Title 118 · ORS Chapter 118

shall take effect at and accrue upon the death of the decedent. A

Citation: ORS 118.010

Section: 118.010

118.010 shall take effect at and accrue upon the death of the decedent. A return shall be filed and the tax shall be paid to the Department of Revenue no later than 12 months following the date of death of the decedent. If the department determines, pursuant to an amended return or refund claim, that the amount of tax imposed by ORS 118.010 is less than the amount theretofore paid, the excess tax shall be refunded by the department with interest at the rate established by ORS 305.220 for a period beginning 45 days after the due date of the return or on the date the amended return or refund claim is filed, whichever is later, and ending at the time the refund is made.

�� (2) If the amount of federal estate tax reported on a federal estate tax return is changed or corrected by the Internal Revenue Service or other competent authority, resulting in a change in the Oregon taxable estate, the executor shall report the change or correction in federal estate tax to the department. If the federal change or correction results in a reduction of the Oregon taxable estate, the report of the change or correction shall be treated by the department as a claim for refund pursuant to ORS 305.270 and, notwithstanding the limitations of ORS 305.270, shall be deemed timely if filed with the department within two years after the federal correction was made. If the change or correction results in an increase in the Oregon taxable estate, the department may issue a notice of deficiency within two years after the federal change or correction was made or within two years after receiving a report of the federal change or correction, whichever is the later. Any executor filing an amended federal estate tax return shall also file an amended return with the department within 90 days thereafter.

�� (3)(a) In the case of an estate that contains property that is valued under section 2032A of the Internal Revenue Code for federal estate tax purposes (relating to the valuation of certain farm or other property) and that ceases to qualify for valuation under section 2032A, an additional tax under ORS 118.005 to 118.540 shall be imposed in the amount attributable to the change in the value of the estate resulting from the imposition of additional federal estate tax under section 2032A.

�� (b) The department shall be notified of the disqualification of the property from valuation under section 2032A in the same time and manner as the federal Internal Revenue Service is notified of the disqualification.

�� (c) The period for assessment of the tax imposed under this subsection, including any penalty or interest, shall be two years from the date on which the department receives the notice described in paragraph (b) of this subsection.

�� (d) The other provisions of ORS 118.005 to 118.540 and ORS chapter 305 shall apply to the additional tax imposed under this subsection in the same manner in which those provisions apply to the tax imposed under ORS 118.010.

�� (4) For purposes of this section, a change or correction of a federal estate tax return is deemed to be made on the date of the federal audit report.

�� (5) The executor shall, upon request of the department, supply a copy of the federal estate tax return which the executor has filed or may file with the federal government, or a copy of any federal agent�s report upon any audit or adjustment of the federal estate tax return.

�� (6) The executor shall explain, on the return, how the reported values were determined and attach copies of any appraisals. [Amended by 1959 c.418 �5; 1971 c.732 �1; 1973 c.703 �3; 1975 c.685 �6; 1977 c.666 �9; 1979 c.582 �1; 1987 c.646 �4; 1989 c.626 �1; 1997 c.99 �8; 2011 c.526 �6; 2017 c.278 �1; 2021 c.372 �1]

�� 118.110 [Amended by 1953 c.704 �1; 1961 c.455 �4; 1973 c.268 �1; 1975 c.685 �5; 1977 c.666 �10; 1979 c.582 �2; repealed by 1997 c.99 �24]

�� 118.120 Qualified family-owned business interests; additional tax. (1) In the case of an estate that contains a qualified family-owned business interest, an additional tax shall be imposed under ORS 118.005 to 118.540 if:

�� (a) The value of the interest was originally taken as a deduction under section 2057(a) of the Internal Revenue Code in computing the value of the taxable estate for federal estate tax purposes; and

�� (b) An additional federal estate tax is imposed with respect to the qualified family-owned business interest for the reasons stated in section 2057(f) of the Internal Revenue Code.

�� (2)(a) The additional tax imposed under this section shall equal the amount of any allowable increase in the state death tax credit under section 2011 of the Internal Revenue Code if the applicable percentage of the family-owned business interest that is being disqualified under section 2057(f) of the Internal Revenue Code were added to the taxable estate for federal estate tax purposes.

