71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
Enrolled
House Bill 2555
Sponsored by Representative BUTLER; Representative NELSON
CHAPTER ................
AN ACT
Relating to capital gains taxation of farmers; creating new
provisions; and amending ORS 318.020.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Section 2 of this 2001 Act is added to and made
a part of ORS chapter 316. + }
SECTION 2. { + (1) As used in this section:
(a) 'Farming' means:
(A) Raising, harvesting and selling crops;
(B) Feeding, breeding, managing or selling livestock, poultry,
fur-bearing animals or honeybees or the produce thereof;
(C) Dairying and selling dairy products;
(D) Stabling or training equines, including but not limited to
providing riding lessons, training clinics and schooling shows;
(E) Propagating, cultivating, maintaining or harvesting aquatic
species and bird and animal species to the extent allowed by the
rules adopted by the State Fish and Wildlife Commission;
(F) On-site constructing and maintaining equipment and
facilities used for the activities described in this subsection;
(G) Preparing, storing or disposing of, by marketing or
otherwise, the products or by-products raised for human or animal
use on land employed in activities described in this subsection;
or
(H) Any other agricultural or horticultural activity or animal
husbandry, or any combination of these activities, except that
'farming' does not include growing and harvesting trees of a
marketable species other than growing and harvesting cultured
Christmas trees or certain hardwood timber described in ORS
321.267 (1)(e) or 321.415 (5).
(b) 'Section 1231 gain' has the meaning given that term in
section 1231 of the Internal Revenue Code.
(2) Notwithstanding ORS 316.037, taxable income that consists
of net long-term capital gain shall be subject to tax under this
chapter at a rate of five percent if all of the following
conditions apply:
(a) The gain is:
(A) Derived from the sale or exchange of capital assets
consisting of ownership interests in a corporation, partnership
or other entity in which, prior to the sale or exchange, the
taxpayer owned at least a 10 percent ownership interest; or
(B) Section 1231 gain.
(b) The property that was sold or exchanged consisted of:
Enrolled House Bill 2555 (HB 2555-INTRO) Page 1
(A) Ownership interests in a corporation, partnership or other
entity that is engaged in the trade or business of farming; or
(B) Property that is predominantly used in the trade or
business of farming.
(c) The sale or exchange is to a person who is not related to
the taxpayer under section 267 of the Internal Revenue Code.
(d) The sale or exchange constitutes a substantially complete
termination of all of the taxpayer's ownership interests in a
trade or business that is engaged in farming or a substantially
complete termination of all of the taxpayer's ownership interests
in property that is employed in the trade or business of farming.
Ownership of a farm dwelling or farm homesite does not constitute
ownership of property employed in the trade or business of
farming.
(3) If the taxpayer has net long-term capital gain derived in
part from the sale or exchange of property described in
subsection (2)(b) of this section and in part from the sale or
exchange of all other property, the net long-term capital gain
that is subject to tax under this section shall be determined as
follows:
(a) Compute the net long-term capital gain derived from all
property described in subsection (2)(b) of this section that was
sold or exchanged during the tax year.
(b) Compute the net capital gain or loss from the sale or
exchange of all other property during the tax year.
(c) If the amount determined under paragraph (b) of this
subsection is a net capital gain, the gain that is subject to tax
under subsection (2) of this section shall be the amount
determined under paragraph (a) of this subsection.
(d) If the amount determined under paragraph (b) of this
subsection is a net capital loss, the gain that is subject to tax
under subsection (2) of this section shall be the amount
determined under paragraph (a) of this subsection minus the
amount determined under paragraph (b) of this subsection. + }
SECTION 3. { + Section 4 of this 2001 Act is added to and made
a part of ORS chapter 317. + }
SECTION 4. { + (1) As used in this section:
(a) 'Farming' means:
(A) Raising, harvesting and selling crops;
(B) Feeding, breeding, managing or selling livestock, poultry,
fur-bearing animals or honeybees or the produce thereof;
(C) Dairying and selling dairy products;
(D) Stabling or training equines, including but not limited to
providing riding lessons, training clinics and schooling shows;
(E) Propagating, cultivating, maintaining or harvesting aquatic
species and bird and animal species to the extent allowed by the
rules adopted by the State Fish and Wildlife Commission;
(F) On-site constructing and maintaining equipment and
facilities used for the activities described in this subsection;
(G) Preparing, storing or disposing of, by marketing or
otherwise, the products or by-products raised for human or animal
use on land employed in activities described in this subsection;
or
(H) Any other agricultural or horticultural activity or animal
husbandry, or any combination of these activities, except that
'farming' does not include growing and harvesting trees of a
marketable species other than growing and harvesting cultured
Christmas trees or certain hardwood timber described in ORS
321.267 (1)(e) or 321.415 (5).
