If a sole proprietorship or partnership obtains a pollution control facility certificate and the business subsequently incorporates, the new corporation must obtain a new certificate before it may claim any remaining credit for the facility. A new certificate is required even if the facility is transferred in a tax-free exchange.
When two or more domestic corporations merge or consolidate, or when one or more domestic corporations and one or more foreign corporations merge or consolidate, the successor corporation is not required to apply for a new certificate.
If a foreign corporation authorized to transact business in Oregon is merged or consolidated into another foreign corporation, the laws of the state in which the successor corporation is incorporated will govern the rights of the successor corporation and, hence, determine the transferability of the certificate.
When a facility is sold, the seller may claim a credit for the year of sale prorated to that portion of the tax year during which the seller owned and operated the facility. The buyer also may claim a credit for the year of purchase prorated to the period of ownership and operation of the facility, provided the buyer applies for and receives a new certificate as required by ORS 315.304 (Pollution control facilities)(8) and 468.170 (Action on application). If the seller’s tax year does not coincide with the purchaser’s, each taxpayer’s credit is based upon the portion of each taxpayer’s own tax year in which that taxpayer owned the facility.Example. Taxpayer A sold a certified facility to taxpayer B on July 1. Taxpayer B is a fiscal year taxpayer with a tax year ending March 31. Taxpayer A’s credit would be limited to 50 percent of a full year’s credit (facility owned January 1 through June 30). Assuming taxpayer B applied for and received a new certificate taxpayer B would be entitled to 75 percent of a full year’s credit (facility owned July 1 through March 31).
Since ORS 315.304 (Pollution control facilities)(8) provides that “the tax credit available to such transferee shall be limited to the amount of credit not claimed by the transferor,” it is necessary that the seller disclose to the buyer the amount of maximum allowable credit not yet claimed, based on 50 percent, or lesser applicable percentage, of the original certificate holder’s investment in the facility. The transferee shall amortize the available credit over the shorter of the remaining useful life, as of the date of the new certificate, or ten years.
When a facility is sold, any credit carryforward from tax years prior to the sale cannot be sold or otherwise transferred to the buyer. Such credit shall be carried forward by the seller.