| Machinery and Equipment Certification |
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| Procedures and forms for ODA certification requests |
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ORS 307.453-307.459 - Food Processors Exemption
The 2011 Oregon Legislature reinstated the property tax exemption for certain types of property acquired and installed by Oregon food processors (ORS 307.453). A food processor is defined as a person engaged in the business of processing, repacking, freezing, canning, dehydrating, concentrating, or preserving raw or fresh fruit, vegetables, nuts, legumes, or seafood for human consumption before the point of the first sale.
Under 2011 HB 2563, there are special requirements to claim an exemption for qualified property (certain machinery and equipment and personal property). For property first put into service in 2011, the filing process for claiming exemption will require filing the completed exemption claim with the county assessor or the Department of Revenue, whichever appraises the property. Such claims will be due on or before March 1, 2012, or by December 31, 2012 if accompanied by the late filing fee.
Overview of Senate HB-2563 - Machinery and Equipment Certification
Under 2011 HB the Oregon Legislative Assembly in 2011 allows food processors to declare a property tax exemption for qualified real property machinery and equipment. The Bill defines a food processor as a person engaged in the business of freezing, canning, dehydrating, concentrating, preserving, processing or repacking for human consumption raw or fresh fruit, vegetables, nuts, legumes or seafood in any procedure that occurs prior to the point of first sale by the processor.
ODA procedures and forms
If you have questions about applying for exemptions, call DOR at 503-378-4988.
2. Print (pdf) the completed Oregon Department of Agriculture Request for Certification of Machinery and Equipment for Property Tax Exemption form. If you have questions about this form, call the ODA office at 503-986-4720.
3. Fax the completed ODA Certification Request form(s) along with the DOR Exemption form(s) to the Oregon Department of Agriculture 503-986-4729 or mail the forms to Oregon Department of Agriculture Food Safety Division; 635 Capitol Street NE; Salem, Oregon 97301-2532. Call 503-986-4720 if you have questions. 4. An ODA Food Safety Specialist will contact your firm to set an appointment to visit your facility to inspect the machinery and equipment. Someone from your firm who is familiar with the qualified machinery and equipment on the list must be present to accompany ODA through the plant and identify each piece of qualified machinery and equipment. 5. After inspection, the ODA Food Safety Specialist will leave signed original certification(s) with your firm for you to submit to the Oregon Department of Revenue. The Food Safety Division will keep a copy of the certification on file.
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| Frequently Asked Questions- General Information |
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1. What exemption year am I applying for?
At this time, qualified firms are applying for the 2012 tax year exemption.
2. When should I submit my request for certification of machinery and equipment?
It is recommended that you submit your request for certification prior to January 31, 2012. All certifications conducted after February 29, 2012 will result in a late fee.
The Oregon Department of Agriculture request for certification of machinery and equipment for property tax exemption form is available on pdf.
3. Can I submit a request for certification and an application for exemption after March 1, 2011?
Yes, the assessor may approve an application that is filed after March 1, and on or before December 31 of the assessment year, if the statement is accompanied by a late filing fee of the greater of $200 or one-tenth of one percent of the real market value of the property that is the subject of the application.
4. During what period must qualified machinery and equipment have been placed in service?
To qualify for the 2011 exemption, qualified machinery and equipment must have been placed in service between January 1, 2010 and December 31, 2010.
5. During what period may qualified machinery and equipment have been purchased?
To qualify, machinery and equipment may have been acquired up to two years (24 months) prior to being placed in service. For example, a piece of equipment placed in service May 25, 2010 may have been purchased any time between May 25, 2008 and May 25, 2010.
6. What is the difference between certification and exemption?
The Oregon Department of Agriculture is responsible for "certification" of machinery and equipment. ODA staff determine if the machinery and equipment qualify under the requirements outlined in HB-2563. The county tax assessors are are responsible for the "exemption" from your taxes.
7. What will happen when the ODA representative comes to certify the machinery and equipment?
The ODA representative will come to your facility with the list of qualified machinery and equipment you have submitted to verify that it is present, in service and meets the criteria for qualification. Someone from your firm who is familiar with the qualified machinery and equipment on the list must be present to accompany ODA through the plant and identify each piece of qualified machinery and equipment.
8. What if the list I submit is inaccurate?
There may be questions about whether a piece of machinery or equipment is qualified for the exemption. Part of the reason for the certification visit is to make those determinations. Forms that list items that are not machinery and equipment, or are clearly not qualified because they are not part of a primary processing line for qualified products, or were not placed in service in 2010 will be sent back to be resubmitted.
