Enterprise Zone

Oregon's enterprise zones offer a unique resource to Oregon communities, and an excellent opportunity for businesses growing or locating in Oregon. Primarily, enterprise zones exempt businesses from local property taxes on new investments for a specified amount of time, which varies among the different zone programs.

Sponsored by city, port, county or tribal governments, an enterprise zone typically serves as a focal point for local development efforts. There are currently 69 enterprise zones creating better opportunities for business investment across Oregon: 54 rural and 15 urban. Local governments are responsible for creating, amending, managing and renewing most of these zones, until June 30, 2025.

Standard Program

In exchange for locating or expanding into any enterprise zone, eligible (generally non-retail) businesses receive total exemption from the property taxes normally assessed on new plant and equipment. Subject to local authorization, timely filings and criteria the benefits include:

• Construction-in-Process Enterprise Zone Exemption—For up to two years before qualified property is placed in service, it can be exempt from local taxes, which can cover more property than the regular exemption for commercial facilities under construction.

• Depending on the zone, local incentives also may be available.

Standard Enterprise Zone Program

Business Eligibility

Before construction/installation activities begin on-site, the local zone manager must receive an application for authorization, which can be found attached at the bottom of the page or here.

A key function of authorization is to ascertain and assure a business firm’s eligibility for exemption. The program is primarily directed at for-profit organizations that provide goods or services to other business operations.

Eligible Businesses Include:

• Manufacturers
• Processors
• Shippers
• A variety of operations that serve other organizations
• Call centers
• Headquarter-type facilities

Ineligible Operations Include:

• Tourism
• Retail Food Service
• Entertainment
• Childcare
• Financial Services
• Property Management
• Housing or Construction
• Retail Sales
• Health Care

An eligible call center may receive customer requests and orders by various means, but at least 90 percent must originate from areas that would entail a long-distance charge if performed by telephone.

E-commerce investments receive special treatment in certain enterprise zones and in the city of North Plains.

Central facilities for management, marketing, design, etc., are eligible if serving statewide or wider operations of a company. (Investment needs to conform to authorized description.)

More than 60 percent of the enterprise zones have elected to make hotels, motels, and destination resorts eligible. The choice may differ among a zone’s sponsoring city/county jurisdictions.

Qualified Property

A new building/structure, structural modifications or additions, or newly installed machinery and equipment qualify for exemption, but not land, previously used property value and miscellaneous personal property.

Criteria for Qualifying Projects

For the basic three-year enterprise zone exemption period, the business needs to:

• Increase full-time, permanent employment of the firm inside the enterprise zone by the greater of one new job or 10% (or less with special-case local sponsor waivers);
• Generally have no concurrent job losses outside the zone boundary inside Oregon;
• Maintain minimum employment level during the exemption period;
• Enter into a first-source agreement with local job training providers; and
• Satisfy any additional local condition that has been established only in an urban zone.

Employment in the Enterprise Zone

To be authorized, the eligible business firm must commit to satisfy the job-creation requirements:

• The number of full-time jobs in the zone must rise and be maintained during the exemption at a minimum of 110 percent of the average level from the time of the authorization application.

• Failure to reach this level precludes the exemption.

• Failure to maintain this level represents “substantial curtailment,” as would a big drop in total employment.

• Your firm must enter into a first-source hiring agreement before hiring new employees. The local zone manager will direct you to the contact agency.

• Your firm and the zone sponsor are solely responsible for compliance/ verification of local additional requirements.

Employment outside the enterprise zone

The business firm is disqualified if:

• The transfer of operations into the enterprise zone results in Oregon job losses more than 30 miles from the zone boundary.

• The movement of employees into the zone from within 30 miles of its boundary results in less than a 10 percent increase of the combined employment level in the zone and from where they are transferred.

Proposed Investment in Qualified Property

To assist eligible business firms in understanding the property tax benefit they may receive for investing in an enterprise zone, the authorization application asks for the best available information on the cost, extent, and timing of planned investments. It is critical for communication among the firm, the local zone manager, and the county assessor.

Pre-application activity at site

In general, physical investment including site preparation must begin after this application is submitted. Exceptions include, but are not limited to, the following:

• A project started and abandoned at least six months earlier.
• Demolition, hazard removal, or environmental cleanup.
• Property acquired from another authorized business firm.
• Purchase or lease from a third party of a newly constructed or newly improved building or structure. In this case, work may already be underway or completed, but approval of this application must include a copy of the sale/lease agreement and must happen before use or occupancy of the building or structure.

• Construction in Process: Property on-site as of January 1 may be exempt for up to two years before being placed in service. Once authorized, file the Application for Construction-in-Process Enterprise Zone Exemption (150-310-021) with the county assessor on or before each April 1, for any qualified property for which work is still underway on January 1. (Not available for centrally assessed/utility or hotel/resort property.)

Property Criteria

• For a significant building or structure to be exempt, the authorization must include some indication of it. In addition, for example, if no machinery and equipment is indicated, then no such property qualifies, so that the applicant is advised to account for every basic type of property that could possibly be part of the final, overall project.

• All property needs to be new, meaning it was not used or occupied in the zone more than one year before exemption begins.

• Machinery and equipment also must be newly acquired or newly transferred from outside of the county (except for major retrofit or refurbishment of real property idle for 18 months).

• Any or all property may be leased from any party, provided that your firm (the lessee) is obligated to pay the property taxes.

• All real property—buildings, structures, and heavy/affixed machin- ery and equipment—listed on the exemption claim property schedule must cost $50,000 or more in total.

• Personal property machinery and equipment is readily movable and qualifies subject to a per-item cost minimum. An integrated system consisting of various components may be treated as a single item for these purposes.

• Land, vehicles, motorized/self-propelled devices, rolling stock, non-in- ventory supplies, and idle or ineligibly used property do not qualify.

• The investment in property needs to be for the furtherance of income. For example, it may not be for personal use.

Additional property and future projects

With an ongoing investment, subsequent property that is not placed in service until the first or second year of exemption on the initial property may be exempted as well.

In other words, property schedules may be filed with up to three consecutive claims, pursuant to a single authorization.

Any major change of plans should be amended into the application, in writing to both the zone manager and the county assessor, before January 1 of the first year of an initial exemption, especially to account for any unrepresented type of basic property.

For more information, see the Enterprise Zone guidelines attached below or follow the link here.