Chapter 509 Oregon Laws 2001

AN ACT

HB 2206

Relating to taxation; creating new provisions; amending ORS 307.050, 307.060, 308.153, 308.156, 309.203, 311.205, 316.143, 316.680, 321.312 and 321.487 and section 4, chapter 405, Oregon Laws 1981; repealing ORS 314.290 and 317.326; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 309.203 is amended to read:

309.203. (1) On or before June 15 of each year, the Department of Revenue shall give specific written recommendations or orders to the county assessor as to the actions which, in the department’s judgment, should be taken by the assessor in order to achieve compliance with the real market value standard required under ORS 308.232 in the forthcoming assessment roll. Copies shall be sent to the county governing body for their information. On or before July 15 following, the county assessor shall act upon the recommendations or orders of the department, or notify the department in writing, of any objections to the department’s recommendations or orders.

(2) After May 1, but prior to September 1, the department shall examine the certified ratio study prepared by each county assessor under ORS 309.200 and studies prepared by the department, to determine if the value of all locally assessed taxable properties complies with the real market value requirements of ORS 308.232. The assessor and the department shall cooperate with each other to keep the department informed as to the assessor’s needs and as to the status of the current assessment work. If, in the judgment of the department, the attainment of the real market value standard required under ORS 308.232 is in jeopardy, the department shall notify the assessor in writing of the determination and the factors giving rise to it, with the statement that if unfulfilled statutory duties specified by the department are not met, the department shall take action pursuant to this section. A copy of such notice shall be sent to the county governing body, for its information. On or before September 1, [if necessary to meet the requirements of ORS 308.232,] the department shall issue a written order to the assessor to adjust the classes of property on the assessment roll:

(a) If the department finds that the ratio of all taxable properties deviates more than five percent[,] from the real market value level required by ORS 308.232, the department shall order an adjustment to the real market values that will result in [assessment levels in] compliance with ORS 308.232. The assessor shall apply the adjustment to [property values shown as] real market [value] values on the assessment roll and compute corrected assessed values if necessary. A tolerance of five percent from 100 percent may be presumed by the department to meet the requirements of ORS 308.232. Notwithstanding satisfactory compliance with the provisions of paragraph (b) of this subsection, the department shall take any action necessary to achieve the real market value level required by ORS 308.232.

(b) If the department finds that the real market value for any class of property provided for under ORS 308.215 [and used in the current assessment roll as the basis for determining assessed value] deviates more than 10 percent from 100 percent of real market value for the class, the department shall order a change of values to bring the class to 100 percent of real market value. The order may be made applicable to the class throughout the county or to the class in specific areas of the county and may take into account variations caused by appraisals being made in different years.

(c) If the department’s order results in a valuation increase, the increase may be appealed in the manner provided by ORS 309.100.

(3) If the department orders an adjustment to the real market values of property under subsection (2) of this section, the department shall immediately give notice to the assessor, showing why the adjustment is ordered.

SECTION 2. ORS 311.205 is amended to read:

311.205. (1) After the assessor certifies the assessment and tax roll to the tax collector, the officer in charge of the roll may correct errors or omissions in the roll to conform to the facts, as follows:

(a) The officer may correct a clerical error. A clerical error is an error on the roll which either arises from an error in the ad valorem tax records of the assessor, or the records of the Department of Revenue for property assessed under ORS 306.126, or which is a failure to correctly reflect the ad valorem tax records of the assessor, or the records of the Department of Revenue for property assessed under ORS 306.126, and which, had it been discovered by the assessor or the department prior to the certification of the assessment and tax roll of the year of assessment would have been corrected as a matter of course, and the information necessary to make the correction is contained in such records. Such errors include, but are not limited to, arithmetic and copying errors, and the omission or misstatement of a land, improvement or other property value on the roll.

(b) The officer may not correct an error in valuation judgment, except as provided in ORS 308.242 (2) and (3). Such errors are those where the assessor would arrive at a different opinion of value. The officer may correct any other error or omission of any kind. Corrections that are not corrections of valuation judgment errors include, but are not limited to, the elimination of an assessment to one taxpayer of property belonging to another on the assessment date, the correction of a tax limit calculation, the correction of a value changed on appeal, or the correction of an error in the assessed value of property resulting from an error in the identification of a unit of property, but not an error in a notice filed under ORS 310.060.