9. What if I disagree with ODA's proposal to deny certification?
If ODA makes a preliminary decision to deny the approval of certification for machinery or equipment, a request for further review may be sent to ODA's Food Safety Administrator, Vance Bybee, at 635 Capitol St NE, Salem, Oregon 97301.
10. Does my machinery and equipment need to be certified every tax year?
No, however each year between January 1 and February 28, a letter and a copy of the certified machinery and equipment will be sent from the Department of Revenue (DOR). The letter will ask for confirmation that previously certified machinery and equipment is still in service in the same capacity as it was when it was certified. If previously certified machinery and equipment is no longer in service or it is no longer being used in the capacity that it was certified, you will be asked to cross out the non-qualifying machinery and equipment and return the revised list to the Department of Revenue.
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| FAQ- What qualifies for certification |
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1. Can engineering fees and permit costs for qualified machinery and equipment be included?
For real property valuation purposes, Department of Revenue includes all of the costs incurred to make the machinery and equipment functional (excluding testing costs). So, engineering fees, freight, wiring, foundations, installation and county permit fees associated with installation can all be included. If the engineering fees are associated with troubleshooting after the installation, then they are not eligible.
2. Can leased machinery or equipment that has been bought out in the last year be certified?
HB-2563 refers to "newly acquired" and placed into service machinery and equipment. To qualify for the 2011 exemption, the machinery or equipment must have been placed into service and the lease must have been bought out between January 1, 2010 and January 31, 2010.
3. Does the air exchanger in the processing room qualify for certification?
No, the air exchanger provides relief for the employees and it is integral to the building but not to the process.
4. Can a new wastewater system qualify?
Yes- For example, the wastewater system does qualify if removing onion solids from the wastewater before irrigation is the final step in the onion process.
5. Can a dehumidifier in a raw produce storage warehouse qualify?
No, while the dehumidifier provides the atmosphere that allows for the storage of the raw produce, it is integral to the building rather than the process.
6. If the new processing line needed catwalks, do the catwalks qualify?
Yes, as long as the catwalks were installed along with the new equipment and the machinery could not operate without them. If catwalks are installed at the same time as the new equipment, but they are integral to the building and not necessary for the process, than the catwalks are not eligible.
7. Does a new section of roof qualify if it was installed to support a new air condenser?
No, this is considered part of a building and is not deemed equipment.
8. If the insides of the tubes on an aseptic fill line are replaced, does this qualify?
No, this is considered an upgrade and/or regular maintenance.
9. If filling tubes on an aseptic fill line are replaced, does this qualify?
Yes, if whole sections of the line are literally removed and replaced with improved tubes that allow for more capacity.
10. Does machinery and equipment used for research and development qualify?
No
11. Do video jet machines that code the finished product qualify?
Yes, as long as the video jet machines are on lines that do primary processing of fruits, vegetables, nuts, legumes or seafood.
12. Does the stove in the QA lab that dries the samples for testing qualify?
Yes, if the stove is used to control or test a process.
13. Does the computer in the lab that runs statistics for the processing line qualify?
Yes
14. Does the computer in the lab that maintains files for the QA lab qualify?
No
15. Does the computer associated with the equipment on the primary processing line qualify?
Yes
16. Does the new server qualify that updates communications to the production staff?
No
17. Does the new metal detector on the packaging line qualify?
Yes, as long as it is on a line that does primary processing.
18. Does a new IQF tunnel qualify?
Yes, if part of the primary process is to send the product through the IQF tunnel.
19. Do new belts on an existing line qualify?
No, this is considered maintenance.
20. If old lines and belts are removed and everything is replaced, does this qualify?
Yes
21. Does air conditioning in the electrical/computer housing room qualify?
If the air conditioning is required to prevent the processing line from stopping due to over heating, then yes it qualifies. If the air conditioning is required for the comfort of the employees, then it does not qualify.
22. Does an ammonia detector qualify if it is required by OSHA?
Yes, if it is required to be installed.
23. If an existing blancher is broadened and lengthened to increase capacity, does this qualify?
No, this is considered a modification to existing equipment.
24. If machinery and equipment is fabricated on site, can it qualify?
Yes, if it is newly installed and involved in primary food processing.
25. If a new overhead door is installed to keep pests and insects out, does this qualify?
No, an overhead door is integral to the building, not the process.
