41-1516

41-1516. Healthy forest enterprise incentives;
definitions

A. The department of commerce shall:

1. Implement a program to encourage counties, cities and towns to provide local
incentives to economic enterprises that promote forest health in this state.

2. Identify and certify to the department of revenue the names of and relevant
information relating to qualified businesses for the purposes of available state tax
incentives for economic enterprises that promote forest health in this state.

B. To qualify for state tax incentives pursuant to this section, a business:

1. Must be primarily engaged in a qualifying project. The business shall submit to
the department of commerce evidence that it is engaged in a qualifying project as
follows:

(a) The business operation must enhance or sustain forest health, sustain or
recover watershed or improve public safety.

(b) If the qualifying forest product is on federal land, the business shall submit
a letter from the federal agency administering the land, or official records or documents
produced in connection with the project, stating that the business is primarily engaged
in the business of harvesting or initial processing of qualifying forest products for
commercial use as follows:

(i) At least seventy per cent of the harvested or processed products, measured by
weight, must be qualifying forest products.

(ii) At least seventy-five per cent of the qualifying forest products, measured by
weight, must be harvested from sources in this state.

(c) If the qualifying forest product is not on federal land, the business shall
submit a letter from the state forester stating that the business is primarily engaged in
the business of harvesting or initial processing of qualifying forest products for
commercial use as follows:

(i) At least seventy per cent of the harvested or processed products must be
qualifying forest products.

(ii) At least seventy-five per cent of the harvested or processed products must be
from areas in this state.

(d) If the business is engaged in transporting qualifying forest products, it must
submit a letter from the state forester or United States forest service, or official
records or documents produced in connection with the project, stating that all of the
qualifying forest products it transports are harvested from areas in this state. In
addition, the business must submit evidence to the department of commerce that at least
seventy-five per cent of the mileage traveled by its units each year are for transporting
qualifying forest products from or to qualifying projects described in subdivision (b) or
(c) of this paragraph, unless a lower mileage is due to forest closures or weather
conditions that are beyond the control of the business.

2. Must employ at least three permanent full-time employees.

3. Must agree to furnish to the department of commerce information relating to the
amount of state tax benefits that the business receives each year.

4. Must enter into a memorandum of understanding with the department of commerce
containing:

(a) Employment goals. Each year the business must report in writing to the
department of commerce its performance in achieving the goals.

(b) A commitment to continue in business and use the qualifying equipment primarily
on qualifying projects in this state as described in paragraph 1 of this subsection,
other than for reasons beyond the control of the business. The department of commerce
shall consult with the department of revenue in designing the memorandum of understanding
to incorporate the legal qualifications for the available tax incentives and shall
include the requirement that any qualifying equipment that is purchased or leased free of
transaction privilege or use tax must continue to be used in this state for the term of
the memorandum of understanding or the duration of its operational life, whichever is
shorter.

(c) Provisions considered necessary by the department of commerce to ensure the
competency and responsibility of businesses that qualify under this section, including
registration or other accreditation with trade and professional organizations and
compliance with best management and operational practices used by governmental agencies
in awarding forestry contracts.

(d) The authorization for the department of commerce to terminate, adjust or
recapture all or part of the tax benefits provided to the business on noncompliance with
the law, noncompliance with the terms of the memorandum or violation of the terms of any
contracts with the federal or state government relating to the qualifying project. The
department of commerce shall notify the department of revenue of the conditions of
noncompliance. The department of revenue may also terminate the certification if it
obtains information indicating a failure to qualify and comply. The department of
revenue may require the business to file appropriate amended tax returns or to file
appropriate use tax returns reflecting the recapture of the direct or indirect tax
benefits.

5. Must submit a copy of the certification to the department of revenue for approval
before using the certification for purposes of any tax incentive. The department of
revenue shall review and approve the certification in a timely manner if the business is
in good standing with the department and is not delinquent in the payment of any tax
collected by the department. A failure to approve or deny the certification within sixty
days after the date the business submits it to the department constitutes approval of the
certification.

C. For the purposes of section 42-5075, subsection B, paragraph 19, the department
of commerce shall certify prime contractors that contract for the construction of any
building, or other structure, project, development or improvement owned by a qualified
business for purposes of a qualifying project described in subsection B, paragraph 1 of
this section.

D. To obtain and maintain certification under this section, a business must:

1. Apply to the department of commerce.

2. Submit and retain copies of all required information, including information
relating to the actual or projected number of employees in this state.

3. Allow inspections and audits to verify the qualification and accuracy of
information submitted to the department of commerce.

E. Certification under this section is valid for twelve calendar months from the
date of issuance. A business must apply for recertification at least thirty days before
the current certification expires. The application for recertification shall be in a
form prescribed by the department of commerce and shall confirm that the business is
continuing in a qualifying project and is in compliance with all requirements prescribed
for certification.