(c) The officer shall make any change requested by the Department of Revenue which relates to an assessment of property made by the department under ORS 308.505 to 308.665.

(d) The officer shall make any change ordered by the tax court or the Department of Revenue under ORS 305.288 or 306.115.

(e) The officer shall make any change required under ORS 308A.089.

(2)(a) The officer in charge of the roll shall make corrections with the assent and concurrence of the assessor or the department. The direction for the correction shall be made in writing and state the type of error and the statutory authority for the correction. Corrections may be made to the roll for any year or years not exceeding five years prior to the last roll so certified.

(b) Any additional taxes resulting from corrections for years prior to the current year shall be deemed assessed and imposed in the particular year or years as to which the corrections apply. Addition of tax to a prior year’s tax roll, due to corrections under this section, shall not be considered in calculating the effect of the tax limitation under section 11b, Article XI of the Oregon Constitution for the current year.

(3) A correction made pursuant to this section shall be made in whatever manner necessary to make the assessment, tax or other proceeding regular and valid. The correction shall be distinguishable upon the roll, shall include the date of the correction and shall identify the officer making the correction. Whenever a correction is to be made after the assessor has delivered the roll to the tax collector, the effect of which is to increase the assessment to which it relates, except where made by order of the department, the procedure prescribed in ORS 311.216 to 311.232 shall be followed; and the provisions therein with respect to appeals shall likewise apply.

(4) Corrections which would result in less than a $1,000 change in [valuation] assessed value or real market value shall not change the value for purposes of computing the taxes levied against the property, but shall be made only for purposes of correcting the office records.

(5) The remedies under this section are in addition to other remedies provided by law.

SECTION 3. The amendments to ORS 311.205 by section 2 of this 2001 Act apply to corrections in the assessment and tax roll that are made on or after the effective date of this 2001 Act.

SECTION 4. ORS 321.312 is amended to read:

321.312. Each year, when extending the operating [levy] taxes, as defined in ORS 310.055, of the county upon the assessment roll, the county assessor shall [offset against the levy] reduce the operating tax rate submitted by the county so as to offset the amount of revenue distributed to the county pursuant to ORS 321.307 (3)(b) against the operating taxes of the county [and correspondingly reduce the amount of the levy to be collected through extension on the tax roll] for the current fiscal year.

SECTION 5. ORS 321.487 is amended to read:

321.487. Each year, when extending the operating [levies] taxes, as defined in ORS 310.055, of the county upon the assessment [rolls] roll, the county assessor shall [offset against the levy] reduce the operating tax rate submitted by the county so as to offset the amount of revenue distributed to the county pursuant to ORS 321.485 (3)(b) against the operating taxes of the county [and correspondingly reduce the amount of the levy to be collected through extension on the tax roll] for the current fiscal year.

SECTION 6. ORS 307.050 is amended to read:

307.050. Whenever real and personal property of the United States or any department or agency [thereof] of the United States is the subject of a contract of sale or other agreement whereby on certain payments being made the legal title is or may be acquired by any person and [such] that person uses and possesses [such] the property or has the right of present use and possession, then [such] a real market value for the property shall [be assessed and taxed as for the full true value thereof] be determined, as required under ORS 308.232, without deduction on account of any part of the purchase price or other sum due on such property remaining unpaid. The property shall have an assessed value determined under ORS 308.146 and shall be subject to tax on the assessed value so determined. The lien for [such] the tax shall neither attach to, impair, nor be enforced against any interest of the United States in [such] the real or personal property. This section [shall] does not apply to real or personal property held and in immediate use and occupation by this state or any county, municipal corporation or political subdivision [therein] of this state, or to standing timber, prior to severance [thereof], of the United States or any department or agency [thereof which] of the United States that is the subject of a contract of sale or other agreement.