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| Definitions |
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Assessed Value (ORS 308.149 definitions for ORS 308.149 to 308.166)
(1) "Property class" means the classification of property adopted by the Department of Revenue by rule, except that in the case of property assessed under ORS 308.505 to 308.665, "property class" means the total of all property set forth in the assessment roll prepared under ORS 308.540.
(2) "Area" means the county in which property, the maximum assessed value of which is being adjusted, is located except that “area” means this state, if the property for which the maximum assessed value is being adjusted is property that is centrally assessed under ORS 308.505 to 308.665.
(3)(a) "Average maximum assessed value" means the value determined by dividing the total maximum assessed value of all property in the same area in the same property class by the total number of properties in the same area in the same property class.
(b) In making the calculation described under this subsection, the following property is not taken into account:
(A) New property or new improvements to property;
(B) Property that is partitioned or subdivided;
(C) Property that is rezoned and used consistently with the rezoning;
(D) Property that is added to the assessment and tax roll as omitted property; or
(E) Property that is disqualified from exemption, partial exemption or special assessment.
(c) Paragraph (b)(B), (C), (D) and (E) of this subsection does not apply to the calculation of average maximum assessed value in the case of property centrally assessed under ORS 308.505 to 308.665.
(4)(a) "Average real market value" means the value determined by dividing the total real market value of all property in the same area in the same property class by the total number of properties in the same area in the same property class.
(b) In making the calculation described under this subsection, the following property is not taken into account:
(A) New property or new improvements to property;
(B) Property that is partitioned or subdivided;
(C) Property that is rezoned and used consistently with the rezoning;
(D) Property that is added to the assessment and tax roll as omitted property; or
(E) Property that is disqualified from exemption, partial exemption or special assessment.
(c) Paragraph (b)(B), (C), (D) and (E) of this subsection does not apply to the calculation of average real market value in the case of property centrally assessed under ORS 308.505 to 308.665.
(5)(a) "New property or new improvements" means changes in the value of property as the result of:
(A) New construction, reconstruction, major additions, remodeling, renovation or rehabilitation of property;
(B) The siting, installation or rehabilitation of manufactured structures or floating homes; or
(C) The addition of machinery, fixtures, furnishings, equipment or other taxable real or personal property to the property tax account.
(b) "New property or new improvements" does not include changes in the value of the property as the result of:
(A) General ongoing maintenance and repair; or
(B) Minor construction.
(c) "New property or new improvements" includes taxable property that on January 1 of the assessment year is located in a different tax code area than on January 1 of the preceding assessment year.
(6) "Minor construction" means additions of real property improvements, the real market value of which does not exceed $10,000 in any assessment year or $25,000 for cumulative additions made over five assessment years.
(7) "Lot line adjustment" means any addition to the square footage of the land for a real property tax account and a corresponding subtraction of square footage of the land from a contiguous real property tax account. [1997 c.541 §9; 1999 c.579 §20]
Stat. Auth.: ORS 305.100
Stats. Implemented: ORS 308.149
Hist.: REV 8-2000, f. & cert. ef. 8-3-00
Construction, Maintenance and Repair (OAR 150-308.149-(A))
1) For purposes of ORS 308.149:
(a) "New construction" means any new structure, building, addition or improvement to the land, including site development.
(b) "Reconstruction" means to rebuild or replace an existing structure with one of comparable utility.
(c) "Major addition" means an addition that has a real market value over $10,000 and adds square footage to an existing structure.
(d) "Remodeling" means a type of renovation that changes the basic plan, form or style of the property.
(e) "Renovation" means the process by which older structures or historic buildings are modernized, remodeled or restored.
(f) "Rehabilitation" means to restore to a former condition without changing the basic plan, form or style of the structure.
(2)(a) For purposes of ORS 308.149 "general ongoing maintenance and repair" means activity that:
(A) Preserves the condition of existing improvements without significantly changing design or materials and achieves an average useful life that is typical of the type and quality so the property continues to perform and function efficiently;
(B) Does not create new structures, additions to existing real property improvements or replacement of real or personal property machinery and equipment;
(C) Does not affect a sufficient portion of the improvements to qualify as new construction, reconstruction, major additions, remodeling, renovation or rehabilitation; and
(D) For income producing properties is part of a regularly scheduled maintenance program.
(b) Regardless of cost, the value of general ongoing maintenance and repairs may not be included as additions for the calculation of maximum assessed value.
