City of Portland, Oregon Enacts Downtown Business Incentive Credit

by Margaret Eisler

The City of Portland, Oregon has adopted a downtown business incentive credit, to be taken against the business license tax (BLT), to encourage new and extended leases and to bring employees back into the core business districts of Downtown, Old Town, Lower Albina, and Lloyd. (City of Portland Ordinance 191451, effective 09/14/2023.)

Businesses eligible for the credit.

A business located within the eligible sub-district boundaries in effect on January 1, 2023 may be eligible for a downtown business incentive (DBI) credit. The eligible sub-district boundaries encompass the sub-districts of Lower Albina, Lloyd, Downtown, and Old Town/China Town as they exist on January 1, 2023.

One-time credit.

A one-time DBI credit is available in either calendar year 2023 or 2024, but not both. If the year of origination is 2023, the credit will be calculated on the tax year 2023 BLT return. If the year of origination is 2024, the credit will be on the tax year 2024 BLT return.

The credit is divided and taken equally over four years beginning with the tax year of origination. The one-fourth of the credit allowed in each tax year cannot exceed the amount of tax owed in the year.

There is no carryover of any unused credit and the credit is nonrefundable.

Pre-return application.

A taxpayer that qualifies for the credit must apply to the Revenue Division for preapproval of the credit amount the taxpayer may claim.

The total amount of credits the Revenue Division can approve for all taxpayers is limited to $25 million over the two years of the program. In the event that the total amount of the credits claimed exceeds the limit, the Revenue Division will reduce the amount of the credit each qualifying taxpayer may claim on a pro rata basis.

Qualifying for the credit.

A taxpayer is eligible for the credit if:

1. The taxpayer enters into a new lease, or extends a current lease, during the 2023 or 2024 calendar year for building space within the eligible sub-district boundaries for a period of four years or more; or

2. The taxpayer owns and occupies that building space within the eligible sub-district boundaries; and

3. The taxpayer maintains at least 15 employees with each employee working at least half their time in the leased or owned building space within the eligible sub-district boundaries over the 4-year period. The taxpayer must file/provide an attestation for each tax year that they claim the credit.

4. If leased building space, a lease/extension entered into in 2023 may be used to calculate the credit on either the 2023 or 2024 BLT return. The year of origination will be 2023 if calculated on the 2023 BLT return or 2024 if calculated on the 2024 BLT return. Building space owned during 2023 can also be used to calculate the credit on either the 2023 or 2024 BLT return.

5. If leased building space, an extended lease must be extended from the end date of an existing lease.

Credit amount.

The maximum credit is $250,000 in the year of origination, limited to the lesser of: (1) 100% of “City of Portland Business License Tax” as shown on the BLT return, Section IV, in the year of origination; or (2) 1% of “income subject to tax” as shown on the BLT return, Section IV, in the year of origination; or (3) $30 per square footage of building space covered in the lease/extension or building space used by a building owner’s staff.

The credit may be limited to the amount approved or adjusted by application of the total amount of credits the Revenue Division can approve for all taxpayers.

Claiming the credit.

The credit is divided by four, with one-fourth of the credit claimed on the BLT return in the year of origination and one-fourth claimed on the BLT return for each of the succeeding consecutive three years.

The portion of the credit claimed in each of the four years cannot exceed the “City of Portland Business License Tax” amount in Section IV of the BLT return for that year.

If the portion of the credit allowed for one of the years exceeds the “City of Portland Business License Tax” amount in Section IV of the BLT return for that year, it cannot be carried or used on the BLT return for another year.