F. Within sixty days after receiving a complete and correct application and all
required information as prescribed by this section, the department of commerce shall
grant or deny certification and give written notice by certified mail to the applicant.
The applicant is certified as a qualified business on the date the notice of
certification is delivered to the applicant. A failure to respond within sixty days
after receiving a complete and correct application constitutes approval of the
application.

G. The certification shall state an effective date with respect to each authorized
tax incentive which, in each case, must be at the start of a taxable year or taxable
period.

H. On or before March 1 of each year, each qualifying business shall make a report
to the department of commerce on all business activity in the preceding calendar year.
Business information contained in the reports is confidential and shall not be disclosed
to the public except as provided by this section and except that a copy of the report
shall be transmitted to the department of revenue. The report shall be in a form
prescribed by the department of commerce and include:

1. Information prescribed by the department of commerce with respect to both
qualifying projects and other projects and business activity that do not qualify for
purposes of this section.

2. Employment information necessary to confirm eligibility for income tax credits
as prescribed by sections 43-1076 and 43-1162.

3. The quantity, measured by weight, of qualifying forest products harvested,
transported or processed.

I. On or before May 1 of each year, the department of commerce shall report to the
joint legislative budget committee:

1. The quantity, measured by weight, of qualifying forest products reported by
harvesters, by transporters and by processors in the preceding calendar year.

2. The number of new full-time employees hired in qualified employment positions in
this state in the preceding calendar year and reported for tax credit purposes.

3. The total number of all full-time employees employed in qualified employment
positions in this state in the preceding calendar year and reported for tax credit
purposes.

J. For purposes of administering and ensuring compliance with this section, agents
of the department of commerce may enter, and a qualified business shall allow access to,
a qualifying project site at reasonable times and on reasonable notice to:

1. Inspect the facilities at the site.

2. Obtain factual data and records pertinent to and required by law to be kept for
purposes of tax incentives.

3. Otherwise ascertain compliance with law and the terms of the memorandum of
understanding.

K. The department of commerce shall revoke the business' certification and notify
the department of revenue and county assessor if either:

1. Within thirty days after a formal request from the department of commerce or the
department of revenue the business fails or refuses to provide the information or access
for inspections required by this section.

2. The business no longer meets the terms and conditions required for qualification
for the applicable tax incentives.

L. For the purposes of this section:

1. "Forest health" means the degree to which the integrity of the forest is
sustained, including reducing the risk of catastrophic wildfire and destructive insect
infestation, benefiting wildland habitats, watersheds and communities.

2. "Harvesting" means all operations relating to felling or otherwise removing
trees and other forest plant growth and preparing them for transport for subsequent
processing.

3. "Initial processing" means:

(a) The first change, after harvest, in the physical structure of qualifying forest
products removed from a qualifying project into a marketable commercial product or
component of a product that has commercial value to a consumer or purchaser and that is
ready to be used with or without further altering its form.

(b) Burning qualifying forest products in the process of commercial electrical
generation or commercial thermal energy production for heating or cooling, regardless of
the physical structure of the forest product before burning.

4. "Qualifying equipment" means equipment used directly in the harvesting or initial
processing of qualifying forest products removed from a qualifying project. Qualifying
equipment does not include self-propelled vehicles required to be licensed by this state,
but may include other licensed vehicles as provided by this paragraph. Qualifying
equipment includes:

(a) Forest thinning and residue removal equipment, including mulching and
masticating equipment, feller-bunchers, skidders, log loaders, portable chippers and
grinders, slash bundlers, delimbers, log trailers, chip trailers and other trailers that
are uniquely designed for handling forest products and that are licensed for operation on
public highways.

(b) Forest residue receiving and handling equipment, including truck dumpers, log
unloaders, scales, log decking facilities and equipment and chip pile facilities.

(c) Sorting and processing equipment, including portable and stationary log
loaders, front end loaders, fork lifts and cranes, chippers and grinders, screens, decks
and debarkers, saws and sawmill equipment, firewood processing, wood residue baling and
bagging equipment, kilns, planing and molding equipment and laminating and joining
equipment.

(d) Forest waste and residue disposal and processing equipment, including:

(i) Processing and sizing equipment, hogs, chippers, screens, pelletizers and wood
splitters.

(ii) Transporting and handling equipment, including loaders, conveyors, blowers,
receiving hoppers, truck dumpers and dozers.

(iii) Waste use equipment, including fuel feed, storage bins, boilers and
combustors.

(iv) Waste project use equipment, including generators, switchgear and substations
and on-site distribution systems.

(v) Generated waste disposal equipment, including ash silos and wastewater
treatment and disposal equipment.

(vi) Shop and maintenance equipment and major spares having a value of more than
five thousand dollars each.

5. "Qualifying forest products" means dead standing and fallen timber, and forest
thinnings associated with the harvest of small diameter timber, slash, wood chips,
peelings, brush and other woody vegetation, removed from federal, state and other public
forest land and from private forest land.

6. "Qualifying project" means harvesting, transporting or the initial processing of
qualifying forest products as required for certification pursuant to this section.