SECTION 7. ORS 307.060 is amended to read:

307.060. Real and personal property of the United States or any department or agency [thereof] of the United States held by any person under a lease or other interest or estate less than a fee simple, other than under a contract of sale, shall [be assessed and taxed as for the full assessed value thereof] have a real market value determined under ORS 308.232, subject only to deduction for restricted use. The property shall have an assessed value determined under ORS 308.146 and shall be subject to tax on the assessed value so determined. The lien for the tax shall attach to and be enforced against only the leasehold, interest or estate in [such] the real or personal property. This section [shall] does not apply to real property held or occupied primarily for agricultural purposes under the authority of a federal wildlife conservation agency or held or occupied primarily for purposes of grazing livestock. This section [shall] does not apply to real or personal property held by this state or any county, municipal corporation or political subdivision [therein which] of this state that is:

(1) In immediate use and occupation by [such] the political body; or

(2) Required, by the terms of the lease or agreement, to be maintained and made available to the federal government as a military installation and facility.

SECTION 8. Section 4, chapter 405, Oregon Laws 1981, as amended by section 1, chapter 169, Oregon Laws 1985, and section 4, chapter 748, Oregon Laws 1995, is amended to read:

Sec. 4. ORS 307.182[, the amendments to ORS 307.060 by section 2, chapter 405, Oregon Laws 1981, and the repeal of section 2, chapter 656, Oregon Laws 1975, by section 3, chapter 405, Oregon Laws 1981, apply for] applies to tax years beginning on or after July 1, 1981, and prior to July 1, 2002.

SECTION 9. ORS 308.153 is amended to read:

308.153. (1) If new property is added to the assessment roll or improvements are made to property as of January 1 of the assessment year, the maximum assessed value of the property shall be the sum of:

(a) The maximum assessed value determined under ORS 308.146; and

(b) The product of the value of the new property or new improvements determined under subsection (2)(a) of this section multiplied by the ratio, not greater than 1.00, of the average maximum assessed value over the average real market value for the assessment year.

(2)(a) The value of new property or new improvements shall equal the real market value of the new property or new improvements reduced (but not below zero) by the real market value of retirements from the property tax account.

(b) If the maximum assessed value of property is adjusted for fire or act of God, the reduction in real market value due to fire or act of God may not be considered to be a retirement under this subsection.

(3) The property’s assessed value for the year shall equal the lesser of:

(a) The property’s maximum assessed value; or

(b) The property’s real market value.

SECTION 10. ORS 308.156 is amended to read:

308.156. (1) If property is subdivided or partitioned after January 1 of the preceding assessment year and on or before January 1 of the current assessment year, then the property’s maximum assessed value shall be established as provided under this section.

(2) If property is rezoned and, after January 1 of the preceding assessment year and on or before January 1 of the current assessment year, the property is used consistently with the rezoning, the property’s maximum assessed value shall be established under this section.

(3)(a) For the first tax year for which property is added to the property tax account as omitted property, the property’s maximum assessed value shall be established under this section.

(b) For tax years subsequent to the first tax year for which property is added to the property tax account as omitted property, the property’s maximum assessed value shall be determined as otherwise provided by law, taking into account the maximum assessed value of the property as determined under this section.

(4)(a) If property was subject to exemption, partial exemption or special assessment as of the January 1 assessment date of the preceding assessment year and is disqualified from exemption, partial exemption or special assessment as of the January 1 of the current assessment year, the property’s maximum assessed value shall be established under this section.

(b) If property described in this subsection is eligible for a different type of exemption, partial exemption or special assessment as of January 1 of the current assessment year, the property’s maximum assessed value shall be established under the provision granting the partial exemption or special assessment.

(5) The property’s maximum assessed value shall be the sum of:

(a) The maximum assessed value determined under ORS 308.146 that is allocable to that portion of the property not affected by an event described in subsections (1), (2), (3) or (4)(a) of this section; and

(b) The product of the value of that portion of the property that is affected by an event described in subsections (1), (2), (3) or (4)(a) of this section multiplied by the ratio, not greater than 1.00, of the average maximum assessed value over the average real market value for the assessment year in the same area and property class.

