AOI Leading Issues – Jan 2012

AOI Leading Issues – Jan 2012

Oregon Court: Good News – Businesses Can Offset Corporate Minimum Tax with Credits
Tax Court Rejects Arguments of Oregon Department of Revenue

In a key court decision that flew under the radar during the Christmas holiday, the Oregon Tax Court sided with Con-Way, Inc. in its dispute with the Oregon Department of Revenue.

At issue: Con-Way’s use of Oregon’s Business Energy Tax Credit (BETC) to offset its corporate minimum tax liability under Measure 67.

For the 2009 tax year, Con-Way acquired a BETC credit of $75,000. Con-Way reported no net income for 2009, but generated enough sales to trigger a $75,000 corporate minimum tax liability under Measure 67. Con-Way applied its BETC credit to offset its 2009 tax liability.

The Oregon Department of Revenue disallowed Con-Way’s use of the BETC credit and instead assessed penalties and interest, asserting that the Measure 67 corporate minimum tax law requires a cash payment each year in the amount of any liability calculated under the Measure 67 scheme regardless of any tax credits.

The Tax Court disagreed. It admonished the Department, saying, “…the department asks the court to add words to the statute so that it reads that there is an obligation to pay ‘in cash and without regard to any tax credit otherwise available to the taxpayer.’ Not only does the statute not contain those words, the context of the revenue laws as a whole indicates that when the legislature desires to prevent a tax credit from being used to satisfy a minimum tax obligation, it knows how to say so and has, in fact, said so.”

In short the Court found no legislative evidence supporting the Department’s position.

The effect of the ruling to AOI members is that BETC credits may now be applied against corporate minimum tax liabilities.

Might the Legislature try and intervene? The interim legislative Revenue Committees discussed this issue last September. Representative Phil Barnhart (D-Eugene) argued that he and his Democratic colleagues meant to deny offsetting when they passed the tax increases in the 2009 Legislative session. Representative Vicki Berger (R-Salem) countered that she wasn’t in the group of legislators that passed Measure 67 and she didn’t see the words in the statute. The Tax Court affirmed her position.

AOI will keep a close watch on this issue during the February 2012 Legislative session. It is likely that a 3/5 supermajority vote of the legislature would be needed to deny Oregon companies the ability to offset corporate minimum tax liabilities with the BETC credit.

Oregon’s Low Carbon Fuel Conundrum
Gasoline or diesel, a gallon may be getting pricier

Following a wave of California greenhouse gas measures (including AB32, cap and trade, etc.) the 2009 Oregon Legislature adopted a statute allowing the Oregon Department of Environmental Quality (DEQ) to adopt rules implementing a low carbon fuel standard (LCFS) similar to one currently pending in the Golden State.

Generally speaking, a LCFS mandates the reformulation of conventional transportation fuels – gasoline and diesel – to reduce their carbon content, and establishes quotas requiring the use of alternative fuels such as bio-diesel and cellulosic ethanol.

The primary concern regarding a LCFS is that it will trigger an economic chain reaction driving consumer fuel costs higher and resulting in supply disruptions. This could occur for two reasons; the LCFS relies on various fuels that have not yet been invented or perfected, and are not available in sufficient quantities to meet the mandated usage. These fuels are typically more expensive than their conventional counterparts, a factor likely to be compounded as scarce supplies drive consumer prices even higher. In addition, the required changes in gasoline and diesel formulations will add to fuel producers’ costs while simultaneously limiting the amount of fuels that can be sold in the state. Higher production costs and reduced availability force upward pressure on prices at the pump. Higher fuel prices translate to higher costs for goods and services leading to job losses as businesses adjust their budgets to accommodate increased costs and consumers have less disposable income. In short, the economic impact could be felt across all sectors

Two weeks ago a federal court blocked enforcement of the California low carbon standard, citing, amongst other things, that it over-reaches its scope of regulatory authority and circumvents lawmaking activity that is appropriately the province of the federal government, not individual states.

