StatesmanJoural.Com Article:Can it apply to IOWA????

Legislators tweak tax breaks
Some are capped, but new ones are created


Written by
Peter Wong


While Oregon lawmakers were scaling back existing tax breaks on Friday, they also were creating another tax break whose effect on state tax coffers — or private investment — will not fully unfold in the next two years.

By a 26-1 vote, the Senate approved House Bill 3672, which reduces tax breaks from the $40 million they were projected to cost the state in the next two years to the $10 million made available by legislative leaders.

The bill, which goes to Gov. John Kitzhaber, eliminates several little-used tax breaks, extends or reduces others, and revamps the much-debated business energy tax credit into three new credits — all of them capped. In addition to the state's budget situation, lawmakers were compelled under a 2009 law to review specified tax credits on a six-year cycle.

"For many years, many of us were concerned we were scrutinizing one part of our budget and not scrutinizing another part of it," said Sen. Jackie Dingfelder, D-Portland.

The bill also reduces a fund for film and video production — contributing investors get the tax credit — and changes a credit for collection and production of woody material used for biomass energy.

The only dissenter was Sen. Larry George, R-Sherwood, who said, "There are some of us who would have voted for even more cuts in giveaways by government."

By a 22-5 vote, the Senate also approved Senate Bill 817, which creates a tax credit for investors in businesses that go into low-income areas based on the U.S. Census and defined by the U.S. Treasury. That bill goes to the House, which is likely to vote on it Monday.

Although the credit would allow investors to recoup 39 percent spread over seven years, they would have to wait two years before claiming their first credits — and they would have to pay all the money back if the business leaves the area or they are repaid any portion of the principal.

It is tied to the federal "new markets" tax credit, created by Congress in 2000 and renewed last year as part of a two-year extension of 2001 tax cuts under President George W. Bush. Investors can qualify only if they are turned down for a traditional bank loan.

"Oregonians need the hope of new jobs and a turnaround in the economy," said Kevin Campbell, a lobbyist who advocated for the credit during a committee hearing May 19.

But Jody Wiser, executive director of Tax Fairness Oregon, said the tax break would result in a seven-year loss of $79 million to state coffers. (SB 817 caps the annual amount at $16 million through mid-2016, and at $4 million for a single project.)

"The state could do this far, far more cheaply — and likely would not choose to add to the public subsidy of typical projects getting federal new-market tax credits," she said.

Just 10 projects qualified for federal credits in the Mid-Valley, she said, adding up to $21.9 million of the $375 million in credits statewide.

"I've been leaning 'no' most of the week," said Sen. Alan Bates, D-Medford. "But having heard the floor debate — and knowing the economic needs of this state in producing new jobs and bringing in more capital — if we watch it carefully over the new few years and cut that program off if it's not doing what we expect it to do, I feel comfortable going forward."

Sen. Ginny Burdick, D-Portland, said the concept has been examined over the past couple of years.

"I am quite convinced that this bill will have a significant effect in low-income communities in our state," said Sen. Frank Morse, R-Albany, the bill's floor manager. "It's worthy of a shot."