(6) The property’s assessed value for the year shall equal the lesser of:

(a) The property’s maximum assessed value; or

(b) The property’s real market value.

(7) The Department of Revenue shall provide by rule the method by which the allocations described in subsection (5) of this section are to be made.

SECTION 11. The amendments to ORS 308.153 and 308.156 by sections 9 and 10 of this 2001 Act apply to property tax years beginning on or after July 1, 2001.

SECTION 12. ORS 316.143 is amended to read:

316.143. (1) A resident or nonresident individual certified as eligible under ORS 442.563, licensed under ORS chapter 677, who is engaged in the practice of medicine, and who has a rural practice that amounts to 60 percent of the individual’s practice, shall be allowed an annual credit against taxes otherwise due under this chapter in the sum of $5,000 during the time in which the individual retains such practice and membership if the individual is actively practicing in and is a member of the medical staff of one of the following hospitals:

(a) A type A hospital designated as such by the Office of Rural Health;

[(b) A type B hospital designated as such by the Office of Rural Health, so long as the type B hospital is not within the boundaries of a metropolitan statistical area, or if the hospital is located within the boundaries of a metropolitan statistical area, is located 30 or more highway miles from the closest hospital within the major population center in the metropolitan statistical area;]

(b) A type B hospital designated as such by the Office of Rural Health if the hospital is:

(A) Not within the boundaries of a metropolitan statistical area;

(B) Located 30 or more highway miles from the closest hospital within the major population center in a metropolitan statistical area; or

(C) Located in a county with a population of less than 75,000;

(d) A rural critical access hospital.

(2) A nonresident shall be allowed the credit under this section in the proportion provided in ORS 316.117. If a change in the status of a taxpayer from resident to nonresident or from nonresident to resident occurs, the credit allowed by this section shall be determined in a manner consistent with ORS 316.117.

(3) For purposes of this section, an “individual’s practice” shall be determined on the basis of actual time spent in practice each week in hours or days, whichever is considered by the Office of Rural Health to be more appropriate. In the case of a shareholder of a corporation or a member of a partnership, only the time of the individual shareholder or partner shall be considered and the full amount of the credit shall be allowed to each shareholder or partner who qualifies in an individual capacity.

(4) As used in this section:

(a) “Type A hospital,” “type B hospital” and “type C hospital” have the meaning for those terms provided in ORS 442.470.

(b) “Rural critical access hospital” means a facility that meets the criteria set forth in 42 U.S.C. 1395i-4 (c)(2)(B) and that has been designated a critical access hospital by the Office of Rural Health and the Health Division.

SECTION 13. The amendments to ORS 316.143 by section 12 of this 2001 Act apply to tax years beginning on or after January 1, 2002.

SECTION 14. Section 15 of this 2001 Act is added to and made a part of ORS chapter 316.

SECTION 15. (1) If gain is deferred upon the voluntary or involuntary disposition of property in an exchange that qualifies for deferral under section 1031 or 1033 of the Internal Revenue Code, and the property acquired in the exchange has a situs outside of this state, upon the sale or other disposition of the acquired property in a transaction in which gain or loss is recognized for federal tax purposes but is not taken into account in computing federal taxable income for Oregon tax purposes, there shall be added to federal taxable income the difference between:

(a) The adjusted basis of the acquired property on the date the exchange under section 1031 or 1033 of the Internal Revenue Code was completed; and

(b) The lesser of:

(A) The fair market value of the acquired property on the date the exchange under section 1031 or 1033 of the Internal Revenue Code was completed; or

(B) The fair market value of the acquired property on the date gain or loss from the sale or other disposition of the acquired property is recognized for federal tax purposes.

(2) If the adjusted basis described in subsection (1)(a) of this section is larger than either value described in subsection (1)(b) of this section, the difference computed under subsection (1) of this section shall be subtracted from federal taxable income instead of being added to federal taxable income.

(3) The Department of Revenue may require taxpayers owning property acquired in an exchange under section 1031 or 1033 of the Internal Revenue Code that has a situs outside of this state to file an annual report on the acquired property, and may adopt rules to implement reporting requirements under this section.

SECTION 16. Section 17 of this 2001 Act is added to and made a part of ORS chapter 317.