Enrolled House Bill 2555 (HB 2555-INTRO) Page 2
(b) 'Section 1231 gain' has the meaning given that term in
section 1231 of the Internal Revenue Code.
(2) Notwithstanding ORS 317.061, taxable income that consists
of net long-term capital gain shall be subject to tax under this
chapter at a rate of five percent if all of the following
conditions apply:
(a) The gain is:
(A) Derived from the sale or exchange of capital assets
consisting of ownership interests in a corporation, partnership
or other entity in which, prior to the sale or exchange, the
taxpayer owned at least a 10 percent ownership interest; or
(B) Section 1231 gain.
(b) The property that was sold or exchanged consisted of:
(A) Ownership interests in a corporation, partnership or other
entity that is engaged in the trade or business of farming; or
(B) Property that is predominantly used in the trade or
business of farming.
(c) The sale or exchange is to a person who is not related to
the taxpayer under section 267 of the Internal Revenue Code.
(d) The sale or exchange constitutes a substantially complete
termination of all of the taxpayer's ownership interests in a
trade or business that is engaged in farming or a substantially
complete termination of all of the taxpayer's ownership interests
in property that is employed in the trade or business of farming.
(3) If the taxpayer has net long-term capital gain derived in
part from the sale or exchange of property described in
subsection (2)(b) of this section and in part from the sale or
exchange of all other property, the net long-term capital gain
that is subject to tax under this section shall be determined as
follows:
(a) Compute the net long-term capital gain derived from all
property described in subsection (2)(b) of this section that was
sold or exchanged during the tax year.
(b) Compute the net capital gain or loss from the sale or
exchange of all other property during the tax year.
(c) If the amount determined under paragraph (b) of this
subsection is a net capital gain, the gain that is subject to tax
under subsection (2) of this section shall be the amount
determined under paragraph (a) of this subsection.
(d) If the amount determined under paragraph (b) of this
subsection is a net capital loss, the gain that is subject to tax
under subsection (2) of this section shall be the amount
determined under paragraph (a) of this subsection minus the
amount determined under paragraph (b) of this subsection. + }
SECTION 5. ORS 318.020 is amended to read:
318.020. (1) There hereby is imposed upon every corporation for
each taxable year a tax at the rate provided in ORS 317.061 upon
its Oregon taxable income derived from sources within this state,
other than income for which the corporation is subject to the tax
imposed by the Corporation Excise Tax Law of 1929 (ORS chapter
317) according to or measured by its Oregon taxable income.
(2) Income from sources within this state includes income from
tangible or intangible property located or having a situs in this
state and income from any activities carried on in this state,
regardless of whether carried on in intrastate, interstate or
foreign commerce.
{ + (3) Income that constitutes net long-term capital gain
described in section 4 of this 2001 Act shall be taxed at the
rate imposed under section 4 of this 2001 Act. + }
Enrolled House Bill 2555 (HB 2555-INTRO) Page 3
SECTION 6. { + Sections 2 and 4 of this 2001 Act and the
amendments to ORS 318.020 by section 5 of this 2001 Act apply to
net long-term capital gain incurred from the sale or exchange of
property in tax years beginning on or after January 1, 2002. + }
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Passed by House May 8, 2001
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate June 1, 2001
...........................................................
President of Senate
Enrolled House Bill 2555 (HB 2555-INTRO) Page 4
Received by Governor:
......M.,............., 2001
Approved:
......M.,............., 2001
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2001
...........................................................
Secretary of State
Enrolled House Bill 2555 (HB 2555-INTRO) Page 5