ORS Chapter 118

OREGON STATUTES AND CODES

Chapter 118 — InheritanceTax

2009 EDITION

INHERITANCETAX

PROBATELAW

GENERALPROVISIONS

118.005 Definitionsfor ORS 118.005 to 118.840

118.007 Connectionto federal law; meaning of terms

118.009 Legislativefindings

118.010 Impositionand amount of tax in general; out-of-state property; nonresident decedents;rules

118.013 Taxableestate adjustment for Oregon special marital property; rules

118.016 Oregonspecial marital property election; rules; form

118.019 Grossestate of surviving spouse; Oregon special marital property adjustment

118.100 Timefor paying tax; refunds; effects of change in federal estate tax return orspecial valuation disqualification

118.120 Qualifiedfamily-owned business interests; additional tax

118.140 Creditbased upon value of natural resource or commercial fishing property; rules

118.160 Whentax return is required; lists of property transfers and other data

118.171 Applicationof ORS chapter 305

LIEN;PAYMENT; COMPROMISE OF TAX

118.210 Liabilityfor tax

118.220 Whentax accrues and is payable

118.225 Extensionof time for payment

118.227 Timeperiod for refund

118.230 Lienof tax; liability for payment; assessment and collection of taxes

118.240 Deliveryof property prior to collection of tax by personal representative or trusteeprohibited

118.250 Towhom tax payable; issuing receipts

118.260 Penaltiesfor delinquency; failure to file and fraud; interest; deposit where tax notdetermined

118.265 Applicationfor determination of tax due; discharge from personal liability; rules

118.270 Propertyfrom which tax is collectible

118.280 Powerto sell for payment of tax; tax lien transferred to proceeds when property ofestate sold or mortgaged

118.290 Dutyof recipient when legacy payable out of property; legacy for limited period

118.300 Deferredpayment election; bond or letter of credit

118.310 Transferof stock or obligations by foreign representative or trustee; payment of taxprior to transfer

118.350 Compromiseand compounding tax; approval by court; proceedings in case of actions or suitsinvolving title to real property

ADMINISTRATIONOF INHERITANCE TAX ACT

118.410 Jurisdictionof tax cases

118.470 Representativeor trustee to furnish additional reports on demand

118.510 Dispositionof revenues

118.525 Disclosureof return information

118.535 Appraisalby department; costs

ENFORCEMENTOF FOREIGN DEATH TAXES

118.810 Application,construction and definition

118.820 Dutyto file proof of death taxes due domiciliary state of nonresident decedent

118.830 Formand requisites of proof; petition for accounting by tax officials ofdomiciliary state

118.840 Finalaccounting or discharge of executor or administrator

DISPUTESRESPECTING DOMICILE OF DECEDENT

118.855 Definitionsfor ORS 118.855 to 118.880

118.860 Electionto invoke provisions of ORS 118.855 to 118.880 where dispute exists as todomicile of decedent for purpose of death taxes

118.865 Settlementagreement fixing amount of taxes due each state involved in dispute

118.870 Arbitrationprocedure

118.875 Limiton amount of interest and penalties

118.880 Reciprocalstatutes required in other states; resolving conflicts between statutes

PENALTIES

118.990 Penalties

GENERALPROVISIONS

118.005Definitions for ORS 118.005 to 118.840. As used in ORS 118.005 to 118.840,unless the context requires otherwise:

(1)“Beneficiary” means the recipient of a beneficial interest in property or theincome therefrom transferred in a manner taxable under ORS 118.005 to 118.840.

(2)“Department” means the Department of Revenue.

(3)“Director” means the Director of the Department of Revenue.

(4)“Executor” means the executor, administrator, personal representative,fiduciary, or custodian of property of the decedent, or, if there is noexecutor, administrator, fiduciary or custodian appointed, qualified andacting, then any person who is in the actual or constructive possession of anyproperty includable in the estate of the decedent for inheritance tax purposeswhether or not such estate is subject to administration.

(5)“Gross estate” has the meaning given that term in section 2031 of the InternalRevenue Code.

(6)“Nonresident decedent” means an individual who is domiciled outside of Oregonat the time of death.

(7)“Passes” includes any case where for the purposes of ORS 118.005 to 118.840 ataxable transfer takes place or is deemed to take place.

(8)“Personal representative” means personal representative as defined in ORS111.005.

(9)“Resident decedent” means an individual who is domiciled in Oregon at the timeof death.

(10)“Transfer” or “transfer of property” means a transfer that is subject to thefederal estate tax imposed under subtitle B, chapter 11 of the Internal RevenueCode. [1959 c.418 §7; 1969 c.520 §23; 1971 c.567 §4; 1973 c.344 §1; 1975 c.762 §1;1977 c.666 §1; 1997 c.99 §6]

118.007Connection to federal law; meaning of terms. Any term used in ORS 118.005 to118.840 has the same meaning as when used in a comparable context in the lawsof the federal Internal Revenue Code relating to federal estate taxes, unless adifferent meaning is clearly required or the term is specifically defined inORS 118.005 to 118.840. Any reference in ORS 118.005 to 118.840 to the InternalRevenue Code means the federal Internal Revenue Code as amended and in effecton December 31, 2000, except where the Legislative Assembly has specificallyprovided otherwise. [2003 c.806 §2]

Note: Section 3,chapter 806, Oregon Laws 2003, provides:

Sec.3.(1) Section 2 of this 2003 Act [118.007] applies to decedents dying on or afterJanuary 1, 1998, and to inheritance taxes imposed on transfers of propertyoccurring due to decedents dying on or after January 1, 1998.