Real Property and land; timber and mineral interests in real property (ORS 307.010)
(1) As used in the property tax laws of this state, unless otherwise specifically provided:
(a) "Intangible personal property" or "intangibles" includes but is not limited to:
(A) Money at interest, bonds, notes, claims, demands and all other evidences of indebtedness, secured or unsecured, including notes, bonds or certificates secured by mortgages.
(B) All shares of stock in corporations, joint stock companies or associations.
(C) Media constituting business records, computer software, files, records of accounts, title records, surveys, designs, credit references, and data contained therein. “Media” includes, but is not limited to, paper, film, punch cards, magnetic tape and disk storage.
(D) Goodwill.
(E) Customer lists.
(F) Contracts and contract rights.
(G) Patents, trademarks and copyrights.
(H) Assembled labor force.
(I) Trade secrets.
(b) "Personal property" means "tangible personal property."
(c) "Tangible personal property" includes but is not limited to all chattels and movables, such as boats and vessels, merchandise and stock in trade, furniture and personal effects, goods, livestock, vehicles, farming implements, movable machinery, movable tools and movable equipment.
(2) Subsection (1) of this section does not apply to any person, company, corporation or association covered by ORS 308.505 to 308.665. [Amended by 1959 c.82 §1; 1977 c.602 §1; 1993 c.353 §1; 1997 c.154 §27; 2005 c.94 §30]
Real property (OAR 150-307.010(1))
(1) For purposes of ad valorem taxation, the determination of real and personal property is controlled by the statutory definitions of real property, whether or not they conform to definitions used for other purposes.
(2) Real property includes:
(a) Land. "Land" may be either the raw undeveloped land, or improved to the extent a site is created. A "site" exists when land has been improved by site developments to the point that it is, or is ready to be, used for the purpose intended.
(A) Site developments are improvements to the land that become so intertwined with the land as to become inseparable. Examples are: fill, grading and leveling, utility facilities (sewer, water, etc.), cost of developer's activities and profit that accrues to the land, including but not limited to: permits, advertising, sales commissions, developer's profit and overhead, insurance coverage, and any other improvements to the land necessary to improve it to become a site. Site developments are synonymous with site improvements, land improvements, and site preparation. Site developments consist of both "offsite developments" and "onsite developments."
(i) Offsite developments are land improvements provided to the site. These include but are not limited to items such as streets, curbs, sidewalks, street lighting, storm drains, and utility services such as electricity, water, gas, sewer and telephone lines.
(ii) Onsite developments (OSD) are land improvements within the site which support the buildings or other property uses. These include but are not limited to items such as grading, fill, drainage, wells, water supply systems, septic systems, utility connections, extension of utilities to any structure(s), retaining walls, landscaping, graveled driveway area.
Onsite development is synonymous with onsite improvement.
(B) For all specially assessed farm and forest land appraisals the value of onsite developments included as part of the land value will be listed as a separate item on the land record. An exception to this procedure is the appraisal of taxable improvements on exempt federal land. In this situation, the onsite development value shall be carried as a separate item on the improvement record.
(C) The value of site development may be higher or lower than the total cost of its component sand is determined by the contribution of the site developments to the market value of the site.
(b) Buildings, structures, improvements, machinery and equipment. These are improvements on the land and are real property when erected upon or affixed to the land.
(A) Erected Upon. "Erected upon" means assembled, built or constructed and permanently situated on real property and adapted to use in place. For example, a large piece of machinery or equipment is set upon a foundation without being fastened thereto, but is integrated with the building by the use of special foundations, special wiring, electrical panels and switches, plumbing, venting, access ramps, openings and other forms of construction.
(B) Affixed To. "Affixed to" means being annexed or attached to the real property by bolts, screws, nails or by being built into the structure. Also, items may be constructively affixed to the land or building and considered real property by virtue of their weight or size. Some examples include but are not limited to: pipeline milking equipment, milk bulk tanks, seed cleaning equipment, bowling alley lanes, pin setters, and scoring equipment, rock crushing plants, foundries, smelters, paper machines, newspaper presses, sawmills, plywood machinery and presses, aluminum reduction machinery and cannery equipment.
(C) When machinery, equipment or fixtures are affixed to or erected upon real property and owned separately from real property, they are assessable as real property to the owner as provided in ORS 308.115(2).
Stat. Auth: ORS 305.100
Stats. Implemented: ORS 307.010
Hist.: 1-54; 3-58; 11-59; 1-66; 3-70; 11-71; RD 16-1987, f. 12-10-87, cert. ef. 12-31-87; RD 8-1992, f. 12-29-92, cert. ef. 12-31-92; RD 6-1993, f. 12-30-93, cert. ef. 12-31-93
Personal property (OAR 150.307.020 & OAR 150.307.020(3)) Personal Property Definitions OAR 150-307.0
(1) Goodwill. "Goodwill" is a saleable business asset based on reputation, not physical assets.
