340-180-0090 General Provisions, Interest Rate Subsidy and Tax Credit Certificate (1) Commercial lending institutions making loans for soil remediation, UST upgrading, and replacement of UST systems containing motor fuel may qualify to receive an Oregon income tax credit. (2) The Oregon income tax credit may not exceed the difference between the amount of finance charge charged during the taxable year including interest on the loan and interest on any loan fee financed at an annual rate of 7.5 percent and the amount of finance charge that would have been charged by the commercial lending institution during the taxable year, including any interest on the loan and interest on any loan fee financed at an annual rate charged for nonsubsidized loans. For purposes of calculating the income tax credit, the determination of the interest rate charged on a nonsubsidized loan (including any additional notes or replacement notes) shall be calculated by using a fixed annual interest rate equal to three percent above the publicly announced prime rate of interest of either United States National Bank of Oregon or First Interstate Bank of Oregon, N.A. in effect on the date of the initial note. The commercial lending institution shall choose which of the two banks prime rate it uses to make this calculation. The difference in income between the interest rate calculated in this manner and a 7.5 percent interest rate shall be the tax credit due the commercial lending institution. (3) Income tax credits may be received where: (a) The borrower pays 7.5 percent fixed interest; (b) The loan is amortized with equal payments over the term of the loan. NOTE: To assure that funds are available from the UST Compliance and Corrective Action Fund (USTCCAF) to pay interest rate subsidies during the life of the loan, it is necessary for most loans to have equal payments over the term of the loan. The Department, however, recognizes that the lending policies may differ between commercial lending institutions and may differ between individual loans, particularly during construction. The Department is willing to consider other loan arrangements and other loan repayment schedules subsequent to the initial loan, such as multiple loans and loan refinancing where the interest rate subsidy conserves the USTCCAF monies so that all qualified interest rate subsidies are paid in full. Each new loan arrangement may be approved by the Department on a case by case basis. The final maturity date of the loan may not exceed ten (10) years from the initial note date. (c) The loan maturity date does not exceed ten years from the initial closing date; (d) The borrower has received a tax credit certificate for an interest rate subsidy; and (e) The loan applicant or the commercial lending institution has provided the terms of the loan to the Department. The terms of the loan include but are not limited to: (A) Amount of loan; (B) Down payment; (C) The nonsubsidized rate calculated in section (2) of this rule; (D) Interest rate; and (E) The term of the loan from the initial note date. (4) Only one interest rate subsidy may be issued to each facility. (5) The interest rate subsidy is limited to loans for work for soil remediation at a facility where USTs contain motor fuel and work to upgrade or replace the underground storage tank systems containing an accumulation of motor fuel located at a facility where: (a) The USTs are regulated by OAR 340, division 150 and 40 CFR 280; (b) UST system upgrading, retrofitting and replacement is performed by licensed service providers in accordance with OAR 340-160-0005 through 340-160-0150; (c) UST tightness testing and/or soil assessment was performed prior to application for a loan; (d) UST tightness testing and soil assessment was performed in accordance with Department regulations; (e) Each regulated underground storage tank has a valid UST permit; and (f) The loan is provided by a commercial lending institution. (6) An Oregon income tax credit may be paid on loans provided by a commercial lending institution that are not guaranteed by the Department where the borrower has received a tax credit certificate from the Department. (7) The commercial lending institution shall file for the Oregon income tax credit during their regular state income tax filing. NOTE: The funds available for Oregon tax credits are estimated to total $3,874,000 over the life of the program, providing tax credits for approximately 245 loans. These 245 loans may be the same as or different from the proposed 245 loans guaranteed under OAR 340-180-070. When the Department has issued tax credit certificates that create a demand of approximately $3,874,000 on the UST Compliance and Corrective Action Fund the Department will recommend to the Environmental Quality Commission to set the maximum interest rate on loans at 7.5 percent. Since it is doubtful that any commercial lending institution will issue a 7.5 percent loan, the effective action will be to stop the subsidized interest rate program. The Department believes that this intended action is consistent with the legislative intent to fund the Oregon income tax credit out of the UST Compliance and Corrective Action Fund. (8) Income tax credits may not be earned by a commercial lending institution after December 31, 1991. The commercial lending institution may file after December 31, 1991 for any Oregon income tax credits earned before January 1, 1992 under these rules. (9) This Division only applies to projects for which soil remediation, UST upgrading and UST replacement work started after September 1, 1989 and had received an interest rate subsidy certificate or confirmation letter on or by October 1, 1991. Statutory/Other Authority: ORS 466.706 - 466.895 & 466.995 Statutes/Other Implemented: OL 1989 & Ch. 1071 History: DEQ 14-1992, f. & cert. ef. 6-11-92 DEQ 29-1991(Temp), f. 12-18-91, cert. ef. 12-20-91 DEQ 13-1990, f. & cert. ef. 3-13-90 DEQ 25-1989(Temp), f. & cert. ef. 10-26-89