided for in this chapter are made, and before allocation and apportionment as provided in ORS ), if any, modified federal consolidated taxable income shall be computed. Modified federal consolidated taxable income shall be determined by eliminating from the federal consolidated taxable income of the affiliated group the separate taxable income, as deter- mined under Treasury Regulations adopted under section 1502 of the Internal Revenue Code, and any deductions or additions or items of income, expense, gain or loss for which consolidated treatment is prescribed

166 COR.POR.ATION EXCISE TAX under Treasury Regulations adopted under section 1502 of the Internal Revenue Code, attributable to the member or members of any unitary group of which the corporation is not a member. 3)( a) After modified federal consolidated taxable income is determined under subsection ( 2) of this section, the additions, sub- tractions, adjustments and modifications prescribed by this chapter shall be made to the modified federal consolidated taxable income of the remaining members of the affiliated group, where applicable, as if all such members were subject to taxation under this chapter. After those modifications are made, Oregon taxable income or loss shall be determined as provided in ORS ( 10) ( a) to ( c), if necessary. b) In the computation of the Oregon apportionment percentage for a corporation that is a member of an affiliated group filing a consolidated federal return, there shall be taken into consideration only the property, payroll, sales or other factors of those members of the affiliated group whose items of income, expense,. gain or loss remain in modified federal consolidated taxable income after the eliminations required under subsection ( 2) of this section. Those members of an affiliated group making a consolidated federal return or a consolidated state return shall not be treated as one taxpayer for purposes of determining whether any member of the group is taxable in this state or any other state with respect to questions of ju- risdiction to tax or the composition of the apportionment factors used to attribute income to this state under ORS or to c. 1 3; 1985 c ; 1987 c Computation of taxable income; excess loss accounts. ( 1) To derive Oregon taxable income, there shall be subtracted from federal taxable income the amount of the excess loss account included under Treasury Regulations adopted under section 1502 of the Internal Revenue Code to the extent that the excess losses have not offset unitary income. However, in no event shall excess losses be recaptured on account of Treasury Regulations adopted under section 1502 of the Internal Revenue Code for purposes of this chapter if the losses were deducted for a taxable year beginning before January 1, ) As used in this section, " unitary income" means income of a unitary group, as that term is defined in ORS , that includes the subsidiary to which excess losses are attributable, and a member of which is subject to taxation under this chapter. ( 1984 c.l llb; 1987 c Adjustments to prevent double taxation or deduction. ( 1)( a) If any provision of the Internal Revenue Code or of ORS to , relating to the use of consolidated federal returns, requires that any amount be added to or deducted from federal consolidated taxable income or the Oregon taxable income subject to taxation under this chapter or ORS chapter 318 that previously had been added to or deducted from income upon or with respect to which tax liability was measured under the Oregon law in effect prior to the taxpayer' s taxable year as to which ORS to , are first effective, an appropriate adjustment shall be made to the income for the year or years subject to ORS to , so as to prevent the double taxation or double deduction of any such amount that previously had entered into the computation of income upon or with respect to which tax li- ability was measured. b) If it appears to the department that a corporation making a return under this chapter or ORS chapter 318 is required to make any adjustment to federal consolidated taxable income pursuant to ORS , that is unduly burdensome or that produces an inequitable or unreasonable result, the department, upon - application by the corporation, may relieve the corporation of the requirement and may, permit or require any other adjustment to be made to fairly reflect income and produce an equitable result. The department shall adopt rules prescribing the method by which a corporation may apply for relief under this paragraph. 2) Notwithstanding the provisions of ORS , any regulation promulgated pursuant to sections 1501 to 1505 of the Internal Revenue Code which makes reference to provisions of the Internal Revenue Code with respect to which modifications to federal taxable income are prescribed under this chapter shall not be applied to the extent the regulation conflicts with the provisions of this chapter. 3) The Department of Revenue shall not make any adjustment under this section if the resulting increase or decrease in tax liability would be less than $ c. 1 19; 1985 c provides: Note: Section 20, chapter 1, Oregon Laws 1984, Sec. 20. ( 1) Except as specifically provided otherwise, the amendments, repeals and new matter contained in sections 2 to 19 of this Act apply to taxable years beginning on or after January 1, For all prior taxable years, the law applicable for those years shall remain in full force for the purposes of assessment, imposition and collection of corporation excise and income taxes and for all interest, penalties or forfeitures that have accrued or may accrue with respect to those taxes. 2) The repeal of ORS by section 18 of this Act and the amendments to ORS by section

167 REVENUE AND TAXATION of this Act apply to charitable contributions made and 501( c)( 1) of the Internal Revenue Code capital losses occurring in taxable years beginning on c.356 2; 1975 c ; 1983 c ; 1985 c b; or after January 1, ( 1984 c c DISPOSITION OF REVENUE [ Formerly ; repealed by 1985 c Disposition of revenue. ( 1) The net revenue from the tax imposed by this chapter, after deduction of refunds, shall be paid over to the State Treasurer and held in the General Fund as miscellaneous receipts available generally to meet any expense or obligation of the State of Oregon lawfully incurred. A working balance of unreceipted revenue from the tax imposed by this chapter may be retained for the payment of refunds, but such working balance shall not at the close of any fiscal year exceed the sum of 500,000. 2) The amendment of this section by the Forty - seventh Legislative Assembly shall first apply to the state levy of taxes for the fiscal year ( Formerly UNRELATED BUSINESS INCOME OF CERTAIN EXEMPT CORPORATIONS c.356 3; repealed by 1983 c Tax imposed on unrelated business income of certain exempt cor- porations ( 1) Notwithstanding ORS , a corporation otherwise exempt from tax under ORS ( 1), ( 2), ( 3), ( 4) or ( 7) shall be subject to the tax imposed by and in ac- cordance with the provisions of this chapter, but only as to its unrelated business taxable income, as defined under the Internal Revenue Code. 2) Subsection ( 1) of this section shall not apply to an organization described in section Exceptions and limitations. In addition to the exclusions and modifications contained in section 512(b) of the Internal Revenue Code, in determining unrelated business taxable income, there shall be excluded, in the case of any school, college or university, which rents real property to its students or faculty, all rents derived there- from, providing that such property is actually a part of the school and that the continued presence of the students and faculty thereon is necessary to the educative function of the institution c.356 4, 1979 c , 1983 c c 356 5; repealed by 1983 c Assessment of deficiency. If the department finds that unrelated, business taxable income, or any portion thereof, has not been assessed, it may, at any time within three years after the return was filed, or in case no return was filed within five years from the time the return should have been filed, compute the tax and give notice to the corporation of the amount due, including penalty and interest thereon. These limita- tions to the assessment of such tax or addi- tional tax, including penalty and interest thereon, do not apply to the assessment of additional taxes, and penalty and interest thereon, upon false or fraudulent returns or in cases where with a fraudulent intent no return has been filed. ORS is also applicable to the extent that it is not incon- sistent with the provisions of this section c [ Repealed by 1957 c ( enacted in lieu of and )

168 Chapter EDITION Shoit title; Department of Revenue to ad- minister chapter Imposition of tax Provisions in ORS chapters 305, 314 and 317 incorporated into corporation income, tax law Exempt corporations Rules and regulations; personnel Disposition of revenue ORS as part of chapter 318: 090 ORS as part of chapter ORS ' as part of chapter ' ORS as part of chapter ORS as part of chapter ' ORS 317: 114 as part of chapter ORS as part of chapter CROSS REFERENCES Administration of revenue laws generally, Ch. 305 Administrative appeals, to Appeal procedure, Associations,' trusts or other unincorporated organization, income tax liability, Corporation Income Tax Business trusts; distributions subject to personal income and corporate excise and income tax provisions, Claim for refund of any tax paid, Deficiency procedure, Estimated tar procedure for corporate excise and income tax, to General provisions relating to income taxation, Ch 314 Interest on deficiency, delinquencv or refund, Metropolitan service district taxing authority, Oregon Mass Transportation Financing Authority, security status of bonds, Oregon Medical Insurance Pool, exempt from taxation, Payment of tax, penalty and interest required before filing complaint with Tar Court to appeal department order, Relocation assistance from public condemnor, business or farm operation required to submit tax returns, Tax Court, Oregon, to Verification of documents riled under tax laws, falsification prohibited, , When tax document deemed filed with tax official,

169 REVENUE AND TAXATION a

170 CORPORATION INCOME.TAX Short title; Department of Revenue to administer chapter. This chapter shall be known and may be cited as the Corporation Income Tax Act of 1955, and it shall be administered by the Department of Revenue c Imposition of tax.. ( 1) There hereby is imposed upon every corporation for each taxable year a tax at the rates provided in ORS upon its Oregon taxable income derived from sources within this state, other than income for which the corporation is subject to the tax imposed by the Corporation Excise Tax Law of 1929 ( ORS chapter 317) according to or measured by its Oregon taxable income. 2) Income from sources within this state includes income from tangible or intangible property located or having a situs in this state and income from any activities carried on in this state, regardless of whether carried on in intrastate, interstate or foreign commerce. [ 1955 c.334 2; 1957 c.607 9; 1957 c.633 1; 1961 c.55 1; subsection ( 3) enacted as 1961 c.55 2; 1975 c ; 1983 c c.334 3; 1957 c.74 3; 1965 c ; 1965 c.460 5; 1967 c ; 1969 c ; 1969 c a; 1969 c ; 1971 c ; 1973 c , 1973 c.753 7; 1977 c 866 6; 1979 c.414 6; 1979 c 561 7; 1979 c ; repealed by 1983 c ( enacted in lieu of ) Provisions in ORS chapters 305, 314 and 317 incorporated into corporation income- tax law. It being the intention of the Legislative Assembly that this chapter and the Corporation Excise Tax Law of 1929 shall be administered as uniformly as possible ( allowance being made for the difference in imposition of the taxes and the operative date of this chapter), the provisions of ORS , , ORS chapter 314 and of the following sections of ORS chapter 317, as amended on or before August 3, 1955, and as they may thereafter be amended, are incorporated into this chapter by this reference and made a part hereof: ORS , , to , , , , , , , , , to , to , and to and sections 2 to 4, chapter 911, Oregon Laws c enacted in lieu of ); 1984 c.l 13; 1985 c ; 1987 c ; 1987 c.911 8f; 1989 c ; 1989 c provides: Note: Section 6, chapter 911, Oregon Laws 1989, Sec. 6. Sections 2 to 4 of this Act and the amendments to ORS by section 5 of this Act apply to amounts paid or incurred in tax years beginning on or after January 1, 1989, and before January 1, ( 1989 c Exempt corporations. In addition to the corporations exempt from the provisions of this chapter by the incorporation in this chapter of ORS , there shall also be exempt those foreign corporations whose activities in this state are confined to purchases of personal property, and the storage thereof incident to shipment outside the state, unless such foreign corporation is an affiliate of another foreign or domestic corporation which is doing business in Oregon or is subject to this chapter. Whether or not corporations are affiliated shall be determined as provided in section 1504 of the Internal Revenue Code. ( 1955 c.334 4; 1977 c.866 7; 1984 c 1 14; 1985 c s s. c , 15; 1971 c ; 1977 c. 89 2; repealed by 1983 c [ 1957 s.s. c 15 16, 17, 1959 c 92 3; repealed by 1983 c c , repealed by 1983 c c ; repealed by 1977 c Rules and regulations; personnel. The Department of Revenue is authorized to employ such personnel, and prescribe and prepare such rules, regulations, forms and tables as are necessary to place this chapter in operation c ; 1957 c Disposition of revenue. The net revenue from the tax imposed byy this chapter shall be paid over to the State ' Measurer and held in the General Fund as miscellaneous receipts available generally to meet any expense or obligation of the State of Oregon lawfully incurred. A working balance of unreceipted revenue from the tax imposed by this chapter may be retained by the Department of Revenue for the payment of refunds, but such working balance shall not at the close of any fiscal year exceed the sum of 50, c ORS as part of chapter. ORS , during its existence and as it may be amended, is incorporated into this chapter by reference and made a part hereof c ORS as part of chapter. ORS , during its existence and as it may be amended, is incorporated into this chapter by reference and made a part of this chapter c ORS as part of chapter. ORS , during its existence and as it may be amended is incorporated into this chapter b reference and made a part hereof c Note: Sections 5 to 7, chapter 438, Oregon Laws 1985, provide: Sec. 5. Section 6 of this Act is added to and made a part of ORS chapter 318. Sec. 6. Section 4 of this 1985 Act ( Note before ORS ), during its existence and as it may be amended, is incorporated into this chapter by reference and made a part hereof. Sec. 7. This Act applies to tax years beginning on or after January 1, 1985, and prior to January 1,

171 REVENUE AND TAXATION Note: Sections 4 to 6, chapter 521, Oregon Laws 1985, provide: Sec. 4. Section 5 of this Act is added to and made a part of ORS chapter Sec. 5. Section 2 of this 1985 Act ( Note following ORS ), during its existence and as it may be amended, is incorporated into this chapter by reference and made a part hereof. Sec. 6. Sections 2 and 5 and the amendments to ORS by section 3 of this Act apply to donations of crops made in tax years beginning on or after January 1, 1986, and prior to January 1, Note: Sections 3 to 5, chapter 695, Oregon Laws 1985, provide: Sec. 3. Section 4 of this Act is added to and made a part of ORS chapter 318. Section 2 of this 1985 Act ( Vote following Sec. 4., ORS ), during its existence and as it may be amended, is incorporated into this chapter and made a part hereof. Sec. 5. ( 1) Except as provided in subsection ( 2) of this section, sections 2 and 4, chapter 695, Oregon Laws 1985, apply to contributions made in tar years beginning on or after January 1, 1986, and prior to, January 1, ) With respect to the credit allowed for a contribution as described in Paragraph ( c) of subsection ( 2) of section 2, chapter 695, Oregon Laws 1985, if a written contract or other written agreement to make the contribution is entered into prior to January 1, 1998, and the moneys contributed after that date are contributed pursuant to the contract or agreement, then notwithstanding subsection ( 1) of this section, the credit allowed as described in paragraph ( c) of subsection ( 2) of section 2, chapter 695, Oregon Laws 1985, shall be allowed for those contributions made pursuant to the written contract or other written agreement entered into prior to January 1, c.695 5; 1989 c Note: Sections 8 and 10, chapter 682, Oregon Laws 1987, provide Sec. & Section 5 of this 1987 Act ( note following ORS , during its existence and as it may be amended, is incorporated into this chapter by reference and made a part hereof c Sec. 10. Sections 2-) ORS , 5 ( note following ORS and 8 of this Act apply to tax years beginning on or after January 1, 1988, and prior to January 1, For all prior taxable years, the law in effect and applicable for those years shall continue to apply c ORS as part of chapter. ORS , during its existence and as it may be amended, is incorporated into this chapter by reference and made a part of this chapter c provides: Note: Section 53, chapter 802, Oregon Laws 1985, Sec. 53. Section 51 of this 1985 Act ( note following ORS ), during its existence and as it may be amended, is incorporated into this chapter by reference and made a part of this chapter ORS as part of chapter. ORS , during its existence and as it may be amended, is incorporated into this chapter byy reference and made a part hereof c d ORS as part of chapter. ORS , during its' existence and as it may be amended, is incorporated into this chapter by reference and made a part hereof c ORS as part of chapter. ORS , during its existence and as it may be amended, is, incorporated into this chapter by reference and made a part hereof c

172 Chapter EDITION Motor Vehicle and Aircraft Fuel Taxes MOTOR VEHICLE FUEL AND AIRCRAFT FUEL TAXES Definitions for ORS to Monthly statement by dealer, license tax imposed License required to be dealer in motor vehicle fuel Application for and issuance of dealer' s li- cense Faithful performance bond Deposit in lieu of bond Release of surety Additional bond or deposit Immediate collection of tax and interest where dealer fails to secure license; waiver; penalties Revocation of license Cancellation of license on request of dealer or when licensee no longer a dealer Remedies cumulative Change of ownership; cancellation of li- cense Payment of tax; delinquency penalty; interest rates; collection of delinquent pay- ments Monthly statement of dealer; penalty Assessing tax and penalty where dealer fails to report Billing purchasers Receipt, payment or sale of motor vehicle fuel without invoice or delivery tag prohibited '! unsporting motor vehicle fuel in bulk Exemption of export fuel Certain sales to Armed Forces exempted; reports Fuel in vehicles coming into or leaving state not taxed Fuel sold or distributed to dealers Liability for taxes, interest and penalties when person importing fuel does not hold license Refunds Limitation on applications for refunds Seller to give invoice for each purchase made by person entitled to refund Claims for refunds may be required to be under oath; investigation of claims Refund of tax on fuel used in operation of vehicles over certain roads or private property Refunds to purchasers of fuel for aircraft Examinations and investigations; correcting reports and payments Limitation on credit for or refund of over- payment and on assessment of additional tax Examining books and accounts of carrier of motor vehicle fuel Records to be kept by dealers; inspection of records Records to be kept three years Disposition of tax moneys Estimate of tax on fuel used for boats; transfer to Boating Safety, Law Enforcement and Facility Account; use Estimate of tax on fuel used in aircraft; transfer to State Aeronautic Account; use ORS to not affected Savings clause Short title USE FUEL TAX Definitions for ORS to Imposition of tax;. rate User' s license required to use fuel; ex- ceptions Application for and issuance of user' s li- cense Faithful performance bond Deposit in lieu of bond Release of surety Display of emblem Penalty for unlicensed use of fuel or non - display of authorization or emblem Seller' s license Revocation of license; reissue of license Cancellation of license on request of user Notifying division upon ceasing to use fuel in connection with motor vehicle Removal of emblem Seller to collect tax unless vehicle has P.U.C. permit or user' s emblem When invoices required Seller' s report to division Payment of tax by seller Monthly report of user; remittance; credit against users taxes; annual reports of certain Quarterly reports if average monthly tax under $ 300; when annual reports authorized Penalty for delinquency in remitting tax; waiver; interest rates Records required of sellers and users; alternative records for certain users Tax as lien Delinquency in payment; notice to debtors of user or seller, report to division Collection of delinquent payment Action by Attorney General to collect delinquency; certificate of division as evidence

173 REVENUE AND TAXATION Assessment of deficiency; presumption that fuel subject to tax, Assessing tax and penalty upon failure to make report Petition for reassessment Appeal to circuit court Time limitation on service of notice of additional tax Refund of tax erroneously ors illegally' collected Refund of tax on fuel used in operation of vehicle over certain roads or private prop- erty Investigation of refund applications Enforcement; rules and regulations Presumption of use Producers, distributors and others to keep records; examining books and records Results of investigations to be private Prohibitions Disposition of moneys 319: 990 Penalties PENALTIES CROSS REFERENCES Administrative procedures and rules of state agencies; to ' Credit for fuel tax paid, Date of receipt of reports, remittance and claims for credit or refund, determination, Federal areas in state, application of tax laws, Interest on deficiency, delinquently or refund, Motor Vehicles Division, functions under this chapter, i Public officer failing to perform duties imposed by tax law, penalty, Refund of taxes adjudged invalid, Snowmobiles, refunds on fuel prohibited, Uniformity of taxation, Const. Art 1, , Const Art, IX, Actions in other states for Oregon taxes, Reciprocal recognition of tax liability, Expenditures without allotment prohibited in certain cases,' Revenue from motor vehicle use and fuel tax to be used only for highway purposes, Const. Art IX, 3a Use -fuel tax not applicable to vehicles subject to tax based on combined weight of vehicle, Removal of lien before issuing registration card or cer- tificate of title upon transfer of vehicle subject to lien, Actions in other states for Oregon taxei, Reciprocal recognition of tax liability, Expenditures without allotment prohibited in certain cases, Revenue from motor vehicle use and fuel tax, to be used only for highway purposes, Const. Art. IX, 3a

174 MOTOR VEHICLE AND, AIRCRAFT. FUEL TAXES MOTOR VEHICLE FUEL AND AIRCRAFT FUEL TAXES Definitions for ORS to As used in ORS to , unless the context requires otherwise: 1) " Aircraft" means every contrivance now known, or hereafter invented, used or designed for navigation of or flight in the air, operated or propelled by the use of aircraft fuel. 2) " Aircraft fuel" means any gasoline and any other inflammable or' combustible gas or liquid by whatever name such gasoline, gas or liquid is known or sold, usable as fuel for the operation of aircraft,.except gas or liquid, the chief use of which, as determined by the division is for purposes other than the propulsion of aircraft. 3) " Airport" means any area of land or water, except a restricted landing area, which is designed for the landing and takeoff of aircraft. 4) " Broker" means - and includes -every person other than a dealer engaged in business as a broker, jobber or wholesale merchant dealing in motor vehicle fuel or aircraft fuel. 5) ` Bulk transfer" means any change in ownership of motor vehicle fuel or aircraft fuel contained in a terminal storage facility or any physical movement of motor vehicle fuel or aircraft fuel between terminal storage facilities by pipeline or marine transport. 6) " Dealer" means any person who: a) Imports or causes to be imported. motor vehicle fuels or aircraft fuels for sale, use or distribution in, and after the same reaches the State of Oregon, but " dealer" does not include any person who imports into this state motor vehicle fuel in quantities of 500 gallons or. less purchased from a supplier who is licensed as a dealer under ORS to and who assumes liability for the payment of the applicable license tax to this state; b) Produces, refines, manufactures or compounds motor vehicle fuels or aircraft fuels in the State of Oregon for use, distribution or sale in this state; c) Acquires in this state for sale, use or distribution in this state motor vehicle fuels or aircraft fuels with respect to which there has been no license tax previously incurred; or d) Acquires title to or possession of motor vehicle fuels or aircraft fuels in this state and exports the product out of this state. 7) " Division" means the Motor Vehicles Division of 'the Department of Transporta- tion. 8) " Distribution" means, in addition to its ordinary meaning, the delivery of motor vehicle fuel or aircraft fuel by a dealer to any service station or into any tank, storage facility or series of tanks or storage facilities connected by pipe lines, from which motor vehicle fuel or aircraft fuel is withdrawn directly for sale or for delivery into the fuel tanks of motor vehicles whether or not the service station, tank or storage facility is owned, operated or controlled by the dealer. 9) " First sale, use or distribution of motor vehicle fuel or aircraft fuel" means the first withdrawal, other than by bulk transfer of motor vehicle fuel or aircraft fuel from terminal storage facilities for sale, use or distribution. " First sale, use or.distribution of motor, vehicle fuel or aircraft fuel" also means the first sale, use or distribution.of motor vehicle fuel or aircraft fuel after import into this state if the motor vehicle fuel or aircraft fuel is delivered other than to the terminal storage facilities of a licensed dealer. 10) " Highway" means every way, thoroughfare and place, of whatever nature, open for use of the public for the purpose of vehicular travel. 11) " Motor vehicle" means all vehicles, engines or machines, movable or immovable, operated or propelled by the use of motor vehicle fuel. 12) " Motor vehicle fuel" means and includes gasoline and any other inflammable or combustible gas or liquid, by whatever name such gasoline, gas or liquid is known or sold, usable as fuel for the operation of motor vehicles, except gas or liquid, the chief use of which, as determined by the division, is for purposes other than the propulsion of motor vehicles upon the highways of this state. 13) " Person" includes every natural per- son, association, firm, partnership, corporation or the United States. 14) ` Restricted landing area" means any area of land or water, or both, which is used or made available for the landing and takeoff of aircraft, the use of which, except in case of emergency, is provided from time to time by the Department of Transportation. 15) " Service station" means and includes any place operated for the purpose of retail- ing and delivering motor vehicle fuel into the fuel tanks of motor vehicles or aircraft fuel into the fuel tanks of aircraft. 16) " Terminal storage facility" means any fuel storage facility that has marine or pipeline access. [ Amended by 1955 c ; 1955 c.730 1, 15; 1957 c.209 1; 1959 c.505 1; 1963 c.226 1; 1987 c ; 1989 c ,

175 REVENUE AND TAXATION Monthly statement by dealer; license tag imposed. ( 1) Subject to subsections ( 2) to ( 4) of this section, in addition to the taxes otherwise provided for by law, every dealer engaging in the dealer' s own name, or in the name of others, in the first sale, use or distribution of motor vehicle fuel or aircraft fuel or withdrawal of motor vehicle fuel or aircraft fuel for sale, use or distribution within areas in this state within which the state lacks the power to tax the sale, use or distribution of motor vehicle fuel or aircraft fuel, shall: a) Not later than the 25th day of each calendar month, render a statement to the division of all motor vehicle fuel or aircraft fuel sold, used, distributed or so withdrawn by the dealer in the State of Oregon as well as all such fuel sold, used or distributed in this state by a purchaser thereof upon which sale, use or distribution the dealer has assumed liability for the applicable license tax during the preceding calendar month. b) Except as provided in ORS , pay a license tax computed on the basis of 18 cents per gallon on the first sale, use or distribution of such motor vehicle fuel or aircraft fuel so sold, used, distributed or withdrawn as shown by such statement in the manner and within the time provided in ORS to ) When aircraft fuel is sold, used or distributed by a dealer, the license tax shall be computed on the basis of three cents per gallon of fuel so sold, used or distributed, except that when aircraft fuel usable in, aircraft operated by turbine engines ( turbo -prop or jet) is sold, used or distributed, the tax rate shall be one -half of one cent per gallon. 3) In lieu of claiming refund of the tax paid on motor vehicle fuel consumed by such dealer in nonhighway use as provided in ORS , and , or of any prior erroneous payment of license tax made to the state by such dealer, the dealer may show such motor vehicle fuel as a credit or deduction on the monthly statement and pay- ment of tax. 4) The license tax computed on the basis of the sale, use, distribution or withdrawal of motor vehicle or aircraft fuel shall not be imposed wherever such tax is prohibited -by the Constitution or laws of the United States with respect to such tax. ( Amended by 1955 c.730 2; 1959 c.505 2; 1967 c.463 1; 1973 c.376 1; 1977 c ; 1981 c ; 1983 c.727 l, 5; 1985 c ; 1987 c.610 2; 1987 c.899 8, 10, 14; 1989 c Note: ORS , as amended by section 1, chapter 865, Oregon Laws 1989, provides: Sec. 1. On January 1, 1991, ORS , as amended by section 14, chapter 899, Oregon Laws 1987, land section 2, chapter 664, Oregon Laws is further amended to read: ( 1) Subject to subsections ( 2) to ( 4) of this section, in addition to the taxes otherwise provided for by law, every dealer engaging in the dealer' s own name, or in the name of others, in the first sale, use or dis- tribution of motor vehicle fuel or aircraft fuel or withdrawal of motor vehicle fuel or aircraft fuel for sale, use or distribution within areas in this state within which the state lacks the power to tax the sale, use or distribution of motor vehicle fuel or aircraft' fuel, shall: a) Not later than the 25th day of each calendar month, render a statement to the division of all motor vehicle fuel or aircraft fuel sold, used, distributed or so withdrawn by the dealer in the State of Oregon. as well as all such fuel sold, used or distributed in this state by a purchaser thereof upon which sale, use or distribution the dealer has assumed liability for the applicable license tax during the preceding calendar month b) Except as provided in ORS ,, pay a license tax computed on the basis of 20 cents pei gallon on the first sale, use or distribution of such motor ve- hicle fuel or aircraft fuel so sold, used, distributed or withdrawn as shown by such statement in the manner and within the time provided in ORS to ) When aircraft fuel is sold, used or distributed by a dealer, the license tax shall be computed on the basis of three cents per gallon of fuel so sold, used or distributed, except that when aircraft fuel usable in aircraft operated by turbine engines ( turbo -prop or, jet) is sold, used or distributed, the tax rate shall be one - half of one cent per gallon. 3) In lieu of claiming refund of the tax paid on motor vehicle fuel consumed by such dealer in non - highway use as provided in ORS 319 "280, and , or of any prior erroneous payment of license tar made to the state by such dealer, the dealer may show such motor vehicle fuel as a credit or deduction on the monthly statement and payment of 'tae. 4) The license tax computed on the basis of the sale, use, distribution or withdrawal of motor vehicle or aircraft fuel shall not be imposed wherever such- tax is prohibited by the Constitution or laws of the United States with respect to such tax License required to! be dealer in motor vehicle fuel. No dealer.shall sell, use or distribute any motor vehicle fuel until the dealer has secured a dealer' s license as required by ORS to Application for and issuance of dealer' s license. ( 1) Every person, before becoming a dealer in motor vehicle fuel in this, state, shall make an application to the division for a license authorizing such person to engage in business as a dealer. 2) Applications for the license must be made on forms prescribed, prepared and furnished by the division. 3) The applications shall be accompanied by a ing: duly acknowledged certificate contain- a) The name under which the dealer, is transacting business within Oregon. b) The places of business and location of distributing stations of the dealer in Oregon. c) The name and address of the managing agent, the names and addresses of the several persons constituting the firm or partnership and, if a corporation, the corpo-

176 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES rate name under which it is authorized to transact - business and the names and addresses of its principal officers and registered agent. 4) If the dealer is an association of persons, firm, partnership or corporation organized under the laws of another state, territory or country, if it has not already done so, it must first comply with the laws of Oregon relating to the transaction of its appropriate business in Oregon. 5) The application for a motor vehicle fuel dealer' s license having been accepted for filing, and the bond required by ORS having been accepted and approved, the division shall issue to the dealer a license in such form as the division may prescribe to transact business as a dealer in the State of Oregon. The license so issued is not assignable, and is valid only for the dealer in whose name issued. 6) The division shall keep and file all applications and bonds with an alphabetical index thereof, together with a record of all licensed dealers. [ Amended by 1957 c Faithful performance bond. ( 1) At the time of filing the certificate and application for a dealer' s license, the division must require the dealer to file with the division, in such form as shall be prepared by the division, a bond duly executed by the dealer as principal with a corporate surety authorized to transact business in this state. The bond shall be payable to the State of Oregon conditioned upon faithful performance of all the requirements of ORS to and ( 1) to ( 3), including the payment of all taxes, penalties and other ob- ligations of the dealer, arising out of ORS to and ( 1) to ( 3). 2) The total amount of the bond or bonds required of any dealer shall be fixed by the division and may be increased or reduced by the division at any time subject to the lirru- tations provided in this section. The total amount of the bond or bonds required of any dealer shall be equivalent to twice the estimated monthly license tax, determined in the manner the division deems proper. However, the total amount of the bond or bonds re- c uired of any dealer shall never be less than 1, 000 nor more than $ 100,000. Any bond given in connection with ORS to shall be a continuing instrument and shall cover any and all periods of time including the first and all subsequent periods for which a license may be granted in consequence of the giving of the bond. The liability of the surety on the bond for the aggregate of all claims which arise there- under shall not exceed the amount of the penalty of the bond. No recoveries on any bond or any execution of any new bond shall invalidate any bond, but the total recoveries under any one bond shall not exceed the amount of the bond. [ Amended by 1967 c Deposit in lieu of bond. In lieu of the bond or bonds in total amount as fixed under ORS , any dealer may deposit with the State Treasurer, under such terms and conditions as the division may prescribe, a like amount of lawful money of the United States or bonds or other obligations of the United States, the State of Oregon, or any county of this state, of an actual market value not less than the amount so fixed by the division Release of surety. Any surety on a bond furnished by a dealer as provided in ORS shall be released and discharged from any and all liability to the state accruing on such bond after the expiration of 30 days from the date upon which the surety has lodged with the division a written request to be released and discharged, but this provision shall not operate to relieve, release or discharge the surety from any liability already accrued or which accrues before the expiration of the 30 day period. The division shall promptly, upon receiving the request, notify the dealer who furnished the bond, and unless the dealer, on or before the expiration of the 30-day period, files a new bond, or makes a deposit in accordance with the requirements of ORS and , the division forthwith shall cancel the dealer' s license Additional bond or deposit. The division may require a dealer to give a new or additional surety bond or to deposit additional securities of the character specified in ORS if, in its opinion, the se- curity of the surety bond theretofore filed by the dealer, or the market value of the properties deposited as security by the dealer, becomes impaired or inadequate. Upon fail- ure of the dealer to give the new or addi- tional surety bond or to deposit additional securities within 10 days after being requested so to do by the division, the division forthwith shall cancel the license of the dealer., Immediate collection of tax and interest where dealer fails to secure license; waiver; penalties. ( 1) If any dealer sells, distributes or uses any motor vehicle fuel without first filing the certificate and bond and securing the license required by ORS , the license tax provided in ORS shall immediately be due and payable on account of all motor vehicle fuel. so sold, distributed or used. 2) Except as otherwise provided in this subsection, the division shall proceed forth-

177 REVENUE AND TAXATION with to determine, from the best available sources, the amount of such tax, and it shall immediately assess the tax and interest in the amount found due, together with a pen- alty of 100 percent of the tax, and shall make its certificate of such assessment and penalty. The division may waive all or part of a penalty imposed under this subsection if the division determines that a violation of the requirement under this section to file the certificate and bond or to secure the license was due to reasonable cause and without intent to avoid payment of the tax. In any suit or proceeding to collect such tax, interest or penalty, the certificate is prima facie evidence that the dealer therein named is indebted to the State of Oregon in the amount of the tax, interest and penalty therein stated. 3) Any tax, interest or penalty so assessed may be collected in the manner prescribed in ORS with reference to delinquency in payment of the tax or by an action at law, which the Attorney General shall commence and prosecute to final determination at the request of the division. Amended by 1981 c.396 1; 1989 c Revocation of license. The division shall revoke the license of any dealer refusing or neglecting to comply with any provision of ORS to The division shall mail by certified mail addressed to such dealer at the last -known address appearing on the files of the division, a notice of intention to cancel. The notice shall give the reason for the cancellation. The cancellation shall become effective without further notice if within 10 days from the mailing of the notice the dealer has not made good its default or delinquency c Cancellation of license on request of dealer or when licensee no longer a dealer. ( 1) The division may, upon written request of a dealer, cancel any license issued to such dealer, the cancellation to become effective 30 days from the date of receipt of the written request. 2) If the division ascertains and finds that the person to whom a license has been issued is no longer engaged in the business of a dealer, the division may cancel the li- cense of such dealer upon investigation after 30 days' notice has been mailed to the last - known address of the dealer Remedies cumulative. Except as otherwise provided in ORS and , the remedies of the state provided in ORS to are cumulative. No action taken pursuant to those statutes shall relieve any person from the penal provisions of ORS to and Amended by 1967 c Change of ownership; cancellation of license. A licensed dealer who has a change of ownership shall notify the division immediately of the change. Upon notification, the division shall immediately cancel the motor vehicle fuel dealer license of the dealer. No license may be issued to any successor of the dealer until the successor com- pletes an application and certificate and supplies the division with an adequate bond. For purposes of this section: 1) In the case of a corporation with more than 100 stockholders, transfer of stock in normal trading is not considered a change in ownership. 2) In the case of a corporation with 100 or fewer stockholders, transfer of less than 50 percent of the stock in any period of 12 consecutive months is not considered a change in ownership c Note: was added to and made a part of to but was not added to any smaller series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation [ Repealed by 1987 c [ Amended by 1959 c ; 1987 c a; 1987 c.610 3; repealed by 1989 c [ Repealed by 1989 c [ Amended by 1957 c ; 1959 c 505 4, 1967 c ; 1987 c.610 4; repealed by 1989 c [ Amended by 1987 c 610 5; repealed by 1989 c Payment of tax; delinquency penalty; interest rates; collection of delinquent payments. ( 1) The license tax imposed by ORS shall be paid on or before the 25th day of each month to the di- vision which, upon request, shall receipt the dealer therefor. 2) Except as provided in subsection ( 4) of this section, to any license tax not paid as required by subsection ( 1) of this section there shall be added a penalty of one percent of such license tax. 3) Except as provided in subsection ( 4) of this section, if the tax and penalty required by subsection ( 2) of this section are not received on or before the close of busi ness on the last day of the month in which the payment is due, a further penalty of 10 percent shall be paid in addition to the penalty provided for in subsection ( 2) of this section. 4) If the division determines that the delinquency was due to reasonable cause and without any intent to avoid payment, the penalties provided by subsections ( 2) and.(3) of this section may be waived. Penalties imposed by this section shall not apply when the penalty provided in ORS has been assessed and paid.

178 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES )( a) If the license tax imposed by ORS is not paid as required by subsection 1) of this section, interest shall be charged at the rate of.0329 percent per day until the tax and interest have been paid in full. b) If the license tax imposed by ORS is overpaid, the division may credit interest to the account of the taxpayer in the amount of.0329 percent per day up to a maximum amount that equals any interest as- sessed against the taxpayer under paragraph a) of this subsection in any given audit pe- riod. 6) If any person fails to pay the license tax as required by ORS to , or any penalty provided in ORS to and ( 1) to ( 3), the amounts thereof shall be collected from such person for the use of this state. The Attorney Gen- eral shall commence and prosecute to final determination in any court of competent jurisdiction an action at law to collect the same. 7) No dealer who incurs a tax liability as provided for in ORS to , shall knowingly and wilfully fail to report and pay the same to the division as required b ORS to [ Amended by 1955 c.6 3; 1957 c.209 4, 1959 c.505 5; 1963 c.226 2; 1967 c.54 2; 1979 c.344 4; 1987 c 610 6; 1989 c Monthly statement of dealer; penalty. ( 1) Every dealer in motor vehicle fuel shall render to the division, on or before the 25th day of each month, on forms prescribed, prepared and furnished by the divi- sion, a signed statement of the number of gallons of motor vehicle fuel sold, distributed or used by the dealer during the preceding calendar month. The statement shall be signed by one of the principal officers, or by an authorized agent in case of a corporation; or by the managing agent or owner in case of a firm or association. 2) The signed statement filed with the division as required by this section is a public record. All other documents, including supporting schedules and information received from other taxing jurisdictions and entities, shall be kept confidential and exempt from public inspection except that such information may be shared with tax collecting entities - in other jurisdictions on the condition that the receiving jurisdiction agrees to keep such information confidential. If a statement is not received on or before the 25th day of each month, a penalty shall be assessed pursuant to ORS or, if the division determines that no tax is due, a penalty of $25 shall be assessed. [ Amended by 1955 c.730 4; 1957 c209 5; 1987 c Assessing tag and penalty where dealer fails to report. If any dealer, except one subject to ORS , fails to file the report required by ORS , the division shall proceed forthwith to determine from the best available source the amount of motor vehicle fuel sold, distributed or used by such dealer for the period unreported, and such determination shall be prima facie evidence of the amount of such fuel sold, distributed or used. The division immediately shall assess the license tax in the amount so determined, adding thereto a penalty of 10 percent for failure to report. The penalty shall be cumulative of other penalties provided in ORS to and In any suit brought to enforce the rights of the state under this section, the certificate of the division showing the amount of taxes, penalties, interest and costs unpaid by any dealer and that the same are due and unpaid to the state is prima facie evidence of the facts as shown. [ Amended by 1967 c.54 3; 1987 c Billing purchasers. Bills shall be rendered to all purchasers of motor vehicle fuel by dealers in motor vehicle fuel. The bills shall separately state and describe to the satisfaction of the division the different products shipped thereunder and shall be serially numbered except where other sales invoice controls acceptable to the division are maintained. [ Amended by 1955 c.730 5; 1987 c Receipt, payment or sale of motor vehicle fuel without invoice or delivery tag prohibited. No person shall receive and accept any shipment of motor vehicle fuel from any dealer, or pay for the same, or sell or offer the shipment for sale, unless the shipment is accompanied by an invoice or delivery tag showing the date upon which shipment was delivered and the name of the dealer in motor vehicle fuel. Amended by 1955 c.730 6; 1987 c Transporting motor vehicle fuel in bulk. Every person operating any conveyance for the purpose of hauling, transporting or delivering motor vehicle fuel in bulk shall, before entering upon the public highways of this state with such conveyance, have and possess during the entire time of hauling or transporting such motor vehicle fuel an invoice, bill of sale or other written statement showing the number of gallons, the true name and address of the seller or consignor, and the true name and address of the buyer or consignee, if any, of the same. The person hauling such motor vehicle fuel shall at the request of any sheriff, deputy sheriff, constable, state police or other officer authorized by law to inquire into or investigate such matters, produce and offer for inspection the invoice, bill of sale or other statement. [ Amended by 1957 c

179 REVENUE AND TAXATION Exemption of export fuel. ( 1) The license tax imposed by ORS shall not be imposed on motor vehicle fuel: or a) Exported from this state by a dealer; b) Sold by a dealer in individual quantities of 500 gallons or less for export by the purchaser to another state, territory or country in containers other than the fuel tank of a motor vehicle, if the dealer is licensed in the state, territory or country of destination to collect and remit the applicable taxes in the state, territory or country of destination, but every dealer shall be required to report such exports and sales to the division in such detail as may be required. 2) In support of any exemption from li- cense taxes claimed under this section other than in the case of stock transfers or deliv- eries in equipment, every dealer must execute and file with the division an export certificate in such form as shall be prescribed, prepared and furnished by the division, containing a statement, made by some person having actual knowledge of the fact of such exportation, that the motor vehicle fuel has been exported from the State of Oregon, and giving such details with reference to such shipment as the division may require. All export certificates in support of shipments to other states, territories or countries must be completed and on file in the principal office of the dealer in this state within three months after the close of the calendar month in which the shipments to which they relate are made, unless the state, territory or country of destination would not be prejudiced with respect to its collection of taxes thereon if the certificate is not filed within such time. The division may demand of any dealer such additional data as is deemed necessary in support of any such certificate, and failure to supply such data will constitute a waiver of all right to ex- emption claimed by virtue of such certificate. The division may, in a case where it believes no useful purpose would be served by filing of an export certificate, waive the certificate. 3) Any motor vehicle fuel carried from this state in the fuel tank of a motor vehicle shall not be considered as exported from this state, except that a refund of the tax may be paid on such fuel as provided in ORS )( d). 4) No person shall, through false statement, trick or device, or otherwise, obtain motor vehicle fuel for export upon which the Oregon tax has not been paid and fail to export the same, or any portion thereof, or cause the motor vehicle fuel or any portion thereof not to be exported, or shall divert the motor vehicle fuel or any portion thereof, or shall cause it to be diverted from interstate or foreign transit begun in this state, or shall unlawfully return the motor vehicle fuel or any portion thereof to be used or sold in this state and fail to notify the division and the dealer from whom the motor vehicle fuel was originally purchased of the person' s act. 5) No dealer or other person shall conspire with any person to withhold from export, or divert from interstate or foreign transit begun in this state, or to return motor vehicle fuel to this state for sale or use so as to avoid any of the taxes imposed by ORS to ) In support of any exemption from taxes on account of sales of motor vehicle fuel in individual quantities of 500 gallons or less for export by the purchaser, the dealer shall retain in files for at least three years an export certificate executed by the purchaser in such form and containing such information as is prescribed by the division. This certificate shall be prima facie evidence of the exportation of the motor vehicle fuel to which it applies only if accepted by the dealer in good faith. [ Amended by 1953 c. 82 2; 1955 c 730 7; 1959 c 186 1; 1963 c 257 1, 1987 c Certain sales to Armed Forces exempted; reports. The license tax imposed by ORS shall not be imposed on any aircraft or motor vehicle fuel sold to the Armed Forces of the United States for use in ships, aircraft or for export from this state; but every dealer shall be required to report such sales to the division in such detail as may be required. A certificate by an authorized officer of such Armed Forces shall be accepted by the dealer as sufficient proof that the sale is for the purpose specified in the certificate. [ Amended by 1955 c 730 8; 1959 c ; 1961 c 43 1; 1987 c Fuel in vehicles coming into or leaving state not taxed. Any person coming into or leaving Oregon in a motor vehicle may transport in the fuel tank of such vehicle motor vehicle fuel for the pur- pose of operating such motor vehicle, with. out complying with any of the provisions imposed upon dealers by ORS to However, if motor vehicle fuel so brought into the state is removed from the fuel tank of the vehicle or used for any purpose other than the propulsion of the vehicle, the person so importing the fuel into this state shall be subject to all the provisions of ORS to and applying to dealers. [ Amended by 1987 c a] Fuel sold or distributed to dealers. ( 1) Notwithstanding ORS , if the first sale, use or distribution of motor vehicle fuel or aircraft fuel is from one licensed dealer to another licensed dealer, the

