Current through Register Vol. 61, No. 4, April 1, 2022
Oregon has not adopted the safe harbor
lease provisions contained in the federal Economic Recovery Tax Act of 1981
(IRC 168(f)(8)). Sale and leaseback transactions must meet the prior federal
sale and leaseback provisions to qualify as a sale and leaseback for Oregon
corporation tax purposes. The Oregon treatment of a safe harbor lease
transaction for safe harbor lease transactions entered into in tax years
beginning prior to January 1, 1983 is as follows:
(a) The down payment received by the
seller-lessee is not taxable as income in the year received or accrued.
(b) The down payment made by the
purchaser-lessor is not deductible from income. The payment is considered a
payment in lieu of federal income taxes which are not deductible under ORS
Chapters 317 and 318.
purchaser-lessor is not taxable in Oregon under ORS Chapter 317 or 318 solely
due to federal tax ownership under a safe harbor lease agreement.
(d) The property subject to the safe harbor
lease agreement is considered property of the seller-lessee. Depreciation is
allowed based upon the original cost less the down payment received.
(e) If the corporation is doing business
within and without Oregon and the apportionment provisions (ORS
314.667) apply, the property
subject to the safe harbor lease agreement is included in the property factor
of the seller-lessee. Lease payments made by the seller-lessee under the
agreement are not included in the computation of the property factor.
Since Oregon does
not recognize the transaction as a true sale and leaseback, it is necessary to
reverse the effect of such treatment in preparing the Oregon tax returns of the
seller-lessee, and the purchaser-lessor. Adjustments are as follows:
(A) A depreciation deduction is allowed based
upon the original cost reduced by the down payment received. The deduction is
computed using the methods allowable under ORS
(B) The lease payments made to the
purchaser-lessor are not deductible except to the extent they exceed the
principal and interest payments received from the purchaser-lessor.
(C) Interest payments received are includible
in income only to the extent the principal and interest payments received
exceed the lease payments made to the purchaser-lessor.
(A) No depreciation deduction is allowed for
the property purchased and leased under a federal safe harbor lease agreement.
(B) Lease payments received from
the seller-lessee are not includible in income.
(C) The "interest" payments made are not
(3) Legal fees, accounting costs or similar
expenses incurred or paid to third parties in connection with safe harbor
leases are deductible.
Admin. R. 150-317-0410
4-5-83(Temp); 8-1-83, Renumbered from 317.105(1); RD 7-1983, f. 12-20-83, cert.
ef. 12-31-83; RD 12-1984, f. 12-5-84, cert. ef. 12-31-84; RD 7-1989, f.
12-18-89, cert. ef. 12-31-89; RD 12-1990, f. 12-20-90, cert. ef. 12-31-90;
Renumbered from 150-317.349-(B),
68-2016, f. 8-15-16, cert. ef.
Stat. Auth.: ORS
Stats. Implemented: ORS