Even before the recent court decision, red flags were being raised not only by California’s fuel producers and business community, but the state’s Energy Commission who warned that the LCFS could cost fuel providers billions of dollars, costs which could go even higher if other states adopt a similar standard. It also raised concerns about the availability of corn-oil biodiesel, the supply of renewable diesel and the feasibility of using half the U.S. supply of cellulosic fuels in 2018 and beyond – and that’s just to meet California’s quotas.

How the California case affects Oregon’s nascent program is not yet clear. The statute does not demand, simply allows, the agency to promulgate such rules. But it is rare that the legislature passes a measure granting an agency authority to implement a major new program without expecting them to carry it out.

To its credit, the DEQ has approached the issue with care. Although it put together a workgroup and produced a report, it has not yet proposed formal rules. The agency has been watching the developments in California and discussing the issues with various stakeholders.

Likewise, Washington State’s program is also on hold pending the outcome of the California case, which the California Air Resources Board is appealing.

Once that appeal is resolved the DEQ will need to make a decision as to whether or not to move forward with a program.

Complicating (or simplifying, depending on one’s point of view) the issue is the fact that the Oregon statute enabling the DEQ program contains a sunset provision that, if not removed by a vote of the legislature, will sunset authority for the program in 2015. Consequently, absent such a bill, any DEQ fuel program will be defunct almost upon startup.

It should be interesting.

Community Members Invited to Discuss Education, From Pre-kindergarten Through College and Career Readiness
Meetings slated for seven Oregon cities January 17 to 30

The Oregon Education Investment Board will hold seven community meetings across the state later this month, to discuss next steps to improve student success in Oregon’s public education system, from pre-kindergarten through to college and career readiness.

Thousands of individuals have already participated in surveys, offered ideas in public testimony and met with representatives of the Governor’s Office around the state. Now local students, educators, parents and community members are invited to the meetings to share their ideas to support student learning.

Each of the seven meetings will run from 6:30 to 8:30 p.m. After a brief presentation on the Oregon Education Investment Board’s proposals, most of the time is reserved for participants to discuss and share their thoughts.

Tuesday, Jan. 17 Portland Community College Rock Creek Campus, Washington County
Rock Creek Event Center, Bldg. 9, 17705 NW Springville Rd.
Wednesday, Jan. 18 Chemeketa Community College, Salem
Eola Viticulture Center, 215 Doaks Ferry Rd. NW
Thursday, Jan. 19 Immigrant and Refugee Community Organization, East Portland
10301 NE Glisan St.
Monday, Jan. 23 Central Oregon Community College, Bend
Wille Hall, 2600 N.W. College Way
Wednesday, Jan. 25 North Medford High School, Medford
1900 North Keene Way Dr.
Thursday, Jan. 26 Lane Community College, Eugene
Center for Meeting and Learning, Rm. 104, 4000 East 30th Ave.
Monday, Jan. 30 Blue Mountain Community College, Pendleton
Rm. E 114, 2400 NW Carden Ave.

Each of these locations is accessible to individuals with disabilities. For other accommodations or language interpretation, please contact Seth Allen at the Oregon Education Investment Board at [email protected] or call 503-378-8213 at least 48 hours before the meeting.

In addition, a live web conference will be scheduled to allow participation via computer or mobile device at any location.

The Oregon Education Investment Board is proposing legislative action in February 2012 to streamline early childhood programs and create a system of accountability for student success from pre-kindergarten through K-12 to college and career readiness. Those are the recommendation of Oregon Learns, a report delivered Dec. 15 to the Oregon Legislature by the board.

Read the Dec. 15 news release, executive summary and full report:

  • News Release ( html)
  • Executive Summary, Oregon Learns ( pdf)
  • Oregon Learns, OEIB Report ( pdf)
  • Executive Summary, Early Learning Council Report ( pdf)

Early Learning Council Report ( pdf)