72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
 
NOTE:  Matter within  { +  braces and plus signs + } in an
amended section is new. Matter within  { -  braces and minus
signs - } is existing law to be omitted. New sections are within
 { +  braces and plus signs + } .
 
LC 1753
 
                           A-Engrossed
 
                         House Bill 2991
                   Ordered by the House May 1
             Including House Amendments dated May 1
 
Sponsored by Representatives MARCH, GARRARD; Representative
  WESTLUND, Senators FERRIOLI, HARPER, METSGER, MORRISETTE
 
 
                             SUMMARY
 
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure.
 
  Allows owner of water right or farmland that would be subject
to capital gain taxation from qualified sale to elect not to
recognize capital gain if taxpayer purchases capital asset of
similar class and similar characteristic within one year or if
taxpayer applies amount of capital gain to long-term farm debt
within one year.
  Applies to tax years beginning on or after January 1, 2004.
 
                        A BILL FOR AN ACT
Relating to taxation.
Be It Enacted by the People of the State of Oregon:
  SECTION 1.  { + Section 2 of this 2003 Act is added to and made
a part of ORS chapter 314. + }
  SECTION 2.  { + (1) As used in this section:
  (a) 'Drought area' means an area in this state where severe
drought conditions have been declared under ORS 536.700 to
536.780.
  (b) 'Farmland' means land that qualifies for special assessment
under ORS 308A.062 or 308A.068.
  (c) 'Long-term farm debt' means an obligation to repay an
amount of money that was borrowed to purchase farmland or farm
equipment. 'Long-term farm debt' includes only obligations that
require repayment within a period of time prescribed by the
Department of Revenue by rule.
  (d) 'Qualified sale' means the sale of a water right or
farmland that is located in a drought area if the sale is made by
the owner of the water right or farmland to the federal
government, the state government or a nonprofit organization for
conservation purposes or other public purposes, or to another
agricultural landowner for irrigation purposes.
  (e) 'Water right' means the right to use water for a purpose
related to farming, including irrigation and consumption by
livestock.
  (2) A taxpayer that would recognize capital gain from a
qualified sale for federal income tax purposes may elect not to
recognize the capital gain under ORS chapter 316, 317 or 318 if:
 
  (a) Within one year from the date of the qualified sale, the
taxpayer purchases a capital asset of similar class and similar
characteristic; or
  (b) Within one year from the date of the qualified sale, the
taxpayer applies the amount of the capital gain to long-term farm
debt.
  (3) A taxpayer that wishes to make an election under subsection
(2) of this section may make the election by filing a claim for
exemption with the Department of Revenue. The claim shall be
filed with the tax return for the tax year in which the qualified
sale was made and shall be on the form and include the
information prescribed by the department.
  (4) Following the purchase of a capital asset described in
subsection (2) of this section or the application of capital gain
to a long-term farm debt described in subsection (2) of this
section, the taxpayer shall file a statement with the Department
of Revenue that verifies the purchase or application. The
statement shall be filed at a time and on a form prescribed by
the department by rule.
  (5) If a taxpayer filed a claim under subsection (3) of this
section but did not file a statement under subsection (4) of this
section to verify a purchase or application described in
subsection (2) of this section, the taxpayer shall recognize all
capital gain for the tax year the qualified sale was made, and
interest at the rate established under ORS 305.220 for each
month, or fraction of a month, from the date of the qualified
sale to the date of the payment of tax due on the recognized
capital gain.
  (6) For the purpose of ORS chapters 316, 317 and 318, a
taxpayer that made a purchase pursuant to an election under
subsection (2)(a) of this section shall have a basis in the
acquired capital asset that is equal to the taxpayer's adjusted
basis in the water right or farmland that was sold in a qualified
sale. + }
  SECTION 3.  { + Section 2 of this 2003 Act applies to tax years
beginning on or after January 1, 2004. + }
                         ----------