180 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES selling or distributing dealer is not required to pay the license tax imposed by ORS When the purchasing or receiving dealer first sells, uses or distributes the fuel, that dealer shall pay the license tax regardless of whether the sale, use or distribution is to another licensed dealer. 2) A dealer who renders monthly statements to the division as required by ORS and shall show separately the number of gallons of motor vehicle fuel sold or delivered to dealers. [ Amended by 1987 c Liability for taxes, interest and penalties when person importing fuel does not hold license. ( 1) A person who is not a licensed dealer shall not accept or receive motor vehicle or aircraft fuel in this state from a person who imports motor vehicle or aircraft fuel who does not hold a valid motor vehicle fuel dealer license in this state. If a person who is not a licensed dealer accepts or receives motor vehicle fuel or aircraft fuel from a person who imports motor vehicle fuel or aircraft fuel and does not hold a valid motor vehicle fuel dealer license in this state, the purchaser or receiver shall be liable for all taxes, interest and penalties contained in ORS to ) A licensed dealer who accepts or receives motor vehicle fuel or aircraft fuel in this state from a person who imports motor vehicle or aircraft fuel who does not hold a valid dealer license in this state shall pay the tax imposed by ORS to the division upon the first sale, use or distribution of the motor vehicle fuel or aircraft fuel c Note: was added to and made a part of to but was not added to any smaller se- ries therein by legislative action. See Preface to Oregon Revised Statutes for further explanation Refunds. ( 1) Any person who has paid any tax on motor vehicle fuel levied or directed to be paid by ORS to either directly by the collection of the tax by the vendor from the consumer, or indirectly by adding the amount of the tax to the price of the fuel and paid by the consumer, shall be reimbursed and repaid the amount of such tax paid, except as provided in ORS to , if such person has: a) Purchased and used such fuel for the purpose of operating or propelling a station- ary gas engine, a tractor or a motor boat, if the motor boat is used for commercial purposes at any time during the period for which the refund is claimed; or b) Purchased and used such fuel for cleaning or dyeing or other commercial use, except when used in motor vehicles operated upon any highway; or c) Purchased and exported such fuel from this state, in containers other than fuel supply tanks of motor vehicles; or d) Purchased and exported such fuel in the fuel supply tank of a motor vehicle and has used such fuel to operate the vehicle upon the highways of another state, if the user has paid to the other state a similar motor vehicle fuel tax on the same fuel, or has paid any other highway use tax the rate for which is increased because such fuel was not purchased in, and the tax thereon paid, to such state. 2) When a motor vehicle with auxiliary equipment uses fuel and there is no auxiliary motor for such equipment or separate tank for such a motor, a refund may be claimed and allowed as provided by subsection ( 4) of this section, except as otherwise provided by this subsection, without the necessity of furnishing proof of the amount of fuel used in the operation of the auxiliary equipment. The person claiming the refund may present to the division a statement of the claim and be allowed a refund as follows: a) For fuel used in pumping aircraft fuel, motor vehicle fuel, fuel or heating oils or other petroleum products by a power take -off unit on a delivery truck, refund shall be allowed claimant for tax paid on fuel purchased at the rate of three - fourths of one gallon for each 1, 000 gallons of petroleum products delivered. b) For fuel used in operating a power take -off unit on a cement mixer truck or on a garbage truck, claimant shall be allowed a refund of 25 percent of the tax paid on all fuel used in such a truck. 3) When a person purchases and uses motor vehicle fuel in a vehicle equipped with a power take -off unit, a refund may be claimed for fuel used to operate the power take -off unit provided the vehicle is equipped with a metering device approved by the division and designed to operate only while the vehicle is stationary and the parking brake is engaged; the quantity of fuel measured by the metering device shall be presumed to be the quantity of fuel consumed by the opera tion of the power take -off unit. 4) Before any such refund may be granted, the person claiming such refund must present to the division a statement, ac- companied by the original invoices showing such purchases; provided that in lieu of original invoices, refunds submitted under paragraph ( d) of subsection ( 1) of this section shall be accompanied by information showing source of the fuel used and evidence of payment of tax to the state in which the fuel was used. The statement shall be made over the signature of the claimant, and shall state

181 REVENUE AND TAXATION the total amount of such fuel for which the claimant is entitled to be reimbursed under subsection ( 1) of this section. The division upon the presentation of the- statement and invoices, or other required documents, shall cause to be repaid to the claimant from the taxes collected on motor, vehicle fuel such taxes so paid by the claimant. ( Amended by 1959 c 186 3; 1963 c.251 2, 1969 c.465 1; 1971 c ; 1973 c. 135 l; 1985 c Limitation on applications for refunds. Applications for refunds made under ORS , and must be filed with the division before, the expiration of 15 months from the date of purchase or invoice, except that unused fuel reported as an ending inventory on any claim may be included in a subsequent claim if presented not later than 15 months from the filing date of the claim which established the inventory. All applications for refunds based upon exportation of motor vehicle fuel from this state in the fuel supply tank of -a motor vehicle, must be filed with the division before the expiration of 15 months from the last day of the month in which the fuel was used, or before the expiration of 15 months from the date of an assessment for unpaid tax by the state in which the fuel was used. [ Amended by 1955 c ; 1963 c , 1979 c Seller to give invoice for' each purchase made by person entitled to refund. ( 1) When motor vehicle fuel is sold to a person who claims to be entitled to a refund of the tax imposed, the seller of the motor vehicle fuel shall make and deliver at the time of the sale separate invoices for each purchase in such form and containing any information prescribed by the division. 2) The invoices shall be legibly written and- shall be void if any corrections or erasures appear on the face thereof. Any person who alters any part of any invoice that will tend to give to the claimant an illegal gain, shall have the entire claim invalidated. The seller shall for a period of at least 18 months retain copies of all invoices and make them available to the division upon request. Amended by 1953 c.77 2; 1955 c c Claims for refunds may be re- quired to be under oath; investigation of claims. ( 1) The division may require any person who makes claim for refund of tax upon motor vehicle fuel to furnish a state- ment, under oath, giving the occupation, de- scription of the machines or equipment in which the motor vehicle fuel was used, the place where used and such other information as the division may require. 2) The division may investigate claims and gather and compile such information in regard to the claims as it- considers neces= sary to safeguard the state and prevent fraudulent practices in connection with tax refunds and tax evasions. The division may, in order to establish the validity of any claim, examine the books and records of the claimant for such purposes. The records shall be sufficient to substantiate the accuracy of the claim. and shall be in such form and contain such information as the division may require. Failure of the claimant to maintain such records or to accede to the demand for such examination constitutes a waiver of all rights to the refund claimed on account of the transaction questioned. ( Amended by 1959 c Refund of tax on fuel used in operation of vehicles over certain roads or private property. ( 1) Upon compliance with' subsection ( 2) or ( 3) of this section the division shall refund, in the manner provided in subsection ( 2) or ( 3) of this section, the tax on motor vehicle fuel that is used in the operation of a motor vehicle: a) By any person on any road, thoroughfare or property in private owner- ship. b) By any person on any road, thoroughfare or property, other than a state highway, county road or city street, for the removal of forest products, as defined in ORS , or the products of such forest products converted to a form other than logs at or near the harvesting site, or for the con- struction or maintenance of the road, thoroughfare or - property, pursuant to a written agreement or permit authorizing the use, construction or maintenance of the road, thoroughfare or property, with or by: A) An agency of the United States; B) The State Board of Forestry; C) The State Forester; or D) A licensee of an agency named in subparagraph ( A), ( B) or ( C) graph. of this para- c) By an agency of the United States or of this state or of any county, city or port of this state on any road, thoroughfare or property, other than a state highway, county road or,city street d) By any person on any county road for the removal of forest products, as defined in ORS , or the products of such forest products converted to a form other than logs at or near the harvesting site, if. A) The use of the county road is pursuant to a written agreement entered into with, or to a permit issued by, the State Board of Forestry, the State Forester or an agency of the United States, authorizing such person to use such road and requiring such person to pay for or to perform the construction or maintenance of the county road;

182 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES B) The board, officer or agency that entered into the agreement or granted the permit, by contract with the county court or board of county commissioners, has assumed the responsibility for the construction or maintenance of such county road; and C) Copies of the agreements or permits required by subparagraphs ( A). and ( B) of this paragraph are filed with the division. 2) Except for a farmer subject to subsection ( 3) of this section, the person or agency, as the case may be, who has paid any tax on such motor vehicle fuels levied or directed to be paid, as provided by ORS to , is entitled to claim a refund of the tax so paid on such fuels or for the proportionate part of tax paid on fuels used in the operation of such vehicles, when part of the operations are over such roads, thoroughfares or property. The proportionate part shall be based upon the number of miles traveled by any such vehicle over such roads, thoroughfares or property as compared to the total number of miles traveled by such vehicle. To be eligible to claim such refund the person or agency, as the case may be, shall first establish and maintain a complete re- cord of the operations, miles traveled, gallons of fuel used and other information, in such form and in such detail as the division.may prescribe and require, the source of supply of all fuels purchased or used, and the particular vehicles or equipment in which used. Whenever any such claim is received and approved by the division, it shall cause the refund of tax to be paid to the claimant in like manner as provided for paying of other refund claims. 3) A farmer who has paid any tax on motor vehicle fuels levied or directed to be paid, as provided in ORS to , is entitled to claim a refund of the tax paid on such fuels used in farming operations in the operation of any motor vehicle on any road, thoroughfare or property in private ownership. To be eligible to claim such refund a farmer shall maintain in such form and in such detail as the division may prescribe and require, a record, supported by purchase invoices, of all such motor vehicle fuel purchased ( including fuel purchased to operate any motor vehicle on the highway) and, for each and every motor vehicle operated on the highway, a record of all fuel used and of all miles traveled on the highway. Whenever any such claim is received and approved by the division, it shall cause the refund of tax to be paid to the claimant in like manner as provided for paying of other refund claims. 4) As used in subsections ( 2) and ( 3) of this section, " farmer" includes any person who manages or conducts a farm for the production of livestock or crops but does not include a person who manages or conducts a farm for the production of forest products, as defined in ORS , or the products of such forest products converted to a form other than logs at or near the harvesting site, or of forest trees unless the production of such forest products or forest trees is only incidental to the primary purpose of the farming operation. [ Amended by 1961 c. 368 l; 1965 c. 64 l; 1965 c ; 1967 c.367 2; 1979 c Refunds to purchasers of fuel for aircraft. ( 1) Whenever any statement and invoices are presented to the division showing that motor vehicle fuel or aircraft fuel has been purchased and used in operat- ing aircraft engines and upon which the full tax for motor vehicle fuel has been paid, the division shall refund the tax paid, but only after deducting from the tax paid three cents for each gallon of such fuel -so purchased and used, except that when such fuel is used in operating aircraft turbine engines ( turbo -prop or jet) the deduction shall be one -half of one cent for each gallon. No deduction provided under this subsection shall be made on claims presented by the United States or on claims presented where a satisfactory showing has been made to the division that such aircraft fuel- has been used solely in aircraft operations from a point within the State of Oregon directly to a point not within any state of the United States. The amount so deducted shall be paid on warrant of the Executive Department to the State Treasurer, who shall credit such amount to the account or appropriation for the purpose of carrying out the provisions of the state aeronautic law, and such amounts hereby are appropriated for such purposes. 2) If satisfactory evidence is presented to the division showing that aircraft fuel upon which the tax has been paid has been purchased and used solely in aircraft operations from a point within the State of Oregon directly to a point not within any state of the United States, the division shall refund the tax paid. [ Amended by 1959 c.505 6; 1973 c ; 1977 c [ Amended by 1959 c ; repealed by 1979 c [ Amended by 1971 c ; repealed by 1979 c [ Amended by 1957 c.209 8; repealed by 1979 c ) Examinations and investi- gations; correcting reports and pay- ments. The division, or its duly authorized agents, may make any examination of the accounts, records, stocks, facilities and equipment of dealers, brokers, service stations and other persons engaged in storing, selling or distributing motor vehicle fuel

183 REVENUE AND TAXATION or other petroleum product or products within this state, and such other investigations as it considers necessary in carrying out the provisions of ORS to If the examinations or investigations disclose that any reports of dealers or other persons theretofore filed with the division pursuant to the requirements of ORS to , have shown incorrectly the amount of gallonage of motor vehicle fuel distributed or the tax, penalty or interest accruing thereon, the division may make such changes in subsequent reports and payments of such dealers or other persons, or may make such refunds, as may be necessary to correct the errors disclosed by its examinations or in- vestigations. ( Amended by Limitation on credit for or refund of overpayment and on assessment of additional tax. ( 1) Except as otherwise provided in ORS to , any credit for erroneous overpayment of tax made by a dealer taken on a subsequent return or any claim for refund of tax erroneously overpaid filed by a dealer must be so taken or filed within three years after the date on which the overpayment was made to the state. 2) Except in the case of a fraudulent report or neglect to make a report, every notice of additional tax proposed to be assessed under ORS to shall be served on dealers within three years from the date upon which such additional taxes become due ; Examining books and accounts of carrier of motor vehicle fuel. The divi- sion or its duly authorized agents may at any time during normal business hours examine the books and accounts of any carrier of motor vehicle fuel operating within this state for the purpose of checking shipments or use of motor vehicle fuel, detecting diversions thereof or evasion of taxes on same in en- forcing the provisions of ORS to Records to be kept by dealers; inspection of records. Every dealer in motor vehicle fuel shall keep a record in such form as may be prescribed by the division of all purchases, receipts, sales and distribution of motor fuel. The records shall include copies of all invoices or bills of all such sales and shall at all times during the business hours of the day be subject to inspection by the division or its deputies or other officers duly authorized by the division. Upon request from the officials to whom is entrusted the enforcement of the motor fuel tax law of another state, territory, country or the Federal Government, the division shall forward to such officials any information which it may have relative to the import or export of any motor vehicle fuel by any dealer, provided such other state, territory, country or Federal Government furnishes like information to this state. ( Amended by ; Records to be kept three years. Every dealer shall maintain and keep, within the State of Oregon, for a period of three years, all records of motor vehicle fuel used, sold and distributed within this state by such dealer, together with stock records, invoices, bills of lading and other pertinent papers as may be required by the division. Amended by 1955 c ; 1987 c Disposition of tax moneys. ( 1) The division shall promptly turn over the li- cense tax to the State Treasurer, as other receipts of the division which shall be disposed of as provided in ORS ) The revenue from the license tax collected from the use, sale or distribution of aircraft fuel as imposed by ORS ( 2) shall be transferred 'upon certification of the division to the State Treasurer, who shall credit such amount to the account or appropriation for the purpose of carrying out' the provisions of the state aeronautic laws, and such amount hereby is appropriated for such purpose. ( Amended by , ; , 1969 c.70 1; Estimate of tax on fuel used for boats; transfer to Boating Safety, Law Enforcement and Facility Account; use. ( 1) On or before July 15, 1987, and on or before July 15 of each. year thereafter, the Executive Department, after consultation with the Motor Vehicles Division and the State Marine Board, shall determine as ac- curately as possible the amount of the motor vehicle fuel tax imposed under ORS to during the preceding fiscal year with respect to fuel purchased and used to operate or propel motor boats. The amount determined shall be reduced by the amount of any refunds for motor boats used for commercial purposes actually paid during the preceding year on account of ORS )( a) ) The Executive Department shall certify the amount of the estimate made under subsection ( 1) of this section, as reduced by refunds, to the Motor Vehicles Division, to the State Marine Board and to the State Treasurer. Thereupon, that amount shall be transferred from the Motor Vehicles Division Suspense Account to the Boating Safety, Law Enforcement and Facility Account created under ORS , and is continuously appropriated to the State Marine Board for the purposes for which the moneys in the Boating Safety, Law Enforcement and Facility Account are appropriated. (

184 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES Estimate of tax on fuel used in aircraft; transfer to State Aeronautic Account; use. ( 1) On or after October 3, 1989, and on or before July 15 of each year thereafter, the Executive Department, after consultation with the Aeronautics Division and the Motor Vehicles Division shall estimate, using a methodology approved by the Oregon Transportation Commission, the amount of the motor vehicle fuel tax imposed under ORS to during the preceding fiscal year with respect to motor vehicle fuel purchased and used in operating aircraft engines and upon which the full tax for motor vehicle fuel has been paid. The estimate shall be reduced by the amount of any refunds actually paid on motor vehicle fuel, excluding those paid on aviation gasoline or jet fuel, during the preceding fiscal year pursuant to ORS ( 1). 2) The Executive Department shall certify -the amount of the estimate made under subsection ( 1) of this section to the Aeronautics Division, to the Motor Vehicles Division and to the State Treasurer. Thereupon, the amount of the estimate shall be transferred from the Motor Vehicles Division Suspense Account to the State Aer- onautic Account and is continuously appropriated to the Aeronautics Division to carry out the purposes of ORS chapters 835 and c Note: was added to and made a part of to by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation ORS to not affected. ORS to do not affect or repeal any of the provisions of ORS to Savings clause. All rights and obligations arising under the provisions of the statutes repealed in section 38, chapter 413, Oregon Laws 1945, shall not in any way be affected by such repeal. Such statutes shall be considered in full force and effect for the purpose of carrying out all duties and obligations contracted or arising under such statutes, prior to June 16, USE FUEL TAX Short title. ORS to may be cited as the Use Fuel Tax Law of Definitions for ORS to As used in ORS to , unless the context clearly indicates a different meaning: 1) " Combined gross weight" means the total empty weight of all vehicles in a combination plus the total weight of the load carried on that combination of vehicles. The weight of a camper or the following trailing vehicles should not be included in the combined gross weight: a) Trailers with a loaded weight of 8,000 pounds or less. b) Special use trailers, travel trailers, mobile homes, fixed load vehicles or any other vehicle that is not registered by weight. 2) " Delinquent" means having failed to pay a tax or penalty within the time provided by law. 3) " Division" means the Motor Vehicles Division of the Department of Transporta- tion. 4) " Fuel" mbans any combustible gas, liquid or material of a kind used for the generation of power to propel a motor vehicle on the highways except motor vehicle fuel as defined in ORS ) " Highway" means every way, thoroughfare and place, of whatever nature, open to the use of the public for the purpose of vehicular travel. 6) " Light weight" means the weight of a vehicle when fully equipped for moving over the highway. 7) " Motor vehicle" means every self - propelled vehicle operated on the highway, except an implement of husbandry used in agricultural operations and only incidentally operated or moved upon the highway. 8) " Person" means any individual, firm, copartnership, joint venture, association, corporation, trust, receiver or any group or combination acting as a unit. 9) " Seller" means a person who sells fuel to a user. 10) " To sell fuel for use in a motor vehicle" means to deliver or place fuel for a price into a receptacle on a motor vehicle, from which receptacle the fuel is supplied to propel the motor vehicle. 11) " To use fuel in a motor vehicle" means to receive into any receptacle on a motor vehicle, fuel to be consumed in propelling the motor vehicle on the highways of this state; and, if the fuel is received into the receptacle outside the taxing jurisdiction of the state, " to use fuel in a motor vehicle" means to consume in propelling the motor vehicle on the highways of this state. Amended by 1955 c ; 1959 c 188 l; 1977 c.429 l; ; 1989 c a] Imposition of tax; rate. To compensate this state partially for the use of its highways, an excise tax hereby is imposed at the rate of 18 cents per gallon on the use of fuel in a motor vehicle. One hundred cubic feet of fuel used or sold in a gaseous state,

185 REVENUE AND TAXATION measured at pounds per square inch of pressure at 60 degrees Fahrenheit is taxable at the same rate as a gallon of liquid fuel. Amended by 1959 c ; 1967 c463 2; 1981 c.698 2; 1981 c.703 2; 1983 c.727 2, 6; 1985 c ; 1987 c 899 H9, 11, 151 Note: ORS , as amended by section 2, chapter 865, Oregon Laws 1989, provides: Sec. 2. On January 1, 1991, ORS , as amended by section 15, chapter 899, Oregon Laws 1987, is further amended to read: To compensate this state partially for the use of its highways, an excise tae hereby is imposed at the rate of 20 cents per gallon on the use of fuel in a motor vehicle One hundred cubic feet of fuel used or sold in a aseous state, measured at 1473 pounds per square inc pressure at 60 degrees Fahrenheit is taxable at the same rate as a gallon of liquid fuel [ Repealed by 1959 c User' s license required to use fuel; exceptions. No person shall use fuel in a motor vehicle in this state unless the person holds a valid user' s license, except that: 1) A nonresident may use fuel in a motor vehicle not registered in Oregon for a period not exceeding 30 days without obtaining a user' s license or the emblem provided in ORS , if, for all fuel used in a motor vehicle in this state, the nonresident pays to a seller, at the time of the sale, the tax provided in ORS ) No user' s license is required for a person who uses fuel in a motor vehicle with a combined gross weight of 26, 000 pounds or less if, for all fuel used in a motor vehicle in this state, the person pays to a seller, at the time of the sale, the tax provided in ORS ) No user' s license is required for a person who uses fuel as described in ORS ( 4) in the vehicles specified in subsection ( 4) of this section if the person pays to a seller, at the time of the sale, the tax provided in ORS ) Subsection ( 3) of this section applies to the following vehicles: a) Motor homes as defined in ORS b) Recreational vehicles as defined in ORS ( Amended by 1959 c ; 1977 c.429 2; 1985 c.265 1; 1989 c Application for and issuance of user' s license. A user of fuel in a motor vehicle required to be licensed under ORS shall apply to the division for a user' s license upon forms prescribed by the division and shall set forth such information as the division may require. On receipt of the application, the division shall issue to the applicant a user' s license without charge authorizing the applicant to use fuel in a motor vehicle in this state. The license is valid only for the person in whose name it is issued and is valid until canceled or revoked. [ Amended by 1959 c.188 4; 1977 c Faithful performance bond. ( 1) At the time of filing the application for a user' s license, the division may require the user of fuel in a motor vehicle to file with the division, in such form as shall be prepared by the division, a bond duly executed by the user as principal with a corporate surety authorized to transact business in this state. The bond shall be payable to the State of Oregon conditioned upon faithful performance of all the requirements of ORS to , including the payment of all taxes, penalties and other obligations of such user arising out of ORS to and ( 4). 2) The total amount of the bond or bonds required of any user of fuel in a motor vehicle shall be fixed by the division and may be increased or reduced by the division at any time subject to the limitations provided in this section. The total amount of the bond or bonds required of any user of fuel in a motor vehicle shall be equivalent to twice the estimated monthly tax of the user, determined in such manner as the division considers proper. However, the total amount of the bond or bonds required of any user of fuel in a motor vehicle shall never be less than $ 10. Any bond given in connection with ORS to shall be a continuing in- strument and shall cover any and all periods of time including the first and all subsequent periods for which a license may be granted in consequence of the giving of the bond. The liability of the surety on the bond for the aggregate of all claims which arise there- under shall not exceed the amount of the penalty of the bond. No recovery on any bond or any execution of any new bond. shall invalidate any bond, but the total recoveries under any one bond shall not exceed the amount of the bond. [ Amended by 1959 c188 5; 1967 c Deposit in lieu of bond. In lieu of any bond or bonds in total amount as fixed under ORS , any user may deposit with the division, under such terms and con ditions as the division may prescribe, a like amount of lawful money of the United States or negotiable bonds or other obligations of the United States, the State of Oregon, or any county of this state, of an actual market value not less than the amount so fixed by the division. The division shall turn over to the State Treasurer for safekeeping all such deposits so received Release of surety. Any surety on a bond furnished by a user as provided in ORS shall be released and discharged from any and all liability to the state accruing on the bond after the expiration of 60

186 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES days. from the date upon which the surety has lodged with the division a written request to be released and discharged, but this provision shall not operate to relieve, release or discharge the surety from any liability already accrued or which accrues before the expiration of the 60 -day period. The division shall promptly, upon receiving the request, notify the user who furnished the bond, and unless the user, on or before the expiration of the 60-day period files a new bond, or makes a deposit in accordance with the requirements of ORS , the division forthwith shall cancel the user' s license Display of emblem. Except as provided in ORS , a user of fuel in a motor vehicle shall display an emblem in a conspicuous place on each motor vehicle in connection with which fuel is used. Each such emblem shall be issued without charge by the division upon application by a person holding an uncanceled or unrevoked user' s license and shall be displayed only upon the motor vehicle with respect to 'which it is issued. [ Amended by 1959 c [ Repealed by 1959 c Penalty for unlicensed use of fuel or nondisplay of authorization or emblem. If any person required to be licensed under ORS uses fuel in a motor vehicle in this state at a time when the person does not hold a valid user' s license or at a time when the person does not display a valid authorization issued by the Public Utility Commission of Oregon or a valid user' s emblem, a penalty of 25 percent of the tax applicable to the fuel so used shall be imposed. The penalty so imposed shall be in addition to any other penalty imposed under the provisions of ORS to c ; 1977 c [ Amended by 1955 c , repealed by 1959 c Seller' s license. ( 1) No person shall sell fuel for use in a motor vehicle in this state unless the person holds a valid seller' s license: 2) A person shall apply to the division for a seller' s license upon forms prescribed, prepared and furnished by the division. No charge shall be made for the license. The license is valid only for the person in whose name it is issued and is valid until.,canceled or revoked. 3) The division may require an applicant for a seller' s license to file with the division a bond or deposit of not less than $ 100 under the same terms and conditions prescribed for users in ORS , and Formerly , 630 Revocation of license; reissue of license. ( 1). The division- may revoke the license of -a user or seller if the user or seller fails to comply with any provision of ORS to or any rule or regulation adopted under ORS to Before revoking the license the division shall serve written notice on the person ordering the person to appear before the division at a time not less than 10 days after such service and show cause why the license should not be revoked. The notice shall be served in the manner prescribed by ORS ( 3). 2) A new license shall not be issued to a person whose license has been revoked unless it appears to the satisfaction of the divi- sion that the person will comply with the provisions of ORS to and the rules and regulations adopted under ORB to [ Amended by 1959 c Cancellation of license on re- quest of user. If any person to whom a cense has been issued pursuant to ORS to ceases using fuel within this state for a period of six months, the person shall immediately request in writing that the ' division cancel the license. On receipt of the request the division shall cancel the license Notifying division upon ceasing to use fuel in connection with motor vehicle. If any person ceases using fuel within this state in connection with a motor vehicle with respect to which an emblem has been issued pursuant to ORS but continues using fuel within this state in connection with another motor vehicle other motor vehicles, the person shall imme- diately notify the division Removal of emblem. Any.person whose license has been revoked or canceled pursuant to ORS or , or who is required by ORS to notify the division that such person has ceased using fuel within this state in connection with a motor vehicle, immediately shall remove from the motor vehicle on which it is displayed and shall destroy or, if the division so requests, shall return to the division each emblem issued to such person under ORS or the emblem issued with respect to the motor vehicle in connection with which such person has ceased using fuel within this state, as the case may be Seller to collect tax unless vehicle, has P. U.C. permit or user' s emblem. ( 1) The seller of fuel for use in a motor vehicle shall collect the tax provided by ORS at the time the fuel is sold, unless the vehicle into which the seller delivers or places the fuel bears a valid permit issued by the Public Utility Commission of Oregon or a valid user' s emblem issued by the division. li- or

187 REVENUE AND TAXATION 2) The division shall supply each seller of fuel for use in a motor vehicle with a chart which sets forth the tax imposed on ggiven quantities of fuel c ; 1971 c. 149 l; 1977 c [ Amended by 1959 c ; renumbered When invoices required. ( 1) The seller of fuel for any purpose shall make a duplicate invoice for every sale of fuel for any purpose and shall retain one copy and give the other copy to the user. The division may prescribe the form of the invoice. The invoice shall show: a) The seller' s name and address; b) The date; c) The amount of the sale in gallons; and d) The name and address of the user. 2) In addition to the invoice entries listed in subsection ( 1) of this section, the seller of fuel for use in a motor vehicle shall indicate on the invoice the amount of the tax collected, if any, and: a) The identification plate or marker number, if the vehicle bears an identification plate or marker issued by the Public Utility Commission of Oregon; b) The emblem number, if the vehicle bears a user' s emblem; or c) The license plate number if the vehicle bears no valid user' s emblem or permit issued by the Public Utility Commission of Oregon. 3) Notwithstanding subsection ( 1) of this section, this section does not require any invoice to be prepared for any sale where fuel is delivered into the fuel tank of a vehicle described in this subsection unless the operator of the vehicle requests an invoice. If an invoice is prepared under this subsection, the name and address of a user is not required to be shown on the invoice for sales where the fuel is delivered into the fuel tanks of vehicles described in this subsection. This subsection applies to vehicles: a) That have a combined gross weight of 26, 000 pounds or less; and b) For which the tax under ORS must be paid at the time of sale under ORS c ; 1981 c , 1989 c Seller' s report to division. Except as provided in ORS , the seller of fuel for use in a motor vehicle shall report to the division on or before the 20th day of each month, the amount of fuel sold, during the preceding calendar month, subject to the tax provided by ORS and such other information pertaining to fuel handled as the division may require. The division may pre- scribe the form of the report c ; 1963 c [ Repealed by 1959 c Payment of tax by seller. The seller of fuel for use in a motor vehicle shall remit to the division with each report required by ORS all the tax due on the amount of fuel sold less four percent, which the seller shall retain c , 1977 c Monthly report of user; remit- tance; credit against taxes; annual reports of certain users. ( 1) Except as provided in subsection ( 2) of this section and ORS , each user of fuel in a motor vehicle required to be licensed under ORS shall, on or before the 20th day of each month, file with the division a report showing the amount of fuel used during the immediately preceding calendar month by the user and such other information as the divi- sion may require for the purposes of ORS to The reports shall be in the form prescribed by the division. Each report shall be accompanied by a remittance payable to the division for the amount of all the tax shown by the report to be due and payable. Any tax paid to a seller is a credit against the amount of tax otherwise due and payable to the state under ORS to or to Also, when filing a monthly tax report, a user may, in lieu of claiming a refund, take a deduction or credit for the tax on any fuel which would otherwise be ( 1). subject to refund under ORS 2) Each user of fuel in a motor vehicle with a light weight of less than 8, 000 pounds required to be licensed under ORS may file an annual report of all fuel used upon Oregon highways. The report for each calendar year shall be filed on or before March 1 of the year following and shall be accompanied by a remittance payable to the division of all the tax shown to be due and payable on the amount of fuel used. [ Amended by 1959 c ; 1963 c.226 7; 1971 c , 1977 c Quarter] reports if average monthly tag under 300; when annual reports authorized. ( 1) Whenever in the judgment of the Motor Vehicles Division the average monthly tax to be paid by a use fuel seller or user will be less than $ 300, the division may authorize the seller or user to file quarterly tax reports in lieu of the monthly tax reports required by ORS and The quarterly reports so authorized, and accompanying remittances as shown thereon to be due and payable, shall be filed on or before the due dates as follows: First quarter, April 20; second quarter, July 20; third quarter, October 20; fourth quarter,

188 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES January 20. Any provisions of ORS and otherwise applicable to the filing of monthly reports and remittances shall be applicable to the quarterly filings. 2) Whenever in the judgment of the Motor Vehicles Division the average annual tax to be paid by a use fuel seller or user will be less than $ 100, the division may authorize the seller or user to file annual tax reports in lieu of the monthly tax reports required by ORS and The annual reports authorized by this subsection, and ac- companying remittances as shown on the reports to be due and payable, shall be filed on or before January 20 following the, year for which the reports are filed. Any provisions of ORS and otherwise applicable to the filing of monthly reports and remittances shall be applicable to the annual filings c.226 5; 1985 c265 2; 1989 c Penalty for delinquency in remitting tax; waiver; interest rates. ( 1) Except as provided in subsection ( 2) of this section, if any user or seller is delinquent in remitting the tax provided by ORS on the date specified in ORS , , or , a penalty of 10 percent of the amount of the tax due shall be added to the amount due and the total shall imme- diately be due and payable. 2) If the division determines that the delinquency was due to reasonable cause and without any intent to avoid payment, the penalty provided by subsection ( 1) of this section may be waived. 3)( a) ' If the excise tax imposed by ORS is not paid as required by ORS , , or , interest shall be charged at the rate of.0329 percent per day until the tax and interest have been paid in full. b) If the excise tax imposed ' by ORS is overpaid, the division may credit interest to the account of the taxpayer in the amount of percent per day up to a maximum amount that equals any interest assessed against the taxpayer under para- graph ( a) of this subsection in any given audit period. ( 1959 c ; 1963 c.226 8; 1971 c 149 3; 1987 ' ; 1987 c Records required of sellers and users; alternative records for certain us- ers. ( 1) Every user of fuel in a motor vehicle required to be licensed under ORS shall keep a record of fuel used and be prepared to prove that all the tax due and payable on fuel used has been paid. An invoice, described in ORS , properly filled out, is proof that any tax due which is shown on the invoice as paid was paid for the fuel covered by the invoice. The user' s record of fuel used for any purpose, other than fuel obtained from a seller who collected the tax, shall indicate the date the fuel was obtained, the name and address of the seller from whom the fuel was obtained, and the amount of fuel obtained, in gallons. 2) In lieu of maintaining an actual re- cord of fuel used, a user required to be licensed under ORS who operates a motor vehicle with a light weight of less than 8, 000 pounds may maintain an accurate record of miles operated upon Oregon highways. The gallons of taxable fuel used shall be computed by applying a reasonable miles per gallon figure to the Oregon miles operated. The division shall determine whether the miles per gallon figure is reasonable and its decision shall be final. 3) Every seller of fuel for any purpose shall keep a record of fuel sold for any pur- pose and shall be prepared to prove that all the tax provided by ORS has been remitted to the division. The division may specify the form of the seller' s record. 4) Every seller, and every user of fuel in a motor vehicle required to be licensed under ORS shall preserve in this state for a period of three years all records of fuel used or fuel sold, together with invoices and any other relevant records or papers which may be specified by the division. 5) The division or its authorized agent may examine every user' s or seller' s records and papers required to be preserved by subsection ( 4) of this section at any time during normal business hours c , 20, 21, 22; 1971 c ; 1977 c Tax as lien. The tax and the penalty imposed upon a user of fuel in a motor vehicle by ORS to shall constitute a lien upon, and shall have the effect of an execution duly levied against, any motor vehicle in connection with which the taxable use is made, attaching at the time of such use. The lien shall not be re- moved until the tax has been paid or the motor vehicle subject to the lien has been sold in payment of such tax. The lien is paramount to all private liens or encumbrances of whatever character upon the motor vehicle and to the rights of any conditional ven- dor or any other holder of the legal title in or to the motor vehicle. ( Amended by 1959 c ' [ Repealed by 1959 c Delinquency in payment; no- tice to debtors of user or seller-, report to division. If a user or seller is delinquent in the payment of any obligation imposed under ORS to , the division may give notice of the amount of such delinquency by registered or certified mail to all persons

189 REVENUE AND TAXATION having in their possession or under their control any credits or other personal property belonging to the user or seller, or owing any debts to such user or seller, at the time of the receipt by them of the notice. Thereafter any person so notified shall neither transfer nor make other disposition of such credits, personal property or debts until the division has consented to a transfer or other disposition or until 30 days have elapsed from and after the receipt of the notice. All persons so notified shall, within five days after the receipt of the notice, advise the divi- sion of all such credits, personal property or debts in their possession, under their control or owingg by them, as the case may be. Amended by 1959 c Collection of delinquent payment. ( 1) Whenever any user is delinquent in the payment of any obligation imposed under ORS to , the division may proceed to collect the amount due from the user in the section. manner prescribed in this 2) The division shall seize any motor vehicle subject to the lien provided for by ORS and thereafter sell it at public auction to pay such obligation and any and all costs that may have been incurred on account of the seizure and sale. 3) Notice of the intended sale and the time and place thereof shall be given to the delinquent user and to all persons appearing of record to have an interest in the motor vehicle. The notice shall be given in writing at least 10 days before the date set for the sale by inclosing it in an envelope addressed to the user at the address as it appears in the records of the division and, in the case of any person appearing of record to have an interest in the motor vehicle, addressed to the person at the last -known residence or place of business, and depositing the envelope in the United States mail, postage prepaid. In addition the notice shall be published for at least three times, the first of which shall be not less than 10 days before the date set for the sale, in a newspaper of general circulation published in the county in which the motor vehicle seized is to be sold. If there is no newspaper of general cir- culation in the county, the notice shall be posted in three public places in the county for such period of 10 days. 4) The notice shall contain a description of the motor vehicle to be sold, together with a statement of the amount due under ORS to , the name of the user and the further statement that unless such amount is paid before the time fixed in the notice the motor vehicle will be sold in accordance with law and such notice. 5) The division shall then proceed to sell the motor vehicle in accordance with the law and the notice, and shall deliver to the purchaser a bill of sale which shall vest title in the purchaser. If upon any such sale the moneys received exceed the amount due to the state under ORS to from the delinquent user, the excess shall be returned to the user and the receipt obtained therefor. If any person having an interest in or lien upon the motor vehicle has filed with the division prior to the sale notice of such interest or lien, the division shall withhold payment of any such excess to the user pendin& a determination of the rights of the respective parties thereto by a court of competent jurisdiction. If for any reason the receipt of the user shall not be available, the division shall deposit the excess with the State Treasurer as trustee for the user, the heirs, successors or assigns of the user Action by Attorney General to collect delinquency; certificate of division as evidence. ( 1) Whenever any user or seller is delinquent in the payment of any obligation under ORS to , the di- vision may transmit notice of the delinquency to the Attorney General who shall at once proceed to collect by appropriate legal action the tax and penalty due. 2) In any suit brought to enforce the rights of the state under ORS to , a certificate by the division showing the delinquency is prima facie evidence of the amount of the obligation, of the delinquency thereof and of compliance by the division with all provisions of ORS to relating to the obligation. [ Amended by 1959 c [ Repealed by 1959 c Assessment of deficiency; presumption that fuel subject to tag. ( 1) If the division is not satisfied that a report filed or amount of tax or penalty paid to the state by any user or seller is correct, the division may assess the tax and penalty due based upon any information available to the division. 2) If a seller fails to account satisfactorily for any fuel sold or disposed of, it shall be presumed that the fuel not accounted for was sold to users for use in motor vehicles and the division shall assess the tax and penalty due against the seller. 3) The division shall give to the user or seller written notice of the assessment. The notice may be served personally or by mail. If made by mail, service shall be made by depositing the notice in the United States mail, postage prepaid, addressed to the user or seller at the address as it appears in the records of the division. [ Amended by 1959 c

190 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES ( Repealed by 1959 c Assessing tax and penalty upon failure to make report. ( 1) If any user or seller fails to make a report required by ORS to , the division shall make an estimate, based upon any information available to the division, for the month or months with respect to which the user or seller failed to make a report, and assess the tax and penalty due from the user or seller under ORS to ) The ' division shall give to the user or seller written notice of the assessment in the manner prescribed by ORS ( 3). Amended by 1959 c Petition for reassessment. ( 1) Any user or seller against whom an assessment is made under ORS and may petition for a reassessment within 30 days after service of notice of the assessment. If a petition is not filed within the 30 -day period, the amount of the assessment becomes conclusive. 2) If a petition for reassessment is filed within the 30 -day period the division shall reconsider the assessment and, if requested in the petition, shall grant the user or seller an oral hearing and give the user or seller 10 days' notice of the time and place thereof. The division may continue the hearing from time to time. The division shall serve on the petitioner notice of its finding upon reassessment. If the finding is that a tax or penalty is delinquent, the petitioner shall pay to the division, within 30 days after notice is served, all the tax or penalty found to be delinquent. 3) Notice required by this section shall be served in the manner prescribed by ORS ( 3). [ Amended by 1959 c [ Repealed by 1959 c ] Appeal to circuit court. Any person aggrieved by a finding, order or determination by the division under ORS or may appeal therefrom to the circuit court of the county, in which the person resides. Such appeal shall be taken within 60 days from the date of the entry or making of such order, finding or determination and in the manner provided by law for appeals in actions at law c Time limitation on service of notice of additional tax. Except in the case of an alleged fraudulent report, or, neglect or refusal to make a report, no notice of s- sessment shall be served on the user or seller after three years have expired since the alleged erroneous report was filed or a report should have been filed. [ Amended by 1959 c Refund of tag erroneously or illegally collected. ( 1) If the division deter- f mines any amount of tax or penalty has been paid more than once or has been erroneously or illegally collected, the division shall credit such amount against any amounts then due from the user or seller under ORS to or ( 4) and shall refund any balance to the user or seller, the successor, administrator or executor of the user or seller. 2) A user or seller may claim a credit or refund for any amount of tax or penalty which the user or seller has paid more than once or which the user or seller has paid or which has been collected erroneously or illegally. No such claim for a credit or refund shall ' be allowed unless the claim ' is filed with the division within three years from the date of the payment or collection or, with respect to an assessment made under ORS and , within six months after the assessment becomes conclusive, which- ever period expires the later. Every such claim must be in writing and must state the specific grounds upon which it is founded. Failure to file such claim within the time prescribed in this section shall constitute waiver of any and all demands against this state on account of overpayments under ORS to Within 30 days of allowing or disallowing any such claim in whole or in part, the division shall serve notice of such action on the claimant. The service shall be made in the manner prescribed by ORS ( 3). [ Amended by 1959 c [ Repealed by 1959 c Refund of tax on fuel used in, operation of vehicle over certain roads or private property. ( 1) If a user obtains fuel for use in a motor vehicle in this state and pays the use fuel tax on the fuel ob- tained, the user may apply for a refund of that part of the use fuel tax paid which is applicable to use of the fuel to propel a mo- tor vehicle: a) In another state, if the user pays to the other state an additional tax on the same fuel; or b) Upon any road, thoroughfare or property in private ownership; or c) Upon any road, thoroughfare or property, other than a state highway, county road or city street, for the removal of forest products, as defined in ORS , or the products of such forest products converted to a form other than logs at or near the harvesting site, or for the construction or maintenance of the road, thoroughfare or property, pursuant to a written agreement or permit authorizing the use, construction or maintenance of the road, thoroughfare or property, with or by: A) An agency of the United States;

191 REVENUE AND TAXATION B) The State Board of Forestry; C) The State Forester; or D) A licensee of an agency named in subparagraph ( A), ( B) or ( C) of this para- graph; or d) By an agency of the United States or of this state or of any county, city or port of this state on any road, thoroughfare or property, other than a state highway, county road or city street; or e) By any incorporated city or town of this state: or f) When used exclusively in the im- provement, construction and maintenance of public highways by any county of this state or by any road assessment district formed under ORS to ; or g) Upon any county road for the removal of forest products as defined in ORS , or the products of such forest products converted to a form other than logs at or near the harvesting site, if A) Such use upon the county road is pursuant to a written agreement entered into with, or to a permit issued by, the State Board of Forestry, the State Forester or an agency of the United States, authorizing such user to use such road and requiring such user to pay for or to perform the construction or maintenance of the county road; B) The board, officer or agency that entered into the agreement or granted the permit, by contract with the county court or board of county commissioners, has assumed the responsibility for the construction or maintenance of such county road; and C) Copies of the agreements or permits required by subparagraphs ( A) and ( B) of this paragraph are filed with the division. 2) An application for a refund under subsection ( 1) of this section shall be filed with the division within 15 months after the date the use fuel tax, for which a refund is claimed, is paid. 3) The application for a refund provided by subsection ( 1) of this section shall include a signed statement by the applicant indicating the amount of fuel for which a refund is claimed, and the way in which the fuel was used which qualifies the applicant for a refund. If the fuel upon which the refund is claimed was obtained from a seller to whom the use fuel tax was paid, the application shall be supported by the invoices which cover the purchase of the fuel. If the applicant paid the use fuel tax directly to the division, the applicant shall indicate the source of the fuel and the date it was obtained. 4) The division may require any person who applies for a refund provided by sub- section ( 1) of this section to furnish a state- ment, under oath, giving the person' s occupation, description of the machines or equipment in which the fuel was used, the place where used and such other information as the division may, require c , 35, 36( 1); 1961 c.542 1; 1963 c.257 4; 1965 c ; 1967 c 367 3; 1971 c ; 1979 c Investigation of refund applications. The division may investigate refund applications and gather and compile such information in regard to the applications as it considers necessary to safeguard the state and prevent fraudulent practices in con- nection with tax refunds and tax evasions. The division may, in order to establish the validity of any application, examine the books and records of the applicant for such purposes. Failure of the applicant to accede to the demand for such examination consti- tutes a waiver of all rights to a refund on account of the transaction questioned c ( 2) Enforcement; rules and regu- lations. The division hereby is charged with the enforcement of the provisions of ORS to and ( 4), and hereby is authorized to prescribe, adopt and enforce rules and regulations relating to the administration and enforcement thereof Presumption of use. For the purposes of the proper administration of ORS to and ( 4) and to prevent evasion of the tax imposed by ORS , it shall be presumed, until the contrary is established under such reasonable rules as the division may adopt, that all fuel received into or delivered into any receptacle on a motor vehicle from which receptacle fuel is supplied to propel such motor vehicle is consumed in propelling such motor vehicle on the highways of this state. [ Amended by 1959 c Producers, distributors and others to keep records; examining books and records. ( 1) Every person producing, manufacturing, importing, distributing, storing, transporting or otherwise handling fuel shall maintain and keep in this state for a period of not less than three years such records, receipts, invoices and other pertinent papers in such form as the division may re quire. 2) The division may examine during normal business hours the books, papers, re- cords and equipment of any person producing, manufacturing, importing, distributing, storing, transporting or otherwise handling fuel and may investigate the character of the disposition which any such person makes of fuel in order to determine whether all taxes due under ORS to are being