�� (b) The applicable percentage to be used in calculating the additional tax under this subsection shall equal the applicable percentage used in calculating the additional federal estate tax under section 2057(f)(2)(B) of the Internal Revenue Code.

�� (3) The Department of Revenue must be notified of the qualified family-owned business interest being made subject to additional federal estate tax under section 2057(f) of the Internal Revenue Code at the same time and in the same manner as the Internal Revenue Service is notified of the additional federal tax.

�� (4) The period for assessment of the additional tax imposed under this section, including any penalty or interest, shall be two years from the date on which the department receives the notice described in subsection (3) of this section.

�� (5) The other provisions of ORS 118.005 to 118.540 and ORS chapter 305 shall apply to the additional tax imposed under this section in the same manner in which those provisions apply to the tax imposed under ORS 118.010. [1999 c.90 �27]

�� 118.140 Credit based upon value of natural resource property; rules. (1) As used in this section:

�� (a) �Adjusted gross estate� means the value of the gross estate reduced by the sum of the amounts allowable under sections 2053 and 2054 of the Internal Revenue Code.

�� (b) �Family member� means a member of the family, as defined in section 2032A of the Internal Revenue Code, of the decedent.

�� (c) �Farm business� means a business operated for the primary purpose of obtaining a profit in money by:

�� (A) Raising, harvesting or selling fruit or crops;

�� (B) Feeding, breeding, managing or selling livestock, poultry, fur-bearing animals or bees, or the produce thereof;

�� (C) Dairying and selling dairy products;

�� (D) Breeding, stabling or training equines;

�� (E) Propagating, cultivating, maintaining or harvesting aquatic species, birds or animal species to the extent allowed by the rules adopted by the State Fish and Wildlife Commission;

�� (F) Raising nursery stock;

�� (G) Practicing animal husbandry; or

�� (H) Raising other agricultural or horticultural products.

�� (d) �Farm use� has the meaning given that term in ORS 308A.056.

�� (e) �Fishing business� has the meaning given that term in section 1301(b)(4) of the Internal Revenue Code.

�� (f) �Forestland� has the meaning given that term in ORS 321.201.

�� (g) �Forestry business� means a business operated for the primary purpose of obtaining a profit in money by the planting, cultivating, caring for, preparing, harvesting or cutting of timber or trees for market.

�� (h) �Homesite� has the meaning given that term in ORS 308A.250.

�� (i) �Natural resource property� means the following property in this state, if on the date of the decedent�s death the property is owned by the decedent and used in the operation of a farm business, forestry business or fishing business owned by the decedent:

�� (A) Real property used as forestland or as forestland homesites, not to exceed 5,000 acres, or that is in farm use.

�� (B) Timber or trees.

�� (C) Crops, fruit or other horticultural products, both growing and stored.

�� (D) Forestry business or farm business equipment.

�� (E) Livestock, poultry, fur-bearing animals, bees, dairying animals, equines, aquatic species, birds or other animal species, including stored products or by-products.

�� (F) Nursery stock as defined in ORS 571.005.

�� (G) Boats, gear, equipment, vessel licenses or permits, commercial fishing licenses or permits and other real or personal property used in the operation of a fishing business.

�� (H) Real or personal property used to process and sell the catch of a fishing business in fresh, canned or smoked form directly to consumers, including a restaurant with seating capacity of fewer than 15 seats at which catch from the fishing business is prepared and sold.

�� (I) An operating allowance.

�� (J) Any other tangible and intangible personal property used in the operation of a farm business, forestry business or fishing business.

�� (j) �Operating allowance� means cash or a cash equivalent that is spent, maintained, used or available for the operation of a farm business, forestry business or fishing business and not spent or used for any other purpose.

�� (k) �Qualified beneficiary� has the meaning given that term in ORS 130.010.

�� (L) �Real property� means real property, as defined in ORS 307.010, that is in this state.

�� (2)(a) An estate shall be allowed a credit for the value of natural resource property claimed. Any operating allowance claimed under this section may not exceed the lesser of $1 million or 15 percent of the total value of natural resource property claimed, not including the operating allowance.

�� (b) The credit allowed under this section shall be computed by multiplying the tax that would be payable under this chapter absent the credit by a ratio, the numerator of which is an amount equal to the lesser of the amount of natural resource property claimed under this section or $7.5 million, and the denominator of which is an amount equal to the total adjusted gross estate.