SECTION 17. (1) If gain is deferred upon the voluntary or involuntary disposition of property in an exchange that qualifies for deferral under section 1031 or 1033 of the Internal Revenue Code, and the property acquired in the exchange has a situs outside of this state, upon the sale or other disposition of the acquired property in a transaction in which gain or loss is recognized for federal tax purposes but is not taken into account in computing taxable income for Oregon tax purposes, there shall be added to taxable income the difference between:

(a) The adjusted basis of the acquired property on the date the exchange under section 1031 or 1033 of the Internal Revenue Code was completed; and

(b) The lesser of:

(A) The fair market value of the acquired property on the date the exchange under section 1031 or 1033 of the Internal Revenue Code was completed; or

(B) The fair market value of the acquired property on the date gain or loss from the sale or other disposition of the acquired property is recognized for federal tax purposes.

(2) If the adjusted basis described in subsection (1)(a) of this section is larger than either value described in subsection (1)(b) of this section, the difference computed under subsection (1) of this section shall be subtracted from taxable income instead of being added to taxable income.

SECTION 18. ORS 316.680, as amended by section 12, chapter 746, Oregon Laws 1999, is amended to read:

316.680. (1) There shall be subtracted from federal taxable income:

(a) The interest or dividends on obligations of the United States and its territories and possessions or of any authority, commission or instrumentality of the United States to the extent includable in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States. However, the amount subtracted under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph, and by any expenses incurred in the production of interest or dividend income described in this paragraph to the extent that such expenses, including amortizable bond premiums, are deductible in determining federal taxable income.

(b) The amount of any federal income taxes accrued by the taxpayer during the taxable year as described in ORS 316.685, less the amount of any refunds of federal taxes previously accrued for which a tax benefit was received.

(c)(A) If the taxpayer does not qualify for the subtraction under subparagraph (B) of this paragraph, compensation (other than pension or retirement pay) received for active service performed by a member of the Armed Forces of the United States in an amount not to exceed $3,000 per annum.

(B) For the tax year of initial draft or enlistment into the Armed Forces of the United States or for the tax year of discharge from or termination of full-time active duty for the Armed Forces of the United States, compensation (other than pension or retirement pay or pay for service when on military reserve duty) paid by the Armed Forces of the United States for services performed outside this state, if the taxpayer is on active duty as a full-time officer, enlistee or draftee, with the Armed Forces of the United States.

[(d) For taxable years open to audit on October 5, 1973, the amount of any deferred income which was added to federal taxable income for state tax purposes under subsection (2)(e) of this section in a prior taxable year and which is now added to federal taxable income. For purposes of this paragraph, the amount subtracted shall not exceed the amount of gain now reported on the federal return. If the gain is a capital gain or subject to capital gain treatment, the adjustments under this paragraph shall be similar to the adjustments made under subsection (2)(e) of this section in the prior year.]

[(e)] (d) Amounts allowable under sections 2621(a)(2) and 2622(b) of the Internal Revenue Code to the extent that the taxpayer does not elect under section 642(g) of the Internal Revenue Code to reduce federal taxable income by those amounts.

[(f)] (e) Any supplemental payments made to JOBS Plus Program participants under ORS 411.892.

[(g)(A)] (f)(A) Federal pension income that is attributable to federal employment occurring before October 1, 1991. Federal pension income that is attributable to federal employment occurring before October 1, 1991, shall be determined by multiplying the total amount of federal pension income for the tax year by the ratio of the number of months of federal creditable service occurring before October 1, 1991, over the total number of months of federal creditable service.

(B) The subtraction allowed under this paragraph applies only to federal pension income received at a time when:

(i) Benefit increases provided under chapter 569, Oregon Laws 1995, are in effect; or

(ii) Public Employees Retirement System benefits received for service prior to October 1, 1991, are exempt from state income tax.

(i) “Federal creditable service” means those periods of time for which a federal employee earned a federal pension.

(ii) “Federal pension” means any form of retirement allowance provided by the federal government, its agencies or its instrumentalities to retirees of the federal government or their beneficiaries.