192 MOTOR VEHICLE AND AIRCRAFT FUEL TAXES properly reported and paid. [ Amended by 1959 x Results of investigations to be private. It is unlawful for the division, or any person having an administrative duty under ORS to , to divulge the business affairs, operations, or information obtained by an investigation of records and equipment of any user or other person visited or examined in the discharge of official duty, or _the amount or source of income, profits, losses, expenditures or particular any thereof, set forth or disclosed in any report, or to permit any report or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law. However, the division may authorize examination of such reports by, and the giving of information therein contained to other state officers, or tax officers of another state or the Federal Government if a reciprocal arrangement exists Prohibitions. ( 1) No person shall intentionally make a false statement in any report, petition or application required or permitted by ORS to ) No person shall intentionally collect, or attempt to collect or receive a refund of a tax or penalty paid to the division under ORS to to which the person is not entitled. 3) No person shall intentionally aid or assist another person to violate any provision of ORS to c , 41, Disposition of moneys. All money received by the division pursuant to ORS to shall be turned over promptly to the State Treasurer and shall be disposed of as provided in ORS Amended by 1955 c ; 1961 c.146 3; 1969 c.70 2; 1983 c PENALTIES Penalties. ( 1) Any person who violates any of the provisions of ORS to , or any person who makes any false statement in any statement required by ORS to for the refund of any money or tax as provided in ORS to , or who collects or causes to be repaid to the person or any person any tax, without being entitled to it under the provisions of ORS to , shall, upon conviction, be punished by a fine of not more than $ 1, 000, or by imprisonment in the county jail not more than six months, or both. 2) Violation of ORS ( 7) is theft of public money upon and, conviction, is punishable as provided in ORS to ) Violation of any provision of ORS ( 4) and ( 5) is punishable, upon conviction, by a fine of not more than $5, 000, or by imprisonment in the county jail not exceeding six months, or both. 4) Violation of any provision of ORS to is a misdemeanor. 5) Justice and district courts have concurrent jurisdiction with the circuit court of all violations under the provisions of ORS to and to , to or this section. [ Amended by 1959 c ; 1961 c.261 3; 1971 c ; 1987 c ; 1987 c

193 REVENUE AND TAXATION

194 Chapter EDITION Definitions Privilege tax imposed on music and amusement devices Tax as property Exemptions addition to other taxes on same Designation of tax year; computation on basis of quarter years When tax payable; separate tax on each device; substitution of devices Issuance of tax receipt; receipt to be dis- played Registration of transferor of music or amusement device Display of device without payment of tax; liability of person in possession of premises; sealing device Procedure on failure to pay tax or penalty Disposal of tax receipts Rules and regulations Employment of agents Law enforcement officers to enforce chapter and assist department Tax does not legalize ownership, display or operation in violation of law Penalties CROSS REFERENCES Administration of revenue laws generally, Ch. 305 Administrative appeals, to Commodity commissions, Privilege Taxes Deficiency procedure, Forest products, privilege tax on harvesting, Interest on deficiency, delinquency or refund, Liquor manufacturing and importing privilege tar, Ch. 473 Motor transportation carriers, taxing, to Oregon Beef Council assessment on cattle, Potatoes, taxing of, Streets, privilege tar for use of without franchise, Tax Court, Oregon, to Uniformity of taxation, Const. Art. I, 32, Const 1 Art. IX, Verification of documents filed under tax laws, falsification prohibited, , Wheat, taxing, When tax document deemed filed with tax official, Determining date of receipt of payments and reports, etc., , Expenditures without allotment prohibited in certain cases, State census, to Administrative procedures and rules of state agencies, to

195 REVENUE AND TAXATION

196 PRIVILEGE TAXES Definitions. As used in this chapter, unless the wise: context requires other- 1) " Music device" means any and all mechanical and electrical devices which render, cause to sound or release music or provide visual entertainment where the same may be heard or seen by one or more public patrons. Any separate loudspeaker, phonograph, juke box or television outlet from which such music or visual picture emits shall be construed to be a separate music device" ; except where the music or visual picture emits from more than one speaker or outlet transmitting from the same mechanism, the several outlets or speakers in each place of business shall be collectively considered one such music device. 2) " Displayed or operated" means the display of any music or amusement device for use by the public or the operation by the public of such device and shall include those music and amusement devices which are displayed or operated by or for the use of members of any private club, lodge, fraternal society or other like organization whose membership is limited to a portion of the public. 3) " Amusement device" means any me- chanical, electronic, mechanical - electronic or nonmechanical mechanism which is designed for the amusement of the player or operator and is complete in itself having as its purpose the production or creation of a game of skill, amusement, entertainment, or test of strength, including, but not limited to, video games of any type, shuffleboards, coin - operated devices utilizing tables, boards cases of any size whatever, or balls, sticks, cues, pegs or marbles, and whether or not any motivating force involved is furnished by the player or the device c.384 2; 1975 c.651 l; 1985 c Privilege tax imposed on music and amusement devices. ( 1) There is imposed on every music and amusement device displayed or operated in this state, a privilege tax, as specified in this chapter. 2) The amount of the privilege tax shall be as follows: a) On each music device an annual tax of $50. b) On each amusement device designed and used solely to provide rides for amusement an annual tax of $50. c) On every other type of amusement device an annual tax of $100 for each device. Amended by 1955 c. 574 l; 1957 c384 3; 1959 c. 155 l; 1967 c.344 7; 1975 c.651 2; 1981 c.677 2; 1989 c Note: The amendments to by section 1, chapter 786, Oregon Laws 1989, take effect July 1, See section 12, chapter 786, Oregon Laws Replacement Part) is set forth for the user' s con- venience ( 1) There hereby is imposed on every music and amusement device displayed or operated in this state, a privilege tax, as specified in this chapter. 2) The amount of the privilege tax shall be as follows: a) On each music device an annual tax of $25. b) On each amusement ' device designed and used solely to provide rides for amusement an annual tax of 25. c) On every other type of amusement device an annual tax of $50 for each device c.574 3; repealed by 1957 c Tax as addition to other taxes on same property. The tax imposed by ORS is in addition to all other taxes or fees imposed upon the same property by any municipality of this state or by the United States Government Exemptions. This chapter does not apply to: 1) Amusement devices used exclusively for the purpose of selling tangible personal property, such as cold drinks, tobacco pro- ducts, candies, postage stamps, or other mer- chandise or services such as pay telephones, parking meters, gas and electric meters or other distributions of public service. 2) Amusement devices when such devices are operated or solely by for a nonprofit corporation for the purpose of conducting a fair, festival or trade show or special fund- raising project. 3) Amusement devices that are related solely to the operation of pool games and bowling alleys. 4) Amusement devices operated on the payment of or insertion of one or two pen- nies. 5) Amusement devices that are operated solely at five or fewer local festivals, carni- vals, bazaars or other fairs or exhibitions if the gross receipts from the operation of the amusement device do not exceed $ 500 for each such event. ( Amended by 1975 c ; 1981 c.677 3; 1985 c Designation of tag year-, computation on basis of quarter years. The tax year, for the purposes of this chapter, begins on July 1 and ends on June 30. The tax payable shall be computed on the basis of quarter years, and shall be paid for tlie quarter in which it becomes payable plus the remaining quarters in the tax year. In lieu 9f the payment of the foregoing tax, the owner of the property may obtain a temporary permit to operate any amusement device for a period of 90 consecutive calendar days at the rate of $50 per each 90-day period. Amended by 1975 c ; 1989 c

197 REVENUE AND TAXATION Note: The amendments to by section 2, chapter 786, Oregon Laws 1989, take effect July 1, See section 12, chapter 786, Orgeon Laws Replacement Part) is set forth for the user' s con- venience The tax year, for the purposes of this chapter, begins on July 1 and ends on June 30. The tax payable shall be computed on the basis of quarter years, and shall be paid for the quarter in which it becomes payable plus the remaining quarters in the tax year In lieu of the payment of the foregoing tax, the owner of the property may obtain a temporary permit to operate any amusement device for a period of 90 consecutive calendar days at the rate of $25 per each 90 -day period When tax payable; separate tax on each device; substitution of devices. The tax imposed by this chapter shall be paid to the Department of Revenue by the owner of the property subject to the tax before the property is displayed or operated in this state. A separate and individual tax shall be paid on each displayed or operated device or game described in this chapter. The taxpayer shall, at the time the tax is paid, designate and identify to the department each game or device by trade name or manufacturer' s number if any. However, the substitution of a game or device for a game or device taxable at the same rate, upon which the tax has been paid, shall not be a violation of any section of this chapter, nor shall it result in the imposition of any additional tax upon such substituted game or device. ( Amended by 1955 c.574 4; 1957 c.384 4; 1981 c Issuance of tax receipt; receipt to be displayed. ( 1) Upon payment of the tax imposed by this chapter, the Department of Revenue shall issue to each taxpayer a receipt for each device with respect to which the tax is paid. 2) No person shall display in any public or private place of amusement or business in this state any property subject to the tax imposed by this chapter unless there is prominently: a) Displayed on the premises the receipt of the Department of Revenue for the payment of the tax; and b) Displayed on the music or amusement device the name and address of the owner thereof. Absence of the duly issued tax receipt is prima facie evidence that the tax has not been paid. 3) No person shall alter or change any Department of Revenue receipt issued pursuant to this section in an attempt to avoid payment of any tax imposed by this chapter. 4) No person shall avoid or attempt to avoid the payment of any tax due under this chapter by displaying anything similar in design, size or color to a Department of Revenue receipt issued pursuant to this section for any device described in this chapter. 5) No person shall avoid or attempt to avoid the payment of any tax due under this chapter by using the receipt for tax paid on any device for any other device, except where a substitution is made pursuant to ORS ) A penalty of $200 is imposed on the owner of the premises where the device is located, for failing to display on the premises a receipt of the Department of Revenue for the tax remitted pursuant to the provisions of this chapter. ( Amended by 1955 c ; 1957 c 384 5, 1959 c ; 1975 c , 1981 c 677 5; 1989 c Note: The amendments to by section 4, chapter 786, Oregon Laws 1989, take effect July I, 1990 See section 12, chapter 786, Oregon Laws Replacement Part) is set forth for the user' s convenience ( 1) Upon payment of the tae imposed by this chapter, the Department of Revenue shall issue to each taxpayer a receipt for each device with respect to which the tax is paid. 2) No person shall display in any public or private place of amusement or business in this state any property subject to the tax imposed by this chapter unless there is prominently: a) Displayed on the premises the receipt of the Department of Revenue for the payment of the tar; and b) Displayed on the music or amusement device the name and address of the owner thereof. Absence of the duly issued tax receipt is prima facie evidence that the tax has not been paid. 3) No person shall alter or change any Department of Revenue receipt issued pursuant to this section in an attempt to avoid payment of any tae imposed by this chapter. 4) No person shall avoid or attempt to avoid the payment of any tax due under this chapter by display - ing anything sinular in design, size or color to a Department of Revenue receipt issued pursuant to this section for any device described in this chapter. 5) No person shall avoid or attempt to avoid the payment of any tae due under this chapter by using the receipt for tax paid on any device for any other device, except where a substitution is made pursuant to ORS ) A penalty of $ 100 is hereby imposed on the owner of the premises where the device is located, for failing to display on the premises a receipt of the Department of Revenue for the tax remitted pursuant to the provisions of this chapter Registration of transferor of music or amusement device. No person shall sell, rent, lease, trade, lend or furnish to another or transfer within this state, except for common carrier, more than two music or amusement devices annually unless the person has first registered with the Department of Revenue c Display of device without payment of tax; liability of person in possession of premises; sealing device. ( 1) If any device subject to tax under this chapter is displayed or permitted to be displayed without the tax therefor first being paid and the receipt displayed as provided in this

198 PRIVILEGE TAXES chapter, the person in possession of the premises where the device is so displayed is liable jointly and severally for the tax and penalty with the owner of the device. 2) For every device found to have been displayed without the tax imposed by this chapter having first been paid, a penalty of 200 shall be imposed. 3) Every agent of the Department of Revenue may, upon discovery of a device being operated or displayed for operation without payment of the tax due, place on said device - a seal, provided pursuant to regulation, in such a manner as to render such device inoperative. The seal shall remain on the device until the tax and penalty due under this chapter have all been paid. The seal may be removed only by a duly authorized agent of the Department of Revenue. Any other person tampering with, obliterating, defacing, cutting, breaking or in any manner removing or attempting to remove said seal at any time shall be subject to all the penalties provided in ORS JAmended by 1955 c.574 6; 1959 c , 1975 c.651 6; 1981 c ; 1989 c Note: The amendments to by section 5, chapter 786, Oregon Laws 1989, take effect July 1, 1990 See section 12, chapter 786, Oregon Laws Replacement Part) is set forth for the user' s con - venience ( 1) If any device subject to tax under this chapter is displayed or permitted to be displayed without the tax therefor first being paid and the receipt displayed as provided in this chapter, the person in possession of the premises where the device is so displayed is liable jointly and severally for the tae and penalty with the owner of the device. 2) For every device found to have been displayed without the tax imposed by this chapter having first been paid, a penalty of $100 shall be imposed. 3) Every agent of the Department of Revenue may, upon discovery of a device being operated or displayed for operation without payment of the tax due, place on said device a seal, provided pursuant to regulation, in such a manner as to render such device inoperative The seal shall remain on the device until the tax and penalty due under this chapter have all been paid. The seal may be removed only by a duly authorized agent of the Department of Revenue. Any other person tampering with, obliterating, defacing, cutting, breaking or in any manner removing or attempting to remove said seal at any time shall be subject to all the penalties provided in ORS Procedure on failure to pay tax or penalty. ( 1) If any tax or penalty imposed by this chapter is not paid as required by this chapter within 30 days after the date that the written notice and demand for payment required under ORS is mailed, the Department of Revenue shall issue a warrant directed to the sheriff of any county of the state commanding the sheriff to levy upon and sell the real and personal property of the person or persons named in the warrant and liable for the tax found within the county, for the payment of the amount thereof with the added penalty and the cost of executing the warrant, and to return the warrant to the department and pay to it the money collected by virtue thereof by a time to be therein specified not more than 30 days from the date of the warrant. A copy of the warrant shall be mailed or delivered to the taxpayer by the department at the taxpayer' s last -known address. 2) The sheriff shall, within five days after the receipt of the warrant, record with the clerk of the county a copy thereof. Thereupon the clerk shall enter in the County Clerk Lien Record the names of the persons mentioned in the warrant, and the amount of the tax and penalty for which the warrant is issued and the date when such copy is recorded. Thereupon the amount of the warrant so recorded shall become a lien upon the title to any interest in real property or personal property of the persons against whom it is issued in the same manner as a Judgment duly docketed. The sheriff shall thereupon proceed upon the same in all respects, with like effect and in the manner prescribed by law in respect to execution issued against property upon judgment of a court of record, and the sheriff is entitled to the same fees for services in executing the warrant to be collected in the same manner. If a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes as if the people of the state had recovered judgment for the amount of the tax. [ Amended by 1981 c.677 7; 1983 c ; 1985 c ; 1989 c [ Repealed by 1981 c Disposal of tax receipts. ( 1) All money received under this chapter as taxes or penalty shall be paid by the Department of Revenue to the State Treasurer quarterly and shall be by the State Treasurer allocated for payment in the following manner: a) Thirty percent thereof shall be credited to the General Fund to be available for payment of general governmental expenses. b) Fifty percent is continuously appropriated to pay the expenses of state and local programs of the Oregon Youth Conservation Corps established under ORS to c) Twenty percent thereof shall be remitted to the county treasurers of the several counties of the state. Each county shall receive such share of the money as its population, determined by the State Board of Higher Education, bears to the total population of the counties of the state, as determined by the census last preceding such apportionment. 2) All revenues received under this section by the treasurers of the several counties

199 REVENUE AND TAXATION shall be placed in the general fund of each county to be expended by the county courts or the board of county commissioners of the several counties for general governmental expenses. [ Amended by 1959 c ; 1963 c.644 3; 1967 c.323 1; 1969 c230 1; 1989 c Note: The amendments to by section 3, chapter 786, Oregon Laws 1989, take effect July 1, See section 12, chapter 786, Oregon Laws Replacement Part) is set forth for the user' s con- venience ( 1) All money received under this chapter as taxes or penalty shall be paid by the Department of Revenue to the State Treasurer quarterly and shall be by the State Treasurer allocated for payment in the following manner a) Sixty percent thereof shall be credited to the General Fund to be available for payment of general governmental expenses. b) Forty percent thereof shall be remitted to the county treasurers of the several counties of the state. Each county shall receive such share of the money as its population, determined by the State Board of Higher Education, bears to the total population of the counties of the state, as determined by the census last preceding such apportionment. 2) All revenues received under this section by the treasurers of the several counties shall be placed in the general fund of each county to be expended by the county courts or the board of county commissioners of the several counties for general governmental expenses Rules and regulations. The Department of Revenue may promulgate the rules and regulations necessary for the administration and enforcement of this chapter Employment of agents. The Department of Revenue may employ the agents necessary for the administration and enforcement of this chapter. Agents of the department charged with the enforcement of this chapter have all the power and authority of police officers in the performance of such duties Law enforcement officers to enforce chapter and assist department. The state police, sheriffs, constables, police and other law enforcement officers within the State of Oregon shall enforce all pro- visions of this chapter and shall assist the Department of Revenue Tax does not legalize ownership, display or operation in violation of law. Nothing in this chapter shall be construed as licensing, authorizing or legalizing the ownership, possession, display or operation, in violation of any law of this state, of any of the property taxed under this chapter Penalties. ( 1) Violation of any provision of this chapter by any person is punishable, upon conviction, by a fine of not more than $ 500, or by imprisonment in the county jail for not more than six months, or by both. Justice courts and district courts have concurrent jurisdiction with the circuit courts of any prosecution provided for in this subsection. 2) Violation of ORS ( 3) is forgery in the first degree and is punishable as such. 3) Violation of ORS ( 4) and ( 5) and ( 3) is punishable, upon conviction, by a fine of not more than,$ 1, 000 or imprisonment in the county jail for not more than one year, or both. [ Amended by 1955 c ; 1971 c )

200 Chapter EDITION FOREST PRODUCTS HARVEST TAX Definitions for ORS to and to Policy Public to share cost of suppressing fires caused by public " Levy of privilege tax on the harvesting of forest products Purposes of taxes levied under ORS and Determination of moneys available in Oregon Forest Land Protection Fund Payment of tax; returns; estimated tax; payment Tax revenue credited to suspense account; refunds Distribution from suspense account Forest Research and Experiment Account established; source; use; appropriation WESTERN OREGON FOREST LAND AND SEVERANCE TAX Definitions for ORS to Purposes of ORS to Exemptions from ORS to ; tax in addition to ORS to ; limitations Severance tax imposed on timber on private lands; assessment and taxation of western Oregon forest land Severance tax on hardwood timber on private lands; western Oregon forest land; election by owner Rate of severance tax Designation of areas for determination of stumpage values by department; net stumpage recovery basis for certain tax- payers Stumpage values; appeal by timber owners Semiannual payments; determination of amount harvested; delinquency Western Oregon Timber Tax Reserve Ac- count Western Oregon Tax Reserve Account; transitional transfers Western Oregon Timber Tax Account; allocation to districts Western Oregon Timber Tax Offset Guarantee Account Western Oregon Timber Tax Offset Guarantee Account; transfers into account Authority of taxing district to contract indebtedness Severance tax offset against levies Timber valuation for computation of borrowing and bonding capacity of western Oregon taxing districts; computation of local district contribution under ORS Timber Taxes Returns; time for filing; extension Land designations; classifications; certain elections by landowners Impact on valuation of change from farm use assessment to forest land designation Western Oregon forest land assessment; standards; certification of values to assessors; appeals of values by certain taxpayers Value of forest land classified as of July 1, 1977, as reforestation land Application for designation as forest land; contents; approval Removal of designation; exceptions; appeal from reassessment or denial; requalification Redesignation as forest land after removal in certain years due to platting Notation of forest land on tax roll for potential additional tax liability State Forester report on forest lands failing minimum stocking, review of manage- ment plan; declassification and reclassification Additional tax upon removal of forest land designation; attachment of lien; payment Notice of appeal of forest land value; form of notice Reports by seller or purchaser of privately owned timber; reports by purchasers of private and public log purchases Confidentiality of reports submitted under ORS Application of disqualification penalties to certain land EASTERN OREGON SEVERANCE TAX Definitions for ORS to Legislative findings; purpose of ORS to Scope of ORS to ; effect on other taxes Exemption of eastern Oregon timber from general ad valorem tax; assessment of timber land by county assessors Severance tax imposed on eastern Oregon timber; additional severance tax on certain timber, rate; measurement of amount harvested Determination of immediate harvest values; application by areas Elective tax calculation; net stumpage re- covery procedures Payment of tax; filing of returns; order of crediting payments; payment of tax under 5 excused Collection of tax and effect of paying tax pending appeal

201 REVENUE AND TAXATION Eastern Oregon Timber Tax Account; de posit of tax revenues; refunds; credits and remittances to counties County treasurer to furnish amounts of distributions from Eastern Oregon Timber Tax Account; county assessors to reduce tax levies by amount certified; apportionment to taxing units Apportionments not to be included as an- ticipated receipts GENERALLY Notice of intent to harvest; rules; effect of failure to file notice Audit of returns; interest and penalties Warrant for collection of delinquent taxes Effect of failure or refusal to make return Tax as lien on forest products Tax as debt; collection; limitation Enforcement of ORS to by department; rules Confidentiality of reports and returns filed under ORS , , and Authority of department to make certain disclosures Penalty for violation of ORS WESTERN OREGON SMALL TRACT OPTIONAL TAX Definitions for ORS to Legislative findings; purpose of ORS to Administration by State Forester; rules and regulations; publicizing-, report to legislature Determination of true cash value of forest land classified under ORS to ; exemption of timber from separate assess- ment Reduction of true cash value Eligibility of forest land for classification; eligible owners Exceptions from minimum acreage requirements of ORS for certain lands Application for classification; certification by State Forester; affidavits of continuing eligibility; false statements Review of classified land by State Forester; notice of deficiencies; declassification Assessment roll and tax roll to show potential additional tax liability Application fees Assignment of " site class "; redetermi- nation Application of severance tax to harvest of timber on small tract Declassifications Appeals Change from timber assessment to special open space use assessment SPECIAL ASSESSMENT OF FOREST LANDS Definitions for ORS to Determining true cash value of forest land generally; appeal of values; notice of ap- peal Application for forest land designation; contents; approval Removal of forest land designation; notice; appeal; requalification Redesignation as forest land after removal in certain years due to platting Additional tax upon removal of forest land designation; lien; prepayment MISCELLANEOUS PROVISIONS Estimated tax liability; payment procedure Penalties applicable to land assessed as farm use or under designated forest land or small tract optional taxes Disqualification due to acquisition by government for park, wildlife, preservation or recreation purpose Penalties PENALTIES CROSS REFERENCES Administration of revenue laws generally, Ch. 305 Administrative appeals, to Administrative procedures and rules of state agencies, to Appeal procedure, Appeals to Oregon Tax Court, Assessment of forest lands for fire suppression costs, Claim for refund of any tax paid, Coniferous trees, transportation without bill of sale, to Deficiency procedure, Emergency Fire Cost Committee, to General provisions relating to property taxation, Ch. 306 Interest on deficiency, delinquency or refund, danagement assistance to nonindustrial private forest landowners, Procedure for assessment and collection of property tares, Chs. 308, 309, 310, 311, 312 Separately owned standing timber, to whom , Tax Court, Oregon, to assessed, Verification of documents filed under tax laws, falsification prohibited, , When tar document deemed filed with tar official, Rules, making and filing, to Rehabilitation of forest lands, loaning credit of state to provide funds, Const. Art. Xl E, Borrowing and bonding capacities of eastern Oregon political subdivisions, determination, Timber values to reflect presence of roads,

202 TIMBER TAXES Release of lien by department, Action in other states for Oregon taxes, Revenue department as party to action involving property subject to lien, Reciprocal recognition of tar liability,

203 REVENUE AND TAXATION

204 TIMBER TAXES FOREST PRODUCTS HARVEST TAX Definitions for ORS to and to As used in ORS to , to and to , unless the context requires otherwise: 1) " Board" means the State Board of Forestry. 2) " Protected forest lands" means those lands which are protected from the starting or spread of fire thereon or therefrom by: a) The State Forester, with the approval of the board; b) The United States of America through contract with the State Forester; c) Any forest protective agency under contract with the State Forester or the board pursuant to ORS ; or d) Any forest protective agency, described in paragraph ( c) of this subsection, under an agreement with the United States of America wherein such agency agrees to protect specific federal forest lands and, in return, the United States of America agrees to protect specific lands of such agency. 3) " Department" means the Department of Revenue. 4) " Committee" means the Emergency Fire Cost Committee. 5) " Forest land" means any land producing forest products. 6) " Forest products" means products from harvested timber. 7) " Harvest" means the point at which timber that has been cut, severed, or removed for purposes of sale or use is first measured in the ordinary course of business as determined by reference to common practice in the timber industry. 8) " Merchantable stand of timber" means any stand on forest lands containing living or dead timber which is being or can be harvested. 9) " Taxpayer" means the owner of timber at time of harvest. 10) " Taxes" means the taxes provided for in ORS ) " Owner" means any individual or combination of individuals, partnership, firm, corporation or association of whatever na- ture holding title to harvested timber by vir- tue of: a) An instrument of conveyance; b) The harvesting of the timber; or c) The harvesting of the timber and payment therefor. 12) " Timber" means all logs which can be measured in board feet and other forest products as determined by department rule c.375 1; 1957 c 309 3; 1961 c ; 1965 c , 1967 c , 1981 c.321 9; 1983 c.539 1, 1985 c [ Repealed by 1953 c Policy. The prevention and suppression of forest fires on forest lands for the preservation of forest resources and the continuous growth of timber on lands suitable therefor are declared to be the public policy of the State of Oregon. The Legislative Assembly recognizes that the forested areas situated within eastern Oregon predominate in Ponderosa pine trees and associated spe- cies, and that the forested areas situated within western Oregon predominate in Douglas fir and associated species; that because of this difference in species, different forest fire protection problems exist in eastern and western Oregon, and different logging conditions and circumstances in each necessitate varied forest practices in the disposal of forest slashings and debris; and that, therefore, in order to give recognition to such differences and their effect on the accomplishment of the public policy stated in this section, certain classifications of forest lands within the State of Oregon are estab- lished by ORS to and to c Public to share cost of suppressing fires caused by public. The Legislative Assembly finds that it is in the interest of the State of Oregon that the pub- lic as a whole share responsibility for protecting the forests of this state, by making funds available from time to time for suppression of fires caused by the public. [ 1967 c Levy of privilege tax on the harvesting of forest products. ( 1) There hereby is levied a privilege tax of five cents per thousand feet, board measure, upon taxpayers on the harvesting of all merchantable forest products harvested on forest lands. 2) In addition to the tax levied by subsection ( 1) of this section, there hereby is levied a forest products harvest tax upon taxpayers of 30 cents per thousand feet, board measure, on all merchantable forest products harvested on forest lands for the payment of benefits as provided in ORS to , to and to ) In addition to the taxes levied under subsections ( 1) and ( 2) of this section, there hereby is levied a privilege tax upon taxpayers on the harvesting of all merchantable forest products harvested on forest land for the purposes described in ORS ) Subject to subsection ( 5) of this section, the taxes shall be measured by and be applicable to each per thousand feet, board

205 REVENUE AND TAXATION measure, on the total quantity of forest products harvested in this state measured by use of any log scale which is or may be in general use in the logging industry and which is designed to measure total volume of merchantable forest products in board feet. However, if the department finds that the scale used by any taxpayer in computing the taxes due under ORS to and to does not accurately reflect the total quantity of merchantable forest products harvested by the taxpayer, it may require the taxpayer to adopt another log scale in general use in the industry which in the department' s opinion will accurately re- flect merchantable harvest in board feet. 5) The first 25, 000 feet, board measure, of forest products harvested annually by any taxpayer during each fiscal year shall be excluded from the total quantity of harvested forest products which constitutes the measure of the taxes under ORS to and to [ 1953 c375 2, 1957 c , 1981 c , 1985 c ; 1989 c provides. Note: Section 1, chapter 627, Oregon Laws 1989, Sec. 1. Notwithstanding any other provisions of law, for the fiscal years beginning July 1, 1989, and July 1, 1990, the rate of tar levied by ORS ( 1) shall be 16 cents higher than the rate that otherwise would be in effect under ORS M c provides: Note: Section 2, chapter 766, Oregon Laws 1989, Sec. 2. The rate of the privilege tax imposed under ORS ( 3) is 16 cents per thousand feet, board measure, on the harvesting of all merchantable forest products harvested on forest land on or after July 1, 1989, and prior to July 1, c [ Repealed by 1953 c [ 1953 c.375 3; 1959 c ; 1961 c242 1, 1967 c ; 1977 c ; 1981 c.321 1; repealed by 1985 c c 172 2, 1979 c.375 1; 1981 c.348 1, 1983 c.682 l; repealed by 1985 c and 1985 c Purposes of taxes levied under ORS and ( 1) The purpose of the tax levied by ORS ( 3) is to derive revenues to defray the costs of administering the Oregon Forest Practices Act, ORS to , in an amount not to ex- ceed 40 percent of the total expenditures approved by the Legislative Assembly for this purpose, including salary adjustments approved by the Legislative Assembly for fiscal years 1990 and ) Notwithstanding ORS , the moneys transferred to the State Forestry Department Account under ORS ( 3) are appropriated continuously for and shall be used by the State Forester, under the supervision and direction of the board, for the purposes of administering the Oregon Forest Practices Act ( ORS to ) c , 1979 c.375 2; 1981 c ; 1983 c.682 2; 1985 c.759 7; 1987 c , 1989 c [ Repealed by 1953 c Determination of moneys available in Oregon Forest Land Protection Fund. ( 1) For purposes of determining the moneys available in the Oregon Forest Land Protection Fund described in ORS as of February 16, such shall be the balance shown on such date less the total of a) The unexpended balance as of February 16 of the amount budgeted to be expended from the account for the fiscal year in which the determination is made; and b) The amount budgeted to be expended from the account for the following fiscal year. 2) The insurance principle is recognized in providing funds for emergency forest fire control c ; 1961 c297 4; 1963 c.88 1; 1967 c 429 7, 1985 c c ; repealed by 1985 c [ Repealed by 1953 c c ; repealed by 1969 c Payment of tax; returns; estimated tax; payment. ( 1) The taxes levied under ORS shall be due and payable in semiannual instalments, on or before the last day of January and July, for the preceding two calendar quarters. The tax shall be delinquent if not paid by the due date which shall be determined without regard to any extension of time for filing the return. 2) Subject to the provisions relating to semiannual estimated tax payments provided in subsections ( 4) and ( 5) of this section, on or before the last day of January and July, each taxpayer shall make out a return on the form prescribed by the department showing the amount of the tax for which the taxpayer is liable for the preceding two calendar quarters and the other information the department considers necessary to correctly determine the tax due and shall mail or deliver the return, together with a remittance for the amount of the tax, to the office of the department. The return shall be signed and verified by the taxpayer or a duly authorized agent of the taxpayer. Whenever in its judgment good cause exists, the department may allow upon written application made on or before the due date further time not ex- ceeding 30 days for filing a return. 3) All payments received under ORS to and to shall be credited, first, to penalty and interest accrued, and then to tax due. 4) Commencing January 1, 1982, each owner expecting to incur a liability pursuant to this section in excess of $ 300 for any

206 TIMBER TAXES semiannual tax period beginning on January 1 or July 1 of any year shall, on forms prescribed by the Department of Revenue, make and file with the department on or before the last day of the fourth month of the period an estimate of the owner' s tax liability for the period. At least one -half of the estimated tax shall be remitted to the department with the estimated tax report and the balance shall be remitted to the department on or before the due date of the semiannual tax return required by subsection ( 2) of this section, without regard for any extension of the due date thereof. 5) If the amount remitted with an estimated tax report filed on or before the due date thereof is at least 50 percent of the tax of the owner as due for the period imme- diately preceding the period for which the report is made or at least 40 percent of the owner' s tax liability as due for the period for which the report is made, or 100 percent of the tax liability on the actual merchantable forest products harvested for the first calendar quarter of the semiannual period, no penalty or interest shall be charged. Otherwise a penalty in the form of interest at the rate established under ORS for each month or fraction thereof shall be assessed for the period of delinquency calculated on the difference between the payment made and the payment which would have been due had the owner estimated the liability for the period in an amount equal to the liability as due for such period. The provisions of ORS chapters 305 and 314 relating to penalties and interest shall not apply to the estimated tax payments described in this section c.375 5, 6; 1965 c.331 l; 1981 c. 363 l; 1982 s.s. l c ; 1989 c ( Repealed by 1953 c c.375 7; 1975 c ; 1977 c ; 1981 c706 8, 1982 s. s. l c ; 1985 c759 10; renumbered ( Repealed by 1953 c ( 1953 c.375 8; repealed by 1977 c enacted in lieu of ) ( Repealed by 1953 c c 375 9; 1981 c.706 9, 1983 c ; 1985 c ; 1985 c ; renumbered [ Repealed by 1953 c c ; repealed by 1961 c enacted in lieu of , and )] [ Repealed by 1953 c c ; 1985 c ; renumbered c ; 1983 c ; 1985 c ; renumbered ( Repealed by 1953 c c , 1985 c ; renumbered ( Repealed by 1953 c [ 1953 c ; 1961 c ; repealed by 1977 c ( enacted in lieu of ) ( Repealed by 1953 c c ; repealed by 1977 c enacted in lieu of ) c ( enacted in lieu of , and ); repealed by 1981 c ( Repealed by 1953 c c ; 1985 c ; renumbered ( Repealed by 1953 c Tax revenue credited to suspense account; refunds. ( 1) The revenue from the taxes levied by ORS to and to shall be remitted to the State Treasurer who shall deposit it in a suspense account established under the provisions of ORS ) Notwithstanding the provisions of ORS , the amount of moneys neces- sary to pay refunds of the taxes levied under ORS ( 1), ( 2) and ( 3) hereby is appropriated continuously to the department from the suspense account referred to in subsection ( 1) of this section, and shall be used by the department for the payment of all refunds of taxes levied under ORS ( 1), 2) and ( 3) which have been audited and approved by the department. Any penalties, interest and taxes then due from the taxpayer shall be applied in that order in com- puting any refund, and only the balance due the taxpayer, if any, shall be refunded. The department shall on its records charge each refund against the revenue from the tax with respect to which the refund is made c ; 1957 c ; 1957 c.528 6; 1961 c.270 1, 1985 c ( Repealed by 1953 c Distribution from suspense account. ( 1) Subject to ORS ( 2), moneys remaining in the department's suspense account referred to in ORS on February 10, May 10, August 10 and November 10 of each year shall be transferred to the various appropriation accounts described in subsections ( 2), ( 3) and ( 4) of this section. 2) That part of the moneys derived from taxes levied by ORS ( 1) shall be transferred to the Forest Research and Experiment Account described in ORS ) That part of the moneys derived from taxes levied by ORS ( 3) shall be transferred to the State Forestry Department Account referred to in ORS ) That part of the moneys derived from taxes levied by ORS ( 2) shall be transferred to the Oregon Forest Land Protection Fund described in ORS [ 1985 c Note: was added to and made a part of ORS chapter 321 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation ( 1953 c ; repealed by 1957 c

207 REVENUE AND TAXATION [ Repealed by 1953 c [ 1953 c ; 1957 c.309 5; 1961 c297 5; 1965 c ; 1967 c ; 1981 c ; repealed by 1985 c [ Repealed by 1953 c c. 375' 20; 1965 c ; repealed by 1967 c [ Repealed by 1953 c Forest Research and Experiment Account established; source; use; appropriation. ( 1) There hereby is established in the State Treasury in the. General Fund an account to be known as the Forest Research and Experiment Account, which account hereby is appropriated continuously to the State Board of Higher Education for the purposes of ORS and ) The Forest Research and Experiment Account shall consist of: a) Allocations from harvest taxes as provided in ORS ( 1). b) All moneys received in payment of uncollected taxes, penalties or interest under chapter 544, Oregon Laws [ 1953 c ; 1957 c ; 1961 c ; ) [ Repealed by 1953 c c ; repealed by 1957 c [ Repealed by 1953 c c ; repealed by 1961 c c ; 1957 c.309 7, 1961 c ; repealed by c ; repealed by [ Formerly ; 1973 c 348 l; repealed by 1977 c WESTERN OREGON FOREST LAND AND SEVERANCE TAX Definitions for ORS to As used in ORS to , unless the context requires otherwise: 1) " Arms - length transaction" means a transaction made in the open market where there is no duress, where each party is independent of the other and where there are no trades or hidden considerations involved. 2) " Department" means the Department of Revenue. 3) " Forest land" means land in western Oregon ( a) which is being held or used for the predominant purpose of growing and harvesting trees of a marketable species and has been designated as forest land or ( b) the highest and best use of which is the growing and harvesting of such trees. Trees of a marketable species may vary in different areas in western Oregon and may change as the utilization of forest trees changes. The size, age, location, quality and condition of trees do not necessarily determine marketable species. Forest land often contains isolated openings which because of rock outcrops, river wash, swamps, chemical conditions of the soil, brush and other like conditions prevent adequate stocking of such openings for the production of trees of a marketable species. If such openings in their natural state are necessary to hold the surrounding forest land in forest use through sound management practices, they are deemed forest land. Forest land does not in- clude buildings, structures, machinery, equipment or fixtures erected upon, under or above the soil, but does include roads described in ORS ) " Harvest" means the point at which timber that has been cut, severed or removed for purposes of sale or use is first measured in the ordinary course of business as determined by reference to common practice in the timber industry. 5) " Inadequate sales data" means sale volume of less than 20 percent of the harvest volume reported for that timber age class in the market area for the two prior reporting periods as described in ORS or less than 10 timber sales transactions. 6) " Log Purchase Value Index" shall be based on log grade recovery classes as set by rule which correspond to the timber age classes. The " Log Purchase Value Index" means the percentage change in the average value of log purchases from private lands calculated by comparing the two preceding reporting periods. 7) " Market area" means those groups of areas containing timber with similar values as designated by the department by the authority under ORS ( 1). The department shall designate market areas by rule. 8) " Owner" means any individual or combination of individuals, partnership, firm, corporation or association of whatever na- ture holding title to harvested timber by vir- tue of: a) An instrument of conveyance; b) The harvesting of the timber; or c) The harvesting of the timber and payment therefor ) " Stumpage value" of timber means values determined from log grade value tables adopted or used by the department pursuant to ORS ) " Taxing district" or " district" means each county, city, school district and other corporation vested with the power to levy property taxes in western Oregon. 11) " Taxpayer" means the owner of timber at time of harvest. 12) " Timber" means all logs which can be measured in board feet and other forest products as determined by department rule.

