Tax Credit Opportunity: Portland’s Downtown Business Incentive Credit

Tax Credit Opportunity: Portland’s Downtown Business Incentive Credit

July 9, 2024

The trend of remote and hybrid work patterns continues to affect communities around the globe. It’s created a drop in foot traffic and spending in formerly thriving communities and several local authorities—such as the Portland, Oregon City Council—are providing financial incentives and other programs to attract additional businesses, tourists, and residents to revitalize their cities and towns.

Revitalization Funds for Portland

In September 2023, the Portland City Council passed the Downtown Business ordinance—which it later expanded to include Portland’s entire central city. The Downtown Business Incentive (DBI) Credit program designated $25 million through a temporary nonrefundable tax credit to incentivize commercial lease signings and lease renewals to support the recovery and revitalization of Portland’s central city. 

Portland has experienced a 56% decrease in leased space since before 2020.

Qualifying for the Downtown Business Incentive Credit Program

The Portland Downtown Business Incentive Credit provides a maximum credit available to each eligible business of $250,000, although most businesses will receive significantly less.

The maximum credit available to each eligible business is limited to the lesser of:

  • 1% of the City of Portland “income subject to tax” as shown on their business tax return in the year of origin; or
  • $30 per square footage of building space covered in the lease or building space used by the building owner’s staff in the eligible sub-district.

Businesses must be registered and current with their City of Portland Revenue Division account and maintain 15 employees (or more) working at least half time in their leased or owned building space.

Qualifying Leases

Portland’s effort to encourage Oregon business development and revitalize neighborhoods can be claimed once by each business by its submission of an application and attestation to register the business and claim the DBI credit.

The Portland downtown business incentive is generally intended for leases or lease extensions for the 2023 or 2024 calendar year, but leases that start in 2025 may qualify for a 2024 tax-year credit if the lease is signed before December 31, 2024. The due date for submitting the application for tax year 2024 is January 31, 2025.

Building space owned during 2023 can be used to calculate the credit on either the 2023 or 2024 business tax return.

Using the Downtown Incentive Tax Credit

To capture the DBI tax credit, business operators will need to divide the credit earned into four equal portions and deduct each on their business tax return in the year of origination and over the following three years’ business tax returns. 

In each year, the portion of credit claimed can’t exceed the City of Portland Business License Tax on the business tax return for that year. Any excess amounts cannot be carried forward to a subsequent year.

Consequences of Noncompliance

If a business were to break their lease prior to the end of the lease period, sell the building before the four-year period of the credit lapses, or fail to meet the employee requirements during the four-year period of the credit, the entire credit previously claimed must be repaid with statutory interest. There would be no penalty on the tax due related to the lost credit.

Oregon Tax Specialists can help

Portland’s foot traffic increased by 14% in 2023 over 2022 and the city’s commitment to incentivize businesses to move into vacant office and warehouse space should encourage businesses to take advantage of the opportunity to offset some of their expenses with the Downtown Business Incentive tax credit.

If your business or organization has questions about the DBI tax credit, or Oregon’s Wealth Tax, REDW’s State and Local Tax (SALT) advisors are standing by to assist, or may offer a free consultation.

Contact us today.

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