Qualified machinery and equipment (M&E) placed in service in Oregon during the 2016 calendar year may be eligible for a five-year property tax exemption, applicable to tax years beginning on or after July 1, 2017.
Real and personal property utilized in business—including machinery, equipment, and other tangible items—are generally subject to tax in Oregon, unless otherwise exempt by law. However, to encourage expansion of the food processing industry in the state, the Oregon legislature passed a five-year property tax exemption in 2005 for qualified M&E.
Which Types of M&E Qualify?
Qualified M&E includes newly acquired real or personal property used to process the following:
- Fresh fruit
- Bakery products
- Dairy products
Producers of alcoholic beverages and marijuana products aren’t eligible for the exemption.
Newly acquired means new or used M&E that was first purchased or leased by a food processor within the 24 months prior to placing it in service. Property must have been placed in service during 2016 to qualify for an exemption in the tax year beginning July 1, 2017. Placed in service means the equipment was fully available and operational for its intended commercial use. Property that was being installed or tested during the time doesn’t qualify.
Bakery producers, in addition, must have a wholesale license from the Oregon State Department of Agriculture (ODA) to qualify. M&E used to process grains or bakery products must have a total initial investment cost of at least $100,000.
Food processors seeking the exemption must first submit a list of qualifying M&E on the Oregon Food Processor Certification of Qualified Machinery and Equipment form. After receipt of the request, the ODA’s Food and Safety Division will schedule a site visit with the food processor. Inspectors will determine which M&E qualifies for the exemption and provide written approval or denial of the request.
Property tax exemption claims are due to the Department of Revenue (DOR) on or before March 1, but no later than December 31 of the year during which the exemption is claimed. If a claim is late, a filing fee applies equal to the greater of $200 or 1/10 of 1 percent of the real market value of the exemption. Tax already paid on property otherwise subject to the exemption must be refunded upon notice from the appropriate tax collector, whether it’s DOR or county.
We're Here to Help
For more information about the potential impact of the law on your business operations or for help determining whether your M&E qualifies for the exemption, contact your Moss Adams professional or email email@example.com.