208 TIMBER TAXES ) " Unit of proper measurement" means any unit of measurement commonly used in the timber industry for measuring timber and timber products harvested. 14) " Western Oregon" means that portion of the state lying west of a line beginning at the intersection of the northern boundary of the State of Oregon and the western boundary of Wasco County, thence southerly along the western boundaries of the counties of Wasco, Jefferson, Deschutes and Klamath to the southern boundary of the State of Oregon c. 892 ]; 1983 c.539 2, 1985 c ; 1989 c ( Formerly ; repealed by 1977 c Purposes of ORS to The purposes of ORS to are: 1) To remove timber in western Oregon from ad valorem taxation. 2) To impose with respect to forest lands in western Oregon a system of ad valorem taxation whereby the value of forest land is determined by a formula. 3) To establish a severance tax on timber harvested in western Oregon as a means of: a) Recognizing the long -term nature of the forest crop and fostering the public policy of Oregon to encourage the growing and harvesting of timber. b) Protecting the public welfare by assuring that the citizens of the state and future generations shall have the benefits to be derived from the continuous production of forest products from the private forest lands of western Oregon. c) Promoting the state' s policy of encouraging forestry and the restocking of forest lands to provide present and future benefits by enhancing the water supply, preventing erosion, providing habitat for wild game, providing scenic and recreational sites and providing for needed products. 4) To provide a gradual, nondisruptive method of effecting the transition from the ad valorem taxation of timber in western Oregon to the severance tax on the harvest- ing of such timber. 5) To assure local taxing districts that severance tax receipts will be considered a local revenue source to replace the locally levied ad valorem tax on timber c [ Formerly ; repealed by 1977 c Exemptions from ORS to ; tax in addition to ORS to ; limitations. ( 1) The following timber and forest land are not subject to ORS to : a) Timber and forest land assessed by the department pursuant to ORS to , to , to and b) Except as provided in ORS , timber and land classified under ORS to c) Timber on land that is exempt from ad valorem taxation. d) Except as provided in ORS , land and Christmas trees which are grown or growing on that land which has been prepared by intensive cultivation and tilling and on which all unwanted plant growth is con- trolled continuously for the exclusive purpose of growing such Christmas trees. e) Except as provided in ORS , land and hardwood timber, including but not limited to hybrid cottonwood, which are: A) Grown or growing on land which has been prepared by intensive cultivation methods such as plowing or turning over the soil and which is cleared of competing vegetation for at least three years after tree planting; B) Of a species marketable as fiber for inclusion in the " furnish" for manufacturing paper products; C) Harvested on a rotation cycle within 10 years after planting; and D) Fertilized, subject to insect and disease control, cultivated and irrigated. 2) The tax imposed by ORS shall be in addition to that levied by ORS to and to ) Nothing contained in ORS to shall prevent: a) The collection of ad valorem property taxes which became a lien prior to January 1, b) The collection of taxes levied by ORS to and to c) Except as provided in section 45, chapter 892, Oregon Laws 1977, the collection of amounts payable upon declassification described under ORS to d) The collection of the additional tax imposed by ORS to ( 1975 Replacement Part) as it pertains to harvesting during the calendar year However, timber that is cut or severed in the calendar year 1977, but that is considered harvested in a subsequent year under ORS , shall not be subject to the additional tax. e) The collection of taxes imposed under ORS to ( 1975 Replacement Part) c.892 3; 1989 c ( Formerly ; 1973 c.348 2; repealed by 1977 c

209 REVENUE AND TAXATION Severance tax imposed on timber on private lands; assessment and taxation of western Oregon forest land. 1) Effective January 1, 1978, all timber in western Oregon shall be exempt from ad valorem taxation and in lieu thereof, there is imposed on timber harvested from privately owned land in western Oregon a severance tax as provided in ORS to ) Effective January 1, 1978, all forest land in western Oregon shall be assessed and taxed and the value determined under ORS , , and 321: c Severance tax on hardwood timber on private lands; election by owner. ( 1) Notwithstanding ORS )( e), and upon the election of an owner made as provided under subsection ( 2) of this section, the taxes imposed under ORS to on timber harvested from other privately owned land in western Oregon are imposed on hardwood timber harvested from land in western Oregon described in ORS ( 1)( e) that is privately owned. 2) An owner having total ownership of forest land in western Oregon in excess of five acres but not in excess of 2, 000 acres who elects to claim a credit allowed under ORS or for reforestation project coats paid or incurred in connection with a reforestation project as described under ORS ( 1)( e) on the forest land and for which a preliminary certificate is issued for a tax year beginning on or after January 1, 1990, shall be considered to have made the election to pay the severance tax imposed under subsection ( 1) of this section upon the harvest, on and after the date the prelimi- nary certificate is issued, of all such hardwood timber harvested from all forest land owned by the owner on the date the preliminary certificate is issued. For purposes of this section, " ownership or total ownership" shall be determined in the same manner as " ownership or total ownership" is determined for purposes of ORS to If, after the date the preliminary certificate is issued, the forest land planted in hardwood timber as described in ORS ( 1)( e) is sold or otherwise transferred, the election shall be binding upon the pur- chaser or transferee and all subsequent pur- chasers and transferees, as to that particular land, until such time as all of the hardwood timber on that land has been harvested, the land is changed in use or the timber is ex- empt under other provision of ORS to , all to be determined subject to rules adopted by the department c bl Note: was added to and made a part of ORS to by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation ( Formerly ; repealed by 1973 c Rate of severance tax. ( 1) All owners of timber in western Oregon shall pay a severance tax of six and one -half percent of the stumpage value of timber har- vested owned from privately land after December 31, ) In addition to the tax imposed by subsection ( 1) of this section, all owners of timber in western Oregon shall a pay severance tax on the stumpage value of timber harvested from land designated as reforestation land pursuant to ORS to ( 1975 Replacement Part) as of July 1, The rate of the tax shall be six percent of the stumpage value of timber harvested in For each calendar year thereafter, the rate shall be one - quarter percent less than the rate imposed for the preceding calendar year until for the calendar year 2002, the additional rate imposed by this subsection shall be zero c c a; repealed by 1983 c a Formerly ; 1973 c.348 3; repealed by 1977 c Designation of areas for determination of stumpage values by department; net stumpage recovery basis for certain taxpayers. ( 1) On or before October 1 of each year, the department shall designate areas containing timber with similar values and such areas shall be used as units for determination of stumpage values. Prior to February 1 and August 1 of each year, for use during the six -month period beginning January 1 and July 1 of the same year, the department shall prepare and adopt by order tables of values by log grade or other appropriate system recognized by the department as commonly used in the industry for each species or subclassification of timber within such units. The values deter- mined for the semiannual period beginning January 1 shall be determined as of the October 1 immediately preceding. The values determined for the semiannual period beginning July 1 shall be determined as of the April 1 immediately preceding. Such stumpage values shall be based upon voluntary purchases of standing timber made in the ordinary course of business for harvest within 37 months and shall make reasonable and adequate allowances for all relevant factors, including size, quality, volume, age, disease, defect, breakage, stand density,, costs of removal, accessibility to point of conversion, topography of the site and surrounding country, and local market conditions in western Oregon. The values shall be expressed in terms of a dollar amount per

210 TIMBER TAXES thousand board feet for each log grade of each species or subclassification, and shall be determined by averaging the available sales data for the 12 calendar months prior to October 1 and April 1 each year for each species or subclassification. Beginning with the January 1, 1992, through June 30, 1992, valuation period, and ending with the July 1, 1993, through December 31, 1993, valuation period, in the event there are inadequate sales data in a market area, the department shall use the Log Purchase Value Index for the affected timber age class for the market area as defined by rule. The log grading system used by the department and by the taxpayer in making the severance tax return shall be that of the Columbia River Log Scaling and Grading Bureau or other system commonly used in the forest industry and adopted by the department by rule. 2)( a) Supplemental tables for adjustment shall be prepared in recognition that certain primary factors affecting logging costs and stumpage values may vary significantly within a given valuation area. The adjust- ments may be either plus or minus, depending upon the basis of the typical logging cost used in subsection ( 1) of this section. The primary factors to be considered are average volume per acre harvested, logging conditions, and average log size for young growth thinning operations. In addition, recognition shall be given to the added costs involved in logging small, somewhat isolated areas. However, the department, either on its own motion or in response to an application from a taxpayer, may specify an adjustment of stumpage value for timber that is damaged by fire, ice storm, insect damage, disease, flood, blowdown or other causes. b) When a taxpayer uses the adjustments specified in this subsection, the taxpayer shall maintain appropriate accounting records to support the adjustments. 3) Public hearings shall be held at least 45 days prior to the adoption of timber valuation schedules or changes in the boundaries of valuation areas developed in accordance with subsections ( 1) and ( 2) of this section. Notice of the hearings shall be published in a newspaper of general circulation throughout the state at least 14 days prior to the hearings date. In addition, the department may cause notice to be broadcast_ pursuant to ORS to )( a) An owner who harvests less than 500, 000 board feet of timber in the calendar year or who has less than 1, 000 acres of forest land in western Oregon, and who, during the 12 -month period immediately preceding the due date of the severance tax return, is not engaged in and does not have an owner -' ship interest of more than 10 percent in a business engaged in the processing of timber into wood products, may elect to calculate and pay a tax on the basis of net stumpage recovery from such forest land rather than by use of the tables prepared in accordance with subsections ( 1) and, 1( 2) of this section. b) For purposes of this subsection, " net stumpage recovery" means the selling price of the logs at a conversion center in an arm' s length transaction, less the costs described in -one of the following subparagraphs: A) The logging costs reflected by a written agreement entered into in connection with the "logging operation. The department may analyze the agreement and adjust the contract price to eliminate costs paid by the owner for work or material not connected with logging, log hauling costs and marketing the timber. B) Administration, logging and log hauling costs typical for the type of harvest as determined by the department. c) The department may require such proof from the owner as it deems necessary to determine the amount of stumpage recovery and eligibility for the alternate calculation of the tax provided in this subsection c892 6; 1979 c ; 1983 c , 1985 c ; 1989 c Stumpage values; appeal by timber owner. ( 1) Within 21 days after the stumpage value tables are adopted by the department as provided in ORS , a timber owner may appeal either. the stumpage values or any allowances of all relevant factors, or both, as listed in ORS to the Oregon Tax Court. Values modified by the court shall apply only to the complainant. Multiple appeals may be consolidated by the court. In. the event that five or more timber owners owning in. the aggregate not less than, five percent of the total forest land subject to ad valorem taxation in a single land market area, or their represen. tative organization appeals, values modified by the court shall apply to all timber owners in that market area. 2) An appeal to the Oregon Tax Court under this section shall be taken in the same manner and form as a complaint filed under ORS A timber owner shall be considered to be aggrieved by the department' s values if the timber owner owns timber in western Oregon. The court has. jurisdiction to affirm or modify the values contained in the stumpage tables adopted by the depart- ment. 3) Notwithstanding ORS ( 4), no appeal to the director is required before an appeal may be taken to the court under this section

211 REVENUE AND TAXATION 4) An appeal filed in the Oregon Tax Court pursuant to this section shall have priority over all other cases pending before the court and shall be heard and decided as soon after coming to issue as is reasonably possible. 5) If the Oregon Tax Court fails to ren- der a decision before May 1 for the valuation period January 1 to June 30, or by November 1 for the valuation period July 1 to December 31, the stumpage values adopted by the department shall be used as the stumpage values for the tables referred to in ORS until a decision is reached. If the court establishes stumpage values different from those adopted by the department, the provisions of ORS shall apply, except that no penalty shall be assessed for deficiencies attributable to changes in the stumpage values and any refund shall be payable, with interest, no later than the end of the fiscal year beginning on July 1 following the calendar year in which the court renders the decision c Note: was added to and made a part of to by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation [ Formerly , 1973 c.348 4; repealed by 1977 c Semiannual payments; determination of amount harvested; delinquency. The tax levied by ORS shall be due and payable quarterly on or before the last day of April, July, October and Jan- uary of each year for all timber harvested during the preceding calendar quarter commencing with the calendar quarter beginning January 1, 1978, and ending with the calendar quarter ending December 31, Commencing with the calendar quarter beginning January 1, 1980, and subject to the provisions related to quarterly estimated tax payments provided in ORS , the tax shall be due and payable semiannually on or before the last day of July and January of each year with respect to all timber har- vested during the preceding two calendar quarters. The amount harvested shall be determined by units of proper measurement of the kinds of timber, species, quality classes, grades and products harvested. The tax shall be delinquent if not paid by the due date or within the additional time allowed for filing under ORS ( 1) c.892 7; 1979 c Formerly ; repealed by 1973 c enacted in lieu of ) [ 1973 c ( enacted in lieu of ); repealed by 1977 c c.892 7a; repealed by 1985 c [ Formerly ; 1963 c. 109 l; 1967 c.59 l; 1973 c.348 7; repealed by 1977 c c.892 8; 1979 c.438 1; 1981 c.623 7; repealed by 1985 c Western Oregon Timber Tax Reserve Account. ( 1) The Western Oregon Timber Tax Reserve Account is established, separate and distinct from the General Fund. The Western Oregon Timber Tax Reserve Account shall consist of the following: a) The moneys transferred to the account under ORS b) The moneys transferred to the account under subsection ( 2) of this section. 2) Prior to August 20 of the fiscal year beginning July 1, 1986, and prior to August 20 of each fiscal year thereafter, the department shall determine the balance in the Western Oregon Timber Tax Reserve Account. If the balance in the Western Oregon Timber Tax Reserve Account is less than 10 percent of the average of the timber tax collections from all timber taxes imposed under ORS in the three preceding fiscal years, the department shall cause to be transferred to the Western Oregon Timber Tax Reserve Account, on a periodic basis, from the Western Oregon Timber Tax Account during the current fiscal year, 50 percent of the amount needed, as of the date of determination, to bring the balance in the Western Oregon Timber Tax Reserve Account to 10 percent of the average of the timber tax collections in the three previous fiscal years. The remaining amount needed to bring the balance in the Western Oregon Timber Tax Reserve Account to 10 percent of the average of the timber tax collections in the three preceding fiscal years shall be transferred in the next succeeding fiscal year. The transfer shall be made before the determination is made under this subsection for that next succeeding fiscal year. 3) If the balance in the Western Oregon Timber Tax Reserve Account as determined under subsection ( 2) of this section is more than 10 percent of the average timber tax collections in the three preceding fiscal years, 75 percent of the excess determined prior to August 20, 1986, and all of the ex- cess determined prior to August 20 of any year thereafter shall be transferred to the Western Oregon Timber Tax Account and shall be included in the estimates of the department made under ORS ( 2)( b) as amounts to be credited and paid as timber tax collections for the current fiscal year. 4) If, for any fiscal year, the amounts available for distribution from the Western Oregon Timber Tax Account do not equal the offsets, as determined and certified under ORS ( 3), an amount equal to the deficiency shall be transferred from the Western Oregon Timber Tax Reserve Account to

212 TIMBER TAXES the Western Oregon Timber Tax Account and shall be paid in the same manner as other moneys in the Western Oregon Timber Tax Account are distributed until each tax- ing district receives amount equivalent to its offset. for the fiscal year an 5) All moneys in the Western Oregon Timber Tax Reserve Account shall be in- vested, upon certification of the amounts available for investment in the account, as provided in ORS to , and the earnings shall be credited to the account c b; 1989 c Formerly ; 1967 c 105 7; repealed by 1977 c Western Oregon Tax Reserve Account; transitional transfers. The Western Oregon Tax Reserve Account shall be abolished at such time after May 15, 1981, as there are no funds in the account. Any funds remaining in the account after July 31, 1985, shall be transferred as follows: One - third of the account balance as of August 1, 1985, shall be transferred to the Western Oregon Timber Tax Account; and the entire account balance shall be transferred to the Western Oregon Timber Tax Reserve Account created under ORS as of August 1, Any interest accruing or paid to the Western Oregon Tax Reserve Account on or after August 1, 1986, shall be considered as interest paid or accrued to the Western Oregon Timber Tax Reserve Account. Any distribution made according to the provisions of this subsection shall not be considered a severance tax receipt for the purposes of ORS ( 3) c.892 9; 1981 ss. c 3 144, 1983 c ; [ Formerly ; repealed by 1977 e Western Oregon Timber Tax Account; allocation to districts. ( 1) The revenue from the taxes levied by ORS shall be remitted by the department to the State Treasurer who shall deposit it in a suspense account, separate and distinct from the General Fund, established under the provisions of ORS which shall be known as the Western Oregon Timber Tax Account. Interest earned on cash balances invested by the State Treasurer shall be credited to this account. Moneys are appropriated continuously for use in reimbursing the General Fund for expenses incurred in the collection of taxes imposed by ORS This ap- propriation shall be from the Western Oregon Timber Tax Account. 2) Notwithstanding the provisions of ORS , the amount of moneys necessary to pay refunds of the taxes levied by ORS is appropriated continuously to the department and shall be used by the department for the payment of all refunds of taxes levied by ORS which have been audited and approved by the department. This appropriation shall be from the Western Oregon Timber Tax Account. Any penalties, interest and taxes due from the taxpayer on account of taxes imposed by ORS shall be applied in that order in computing any refund, and only the balance due the taxpayer, if any, shall be refunded. 3)( a) The records of the department shall reflect the amount of revenue deposited in the Western Oregon Timber Tax Account which it has credited to the account of each taxing district. Subject to appropriations as provided in subsections ( 1) and ( 2) of this section and ORS and transfers required under ORS , the department shall credit the entire balance of such revenue to such districts. The amount credited to each district from the revenue collected during each calendar quarter shall be determined by allocating the revenue collected in each calendar quarter to the several western Oregon counties and then by allocating the share of each county among the several participating taxing districts within that county. Seventy -five percent of the collections shall be allocated in the proportion that the average annual harvest value of timber harvested in each county during the last five calendar years preceding the fiscal year in which the collection occurs bears to the average annual harvest value of timber harvested in all western Oregon counties during the same period. Twenty -five percent of the collections shall be allocated in the proportion that the assessed value of forest land in each western Oregon county during the preceding fiscal year bears to the assessed value of forest land in all western Oregon counties during such fiscal year. The amounts as allocated shall be apportioned and credited to each participating district in each county as fol- lows: A) Seventy -five percent thereof shall be apportioned in the proportion that the average annual harvest value of timber harvested in the district during said five years, multiplied by the average of the district's rates of levy in the ad valorem tax roll for the five preceding fiscal years, bears to the average harvest value of timber harvested in all districts in the county multiplied by the corresponding average rate of levy in each district. B) Twenty -five percent thereof shall be apportioned in the proportion that the assessed value of forest land in the district during the preceding fiscal year multiplied by the average of the district' s rates of levy in the ad valorem tax roll for the five preceding fiscal years bears to the assessed value of forest land in all districts in the

213 REVENUE AND TAXATION county multiplied by the corresponding average rate of levy in each district. b) For purposes of this subsection, the average annual harvest value of timber harvested from land classified under ORS to ( 1975 Replacement Part) as reforestation land as of July 1, 1977, shall be adjusted. The adjustment shall be computed by dividing the total severance tax rate imposed upon timber harvested from such reforestation land by six and one -half percent. The resulting factor shall be multiplied by the value of timber harvested from the reforestation lands. 4) All moneys credited to the taxing dis- tricts pursuant to subsection ( 3) of this section are continuously appropriated to the districts in whose names they are credited, and the department shall remit the full amounts including interest remaining to the credit of each district as of the 10th day of the second month following the close of each calendar quarter to the county treasurers of the respective counties in which the districts are located on or before the last day of that month, together with the department' s certification of the amount thereof which is for the credit of each such district. A working balance may be retained in the Western Oregon Timber Tax Account for the payment of administrative expenses provided by sub- section ( 1) of this section c892 10, 1979 c , 1981 c 623 9; 1985 c ; 1989 c ; 1989 c Western Oregon Timber Tax Offset Guarantee Account. ( 1) The Western Oregon Timber Tax Offset Guarantee Account is established in the General Fund. 2) The account shall consist of the moneys transferred to the account under ORS All moneys in the account shall be invested, upon certification of the amounts available for investment in the account, as provided in ORS to , and the earnings shall be credited to the account c Note: , and were added to and made a part of to by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further ex- planation Western Oregon Timber Tax Offset Guarantee Account; transfers into account. ( 1) Notwithstanding ORS )( a), one -half of the entire balance over $ 29 million, of the moneys otherwise to be cred- ited to taxing districts under ORS )( a) in , shall be transferred to the Western Oregon Timber Tax Offset Guarantee Account established under ORS ) Notwithstanding ORS ( 3)( a), one -half of the entire balance over $ 30 million, of the moneys otherwise to be cred- ited to taxing districts under ORS )( a) in , shall be transferred to the Western Oregon Timber Tax Offset Guarantee Account established under ORS ) The estimates of severance tax revenues or collections prepared under ORS ( 2) shall not include the amounts required to be transferred under subsection ( 1) or ( 2) of this section. The amounts so trans- ferred shall not be distributed to taxing dis- tricts under ORS , and shall not be used to reduce the levy of taxing districts under ORS , in the fiscal or tax year beginning July 1, 1990, or in the fiscal or tax year beginning July 1, c Note: See, note under IF' ormerly ; repealed by 1977 c Authority of taxing district to contract indebtedness. ( 1) If, notwith- standing ORS ( 4) and ( 4) and 5), and for any reason, the amount distributed to a taxing district under ORS for any fiscal year is less than the amount offset against the levy of the taxing district under ORS for the same fiscal year, the taxing district may contract indebtedness to meet current expenses by issuance of short -term promissory notes not in excess of the amount of the difference. 2) If, as determined prior to August 20 of each fiscal year, and notwithstanding ORS ( 4) and ( 4), the amount dis- tributed to any taxing district for the preceding fiscal year from the Western Oregon Timber Tax Account established under ORS does not equal its offset, as determined and certified under ORS ( 3), for the preceding fiscal year,,the difference shall be remitted to the taxing district from the Western Oregon Timber Tax Account established under ORS and amounts are continuously appropriated to the department for that purpose. Payment under this subsection shall be made in the same manner as other moneys in the Western Oregon Timber Tax Account are distributed. Amounts distributed under this subsection shall not be further offset under ORS ) Nothing in this section shall affect the authority of a taxing district to contract indebtedness under law other than this sec- tion c Note: See note under Severance tax offset against levies. ( 1) Each year when extending the levies of the taxing districts upon the assessment rolls the county assessor shall offset against the levy submitted by each taxing district an estimated amount of revenue to be raised from severance taxes imposed by

214 TIMBER TAXES ORS and correspondingly reduce the amount of the levy to be collected through extension on the tax roll for the current fis- cal year. 2)( a) Prior to January 15, 1986, and prior to January 15 of each year thereafter, the Department of Revenue shall prepare a preliminary estimate of the revenues received from all taxes levied under ORS as a result of the harvesting of timber that will be credited to taxing districts for the ensuing fiscal year. The estimate shall include an estimate of the proportion of those revenues that each taxing district will receive. The estimate shall be forwarded to the taxing unit and may be used by the taxing unit in the preparation of its budget. b) Prior to August 20 of the fiscal year beginning July 1, 1986, and prior to August 20 of each fiscal year thereafter, the Department of Revenue, on the basis of its records and other information available to the department, shall prepare a final estimate of the collections that will be credited to each taxing district as a result of the harvest of timber during the calendar quarter beginning July 1, October 1 and January 1 of the current fiscal year and shall certify the final estimates so prepared to the appropriate county treasurer for use by the county treasurer and by the county assessor both in determining the amount of revenue to be distributed to the taxing district as limited by subsection ( 6) of this section and the amount of revenue to be offset against the levy of the taxing unit under subsection ( 3) of this section. In making the estimate, the department shall take into consideration any transfers to or from the Western Oregon Timber Tax Reserve Account required under ORS ) Not later than August 20 of each year beginning on or after July 1, 1986, each county treasurer in western Oregon shall certify to the county assessor of the county the amount of-severance tax receipts then on deposit to the credit of each taxing district in the county under ORS plus an amount equal to the department' s estimate of collections that will be credited to the taxing district as a result of the harvest of timber during the calendar quarters beginning July 1, October 1 and January 1 of the current fiscal year as certified under paragraph ( b) of subsection ( 2) of this section. However, the amount on deposit each August 20 shall be deemed to include amounts payable to the treasurer. by the department not later than August 31 pursuant to ORS ( 4) even if payment has not been made by August 20. Subject to instructions from the department pursuant to subsection 4) of this section, the estimated amount of revenue to be offset against the levy of a district pursuant to subsection ( 1) of this section for the tax year beginning July 1, 1986, and each tax year thereafter shall be the amount so certified to the assessor by the treasurer. 4) Subject to ORS , if the department has reason to believe that estimates made pursuant to subsection ( 3) of this section will be greater than the revenue from severance taxes which will actually be avail- able to the taxing district in the fiscal year, it may instruct the assessor to decrease the estimate accordingly, and such corrected estimate shall be the amount offset against the levy submitted by the district pursuant to subsection ( 1) of this section. 5) Each county treasurer shall thereafter distribute the moneys on deposit on August 20 and the moneys remitted from the Western Oregon Timber Tax Account during that fiscal year, to the taxing districts to which they have been credited as certified by the department pursuant to ORS ( 4) until the total of the moneys which were thus on deposit plus the total thus remitted, or the amount offset against the levy under subsection ( 1) of this section, whichever is the lesser, has been distributed. 6) If the moneys on deposit on August 20 plus the moneys thus remitted to the treasurer and credited to a taxing district exceed the amount offset against the levy under subsection ( 1) of this section, the county treasurer shall hold such excess re- ceipts on deposit in a special account until the following year when they shall be- in- cluded in and treated as moneys on deposit on August 20 of such following year c ; 1979 c.438 2; 1985 c [ Formerly ; 1967 c ; repealed by 1977 c Timber valuation for computation of borrowing and bonding capacity of western Oregon taxing districts; com- putation of local district contribution under ORS ( 1)( a) For purposes of determining the borrowing and bonding capacities of taxing districts in western Oregon, timber shall be considered as though it remained on the tax rolls at true cash values which would produce a levy of ad valorem taxes equal to the severance taxes levied under ORS ( 1) and collected and distributed to the taxing districts in the most recent fiscal year. Such true cash value equivalent shall be determined by dividing the severance tax by the decimal equivalent of the rate of levy used in the district for ad valorem taxation and further dividing the quotient by the ratio posted under ORS

215 REVENUE AND TAXATION b) For purposes of determining the " local district contribution" under ORS for school districts in western Oregon, timber shall be considered as though it remained on the tax rolls at assessed values which would produce a levy of ad valorem taxes equal to the severance taxes levied under ORS ( 1) and collected and distributed to the taxing districts in the most recent fiscal year. Such assessed value equivalent shall be determined by dividing the severance tax by the decimal equivalent of the average of the rates of levy used in the district for ad valorem taxation in the current and the four preceding tax years. 2)( a) For purposes of paragraph ( a) of subsection ( 1) of this section, any district which has a zero rate of levy in any year shall use the true cash value or assessed value equivalent developed in the most recent year in which an ad valorem tax was levied. b) For purposes of this section, severance taxes levied under ORS ) and collected and distributed to the tax- ing districts" means the amount of severance taxes allocated to the district by the Department of Revenue exclusive of any interest which may have been earned by the county treasurer following receipt by the county treasurer of the tax revenues and the dis- tribution of such revenues. 3) When the amount computed for local distribution under ORS pursuant to this section is for a school district where all 12 grades are not operated or provided by the same district, the amount computed shall be reduced as provided in ORS ( 9) c ; 1979 c.438 3; 1981 c.677 1; 1981 c ; 1983 s. s. c 5 23, 1985 c , 1985 c [ Formerly ; repealed by 1977 c Returns; time for filing, extension. ( 1) On or before the last day of July and January, each- owner who has harvested any timber during the preceding two calendar quarters, shall prepare a return on the form prescribed by the department showing the amounts and kinds of timber harvested for the preceding two calendar quarters, the amount of tax for which the owner is liable for harvesting during the preceding two calendar quarters and such other relevant information as the department considers necessary to determine the tax due correctly and shall mail or deliver the return, together with a remittance for the unpaid balance of the tax, to the office of the department at Salem, Oregon. The return shall be signed and certified by the owner or a duly authorized agent of the owner, as provided in ORS Whenever in its judgment good cause exists, the department may allow upon written application made on or before the due date further time not exceeding 30 days for filing a return. The tax shall be delinquent if not paid by the due date which shall be determined without regard to any extension of time for filing the return. 2) All severance tax payments received under ORS to shall be credited first to penalty and then to interest accrued on the tax being paid and then to the tax. 3) An owner incurring less than $ 10 total severance tax liability under ORS to in any two calendar quarters is excused from the payment of such tax but shall be required to file a return c ; 1979 c454 3; 1981 c ; 1989 c [ Formerly ; repealed by 1977 c c ; 1981 c , 1982 s.s. 1 c 16 14, repealed by 1985 c ( Formerly ; repealed by c c ; repealed by 1985 c IFormerly ; repealed by 1977 c : 337 ( 1977 c , repealed by 1985 c ( Formerly ; 1973 c , repealed by 1977 c c ; repealed by 1985 c c.706 4, 1983 c ; repealed by 1985 c [ Formerly ; 1973 c ; repealed by 1977 c c.706 5; 1983 c ; 1983 c ; repealed by Land designations; classifications; certain elections by landowners. For the purposes of ORS to : 1) All land in western Oregon valued as forest land for ad valorem tax purposes on January 1, 1977, shall retain that classification for the purposes of ORS to unless it is specifically excluded from the provisions thereof or unless it is removed from that classification as provided in ORS or is no longer land the highest and best use of which is forest land ) Land designated as forest land pursuant to ORS to ( 1975 Replacement Part) shall retain the original date of such designation. 3) Lands classified as reforestation lands as of July 1, 1977, pursuant to ORS to ( 1975 Replacement Part) shall be considered to have been designated as forest land from the date of original classification as reforestation lands. Any lands so classified prior to February 1, 1972, shall be presumed to have been designated not earlier than February 1, 1972, for the purposes of back taxes imposed by ORS

216 TIMBER TAXES ) Pursuant to the election of the owner, as provided in section 45, chapter 892, Oregon Laws 1977, land which, as of January 1, 1977, was designated under the provisions of ORS to shall be considered to have been designated as forest land for the purposes of ORS to from the date of the original designation under those provisions.- Any lands so designated prior -to January 1, 1972, shall be presumed to have been designated not earlier than January 1, 1972, for the purposes of back taxes imposed by ORS ) Land in western Oregon described in OIj.S ( 1)( d), which as of January 1, 1977, was designated as forest land pursuant to ORS or classified as reforestation lands pursuant to ORS to Replacement Part) may upon application of,the owner filed prior to January 1, 1978, be classified and assessed pursuant to ORS , to , commencing as of January 1, 1978, without the imposition of either, the adjustment tax provided in ORS ( 1977 Replacement Part) or the additional tax provided in ORS ( 4) c ; 1975 c ; 1981 c Impact on valuation of change from farm use assessment to forest land designation. ( 1) Subject to subsection ( 3) of this section, land that is changed under ORS from special assessment at true cash value for farm use under ORS ( 1) or 2) to special assessment as forest land under ORS to , at the election of the owner made under rules adopted by the Department of Revenue, shall not be valued under ORS , , and 321: 357 for the assessment year of the change and years thereafter in which such special forest land assessment is in effect for the land, but,shall be valued under ORS , if. a)- The land has been assessed under ORS ( 1) or ( 2) for at least the 10 consecutive years immediately prior to the year for which the change is first effective; b) The planting of the timber takes place after October 15, 1983, and qualifies for the current assessment- year for special assessment.as forest land under ORS ( 2); c) The timber on the land is of an average age of less than 40 years; and d) The land is held by an owner having a total ownership of forest land in western Oregon not in excess of 2,000 acres, as determined under subsection ( 4) of this section. 2) If. land described in subsection ( 1) of this section was classified as reforestation land under ORS to ( 1975 Replacement Part) on July 1, 1977, the percentage provided in ORS shall be applied to the value determined under subsection ( 1) of this section. 3) If timber on land valued under subsection ( 1) of this section reaches, for any assessment year, an average age of 40 years or more, this section shall cease to apply. However, without application and without any additional tax, interest or penalty, the land shall for that assessment year and for each year thereafter for which the land is qualified, be valued under ORS , , and ) In, computing a forest land owner' s acreage. for purposes of subsection ( 1) of this section, all of the owner's forest land, as defined in ORS , in western Oregon shall be included. As used in this subsection, total ownership" includes ( a) forest land and ( owned by the owner individually; b) forest land owned by any corporate or other group owner in which the owner holds a share of ownership of 10 percent or more. No owner may have forest land valued under subsection ( 1) of this section if the owner, or any individual having a share in the owner, has a spouse, brother, sister, ancestor or lineal descendant who is an owner, or who holds a share in an owner having forest land valued under subsection ( 1) of this section. However, the county assessor may grant exceptions to this requirement if the owner satisfactorily demonstrates that the combination of ownership with the indicated relatives arose from bona fide business reasons other than a desire to circumvent the 2, 000 acre limitation imposed under subsection ( 1) of this section c ( Formerly ; 1973 c , repealed by 1977 c Western Oregon forest land assessment; standards; certification values to assessors; appeals of values by certain taxpayers. ( 1) Notwithstanding ORS , for the, assessment years 1978 and 1979, forest land in western Oregon shall be assessed at true cash value for forest use on the basis of January 1, 1977, assessed values, established pursuant to ORS ( 1975 Replacement Part), adjusted by the percentage change in the average stumpage value of young growth Douglas fir timber, classes B, C and D, in the market area in which the forest land is located. For the assessment year 1980, the assessed value of forest land shall be its 1978 value, adjusted by a moving average percentage change calculated pursuant to subsection ( 2) of this section for the year 1979, and then further adjusted by the percentage increase in the state -wide assessed value computed for all other property in the manner provided by the first sentence of ORS ( 2) ( 1983 Replacement Part). For each assessment year after 1980, the of

217 REVENUE AND TAXATION value of forest land shall be the previous year' s value as adjusted by the moving average percentage change calculated under subsection ( 2) of this section. 2)( a) Each year, the department shall determine a percentage change in the average stumpage value of young growth Douglas fir timber, classes B, C and D, for the current and two preceding years when compared with a similar calculation made in the previous year. For the year 1978, the percentage change shall be determined by using the av- erage for 1975, 1976 and 1977 and the average for 1976, 1977 and For purposes of obtaining, the averages required by this sub- section: A) In computing the increase or decrease in stumpage value for any year after 1979, the stumpage values established as of October 1 under ORS for severance tax purposes shall be used. B) The standards for classes B, C and D shall be the standards used by the department for valuing timber under ORS Replacement Part). b) For assessment years beginning on or after January 1, 1981, and prior to January 1, 1984, the moving average percentage change under paragraph ( a) of this subsection shall not be greater than the percentage increase in the state -wide assessed value computed for all other property in the manner provided by the first sentence of ORS ( 2) ( 1983 Replacement Part). 3) For purposes of determining forest land values pursuant to subsections ( 1) and 2) of this section, forest land in western Oregon shall be divided into those market areas as the department shall establish by rule. 4) Prior to March 1 of each year, the department shall determine and certify to the appropriate county assessor the true cash values of forest land as provided in subsections ( 1) to ( 3) of this section. Except as provided in subsection ( 7) of this section, the county assessor shall use the value so certified in the preparation of the assessment and tax rolls of the county for the tax year and for each tax year thereafter. 5) At any time after the certification of values pursuant to subsection ( 4) of this section, but not later than March 20, five or more taxpayers owning in the aggregate not less than five percent of the total forest land acreage subject to ad valorem taxation in a single land market area may appeal any or all of the values in that area directly to the director of the department by filing a joint petition with the director in the manner provided for appeals from orders of the county boards of equalization. Notice of the appeal shall be made in each county having values affected by the appeal, either by personal service by certified mail on each taxpayer affected, or by publication made once a week for two consecutive weeks in a newspaper of general circulation in the county. The notice shall designate the values appealed, and include a statement of the provisions of subsection ( 6) of this section. The petition shall designate one of the group as the representative of all, and all proceedings before the department and any appeal from its determination shall be conducted procedurally as though the designated representative were the only petitioner. Unless the right to a hearing is waived by stipulation of the designated representative and the department, the hearing on the appeal shall be held not earlier than 15 days nor later than 45 days after the filing of the petition. The order of the director on the appeal shall be issued not later than 60 days following the filing of the petition and if not issued within that time, the relief requested in the petition shall be deemed to have been denied. The group, by and through its representative, may appeal to the Oregon Tax Court by filing a complaint with the tax court within 30 days after a copy of the order has been served on the representative or within 90 days from the filing of the petition with the director if the director fails to issue an order. Except as provided in this subsection, an appeal to the tax court shall be taken and heard in the same manner as is provided with respect to appeals from orders of the director in property tax cases. 6) If the tax court increases or reduces any of the values under appeal, the decree of the court shall apply to the valuation of all forest land in the designated market area for that year. An appeal may be taken to the Oregon Supreme Court from the decree of the tax court. Unless changed upon appeal to the Supreme Court, the tax court determination shall be binding upon the depart- ment and upon each assessor and taxpayer affected by such determination of value. 7) If an appeal is made to the tax court under this section, and the decision of the court is not rendered on or before the next September 1, the higher of (a) the value asserted by the representative group or ( b) the comparable value used in arriving at the true cash value of forest land on the assessment and tax rolls for the prior tax year shall be used in computing the true cash value of those forest land values that are based on the value under appeal. 8) The tax court and Supreme Court on appeal shall hear and determine appeals under subsections ( 5) to ( 7) of this section expeditiously as may be appropriate for the

218 TIMBER TAXES timely and orderly completion of the assessment process for the assessment year, under appeal. 9) All other appeals from the application of the forest land values certified by the department under subsection ( 4) of-this section shall be taken in the time and manner otherwise provided by law for such property tax appeals c ; 1979 c.437 1; 1981 c.428 l; 1881 c ; 1985 c [ Formerly , 1973 c ; repealed by 1977 c Value of forest land classified as of July 1, 1977, as reforestation land. Notwithstanding ORS , , and , the true cash value of forest land in eastern and western Oregon classified as of July 1, 1977, as reforestation land under ORS to ( 1975 Re- placement Part) shall be determined by multiplying its value determined under ORS , , and , whichever are applicable, by a percentage. The percentage applied for the assessment year 1978 shall be five percent. For each assess- ment year thereafter, and until the percent- age applied reaches 100 percent, the percentage applied shall be five percent more than the percentage applied for the preceding assessment year. [ 1977 c a; 1981 c Application for designation as forest land; contents; approval. ( 1) An owner of land desiring that it be designated as forest land shall make application to the county assessor on or before April 1 following the assessment date on which special as- sessment as forest land is first desired, and the owner may also do so within 30 days of receipt of notice of its assessment as omitted property or notice of an increase in its true cash value, or by December 15 of the year of increased assessment if the owner does not receive the notice. 2) The application shall be made upon forms prepared by the Department of Revenue and supplied by the county assessor, and shall include the following: a) A description of all land the applicant desires to be designated as forest land. b) Date of acquisition. c) Whether ' the land is being - held or used for the predominant purpose of growing and harvesting trees of marketable species. d) Whether there is a forest management plan for it. e) If so, whether the plan is being implemented, and the nature and extent of im- plementation. f) Whether the land is used for grazing. g) Whether the land has been platted under ORS chapter 92. h) Whether the land is timberland subject to ORS chapter 477, and if it is not, the reasons therefor. i) Whether the land, or any of it, is subject to a lease or option which permits it to be used for any purpose other than the growing and harvesting of trees. 0) A summary of past experience and activity of the applicant in growing and harvesting trees. k) A summary of current and continuing activity of the applicant in growing and harvesting trees. L) A statement that the applicant is aware of the potential tax liability involved when the land ceases to be designated as forest land. m) An affirmation that the statements contained in the application are true. 3) The county assessor shall approve an application for forest land designation if the assessor finds that the land is properly classifiable as forest land. The county assessor shall not find land properly classifi- able as forest land if a) The application states the land is not being- held or used for the predominant purpose of growing and harvesting trees of marketable species; or b) Subject to the provisions of ORS , the land does not substantially meet minimum stocking or acreage requirements under rules adopted by the department. Otherwise, the determination whether the land is properly classifiable as forest land shall be made with due regard to all relevant evidence and without any one or more items of evidence necessarily being determinative. 4) The application shall be deemed to have been approved unless, within three months of the date such application was delivered to the assessor or prior to July 1, whichever is later, the assessor shall notify the applicant in writing of the extent to which the application is denied. [ Formerly ; 1981 c ; 1983 c ; 1983 c.657 2; 1989 c Removal of designation; exceptions; appeal from reassessment or denial; requalification. ( 1)( a) When land has once been designated as forest land ei- ther as a result of an application being filed therefor or through the application of ORS ( 3) or ( 4), it shall be valued as such until the assessor removes the forest land designation under paragraph ( b) of this sub- section. b) The county assessor shall remove the forest land designation upon:

219 REVENUE AND TAXATION A) Notification by the taxpayer to the assessor to remove the designation; B) Sale or transfer to an ownership making it exempt from ad valorem property taxation; C) Discovery by the assessor that the land is no longer forest land; or D) The act of platting the land under ORS chapter 92. c) Within 30 days after removal of a designation of forest land, the assessor shall so notify in writing the taxpayer and shall specify the reasons for the removal. d) Paragraph ( b) of this subsection does not apply to any forest land that ceases to be devoted to forest land use because it is transferred to a government entity in exchange for other forest land located within the State of Oregon. 2) A taxpayer whose application filed under ORS has been denied in whole or in part, or a taxpayer whose forest land has had the designation thereof removed in whole or in part, may appeal to the Department of Revenue within the time and in the manner provided in ORS chapter ) If, under subparagraph ( D) of paragraph ( b) of subsection ( 1) of this section, the county assessor removes the forest land designation upon the act of platting the land, the land, or a part of the land, may be requalified for forest land designation upon: a) Payment of all additional tax, interest or penalty that remains due and owing on the land; b) Submission by the owner of an appli- cation for designation as forest land as provided in ORS to ; c) Meeting all of the qualifications for designation as forest land as provided in ORS to ; and d) Meeting the requirements, if any, of applicable local government zoning ordinances with regard to minimum lot or parcel acreage for forest use. [ Formerly ; 1983 c ; 1983 c.563 2; 1985 c a; 1987 c Note: The amendments to by section 5, chapter 174, Oregon Laws 1987, do not apply after January 1, 1992 See section 8, chapter 174, Oregon Laws The text is set forth for the user' s convenience ( 1)( a) When land has once been designated as forest land either as a result of an application being filed therefor or through the application of ORS ) or ( 4), it shall be valued as such until the assessor removes the forest land designation under paragraph ( b) of this subsection. b) The county assessor shall remove the forest land designation upon: A) Notification by the taxpayer to the assessor to remove the designation; B) Except as provided in paragraph ( e) of this subsection, sale or transfer to an ownership making it exempt from ad valorem property taxation, C) Discovery by the assessor that the land is no longer forest land, or 92. D) The act of platting the land under ORS chapter c) Within 30 days after removal of a designation of forest land, the assessor shall so notify in writing the taxpayer and shall specify the reasons for the removal. d) Paragraph ( b) of this subsection does not apply to any forest land that ceases to be devoted to forest land use because it is transferred to a government entity in exchange for other forest land located within the State of Oregon e) The county assessor shall not remove the forest land designation from land when that land is transferred to the Director of Veterans' Affairs or while the land is held by the Director of Veterans' Affairs 2) A taxpayer whose application filed under ORS has been denied in whole or in part, or a taxpayer whose forest land has had the designation thereof removed in whole or in part, may appeal to the Department of Revenue within the time and in the manner provided in ORS chapter ) If, under subparagraph ( D) of paragraph ( b) of subsection ( 1) of this section, the county assessor removes the forest land designation upon the act of platting the land, the land, or a part of the land, may be requalified for forest land designation upon: a) Payment of all additional tar, interest or penalty that remains due and owing on the land; b) Submission by the owner of an application for designation as forest land as provided in ORS to , c) Meeting all of the qualifications for designation as forest land as provided in ORS to ; and d) Meeting the requirements, if any, of applicable local government zoning ordinances with regard to minimum lot or parcel acreage for forest use c ; 1969 c ; 1973 c ; repealed by 1977 c Redesignation as forest land after removal in certain years due to platting. Land that has been removed from forest land designation under ORS to for the 1981, 1982 or 1983 assessment years solely because the land is included in a subdivision platted and recorded under ORS chapter 92 est land if: may be redesignated as for- 1) The owner submits an application for forest land designation under ORS to ; and 2) The land meets all the qualifications for forest land designation under ORS to c Notation of forest land on tax roll for potential additional tax liability. The tax roll shall show the notation " Forest Land - Potential Additional Tax Liability" for each parcel of land designated as forest land by the assessor upon application of the owner or by the application of ORS ) or ( 4). That notation shall not be made with respect to parcels of undesignated forest land c

220 TIMBER TAXES State Forester report on forest lands failing minimum stocking; review of management plan; declassification and reclassification. ( 1) The State Forester shall report to each county assessor in western Oregon on or before February 28, 1989, the locations in accordance with subsection ( 3) of this section of all lands designated as forest lands under ORS which were logged prior to 1973 and are suitable for the growing and harvesting of timber, that fail to meet the minimum stocking required un- der ORS to The State Forester shall not include in such report any land for which the owner shows just cause as to why acceptable stocking levels have not been achieved and has provided an acceptable management plan for achieving the required stocking levels within a reasonable period of time. 2) At any time the State Forester has reason to believe that the forest land is. not being managed as forest land, the State Forester shall review the owner' s management plan and inspect the property. If the State Forester then determines the land is not being managed in accordance with a plan which makes provision for: ( a) Regeneration of all suitable nonstocked land; ( b) protection from fire, insects, disease, animal damage, undesirable vegetative competition; and ( c) final harvest, the State Forester shall advise the owner of any deficiency and county assessor. notify the 3) The county assessor, upon receipt of the report from the State Forester for any legal subdivision of 20 acres or more or any tax lot of lesser size under subsection ( 1) of this section or notice under subsection ( 2) of this section, shall cease to treat such lands as forest land under ORS to and shall value such lands under ORS and ) When the owner of forest land declared ineligible for forest land taxation under this section provides satisfactory information to the State Forester of subsequent action taken to correct the deficiency resulting in the disqualification of land, or provides an acceptable management plan to correct such deficiency, the State Forester shall so indicate to the county assessor. The assessor shall then assess the land under ORS , if the land is otherwise qualified for such assessment c a; 1979 c , 1983 c.669 l; 1987 c Additional tag upon removal of forest land designation; attachment of lien; payment. ( 1) If and when the desig- nation of forest land is removed pursuant to ORS from any parcel of designated forest land, there shall be added to the tax extended with respect to such property on the next tax roll an amount equal to five times ( or such lesser number of times, corresponding to the number of years of forest land designation of such property) the total amount by which the taxes assessed against the land would have been increased if it had been valued without such designation during the last year in which such designation was in effect for the land. 2) When the designation of forest land is removed as a result of a sale or transfer described in ORS ( 1)( b)( B), the lien of such increased taxes described in subsection ( 1) of this section shall attach as of the date preceding such sale or transfer. 3) The amount determined to be due pursuant to subsection ( 1) of this section may be paid to the tax collector prior to completion of the next general property tax roll, pursuant to ORS c ; 1979 c ; 1983 c ; 1985 c Notice of appeal of forest land value; form of notice. For any assessment year beginning on or after January 1, 1982, for which the value of forest land in western Oregon is determined under ORS ( 7), the county assessor or tax collector shall notify the owner of each affected parcel of the appeal of the forest land value, and that additional taxes may be assessed if the court determines that the value of the forest land is greater than the value placed upon the assessment and tax rolls. The notice may be on or accompany the tax statement, or may be mailed to the owner by separate mailing within 30 days before or after the tax state- ment is mailed. If the notice is on the tax statement, the words " forest land value under appeal - potential additional tax liability" or other similar phrase shall be considered to meet the requirements of this section. If an owner owns more than one parcel of forest land in the county, and the notice is given by separate mailing, only one notice need be given to that owner c.428 3; 1985 c c ; repealed by 1985 c Reports by seller or purchaser of privately owned timber; reports by purchasers of private and public log purchases. ( 1) Any seller or purchaser in an arms - length transaction of privately owned timber located within western Oregon shall, within 30 days after the sale or purchase of the timber, report the particulars of the sale or purchase to the department. The particulars that must be reported shall be those designated by rule of the department and shall be relevant to the valuation of stumpage. The report shall be made on forms provided by the department. 2) On or before September 1 of each year, purchasers of logs shall report private

