Current through Register Vol. 63, No. 9, September 1, 2024
(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).
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
