Oregon semiconductor panel probes scope of R&D tax credit

Generous or stingy? Generous or tight-fisted? Or, none at all?

Oregon lawmakers are digging into questions surrounding a research-and-development tax credit, a chief unresolved issue in the state's pursuit of semiconductor expansion through the federal CHIPS Act.

A task force in Oregon last year called a R&D tax incentive 'one glaring oversight in our toolbox.' But the Joint Committee on Semiconductors tackled the land availability and location incentives first in the 2023 sessions. Senate Bill 4 was enacted by Governor. Tina Kotek was in the news earlier this month.

In a Wednesday evening hearing, business representatives pushed for more than what was offered in a memo from a committee working group on possible approaches to a R&D credit. The idea that the credit should only be available to companies who receive a CHIPS Act award was slammed.

In a submitted statement, the group Oregon Business & Industry stated that it was respectfully encouraging you not to pick winners or losers. The government generally does not do a very good job of that. We would also like to note that no state that has an R&D tax credit limits it to such a narrow set of criteria as was suggested to this committee.

OBI supported the expansion of credit to "all research-driven industry."

Looptworks is an upcycled apparel maker based in Portland. It said that 'tax structures and lack incentives in the State (make it difficult) to justify both keeping our business here in the state as well as expanding in this state'. The company said that a readily available R&D credit was crucial to the building of a 'Circular Fabrication Facility' in Oregon.

Ampere Computing, a California-headquartered chip designer with more than 250 employees in Oregon, noted that fabless companies aren't the focus of CHIPS Act subsidies -- but are an important part of the Oregon tech scene with growth potential.

Ampere advocated for the expansion of the tax credit to all players in the semiconductor industry, not just CHIPS recipients. This was done to 'ensure that the future of U.S. Semiconductor Innovation continues to remain in Oregon'.

Tax Fairness Oregon and Oregon Center for Public Policy, two organizations opposed to any R&D tax credits, have noted that it is likely something will pass and supported the narrow focus.

The credit was capped at $10 million in the workgroup's outline. Tax Fairness proposed a cap of $1 million, similar to a credit Oregon discontinued several years ago.

Oregon Business Council stated that the cap of $1 million was one of the factors in making earlier credits ineffective.

The group stated that 'our last credit was too small for larger companies to be of any use, and smaller, less profitable startups for whom $1M could be a significant incentive, couldn't take advantage of the credit, because it wasn’t refundable.

Standard credits do not provide tax refunds to recipients if their credit exceeds their tax liability.

The committee will hold at least another hearing where it will examine amendments before a working session on the R&D credit, where a vote may be held. The Senate Committee on Finance and Revenue also has a bill similar to this one, but with broader R&D credit provisions.