�� (c) An executor may:

�� (A) Elect not to claim the credit allowed under this section;

�� (B) Elect to claim less than the full amount of the credit allowed under this section; or

�� (C) Elect to claim the credit only for the value of certain assets.

�� (3) Except as provided in subsections (4), (7) and (8) of this section, a credit is allowed under this section only if:

�� (a) The total adjusted gross estate does not exceed $15 million;

�� (b) The total value of natural resource property in the estate is at least 50 percent of the total adjusted gross estate that is in this state;

�� (c) The natural resource property is transferred to a family member; and

�� (d) During an aggregate period of five out of the eight years ending on the date of the decedent�s death, the decedent or a family member operated a farm business, forestry business or fishing business and the property for which a credit is claimed under this section is part of the business.

�� (4) Property that otherwise meets the requirements of this section shall be allowed a credit under this section if:

�� (a) The property is the subject of a net cash lease to or from the decedent or a qualified beneficiary who is a family member;

�� (b) The property is held in trust for a qualified beneficiary who is a family member; or

�� (c) The property replaces natural resource property, and the replacement property would otherwise meet the definition of natural resource property except that it was acquired after the date of the decedent�s death but before the estate tax return is filed. In order to qualify under this paragraph, real property must be replaced with real property.

�� (5) A credit is allowed under this section for the following real property only if the real property was owned by the decedent or a family member during an aggregate period of five out of the eight years ending on the date of the decedent�s death and used in a business described in subsection (3)(d) of this section:

�� (a) Real property used as forestland or as forestland homesites, not to exceed 5,000 acres.

�� (b) Real property used in farm use.

�� (6) A credit is allowed under this section for property used in the operation of a fishing business only if the decedent or a family member, during an aggregate period of five out of the eight years ending on the date of the decedent�s death:

�� (a) Owned a vessel used in taking food fish or shellfish for commercial purposes as defined in ORS 506.006;

�� (b) Held a boat license as provided in ORS 508.260;

�� (c) Held a commercial fishing license under ORS 508.235; and

�� (d) Held one or more restricted fisheries permits as provided in ORS chapter 508 or an equivalent restricted vessel permit system under the laws of another state.

�� (7) For the purpose of meeting the requirements of subsection (5) of this section, in determining the period of time during which the decedent or a family member owned real property received in exchange under section 1031 of the Internal Revenue Code or acquired in an involuntary conversion under section 1033 of the Internal Revenue Code, the period during which the decedent or a family member owned the exchanged or acquired real property, if the exchanged or acquired real property was used in the farm business or forestry business, may be included.

�� (8) Property that otherwise meets the requirements of this section and that is owned indirectly by the decedent or a family member qualifies for a credit under this section if the property is owned through an interest in a limited liability company or in a corporation, partnership or trust as the terms corporation, partnership or trust are used in section 2032A(g) of the Internal Revenue Code. In order to qualify under this subsection, at least one family member must materially participate in the business after the transfer. For purposes of this subsection, �materially participate� means to engage in active management, as defined in section 2032A of the Internal Revenue Code, of the farm business, forestry business or fishing business. The Department of Revenue may adopt rules to administer this subsection consistent with this definition.

�� (9)(a) A disposition shall occur and an additional tax under ORS 118.005 to 118.540 shall be imposed if the natural resource property for which a credit is allowed under this section is not used in the operation of a farm business, forestry business or fishing business for at least five out of the eight calendar years following the decedent�s death or is transferred to a person other than a family member or another entity eligible for the credit allowed under this section.

�� (b) The use of cash or other assets for which a credit is claimed under this section for the payment of federal estate taxes or state inheritance or estate taxes shall be a disposition and an additional tax shall be imposed under this subsection.

�� (c) The conveyance after the decedent�s death of property that otherwise meets the requirements of this section and is conveyed as a qualified conservation contribution, as defined in section 170(h) of the Internal Revenue Code, is not a disposition requiring payment of additional tax under this subsection.

