ORS 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]