Sustainable Forestry: Beneficial New Transferable Oregon Tax Credit
Our tax partner Mark LeRoux has analyzed a new transferable Oregon tax credit that could add to your bottom line, particularly for companies in the timber industry.
Under this new credit an "agricultural producer" or "biomass collector" will qualify for an Oregon income tax credit for transfers of "biomass" to a "biomass producer." Qualified biomass includes, among other things,
(i) forest and rangeland woody debris from harvesting or thinning conducted to improve forest and rangeland ecological health and reduce uncharacteristic stand replacing wildfire risk;
(ii) certain wood material from hardwood grown on qualifying tree farms; and
(iii) crops grown solely to be used for energy
The credit is available when the biomass is transferred to a party that either uses it as biofuel or to produce biofuel. The credit amount depends upon the particular type of biomass. For example, for woody debris the credit is equal to $10 per green ton. The credit may be used to offset Oregon taxes for the year in which it was earned and in the succeeding four years.
Biomass credit also may be sold with gain on the sale generating income; a similar Oregon tax credit has been selling for about $.86 per dollar of credit. However, it is import to determine if the credit would create unrelated business taxable income for tax exempt partners. For example, assume that forest harvesting/thinning produced 100,000 green tons from of qualified biomass per year. The transfer of the biomass would generate a $1 million Oregon income tax credit, which could probably be sold for approximately $860,000.
Contact Mark LeRoux if you have additional questions on this new transferable Oregon tax credit.