�� (d) Natural resource property may be replaced with real property or personal property after the credit is claimed and not result in a disposition subject to an additional tax if the replacement property is used in the operation of the farm business, forestry business or fishing business. Real property for which a credit is claimed under this section may be replaced only with real property that would otherwise qualify as natural resource property and that replacement must be made within one year to avoid a disposition and additional tax, except that a replacement of property that is involuntarily converted under section 1033 of the Internal Revenue Code must occur within two years.

�� (e) The additional tax liability shall be the amount of additional tax that would have been imposed, had the disqualified property not been included in the numerator of the ratio in subsection (2)(b) of this section, multiplied by ((five minus the number of years the property was used as natural resource property) divided by five). The additional tax liability is the responsibility of the owner of the property at the time of the disposition or disqualifying event and is due within six months after the date on which the disposition or event occurs. The Department of Revenue may establish by rule procedures for reporting the additional tax due, consistent with ORS chapter 305.

�� (f) Prior to the executor�s identification of property for which a credit under this section is claimed, the executor shall notify the transferee of the potential for tax consequences to the transferee if the transferee fails to meet the conditions of paragraph (a) of this subsection. The transferee�s written acknowledgment of this notice shall be attached to the estate tax return.

�� (10) The executor shall identify property for which a credit under this section is claimed, by asset, on a form prescribed by the department and filed with the estate tax return. Transferees of property for which a credit under this section has been claimed shall file a report with the department on a form prescribed by the department. This report shall be filed annually until the requirements of subsection (9)(a) of this section are met and shall require tracking of each asset for which the credit has been claimed, with confirmation that each asset falls into one of the following categories:

�� (a) The asset is still used in the operation of a farm business, forestry business or fishing business;

�� (b) The asset has been replaced with property that meets the requirements of subsection (9)(d) of this section; or

�� (c) The asset has been subject to a disposition under subsection (9) of this section, resulting in additional tax. [2007 c.843 �68; 2008 c.28 �1; 2011 c.526 �7; 2015 c.301 �1]

�� 118.145 Natural resource property exempted. (1) As used in this section:

�� (a) �Eligible business entity� means a business entity that is owned 100 percent by family members or eligible entities.

�� (b) �Eligible entity� means an eligible business entity or an eligible trust.

�� (c) �Eligible trust� means a trust or subtrust whose permissible distributees are all family members or eligible entities.

�� (d) �Family member� means a person within the third degree of relation, by blood, marriage, adoption, civil union or domestic partnership, to another person.

�� (e) �Interest in natural resource property� means:

�� (A) Any direct ownership interest in natural resource property;

�� (B) An ownership interest or beneficial interest in a business entity that owns natural resource property, either directly or indirectly through other business entities, but only to the extent of the value of that portion of the interest that is attributable to natural resource property and to the associated farm business, forestry business or fishing business owned by the decedent; or

�� (C) Any beneficial interest in a trust that owns natural resource property, but only to the extent of the value of that portion of the interest that is attributable to natural resource property and to the associated farm business, forestry business or fishing business owned by the decedent.

�� (f) �Materially participate� means to engage in the active management, as defined in section 2032A of the Internal Revenue Code, of a farm business, forestry business or fishing business owned by the decedent on the date of the decedent�s death. The Department of Revenue may adopt rules to administer this section consistent with this definition.

�� (g) �Natural resource property� has the meaning given that term in ORS 118.140.

�� (h) �Permissible distributee� has the meaning given that term in ORS 130.010.

�� (i) �Relevant business days� means those days during which a person that is engaged in active management of natural resource property would customarily be expected to exercise significant management activities, given the nature of the industry in which the business is operating.

�� (j) �Small forestland owner� means a decedent who owns, throughout the five years immediately prior to the date of the decedent�s death, forestland that is at least 10 acres but fewer than 5,000 acres.

�� (2) Except as provided in subsection (3) of this section, an interest in natural resource property is exempt from the tax imposed under this chapter if:

�� (a) The interest is held by a decedent for at least five years before the death of the decedent;

�� (b) During at least 75 percent of the relevant business days of each of the five calendar years immediately prior to the date of the decedent�s death, the decedent or any family member of the decedent materially participates in the farm business, forestry business or fishing business;

�� (c) The interest is transferred, as a consequence of the decedent�s death, to one or more family members of the decedent or eligible entities; and

�� (d) During each of the five calendar years immediately following the date of the decedent�s death, any family member of the decedent materially participates in the farm business, forestry business or fishing business.

