75th OREGON LEGISLATIVE ASSEMBLY--2010 Special Session

                            Enrolled

                         House Bill 3627

Sponsored by Representative READ; Representatives BAILEY, BENTZ,
  CLEM, EDWARDS, GARRETT, MATTHEWS, STIEGLER, Senators HASS,
  JOHNSON (Presession filed.)

                     CHAPTER ................

                             AN ACT

Relating to subtraction for investment of severance pay in small
  business; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

  SECTION 1.  { + Section 2 of this 2010 Act is added to and made
a part of ORS chapter 316. + }
  SECTION 2.  { + (1) As used in this section:
  (a) 'Invest' means to exchange cash for equity, debt,
convertible debt or management responsibilities, accompanied by
terms that substantiate ownership or control of an interest in a
business. 'Invest' does not mean to make a loan to a business.
  (b) 'Material participation' has the meaning given that term in
section 469 of the Internal Revenue Code.
  (c) 'Severance pay' means funds paid to an employee upon
termination of employment, other than back wages, vacation pay or
sick pay.
  (d) 'Small business' has the meaning given that term in ORS
183.310.
  (2) There shall be subtracted from federal taxable income an
amount equal to severance pay that a taxpayer receives during the
tax year and invests in a new or existing small business in this
state if:
  (a) The investment occurs on or before the due date for the
return for the tax year or the expiration of the extension period
for filing that return, if any;
  (b) The investment continues for at least 24 months following
termination of employment;
  (c) The taxpayer materially participates in the small business;
  (d) The taxpayer has not previously claimed a subtraction under
this section; and
  (e) The small business is not the employer that paid the
severance pay and does not have any owner in common with the
employer that paid the severance pay.
  (3) The subtraction under this section may not exceed the
lesser of:
  (a) The minimum balance of principal that remains invested by
the taxpayer in the small business at the close of any month
during the 24 months following termination of employment; or
  (b) $500,000.
  (4) If at any time the Department of Revenue determines that a
taxpayer is not in compliance with any of the provisions of this

Enrolled House Bill 3627 (HB 3627-A)                       Page 1

section, the department shall disallow the subtraction under this
section. Upon this disallowance, the department shall determine
the amount of tax due absent the subtraction under this section
and immediately shall collect any taxes due by reason of the
disallowance.
  (5) The Department of Revenue shall establish by rule
procedures for administering this section, including procedures
for verifying the receipt of severance pay by the taxpayer. + }
  SECTION 3.  { + No later than February 1, 2015, the Department
of Revenue, in conjunction with the Oregon Business Development
Department and the Legislative Revenue Officer, shall prepare a
report regarding the economic impact of section 2 of this 2010
Act and shall present the report to the revenue committees of the
Seventy-eighth Legislative Assembly. The purpose of the report is
to analyze the job creation and tax implications of section 2 of
this 2010 Act. + }
  SECTION 4.  { + Section 2 of this 2010 Act applies to tax years
beginning on or after January 1, 2010, and before January 1,
2014. + }
  SECTION 5.  { + This 2010 Act takes effect on the 91st day
after the date on which the special session of the Seventy-fifth
Legislative Assembly adjourns sine die. + }
                         ----------

Passed by House February 17, 2010

      ...........................................................
                                             Chief Clerk of House

      ...........................................................
                                                 Speaker of House

Passed by Senate February 22, 2010

      ...........................................................
                                              President of Senate

Enrolled House Bill 3627 (HB 3627-A)                       Page 2

Received by Governor:

......M.,............., 2010

Approved:

......M.,............., 2010

      ...........................................................
                                                         Governor

Filed in Office of Secretary of State:

......M.,............., 2010

      ...........................................................
                                               Secretary of State

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