In 2007, the Oregon legislature passed a law which allowed an estate to exclude up to $7.5 million of natural resource property from Oregon Inheritance Tax. The tax policy was two-fold. First, the legislature wanted to preserve family farms, fishing and forestry operations. Second, the legislature wanted to help preserve natural resource property, such as timber, from having to be harvested prematurely, before it was ready for harvesting.
A number of 2007 estates and early 2008 estates relied on this exclusion and filed Oregon Inheritance Tax returns owing little or no tax. But the 2007 legislation, which was passed in the last few days of that session, had a number of unanswered questions. So, in 2008, a number of technical corrections were made, and these were applied retroactively to 2007. As a result, estates which claimed the natural resource property exclusion for decedents dying between January 1, 2007 and March 11, 2008, had additional taxes due.
Last year some of these taxpayers asked the legislature for relief from this retroactive tax burden, but some members of the legislature turned a deaf ear. However, during the February 2010 session, the Oregon legislature granted relief to these taxpayers. They may now apply for a tax refund.
So, what are the eligibility requirements?
- First, the estate must have eligible natural resource property. See the 2007 version of ORS 118.140.
- Second, the death must have occurred between January 1, 2007 and March 11, 2008.
- Third, less inheritance tax would be due under the 2007 version of the law.
- Fourth, eligible taxpayers must apply by December 31, 2010 or within two years of the tax payment.
If you are aware of an estate which claimed a natural resource property exclusion in 2007 or early 2008 and then subsequently had to pay Oregon Inheritance Tax as a result of the 2008 law change, they are probably eligible for a refund. The Oregon Department of Revenue is in the process of finalizing Form NRE Inheritance Tax Refund Application which taxpayers may utilize to process their refund claim. Generally, this application must be completed by December 31, 2010.
