OAR 150-315-0152: Pollution Control Facilities: Tax Credit Carry Forward

(1) The amount of pollution control facility tax credit that may be carried forward to a succeeding tax year is the sum of credits that exceed the tax liability, after other credits, for all prior tax years that are within the carryover period. Example 1: A corporate excise taxpayer built a pollution control facility in 1995 at a certified cost of $80,000. The certified percentage allocable to pollution control is 50 percent and the facility has a useful life of eight years. The maximum credit allowed in one tax year is calculated as follows: The $80,000 certified cost is multiplied by the 50 percent allocable to pollution control, yielding $40,000 as the total amount of credit to be claimed over the eight year life of the facility. The $40,000 divided by eight equals $5,000, the maximum yearly credit. See ORS 315.304(2). The taxpayer claimed the maximum credit on tax returns for 1995 and 1996. On the taxpayer's 1997 return, the taxpayer is subject to a corporate excise tax of $1,000 that is offset by $1,000 of the pollution control facility tax credit, leaving $4,000 of credit to be carried forward. (2) If a credit carried forward from a prior year and a current year's credit are available, the taxpayer must use the credit from a previous year first and then the current year's credit. (3) If a credit carried forward from a prior year and a current year's credit are available, the two credits may be combined and taken up to the amount of tax liability for the year. Example 2: The taxpayer described in the prior example computes a tax of $8,000 for 1998. The taxpayer will offset that tax with $8,000 of credit ($4,000 carried over from 1997 plus $4,000 of the current year's $5,000 credit), leaving $1,000 of the 1998 credit to be carried forward. (4) When a facility is sold, the amount of unused credit carried forward from tax years before the sale is retained by the seller to offset tax in future years. Example 3: Calendar year taxpayer A sold a facility to taxpayer B on January 1, 2001. A's allowable pollution control facility credit for 2000 was $500, but A had a net loss and no tax liability to offset. The unused 2000 credit will be carried forward by A to offset A's future taxes. (5) A taxpayer that has unexpired credits at the beginning of tax year 2001 may carry those credits forward for up to three additional tax years, but only if the facility is in use and operation during the tax year to which the credit is carried. Example 4: Calendar year corporation taxpayer B received certification for a pollution control facility with a 10 year asset life and was first eligible to claim the credit in tax year 1996. B reported losses for tax years 1996 through 2000 and was not able to claim the allowable credits for those years. The credit allowed for 1996 was carried forward to 1997, 1998, and 1999 and expired. The credit allowed for 1997 was carried forward to 1998, 1999, and 2000 and expired. The credits allowed for tax years 1998 through 2005 were unexpired at the beginning of B's 2001 tax year and are eligible to be carried forward for up to six years. Example 5: Taxpayer B from Example 4 reports a loss in tax year 2002 and closes the pollution control facility on December 31, 2002. B's unused credits from 1998 and 1999 may not be carried forward to 2003 because the facility was not in use and operation during the tax year to which the credit is carried and the three year period for carryover expired in 2001 and 2002 respectively. The credits for tax years 2000, 2001, and 2002 are eligible to be carried forward for up to three years. No credits may be computed for tax years 2003, 2004, and 2005, but the unused credits carried forward from 2000, 2001, and 2002 may be claimed in the three later years. Example 6: Corporation taxpayer C's pollution control facility is certified on January 1, 2001. C is able to offset only half of its allowable credit against tax on its 2001 return. The balance of the 2001 credit may only be carried forward for up to three years. C did not have unexpired credits at the beginning of its tax year beginning in 2001.