(2) Customer list. "Customer list" is a proprietary list containing information regarding a business enterprises's clients and is part of the business records for that business.
(3) Contracts and contract rights. "Contracts and contract rights" refers to agreements between two or more parties, which establish mutual rights and responsibilities for a stated consideration, and rights created under such agreements. Examples of contracts include but are not limited to:
(a) Contracts for sale of goods;
(b) Covenants not to compete;
(c) Contracts for purchase of supplies;
(d) Contracts to rent or lease property;
(e) Contracts to provide financing;
(f) Contracts for services by employees or others;
(g) Contracts for permission to use property or processes.
When appraising property utilizing the income approach, the rent attributable to the property shall be based on market rent. "Market rent" is the rental income that the property would most probably command in the open market as of the assessment date. Market rent shall be used for both owner occupied and rented or leased property regardless of the terms of any particular rental or lease agreement encumbering the property.
(4) Trade secret. "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process that derives independent economic value from not being generally known by other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Stat. Auth.: ORS 305.100
Stats. Implemented: ORS 307.020
Hist.: RD 6-1994, f. 12-15-94, cert. ef. 12-30-94
OAR 150-307.020(3)
Personal Property
Property classified as personal property is: (This list is not exclusive.)
(1) Boats and vessels includes all floatable craft. See also ORS 308.260.
(2) Merchandise and stock in trade, commonly referred to as inventories, include the following categories:
(a) Merchandise includes all classes of commodities which are obtained in a salable condition and held for sale in the ordinary course of business.
(b) Materials consist of goods purchased for use in manufacturing and upon which further work is necessary before they are available for disposal. Such goods may be raw materials or they may be partially fabricated commodities secured from others. Thus, things which are finished stock or merchandise for one establishment may be raw materials for another. However, when parts are manufactured and held for future use in manufacturing, they may be classed as finished parts but included in raw materials inventory.
(c) Supplies fall within two categories:
(A) Inventory Supplies consist of personal property owned by or in possession of the taxpayer, that are expended in the production of finished goods or will be consumed in the sale of the stock in trade of the taxpayer held for sale in the ordinary course of his business.
(B) Noninventory Supplies include those items which are not to be expended in the production of finished goods or not to be sold to customers.
(d) Work in process applies to all goods to which manufacturing services have been applied and on which further operation will be necessary before the product is normally ready for disposition. The value of work in process includes material and any labor and factory service (overhead) which have been exerted in bringing the work to the present state of completion.
(e) Finished stock consists of completed products which are available for disposal, comparable to a dealer's merchandise. See ORS 308.250 -- Processor's Exemptions and ORS 311.211 -- Omitted Property Statutes.
(3) Livestock consisting of all domesticated or confined animals, birds, bees, fish and reptiles.
(4) Movable machinery, movable tools and movable equipment include items readily movable as opposed to apparently stationary or fixed items. See Paragraph 2b of OAR 150-307.010(1).
Stat. Auth.: ORS 305.100
Stats. Implemented: ORS 307.020
Hist.: 1-54; 3-58; 11-59; 12-61; 12-65; 1-66; 12-66; 3-70; RD 8-1992, f. 12-29-92, cert. ef. 12-31-92
Qualified Machinery and Equipment
"Qualified machinery & equipment" is a term specifically defined for SB 479. It is defined in 307.455(d) as "property, whether new or used, that is newly acquired by a food process and placed into service prior to January 1 preceding the first tax year for which an exemption under this section is sought. . ." The term, "qualified machinery and equipment" is also used for Enterprise Zones but it is defined differently, specifically for those statutes.
Furniture (ORS 307.020)
"Furniture" is mentioned specifically as being tangible personal property.
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| Laws and Rules |
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Oregon Department of Revenue
Senate Bill 479 was enacted by the legislature in 2005 and sections 2 to 5 of this 2005 Act have been added to and made a part of ORS Chapter 307.
HB-2563 link:
http://www.leg.state.or.us/11reg/measures/hb2500.dir/hb2563.en.html
ORS Chapter 307
OAR 150-307
Personal Property Valuation Guidelines, 2007
Oregon Department of Agriculture
OAR 603-025-0150 (4), Property Tax exemption for qualified machinery and equipment
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