(2)Except where the Legislative Assembly has provided otherwise, the effective andapplicable dates, and the exceptions, special rules and coordination with theInternal Revenue Code, as amended, relative to those dates, contained in theTaxpayer Relief Act of 1997 (P.L. 105-34) and the Internal Revenue ServiceRestructuring and Reform Act of 1998 (P.L. 105-206), apply for purposes of ORS118.005 to 118.840, to the extent they can be made applicable, in the samemanner as they are applied under the Internal Revenue Code and related federallaw. [2003 c.806 §3]

118.009Legislative findings.The Legislative Assembly finds that significant recent changes have been madein federal estate tax laws. The Legislative Assembly further finds that anunintended consequence of these federal law changes has been to createdifficulties in the administration and enforcement of the Oregon inheritancetax. The Legislative Assembly declares that ORS 118.007 and section 3, chapter806, Oregon Laws 2003, and the amendments to ORS 118.010, 118.160 and 118.230by sections 6, 7 and 8, chapter 806, Oregon Laws 2003, are needed to ensurethat the level of tax compliance with the Oregon inheritance tax is at thelevel that Oregonians expect from a fair and balanced tax system. [2003 c.806 §1a]

118.010Imposition and amount of tax in general; out-of-state property; nonresidentdecedents; rules.(1) A tax is imposed upon a transfer of property and any interest therein,within the jurisdiction of the state, whether belonging to the inhabitants ofthis state or not, which passes to or vests in any person or persons, or anybody or bodies politic or corporate, in trust or otherwise, or by reasonwhereof any person or body politic or corporate shall become beneficiallyentitled, in possession or expectation, to any property or interest therein orincome thereof.

(2)The tax imposed under this section shall equal the maximum amount of the statedeath tax credit allowable against the federal estate tax under section 2011 ofthe Internal Revenue Code.

(3)In the case of a resident decedent owning property outside of the jurisdictionof this state at the time of death, the tax imposed under this section shall bethe amount determined under subsection (2) of this section multiplied by aratio. The numerator of the ratio shall be the sum of the appraised value ofthe decedent’s real property located in Oregon, tangible personal propertylocated in Oregon and intangible personal property located both in and outsideof Oregon. The denominator of the ratio shall be the total appraised value ofthe decedent’s gross estate.

(4)(a)In the case of a nonresident decedent owning property within the jurisdictionof this state at the time of death, the tax imposed under this section shall bethe amount determined under subsection (2) of this section multiplied by aratio. The numerator of the ratio shall be the sum of the appraised value ofthe decedent’s real property located in Oregon, tangible personal propertylocated in Oregon and intangible personal property located in Oregon. Thedenominator shall be the total appraised value of the decedent’s gross estate.

(b)Intangible personal property of a nonresident decedent shall not be included inthe numerator of the ratio used to determine the tax under this subsection if asimilar exemption is made by the laws of the state or country of the decedent’sresidence in favor of residents of this state.

(5)In the case of decedents dying before January 1, 2003, if federal estate taxcredits other than the state death tax credit result in no federal estate tax,no tax shall be imposed under this section.

(6)Payment, in whole or in part, of inheritance and estate taxes from funds of anestate or trust on any benefit subject to tax under ORS 118.005 to 118.840 isnot to be considered as a further taxable benefit, when such payment isdirected by decedent’s will or by a trust agreement.

(7)If the federal taxable estate is determined by making an election under section2032 or 2056 of the Internal Revenue Code or another provision of the InternalRevenue Code, or if a federal estate tax return is not required under theInternal Revenue Code, the Department of Revenue may adopt rules providing fora separate election for state inheritance tax purposes. [Amended by 1955 c.727 §1;1959 c.418 §1; 1965 c.470 §1; 1969 c.591 §213; 1975 c.685 §3; 1977 c.666 §2;1997 c.99 §7; 2003 c.806 §6]

118.013Taxable estate adjustment for Oregon special marital property; rules. (1) Forpurposes of computing the tax imposed under ORS 118.010, the taxable estate tobe used for computing the maximum amount of the state death tax creditallowable under section 2011 of the Internal Revenue Code shall be the taxableestate determined for federal estate tax purposes, reduced by the value on thedate of death of the decedent of all Oregon special marital property in theestate.

(2)Oregon special marital property consists of any trust or other propertyinterest, or a portion of a trust or property interest:

(a)In which principal or income may be accumulated or distributed to or for thebenefit of only the surviving spouse of the decedent during the lifetime of thesurviving spouse;

(b)In which a person may not transfer or exercise a power to appoint any part ofthe trust or other property interest to a person other than the survivingspouse during the lifetime of the surviving spouse; and

(c)For which the executor of the estate of the decedent has made the electiondescribed in ORS 118.016 (1).

