Or. Admin. R. 150-118-0110 - Estate Tax Credit for Natural Resource Property

Current through Register Vol. 61, No. 4, April 1, 2022

(1) Definitions. The following definitions apply for purposes of ORS 118.140:
(a) "Active Management" is defined by Internal Revenue Code (IRC) Section 2032A(e)(12) to mean the making of the management decisions of a business (other than the daily operating decisions).
(b) "Ancestor" means a person from whom the decedent is directly descended, such as a parent, grandparent, or great-grandparent. The term does not include aunts, uncles, or cousins.
(c) "Cash equivalents" means accounts receivable, inventory, marketable securities, capital or sinking funds, prepaid expenses and other assets that are spent, maintained, used or available for use, in the operation of a farm business, forestry business, or fishing business.
(d) "Disposition" means to sell, exchange, transfer, convey, or otherwise dispose of natural resource property that was used to compute the natural resource property credit, if such disposition results in the property no longer qualifying for the credit.
(e) "Domestic partner" means an individual who has entered into a domestic partnership as defined in ORS 106.310. Per the general applicability provision of ORS 106.340, "spouse" as used in these rules includes domestic partner.
(f) "Family member" means a member of the family as defined in IRC section 2032A, and for purposes of ORS 118.140 includes:
(A) An ancestor of the decedent;
(B) The spouse of the decedent;
(C) A lineal descendant of the decedent or of the decedent's spouse;
(D) A lineal descendant of a parent of the decedent; or
(E) The spouse of any lineal descendant described in paragraph (C) or (D). For purposes of the preceding sentence, a legally adopted child of an individual is a lineal descendant of the adoptive parent(s).
(g) "Lineal descendant" means a person in a direct line of descent from the decedent, such as a child, grandchild or great-grandchild.
(h) "Lineal descendant of a parent of the decedent" means a decedent's siblings, children and grandchildren of those siblings, and any other person in a direct line of descent from the decedent's siblings.
(2) Estates of decedents who die on or after January 1, 2015 may only claim the natural resource property tax credit with respect to natural resource property located in Oregon that equals at least 50 percent of the adjusted gross estate that is in Oregon. All relevant provisions of this rule continue to apply to estates of decedents who die on or after January 1, 2015.
(3) Material participation by a Family Member. In order to qualify under ORS 118.140(8), at least one family member must materially participate in the business after the transfer.
(a) Material participation is a factual determination, and the types of activities which will support such a finding will vary. No single factor is determinative.
(b) Actual employment of the family member on a substantially full-time basis (35 hours a week or more) or to any lesser extent necessary personally to manage fully the farm or business in which the real property to be valued under section 2032A is used constitutes material participation.
(c) Payment of self-employment tax for employment with respect to the farm business, forestry business or fishing business is not conclusive as to the presence of material participation, and the requirement can be met even though no self-employment tax is payable by the family member with respect to income derived from the business.
(d) As provided by section 2032A of the Internal Revenue Code, active management shall be treated as material participation.
(e) The rules for determining material participation are illustrated by the examples found in CFR 20.2032A-3(g).
(f) Examples of active management decisions that can be used to demonstrate material participation include the following: inspecting growing crops, animals, forests, or equipment; reviewing and approving annual crop plans in advance of planting; making a substantial number of the management decisions of the business operation; approving expenditures for other than nominal operating expenses in advance of the time the amounts are expended; deciding what crops to plant or how many cattle to raise; determining what fields to leave fallow; determining where and when to market crops and other business products; determining how to finance business operations; and determining what capital expenditures the trade or business should make.
(4) If a transferee disposes of property resulting in additional tax as described in ORS 118.140(9)(a), the transferee must file a report with the department and pay the additional tax. The report may be made by filing a copy of the form described in ORS 118.140(10), identifying the asset or assets that no longer qualify for the credit, and including a calculation of the additional tax as described in ORS 118.140(9)(e). The report and payment of the tax are due within six months of the disposition. Interest and penalties under ORS 118.260 apply if the report is not filed and tax is not paid on or before the due date prescribed in ORS 118.140(9)(e).

Notes

Or. Admin. R. 150-118-0110
REV 4-2008(Temp), f. & cert. ef. 5-23-08 thru 11-17-08; REV 13-2008, f. & cert. ef. 11-3-08; REV 8-2010, f. 7-23-10, cert. ef. 7-31-10; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13; REV 5-2015, f. 12-23-15, cert. ef. 1-1-16; Renumbered from 150-118.140, REV 9-2016, f. 8-10-16, cert. ef. 9/1/2016

Publications: Contact the Oregon Department of Revenue for information on obtaining copies of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360(2) and ORS 183.355(1)(b).

Stat. Auth.: ORS 305.100 & 118.140

Stats. Implemented: ORS 118.140

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