Tax Attorney Eugene OR

Kent Anderson
Tax Attorney Eugene OR

Oregon Governor Tina Kotek has signed a new law, Senate Bill 498, aimed at providing tax relief to farm estates, despite concerns that it benefits wealthy investors and reduces state revenues.

The bill aims to address succession challenges faced by family-owned farm, forest, and fishing estates by offering a tax exemption for estates valued up to $15 million. The objective is to support family farming and prevent larger entities from acquiring farmland previously owned by families.
Tax Attorney Eugene OR

SB 498 received bipartisan support in the Legislature, with the Senate voting 16-9 and the House voting 35-20 in favor during the final days of the session.

Previously, farm families could use a tax credit to reduce their estate tax burden by up to $7.5 million for inherited assets valued below $15 million. However, the existing provision’s 36 requirements often hindered families from utilizing it effectively.

The new law streamlines the process and eliminates the restrictions on the tax credit. It applies the tax exemption regardless of the estate’s total value or the proportion of natural resource properties it holds. The exemption covers only natural resource assets, such as farmland, forestland, fishing vessels, livestock, crops, machinery, equipment, and other assets used in qualifying activities.

While some lawmakers believe the previous restrictions were essential to ensure that genuine family farms benefited from the tax relief, SB 498 removes those sideboards to simplify the process. It also requires that family members be actively engaged in farming, forestry, or fishing for at least 75% of their days for five years before and after the estate transfer to be eligible for the exemption.
Tax Attorney Eugene OR

Critics, including the advocacy group Tax Fairness Oregon, argue that the new approach may still benefit larger estates and wealthy investors. They are concerned that the “material participation” requirement for natural resource activities may be easily fulfilled, potentially weakening the effectiveness of the law. Additionally, there are worries about the impact on Oregon’s tax revenues, with an estimated decrease of $8 million in the current biennium and $15.5 million in the next biennium.

Despite the criticism, supporters of SB 498 maintain that the measure is designed to help family-owned farms and ensure active engagement in agricultural activities. They believe the law provides a simpler and cleaner approach to supporting family farming and preventing the loss of farmland to larger entities.

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