221 REVENUE AND TAXATION log purchases from timber harvested from within western Oregon for the first six months of that calendar year to the department as prescribed by rule of the department. On or before March 1 of each year, purchasers of logs harvested from within western Oregon shall report private log purchases for the second six months of the preceding calendar year to the department. 3) On or before September 1 of each year, purchasers of logs. shall report public log purchases from timber harvested within western Oregon- for the first six months of that calendar year to the department under rules adopted by the department. On or before March 1 of each year, purchasers of logs harvested from within western Oregon shall report public log purchases for the second six months of the preceding calendar year to the department under rules adopted by the de- partment. 4) Any seller or purchaser who fails to report a sale or purchase as required under subsection ( 1) or ( 2) of this section shall be liable for a penalty of $1, 000 for each failure to report, which shall be assessed and collected in the manner provided in ORS and c Confidentiality of reports submitted under ORS ( 1) Particulars of timber and log sales or purchases, reported to the department under ORS , shall be confidential records of the department. Those records shall be available to the State Forestry Department, the Legislative Revenue Officer, or authorized representatives of the Legislative Revenue Officer, for the purpose of preparation of reports, estimates and analyses required by ORS to , and to the authorized agents of the Federal Government and the several states on a reciprocal basis where the Federal Government and states have a provision of law which provides confidentiality meeting or exceeding that provided by this section. 2) Violation of subsection ( 1) of this section is subject to a fine not exceeding 5, 000 or, if an officer or employee of the state, dismissal or removal from office or employment, or both fine and dismissal or removal from office or employment. 3) Notwithstanding subsection ( 1) of this section, if stumpage value tables are appealed to the Oregon Tax Court under ORS , the department may disclose to the court any information received under ORS that the department collected in determining the stumpage values under appeal c provides: Note: Section 7, chapter 1083, Oregon Laws 1989, Sec. 7. The department shall collect data and information needed to evaluate other methods of valuing timber for purposes of ORS to and shall report its evaluation in findings and recommendations to the Joint Interim Committee on Revenue and School Finance prior to the Sixty -sixth Legislative Assembly c Application of disqualification penalties to certain land. ( 1) ORS and the amendments to ORS , and by sections 5 to 7, chapter 887, Oregon Laws 1989, apply to assessment years beginning on or after January 1, 1990, and to timber harvested on or after January 1, ) Nothing in the amendments to ORS , or by sections 5 to 7, chapter 887, Oregon Laws 1989, shall be construed to subject any land to the disqual- ification penalties imposed under ORS or or other law. However, if land described in ORS ( 1)( e), as amended by section 5, chapter 887, Oregon Laws 1989, becomes disqualified for special assessment at true cash value for farm use on or after January 1, 1990, or on or after that date is changed to assessment under another law under ORS and is thereafter declassified or disqualified for special assessment, then any years prior to 1990 for which special assessment under a law listed under ORS ( 2) was in effect for the land shall be included in determining the disqualification or declassification penalty as otherwise provided by law. 3)( a) If on January 1, 1990, or upon any date thereafter, land is or becomes land described under ORS ( 1)( e) and the land' is not located within an exclusive farm use zone, the owner shall make application for special valuation as farm use land in the manner provided under ORS , as follows: A) If the change in use takes place on or after July 1, the owner shall file the application on or before April 1 of the following year. B) If the change in use takes place prior to July 1, the owner shall file the application on or before August 1 of the same year b) If an application is filed as provided under this subsection, the owner shall have seven years beginning with the first year of classification to meet the income requirements of ORS and need not meet the two -year farm use requirements of ORS ( 2) c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 321 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation

222 TIMBER TAXES EASTERN OREGON SEVERANCE TAX Definitions for ORS to As used in ORS to , unless the context requires otherwise: 1) " Eastern Oregon" means that portion of the state lying east of a line beginning at the intersection of the northern boundary of the State of Oregon and the western boundary of Wasco County, thence south along the western boundaries of the counties of Wasco, Jefferson, Deschutes and Klamath to the southern boundary of the State of Oregon. 2) " Department" means the Department of Revenue. 3) " Forest land" means forest land as defined in ORS ) " Harvest" means the point at which timber that has been cut, severed, or removed for purposes of sale or use is first measured in the ordinary course of business as determined by reference to common practice in the timber industry. 5) " Owner" means any individual or combination of individuals, partnership, firm, corporation or association of whatever na- ture holding title to harvested timber by vir- tue of- a) An instrument of conveyance; b) The harvesting of the timber; or c) The harvesting of the timber and payment therefor. 6) " Timber" means all logs which can be measured in board feet and other forest products as determined by department rule. 7) " Taxpayer" means the owner of timber at time of harvest c ; 1971 c.654 7; 1983 c ; 1985 c Legislative findings; purpose of ORS to ( 1) It is hereby found that: a) Multiple taxation through yearly ad valorem levy on trees utilized in sustained yield timber operations discourages conservation, private ownership and investment of capital. b) The interests of the state, its citizens and future citizens are best served by sustained yield practices which preserve, our forest resources for commerce, recreation and watersheds, stabilize employment levels and prevent large population shifts. c) Timber under sustained yield management should be treated as a crop. d) A tax at time of harvest recognizes the hazards and uncertainties involved in growing timber on a sustained yield basis and distributes these proportionately to the citizens' tax share. e) That portion of our state lying east of the summit of the Cascade Mountains differs greatly in forest tree types, soils, cli- mate, growing conditions and topography from western Oregon. f) Eastern Oregon forests predominate in Ponderosa pine and associated species, while western Oregon forests predominate in Douglas fir and associated species. g) Timber cutting in eastern Oregon is conducted on a tree selection basis with few virgin whereas timber stands remaining, block cutting and virgin timber stands figure prominently in western Oregon timber oper- ations., 1, - -,..,: 1 2) It is the purpose of ORS to to establish for eastern Oregon timber a severance tax in lieu of the ad valorem real property tax on a basis which does not discriminate in favor of either eastern or western Oregon but which recognizes the foregoing findings c Scope of ORS to ; effect on other taxes. ( 1) Lands assessed by the Department of Revenue pur- suant to ORS to and and ' the timber thereon shall not be subject to the provisions of ORS to ) The tax imposed under the provisions of ORS to shall be additional to that levied under the provisions of ORS to and to ) Timber on timberland which is exempt from the ad valorem real property tax shall be. exempt from the severance tax imposed by ORS to ) Land used exclusively for growing cultured Christmas trees, and- the cultured Christmas trees growing thereon, as defined in ORS , shall not be subject to the provisions of ORS to and to ) Nothing contained in ORS to shall prevent: a) The collection of ad valorem property taxes which became a lien against timber prior to July 1, b) The collection of taxes, charges or assessments made pursuant to law for pro- tection. c) The collection of taxes levied under the provisions of ORS to and to c.627 5; 1963 c.60 1; 1977 c ; 1983 c Exemption of eastern Oregon timber from general ad valorem tax; as- sessment of timber land by county assessors. ( 1) All timber in eastern Oregon shall be exempt from levy and collection of the general ad valorem real property tax and

223 REVENUE AND TAXATION in lieu thereof, there is imposed on such timber a severance tax as set forth in ORS to ) Beginning January 1, 1972, and each year thereafter, forest land shall be appraised by the various county assessors and such forest land shall continue to, be assessed and taxed in accordance with ORS to c 627 3, 1963 c 225 1; 1971 c Severance tax imposed on eastern Oregon timber; additional severance tax on certain timber; rate; measurement of amount harvested. ( 1) All owners of timber in eastern Oregon shall pay a severance tax of five percent of the immediate harvest value of merchantable quantities of timber harvested. The immediate harvest value shall be determined as provided in ORS The amount harvested shall be determined by the Scribner Decimal Scale C or other prevalent measuring practice adjusted to arrive at substantially equivalent measurements. 2) In addition to the severance tax imposed by subsection ( 1) of this section,. all owners of timber in eastern Oregon shall pay a severance tax on the immediate harvest value of merchantable timber harvested from land designated as reforestation land pursuant to ORS to ( 1975 Replacement Part), as of July 1, The rate of the tax shall be seven and one -half percent on the immediate harvest value of merchantable timber harvested in For each calendar year thereafter, the rate shall be one - quarter percent less than the rate imposed for the preceding calendar year, until for the calendar year 2008, the additional rate imposed by this subsection shall be zero. 3) The receipts from the tax imposed by subsection ( 2) of this section for the first calendar quarter of 1978 shall be held by the Department of Revenue for distribution until the appraised values are adjusted pursuant to ORS ( 1975 Replacement Part) as of July 1, c.627 4; 1977 c al Determination of immediate harvest values; application by areas. ( 1) The department shall determine on or before August 1 of each year the immediate harvest values to be used during the fiscal year beginning July 1 in computing the severance tax imposed by ORS The values shall be determined for each species or subclassification, as provided in subsections ( 2) and 3) of this section, and shall be expressed in terms of a dollar amount per thousand board foot or other unit measure. The total listing of values shall be combined into a convenient set of tables issued by the department in duplicate. One copy shall be delivered to the Secretary of State, and the other copy shall be retained on file in the office_ of the de- partment. 2) The department shall select various areas in eastern Oregon which shall be treated as units for the application of the immediate harvest values determined under this section. The department shall determine unit values for immediate harvest for each species in each area, except that for Ponderosa pine the department may make further value classifications based on age, size and other relevant factors. The area's shall be selected, within the discretion of the department based on administrative feasibility, to include timber having similar growing and marketing conditions. The detei-minatiori of the size and location of appropriate sreas shall not be subject to review by the courts. 3) As used in this section, " immediate harvest value" means the amount, that each species or subclassification of timber would sell for at a voluntary sale made in the ordinary course of business for purposes of im- mediate harvest. Such value shall be determined by methods which make reason- able and adequate allowances for age, size, quality, growing conditions, costs of removal, accessibility to point of conversion, market conditions and all other relevant factors c.627 4a; 1983 c 563 3; 1985 c Elective tax calculation; net stumpage recovery procedures. ( 1) An owner who harvests less than 500, 000 board feet of timber in the calendar year and Ao, during the 12 -month period immediately preceding the due date of the severance ;tax',seturn, is not engaged in and does not have an ownership interest of more than' 10 percent in a business engaged iii the processing of timber into wood products, may elect to, cal: culate and pay a tax on the basis of net stumpage recovery from such forest land rather than by use of the tables prepared' iii accordance with ORS ) For purposes of this section, " net stumpage recovery" means the selling price of the logs at a conversion center in an arm's length transaction, less the costs described in one of the following paragraphs: a) The logging costs reflected by a, written agreement entered into in connection with the logging operation. The department may analyze the agreement and adjust, the contract price to eliminate costs paid by the owner for work or material not.' connected with logging, log hauling costs and marketing the timber b) Administration, logging and log hauling costs typical for the type of -harvest as determined by the department. 3) The department may require such proof from the owner as it deems necessary

224 TIMBER TAXES to determine the amount of stumpage recov- ery and eligibility for the alternate calculation of the tax provided in this section c Payment of tax-, filing of returns; order of crediting payments; payment of tax under $5 excused. ( 1) Subject to the provisions related to quarterly estimated tax payments provided in ORS , the tax shall be due and payable semiannually on or before the last day of July and January of each year with respect to all timber harvested during the preceding two calendar quarters. Timber shall be considered harvested for purposes of this sub- section at the time when in the ordinary course of business the quantity of timber harvested is first definitely determined. The tax shall be delinquent if not paid by the due date which shall be determined without regard to any extension of time for filing the return. 2) On or before the last day of July and January, each owner shall make out a return on the form prescribed by the department showing, the amount of tax for which the owner is liable for the preceding two calendar quarters and such other relevant infor- mation as the department considers necessary to correctly determine the tax due and shall mail or deliver the return, together with a remittance for the unpaid balance of the tax, to the office of the department at Salem, Oregon. The return shall be signed and verified by the owner or a duly authorized agent of the owner, as provided in ORS Whenever in its judgment good cause exists, the department may allow upon written application made on or before the due date further time not exceeding 30 days for filing a return. 3) All payments received under ORS to shall be credited first to penalty and then to interest accrued on the tax being paid and then to the tax. 4) Owners incurring less than $ 5 total tax liability under ORS to in any reporting period are excused from the payment of such tax but shall be required to file a return c.627 6, 1963 c 86 l; 1979 c.454 6; ; 1989 c c ; 1975 c ; 1977 c ; ; 1982 s.s. 1 c ; 1983 c.563 4; repealed by [ 1961 c.627 8; 1981 c ; repealed by c ; 1981 C ; 1983 c ; ; repealed by c ; repealed by 1981 c c ; 1977 c ; repealed by c ; 1983 c ; repealed by 1985 c c ; 1965 c.6 13; 1967 c ; repealed by 1977 c Collection of tax and effect of paying tax pending appeal. ( 1) No proceeding for the collection of the taxes provided for in ORS to shall be stayed by reason of the taking or pending of any appeal, except under order of the court and only in those cases wherein a good and sufficient undertaking has been executed in favor of the department and approved by the court covering the entire amount of the tax, interest and penalties imposed and any and all costs that may be involved. The undertaking shall be filed with the clerk of the court. 2) The payment of taxes while appeal is pending shall -not operate as a waiver of the appeal or the right to a refunding of taxes found to be excessively determined c [ 1961 c ; repealed by 1985 c Eastern Oregon Timber Tax Account; deposit of tax revenues; refunds; credits and remittances to counties. ( 1) The revenue from the taxes levied by ORS to shall be remitted by the department to the State Treasurer who shall deposit it in a suspense account, separate and distinct from the General Fund, established under the provisions of ORB which shall be known as the Eastern Oregon Timber Tax Account. Interest earned on cash balances invested by the State ' Measurer shall be credited to this account. Moneys are appropriated continuously for use in reimbursing the General Fund for expenses incurred in the collection of taxes imposed by ORS to The appropriation shall be from the Eastern Oregon Timber Tax Account. 2) Notwithstanding the provisions of ORS , the amount of moneys necessary to pay refunds of the taxes levied under ORS to is appropriated con= tinuously to the department from the sus- pense account referred to in subsection ( 1) of this section, and shall be used by the department for the payment of all refunds of taxes levied under ORS to which have been audited and approved by the department. Any penalties, interest and taxes then due from the taxpayer shall be applied in that order in computing any refund, and only the balance due the taxpayer, if any, shall be refunded. 3) Subject to subsections ( 1) and ( 2) of this section, the records of the department shall reflect each county' s credit which shall be proportionate to the total credit in the same proportion that each county' s total appraised timber valuation bears to the total appraised timber valuation for eastern

225 REVENUE AND TAXATION Oregon. Appraised valuations of timber for purposes of ORS to shall be those determined in accordance with the provisions of ORS ( 1961 Replacement Part), as adjusted by the department, or with the department' s approval, as of July 1 of each year. After July 1, 1964, however, the appraised values as of that date shall serve as the basis for the allocation of severance tax revenues under ORS to , except that readjustments in such appraised values shall be made annually for the purpose of subtracting or adding the appraised valuations of timber on reforestation lands which have been on or before July 1 of each year classified or declassified and for the purpose of subtracting or adding the appraised valuations of timber which before July 1 of each year has been transferred into or out of ownerships exempt from taxation. 4) All moneys and interest earned thereon credited to the counties pursuant to subsection ( 3) of this section are contin- uously appropriated to the counties in whose names they are credited, and the full amounts remaining to the credit of each county as of the 10th day of the second month following the close of each of the calendar quarters designated in ORS shall be remitted to the county treasurers of the respective counties on or before the last day of that month. Remittances shall be made by the Department of Revenue from the suspense account referred to in subsection 1) of this section. A working balance may be retained in the Eastern Oregon Timber Tax Account for the payment of administrative expenses provided by subsection ( 1) of this section c ( 1), ( 2), ( 3) and -(5); 1963 c.86 2; 1971 c.408 2; 1981 c 623 8; 1985 c , 1989 c c ( 4); 1963 c 86 3; 1979 c.438 6; repealed by 1985 c ( 1961 c ; repealed by 1971 c c , repealed by 1971 c c ; 1963 c 86 4; repealed by 1971 c c , 1965 c ; repealed by 1971 c County treasurer to furnish amounts of distributions from Eastern Oregon Timber Tax Account; county assessors to reduce tax levies by amount certified; apportionment to taxing units. 1) Not later than August 20 of each fiscal year, each county treasurer in eastern Oregon shall certify to the county assessor of the county the amount of severance tax receipts then on deposit plus an amount equal to 50 percent of the receipts from the severance tax in the preceding year. Each county assessor shall apply the amount so certified to reduce the property tax levy of taxing units within the county as provided in subsections ( 2) to ( 4) of this section. 2) The county assessor shall first allocate such anticipated receipts to the various taxing units having appraised timber valuations established under ORS ( 3) in the same proportion which the computed property tax on timber in such unit bears to the total computed property tax on timber in all units within the county. As used in this subsection, " computed property tax on timber" means the amount of property tax in dollars which would have been imposed on the appraised valuation of timber in the unit in the current fiscal vear if timber were not exempted from ad valorem taxation by ORS , but were included in the computation of a rate percent of levy extended against timber as well as other property within the unit. 3) The county assessor shall subtract from the levy submitted by each taxing unit the amount of anticipated receipts allocated to it pursuant to subsection ( 2) of this section and shall extend on the assessment role in each case no more than the remainder as the taxing unit's levy for the current fiscal year. 4) Immediately upon extension of the tax levy as provided in ORS , the county assessor shall certify to the county treasurer the amounts which have been apportioned to the various taxing units within the county. The county treasurer shall thereafter distribute the moneys on deposit on August 20 and the moneys remitted to the county treasurer from the Eastern Oregon Timber Tax Account for tax quarters of that fiscal year, to the taxing units in proportion to the total amounts certified to the county treasurer by the county assessor until the total amounts remitted or the total amounts so certified, whichever is the lesser, have been distributed. 5) If the amounts received by the treas- urer under subsection ( 4) of this section are greater than one -half of the previous year' s county severance tax share, the county treasurer shall hold such excess receipts in a special account until they are certified and apportioned under subsections ( 1) to ( 4) of this section c ; 1971 c Apportionments not to be included as anticipated receipts. Amounts of offset moneys apportioned to the various taxing units under. ORS shall not be included as anticipated receipts in the budgets of the taxing units c c ; 1963 c 86 5; repealed by 1971 c c ; 1967 c ; repealed by 1971 c

226 TIMBER TAXES GENERALLY Notice of intent to harvest; rules; effect of failure to file notice. ( 1) No person shall cut, sever or remove or cause to be cut, severed or removed any timber from land in Oregon without first having notified the State Forester in writing with a copy to the department on forms prepared by the State Forester and the department of intent to harvest pursuant to ORS to , to , to and to ) The notification shall specify where and when the harvest will take place and the nature of the harvest and shall include maps and other data as required by the State Forester and the department. The department shall establish by rule procedures to assure the receipt of the tax returns sent out or a report of nonharvest from the owner. The department shall conduct field and office au- dits to ascertain the correctness of any tim- ber tax return. 3)( a) If, on or after October 3, 1989, a person fails to file a written notice as required in subsection ( 1) of this section with respect to any harvest over 5,000 board feet, the department shall notify the person. If, after the person has been notified, the person fails to file a written notice as required in subsection ( 1) of this section with respect to any subsequent harvest, over 5,000 board feet, there' shall be added to the amount of the timber tax required to be shown on the return as a result of the subsequent harvest a delinquency penalty of $250 for each violation occurring within a calendar year. The department shall collect the penalty in the same manner as other taxes are collected. b) No penalty shall be imposed under this subsection if a penalty for failure to file the notice with the State Forester has been imposed under ORS c) The delinquency penalty shall first be added to either the western Oregon forest land and severance tax imposed under ORS to , or the eastern Oregon severance tax imposed under ORS to , if either tax is applicable to the harvest. If neither.tax is applicable, the de- linquency penalty shall be added to the forest products harvest tax imposed under ORS to c.759 2, 1989 c Audit of returns; interest and penalties. ( 1)( a) The provisions of ORS chapters 305 and 314 as to the audit and examination of reports and returns, determination of deficiencies, assessments, claims for refund, conferences, appeals to the director of the department and appeals to the Oregon Tax Court, and the procedures relating thereto, shall apply to the determination of taxes, penalties and interest imposed under ORS to , to , to or to , except where the context requires otherwise. b) In addition, on or before August 31 of the year of determination, any owner may appeal to the Oregon Tax Court, other than to the small claims division, for the revision of a harvest value for an area determined pursuant to ORS Also, an owner may utilize the procedure respecting appeals to the small claims division of the Oregon Tax Court as provided in ORS to ) If a taxpayer fails to file a return re -' quired by ORS , to or to , or fails to pay a tax at the time the tax becomes due, there shall be added to the amount of tax required to be shown on the return a delinquency penalty of five percent of the amount of such tax. 3) If the failure to file a return continues for a period in excess of three months after the due date, there shall be added to the amount of tax required to be shown on the return a failure to file penalty of 20 percent of the amount of such tax. This penalty is in addition to the delinquency penalty imposed by subsection ( 2) of this section. 4) If all or any part of the delinquency or deficiency for which a determination is made is due to fraud or an intent to evade the provisions of ORS to , to , to or to or the rules adopted thereunder, a penalty of 100 percent of such delinquency or deficiency shall be added, plus interest at the rate established under ORS for each month, or any fraction thereof, computed on the full amount of the delinquency or deficiency plus penalty, from the time the return was due. 5) For purposes of this section, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be lawfully claimed upon the return ) A delinquent tax or a deficiency shall bear interest at the rate established under ORS for each month, or any fraction thereof, from the time the return was due. Formerly Warrant for collection of delinquent taxes. ( 1) If any tax imposed by ORS to , to , to or to , or any portion of such tax, is not paid within

227 REVENUE AND TAXATION 30 days after the date that the written notice and demand for payment required. under ORS is mailed, the department may issue a warrant, directed to the sheriff of any county of the state, commanding the sheriff to levy upon and sell the real and personal property of the taxpayer owning the same, found within that county, for the payment of the amount of the tax, with the added penal- ties, interest and cost of executing the war- rant, and to return the warrant to the department and to pay to it the money collected from the sale, within 60 days after receipt of the warrant. A copy of the warrant shall be mailed or delivered to the taxpayer by the department at the taxpayer' s last known address. 2) The sheriff shall, within five days after the receipt of the warrant, record a copy with the county clerk, and the clerk shall immediately enter in the County Clerk Lien Record the name of the taxpayer mentioned in the warrant, and the amount of the tax or portion of the tax and penalties for which the warrant is issued and the date when the copy is recorded. The amount of the warrant so recorded shall become a lien upon the title to and interest in real property' of the taxpayer against which it is issued, in the same manner as a judgment duly docketed. The sheriff immediately shall proceed upon the warrant in all respects, with like effect, and in the same manner prescribed by law in respect to executions issued against property upon judgments of a court of record, and shall be entitled to the same fees for services in executing the warrant, to be added to and collected as a part of the warrant liability. 3) In the discretion of the department a warrant of like terms, force and effect may be issued and directed to any agent authorized to collect this tax. In the execution of the warrant, such agent has the powers conferred by law upon sheriffs, but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty. 4) If a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes against the taxpayer as if the state had a recorded judgment against the taxpayer for the amount of the tax. [ Formerly ; 1989 c Effect of failure or refusal to make return. If any taxpayer neglects or refuses to make a return required to be made by ORS to , to , to or to the department is authorized to determine the tax due, based upon any information in its possession or that may come into its possession. The department shall give the tax- payer written notice of the tax and delinquency charges and the tax and delinquency charges shall be a lien from the time of severance. If the tax and delinquency charges are not paid within 30 days from the mailing of the notice, the department shall proceed to collect the tax in the manner provided in ORS IFormerly Tax as lien on forest products. The taxes imposed by ORS to , to , to or to shall operate as a first lien on the forest products from the time of harvest. The lien shall follow the forest products in the same manner as provided for liens on logs under ORS and to , and may be attached and be foreclosed in the manner provided in those statutes. [ Formerly Tax as debt; collection; limitation. All taxes, interest and penalties due and unpaid under ORS to , to , to or to shall constitute a debt due the State of Oregon and may be collected, together with interest, penalty and costs, by appropriate judicial proceeding, which remedy is in addition to all other existing reme- dies. However, no proceeding for the collection of taxes under ORS to , to , to or to shall be instituted after the expiration of six years from the date such taxes were due. ( Formerly c ; 1963 c.60 2, 1967 c ; 1975 c745 1, repealed by 1977 c Enforcement of ORS to rules. ( by department; 1) ORS to , to , to and to shall be en- forced and the taxes imposed by ORS to , to , to and to shall be col- lected by the department which shall have the power to prescribe forms and to adopt rules for the ascertainment, assessment and collection of the taxes imposed by ORS to , to , to or to ) For the purpose of determining the taxes imposed by ORS to , to , to or to , the department may: a) Require any person to furnish any information deemed necessary. b) Examine the books, records and files of such person. c) Subpoena and examine witnesses and administer oaths. d) Enter upon and inspect the land of any owner of the land from which any timber has been harvested. ( Formerly

228 TIMBER TAXES c 659 l; repealed by 1977 c ( 1961 c ; repealed by 1977 c ( Formerly part of ; repealed by 1977 c ( Formerly part of ; 1973 c.237 1; 1977 c , 1977 c b; renumbered ( Formerly part of ; 1971 c 684 5, 1977 c ; 1977 c ; 1977 c c; renumbered c.659 4; 1965 c ; 1967 c.93 4; 1967 c ; renumbered , , and ( Formerly part of 32100, repealed by 1977 c c 639 7( 1), ( 3), repealed by 1977 c c , repealed by 1977 c c 659 6( 2), repealed by 1977 c ( 1961 c 659 7( 2); repealed by 1977 c ; 1977 c c659 8; repealed by 1977 c c ), ( 2), ( 3), ( 4) and ( 5); repealed by 1977 c c 659 5( 6); 1975 c.636 1; repealed by 1977 c c ( 7), ( 8); 1967 c. 78 6; repealed by 1977 c c ( 9); 1965 c. 6 14; 1967 c. 78 7; repealed by 1977 c c.659 5( 10); 1963 c60 3; repealed by 1977 c c.659 5( 11), repealed by 1977 c c ( 12); repealed by 1977 c c659 5( 13); 1963 c ; repealed by 1977 c Confidentiality of reports and returns filed under ORS , , and Except as otherwise specifically provided by law, it shall be unlawful for the Department of Revenue or any officer or employee, of the department to divulge or make known in any manner the amount of the, tax or any particulars set forth or disclosed in any report or return required to be filed under ORS , , and It shall be unlawful for any person or entity to whom information is disclosed or given by the department pursuant to subsection ( 2) of ORS ( 2) or any other provision of state law to divulge or use such information for any purpose other than that specified in the provisions of law authorizing the use or disclosure. No subpoena or judicial order shall be issued compelling the department or any of its offi- cers or employees, or any person who has acquired information pursuant to ORS ( 2) or any other provision of state law, to divulge or make known the amount of tax or any particulars set forth or disclosed in any report or return except where the taxpayer' s liability for timber tax is to be adjudicated by the court from which such process issues. As used in this section, " offi- cer," " employee" or " person" includes an authorized representative of the officer, employee or person, or any former officer, employee or person, or an authorized representative of such former officer, em- ployee or person c Authority of department to make certain disclosures. ( 1) ment may: The depart- a) Furnish to any taxpayer or authorized representative, upon request of the taxpayer or authorized representative, a copy of the taxpayer' s timber tax return filed with the department for any year, or a copy of any report filed by the taxpayer in connection. with the return. b) Publish a list of taxpayers who are entitled to unclaimed tax refunds. c) Publish statistics classified so as to prevent the identification of taxable value or any particulars contained in any report or return. d) Disclose a taxpayer' s name, address and social security number or employer identification number to the extent necessary in connection with the processing and mailing of forms for any report or return required in the administration of ORS , , and e) Disclose names and addresses of taxpayers filing under ORS ( 4) and to Oregon State University pursuant to surveys and programs related to forest management. 2) The department also may disclose and give access to information described in ORS to: a) The Commissioner of Internal Revenue or authorized representative, for tax purposes only. b) The United States Forest Service, Bureau of Land Management and the State Forestry Department pursuant to their regulatory programs and for investigative purposes related to timber theft. c) The Attorney General, assistants and employees in the Department of Justice or other legal representative of the State of Oregon, to the extent the department considers disclosure or access necessary for the performance of the duties of advising or representing the department pursuant to ORS , , and d) Employees of the State of Oregon, other than the Department of Revenue or Department of Justice, to the extent the department considers disclosure or access necessary for such employees to perform their duties under contracts or agreements between the department and any other department, agency or subdivision of the State of

229 REVENUE AND TAXATION Oregon in the department' s administration of the tax laws. e) The Legislative Revenue Officer or the authorized representative upon compliance with ORS Such officer or representative shall not remove from the premises of the department any materials that would reveal the identity of any taxpayer or any other person or the volume of harvest and value reported on individual re- turns and reports. f) Any agency of the State of Oregon, or any person, or any officer or employee of such agency or person to whom disclosure of access is given by state law and not oth; erwise referred to in this section, including but not limited to the Secretary of State as Auditor of Public Accounts under section 2, Article VI of the Constitution of the State of Oregon. 3) Each officer or employee of the department and each person described or referred to in paragraphs ( b) to ( f) of subsection ( 2) of this section to whom disclosure or access to the tax information is given under subsection ( 2) of this section or any other provision of state law, prior to beginning employment or the performance of duties involving such disclosure or access, shall be advised in writing of the provisions of ORS and relating to pen- alties for the violation of ORS , and shall, as a condition of employment or per- formance of duties, execute a certificate for the department, in a form prescribed by the department, stating in substance that the person has read these provisions of law, that the person has had them explained and that the person is aware of the penalties for the violation of ORS c. 1o Penalty for violation of ORS Violation of ORS is subject to a fine not exceeding $ 5, 000 or, if an officer or employee of the state, dismissal or removal from office or employment, or both fine and dismissal or removal from office or employment c WESTERN OREGON SMALL TRACT OPTIONAL TAX Definitions for ORS to As used in ORS to , unless the context requires otherwise: 1) " State Forester" means. the, State Forester or the authorized representative of the State Forester. 2) " Western Oregon" means that portion of the state lying west of a line beginning at the intersection of the northern boundary of the State of Oregon and the western boundary of Wasco County, thence south along the western boundaries of the counties of Wasco, Jefferson, Deschutes and Klamath to the southern boundary of the State of Oregon. 3) " Forest -land" means land which, in the judgment of the State Forester, is suitable for the production of timber or cultured Christmas trees and is being utilized primarily for that purpose. Forest land often contains isolated openings which, because of rock outcrops, river wash, swamps, chemical conditions of the soil, brush and other like conditions prevent adequate stocking of such openings for the production of trees of a marketable species. If such openings in their natural state are necessary to hold the surrounding forest land in forest use through sound management practices, they are deemed forest land. Forest land does not in- clude buildings, structures, machinery, equipment or fixtures erected upon, under or above the soil, but does include roads described in ORS Land used exclusively for growing cultured Christmas trees shall include that portion of such lands under buildings supporting accepted farming practices, areas used in the loading and sorting of Christmas trees and access roads used in the management of Christmas tree lands. 4) " Timber" means wood growth, mature or immature, growing or dead, standing or down. 5) " Owner" means any individual, part- nership, corporation or association of what- ever nature, owning both the forest land and any timber thereon. trees: 6) " Cultured Christmas trees" means a) Grown on lands used exclusively for that purpose capable of preparation by intensive cultivation methods such as plowing or turning over the soil; b) Of a marketable species; c) Managed to produce trees meeting U. S. No. 2 or better standards for Christmas trees as specified by the Agriculture Marketing Service of the United States Depart- ment of Agriculture; and d) periodic maintenance Evidencing practices of shearing for Douglas fir and pine species; weed and brush control and one or more of the following practices: Basal pruning, fertilization, insect and disease control, stump culture, soil cultivation, irrigation c.714 l; 1977 c ; 1977 c.893 la; 1979 c Legislative findings; purpose of ORS to It is the purpose of ORS to to provide an optional method of ad valorem taxation for certain owners of forest land in western Oregon which will tax the land alone at its productivity value. It is hereby found that

230 TIMBER TAXES the normal system of taxing both the land and the increasing value of the growing timber tends to force those smaller owners with predominantly young growth holdings to harvest their timber before it has properly matured because of the constantly increasing taxes imposed on the timber and the lack of sufficient annual income from mature timber to meet the overall tax burden. The optional tax provided by ORS to is intended to make it possible for such owners to hold their timber to the proper rotation age c Administration by State Forester; rules and regulations; publicizing-, report to legislature. ( 1) The State Forester may provide rules and regulations for the classification of forest land under ORS to and prescribe the form of any required statements and reports. 2) The State Forester shall take appropriate action to bring to the attention of forest landowners the possibilities and effects of classification under ORS to ) The State Forester shall submit a report to each regular session of the Legisla- tive Assembly of the values per acre determined by the State Forester under ORS ( 1) c , 1975 c Determination of true cash value of forest land classified under ORS to ; exemption of timber from separate assessment. Notwithstanding ORS or any other provision of law: 1) Forest land in western Oregon classified under the provisions of ORS to shall be appraised by the county assessor of the county within which the land is located at a true cash value per acre for purposes of ORS in accordance with the site class assigned to the land. The State Forester shall determine a true cash value per acre for each site class as defined in ORS by using an income approach that capitalizes the average annual net income over a rotation age including periodic and final harvests. In using the income approach, the capitalization rate shall be 17 percent. The income approach used in determining the value per acre of the forest land shall be based upon the following factors: a) The volume of timber or quantities of related products that each site class may be expected to produce under reasonable and prudent levels of resource management using Staebler' s gross yield and mortality tables for fully stocked stands of Douglas fir; b) A rotation age consistent with the site class and with prudent management practices; c) Thinning and other periodic harvest volume and value including final harvest; d) Current immediate harvest value of the timber volume to be derived from all harvests; and e) Costs of growing the timber volume through the final harvest. 2) The true cash values determined under subsection ( 1) of this section shall first apply to the January 1 assessment date for which the application for classification of the land is made with the State Forester under ORS The site class used in subsection ( 1) of this section shall be the average- site class certified for the land by the State Forester. 3) Timber on forest land classified under ORS to shall be exempt from separate ad valorem taxation c ; 1969 c 326 5; 1975 c.617 1; 1977 c ; 1977 c.893 3; 1979 c.787 1; 1985 c Reduction of true cash value. The true cash value per acre for each site class determined by the State Forester under ORS ( 1) shall be reduced as follows: Assessment Date Percent Reduction January 1, % January 1, % January 1, % January 1, % January 1, % January 1, 1981, and thereafter None c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 321 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation Eligibility of forest land for classification; eligible owners. ( 1) Subject to subsections ( 2) to ( 4) of this section, owners of forest land in western Oregon may elect to have such land classified under ORS to if- a) The forest land is not used for uses which are incompatible with the cultivation of timber thereon, as determined in accordance with generally accepted principles of good forestry; b) The size of timber on the forest land that predominates is not in excess of eight inches in diameter, breast high, outside the bark or the average age of timber on the forest land is not in excess of 40 years. However, forest land bearing timber of a predominate size of eight inches or less or of an average age of 40 years or less when classified may continue under such classification until the average age of the timber

231 REVENUE AND TAXATION reaches 90 years. If the State Forester determines that the forest land proposed to be classified consists of areas of substantially different size or age classes, the State Forester may consider each area separately and determine a predominant size or age of timber for each such area for purposes of this subsection; c) The land is being held or used for the predominant purpose of growing and harvesting trees of marketable species and such trees are well distributed over the area to be classified: and d) The land meets the minimum forest management standards established by rule by the State Forester, or if the owner has a plan approved by the State Forester for meeting those standards. 2) Only owners having a total ownership of forest land in western Oregon in excess of 10 acres but not in excess of 2, 000 acres shall be entitled to classify forest land under this section. In computing an owner's acreage for purposes of this subsection, total ownership shall be included even though portions of the forest land of the owner may not be eligible for classification under subsection ( 1) of this section. As used in this subsection, " total ownership" includes ( a) forest land owned by the applicant owner individually and ( b) any forest land owned by any corporate or other group owner in which the applicant owner holds a share of ownership of 10 percent or more. 3) An owner may classify all or a portion of the lands that are eligible for classi- fication under ORS to However, if the owner elects to classify only a portion of the lands eligible for classifica- tion, the owner must either: a) Classify all of the eligible lands that are contained in each tax lot that contains any lands proposed to be classified; or b) Furnish an adequate legal description of the lands that the owner desires classified to the State Forester and to the county assessor. As used in this paragraph, " adequate legal description" means a legal description which the State Forester and the county assessor may use to locate the forest land and determine its acreage without un- due difficulty. 4) No owner may.have forest land classified under ORS to if such owner, or any individual having a share in an owner, has a spouse, brother, sister, ancestor or lineal descendant who is an owner, or holds a share in an owner, having forest land classified under ORS to However, the State Forester may grant exceptions to this requirement where the ap- plicant satisfactorily demonstrates that the combination of ownerships with the indicated relatives arose from bona fide business reasons other than a desire to circumvent the 2, 000 -acre limitation imposed by this section c.714 4; 1969 c.326 1; 1971 c ; 1975 c , 1977 c ; 1979 c.553 2; Exceptions from minimum acreage requirements of ORS for certain lands. Notwithstanding the minimum acreage requirement imposed by ORS ( 2), owners with 10 acres or less of land that is classified under ORS to as of the July 1, 1977, assessment date shall remain classified until the land is removed from such classification as provided in ORS However, land described in this section shall not be removed from classification upon transfer of ownership if the sole reason for the removal is that the new owner has a total ownership of forest land in western Oregon of 10 acres or less c Application for classification; certification by State Forester; affidavits of continuing eligibility; false statements. 1) An owner of forest land eligible for classification under ORS to may apply to the State Forester for a determination and certification to that effect. Applications shall be made on or before April 1 of the assessment year for which classification is first desired or in the calendar year previous to the calendar year for which classification is first desired. Application shall be made on appropriate forms supplied by the State Forester, and shall include the following: a) A description of all land the applicant desires to be classified under ORS to b) Date of acquisition. c) Whether the land is being held or used for the predominant purpose of growing and harvesting trees of marketable species, including cultured Christmas trees. d) Whether the land has been subdivided or a plat has been filed under ORS e) Whether a permit has been granted for harvesting for excepted the Oregon Forest Practices Act. purposes under f) Whether the land, or any of it, is subject to a lease or option which permits it to be used for any purpose other than the growing and harvesting of trees. g) A statement that the applicant is aware of the potential tax liability involved when the land ceases to be classified under ORS to h) An affirmation that the statements contained therein are true.

