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Portland recently enacted Ordinance 191451, effective Sept. 14, in which the city is providing a new Downtown Business Incentive Credit (DBIC). Eligible taxpayers may use the DBIC against their applicable business license tax.
The Portland City Council recognized that lockdowns and other restrictions during the pandemic, as well as increased homelessness in the city, have negatively impacted the business community. Businesses and their workers responded by reducing leased space and spending less time in the city. Based on an EcoNorthwest analysis, the council found the downtown, Old Town/Chinatown, Lower Albina, and Lloyd districts had been particularly affected.
In response to the negative impacts, the ordinance added Portland City Code 7.02.875. Pursuant to the code provision, a company located in any of the four districts may be eligible for an incentive credit against its business license tax (BLT). Capped at $25 million over two years (2023 and 2024), the one-time credit is available in either year. The credit would be divided and taken equally over four years, beginning with the year of origination, whether 2023 or 2024.
To claim the incentive credit, the taxpayer must obtain preapproval from the Portland Revenue Division. The division is authorized to approve a total amount of $25M in credits over the two years of the program. To the extent that amount is exceeded, the division is required to reduce the amount so that each taxpayer is permitted a pro-rata share of the total.
To qualify for the credit, the taxpayer must either: 1, enter into a new lease or extend a current lease for a period of four years during 2023 or 2024 for building space in one of the districts, or 2, own and occupy that building space within the district. If 1 or 2 is satisfied, then the taxpayer must maintain at least 15 employees, each of which must work at least half-time in the leased or owned space in the district over the four-year period (and the taxpayer must annually attest to this fact). If a commercial property is leased or owned in 2023, that commercial property lease may be used for the 2023 or 2024 origination date. If leased space is involved, an extended lease must be applied from the end date of an existing lease.
The incentive credit is capped at $250,000 per taxpayer and is computed as the lesser of 1, 100 percent of the BLT in the year of origination, 2, 1 percent of “income subject to tax” on the BLT return, or 3, $30 per square foot of building space leased or owned by the taxpayer.
The DBIC is claimed one-quarter per year starting with the year of origination (2023 or 2024). The credit is nonrefundable and cannot be carried forward.
To the extent the taxpayer breaks the lease or sells the property, the taxpayer is required to repay any amount of the incentive credit received, plus interest. No penalty will be required.
The code provision goes on to state that the director of the Revenue Division may adopt rules, written policies, forms, and procedures related to the DBIC and its implementation. With that in mind, and because this is a new credit, it is prudent to keep an eye on this space going forward.
Dan Eller is a shareholder in the Portland office of Schwabe, Williamson & Wyatt. Contact him at 503-796-3762 or [email protected].
This column is intended to provide readers with general information and not legal advice. Consult professional counsel for help regarding specific situations.
The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the DJC guarantees the accuracy or completeness of any information published herein.
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