Tyler Sweet
Starting with a date of death on or after January 1, 2012, the Oregon Estate Transfer Tax replaces the Oregon Inheritance Tax. The following is an explanation of some of the major changes.
Change in Tax Computations
The new law modifies the computation of tax with a $1 million exemption built into the tax table. The tax rate starts at 10% on taxable estates above $1 million and gradually increases to 16% on taxable estates above $9.5 million. The new law ties the Oregon estate tax to the federal estate tax as the federal tax existed on December 31, 2010.
To determine the Oregon percentage computation for tax proration, an Oregon nonresident decedent will include only real property and tangible personal property located in Oregon in the numerator.
Elimination of Unified Credit
The new law eliminates the need to compute a tentative tax and eliminates the use of the unified credit. This provides an opportunity to make lifetime gifts that can escape the Oregon estate tax.
Natural Resource and Commercial Fishing Business Credit
The natural resource and commercial fishing business credit has been revised and improved. Natural resource property is farm use and forestland property, as defined in the ORS. The credit is available if certain requirements are met. For instance, the total value of natural resource property must be at least 50 percent of the total adjusted gross estate. Additionally, each transferee receiving NRC property must report annually (via a certification form) to confirm the NRC assets continue to qualify for the credit.
There is some flexibility in determining qualifying property for the credit. For example, farm property can qualify if it’s the subject of a net cash lease to or from the decedent. Property owned indirectly through an interest in an LLC, corporation, partnership, or trust can qualify too. A cash operating allowance is also available, but can’t exceed the lessor of $1 million or 15 percent of the total value of natural resource property, not including the allowance.
A webpage has been added to the Oregon Department of Revenue’s website and nicely summarizes the new estate transfer tax. For complete details of the law changes, see ORS Chapter 118.