232 TIMBER TAXES ) The State Forester, in determining whether the application submitted under subsection ( 1) of this section should be approved, shall weigh the relevant evidence submitted on the application form required by subsection ( 1) of this section to determine if the land meets the eligibility requirements under ORS to ) If the State Forester determines that an applicant' s land is eligible for classification under ORS to , the State Forester shall so certify to the county assessor or assessors of the county or counties in which the land that is the subject of the classification is located and the land shall be classified under ORS to as of the January 1 of the first assessment year for which the application applies. A copy of such certification shall be sent to the applicant. 4) Certifications made under this section shall include the average site class of the forest land certified. Whenever appropriate in making such determination, the State Forester may split the area being certified into smaller areas for the application of different average site classes. 5) In the event the application submitted under subsection ( 1) of this section is not or cannot be made acceptable to the State Forester, the State Forester' shall not classify the land. Any adverse ruling by the State Forester under this section shall be made within 90 days of the receipt of the applica- tion. 6) If an owner has forest land classified under-this section, the owner shall notify the State Forester by mail not later than the 30th day after any change of land use or ownership. 7) No person shall make any false statement in any application, statement or report made under this section. [ 1961 c ; 1967 c.619 $ 1; 1969 c 326 2; 1971 c.684 2; 1977 c ; 1979 c.553 3; 1985 c Review of classified land by State Forester; notice of deficiencies; declassification. ( 1) The State Forester shall review all classified lands periodically, but in any event not less than once in every five years, to insure that the lands are managed in accordance with the minimum forest management standards described in ORS In the event that the State Forester finds that the owner of classified lands is not complying with Forester shall: ORS , the State a) Notify the owner in writing of the specific deficiencies in forest management practices to be corrected. b) Allow the owner a reasonable time, as determined by the State Forester, to cor- rect the deficiencies in forest management practices. In fixing a reasonable time, the State Forester shall consider available materials, equipment and the season of the year. 2) If; after notice under subsection ( 1) of this section is given, the State Forester determines that management of the land continues to fail to meet minimum management standards under ORS , and that the deficiencies which were the subject of the notice have not been corrected within the time specified in the notice, the State Forester shall declassify the land pursuant to ORS ( 1)( b). [ 1977 c , 1979 c c ; 1963 c , 1965 c 371 1, 1967 c 619 2, 1969 c ; repealed by 1979 c Assessment roll and tax roll to show potential additional tax liability. The assessment roll and the tax roll shall show " potential additional tax liability" for each parcel of land classified under ORS to c Application fees. ( 1) With each application for classification of forest land under ORS , the owner shall pay to the State Forester a fee for inspection by the State Forester of the lands proposed to be classified. The fee is $ 2 for acreages under 100; $ 5 for acreages of 100 to 500; and $ 7.50 for acreages over ) All fees collected by the State Forester under subsection ( 1) of this section shall be paid by the State Forester into the State Treasury within 30 days after col- lection, and shall be placed by the State Treasurer to the credit of the General Fund to be available for general governmental ex- penses c ; 1967 c Assignment of "site class"; redeterminations. ( 1) Forest land shall be assigned to one of the following average site classes, for purposes of the certification un- der ORS , according to the estimated total height of the dominant and codominant trees on the land at 100 years of age: a) Site I feet. b) Site feet. c) Site III feet. d) Site [ V feet. e) Site V feet ) The growth standards for site class determination specified in subsection ( 1) of this section shall apply to Douglas fir sites. In the case of other species, the State Forester may apply the standards specified in subsection ( 1) of this section or, if in the opinion of the State Forester such standards are not appropriate for a particular species, the State Forester may adopt different

233 REVENUE AND TAXATION standards which are demonstrated to the satisfaction of the State Forester to be more appropriate for establishing five corresponding site classes for the species involved. 3) Site classes assigned under subsections,( 1) and ( 2) of this section may be changed thereafter by the State Forester upon the initiative of the State Forester, or upon request of an owner, if further investigation reveals that the estimates forming the basis of the site class determination were inaccurate. Any such redetermination of site class shall be certified immediately to the county assessor c Application of severance tax to harvest of timber on small tract. ( 1) Notwithstanding ORS ( 2), ( 3) or any other law, if land or a portion of land is classified or is changed to the classification granted under ORS to for ad valorem property tax purposes on or after October 15, 1983, and the land or por- tion would have failed to qualify for such classification or change except for the amendments to ORS by section 1, chapter 745, Oregon Laws 1983, then if, within five years after January 1 of the first assessment year for which classification is granted timber is harvested from the land, ORS to shall apply to the harvest of the timber with the exception of cultured Christmas trees. 2) Nothing in this section shall be construed to affect any determination made as to classification or declassification of land under ORS to or designation or removal of land from designation under ORS to c c714 11, 1963 c.582 2; 1965 c371 2; 1971 c.684 3; 1977 c ; repealed by 1979 c c ; 1963 c ; repealed by 1979 c Declassifications. ( 1) The State Forester shall certify to the owner involved, and to the appropriate county assessor or assessors, the removal from classification of any forest land previously classified under ORS to when: a) The owner requests such declassification in writing. An owner may request declassification for all or a portion of the forest lands that are classified under ORS to However, if the owner requests declassification of only a portion of the classified forest land, the owner must either: A) Request declassification of all of the forest lands that are contained in each tax lot that contains any forest lands for which declassification is requested; or B) Furnish an adequate legal description of the land which the owner desires be declassified to the State Forester and to the county assessor. As used in this subparagraph, " adequate legal description" means a legal description from which the State Forester and the county assessor may locate the forest land requested to be declassified and determine its acreage without undue difficulty. b) The State Forester determines, after investigation, that the forest land is no longer entitled to classification under ORS to )( a) Forest land shall be declassified upon sale or transfer to an ownership mak- ing it exempt from ad valorem property taxation. Except as provided by this paragraph, the sale or transfer to a new owner or the transfer by reason of death of a former owner to a new owner shall not operate to declassify the land so long as the land continues to meet all of the eligibility require- ments under ORS and , except that the land need not meet the requirement that the predominant size of timber on the forest land be eight inches in diameter, breast high, outside the bark or of an average age of less than 40 years. However, the assessor shall county notify the State Forester if a sale or transfer of the forest land occurs for the purpose of determining the continued eligibility of the forest land for classification under ORS to The State Forester shall notify the county assessor in writing of the finding within 90 days after the date the county assessor' s notice is mailed or delivered. b) The lien for increased taxes and interest on land declassified shall attach on the day preceding a sale or transfer of the land making it exempt from ad valorem taxation or on the day preceding a sale or transfer that follows or is connected with a division of the land that results in its declassification. 3) Upon declassification there shall be added to the tax extended against the land, on the next property assessment and tax roll, to be collected and distributed in the same manner as ad valorem taxes on real property, an amount equal to the sum of a) An additional tax in the amount of five times ( or such lesser number of times, corresponding to the number of years of small tract optional tax classification applicable to the property) the total amount by which the taxes assessed against the land would have been increased if it had been valued without regard to ORS during the last year in which the special classification was in effect for the forest land; b) The amount of severance taxes which would have been payable under ORS to , during the five years immediately preceding such extension on the tax roll; and

234 TIMBER TAXES c) Interest on the amounts of taxes added pursuant to paragraph ( b) of this sub= section at the rate of six percent a year from the date at which such increased taxes would have been payable if the forest land had been valued without regard to ORS )( a) Declassifi cations certified under this section shall take effect as of the date that the notice of declassification is sent by certified mail or delivered by the State Forester to the owner. If the declassification is effective before July 1 of the current assessment year, the declassification shall apply for the current assessment year. However, if the declassification is effective on or after July 1, classification,shall continue for the current assessment year and declassification shall apply for the assess- ment year beginning the 1. following January b) A notice of declassification mailed or delivered under this section shall inform the owner- of the land of ORS and the opportunity, if qualified to do so, to change to classification or designation under one of the other special assessment laws listed in ORS The notice shall be in lieu of any further notice required under ORS ( 5) and shall contain the information required in a notice given under ORS ). 5) The amount determined to be due un- der subsection ( 3) of this section may be paid to the tax collector prior to completion of the next general property tax roll, pursuant to ORS ) No additional tax shall be imposed under paragraph ( a) or ( b) of subsection ( 3) of this section if: a) The forest land or portion thereof that is declassified is designated as forest land at the election of the owner pursuant to ORS ( 4) and section 45, chapter 892, Oregon Laws If the land is later removed from designation under ORS to , however, the land shall be subject to the back taxes imposed by ORS in the manner provided in ORS ( 4) ( re- lating to computation of the period of classi- fication as designated forest land). b) The land is changed to assessment under ORS or pursuant to ORS If the land is later removed from special assessment as farm or forest land, however, the additional tax or penalty under ORS ( 4) shall apply. ( 1961 c ; 1969 c.326 4; 1971 c.684 4, 1975 c.617 7; 1977 c ; 1977 c a; 1979 c350 16; 1979 C553 5a; 1981 c , 1981 c ; 1983 c.745 2; 1985 c Note: The amendments to by section 6, chapter 174, Oregon Laws 1987, do not apply after January 1, See section 8, chapter 174, Oregon Laws The text is set forth for the user' s convenience ( 1) The State Forester shall certify to the owner involved, and to the appropriate county assessor or assessors, the removal from classification of any forest land previously classified under ORS to when: a) The owner requests such declassification in writing. An owner may request declassification for all or a portion of the forest lands that are classified under ORS to However, if the owner requests declassification of only a portion of the classified forest land, the' owner must either: A) Request declassification of all of the forest lands that are contained in each tax lot that contains any forest lands for which declassification is requested; or B) Furnish an adequate legal description of the land which the owner desires be declassified to the State Forester and to the county assessor As used in this subparagraph, " adequate legal description" means a legal description from which the State Forester and the county assessor may locate the forest land requested to be declassified and determine its acreage without undue difficulty. b) The State Forester determines, after investigation, that the forest land is no longer entitled to classification under ORS to )( a) Except as provided in paragraph ( c) of this subsection, forest land shall be declassified upon sale or transfer to an ownership making it exempt from ad valorem property taxation. Except as provided by this paragraph, the sale or transfer to a new owner or the transfer by reason of death of a former owner to a new owner shall not operate to declassify the land so long as the land continues to meet all of the eligibility requirements under ORS and , except that the land need not meet the requirement that the predominant size of timber on the forest land be eight inches in diameter, breast high, outside the bark or of an average age of less than 40 years. However, the county assessor shall notify the State Forester if a sale or transfer of the forest land occurs for the purpose of determining he continued eligibility of the forest land for classification under ORS to The State Forester shall notify the county assessor in writing of the finding within 90 days after the date the county assessor' s notice is mailed or delivered. b) The lien for increased taxes and interest on land declassified shall attach on the day preceding a sale or transfer of the land making it exempt from ad valorem taxation or on the day preceding a sale or transfer that follows or is connected with a division of the land that results in its declassification. c) Forest land shall not be declassified upon transfer of the land to the Director of Veterans' Affairs or while the forest land is held by the Director of Veterans' Affairs. 3) Upon declassification there shall be added to the tax extended against the land, on the next property assessment and tax roll, to be collected and distributed in the same manner as ad valorem taxes on real property, an. amount equal to the sum of: a) An additional tax in the amount of five times or such lesser number of times, corresponding to the number of years of small tract optional tax classification applicable to the property) the total amount by which the taxes assessed against the land would have been increased if it had been valued without regard to ORS during the last year in which the special classification was in effect for the forest land; b) The amount of severance takes which would have been payable under ORS to , during the five years immediately preceding such extension on the tax roll; and

235 REVENUE AND TAXATION c) Interest on the amounts of taxes added pursuant to paragraph ( b) of this subsection at the rate of six percent a year from the date at which such increased taxes would have been payable if the forest land had been valued without regard to ORS )( a) Declassifications certified under this section shall take effect as of the date that the notice of declassification is sent by certified mail or delivered by the State Forester to the owner. If the declassification is effective before July 1 of the current assessment year, the declassification shall apply for the current assess. ment year. However, if the declassification is effective on or after July 1, classification shall continue for the current assessment year and declassification shall apply for the assessment year beginning the following January 1. b) A notice of declassification mailed or delivered under this section shall inform the owner of the land of ORS and the opportunity, if qualified to do so, to change to classification or designation under one of the other special assessment laws listed in ORS The notice shall be in lieu of any further notice required under ORS ( 5) and shall contain the information required in a notice given under ORS ( 5). 5) The amount determined to be due under subsection ( 3) of this section may be paid to the tax collector prior to completion of the next general properly tax roll, pursuant to ORS ) No additional tae shall be imposed under paragraph ( a) or ( b) of subsection ( 3) of this section if- a) The forest land or portion thereof that is declassified is designated as forest land at the election of the owner pursuant to ORS ( 4) and section 45, chapter 892, Oregon Laws If the land is later removed from designation under ORS to , however, the land shall be subject to the back tares imposed by ORS in the manner provided in ORS ( 4) ( relating to computation of the period of classification as designated forest land). b) The land is changed to assessment under ORS or pursuant to ORS If the land is later removed from special assessment as farm or forest land, howe,.er, the additional tae or penalty under ORS ( 4) shall apply Appeals. ( 1) Any owner affected by a determination of the State Forester made under ORS to may appeal to the State Board of Forestry under such rules as it may adopt. A suit to set aside any decision of the board may be taken within 60 days of the decision to the Oregon Tax Court in the manner provided for ad valorem property tax cases under ORS chapter ) On or before March 1 of the assessment year for which a determination is made, any owner affected by a determination of true cash value per acre for a site class made by the State Forester under ORS ( 1) may appeal to the State Board of Forestry for a revision of the true cash value per acre for the site class. The appeal shall be made under such rules as the State Board of Forestry may adopt. A suit to set aside a decision of the board may be taken within 30 days of the decision to the Oregon Tax Court in the manner provided for ad valorem property tax cases under ORS chapter 305. [ 1961 c ; 1965 c. 6 15; 1977 c870 60; 1977 c a; 1979 c c.617 5; repealed by 1977 c Change from timber assessment to special open space use assess- ment. ( 1) Land specially assessed under any of the special assessment laws listed in ORS ( 2) for an assessment year beginning on or after January 1, 1982, shall be changed to special open space use assessment under ORS to if- a) Application for special open space use assessment is or has been made under ORS ; b) The land qualifies for such special open space use assessment; c) The application for special open space use assessment is or has been approved under ORS and ; d) The open space use is for a golf course open to the general public with or without payment of fee or charge; and e) All or a portion of the land is within or is contiguous to an urban growth boundary as defined in ORS ) Land described in subsection ( 1) of this section shall not, upon the change from farm or forest use to open space use, be sub- ject to any of the additional taxes, penalties or interest ordinarily applicable when land specially assessed under one of the special assessment laws listed under ORS ( 2) is disqualified, declassified or otherwise removed from such special assessment. 3) When land that has been changed from special assessment as farm or forest land to special open space use assessment under subsections ( 1) and ( 2) of this section is later withdrawn or otherwise removed from such open space use assessment, all the provisions of ORS to shall apply except that there shall be added to the amount of additional taxes imposed under ORS or and computed under ORS ( 3), the amount of the additional taxes, interest and penalties that, except for subsections ( 1) and ( 2) of this section, would have been added at the time of the change. However, in making the computation of the amount to be added under this subsection, the number of years specified in ORS , , , ( 3)( a) and ( b), or , whichever is applicable, shall be reduced by the number of continuous years of open space use assessment in effect for the land pursuant to the change. At the time of the change to open space use and each year thereafter, the assessor shall determine and note upon the assessment and tax rolls the added amount of potential additional taxes, if any, that may become due under this subsection

236 TIMBER TAXES ) For purposes of ORS and in construing any other provision of ORS to , the amount of additional taxes, interest and penalties added under subsection ( 3) of this section shall be treated as additional taxes imposed under ORS or ) Upon receipt of any application for special open space use assessment under ORS to , in addition to the notice required under ORS , the pub- lic official or agency shall notify the owner of the provisions of this section c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 321 or any series therein by legislative action. See Preface to Oregon Revised Statutes fot fur- ther explanation. SPECIAL ASSESSMENT OF FOREST LANDS Definitions for ORS to As used in ORS to , unless the context requires otherwise: 1) " Forest land" means land east of the summit of the Cascade Mountains which is not assessed as farmland pursuant to ORS to , , , and and is not assessed as property pursuant to ORS to ; and which either is being held or used for the predominant purpose of growing and harvesting trees of a marketable species and has been designated as forest land under ORS to , or is land the highest and best use of which is the growing and harvesting of such trees. Forest land is the land alone. Forest land often contains isolated openings which because of rock outcrops, river wash, swamps, chemical conditions of the soil, brush and other like conditions prevent adequate stocking of such openings for the production of trees of a marketable species. If such openings in their natural state are necessary to hold the surrounding forest land in forest use through sound management practices, they are deemed forest land. 2) " Owner" means any individual or combination of individuals, partnership, firm, corporation or association of whatever na- ture owning or controlling forest land. 3) The " summit of the Cascade Mountains" shall be considered to be a line beginning at the intersection of the northern boundary of the State of Oregon and the western boundary of Wasco County, thence southerly along the western boundaries of the counties of Wasco, Jefferson, Deschutes and Klamath to the southern boundary of the State of Oregon c654 2; 1977 c ; 1983 c Determining true cash value of forest land generally; appeal of values; notice of appeal. ( 1) Notwithstanding ORS and , and for purposes of ORS , the true cash value of forest land shall be determined under this section. Land which has been designated as forest land under ORS to shall be valued as forest land under this section and shall be noted on the assessment and tax roll as being forest land potentially subject to increased taxes under ORS ( 1). 2) The true cash value of forest land for the assessment year 1982 shall be $ 25 per acre. For the assessment year 1983, and for each assessment year thereafter, the true cash value of forest land shall be determined by multiplying the true cash value of the forest land for the previous year by the forest land index calculated by the Department of Revenue and certified to the appropriate county assessors under subsection ( 3) of this section. 3) The Department of Revenue shall cal- culate, and certify to each county assessor on or before October 15, 1982, and on or before October 15 of each year thereafter, the forest land index to be used in the calculation of the true cash, value of forest land as of the next assessment date. Except as provided in subsection ( 7) of this section, the county assessor shall use the index so certified in the preparation of the assessment and tax rolls. 4) As used in this section, " forest land index" means the number 1. 0 plus the decimal equivalent of 50 percent of the percentage change, whether positive or negative, in the sum of the yearly average immediate harvest value of timber harvested over the previous five July 1 to June 30 fiscal years compared to the sum of the five yearly average immediate harvest values beginning one year prior to the most recent five -year har- vest dates. The average immediate harvest value for each year shall be calculated by the Department of Revenue by dividing the total of the immediate harvest values on the returns by the total of the volumes on the returns. The volumes and immediate harvest values used to determine the index shall be based upon those volumes reported in thousand board feet or in the unit of measure in which the preponderance of volume has been reported. The returns used shall be the severance tax returns timely filed under ORS ) At any time after the certification of the index pursuant to subsection ( 3) of this section, but not later than March 20, five or more taxpayers owning in the aggregate not less than five percent of the total forest land acreage subject to ad valorem taxation in eastern Oregon may appeal the values directly to the director of the department by

237 REVENUE AND TAXATION filing a joint petition with the director in the manner provided for appeals from orders of the county boards of equalization. Notice of the appeal shall be made in each county having values affected by the appeal, either by personal service, by certified mail on each taxpayer affected, or by publication made once a week for two consecutive weeks in a newspaper of general circulation in the county. The notice shall designate the values appealed, and include a statement of the provisions of subsection ( 6) of this section. The petition shall designate one of the group as the representative of all, and all proceedings before the department and any appeal from its determination shall- be conducted procedurally as though the designated representative were the only petitioner. Unless the right to a hearing is waived by stipulation of the designated representative and the department, the hearing on the appeal shall be held not earlier than 15 days nor later than 45 days after the filing of the petition. The order of the director on the appeal shall be issued not later than 60 days following the filing of the petition and if not issued within that time, the relief requested in the petition shall be deemed to have been denied. The group, by and through its representative, may appeal to the Oregon Tax Court by filing a complaint therein within 30 days after a copy of the order has been served on the representative or within 90 days from the filing of the petition with the director if the director fails to issue an order as provided herein. Except as herein modified, an appeal to the tax court shall be taken and heard in the same manner as is provided with respect to appeals from orders of the director in property tax cases. 6) If the tax court increases or reduces any of the values under appeal, the decree of the court shall apply to the valuation of all forest land for that year. An appeal may be taken to the Oregon Supreme Court from the decree of the tax court. Unless changed upon appeal to the Supreme Court, the tax court determination shall be binding upon the department and upon each assessor and taxpayer affected by such determination of value. 7) If an appeal is made to the tax court under this section or ORS , and the decision of the court is not rendered on or before the next September 1, the most recent uncontested forest land index shall be used in computing forest land values on the assessment and tax rolls. 8) The tax court and Supreme Court on appeal shall hear and determine appeals under subsections ( 5) to ( 7) of this section expeditiously as may be appropriate for the timely and orderly completion of the assessment process for the assessment year under appeal. 9) All other appeals from the application of the forest land index certified by the department under subsection ( 3) of this section shall be taken in the time and manner otherwise provided by law for such property tax appeals c.654 3; 1981 c337 1; 1985 c Application for forest land designation; contents; approval. ( 1) An owner of land desiring that it be designated as forest land for purposes of ORS shall make application to the county assessor on or before April 1 following the assessment date on which special assessment as forest land is first desired, and the owner may also do so within 30 days of receipt of notice of its assessment as omitted property or of the sending of notice of an increase in its true cash value, or by December 15 of the year of increased assessment if the owner does not receive the notice. 2) The application shall be made upon forms prepared by the Department of Re- venue and supplied by the county assessor, and shall include the following: a) A description of all land the applicant desires to be designated as forest land. b) Date of acquisition. c) Whether the land is being held or used for the predominant purpose of growing and harvesting trees of marketable species. d) Whether there is a forest management plan for it. e) If so, whether the plan is being im- plemented, and the nature and extent of im- plementation. f) Whether the land is being held or used for the predominant purpose of grazing or raising of livestock. g) Whether the land has been platted under ORS chapter 92. h) Whether a permit has been granted for harvesting for excepted purposes under the Oregon Forest Practices Act i) Whether the land is timber land subject to ORS chapter 477, and if it is not, the reasons therefor. 0) Whether the land, or any of it, is sub- ject to a lease or option which permits it to be used for any purpose other than the growing and harvesting of trees. k) A summary of past experience and activity of the applicant in growing and harvesting trees. L) A summary of current and continuing activity of the applicant in growing and harvesting trees.

238 TIMBER TAXES m) A statement that the applicant is aware of the potential tax liability involved when the land ceases to be designated as forest land. n) An affirmation that the statements contained in the application are true. 3) The county assessor shall approve an application for forest land designation if the assessor finds that the land is properly classifiable as forest land. The county assessor shall not find land properly classifiable as forest land if the application states the land is not being held or used for the predominant purpose of growing and harvesting trees of marketable species. Other - wise, the determination whether the land is properly classifiable as forest land shall be made with due regard to all relevant evidence and without any one or more items of evidence necessarily being determinative. 4) The application shall be considered to have been approved unless, within three months of the date such application was delivered to the assessor or prior to July 1, whichever is later, the assessor shall notify the applicant in writing of the extent to which the application is denied c , 1977 c ; 1981 c ; 1983 c.462 9; 1983 c Removal of forest land desig- nation; notice; appeal; requalification. 1)( a) When land has once been designated as forest land as a result of an application being filed therefor it shall be valued as such until the county assessor removes the forest land designation under paragraph ( b) of this subsection. b) The county assessor shall remove the forest land designation upon: A) Notification by the taxpayer to the assessor to remove the designation; B) Sale or transfer to an ownership making it exempt from ad valorem property taxation; C) Discovery by the assessor land is no longer forest land; or that the 92 D) The act of platting the land under ORS chapter 92. c) Within 30 days after removal of a designation of forest land, the assessor shall so notify in writing the taxpayer and shall specify the reasons for the removal. d) Paragraph ( b) of this subsection does not apply to any forest land that ceases to be devoted to forest land use because it is transferred to a government entity in exchange for other forest land located within the State of Oregon. 2) A taxpayer whose application filed under ORS has been denied in whole or in part, or a taxpayer whose forest land has had the designation thereof removed in whole or in part, may appeal to the Department of Revenue within the time and in the manner provided in ORS chapter 305. Orders of the department shall be subject to appeal as provided in ORS chapter ) If, under subparagraph ( D) of paragraph ( b) of subsection ( 1) of this section, the county assessor removes the forest land designation upon the act of platting the land, the land, or a part of the land, may be re- qualified for forest land designation upon: a) Payment of all additional tax, interest or penalty that remains due and owing with respect to the land; b) Submission by the owner of an application for designation as forest land as pro- vided in this section; c) Meeting all of the qualifications for designation as forest land as provided in ORS to ; and d) Meeting the requirements, if any, of applicable local government zoning ordinances with regard to minimum lot or parcel acreage for forest use c ; 1973 c296 l; 1977 c870 53; 1977 c a; 1983 c ; 1983 c ; 1987 c Note: The amendments to by section 7, chapter 174, Oregon Laws 1987, do not apply after January 1, See section 8, chapter 174, Oregon Laws The text is set forth for the user' s convenience ( 1)( a) When land has once been designated as forest land as a result of an application being filed therefor it shall be valued as such until the county assessor removes the forest land designation under paragraph ( b) of this subsection. b) Except as provided in paragraph ( e) of this subsection, the county assessor shall remove the forest land designation upon: A) Notification by the taxpayer to the assessor to remove the designation, B) Sale or transfer to an ownership making it exempt from ad valorem property taxation; C) Discovery by the assessor that the land is no longer forest land; or D) The act of platting the land under ORS chapter c) Within 30 days after removal of a desi &nation of forest land, the assessor shall so notify in writing the taxpayer and shall specify the reasons for the removal. d) Paragraph ( b) of this subsection does not apply to any forest land that ceases to be devoted to forest land use because it is transferred to a government entity in exchange for other forest land located within the State of Oregon. e) Forest land designation shall not be removed upon transfer of the land to the Director of Veterans' Affairs or while the forest land is held by the Director of Veterans' Affairs. 2) A taxpayer whose application filed under ORS has been denied in whole or in part, or a taxpayer whose forest land has had the designation thereof removed in whole or in part, may appeal to the Department of Revenue within the time and in the manner provided in ORS chapter 305. Orders of the department shall be subject to appeal as provided in ORS chapter

239 REVENUE AND TAXATION 3) If, under subparagraph ( D) of paragraph ( b) of subsection ( 1) of this section, the county assessor removes the forest land designation upon the act of platting the land, the land, or a part of the land, may be requalified for forest land designation upon. a) Payment of all additional tar, interest or penalty that remains due and owing with respect to the land; b) Submission by the owner of an application for designation as forest land as provided in this section; c) Meeting all of the qualifications for designation as forest land as provided in ORS to , and d) Meeting the requirements, if any, of applicable local government zoning ordinances with regard to minimum lot or parcel acreage for forest use Redesignation as forest land after removal in certain years due to platting. Land that has been removed from forest land designation under ORS to for the 1981, 1982 or 1983 assessment years solely because the land is included in a subdivision platted and recorded under ORS chapter 92 may be redesignated as for- est land if: 1) The owner submits an application for forest land designation under ORS to ; and 2) The land meets all of the qualifications for forest land designation under ORS to c Additional tax upon removal of forest land designation; lien; prepayment. ( 1) Whenever land designated as for- est land as a result of an application being filed therefor under ORS to thereafter becomes disqualified, there shall be added to the tax extended against the land on the next property assessment and tax roll, to be collected and distributed in the same manner as the remainder of the real property tax, an additional tax equal to five times ( or such lesser number of times, corresponding to the number of years of forest land designation applicable to such property) the total amount by which the taxes assessed against the land would have been increased if it had been valued without regard to ORS ) and ( 1) during the last year in which forest land designation was in effect for the land. 2) In cases where the designation of forest land is removed as a result of a sale or transfer described in ORS ( 1)( b)( B), the lien for such increased taxes and interest shall attach as of the day preceding such sale or transfer. 3) The amount determined to be due under subsection ( 1) of this section may be paid to the tax collector prior to the time of the next general property tax roll, pursuant to the provisions of ORS c ; 1977 c ; 1979 c ; 1981 c 791 6; 1983 c MISCELLANEOUS PROVISIONS Estimated tax liability; payment procedure. ( 1) Commencing with each six -month tax period described in ORS or beginning on or after January 1, 1980, each owner expecting to incur a liability pursuant to ORS of $5, 000 or pursuant to ORS of $ 2, 500, or more for the period shall, on forms pre- scribed by the Department of Revenue, make and file with the department on or before the last day of the fourth month of the period an estimate of tax liability for the period. at least one -half of the estimated tax shall be remitted to the department with the estimated tax report and the balance shall be remitted to the department on or before the due date of the severance tax return for the period described in ORS or , whichever is applicable, without regard for any extension of the due date thereof. 2) If the amount remitted with an estimated report filed on or before the due date thereof is at least 50 percent of the severance tax of the owner as due for the period immediately preceding the period for which the report is made or at least 40 percent of the severance tax liability as due for the period for which the report is made, or 100 percent of the severance tax liability on the actual timber harvested for the first cal- endar quarter of the six -month tax period, no penalty or interest shall be charged. Otherwise a penalty in the form of interest at the rate established under ORS for each month or fraction thereof shall be assessed for the period of delinquency calculated on the difference between the payment made and the payment which would have been due had the owner estimated liability for the period in an amount equal to the liability as due for such period. The provisions of ORS chapters 305 and 314 relating to penalties and interest shall not apply to the estimated tax payments described in this section. 3) This section does not apply to an owner who elects to compute tax liability pursuant to ORS ( 4) or c.454 4; 1982 s. s. l c ; 1987 c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 321 or any series therein by legislative action See Preface to Oregon Revised Statutes for fur- ther explanation ( Formerly ; 1965 c ; 1971 c.272 1, 1975 c , repealed by 1977 c Penalties applicable to land assessed as farm use or under designated forest land or small tract optional taxes. 1) Land which is assessed under any of the special assessment laws listed in subsection 2) of this section shall not be subject to the

240 TIMBER TAXES additional taxes or penalties imposed by ORS , , , ( 3)( a) or ( b), or any other additional tax or penalty when such land is changed to a different special assessment listed in subsection ( 2) of this- section. 2) The provisions of this section apply to the following special assessment laws: a) ORS ( 1), relating to special farm use assessment of land in an exclusive farm use zone. b) ORS ( 2), relating to special farm use assessment requiring application under ORB c) ORS , relating to classification as designated forest land in western Oregon. d) ORS , relating to classification as western Oregon small tract optional tax land. e) ORS , relating to classification as designated forest land in eastern Oregon. 3) If, after disqualification or declassification occurs under one special assessment law, the owner is required to file an application or claim for classification under another special assessment law: a) If the disqualification or declassification is effective prior to July 1 in any year, the owner shall file the required claim or application on or before August 1 of that year. b) If the disqualification or declassification is effective on or after July 1 in any year, the county taxing authorities shall continue the classification on the current assessment and tax rolls, and the owner shall file the required claim or application in the next calendar year in accordance with the laws governing the particular classification. 4)( a) Land which was assessed under any of the special assessment laws listed in subsection ( 2) of this section but was changed to assessment under a different special assessment law shall be subject to the additional tax imposed under paragraph ( b) of this subsection when such land becomes disqualified or declassified from special assessment and does not become qualified in the next assessment year for assessment under any other special assessment law listed in subsection ( 2) of this section. No other additional tax or penalty shall be imposed on such land at the time of disqualification or declassification. b) Except as provided in paragraphs ( c) and ( d) of this subsection, upon disqualifica- tion or declassification, the assessor shall notify the owner thereof and there shall be added to the tax extended against the land on the next general property tax roll, to be collected and distributed in the same manner as the remainder of the real property tax, an additional tax equal to five times ( or such lesser number of times, corresponding to the number of continuous preceding years of special assessment under any of the special assessment laws listed in subsection ( 2) of this section and applicable to such land) the total amount by which the taxes assessed against the land would have been increased if it had been valued without regard to any of the special assessment laws listed in subsection ( 2) of this section during the last year in which any such special assessment was in effect for the land. c) In determining the additional tax or penalty under paragraph ( b) of this section, the number of continuous preceding years of special assessment counted shall not include those years in which the land was specially assessed under any of the special assessment laws listed in subsection ( 2) of this section prior to a disqualification of the land for special assessment as farm use land under ORS ( 1) under the conditions described in ORS ( 3). d) If land, upon disqualification or declassification, is land that is receiving or has received special assessment as farm use land under ORS ( 1) during one or more of the continuous preceding years of special assessment in effect for the land, and upon the most recent removal from special assessment under ORS ( 1) was not in an urban growth boundary, in making the computation of additional tax or penalty in accordance with paragraphs ( b) and ( c) of this sub- section, the phrase " 10 times" shall be sub- stituted for the phrase " five times ". However, the number of continuous preceding years of special assessment under the special assessment taxes listed in subsection 2)( b) through ( e) of this section that may be taken into consideration for purposes of computing the additional tax or penalty shall not exceed five. As used in this section, " ur- ban growth boundary" means an urban growth boundary contained in a city or county comprehensive plan that has been acknowledged by the Land Conservation and Development Commission pursuant to ORS or an urban growth boundary that has been adopted by a metropolitan service district council under ORS ( 3)

241 REVENUE AND TAXATION 5) Where any land has been granted special assessment under any of the special assessment laws listed in subsection ( 2) of this section, and the land is disqualified or declassified from such special assessment, the owner shall be given notice of the provisions of this section either in the order or notice of disqualification or declassification provided by law, or if there is none provided by law, by written notice from the county assessor. Notice shall be given by the assessor within 15 days of the effective date of such disqualification or declassification. The notice also shall advise the owner of the administrative act necessary to change the property to another classification listed in subsection ( 2) of this section, and shall give notice of the imposition of any additional taxes or penalties that would result from the declassification or disqualification if no re- classification is made under one of the other special assessment laws listed in subsection 2) of this section. Notwithstanding the provisions of paragraph ( a) of subsection ( 3) of this section, if the disqualification or declassification is effective prior to July 1 in any year, the owner shall have no less than 30 days after the effective date of the notice within which to file an application or claim for reclassification under another special assessment law listed in subsection ( 2) of this section. 6) If an owner of land disqualified or declassified under one of the special assessment laws listed in subsection ( 2) of this section files an application for classification for special farm use assessment under ORS ( 2), the owner shall have five years beginning with the first year of classification under ORS ( 2) within which to qualify for the two -year farm use requirement of that section and the income requirement under ORS c 617 4; 1977 c ; 1979 c , 1981 c.419 1, 1981 c c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 321 or any series therein by legislative action. See Preface to Oregon Revised Statutes for fur- ther explanation Disqualification due to acqui- sition by government for park, wildlife, preservation or recreation purpose ( 1) No additional taxes, interest or penalty shall be imposed under ORS , , or upon an owner of land that has received special as- sessment as forest land under ORS ), ( 2) or if the land becomes disqualified for such special cause the land is acquired: assessment be- a) For use as a park or recreation area by a governmental agency as a result of the lawful exercise of the power of eminent do- main or the threat or imminence thereof-, b) By the State Parks and Recreation Department by purchase, agreement or do- nation under ORS ; c) By a city, county or park and recre- ation district organized under ORS chapter 266 for public recreational purposes or for the preservation of scenic or historic places: or d) By the State Department of Fish and Wildlife under ORS for wildlife man- agement purposes. 2) No additional taxes, interest or penalty shall be imposed under ORS , , or upon an owner of land that has received special assessment as forest land under ORS ( 2), ( 2) or if the land becomes disqualified for such special assessment when it is acquired and used as follows: a) The land is registered under ORS as a natural heritage conservation area; b) The land is acquired by a private nonprofit corporation; c) The land is retained by the corporation, or transferred to the state by the corporation, for the purpose of educational, scientific and passive recreational use con- sistent with conservation of the ecological values and natural heritage elements of the area; d) If the land is retained by the corporation, it remains open to the public without charge for the uses described in paragraph c) of this subsection; and e) The land is managed pursuant to a voluntary agreement under ORS ( 5). 3) The additional taxes, interest or penalties that would have been imposed at the time of disqualification shall be imposed when the land is no longer used as described in subsection ( 2) of this section c ; 1985 c.607 4; 1989 c PENALTIES [ Repealed by 1953 c Penalties. ( 1) Violation of any provision of ORS to and to is punishable, upon con

242 TIMBER TAXES viction,, by a fine not exceeding $ 1, 000 or by imprisonment in the county jail for not exceeding one year, or by both. 2) Violation of ORS ( 7) is punishable, upon conviction, by a fine of not more than $ 500 or by imprisonment in the county jail for not more than three months, or both. Justices of the peace and district courts shall have concurrent jurisdiction with the circuit court of all prosecutions for violations of ORS ( 7) c ; subsections ( 2) and ( 3) formerly ; subsection ( 4) enacted as 1961 c.659 9; subsection ( 5) enacted as 1961 c ; subsections ( 6) and ( 7) formerly part of ; 1977 c CHAPTER 322 Reserved for expansion]

243 REVENUE AND TAXATION

244 CHAPTER RESERVED FOR EXPANSION

245 Chapter EDITION Cigarette and Tobacco Products Tax CIGARETTE TAX General Provisions) Short title; construction Definitions generally " Distribution," " distributor" and " distributor engaged in business in this state" defined Imposition of Tax) Tax imposed; rate; exclusiveness; only one distribution taxed Distributions by manufacturers to licensed distributors exempted Sales to common carriers in interstate or foreign passenger service exempted; tax on carriers Gifts of sample packets exempted Storage in bonded warehouses exempted Sales to federal installations and veterans' institutions exempted Consumer exemption; payment of tax in certain cases Claim for exemption Distributor to collect tax on certain sales Manufacturers' agreements for prepay- ment Presumptions regarding distribution and precollection of tax Floor tax on dealer for privilege of holding cigarettes for sale, use or consumption; amount; report Floor tax and cigarette indicia adjustment tax on distributor for privilege of distrib- uting; amount Report by distributor regardingg cigarette tax stamps affixed and unaffixed Exemptions from ORS to License and Bond) Distributor' s license Wholesaler' s license Security required for licensing-, conditions of bond Provision for withdrawal of surety Deposit of money or securities in lieu of bond Liquidation of security to pay delinquency Issuance and display of license Suspension of license; reinstatement; hearing Revocation of license; notice; hearing; reinstatement Stamps and Meter Machines) Tax payment by use of stamps or meter impressions Design; manner of affixing and canceling Use of metering machines; sale of stamps and meter settings Payment for stamps and meter settings; discount Application for credit purchases of stamps and meter settings Authorization of agent; revocation Date when payment for credit purchases due; extension Suspension of credit Penalty for nonpayment of credit purchase; interest Administration) Manufacturers' reports Posting of certain information on vending machines required; seizure for failure to comply Records of vending machine operators Records of distributors; preservation Transporters' permits and records Examination of records by department; supplemental reports Subpoenas; enforcement Search warrants; seizure of cigarettes unlawfully held Forfeiture and sale of seized cigarettes and other objects; redemption Exchanges of information with other rpov- ernmental units Rewards for information Collections and Refunds) Determination of amounts unpaid Petition for redetermination; deposit of security Finality of determination; interest on amount due Refund when increase in cigarette tax is not continued Refunds for unused stamps or meter settings and for unsaleable or destroyed cig- arettes Limitation period on claim for refund Interest on certain refunds Date when payment of tax is due Report by distributors of distributions Quarterly remittance of tax due Report of sales on common carriers in interstate or foreign passenger service Report by consumers Extension of time for reports and payment of tax; interest Deficiency determinations Jeopardy determinations Collection of unsecured, unpaid tax after deficiency or jeopardy determination; collection charge; warrants

246 REVENUE AND TAXATION Department authorized to make refund Warrant to sheriff to levy upon and sell agreement with governing body of Indian property of delinquent taxpayer; recording; reservation; contents; financing execution; agents; remedies for warrant returned not satisfied Appeals) Appeals governed by ORS chapter Refund agreement with governing body of Indian reservation; appropriation for re Venue; departmental certificate as evi- funds dence Remedies cumulative Enforcement) Disposition of moneys Actions by Attorney General; limitation on Penalties in ORS additional to other actions penalties Department to enforce ORS to Tax on distributors in lieu of all other and ; rules; personnel state, county or municipal taxes on sale Distribution of Certain Revenues) or use of tobacco Distribution of certain cigarette tax re Short title venues PENALTIES TOBACCO PRODUCTS TAX Penalties for certain violations of ORS to Definitions for Tobacco Products Tax Act Civil and criminal penalties for violation Tax imposed on distributors; rate; calcu- Tobacco Products Tax Act; appeal; collation; l exemption; payment by person lection of amount assessed other than distributor Dates for payment of tax; returns; exten- CROSS REFERENCES sion Exemption for tobacco products not sub- Administration of tax laws generally, Ch. 305 ject to taxation by state Administrative appeals, to Application for distributor or subjobber li- Administrative procedures and rules of state agencies, cense; fee to Date of receipt of reports, remittances and claims for Security; amount credit or refund, determination, Issuance of license; validity; display Deficiency procedure, Suspension or revocation; notice; appeal Interest on deficiency, delinquency or refund, Records; contents; retention time; examinaeions Public officer failing to perform duties imposed by tax law, penalty, Sellers' invoices; contents; preservation Refund of taxes adjudged invalid, Invoices of retail dealer and subjobber, Revenue, distribution where validity of incorporation contents; preservation; inspection challenged, Warehouse records; inspection; contents; Revenue to incorporated cities, no distribution to his - preservation toric ghost town, Credit of tax for tobacco products shipped Uniformity of taxation, Const. Art. I, 32, Art. IX, 1 out of state or returned to manufacturer Verification of documents filed under tax laws, Exemption for distributors to common falsification prohibited, , carriers engaged in interstate. or foreign When tax document deemed filed with tax official, passenger service; tax on carers or persons authorized to sell tobacco products on the facilities of carriers Public contracts and purchasing, Ch Transport of untaxed products; permit; bills of lading Administration and enforcement; rules and Power of department to waive, reduce or compromise procedures tax, penalty and interest, Prohibited acts Failure to file return or pay tax; penalties; Adjustment of distribution upon filing of corrected cer- interest tificate of census, Failure to file timely report or return; Appraisal system, reimbursement of state by county for show cause order; notice; hearing-, appeal; costs of conducting appraisal from tax proceeds, costs Application of other statutes City- county to receive share of funds distributed, Department determination of amount of City' s failure to file required budget, reports or other tax; deficiency determinations; liens documents, effect, Immediate determination and collection of Revenues from cigarette tax, prerequisite for receipt by tax certain cities,

247 CIGARETTE AND TOBACCO PRODUCTS TAX CIGARETTE TAX General Provisions) Short title; construction. ( 1) ORS to and may be cited as the Cigarette Tax Act. 2) Except where the context otherwise requires, the definitions given in ORS to and govern its con- struction. ( 1965 c , Definitions generally. ( 1) " Cigany roll for smoking, made arette" means wholly or in part of tobacco, irrespective of size or shape and irrespective of whether the tobacco is flavored, adulterated or mixed with any other ingredient, where such roll has a wrapper or cover made of paper or any other material, except where such wrapper is wholly or in the greater part made of tobacco and 1, 000 such rolls weigh over three pounds. 2) " Department" means the Department of Revenue. 3) " Dealer" includes every person, other than a manufacturer or a person holding a distributor' s license, who engages in this state in the sale of cigarettes. 4) " In this state" means within the exterior limits of the State of Oregon and includes all territory within these limits owned by or ceded to the United States of America. 5) " Manufacturer" means any person who makes, manufactures or fabricates cigarettes for sale to distributors. 6) " Package" means the individual package, box or other container in which retail sales or gifts of cigarettes are normally made or intended to be made. 7) " Person" includes any individual, venture, associ- firm, copartnership, joint ation, social club, fraternal organization, corporation, estate, trust, receiver, trustee, syndicate, this state, any county, munici- pality, district or other political subdivision of the state, or any other group or combination acting as a unit. 8) " Sale" includes any transfer of title or possession for a consideration, exchange or barter, in any manner or by any means whatsoever, but does not include the sale of cigarettes by a manufacturer to a distributor. 9) " Transporter" means any person importing or transporting into this state, or transporting in this state, cigarettes obtained from a source located outside this state, or from any person not licensed as a distributor under ORS to and It does not include a licensed distributor, a common carrier to whom is issued a certificate or permit by the United States Interstate Commerce Commission to carry commodities in interstate commerce, or to a carrier of federal tax -free cigarettes in bond, or any person transporting no more than 200 cigarettes at any one time. 10) " Untaxed cigarette" means any cigarette which has not yet been distributed in such manner as to result in a tax liability under ORS to and ) " Use or consumption" includes the exercise of any right or power over cigarettes incident to the ownership thereof, other than the sale of the cigarettes or the keeping or retention thereof for the purpose of sale. 12) " Wholesaler" means any dealer who engages in the sale of cigarettes to any other dealer for purposes other than use or con- sumption c , 4, 5, 9, 10, 12, 13, 14, 15, 16, 17; subsection ( 12) enacted as 1967 c " Distribution," " distributor" and " distributor engaged in business in this state" defined. ( 1) " Distribution" in- cludes: arettes. a) The sale in this state of untaxed cig- b) The use or consumption in this state of untaxed cigarettes. c) The receipt or retention in this state of untaxed cigarettes at a place of business where cigarettes are customarily sold or offered for sale to consumers. d) The placing of cigarettes in vending machines in this state. e) The use or consumption by the first person in possession in this state of untaxed cigarettes transported to the state in quantities of more than 200 in a single shipment. f) Donations of sample cigarettes or gift cartons by the manufacturers thereof, except sample packages containing not more than five cigarettes and labeled as " sample," " not for sale" or with similar wording. 2) " Distributor" includes: a) Every person who after July 1, 1966, and within the meaning of the term " distribution" as defined in this section, distributes cigarettes. b) Every person who sells or accepts or- ders for cigarettes which are to be transported from a point outside this state to a consumer within this state. c) Notwithstanding the provisions of ORS ( 3), any dealer who serves as the dealer' s own distributor or who buys directly from a manufacturer for resale in this state shall be deemed to be both a distributor and a dealer under ORS to and ) " Distributor engaged in business in this state" includes any of the following:

248 REVENUE AND TAXATION a) Any distributor maintaining, occupying or using, permanently or temporarily, directly or indirectly, or through a subsidiary or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place or any other place of business. b) A distributor having a representative, agent, salesperson, canvasser or solicitor op- erating in this state under the authority of the distributor or its subsidiary for the purpose of selling, delivering, or the taking of orders for cigarettes c.525 6, 7, 81 Imposition of Tax) Tax imposed; rate; exclusiveness; only one distribution taxed. ( 1) Every distributor shall pay a tax upon distributions of cigarettes at the rate of 14 mills for the distribution of each cigarette in this state. 2) The taxes imposed by ORS to and are in lieu of all other state, county or municipal taxes on the sale or use of cigarettes. 3) Any cigarette with respect to which a tax has once been imposed under ORS to and shall not be subject upon a subsequent distribution to the taxes imposed by ORS to and c , 30; 1971 c ; 1985 c816 l; 1989 c Distributions by manufacturers to licensed distributors exempted. The taxes imposed by ORS to and shall not apply to distributions of cigarettes by the manufacturer to a licensed distributor c Sales to common carriers in interstate or foreign passenger service exempted; tax on carriers. The taxes imposed by ORS to and shall not apply to the sale of cigarettes by a distributor to a common carrier engaged in interstate or foreign passenger service or to a person authorized to sell cigarettes on the facilities of such carrier. Whenever ciga- rettes are sold by distributors to common carriers engaged in interstate or foreign passenger service for use or sale on facilities of the carriers, or to persons authorized to sell cigarettes on those facilities, the tax imposed by this section shall not be levied with respect to sales of the cigarettes by the distributors, but a tax is hereby levied upon the carriers or upon the persons authorized to sell cigarettes on the facilities of the carriers, as the case may be, for the privilege of making such sales in Oregon at the same rate that is imposed upon the distribution of cigarettes in this state for each cigarette sold. Such common carriers and authorized persons shall pay the tax imposed by this section and file reports with the department as provided in ORS c ; 1985 c Gifts of sample packets exempted. The taxes imposed by ORS to and shall not apply to do- nations of cigarettes as samples in packets of five or less cigarettes c Storage in bonded warehouses exempted. The taxes imposed by ORS to and shall not apply to cigarettes stored in a bonded warehouse and which are nontax paid under the provisions of chapter 52 of the Internal Revenue Act of 1954, as amended c Sales to federal installations and veterans' institutions exempted. The taxes imposed by ORS to and shall not apply to: 1) The sale of cigarettes to United States Army, Air Force, Navy, Marine Corps, or Coast Guard exchanges and commissaries and Navy or Coast Guard ships' stores, the United States Veterans Administration, ships' stores maintained under federal bond, or to any person which by virtue of the constitution or statutes of the United States cannot be made the subject of taxation by this state. 2) The sale or gift of federally tax -free cigarettes when the cigarettes are delivered directly from the manufacturer under Internal Revenue bond to a veterans' home or a hospital or domiciliary facility of the United States Veterans Administration for gratuitous issue to veterans receiving hospitalization or domiciliary care. The tax shall not be imposed with respect to the use or consumption of such cigarettes by the institution or by the veteran patients or domiciliaries c. 525 H21, Consumer exemption; payment of tax in certain cases. The taxes imposed by ORS to and shall not apply to the use or consumption of untaxed cigarettes transported to this state in a single lot or shipment of not more than 200 cigarettes, or of not more than 200 untaxed cigarettes obtained at one time from any of the instrumentalities listed in ORS ). The taxes resulting from a distribution of cigarettes within the meaning of ORS ( 1)( b) shall be paid by the user or consumer c Claim for exemption. Any claim for exemption from tax under ORS to and shall be made to the department in such manner as it shall prescribe c ) c ; repealed by 1971 c

