(a) "Invest" means to exchange cash for equity, debt, convertible debt or management responsibilities, accompanied by terms that substantiate ownership or control of an interest in a business. "Invest" does not mean to make a loan to a business.
(b) "Material participation" has the meaning given that term in section 469 of the Internal Revenue Code.
(c) "Severance pay" means funds paid to an employee upon termination of employment, other than back wages, vacation pay or sick pay.
(d) "Small business" has the meaning given that term in ORS 183.310.
(2) There shall be subtracted from federal taxable income an amount equal to severance pay that a taxpayer receives during the tax year and invests in a new or existing small business in this state if:
(a) The investment occurs on or before the due date for the return for the tax year or the expiration of the extension period for filing that return, if any;
(b) The investment continues for at least 24 months following termination of employment;
(c) The taxpayer materially participates in the small business;
(d) The taxpayer has not previously claimed a subtraction under this section; and
(e) The small business is not the employer that paid the severance pay and does not have any owner in common with the employer that paid the severance pay.
(3) The subtraction under this section may not exceed the lesser of:
(a) The minimum balance of principal that remains invested by the taxpayer in the small business at the close of any month during the 24 months following termination of employment; or
(b) $500,000.
(4) If at any time the Department of Revenue determines that a taxpayer is not in compliance with any of the provisions of this section, the department shall disallow the subtraction under this section. Upon this disallowance, the department shall determine the amount of tax due absent the subtraction under this section and immediately shall collect any taxes due by reason of the disallowance.
(5) The Department of Revenue shall establish by rule procedures for administering this section, including procedures for verifying the receipt of severance pay by the taxpayer. [2010 c.66 §2]
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