Oregon Administrative Rules
Chapter 123 - OREGON BUSINESS DEVELOPMENT DEPARTMENT
Division 674 - STANDARD EXEMPTION ON TAXABLE ENTERPRISE ZONE PROPERTY
Section 123-674-5500 - Obligations for All Leases, Lessors and Lessees

Universal Citation: OR Admin Rules 123-674-5500

Current through Register Vol. 63, No. 9, September 1, 2024

(1) Qualified property that is not owned by the authorized business firm is exempt in an enterprise zone under ORS 285C.185(3) subject to all other applicable requirements, if used, occupied or operated by the firm under a lease agreement executed no later than July 1 of the first year of exemption on the leased property under ORS 285C.175.

(2) The term of the lease must also extend until at least the end of the tax year that begins in the last exemption year, unless the qualified business firm will or does assume ownership of the property by such time. In certain cases where the term of a lease is technically too short, mitigating circumstances include but are not limited to where:

(a) The firm has the option to unilaterally renew the lease; or

(b) The firm:
(A) Retains effective prerogatives of ownership under an unconventional or nontraditional lease that serves mainly as a financial instrument; and

(B) Would have an unfettered right to retain title to the property in the event that the lease were not mutually renewed before the expected end of the exemption period.

(3) The owner of leased qualified property may be any person or corporation, including but not limited to a public body or an owner of the firm.

(4) The lease agreement must effectively operate as a net lease, inasmuch as:

(a) The firm/lessee directly pays all ad valorem taxes assessed against any qualified property covered by the lease agreement; or

(b) The firm/lessee will compensate the owner of such property in full for the property taxes in addition to rent or other costs throughout the period of the lease.

(5) The stipulation of a net lease is irrelevant if the owner and lessee have common ownership and are subject to treatment as a single eligible business firm according to OAR 123-674-0200(4).

(6) The owner of any such qualified property (even machinery & equipment) must join the firm in filing the property schedule as an attachment to the exemption claim form under ORS 285C.225(4)(d) for the first exemption year, such that the owner or the owner's authorized legal agent signs one of the following:

(a) The same property schedule that has the original signature of the firm's representative; or

(b) An attachment to the schedule that provides for equivalent acknowledgment by the owner.

(7) For purposes of this rule, a lessee that sub-leases property to the firm may substitute for the owner.

(8) The owner has the same right as the firm to timely notify the county assessor and the zone sponsor under ORS 285C.240(1) if a requirement is not met, in order to avoid penalties under ORS 285C.240(4).

(9) A copy of the lease agreement is not required with Application or with the exemption claim, except as described in OAR 123-674-2100(4) or as requested by the county assessor.

Stat. Auth.: ORS 285A.075 & 285C.060(1)

Stats. Implemented: ORS 285C.170, 285C.175, 285C.180& 285C.220

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