Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

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.

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Effective September 28, 2009, a new bill passed by the 2009 Oregon legislature imposes a new tax on what a legislative staff summary refers to as a “specified group of health insurers.” In particular, the new law assesses a 1% tax upon the gross amount of premiums earned by health insurance providers. The stated purpose of the new tax is to provide health insurance to low income children – a commendable objective.

As the popularity of insurance companies is probably not high, most people might not have a great deal of sympathy for the plight of the newly taxed. However, the tax has already begun to “trickle down” to the rest of us. I've recently read a copy of a letter from a CEO of a major Oregon health insurance provider to a customer. Noting the new tax’s impending effective date, the letter pleasantly informs the small business insurance customer that “your premium rates will be adjusted to reflect the new 1 percent tax.”

However, the “trickle” does not stop with the small business. The owner of that business will now need to make a difficult decision as to whether to raise prices, absorb the cost, cut costs of other employee benefits, or pass the additional costs on to employees. You get the idea – the tax lands upon small businesses and their employees at a time when many such businesses are stretched to the breaking point (assuming they’ve made it this far in the recession).

Is this really the intended consequence of the new policy? I welcome your comments and questions.
 

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Recently, the Oregon Legislature passed a tax amnesty program with the hope of raising $16.2 million in additional revenue. (See Revenue Impact of Proposed Legislation (pdf)) The amnesty applies to corporate income and excise tax, personal income tax, inheritance tax, and transit district (self-employment) taxes. Any Oregon taxpayer with any of these underreported taxes or unfiled tax returns for any period prior to January 1, 2008 will be eligible to apply. (For a copy of the bill see SB880-B (pdf))

• Short time period: The tax amnesty program is only open for 50 days, beginning on October 1, 2009 and closing on November 19, 2009.
• Minimal Benefit: The only benefits being offered are the waiver of one half of the interest and all penalties. Not much of an incentive.
• No Taxes Waived: All the taxes due and the reduced interest must either be paid in full within 60 days of the application or be paid under an installment plan on or before May 31, 2011. Failure to complete an installment plan voids the amnesty benefits.
• Gotcha Penalty: Anyone who is eligible for this program, but fails to apply will be subject to an additional 25% penalty. This penalty can apply to tax adjustments discovered after November 19, 2009. Also any taxpayer who has received a notice of delinquency or notice of assessment from the Oregon Department of Revenue for any year that would be eligible for the amnesty program cannot participate.

This program is a "cruel joke" because:

• The amnesty program is only open for 50 days.
• The amnesty offer is minimal. There is no provision to compromise taxes.
• Anyone who is currently delinquent with Oregon taxes is probably not eligible.
• An eligible taxpayer who chooses not participate will have an additional 25% penalty added on.
• If there is a tax adjustment after the amnesty program has closed it is possible that the additional penalty can be assessed even though the tax payer was not aware of additional tax liability during the 50 day election period.

In conclusion it is hard to see that this program will help either the state of Oregon or its taxpayers.

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