Energy Tax Law Alert: Oregon Continues to Welcome Renewable Industries - 2008 Modifications to the State BETC
On February 22, the Oregon Legislative Assembly passed HB 3619, which will modify the Oregon Business Energy Tax Credit ("BETC"). Based on the bill's overwhelming support in both the House and Senate, it is expected to be signed by the Governor. The bill primarily relates to the amount of BETC available to a manufacturer of renewable resource equipment, including solar panels, but the bill also contains provisions relevant to the BETC generally.
HB 3619 resolves issues that arose after last year's substantial expansion of the BETC. In 2007, HB 3201 increased the maximum BETC from $3.5 million to $10 million for facilities that use or produce renewable energy resources, high-efficiency combined heat and power facilities, and renewable energy resource manufacturing facilities. In rulemaking proceedings conducted by the Oregon Department of Energy ("ODOE") during the last several months, there was some debate about the definition of a renewable energy resource manufacturing facility and whether components of a single plant were eligible for more than one maximum credit. HB 3619 apparently resolves that debate by increasing the maximum BETC to $20 million only for a project that qualifies as a renewable energy equipment manufacturing facility, and by authorizing ODOE to adopt limits on the costs that are eligible for the credit, as discussed below. The bill achieves the increase in the credit by increasing the cap on eligible costs for renewable energy equipment manufacturing facility projects from $20 million to $40 million. The bill retains the existing 50 percent multiplier for eligible costs, resulting in a maximum credit of $20 million.
The bill makes no change to the existing law that allows the sale of the BETC, including the BETC for a renewable energy equipment manufacturing facility. However, the bill adds new language, applicable to all projects eligible for the BETC, that holds a purchaser of the BETC harmless from repaying the BETC if the state revokes certification of the project. The bill also prohibits ODOE from recapturing tax against certain persons who are not considered successors in interest to the developer that applied for the BETC, including lenders, bankruptcy trustees, or other persons that acquire an interest through bankruptcy or foreclosure of a security interest.
For a renewable energy resource equipment manufacturing facility, HB 3619 requires ODOE to set standards related to what does and does not constitute such a facility, as well as the facility's minimum level of increased employment, financial viability, likelihood of long-term success, and likelihood of locating in Oregon based upon the applicant's receipt of the BETC. ODOE can apply those standards to certify a lesser amount of costs than applied for, including zero costs. HB 3619 also requires ODOE to consider criteria relating to the state's general fund before determining the amount of costs eligible for the BETC.
The changes made by the bill will be effective for applications for preliminary certification approved on or after January 1, 2008 and for tax years beginning on or after January 1, 2008.
For more information on the BETC legislation and its requirements, or legal assistance with the BETC-related projects, please contact:
Stephen C. Hall at firstname.lastname@example.org or (503) 294-9625
Chris Heuer at email@example.com or 503-294-9206
William H. Holmes at firstname.lastname@example.org or (503) 294-9207
Robert T. Manicke at email@example.com or (503) 294-9664
Kevin T. Pearson at firstname.lastname@example.org or (503) 294-9622
Eric Kodesch at email@example.com or 503-294-9684
Adam Kobos at firstname.lastname@example.org or 503-294-9246
IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.
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