(3)If a trust or other property interest would qualify as Oregon special maritalproperty under subsection (2) of this section except that the trust or otherproperty interest allows principal or income to be distributed to other personsin addition to the surviving spouse, the executor may elect to set aside ashare of the trust or other property interest as a separate share of the trust orproperty interest or as a separate trust, which shall qualify as Oregon specialmarital property if:

(a)The executor makes the election described in ORS 118.016 (1);

(b)Each beneficiary who is living at the time the election is made and who may beentitled to a distribution from the share during the lifetime of the survivingspouse makes the election described in ORS 118.016 (2);

(c)The surviving spouse makes the election described in ORS 118.016 (2); and

(d)All elections are attached to the inheritance tax return filed with respect tothe estate of the decedent, or are filed or maintained as records as otherwiseprescribed by the Department of Revenue by rule. [2005 c.124 §2]

118.016Oregon special marital property election; rules; form. (1) The executorof an estate containing property that the executor seeks to qualify as Oregonspecial marital property under ORS 118.013 shall make an election under thissubsection in order for the property to be Oregon special marital property. Theelection shall be made:

(a)By attaching a statement to the inheritance tax return for the estate of thedecedent that identifies the trust or other property interest that constitutesOregon special marital property and that affirms that the identified propertymeets the requirements of Oregon special marital property under ORS 118.013 andwill be administered as required under ORS 118.013; or

(b)In such other manner as the Department of Revenue prescribes by rule.

(2)For a trust or other property interest described in ORS 118.013 (3), in orderfor any portion of the trust or other property interest to be Oregon specialmarital property, in addition to the election of the executor described insubsection (1) of this section, the surviving spouse and each beneficiary whois living at the time of the election and who may be eligible for adistribution from the trust or other property interest during the lifetime ofthe surviving spouse shall make an election and written consent that is insubstantially the following form:

______________________________________________________________________________

CONSENT TOESTABLISHMENT OF

OREGON SPECIALMARITAL PROPERTY

(a)ELECTION TO BE SIGNED BY ALL BENEFICIARIES EXCEPT THE SURVIVING SPOUSE: Each ofthe undersigned acknowledge and consent to a portion of the ____________ (nameof trust or other property interest) being set aside as a separate share ortrust in order to qualify for the Oregon special marital property election inaccordance with ORS 118.013, for the primary purpose of reducing or eliminatingthe Oregon inheritance tax due on the estate of ____________ (name ofdecedent). The undersigned together with the surviving spouse constitute all ofthe persons living on the date of this election who may be entitled to a distributionduring the lifetime of the surviving spouse from the ___________ (name of trustor other property interest). Each of the undersigned, both on behalf of theundersigned and on behalf of the unborn lineal descendants of the undersigned,irrevocably agrees to release all rights to distributions from the Oregonspecial marital property during the lifetime of the surviving spouse. Each ofthe undersigned agrees that all other provisions of the _________ (name oftrust or other property interest) shall remain in effect and that, upon thedeath of the surviving spouse, any remaining Oregon special marital propertyshall be distributed as otherwise provided in the trust or other propertyinterest.

Signature of: _________(beneficiary)

(b)ELECTION TO BE SIGNED BY THE SURVIVING SPOUSE: I am the surviving spouse of ____________(name of decedent). I acknowledge and consent to a portion of the ____________(name of trust or other property interest) being set aside as a separate shareor trust in order to qualify as Oregon special marital property under ORS118.013, for the primary purpose of reducing or eliminating the Oregoninheritance tax due on the estate of ____________ (name of decedent). I,together with all of the other individuals executing the election in accordancewith ORS 118.013, constitute all of the persons living on the date of thiselection who may be entitled to a distribution from the Oregon special maritalproperty to which this election applies and who might be entitled to adistribution during my lifetime. I agree that all other terms, conditions andprovisions that apply to the ____________ (name of trust or other propertyinterest) shall apply to the Oregon special marital property to which this electionapplies, and that upon my death, any remaining Oregon special marital propertyshall be distributed as otherwise provided in the trust or other propertyinterest.

Signature of: ____________

(survivingspouse)

SUBSCRIBEDAND SWORN TO before me this _____ day of _____, 2_____.

_______________

Notary Public ofOregon

My commissionexpires: _________

______________________________________________________________________________

(3)Elections made under this section are irrevocable.

(4)The custodial parent or court appointed guardian of a minor beneficiary maysign the election on behalf of the minor beneficiary and the unborn linealdescendents of the minor beneficiary. [2005 c.124 §3]

118.019Gross estate of surviving spouse; Oregon special marital property adjustment. For purposes ofcomputing the tax imposed under ORS 118.010, the gross estate of a decedent whowas a surviving spouse with respect to property that is Oregon special maritalproperty under ORS 118.013 shall include the Oregon special marital property,valued as of the date of death of the surviving spouse. [2005 c.124 §4]

118.020