Excise tax exemption bill introduced

David Gomberg

SALEM —A coastal representative on Monday introduced his bill to explicitly exempt homes rebuilt after a declared disaster from school district construction excise taxes.

The construction excise tax was created by the Oregon Legislature in 2007, allowing school districts to independently opt into collection as a capital funding source. The Lincoln County School District adopted a construction excise levy the next year, which is currently at $1.24 per square foot for new residential construction and $0.65 per square foot for non-residential.

In October 2020, contractors representing multiple property owners looking to rebuild after their homes were destroyed by the Echo Mountain Complex fire asked the school board to exempt fire victims from the tax. About 300 homes in north Lincoln County were destroyed or severely damaged by the September fires, and the excise tax to replace an average home in the affected area would be around $1,500 (based on 1,200 square feet for the typical manufactured single-wide).

At the time, school board members and district staff said their hands were tied because the law did not allow for exemptions other than those specifically described in its text (such as for affordable housing, hospitals and public facilities).

The district reiterated that position when it faced criticism following reports about waivers in other school districts. Superintendent Karen Gray said in a written statement at the time, “We are 100 percent for getting exceptions due to natural hazards and stand ready to do that, but we cannot until we get legal permission to do so. The board cannot be asked to break the law even if other districts do so.”

Gray then told the board in November that she believed it had the latitude to grant an exemption, based on her consultation with an attorney for the Oregon School Board Association who said the law neither explicitly allowed nor prohibited granting one. In December, the board adopted a resolution waiving the tax for Echo Mountain fire victims.

State Rep. David Gomberg represents the 10th House District, which comprises all of Lincoln County except a sliver south of Yachats. For the current legislative session, he introduced House Bill 2607 to amend the excise tax law and provide an explicit exemption for post-disaster rebuilds.

During the first public hearing for the bill on Monday before the House Special Committee on Wildfire Recovery, Gomberg said he’d spoken with legislative counsel when the issue first arose in October 2020, and he was told that while districts have the option of whether or not to collect the tax, if they did collect it, they had to do so “uniformly,” and therefore couldn’t grant special exemptions. 

The representative acknowledged that other school districts had come to different interpretations. “In my own district, our school district struggled with the legal interpretation compared to what they thought was the fair and right thing to do,” Gomberg said. “Eventually, they decided to go ahead and waive the tax, although they were receiving some legal advice that it must be applied.”

Gomberg told the committee that the former legislator who crafted the 2007 law, Ryan Deckert, has said he “never imagined” it would be applied to replacement homes after a disaster. “As I said, some lawyers say yes, some lawyers say no,” Gomberg said. “I just want to make sure that we get this extremely clear.”

If passed as introduced, the law would go into effect 90 days after signing by the governor, and it would be retroactive to Jan. 1, 2020. It would amend Oregon Revised Statue 320.173, exemptions to the construction excise tax, adding “residential housing being constructed on a lot or parcel of land to replace residential housing on the lot or parcel of land that was destroyed or damaged by wildfire or another event or circumstance that is the basis for a state of emergency.”

The wildfire recovery committee received testimony in support of the bill from Lincoln County School District Superintendent Karen Gray and Lincoln County Commissioner Claire Hall.

After the school board said in October that it could grant a waiver, Hall asked fellow commissioners to subvert that ruling by instructing the county planning department not to collect the tax from wildfire victims. The planning department collects the surcharge during the permitting process via an intergovernmental agreement with the school district.

Committee Chair Brian Clem closed the public hearing without any action on the bill — the committee will consider it during a future meeting.

Prior to the public hearing, the committee held an informational session on recovery efforts. Ed Flick, director of emergency management for the Department of Human Services, said the agency was sheltering 174 people in seven Lincoln County hotels, and 1,135 people in 56 hotels statewide, as of Feb. 4. Human services took over responsibility for emergency shelter from the Red Cross on Jan. 1.

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