249 CIGARETTE AND TOBACCO PRODUCTS TAX Distributor to collect tax on certain sales. Every distributor engaged in business in this state and selling or accepting orders for cigarettes with respect to the sale of which the taxes imposed by ORS to and are inapplicable shall, at the time of making the sale or accepting the order or, if the purchaser is not then obligated to pay the taxes with respect to the distribution of the cigarettes, at the time the purchaser becomes so obligated, collect the tax from the purchaser, if the purchaser is other than a licensed distribu- tor, and shall give to the purchaser a receipt therefor in the manner and form prescribed by the department c525 27, 1981 c Manufacturers' agreements for prepayment. Manufacturers may enter into agreements with the department for the prepayment of the tax on nonexempt ciga- rettes given away for advertising and any other purpose c Presumptions regarding distribution and precollection of tax. ( 1) Unless the contrary is established, it shall be presumed that all cigarettes acquired by a distributor are untaxed cigarettes, and that all cigarettes manufactured in this state or transported to this state, and no longer in the possession of the distributor, have been distributed. 2) All taxes paid pursuant to the provisions of ORS to and shall be presumed to be direct taxes on the retail consumer precollected for the purpose of convenience and facility only. When the tax is paid by any other person, such payment shall be considered as an advance payment and shall be added to the price of the cigarette and recovered from the ultimate consumer or user. Except for a person selling cigarettes through a vending machine or machines, any person selling cigarettes at retail shall state or separately display in the retail premises a notice of the amount of the tax included in the selling price and charged or payable pursuant to ORS to and The provisions of this subsection shall in no way affect the method of collection of such tax as provided by ORS to and c , Floor tax on dealer for privilege of holding cigarettes for sale, use or consumption; amount; report. ( 1) For the privilege of holding or storing cigarettes for sale, use or consumption, a floor tax is imposed upon every dealer at the rate of one - half mill for each cigarette in the dealer' s possession or under the dealer' s control at 12:01 a. m. on the first day of the month following October 3, ) The tax imposed by this section is due and payable on or before 20 days after the first day of the month following October 3, Any amount of tax imposed by this section which is not paid within the time required shall bear interest at the rate established under ORS per month, or fraction thereof, from a date which is 20 days after the first day of the month following October 3, 1989, until paid. 3) Every dealer, on or before 20 days after the first day of the month following October 3, 1989, shall file a report with the department in such form as the department may prescribe. Dealer reports shall state the number of cigarettes in the possession of or under the control of the dealer in this state at 12: 01 a. m. on the first day of the month following October 3, 1989, and the amount of tax due thereon. Each report shall be accompanied by a remittance payable to the department for the amount of tax due c Note: to were added to and made a part of chapter 323 by legislative action but were not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation Floor tax and cigarette indicia adjustment tax on distributor for privilege of distributing, amount. For the privilege of distributing cigarettes as a licensed distributor and for holding or storing cigarettes for sale, use or consumption, a floor tax and cigarette indicia adjustment tax is imposed upon every licensed distributor as follows: 1) In the amount of one and one - fourth cents for each Oregon cigarette tax stamp bearing the designation " 25," in the amount of one cent for each Oregon cigarette tax stamp bearing the designation " 20" and in the amount of one -half cent for each Oregon cigarette tax stamp bearing the designation 10," which is affixed to any package of cigarettes in the possession of the licensed distributor or under the distributor' s control at 12: 01 a. m. on the first day of the month following October 3, ) In the amount of one and one - fourth cents for each unaffixed Oregon cigarette tax in the stamp bearing the designation " 25," amount of one cent for each unaffixed Oregon cigarette tax stamp bearing the des- ignation " 20" and in the amount of one -half cent for each Oregon cigarette. tax stamp bearing the designation " 10" in the possession of the licensed distributor or under the distributor's control at 12: 01 a. m. on the first day of the month following October 3, c Note: See note under Report by distributor regarding cigarette tax stamps affixed and un-

250 REVENUE AND TAXATION affixed. Every licensed distributor shall take an inventory as of 12: 01 a. m. on the first day of the month following October 3, 1989, of all packages of cigarettes to which are affixed Oregon cigarette tax stamps and all unaffixed Oregon cigarette tax stamps in the distributor' s possession or under the distributor' s control. Every licensed distribu- tor shall file a report with the department on or before 20 days after the first day of the month following October 3, 1989, in such form as the department may prescribe, showing: 1) The number of Oregon cigarette tax stamps, with the designations thereof, which were affixed to packages of cigarettes in possession or under the distributor' s control at 12: 01 a. m. on the first day of the month following October 3, ) The number of unaffixed Oregon ciga- rette tax stamps, with the designations thereof, which were in the distributor' s possession or under the distributor' s control at 12: 01 a. m. on the first day of the month following October 3, The amount of tax required to be paid with respect to the stamps shall be computed and remitted with the distributor' s report. Any amount of tax not paid within the time specified for the filing of the report shall bear interest at the rate established under ORS per month, or' frraction thereof, from the due date of the report, until paid c Note: See note under Exemptions from to ( 1) ORS to shall not apply to cigarettes which are nontax paid under the provisions of chapter 52 of the federal Internal Revenue Code, as amended, and that are owned and in the possession or control of a licensed distributor or stored in a bonded warehouse. 2) After the payment of any refunds, the moneys received from the taxes imposed under ORS to shall be credited and appropriated in the same proportion as the moneys received from the taxes imposed under ORS ( 1) c Note: See note under License and Bond) Distributor' s license. Every person desiring to engage in the sale of cigarettes as a distributor, except a person who desires merely to sell or accept orders for cigarettes which are to be transported from a point outside this state to a consumer within this state, shall file with the department an application, in such form as the department may prescribe, for a distributor' s license. A distributor shall apply for and obtain a license for each place of business at which the distributor engages in the business of distributing cigarettes. No fee shall be charged for such license. For the purposes of this section, a vending machine in and of itself, shall not be deemed a place of business c Wholesaler' s license. ( 1) Every person desiring to engage in the sale of cig- arettes as a wholesaler shall file with the department an application, in such form as the department may prescribe, for a whole- saler' s license. No person shall engage in business as a wholesaler without a license. A wholesaler' s license may be revoked or reinstated by the department as in the case of a distributor' s license pursuant to ORS ) A wholesaler is subject to all the requirements of this 1967 Act imposed upon distributors relating to making, preserving and supplying records necessary to effective administration by the department c Note: The Legislative Counsel has not, pursuant to , substituted ORS references for the words This 1967 Act" in c. 193 also enacted subsection ( 12) of Security required for licensing; conditions of bond. The department, to insure compliance with ORS to and ; shall require a licensee or an applicant for a license as distributor to deposit with it such security as the department may determine. The amount of the security shall be fixed by the department but shall not be greater than two times the estimated average monthly shown liability in the monthly reports, determined in such manner as the department deems proper. The amount of the security may be increased or decreased by the department subject to the limitations herein provided. Except as pro- vided in ORS , the security shall be in the form of a bond or bonds executed by the distributor as principal and by a corporation, authorized to engage in business as a surety company in Oregon under ORS chapter 747, as surety, payable to the State of Oregon through its Department of Revenue, conditioned upon the payment of all taxes, penalties and other obligations of the dis- tributor arising under ORS to and c Provision for withdrawal of surety. Every bond shall contain a provision substantially to the effect that when the surety exercises its right to withdraw as surety, the withdrawal shall be effective on the first day of the calendar month after receipt of the notice by the department if the notice is received on or before the 15th day of the month, otherwise the withdrawal shall be effective on the first day of the second

251 CIGARETTE AND TOBACCO PRODUCTS TAX calendar month after receipt of the notice by the department c Deposit of money or securities in lieu of bond. In lieu of a bond or bonds a distributor, under such conditions as the department may prescribe, may deposit with the State Treasurer an amount of lawful money equivalent to the amount of the bond or bonds otherwise required, or the distributor may deposit readily saleable bonds or other obligations of the United States, the State of Oregon, or any county of this state of an actual market value of not less than the amount of the bond or bonds otherwise required by ORS to and The State Treasurer shall immediately notify the department as to the time of receipt and the amount of money or value of bonds received by the State Treasurer c Liquidation of security to pay delinquency. Upon receipt of a certificate of the department setting forth the amount of a distributor's delinquencies, the State Treasurer shall pay to the department the amount so certified from the money deposited with the State Treasurer by the distributor or from the amounts received from the sale of bonds or other obligations deposited with the State Treasurer by the distributor. Securities deposited with the State. Treasurer which have a prevailing market price may be sold by the State Treasurer for the purposes of this section at private sale at a price not lower than the prevailing market price thereof c Issuance and display of li- cense. Upon receipt of a completed application and such bonds or other security as may be required by the department under ORS to and , the department shall issue to the applicant a license as a distributor. A separate license shall be issued for each place of business of the distributor within the state. A license is valid only for engaging in business as a distributor at the place designated thereon, and it shall at all times be conspicuously displayed at the place for which issued. The license is not transferable and is valid until canceled, sus- pended or revoked c Suspension of license; reinstatement; hearing. The license of any distributor shall be automatically suspended upon the cancellation of the bond of the distributor, or if the bond becomes void or unenforceable for any reason, or if the distributor fails to pay any taxes or penalties due under ORS to and The license shall be automatically reinstated if the distributor files a valid bond, or pays the delinquent taxes of the distributor, as the case may be. Upon the petition of any distributor whose license has been suspended under this section, a hearing shall be afforded to the distributor before the department, pursuant to ORS to , after five days' notice of the time and place of hearing c525 40; 1971 c Revocation of license; notice; hearing-, reinstatement. ( 1) Whenever any distributor fails to comply with any provision of ORS to and or any rule or regulation of the department prescribed and adopted under ORS to and , the department may revoke or suspend the license held by the distributor. The department shall not issue a new license to a distributor whose license has been revoked unless it is satisfied that the distributor will comply with the provisions of ORS to and and the rules and regulations of the depart- ment. 2) Where the department proposes to refuse to issue or renew a license, or proposes to revoke a license, opportunity for hearing shall be accorded as provided in ORS to ) Judicial review of orders under subsection ( 1) of this section or under ORS shall be as provided in ORS to c ; 1971 c Stamps and Meter Machines) Tag payment by use of stamps or meter impressions. Except for the use or consumption of cigarettes by other than a licensed distributor, and as may be authorized under the provisions of ORS , the tax imposed by ORS to and with respect to distributions of ciga- rettes shall be paid by distributors through the use of stamps or meter impressions. The department shall furnish stamps for sale and provide for the sale of meter register settings for metering machines approved by the de- partment. ( 1965 c Design; manner of affixing and canceling. ( 1) Stamps and meter impressions shall be of such designs, specifications and denominations as may be prescribed. by the department. The department shall prescribe by regulation the method and manner in which stamps or meter impressions are to be affixed to packages of cigarettes and may provide for the cancellation of stamps or meter impressions. 2) An appropriate stamp shall be affixed to, or an appropriate meter impression shall be made on, each package of cigarettes prior to the distribution of the cigarettes. ( 1965 c ,

252 REVENUE AND TAXATION Use of metering machines; sale of stamps and meter settings. ( 1) A metering machine may be used and a meter may be stored, transferred, transported, repaired, opened, set or used only in accordance with rules and regulations prescribed by the department. Meters, meter register settings, or unaffixed stamps shall not be sold, exchanged or in any manner transferred by a distributor to another person without prior written approval of the department. 2) With the approval of the Executive Department, the Department of Revenue may enter into contracts with financial institutions, conveniently located with reference to distributors, constituting such financial institutions the department' s agents for the sale of stamps and setting of meters, and matters appertaining thereto c Payment for stamps and meter settings; discount. ( 1) Stamps and meter register settings shall be sold to a licensed distributor at their denominated values less a sum allowed as compensation to a distributor for services in affixing stamps or meter impressions to packages as required by ORS to and Payment for stamps or meter register settings shall be made at the time of purchase, provided that a licensed distributor, subject to the condi- tions ank provisions of ORS to and , may be permitted to de- fer payments therefor. 2) The compensation to each distributor for each package of 20 cigarettes to which the distributor affixes an Oregon stamp or meter impression during the calendar year shall be: a) For the first 26, 000 cases of ciga- rettes, $.0024 per package. b) For any volume in excess of 26, 000 cases, $ per package c525 47, 1983 c Application for credit purchases of stamps and meter settings. A licensed distributor may apply to the depart- ment to fix the maximum amount of deferred - payment purchases of stamps and meter register settings which the distributor may make in any calendar month. Upon receipt of the application and the security deposit required pursuant to ORS , the department shall fix such amount. The department at any time may designate the sales locations where the distributor may make deferred - payment purchases of stamps and meter register settings and fix the amount of such purchases which the distributor may make within each monthly period at the designated sales location c Authorization of agent; revocation. A distributor shall authorize in writing those persons who may order pur- chases of stamps or meter register settings for the account of the distributor at a lo- cation where stamps or meter register set- tings are sold. The authorization shall continue in effect until written notice of revocation of the authority is delivered at the sales location in such manner as may be prescribed by the department c Date when payment for credit purchases due; extension. ( 1) Amounts owing for stamps and meter register settings purchased on the deferred - payment basis for a calendar month shall be due and payable on or before the 20th day of the next calendar month. Payments shall be made by a remittance payable to the department. 2) The department for good cause may extend for not to exceed five days the time for paying any amount owing for stamps or meter register settings purchased on the deferred - payment basis provided a request for the extension is filed with the department within or prior to the period for which the extension may be granted c , Suspension of credit. The de- partment may suspend without prior notice a distributor' s privilege to purchase stamps or meter register settings on the deferred - payment basis or may reduce the amount of permissible monthly purchases fixed for the distributor, if the distributor fails to pay promptly for stamps or meter register settings when payment is due, if the bond or bonds of the distributor are canceled, become void, impaired, or unenforceable for any reason, or if in the opinion of the department, collection of any amounts unpaid or due from the distributor under ORS to and are jeopardized c Penalty for nonpayment of credit purchase; interest. Any distributor who fails to pay any amount owing to the purchase of stamps or meter register settings within the time required, shall pay a penalty of 10 percent of the amount due in addition to the amount plus interest at the rate established under ORS for each month, or fraction thereof, from the date on which the amount became due and payable until the date of payment c ; 1982 s. s 1 c Administration) Manufacturers' reports. Every manufacturer selling and shipping cigarettes into this state to other than a distributor licensed by this state shall deliver with each sale or consignment of cigarettes a written statement containing the name or trade name of both the seller and the purchaser, the date of delivery, the quantity of cigarettes, and the trade name or brand thereof,

253 CIGARETTE AND TOBACCO PRODUCTS TAX and within 10 days shall deliver a duplicate of each such statement to the department. Each cancellation or modification of the written statement and any other information necessary to the reconciliation of accounts shall be filed with the department by the manufacturer at the earliest possible date c c ; repealed by 1971 c enacted in lieu of ) Posting of certain information on vending machines required; seizure for failure to comply. Every distributor and dealer or other person engaging in the sale of cigarettes through the use of one or more vending machines, must affix in a conspicuous place on each machine, a card or decal bearing the name, telephone number, address, and place of business of the operator or owner who regularly places cigarettes in the vending machine. If a person fails to comply with this section the department may seize the vending machine and its contents c ( enacted in lieu of ) Records of vending machine operators. Every distributor and dealer or other person engaging in the sale of ciga- rettes through the use of one or more vend- ing machines shall keep a detailed record of each vending machine operated for the sale of cigarettes, showing the location of the machine and the date of placing the machine on location c Records of distributors; pres- ervation. Every distributor and every person dealing in, transporting or storing cigarettes in this state shall keep on the premises such records, receipts, invoices, and other perti- nent papers with respect thereto in such form as the department may require, and each such paper shall be preserved for four years from the time to which it relates. During the four -year period and at any time prior to destruction of records, the department may give written notice to a distributor not to destroy records described in the notice without written permission from the department. Notwithstanding other provisions of law, reports and returns filed with the department shall be preserved by it for four years and thereafter until the department orders them destroyed c Transporters' permits and re- Any transporter desiring to pos- cords. ( 1) sess or acquire untaxed cigarettes for transportation or transport upon the high- ways, roads or streets of this state shall obtain a permit from the department authorizing such ' transporter to possess or acquire for transportation or transport the untaxed cigarettes, and shall have the permit in the transporting vehicle during the period of transportation of the cigarettes. The ap- plication for the permit shall be in such form and shall contain such information as may be prescribed by the department. The department may issue a permit for a single load or shipment or for a number of loads or shipments to be transported under specified conditions. 2) Each transporter who shall transport or possess or acquire for the purpose of transporting untaxed cigarettes upon the highways, roads or streets of this state is required to have within the transporting vehicle invoices or bills of lading covering the shipment of cigarettes being transported which shall show the name and address of the consignor or seller, the name and address of the consignee or purchaser and the quan- tity and brands of cigarettes transported c ; 1985 c Examination of records by department; supplemental reports. The department or its authorized representative, upon oral or written demand, may make such examinations of the books, papers, records and equipment of persons dealing in, trans- porting, or storing cigarettes and such other investigations as it may deem necessary in carrying out the provisions of ORS to and In addition to any other reports required under ORS to and , the department may, by rule or otherwise, require additional, other, or supplemental reports from distributors, dealers, transporters, common and private carriers, warehousemen, bailees and other persons and prescribe the form, including verification, of the information to be given and the times for filing of such additional, other or supplemental reports c Subpoenas; enforcement. ( 1) The department shall have authority, by order or subpoena to be served with the same force and effect and in the same manner that a subpoena is served in a civil action in the circuit court, or the Oregon Tax Court, to require the production at any time and place it may designate of any books, papers, accounts or other information necessary to the carrying out of ORS to and , and may require the attendance of any person having knowledge in the premises, and may take testimony and require proof material for the information, with power to administer oaths to such person. 2) If any person fails to comply with any subpoena or order of the department or produce or permit the examination or inspection of any books, papers, records and equipment pertinent to any investigation or inquiry under ORS to and , or to testify to any matter regarding which the person may be lawfully interrogated, the department may apply to the

254 REVENUE AND TAXATION Oregon Tax Court or to the circuit court of the county in which the person resides or where the person may be found for an order to the person to attend and testify, or otherwise to comply with the demand or request of the department. The application to the court shall be by ex parte motion upon which the court shall make an order requiring the person against whom it is directed to comply with the request on demand of the department within 10 days after the service of the order, or such further time as the court may grant, or to justify the failure within that time. The order shall be served upon the person to whom it is directed in the manner required by this state for service of process, which service shall be required to confer jurisdiction upon the court. Failure to obey any order issued by the court under this section is contempt of court. The remedy provided by this section shall be in addition to other remedies, civil or criminal, existing under the tax laws or other laws of this state c Search warrants; seizure of cigarettes unlawfully held. Whenever the department has good reason to believe that any cigarettes are being kept, sold, offered for sale or given away in violation of the provisions of ORS to and or regulations issued under its authority, it' may make affidavit of such fact, describing the place or thing to be searched, before any judge of any court in this state, and such judge shall issue a search warrant directed to the sheriff, any constable, police officer, or duly authorized agent of the department, commanding the sheriff, constable, police officer or duly authorized agent of the department to enter and diligently search any building, room in a building, place or vehicle as may be designated in the affidavit and search warrant, and to seize such ciga- rettes together with any vending machine or receptacle containing them and any vehicle carrying them, and to arrest the person in possession or control thereof. If, upon the return of such warrant, it shall appear that tax payable upon the cigarettes seized has not been paid, the cigarettes, containers and vehicle, if any, shall be forfeited to the state and sold pursuant to ORS c Forfeiture and sale of seized cigarettes and other objects; redemption. 1) Whenever the department discovers any cigarettes subject to tax under ORS to and and with respect to which the tax has not been paid, it is hereby authorized and empowered forthwith to seize and take possession of such cigarettes to- gether with any vending machine or receptacle in which they are held for sale and any vehicle in which they are being transported. Such seized cigarettes, vending machine or receptacle, and vehicle, not including money contained in such vending machine or receptacle, shall be forfeited to the state, and the clear proceeds shall be deposited, with the State Treasury in the Common School Fund. The department may, within a reasonable time thereafter, by public notice at least 20 days before the date of sale, sell such forfeited cigarettes, vending machines or recep- tacles, and vehicle, at public sale. 2) Notwithstanding the provisions of subsection ( 1) of this section, the person from whom cigarettes were seized may redeem the cigarettes and any vending machine or receptacle and vehicle seized therewith, within 20 days from the date of seizure, by the payment of the tax due together with a penalty of 100 percent thereof and the costs incurred in such proceeding, which total payment shall not be less than $ 100; however, such seizure, sale or redemption shall not relieve any such person from fine or imprisonment as provided for violation of any provision of ORS to and ) Notwithstanding the provisions of subsection ( 1) of this section, the owner of such seized cigarettes, vending machine, receptacle or vehicle shall have the right of redemption provided in subsection ( 2) of this section for a period of 60 days from the date of such seizure if the owner claims such right prior to the redemption provided for in subsection ( 2) of this section. 4) Notwithstanding the provisions of subsections ( 1), ( 2) and ( 3) of this section, the owner of a vending machine which is seized for failure to comply with ORS may redeem the seized vending machine and its contents within a period of 60 days from the date of such seizure by the payment of $25 plus costs of $15 or the actual costs incurred in such seizure proceedings, whichever is greater c525 62; 1971 c260 3, 1987 c Exchanges of information with other governmental units. To promote administrative efficiency, the department may transmit information obtained under ORS to and to the proper officers of governmental units outside Oregon which tax tobacco products and which reciprocate in the. exchange of relevant information c Rewards for information. The department may pay rewards to persons, other than officers or employees of the department, furnishing information that leads to the recovery of tax from other persons guilty of violating the provisions of ORS to and Such rewards shall not exceed 10 percent of the net

255 CIGARETTE AND TOBACCO PRODUCTS TAX amount of tax, penalty and interest recovered by suit or otherwise and shall be paid only in cases where such evasions of tax would not be disclosed by the audit of reports or from other information available to the de- partment c Collections and Refunds) Determination of amounts unpaid. If a distributor fails to make payment for stamps or meter register settings when payment is due, the department may compute and determine from any available records and information the amount required to be paid, including interest and penalties. One or more determinations may be made of the amount due for one or for more than one purchase. In making a determination the de- partment may offset overpayments with respect to purchases of stamps or meter register settings against underpayments for purchases and interest and penalties on the underpayments. The department shall give the distributor written notice of its determi- nation in the manner provided by ORS ( 6). Except in the case of fraud, every notice of a determination made under ORS to and shall be given within three years of the due date for pay- ment of the purchase of stamps or a register setting c meter Petition for redetermination; deposit of security. The distributor against whom a determination is made under ORS may petition for the redetermination thereof pursuant to ORS The distributor shall, however, file the petition for redetermination within the time prescribed by ORS and shall at the time of filing the petition deposit with the department such security as it may deem. necessary to insure compliance with ORS to and The security may be sold in the same manner as prescribed by ORS ( 3) c Finality of determination; interest on amount due. If the amount specified in the determination made under ORS to and is not paid within 10 days after service of the notice upon the distributor, the determination becomes final unless a petition for redetermination is filed with the department within the 10 -day period. The determination is due and payable when it becomes final and the amounts determined, exclusive of interest and penalties, shall bear interest at the rate established under ORS for each month, or fraction thereof c ; 1982 ss.1 c to and is provided by law and the increase provided is for a limited time period, then at such time as the increase expires and is not reenacted or otherwise by law continued, the Department of Revenue may enter into a cigarette tax refund or credit agreement with any distribu- tor. The cigarette tax refund or credit agreement may provide for a mutually agreed upon amount as a refund or credit to the distributor of any cigarette tax attributable to the increase precollected for distributions of cigarettes occurring on or after the date the increase expires. 2) Subsection ( 1) of this section is in addition to and not in lieu of other laws allowing cigarette tax refunds or credits. 3) There is continuously appropriated to the Department of Revenue from the suspense account established under ORS and , the amounts necessary to make refunds agreed upon under subsection ( 1) of this section c ; 1987 c Refunds for unused stamps or meter settings and for unsaleable or destroyed cigarettes. ( 1) The department shall, pursuant to regulations prescribed by it, refund or credit to a distributor the denominated values, less the discount given on their purchase, of a) Any unused or damaged stamps or meter register settings. b) Stamps or meter impressions affixed to packages of cigarettes which have prior to distribution become unfit for use, unsaleable or have been destroyed, or which after distribution have become unfit for use or unsaleable and have been returned for credit or have been replaced, and the department has proof of the cigarettes not being used for smoking in the State of Oregon. 2) Notwithstanding the provisions of ORS , no interest shall be paid with respect to refunds made under this section c , 69; 1989 c Limitation period on claim for refund. No refund or credit for amounts overpaid for the purchase of stamps or meter register settings shall be allowed or approved after three years from the due date for payment of the purchase for which the overpayment was made, or with respect to a determination made pursuant to ORS to and , after six months from the date the determination becomes final, or after six months from the date of overpayment, whichever period expires the later, unless a claim therefor is filed with the de- partment within such period. [ 1965 c Refund when increase in ciga Interest on certain refunds. rette tax is not continued. ( 1) If an in- Except as provided in ORS , interest crease in cigarette tax imposed under ORS shall be computed, allowed and paid upon

256 REVENUE AND TAXATION any overpayment for the purchase of stamps or meter register settings at the rate established under ORS for each month or fraction of a month during a period beginning 45 days after the due date for payment of the purchase for which the overpayment was made or the date of the payment, whichever is the later, to the time the refund is made. No refund or credit shall be made of any interest imposed upon the claimant with respect to the amount being refunded or credited c525 71; 1987 c.758 I; 1989 c Date when payment of tax is due. When the tax imposed under ORS to and is not paid through the use of stamps or meter impressions, the tax shall be due and payable monthly on or before the 20th day of the month following the calendar month in which a distribution of cigarettes occurs, or in the case of a sale of cigarettes on the facilities of a common carrier for which the tax is imposed pursuant to ORS , the tax shall be due and payable monthly on or before the 20th day of the month following the calendar month in which a sale of cigarettes on the facilities of the carrier occurs c Report by distributors of distributions. ( 1) On or before the 20th day of each month, every distributor shall file on forms prescribed by the department a report containing such information as the department may require to carry out the purposes of ORS to and ) When any distributor regularly maintains and closes the books and records of the distributor pursuant to a method utilizing periods ending each four calendar weeks, the department by regulation may require different reporting and payment date for such distributor, conforming as nearly as practicable with the reporting and payment dates of other distributors. 3) A distributor holding more than one distributor' s license and having centralized accounting may file one composite report combining the information required of each license location under subsection ( 1) of this section c ; 1971 c c525 74; repealed by 1971 c Quarterly remittance of tax due. The distributor shall submit quarterly a remittance payable to the department for the amount of tax due and unpaid c ; 1971 c Report of sales on - common carriers in interstate or foreign passenger service. On or before the 20th day of each month the common carriers and authorized persons specified in ORS shall file with the department a report of the sales of cigarettes made by them on the facilities of the carriers in Oregon in the preceding calendar month in such detail and form as the department may prescribe, submitting with the report the amount of the tax due under ORS c Report by consumers. Every consumer or user subject to the tax resulting from a distribution of cigarettes within the meaning of ORS ( 1)( b) from whom the tax has not been collected under ORS shall on or before the 20th day of the month following receipt of cigarettes file with the department a report of the amount of cigarettes received by the consumer or user in the preceding calendar month in such detail and form as the department may prescribe, submitting with the report the amount of tax due c Extension of time for reports and payment of tax; interest. ( 1) The department for good cause may extend for not to exceed 30 days the time for making any report or paying any amount of tax required under ORS to and The extension may be granted at any time provided a request therefor is filed with the department within or prior to the period for which the extension may be granted. 2) Any person to whom an extension is granted shall pay, in addition to the amount of tax, interest at the rate established under ORS for each month, or fraction thereof, from the date on which the amount of tax would have been due without the extension to the date of payment c , 1982 s s. l c Deficiency determinations. ( 1) If the department is dissatisfied with the report filed by any person, or if any person fails to file a report, it may compute and determine the amount to be paid upon the basis of any information available to it. One or more deficiency determinations may be made of the amount of tax due for one or for more than one month. 2) The amount of the determination, exclusive of penalties, shall bear interest at the rate established under ORS for each month, or fraction thereof, from the 20th day after the close of the month for which the amount of the tax, or any portion thereof, should have been reported until the date of payment. 3) In making a determination the department may offset overpayments for a month or months against underpayments for another month or months and against the interest and penalties on the underpayments. 4) If any part of the deficiency for which a deficiency determination is made is due to

257 CIGARETTE AND TOBACCO PRODUCTS TAX negligence or intentional disregard for ORS to and or the rules and regulations adopted under ORS to and , a penalty of 10 percent of the amount of the determination shall be added thereto. 5) If any part of the deficiency for which a deficiency determination is made is due to fraud or an intent to evade to and or the rules and regulations adopted under ORS to and , a penalty of 25 percent of the amount of the determination shall be added thereto. 6) The department shall give the person written notice of its determination. The notice may be served personally or by certified mail; if by mail, service shall be addressed to the person at the address of the person as it appears in the records of the department, but the service shall be deemed complete at the time of deposit of the notice in the mail without extension of time on account of the distance between the place of deposit and the place of address. 7) Except in the case of fraud, intent to evade the tax, or failure to make a report, every notice of a deficiency determination shall be given within three years after the date when the amount should have been reported c ; 1982 s.s. 1 c Jeopardy determinations. ( 1) If the department believes that the collection of any amount of tax required to be paid by any person under ORS to and will be jeopardized by delay, it shall thereupon make a determination of the amount of tax, noting that fact upon the determination. The amount determined is immediately due and payable, with interest and penalty as provided in ORS ) If the amount of the tax, interest, and penalty specified in the jeopardy determination is not paid within 20 days after ser- vice upon the person of notice - of the determination, the determination becomes final, unless a petition for redetermination is filed within the 20 days. 3) The person against whom a jeopardy determination is made may petition for the, redetermination thereof pursuant to ORS The person shall, however, file the petition for redetermination with the department within 20 days after the service upon the person of notice of the determination. The person shall at the time of filing the petition for redetermination deposit with the department such security as it may deem necessary to insure compliance with ORS to and The security may be sold by the department at public sale if it becomes necessary in order to recover any amount due. Notice. of the sale may be served upon the person who deposited the security personally or by mail in the same manner as prescribed for service of notice by ORS ( 6). Upon any such sale, the surplus, if any, above the amount due under ORS to and shall be returned to the person who deposited the security c Collection of unsecured, unpaid tax after deficiency or jeopardy determination; collection charge; warrants. 1) If any tax imposed. by ORS to and or any portion of such tax is not paid within 30 days after notice of a deficiency determination is given under ORS ( 6) or of a tax determined under ORS , and no provision is made to secure the payment thereof by bond, deposit or otherwise, pursuant to regulations promulgated by the department,' the depart- ment shall: a) Assess a collection charge of $5 if the sum of the tax, penalty and interest then due exceeds $ 10. b) Issue a warrant directed to the sheriff of any county of the state commanding the sheriff to levy upon and sell the real and personal property of the taxpayer found within that county, for the payment of the amount of the tax, with the added penalties, interest, collection charge and the sheriffs cost of executing the warrant, and to return such warrant to the department and pay to it the money collected by virtue thereof by a time to be therein specified, not less than 60 days from the date of the warrant. 2) The sheriff shall, within five days af- ter the receipt of the warrant, record with the clerk of the county a copy thereof, and thereupon the clerk shall enter in the County Clerk Lien Record the name of the taxpayer mentioned in the warrant, and the amount of the tax or portion thereof and penalties and interest for which the warrant is issued and the date when such copy is recorded. Thereupon the amount of -the warrant so recorded shall become a lien upon the title to and interest in property of the taxpayer against whom it is issued in the same manner as a judgment duly docketed. The sheriff thereupon shall proceed upon the same in all respects, with like effect and in the same manner prescribed by, law in respect to executions issued against property upon judgment of a court' of record, and shall be entitled to the same fees for services in executing the warrant, to be added to and collected as a part of the warrant liability ) In the discretion of the department a warrant- of like terms, force and effect.may be issued and directed to any agent author-

258 REVENUE AND TAXATION ized to collect income taxes, and in the execution thereof the agent shall have all the powers conferred by law upon sheriffs, but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty. 4) If a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes against the taxpayer as if the people of the state had recovered judgment against the taxpayer for the amount of the tax c , 1983 c , 1985 c Department authorized to make refund agreement with governing body of Indian reservation; contents; financing. ( 1) The Department of Revenue is authorized to enter into a cigarette tax refund agreement with the governing body of any Indian reservation in Oregon. The agreement may provide for a mutually agreed upon amount as a refund to the governing body of any cigarette tax precollected on sales of cigarettes to Indians upon the reservation and paid into the State Treasury after April 27, This provision is in addition to other laws allowing tax refunds. 2) There is annually appropriated to the Department of Revenue from the suspense account established under ORS and , they amounts necessary to make the refunds provided by subsection ( 1) of this section c.581 1, 2, 3; 1987 c Note: was enacted into law by the Legislative Assembly but was not added to or made a part of ORS chapter 323 or any series therein by legislative action. See Preface to Oregon Revised Statutes for fur- ther explanation. Appeals) c ; repealed by 1977 c enacted in lieu of )) c ; repealed by 1977 c enacted in lieu of )] c , 84; repealed by 1977 c ( enacted in lieu of ) Appeals governed by ORS chapter 305. ( 1) Any person aggrieved by an act or determination of the department or its authorized agent under ORS to and may appeal to the director of the department and from the department' s.order to the Oregon Tax Court in the manner provided in ORS chapter 305. The appeals rights provided herein shall be the exclusive remedy, available to determine the liability of such person for the taxes imposed by ORS 323:005 to and ) An appeal to the department or to the Oregon Tax Court under ORS to and shall not stay proceedings to collect any unpaid tax if the department believes the collection of the tax will be jeopardized ' by delay, unless it be otherwise ordered by the court c enacted in lieu of , and )] Venue; departmental certificate as evidence. ( 1) The failure to do any act required by or under the provisions of ORS to and shall be deemed an act committed in part at the office of the department in Salem, Oregon. 2) The certificate of the department to the effect that a "tax has not been paid, that a return has not been filed or that information has not been supplied, as required by or under ' the provisions of ORS to and , shall be prima facie evidence that such tax has not been paid, or that such return has not been filed or that such information has not been supplied c ) Enforcement) Actions by Attorney General; limitation on actions. In addition to all other remedies specified in ORS to and , action may be brought by the Attorney General, at the instance of the department, in the name of the state, to recover the amount of any taxes, penalties and interest due under ORS to and , if the action for recovery is commenced within three years from the time the tax is due to be paid c Department to enforce ORS to and ; rules; personnel. ( 1) The department shall enforce the provisions of ORS to and and may prescribe, adopt and enforce rules and regulations relating to the administration and enforcement of ORS to and ) The department may employ account- ants, auditors, investigators, assistants, and clerks necessary for the efficient administration of ORS to and and may designate representatives to conduct hearings, or perform any other duties imposed by ORS to and upon the department c , Distribution of Certain Revenues) Distribution of certain cigarette tag revenues. ( 1) All moneys received by the department from the tax imposed by ORS ( 1) shall be paid over to the State Treasurer to be held in a suspense account established under ORS After the payment of refunds, eleven - fourteenths shall be credited to the General Fund, one - fourteenth is appropriated to the cities of this state, one - fourteenth is appropriated to the counties of this state and one - fourteenth is continuously appropriated to the Public

259 CIGARETTE AND TOBACCO PRODUCTS TAX Transit Division of the Department of Transportation for the purpose of financing and improving transportation services for elderly and disabled individuals as provided in ORS to ) The moneys so appropriated to cities and counties shall be paid on a monthly basis within 35 days after the end of the month for which a distribution is made. Each city shall receive such share of the money appropriated to all cities as its population, as determined under ORS to last preceding such apportionment, bears to, the total population of the cities of the state, and each county shall receive such share of the money as its population, determined under ORB to last preceding such apportionment, bears to the total population of the state. 3) The moneys appropriated to the Public Transit Division of. the ' Department of Transportation under subsection ( 1) of this section shall be distributed and transferred to the Elderly and Disabled Special Transportation Fund established by ORS at the same time as the cigarette tax moneys are distributed to cities and counties under this section. ( 1965 c ; 1969 c199 1; 1971 c-535 7; 1975 c ; ; 1985 c ; 1989 c:224 52; 1989 c c ; repealed by 1969 c TOBACCO PRODUCTS TAX Definitions for Tobacco Products Tax Act. As used in the Tobacco Products Tax Act, unless the context other- wise requires: 1) " Business" means any trade; occupation, activity or enterprise engaged in for the purpose of selling or distributing tobacco products in this state. 2) " Department" means the Department of Revenue. 3) " Distributor" means: a) Any person engaged in the business of selling tobacco products in this state who brings, or causes to be brought, into this state from without the state any tobacco products for sale; b) Any person who makes, manufactures or fabricates tobacco products in this state for sale in this state; or c) Any person engaged in' the business of selling tobacco products without this state who ships or transports tobacco products to retailers in this state, to be sold by those retailers. 4) " Manufacturer" means a person who manufactures and sells tobacco products.' 5) " Place of business" means any place where tobacco products are sold or where tobacco products are manufactured, stored or kept for the purpose of sale or consumption, including any vessel, vehicle, airplane, train or vending machine., 6) " Retail dealer" means every person, other than a distributor, manufacturer or subjobber who is engaged in the business of selling or otherwise dispensing to ultimate consumers any, tobacco product. The term also includes the operators of or recipients of revenue from all places, such as smoke shops, cigar stores and vending - machines, where tobacco products are made' or stored for ultimate sale to consumers. 7) " Sale" means any - transfer, exchange or barter, in any' manner, or by' anv means whatsoever, for a bonsideration, and includes and means all sales made by any person. It includes a gift by a person engaged in the business, of selling tobacco products, for advertising, as a means of evading' the provisions of ORS' to , or for any other purposes whatsoever.' 8)- " Subjobber means any person, other than a manufacturer or distributor, who buys tobacco products from, a, distributor and sells them to persons other than the ultimate consumers. 9) " Tobacco products" means cigars, cheroots, stogies, periques, granulated, plug cut, crimp cut; ready rubbed and other smoking tobacco, ' snuff, snuff flour, cavendish, plug and twist tobacco, fine -cut and other chewing tobaccos, shorts, refuse scraps, clippings,. cuttings and sweepings of tobacco and other kinds and forms of tobacco, prepared in such manner as to be suitable for chewing or smoking in a pipe or otherwise, or both for chewing and smoking, but shall not include cigarettes as defined in ORS ( 1). 10) " Wholesale sales price" means the established price for which a manufacturer sells a tobacco productt to a distributor, after any discount or, other reduction for quantity or cash c ? 323: 505 Tax imposed' on distributors; rate; calculation; exemption; payment by person 'other than distributor. (1) A tax, is hereby imposed upon the sale, storage, use, consumption, handling or distribution of all tobacco products, in this' state at, the rate of 35 percent of, the, wholesale sales price of such ' tobacco products.. The tax shall be imposed on distributors, at the time the distrib- utor: a) Brings, or causes to be brought, into this state from, without the state tobacco products for sale, storage, use or consump- tion; I..... _

260 REVENUE AND TAXATION, b) Makes, manufactures or fabricates tobacco products in this state for sale, storage, use or consumption in this state; or c) Ships or transports tobacco products to retail dealers in this state, to be sold, stored, used or consumed by those retail dealers. 2) If the tax imposed under this section does not equal an amount calculable. to a whole cent, the tax shall' be equal to the next highest whole cent. However, the amount remitted to the Department of Revenue by the taxpayer for each quarter shall be equal only to percent of the total taxes due and payable by the taxpayer for the quarter. 3) No tobacco product shall be subject to the tax if the base product or other intermediate form thereof has previously been taxed under this section. 4) Notwithstanding any provision of the Tobacco Products Tax Act to the contrary, the tax imposed by this section may be paid by the manufacturer or any other person or entity instead of the taxpayer from whom such tax would otherwise be due. In the event of payment by another person or en- tity, the taxpayer shall be excused from pay- ment of the amount of the tax which has been so paid if, together with the return required under ORS , the taxpayer,supplies evidence satisfactory to the department or in a form prescribed by the department showing hat such tax has been so paid c F Dates for payment of tax; returns; extension. ( 1) Except as otherwise provided in the Tobacco Products Tax Act, the tax imposed by ORS and shall be paid by each distributor and each common carrier or authorized person speci- fied in ORS to the department on or before the last day of January, April, July and October of each year for the preceding calendar quarter. 2) With each quarterly payment, the taxpayer shall submit a return to the department, in such form and containing such information as the department shall prescribe. 3) The tax, penalties and interest imposed by the Tobacco Products Tax Act shall be a personal debt, from. the time liability is incurred, owed by the taxpayer to the State of Oregon until paid. 4) The returns required of distributors and common carriers or authorized persons Specified in ORS under this section St be filed by all such distributors, common carriers or authorized persons regardless of whether any tax is owed by them. 5) The department for good cause may extend for not to exceed one month the time for making. any return under the Tobacco Products Tax Act. The extension may be granted at any, time if a written request therefor is filed with the department within or prior to the, period for which the extension may be granted. When the time for filing a return is extended at the request of a taxpayer, interest at the rate established un- der ORS , for each month, or fraction of a month, from the time the return was originally required to be filed to the time of payment, shall be added ' and' paid c Exemption for tobacco products not subject to taxation by state. The tax imposed by ORS does not apply with respect.to any tobacco products which under the Constitution and laws of the United States may not be made the subject of taxation by the state c Application --for distributor or subjobber license; fee. Every person desiring to engage in the sale of tobacco products as a distributor or 'subjobber, except a person who desires merely to sell or accept orders for tobacco products which are to be transported from. a point outside this state to a consumer within this state, shall file with the department an application, in such form as the department may prescribe, for a license. A distributor or subjobber shall apply for and obtain a license for each place of business at which the distributor or subjobber engages in the business of distributing tobacco products: No fee shall be charged for such license. For the purposes of this section,' a' vending machine in and of itself, shall not be deemed a place of business c Security;' amount. ( 1) If the department considers. 6such action necessary to insure cor; ' liahce with the Tobacco Products Tax Act, it may require any person subject to the Tobacco Products TgLx Act to place with the department such security as the department may determine. 2) The' amount of the' security shall be fixed by the department but, except as provided in subsection ( 3) of this section, may not be greater, than twice the estimated tax liability. of a petsoni for, the reporting period under the Tobacco -Products Tax. Act determined in such manner as the department considers proper. 3) In case of a person who, pursuant to ORS , has been given notice of pro- posed revocation or suspension of permit, the amount of the security- may not be greater than twice the tax liability of the person for the reporting period under the Tobacco Products Tax, Act determined in such manner as