�� (3) An interest in natural resource property that is forestland is exempt from the tax imposed under this chapter if:

�� (a) The decedent is a small forestland owner;

�� (b) The forestland property is held by the decedent for at least five years immediately prior to the date of the decedent�s death;

�� (c) During the five calendar years immediately prior to the date of the decedent�s death, the decedent or any family member of the decedent actively manages the forestland property and maintains documentation of activities that are appropriate or customary silvicultural or management activities given the current phase in the forest management cycle for a parcel of forestland property;

�� (d) The interest is transferred, as a consequence of the decedent�s death, to one or more family members of the decedent and is subsequently owned by family members of the decedent for at least five consecutive calendar years beginning with the calendar year immediately following the date of the decedent�s death; and

�� (e) During the five calendar years immediately following the date of the decedent�s death, any family member of the decedent actively manages the forestland property and maintains documentation of activities that are appropriate or customary silvicultural or management activities given the current phase in the forest management cycle for a parcel of forestland property.

�� (4) If, after the date of death of the decedent, natural resource property previously transferred from the decedent as a consequence of the decedent�s death:

�� (a) Is subsequently transferred to a family member, the property shall be deemed to have been owned by the family member during the time that the property was held or deemed to have been held by the transferor.

�� (b) Is subsequently transferred to an eligible entity, the property shall be deemed to have been owned by the eligible entity during the time that the property was held or deemed to have been held by the transferor.

�� (c) Is subsequently transferred and replaced by other property in a like-kind exchange as provided in section 1031 of the Internal Revenue Code, or is otherwise replaced with other property within 180 days of the transfer, the replacement property shall be deemed to have been owned by the transferor during the time that the transferred property was held or deemed to have been held by the transferor.

�� (5) An additional tax under ORS 118.005 to 118.540 shall be imposed if:

�� (a) An interest in natural resource property for which an exemption is allowed under this section is, during the five calendar years following the date of the decedent�s death, subsequently sold or otherwise transferred to a person other than a family member of the decedent or an eligible entity;

�� (b) The natural resource property is held by an entity that ceases to be an eligible entity because the permissible distributees or owners no longer consist solely of family members and the interest is deemed sold or otherwise transferred; or

�� (c) The material participation requirement of subsection (2)(d) or (3)(e) of this section is not met.

�� (6) Natural resource property may be replaced with real property or personal property after the exemption under this section is claimed and not result in a disposition subject to an additional tax if the replacement property is used in the operation of the farm business, forestry business or fishing business. Real property for which an exemption is claimed under this section may be replaced only with real property that would otherwise qualify as natural resource property, and that replacement must be made within one year to avoid a disposition and additional tax, except that a replacement of property that is involuntarily converted under section 1033 of the Internal Revenue Code must occur within two years.

�� (7) The additional liability imposed under subsection (5) of this section shall be the amount of additional tax that would have been imposed had the transferred interest been included in the decedent�s taxable estate. The additional tax liability is the responsibility of the owner of the property at the time of the disposition or disqualifying event and is due within six months after the date on which the disposition or event occurs. Upon receiving notice of a subsequent sale or other transfer of property for which an exemption has been claimed, or upon receiving notice that the material participation requirement of subsection (2)(d) or (3)(e) of this section has not been met, the department shall immediately proceed to collect the additional tax.

�� (8) An estate claiming the exemption under this section may not claim the credit allowed under ORS 118.140.

�� (9) The exemption allowed under this section may not exceed $15 million for the estate. [2023 c.286 �2; 2025 c.577 �1; 2025 c.595 �1]

�� Note: 118.145 was added to and made a part of ORS chapter 118 by legislative action but was not added to any smaller series therein. See Preface to Oregon Revised Statutes for further explanation.

�� 118.150 [Formerly 118.640; 1971 c.652 �2; 1973 c.498 �1; 1975 c.762 �4; 1977 c.666 �11; 1985 c.761 �1; repealed by 1997 c.99 �24]

�� 118.152 Credit allowed for use of small forest owner minimum option. (1) The definitions in ORS 315.124 apply to this section.

�� (2) If, at the date of death, a decedent held the certification for a credit under ORS