[(h)] (g) Any amount included in federal taxable income for the tax year that is attributable to the conversion of a regular individual retirement account into a Roth individual retirement account described in section 408A of the Internal Revenue Code, to the extent that:

(A) The amount was subject to the income tax of another state or the District of Columbia in a prior tax year; and

(B) The taxpayer was a resident of the other state or the District of Columbia for that prior tax year.

[(i)] (h) Any amounts awarded to the taxpayer by the Public Safety Memorial Fund Board under ORS 243.954 to 243.970 to the extent that the taxpayer has not taken the amount as a deduction in determining the taxpayer’s federal taxable income for the tax year.

[(j)] (i) The amount contributed to a qualified tuition savings program account established under ORS 348.841 to 348.873, except that a subtraction under this paragraph may not exceed:

(A) $2,000 for the tax year; or

(B) In the case of a married individual filing separately, $1,000 for the tax year.

(2) There shall be added to federal taxable income:

(a) Interest or dividends, exempt from federal income tax, on obligations or securities of any foreign state or of a political subdivision or authority of any foreign state. However, the amount added under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph and by any expenses incurred in the production of interest or dividend income described in this paragraph.

(b) Interest or dividends on obligations of any authority, commission, instrumentality and territorial possession of the United States which by the laws of the United States are exempt from federal income tax but not from state income taxes. However, the amount added under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph and by any expenses incurred in the production of interest or dividend income described in this paragraph.

(d) The amount of any allowance for depletion in excess of the taxpayer’s adjusted basis in the property depleted, deducted on the taxpayer’s federal income tax return for the taxable year, pursuant to sections 613, 613A, 614, 616 and 617 of the Internal Revenue Code.

[(e) The amount of any gain which is deferred for tax recognition purposes upon the voluntary or involuntary conversion or exchange of tangible real or personal property as provided under ORS 314.290.]

[(f)] (e) For taxable years beginning on or after January 1, 1985, the dollar amount deducted under section 151 of the Internal Revenue Code for personal exemptions for the taxable year.

[(g)] (f) The amount taken as a deduction on the taxpayer’s federal return for unused qualified business credits under section 196 of the Internal Revenue Code.

[(h)] (g) The amount of any increased benefits paid to a taxpayer under chapter 569, Oregon Laws 1995, under the provisions of chapter 796, Oregon Laws 1991, and under section 26, chapter 815, Oregon Laws 1991, that is not includable in the taxpayer’s federal taxable income under the Internal Revenue Code.

[(i)] (h) The amount of any long term care insurance premiums paid or incurred by the taxpayer during the tax year if:

(A) The amount is taken into account as a deduction on the taxpayer’s federal return for the tax year; and

(B) The taxpayer claims the credit allowed under ORS 315.610 for the tax year.

[(j)] (i) Any amount taken as a deduction under section 1341 of the Internal Revenue Code in computing federal taxable income for the tax year, if the taxpayer has claimed a credit for claim of right income repayment adjustment under ORS 315.068.

(3) Discount and gain or loss on retirement or disposition of obligations described under subsection (2)(a) of this section issued on or after January 1, 1985, shall be treated for purposes of this chapter in the same manner as under sections 1271 to 1283 and other pertinent sections of the Internal Revenue Code as if the obligations, although issued by a foreign state or a political subdivision of a foreign state, were not tax exempt under the Internal Revenue Code.

SECTION 19. ORS 314.290 and 317.326 are repealed.

SECTION 20. Sections 15 and 17 of this 2001 Act, the amendments to ORS 316.680 by section 18 of this 2001 Act and the repeal of ORS 314.290 and 317.326 by section 19 of this 2001 Act apply to:

(1) Tax years beginning on or after January 1, 1998; and

(2) Any tax year for which an amended return may be filed or a notice of deficiency issued on or after the effective date of this 2001 Act.

SECTION 21. This 2001 Act takes effect on the 91st day after the date on which the regular session of the Seventy-first Legislative Assembly adjourns sine die.

Approved by the Governor June 21, 2001

Filed in the office of Secretary of State June 22, 2001

Effective date October 6, 2001

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