261 CIGARETTE AND TOBACCO PRODUCTS TAX the department considers proper, or'$ 10,000, whichever is greater. 4) The limitations provided in this section apply regardless of the type of security placed with the department. The required amount of the security may be increased or decreased by the department' subject to the limitations provided in this section c Issuance of license; validity; display. Upon receipt of a completed application and such security as may be required by the department under the Tobacco Products Tax Act, the department shall issue to the applicant a license as a distributor or subjobber. A separate license shall be issued for each place of business of the distributor or subjobber within the state. A license' is valid only for engaging in business as a dis- tributor or subjobber at the place designated thereon, and it shall at all times be conspicuously displayed at the place for which issued. The license is not transfer_ able and is valid until canceled, suspended or revoked c Suspension or revocation; notice; appeal. ( 1) If any person fails to comply with any provision of the Tobacco Products Tax Act relating to the tax or any rule of the department relating to the tax adopted under the Tobacco Products Tax Act, the department may suspend or revoke the permit or permits held by the person. The department shall not issue a new permit after the revocation of a permit unless it is satisfied that the former holder of the permit will comply with the provisions of the Tobacco Products Tax Act relating to the tax and the rules of the department. 2) If the department proposes to refuse to issue or renew a permit, or proposes to suspend or revoke a permit, the department shall give notice of the proposed refusal, suspension or revocation at least 30 days before the refusal, suspension or revocation will be final. Appeal following the notice of the determination may be taken to the director in the manner provided in ORS within the time provided in ORS ( 1). 3) An appeal from the director' s order sustaining a proposed refusal to issue or- renew, or suspension or revocation, may be taken by the person by filing an appeal to the Oregon Tax Court following the proce- dure provided in ORS chapter 305 within the time prescribed under ORS [ 1985 c Records; contents; retention time; examinations. ( 1) Every distributor, and every person dealing in, transporting or storing tobacco products, shall keep at each registered place of business complete and accurate records for that place of business,. in- cluding itemized, invoices, of tobacco products held, purchased, manufactured, brought in or caused to be brought in from without the state or shipped or transported to retail dealers in this state, and of all sales of tobacco products made, except sales to the ultimate consumer. 2) The records required by subsection ( 1) of this section shall show the names and ad- dresses of purchasers, the inventory of all tobacco products on hand on January 1, 1986, and other pertinent papers' and documents relating to the purchase, sale or disposition of tobacco products. 3) When a licensed distributor sells tobacco products exclusively to the ultimate consumer at the address given in the certif icate, no invoice of those sales shall be required, but itemized invoices shall be made of all tobacco products transferred to other places of business owned or controlled by that licensed. distributor. 4)( a) All books, records and other papers and documents required by this section to be kept shall be preserved for a period of at least five years after the initial date of the books, records and other papers or documents, or the date of entries appearing therein, unless ' the Department of Revenue, in writing, authorizes disposal at an earlier date. their destruction' or b) The department or its authorized representative, upon oral or written demand, may make such examinations of the books, papers, records and equipment required to be kept under this section as it may deem necessary in carrying out the provisions of the Tobacco Products Tax Act. i c) If the department, or any of its agents or employees, are denied free access or are hindered or interfered with in making such examination, the license of the distributor at such premises shall be subject to revocation by the department c Sellers' invoices; contents; preservation. Every person who sells tobacco products to persons other than the ul timate consumer shall render with each sale itemized invoices. showing the seller' s naive and address, the purchaser' s name and address, the date of sale, and all prices and discounts. The person shall preserve legible copies of all such invoices for five years from the date of sale c Invoices of retail dealer and subjobber; contents; preservation; inspection, Every retail dealer and subjobber shall procure itemized invoices of all tobacco products purchased. The invoices shall show the name and address of the seller and the

262 REVENUE AND TAXATION date of purchase. The retail dealer and subjobber shall preserve a legible copy of each such invoice for five years from the date of purchase. Invoices shall be available for inspection by the Department of Revenue or its authorized agents or employees at the retail dealer' s or subjobber' s place of business c Warehouse records; inspection; contents; preservation. Records of all deliveries or shipments of tobacco pro- ducts from any public warehouse of first destination in this state shall be kept by the warehouse and be available to the Depart- ment of Revenue for inspection. They shall show the name and address of the consignee, the date, the quantity of tobacco products delivered and such other information as the department may require. These records shall be preserved for five years from the date of delivery of the tobacco products c Credit of tax for tobacco products shipped out of state or returned to manufacturer. Where tobacco products, upon which the tax imposed by ORS has been reported and paid, are shipped or transported by the distributor to retail dealers without the state,' to be sold by those re- tail dealers, or are returned to ' the manufacturer by the distributor or destroyed by the distributor, credit of such tax may be made to the distributor c Exemption for distributors to common carriers engaged in interstate or foreign passenger service; tax on carriers or persons authorized to sell tobacco products on the facilities of carriers. The taxes imposed by the Tobacco Products Tax Act shall not apply to the sale of tobacco products by a distributor to a common carrier engaged in interstate or for- eign passenger' service. or to a person authorized to sell tobacco products on the facilities of such carrier. Whenever tobacco products are sold by distributors to common carriers engaged in interstate or foreign passenger service for use or sale on facilities of the carriers, or to persons authorized to sell tobacco products on those facilities, the tax imposed by this section shall not be levied with respect to sales of the tobacco products by the distributors, but a tax is hereby levied upon the carriers or upon the persons au- thorized to sell tobacco products on the facilities of the carriers, as the case may be, for the privilege of making such sales in Oregon at the same rate that is imposed upon the distribution of tobacco products in this state. Such common carriers and authorized persons shall pay the tax imposed by this section and file returns with the de- partment as provided in ORS c b Transport of untaxed products; permit; bills of lading. ( 1) Any transporter desiring to possess or acquire untaxed tobacco products for transportation or transport upon the highways, roads or streets of this state shall obtain a permit from the department authorizing such transporter to possess or acquire for transporta- tion or transport the untaxed tobacco products, and shall have the permit in the transporting vehicle during the period of transportation of the tobacco products. The application for the permit shall be in such form and shall contain such information as may be prescribed by the department. The department may issue a permit for a single load or shipment or for a number of loads or shipments to be transported under specified conditions. 2) Each transporter who shall transport or possess or acquire for the purpose of transporting untaxed tobacco products upon the highways, roads or streets of this state is required to have within. the transporting vehicle invoices or bills of lading covering the shipment of tobacco products being transported which shall show the name and address of the consignor or seller, the name and address of the consignee or purchaser and the quantity and types of tobacco products transported c c Administration and enforcement; rules and procedures. The depart- ment shall administer and enforce the Tobacco Products Tax Act. The department is authorized to establish those rules and procedures for the implementation and enforcement of the Tobacco Products Tax Act that are consistent with its provisions and as are considered necessary and appropriate c Prohibited acts. ( 1) No distributor or other person shall: a) Fail to furnish any return required to be made pursuant to the Tobacco Products Tax Act; b) Fail to furnish a supplemental return or other data required by the department; or c) Render a false or fraudulent return, report or claim for refund. 2) No person who is required to make, render, sign or verify any report or return under the Tobacco Products Tax Act shall make a false or fraudulent report or return with intent to defeat or evade the determination of an amount due required by law c Failure to file return or pay tax; penalties; interest. ( 1) If there is a

263 CIGARETTE AND TOBACCO: PRODUCTS TAX failure to file a return required under the Tobacco Products Tax Act or a failure to pay a tax at the time the tax becomes due, and no extension is granted under ORS , or if the time granted as an extension has expired and there is a failure to file a return or pay a tax, there shall be added to the amount of tax required to be shown on the return a delinquency penalty of five percent of the amount of the tax. 2) If the failure to file a return continues for a period in excess of three months after the- due date: a) There shall be added to the amount of tax required to be shown on the return a failure to file penalty of 20 amount of such tax; and percent of the b) Thereafter, the department may send a notice and demand to the person -to file a return within 30 days of the mailing of the notice. If after such notice and demand no return is filed within the 30 days, the department may determine the tax according to the best of its information and belief, assess the tax with appropriate penalty and interest, plus an additional penalty of 25 percent of the tax deficiency determined by the ' department, and give written notice of the de= termination and assessment to the person required to make the filing. 3) A penalty equal to 100 percent of any deficiency determined by the department shall be assessed and collected if: a) There is a failure to file a return with intent to evade the tax; or b) A return was falsely prepared and filed with intent to evade the tax. 4) Interest shall be collected on the unpaid tax at the rate established under ORS , for each month or fraction of a month, computed from the time the tax be- came due, during which the tax remains un- paid. 5) Each penalty imposed under this section is in addition to any other penalty im- posed under this section. However, the total amount of penalty imposed under this section with respect to any deficiency shall not exceed 100 percent of the deficiency c Failure to file timely report or return; show cause order; notice; hear- ing, appeal; costs. ( 1) If a person fails to file a report or return within 60 days of the time prescribed under the Tobacco Products Tax Act, the department may petition the Oregon Tax Court for an order requiring the person to show cause why the person is, not required to file the report or return. 2) Within 10 days after the filing of the petition, the tax court shall enter an order directing the person to appear and show cause why,no report -or - return is required to be filed. The petition and order shall be served upon the person in the manner pro- vided by law. Not ' later than 20 service, the person shall: days after a) File the requested report or return with the department; b) Request from the court an order granting reasonable time within which to file the requested report or return with the de- partment; or c) File with. the court an answer to the petition showing, cause why such report or return is not required to be filed.. 3) If an answer is filed, the court shall set the- matter for hearing within 20 days from the filing bf the answer, and shall determine the matter in an expeditious manner, consistent with the rights of the parties. 4) An appeal may be taken to the Supreme Court as provided in ORS , from an order of the tax court made and entered after a hearing and determination under subsection ( 3) of this section. 5) v Costs shall be awarded to the prevail- ing party c Application of other statutes. The provisions of ORS chapters 305 and 314 as to the. audit and examination of returns, periods of limitations, determination of and notices of deficiencies, assessments, liens, delinquencies, claims for refund and refunds, conferences, appeals to the director of the department, appeals to the Oregon Tax Court, stay of collection pending appeal, confidentiality of returns and, the penalties relative thereto, and the procedures relating thereto, shall apply to the determinations of taxes, penalties and interest under the Tobacco Products Tax Act, except where the context requires otherwise c Department determination of amount of tax; deficiency determinations; liens. If, under the Tobacco Products Tax Act, the department is not satisfied with the return of the 'tax or as to the amount of tax required to be paid to this state by any person, if may compute and determine the amount' required to be paid upon the basis of the facts contained in the return or upon the basis of any information within its pos- session or that may come into its possession. One or more deficiency determinations may be made of the amount due for one or for more than' one period. Notices of deficiency shall be given and interest on deficiencies shall be computed as provided in ORS Subject to ORS and , liens for taxes or deficiencies shall arise at the time of assessment, shall continue until

264 REVENUE AND TAXATION the taxes, interest and penalties are fully satisfied and may be recorded and collected in the manner provided for the collection of delinquent income taxes c Immediate determination and collection of tag. If the department believes that the collection of any tax imposed under the Tobacco Products Tax Act or any amount of the tax required to be collected and paid to the state or of any determination will be jeopardized by delay, it shall make a deter- mination of the tax or amount of tax re- quired to be collected, noting that fact upon the determination. The amount determined is immediately due and payable and the department shall assess the taxes, notify the person and proceed to collect the tax in the same manner and using the same procedures as for the collection of income taxes under ORS c Warrant to sheriff to levy upon and sell property of delinquent tax- payer-, recording, execution; agents; remedies for warrant returned not satisfied. 1) If any tax imposed under the Tobacco Products Tax Act or any portion of the tax is not paid within the time provided by law and no provision is made to secure the payment of the tax by bond, deposit or otherwise, pursuant to rules adopted by the department, the department may issue a warrant directed to the sheriff of any county of the state commanding the sheriff to levy upon and sell the real and personal property of the taxpayer found within the county, for the payment of the amount of the tax, with the added penalties, interest and the sheriffs cost of executing the warrant, and to return the warrant to the department and pay to it the money collected from the sale, within 60 days after the date- of receipt of the warrant. 2) The sheriff shall, within five days after the receipt of the warrant, record with the clerk of the county a copy of the warrant, and the clerk shall immediately enter in the County Clerk Lien Record the name of the taxpayer mentioned in the warrant, the amount of the tax or portion of the tax and penalties for which the warrant is issued and the date the copy is recorded. The amount of the warrant so recorded shall become a lien upon the title to and interest in real property of the taxpayer against whom it is issued in the same manner as a judgment duly docketed. The sheriff immediately shall proceed upon the warrant in all respects, with like effect and in the same manner prescribed by law in respect to executions issued against property upon judgment of a court of record, and shall be entitled to the same fees for services in executing the warrant, to be added to and collected as a part of the warrant liability. 3) In the discretion of the department a warrant of.like terms, force and effect may be issued and directed to any agent authorized to collect the taxes imposed by the Tobacco Products Tax Act. In the execution of the warrant, the agent shall have all the powers conferred by law upon sheriffs, but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty. 4) I a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes against the taxpayer as if the people of the state had recovered judgment against the taxpayer for the amount of the tax c , 1987 c Refund agreement with governing body of Indian reservation; appropriation for refunds. ( 1) The director is authorized to enter into a tobacco products tax refund agreement with the governing body of any Indian reservation in Oregon. The agreement may provide for a mutually agreed upon amount as a refund to the gov- erning body of any tobacco tax collected un- der the Tobacco Products Tax Act in connection with the sale, use, storage or consumption of tobacco products on the Indian reservation. This provision is in addi- tion to other laws allowing tax refunds. 2) There is annually appropriated to the director from the suspense.,account established under ORS and , the amounts necessary to make the refunds provided by subsection ( 1) of this section c Remedies cumulative. The remedies of the state provided for in the Tobacco Products Tax Act are cumulative, and no action taken by the department or Attorney General constitutes an election by the state to pursue any remedy to the exclusion of any other remedy for which provision is made in the Tobacco Products Tax Act c Disposition of moneys. All moneys received by the Department of Re- venue under the Tobacco Products Tax Act shall be deposited in the State Treasury and credited to a suspense account established under ORS After payment of ad- ministration expenses incurred by the de- partment in the administration of the Tobacco Products Tax Act and of refunds or credits arising from erroneous overpayments, the balance of the money shall be credited to the General Fund c Penalties in ORS additional to other penalties. The penalties provided in ORS are additional to all other penalties provided under the Tobacco Products Tax Act c

265 CIGARETTE AND TOBACCO PRODUCTS TAX Tag on distributors in lieu of all other state, county or municipal taxes on sale or use of tobacco.. (1) The taxes imposed by ORS are in lieu of all other state, county or municipal taxes on the sale or use of tobacco products. 2) Any tobacco product ' with respect to which a tax has once been imposed under ORS shall not be subject upon a subsequent distribution to the taxes imposed by ORS c al Short title. ORS to 32j.640 may be cited as the Tobacco Products Tax Act. ' c Note: ORS to 3 x.645 were enacted into law by the Legislative Assembly but were not added to or made a part of ORS chapter 323 or any series therein by legislative action. See Preface to Oregon Revised Statutes for further explanation PENALTIES Penalties for certain violations of- ORS to ( 1) Any person required to obtain a license as a distributor under ORS to who engages in business as a distributor without a license or after a license has been canceled, sus- pended, or revoked, and each officer of any corporation which so engages in business, is guilty of a misdemeanor, and upon conviction thereof, shall lie fined not more than $ 1, 000, or shall be imprisoned for not more than one year, or both, for each offense. 2) Any person who fails or refuses to file any report required to be made by ORS to , or who fails or refuses to furnish a supplemental report or other data required by the department under ORS `to , or who renders a false report is guilty of a misdemeanor and, upon conviction" thereof, shall be fined not more than $500 for each offense. 3) Any person required to make, render, sign or verify any report under ORS to , who makes any false report with intent, to defeat or evade the determination required. by law to be made is guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $ 5,000, or be imprisoned for not exceeding one year in the county jail, or be subject to both fine and imprisonment, in the discretion of the circuit court. 4) Any transporter who violates the provisions of ORS shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $ 1, 000, or be imprisoned for not exceeding one year in the county jail, or be subject to both fine and imprisonment, in the discretion of the circuit court. 5) Any person who violates any provisions of ORS to , except as otherwise provided, is guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $ 500 for each offense c c325 91, repealed by 1971 c Civil and criminal penalties for violation of Tobacco Products Tax Act; appeal; collection of amount assessed. ( 1) If a' person or an officer or employee of a corporation or a member or employee of a partnership violates ORS ( 1)( a) or ( b), the Department of : Revenue shall assess against the person a civil penalty of not more than $ 1, 000. The penalty shall be re- covered as provided in subsection ( 4) of this section. 2) A person or an officer or employee of a corporation or a member or employee of a partnership who violates ORS ( 1)( c) or ( 2), is liable to a penalty of not more than 1, 000, to be recovered in the manner provided in subsection ( 4) of this section, and is also guilty of a Class C felony. 3) If any person violates any provision of the Tobacco Products Tax Act other than ORS , the department shall assess against the person a civil penalty of not more than $ 1, 000, to be recovered as provided in subsection ( 4) of this section. 4) Any person against whom a penalty is assessed under this section may appeal to the director as provided in ORS If the penalty is not paid within 10 days after the order of the department becomes final, the department may record the order and collect the amount assessed in the same manner as income tax deficiencies are recorded and collected under ORS c

266 REVENUE AND TAXATION

267 Chapter EDITION Definitions GENERAL IMPOSITION OF TAX Imposition of tax; rate; basis of levy Exemptions of gross sales value State and local government interests exempt: credit of taxes imposed by state and local governments COLLECTION OF TAX Quarterly payment of tax; computation of prevailing cash price Statement by taxpayer; other required in- formation Statement of producer; filing of statement Penalty for delinquent reports; report of claimed exempt royalties Audit; interest on delinquent tax or defi- ciency Notice to person liable for unpaid tax Collection of unpaid tax Release of lien on real estate Status of taxes, interest and penalties as debt; limitation on time of collection Payment of tax when oil or gas in liti- gation Oil and Gas Tax ADMINISTRATION Powers of department Rulemaking authority of department DISPOSITION OF REVENUE Net revenue payable to Common School Fund Temporary provisions relating to underground- storage tank regulatory fees are compiled as notes after ORS ) Temporary provisions relating to sales tax on lubricating oil and grease are compiled as notes after ORS ) CIVIL PENALTY Prohibited conduct; civil penalty MISCELLANEOUS Content of statement or settlement sheet Duty to provide information to department; penalty CROSS REFERENCES Condemnation by pipeline, gas corporations; underground storage, to Gas and oil drilling and conservation, Ch. 520 Interest on deficiency, delinquency or refund, Taxation of oil, gas when owned separately from real property,

268 REVENUE AND TAXATION

269 OIL AND GAS TAX GENERAL Definitions. As used in this chapter, unless the context requires other- wise: 1) " Department" means the Department of Revenue. 2) " Gas" means natural gas and casinghead gas. 3) " Gross value" or " gross sales value" means the actual cash price prevailing for oil or gas of the kind, character and quality of the oil or gas subject to the tax imposed under this chapter at the time such oil or gas is produced, as determined by the depart- ment. 4) " Gross production" means the total volume of oil or gas extracted from a well, including oil or gas extracted but not sold. Gross production" does not include the ex- traction from a well of any oil or gas reinjected therein for storage. 5) " Produced and saved" means ex- tracted and sold, extracted and used or extracted and retained for later sale or use. 6) " Oil" means petroleum, crude oil, mineral oil and casinghead gas. 7) " Person" includes partnership, corporation, association, fiduciary, trustee and any combination of individuals. 8) " Quarter" and " quarterly" endar quarters c IMPOSITION OF TAX mean cal Imposition of tax; rate; basis of levy. ( 1) A tax of six percent of the gross value at the well is levied upon all oil and gas produced within the State of Oregon, less the value of any part thereof, the ownership or right to which is exempt from taxation. 2) The tax levied shall be attached to and is levied upon the whole production, including what is commonly known as the royalty interest c Exemptions of gross sales value. An exemption from the tax levied on oil or gas imposed by ORS is granted upon the first $3,000 in gross sales value of the gross production each calendar quarter from each well c State and local government interests exempt; credit of taxes imposed by state and local governments. ( 1) Any royalty or other interest in oil or gas owned by the state, counties, cities, towns, school districts or other municipal corporations or political subdivisions, is exempt from the gross production tax imposed by ORS ) There shall be allowed as a credit against taxes imposed by this chapter all ad valorem taxes imposed by the state, counties, cities, towns, school districts and other mu- nicipal corporations and political subdi- visions upon any property rights attached to or inherent in the right to produce oil and gas, upon producing oil and gas leases, upon machinery, appliances and equipment used in and around any well producing oil or gas and actually' used in the operation of the well, upon oil and gas produced in the state and upon any investment in any property mentioned or described in this subsection c COLLECTION OF TAX Quarterly payment of tax; computation of prevailing cash price. ( 1) The gross production tax on oil or gas im- posed by this chapter shall be paid on a quarterly basis. The tax shall become due on the 45th day following the preceding quarterly period on all oil or gas produced in and saved during the preceding quarterly period, and, if the tax is not paid on or before the end of the 45th day, it shall become delinquent and shall be collected as provided in this chapter. The department, upon request and a proper showing of the necessity therefor, may grant an extension of time, not to exceed 30 days, for paying the tax and when such a request -is granted the tax shall not be delinquent until the extended period has expired. 2) On oil or gas sold at the time of production, the gross production tax shall be paid by the purchaser, and the purchaser shall and is authorized to deduct in making settlements with the producer or royalty owner, the amount of tax so paid. In the event oil on which the gross production tax becomes due is not sold at the time of pro- duction but is retained or used by the producer, the tax on the oil not so sold shall be paid by the producer, including the tax due on royalty oil not sold. In settlement with the royalty owner, the producer shall have the right to deduct the amount of the tax so paid on royalty oil or to deduct royalty oil equivalent in value at the time the tax becomes due with the amount of the tax paid ) The amount of gas produced and used for fuel or otherwise used in the operation of any lease or premises in the drilling for or production of oil or gas, or for repressuring, shall not be considered for the purpose of this chapter as gas actually produced and saved. 4) When oil or gas is sold at a sale price that does not represent the cash price prevailing for oil or gas of like kind, character or quality in the field from which such prod-

270 REVENUE AND TAXATION uct is produced, the department 'may require the tax to be paid upon the basis of the prevailing cash price then being paid at the time of production in the field for oil, or gas of like kind, quality and character c Statement by taxpayer; other required information. ( 1) The tax imposed by this chapter shall be paid to the department and the person paying the tax shall file with the department at the time the tax is required to be paid, a statement, under oath, on forms prescribed by the department, giving, with other information required, the following: a) Full description of the property by lease name, subdivision of quarter section, section, township and range from which the oil or gas was produced; b) The name of the producer; c) The gross amount of the oil or gas purchased; d) The total value of the oil or gas at the price paid, if purchased at time of production; e) The formation from which the oil or gas is produced; and f) The prevailing market price of oil or gas sold at time of production. 2) If a purchaser of oil or gas pays the tax, the producer of the oil or gas for which the tax is being paid shall make available to the purchaser all information required under. subsection ( 1) of this section. In lieu of the statement, a purchaser, at time of pro- duction, may furnish a true verified copy of the regular settlement sheet in use by such purchaser, if the sheet contains all the information required c Statement of producer; filing Any person engaged in the of statement. ( 1) production within this state of oil or gas, shall on or before the 45th day following the preceding quarterly period file with the de- partment a statement under oath upon forms prescribed by the, department, giving, along with other information required, the following: a) Name of the property, description by subdivision of quarter section, section, town- ship and range; b) The gross amount of oil or gas produced and saved; c) The name of the purchaser and the price received therefor; and d) The formation from which the oil or gas is produced. 2) Each report required by this section shall be filed on separate forms as to product and county. ( 1981 c Penalty for delinquent reports; report of claimed exempt royalties. ( 1) Reports. required under ORS and from' either the purchaser or producer, as the - case may be, shall be delinquent after the last day fixed for filing, and every person required to file a report shall be subject to penalty of $25 per day for each property upon which the person fails or refuses to file a report. The penalties prescribed by this section shall be for failure to file reports and shall be in addition to the interest and penalty imposed for delinquent tax, and shall likewise constitute a lien against the assets of the person failing or refusing to file a report. The penalties pre - scribed under this section shall be collected in the same manner as gross production taxes and shall be deposited in the suspense account referred to in ORS ) When royalty is claimed to be exempt from taxation by law, the facts on which claims of exemption are based and other information as the department may require shall be furnished in the report c.889 8; 1983 c Audit; interest on delinquent tax or deficiency. ( 1) The provisions of ORS chapters 305 and 314 as to the audit and examination of reports and returns, - determination of deficiencies, assessments, claims for refund, conferences, appeals to the director of the department and appeals to the Oregon Tax Court, and the procedures relat- ing thereto, shall apply to the determination of taxes, penalties and interest under this chapter, except where the context requires otherwise. 2) A delinquent tax or deficiency shall bear interest at the rate established under ORS for each month, or any fraction thereof, from the time the tax was due c , 1982 s.s. 1 c Notice to person liable for un- paid tax. If any person neglects or refuses to make a return required to be made by this chapter, the department is authorized to determine the tax due, based upon any information in its possession or that may come into its possession. The department shall give the person liable for the tax written notice by registered mail of the tax and delinquency charges and the tax and delinquency charges shall be a lien from the time of production. If the tax and delinquency charges are not paid within 30 days from the mailing of the notice, the department shall proceed to collect the tax in the manner provided in ORS c Collection of unpaid tax. ( 1) If any tax imposed by this chapter, or any por- tion of such tax, is not paid within 30 days after the date that the written notice and

271 OIL AND GAS TAX demand for payment required under ORS is mailed, the department shall issue a warrant, directed to the sheriff of any county of the state, commanding the sheriff to levy upon and sell the real and personal property of the person owing the tax, found within that county, for the payment in the amount thereof, with the added penalties, interest and cost of executing the warrant, and to return the warrant to the department and to pay to it the money collected ' by virtue thereof, within 60 days after receipt of the warrant. A copy of the warrant shall be mailed or delivered to the taxpayer by the department at the taxpayer' s last -known ad- dress. 2) The sheriff shall, within five days af- ter the receipt of the warrant, record a copy with the county clerk, and thereupon the clerk shall enter in the County Clerk Lien Record the name of the person mentioned in the warrant, and the amount of the tax or portion thereof and penalties for which the warrant is issued and the date when the copy is recorded. Thereupon the, amount of the warrant so recorded shall become a lien upon the title to and interest in real property of the person against which.it is issued, in the same manner as. a judgment duly docketed. The sheriff thereupon shall proceed upon the warrant in all respects, with like effect, and in the same manner prescribed by law in respect to executions issued against property upon judgments of a court of records, and shall be entitled to the same fees for services in executing the warrant, to be added to and collected as a part of the warrant liability. 3) In the discretion of the department a warrant of like terms, force and effect may be issued and directed to any agent of the department authorized by it to collect this tax. In the execution of the warrant, such agent has the powers conferred by law upon sheriffs, but is entitled to no fee or compensation in excess of actual expenses paid in the performance of such duty. 4) If a warrant is returned not satisfied in full, the department shall have the same remedies to enforce the claim for taxes against the owner as if the state had a recorded judgment against the owner for the amount of the tax c , 1983 c ; ; 1989 c Release of lien on real estate. 1) Any person having a lien upon or any interest in real estate against which the amount of the warrant provided for in ORS has become a lien, notice of which has been recorded in accordance with the laws of the state prior to the filing of the warrant, may request the department in writing to release the real estate from the lien of the warrant. If, upon such request the department finds that a sale of the,property would not result in satisfaction of the taxes due in whole or in part, the department shall execute a release of the lien as to such property and such release shall be conclusive evidence of the extinguishment of the lien as to that property. If the department fails to act upon a request for release of a lien under this subsection within 60 days from the date of the request, any person having a lien upon or interest in the property against which the warrant has become a lien may make the department a party to any proceeding brought to enforce any interest in or lien upon such real property, and the determination of the court in such proceeding shall be conclusive and binding upon the department and the State of Oregon. 2) In addition to the release of the lien provided for in subsection ( 1) of this section, the department may execute releases in the following cases, which releases shall be conclusive evidence of the extinguishment of the lien: a) If the department finds that the liability for the amount of the warrant, together with all interest, penalties and costs in respect thereto has been satisfied. b) If the department finds that the fair market value of that part of the property remaining subject to the lien is at least double the amount of the liability remaining unsatisfied in respect of such tax and the amount of all prior liens upon the property. c) If there is furnished to the department a' bond, in such form and with the security the department considers sufficient, conditioned upon the payment of the amount of the warrant, together with all interest in respect thereof, within 60 days after the issu- ance- of the release. d) If there is paid to the department in partial satisfaction of the amount of the warrant an amount not less than the value, as determined by the department, of the interest of the State of Oregon in the part of the property to be so discharged. In determining such value the department shall give consideration to the fair market value of the part of the property to be so discharged and to such liens thereon as have priority to the lien of the State of Oregon c ] Status of taxes, interest and penalties as debt; limitation on time of collection. All taxes, interest and penalties due and unpaid under this chapter, shall constitute a debt due the State of Oregon from the person liable for the tax and may be collected, together with interest, penalty and costs, by appropriate judicial proceeding, which remedy is in addition to all other existing remedies. However, no proceeding for

272 REVENUE AND TAXATION the collection of taxes under this section shall be instituted after the expiration of six ears from the date such taxes were due c Payment of tag when oil or gas in litigation. When oil or gas subject to gross production tax under this chapter is in litigation or dispute involving ownership of the oil or gas, and the oil or gas is sold, the usual gross production tax, as provided by law, shall be paid from the proceeds or funds in the hands of the purchaser of the oil or gas and in lieu of payment for the production, to the extent of the tax. The department' s receipt therefor shall be accepted in lieu of money in settlement of the pur- chase price of the production. If oil or gas is assigned as security for debt or otherwise, the tax shall be likewise paid by the assignee, and the tax shall constitute a lien upon the interest assigned, which shall be paramount to the indebtedness for which the assignment is made, and if the tax becomes delinquent, the usual penalty shall apply c ADMINISTRATION Powers of department. The de- partment may: 1) Require any producer of oil or gas, purchaser of oil or gas, agent or employee of any producer or purchaser or the owner of any royalty interest in oil or gas to furnish any additional information considered by the department to be necessary for the purpose of correctly computing the amount of tax imposed by this chapter; 2) Examine the books, records and files of any producer, purchaser or royalty owner; 3) Administer oaths and conduct hearings and compel the attendance of witnesses and the production of books, records and papers of any person by subpoena; and 4) Make any investigation considered necessary to a full and complete determination as to the amount of production from any oil or gas location, or of any producer of oil or gas, and as to the correct determination of taxes due under this chapter c Rulemaking authority of department. ( 1) The department is authorized to adopt all necessary rules for the purpose of making and filing all reports required under this chapter and otherwise necessary to the enforcement of this chapter. 2) The department may, at its option and discretion, require a sufficient bond from any person charged with the making and filing of reports and the payment of the taxes imposed by this chapter. The bond shall run to the State of Oregon and shall be conditioned upon the making and filing of reports as- -required by law, upon compliance with' the rules of the department, and for the prompt payment, by the principal, of all taxes justly due the state by virtue of the provisions of this chapter. 3) When any reports required have not been filed, or may be insufficient to furnish all the information required by the depart- ment, the department shall institute, in the name of the State of Oregon, upon relation of the department, any necessary action or proceedings in the court having jurisdiction, to enjoin the person from continuing operations until the reports have been filed as required, and in all proper cases, injunction shall issue without bond from the State of Oregon. 4) Upon showing that the state is in danger of losing its claims or the property is being mismanaged, dissipated or concealed, a receiver shall be appointed at the suit of the state c DISPOSITION OF REVENUE Net revenue payable to 'Cori% mon School Fund. ( 1) The revenues derived from the tax imposed by this chapter including interest and penalties, shall be deposited in a suspense account created pursuant to ORS After payment' of refunds and the expenses of the Department of Revenue incurred in the administration of this chapter, the remaining revenues shall be paid into the Common School Fund and are continuously appropriated to the Division- of State Lands for the purposes for which other moneys in the Common School Fund may be used. 2) The amount of moneys necessary to pay refunds and expenses of the Department of Revenue incurred in the administration of this chapter are continuously appropriated to the Department of Revenue from the suspense account referred to in subsection ( 1) of this section c Temporary provisions relating to underground storage tank regulatory fee Note: Sections 11 to 19, chapter 1071, Oregon Laws 1989, provide - Sec. 11. As used in sections 11 to 19 of this Act: 1) " Bulk facility" means a facility, +including pipeline terminals, refinery terminals, rail and barge terminals and associated underground and aboveground tanks, connected or separate, from which petroleum products are withdrawn from bulk and delivered into a cargo tank or barge used to transport those products. 2) " Cargo tank" means an assembly used for transporting, hauling or delivering petroleum products and consisting of a tank having one or more compart- ments mounted on a wagon, truck, trailer, truck - trailer combination, railcar or wheels. " Cargo tank" does not include any assembly used for transporting, hauling or

273 OIL AND GAS TAX delivering petroleum products that holds less than 100 gallons in individual, separable containers. venue. 3) " Department" means the Department of Re- 4) " Person" means an individual, trust, firm, joint stock company, corporation, partnership joint venture, consortium, association, state, municipality, commission, political subdivision of a state or any interstate body, any commercial entity and the Federal Government or any agency of the Federal Government. 5) " Petroleum product" means a petroleum product that is obtained from distilling and processing crude oil and that is capable of being used as a fuel for the propulsion of a motor vehicle or aircraft, including motor gasoline, gasohol, other alcohol - blended fuels, aviation gasoline, kerosene, distillate fuel oil and number 1 and number 2 diesel. The term does not include naphtha -type jet fuel, kerosene -type jet fuel, or a petroleum product destined for use in chemical manufacturing or feedstock of that manufacturing or fuel sold to vessels engaged in interstate or foreign commerce 6) " Withdrawal from bulk" means the removal of a petroleum product from a bulk facilityy ' for delivery directly into a cargo tank or a barge to be transported to another location other than another bulk facility for use or sale in this state c Sec. 12. ( 1) Beginning September 1, 1989, the seller of a petroleum product withdrawn from a bulk facility, on withdrawal from bulk of the petroleum product, shall collect from the person who orders the withdrawal an underground storage tank regulatory fee in the maximum amount of $10. 2) Beginning September 1, 1989, any person who imports petroleum products in a cargo tank or a barge for delivery into a storage tank, other than a tank connected to a bulk facility, shall pay an underground storage tank regulatory fee in the maximum amount of 10 to the Department of Revenue for each such delivery of petroleum products into a storage tank located in the state 3) Subsections ( 1) and ( 2) of this section do not apply to a delivery or import of petroleum products destined for export from this state if the petroleum products are in continuous movement to a destination outside the state. 4) The seller of petroleum products withdrawn from a bulk facility and each person importing petroleum products shall remit the first payment on October 1, Beginning January 1, 1990, payment of the fee due shall be on a quarterly basis. 5) Each operator of a bulk facility and each person who imports petroleum products shall register with the Department of Revenue by August 1, 1989, or 30 days prior to operating a bulk facility or importing a cargo tank of petroleum products, whichever comes first c Sec. 12a. On or before September 1, 1989, the State Fire Marshal shall report to the Emergency Board the amount of the underground storage tank regulatory fee necessary to provide funding to the Underground Storage Tank Compliance and Corrective Action Fund for the purposes set forth in ORS Upon approval of the Emergency Board, the State Fire Marshal immediately shall adopt by rule the fee amounts c a1. Sec. 13. ( 1) The Department of Revenue shall collect the fee imposed under section 12 of this Act. 2). Any petroleum product which the Constitution or laws of the United States prohibit the state from taxing is exempt from the fee imposed under section 12 of this Act c Sec. 14. The Department of Revenue for good cause may extend, for not to exceed one month, the time for payment of the fee due under sections 11 to 19 of this Act. The extension may be granted at any time if a written request is filed with the department within or prior to the period for which the extension may be granted. If the time for payment is extended at the request of a person, interest at the rate established under ORS , for each month, or fraction of a month, from the time the payment was originally due to the time payment is actually made, shall be added and paid c Sec. 15. ( 1) Each operator of a bulk facility and each person who imports petroleum products into this state shall keep at the person' s registered place of business complete and accurate records of any petroleum products sold, purchased by or brought in or caused to be brought in to the place of business. 2) The Department of Revenue, upon oral or written reasonable notice, may make such examinations of the books, papers, records and equipment required to be kept under this section as it may deem necessary in carrying out the provisions of sections 11 to 19 of this Act c Sec. 16. The department is authorized to establish those rules and procedures for the implementation and enforcement of sections 11 to 19 of this Act that are consistent with its provisions and are considered necessary and appropriate c Sec. 17. The provisions of ORS chapters 305 and 314 as to liens, delinquencies, claims for refund, issuance of refunds, conferences, appeals to the director of the department, appeals to the Oregon Tax Court, stay of collection pending appeal, cancellation, waiver, reduction or compromise of fees, penalties or interest, subpoenaing and examining witnesses and books and papers, and the issuance of warrants and the procedures relating thereto, shall apply to the collection of fees, penalties and interest by the department under sections 11 to 19 of this Act, except where the context requires otherwise. [ 1989 e Sec. 18. All moneys received by the Department of Revenue under sections 11 to 19 of this Act shall be deposited in the State Treasury and credited to a suspense account established under ORS After payment of administration expenses incurred by the department in the administration of sections 11 to 19 of this Act and of refunds or credits arising from erroneous overpayments, the balance of the money shall be deposited in the Underground Storage Tank Compliance and Corrective Action Fund. [ 1989 c ) Sec. 19. The fee imposed by section 12 of this Act is in addition to all other state, county or municipal fees on a petroleum product c Temporary provisions relating to sales tax on lubricating oil and grease. Note: Sections 31 to 43 and 51, chapter 1071, Oregon Laws 1989, provide: Sec. 31. ( 1) It is the intent of the Legislative Assembly that funds assessed pursuant to sections 11 to 19 of this Act are not subject to the provisions of section 2, Article VIII or section 3a, Article IX of the Oregon Constitution )( a) Jurisdiction to determine whether sections 11 to 19 of this Act impose a tax or excise levied on, with respect to or measured by the extraction, production, storage, use, sale, distribution or receipt of oil or natural gas or levied on the ownership of oil or natural Vs that is subject to the provisions of section 2, Article VIII or section 3a, Article IX of the Oregon Constitution is conferred upon the Supreme Court. A petition for review shall be filed within 60 days only after September 1, Any person interested in or affected or aggrieved by sections 11 to 19 of this Act may petition for judicial review. The petition shall state the facts showing how the petitioner is interested, affected or

274 REVENUE AND TAXATION aggrieved, and the ground upon which the petition is based. The Supreme Court shall give priority on its docket to a petition for review filed under this ' subsection. Filing of a petition shall stay the operation of sections 11 to 19 of this Act. b) Judicial review under paragraph ( a) of this subsection shall be limited to. A) The provisions of this Act authorizing the imposition of the fee; and B) The legislative history and any supporting documents related to section 2, Article VIII or section 3a, Article IX of the Oregon Constitution c) The court may declare the provisions of sections 11 to 19 of this Act invalid if it rinds that the provisions violate consulutional provisions c Sec. 32. if sections I I to 19 of this Act or any part thereof are judicially declared to impose a tax or excise levied on, with respect to or measured by the extraction, production, storage, use, sale, distribution or receipt of oil or natural gas or levied on the ownership of oil or natural gas, that is subject to the provisions of section 2, Article Vlll or section 3a, Article IX of the Oregon Constitution, sections 11, 12, 12a, 13; 14, 15, 16, 17, 18 and 19 of this Act are repealed c. 107, See. 33. Sections 34 to 43 of this Act become operative on the date the Supreme Court declares that sections 11 to 19 of this Act impose a tax -or excise levied on, with respect to or measured by the extraction, production, storage, use, sale, distribution' or receipt of oil or natural gas or levied on the ownership of oil or natural gas, that is subject to the provisions of section 2, Article VIII or section 3a, Article 1X of the Oregon Constitution c enue. Sec. 34. As used in sections 34 to 43 of this Act: 1) " Department" means the Department of Re- 2) " Lubricating oil" means automotive and aviation engine oil, automatic transmission fluid, industrial engine oil, metal - working fluids, process oil, general industrial oil and grease 3) " Person" means an individual, trust, firm, joint stock company, corporation, partnership, joint venture, consortium, association, state, municipality, commission, political subdivision of a state or any interstate body, any commercial entity and the Federal Government or any agency of the Federal Government c Sec. 35. It is the intent of sections 34 to 43 of this Act to impose a tax on the sale of lubricating oil or grease in this state. These provisions are not intended to relieve any person from any other duty or responsibility imposed by law c Sec. 36. ( 1) A tar is imposed on the sale at wholesale of each quart of lubricating oil or pound of grease in this state in the amount of five cents per quart of lubricating oil and 2. 5 cents per pound of grease. The tae shall be imposed annually in accordance with section 37 of this Act. 2) If any person fails to pay the tax imposed under subsection ( 1) of this section within 60 days, there shall be added to the tae a penalty of five percent of the amount of the tae. Any payment made after 60 days shall bear interest at the rate prescribed under ORS c Sec. 37. ( 1) The Department of Revenue shall collect the tax established under section 36 of this Act. 2) The following are exempt from the fee imposed under this section: a) Any lubricating oil or grease shipped into the state from points of origin outside this state until the interstate transportation of the substance has ended. b) Any lubricating oil or grease which the Constitution or laws of the United States prohibit the state from taxing c Sec. 38. The Department of Revenue for good cause may extend, for not to exceed one month, the time for making any return due under sections 34 to 43 of this Act. The extension may be granted at any time if a written request is riled with the department within or prior to the period for which the extension may be granted. When the time for filing a return is extended at the request of a person, interest at the rate established under ORS , for each month, or fraction of a' month, from the time the return was originally required to be filed to the time of payment, shall be added and paid c Sec. 39. ( 1) Every person who sells lubnraiing oil or grease at wholesale shall keep at the person' s registered place of business complete and accurate records of any lubricating oil or grease sold, purchased by or brought in or caused to be brought in to the place of business. 2) The Department of Revenue, upon oral or written reasonable notice, may make such examinations of the books, papers, records and equipment required to be kept under this section as it may deem necessary in carrying out the provisions of sections 34 to 43 of this Act c Sec. 40. The department is authorized to establish those rules and procedures for the implementation and enforcement of sections 34 to 43 of this Act that are consistent with its provisions and are considered necessary and appropriate c See. 41. The provisions of ORS chapters 305 and 314 as to liens, delinquencies, claims for refund, issuance of refunds, conferences, appeals to the director of the department, appeals to the Oregon Tax Court, stay of collection pending appeal, cancellation, waiver, reduction or compromise of fees, penalties or interest, subpoenaing and examining witnesses and books and papers, and the issuance of warrants and the procedures relating thereto, shall apply to the collection of taxes, penalties and interest by the department under sections 34 to 43 of this Act, except where the context requires otherwise c Sec. 42. All moneys received by the Department of Revenue under sections 34 to 43 of this Act shall be deposited in the State Treasury and credited to a suspense account established under ORS After payment of administration expenses incurred by the department in the administration of sections 34 to 43 of this Act and of refunds or credits arising from erroneous overpayments, the balance of the money shall be deposited in the Underground Storage Tank Compliance and Remedial Action Fund c Sec. 43. The tax imposed by section 36 of this Act is in addition to all other state, county or municipal fees on lubricating oil or grease c Sec. 51. Sections 11, 12, 12as, 13, 14, 15, 16, 17, 18, 19, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42 and 43 of this Act are repealed August 31, c CIVIL PENALTY Prohibited conduct; civil penalty. ( 1) No person, or officer or employee of a corporation, or a member or employee of a partnership, shall, with intent to evade any requirement of this chapter,. or any lawful requirement of the department pursuant to this chapter: a) Fail to pay any tax or to make, sign or verify any return or to supply any information required;