Or. Admin. Code § 150-118-0150

Current through Register Vol. 63, No. 12, December 1, 2024

Section 150-118-0150 - Extension of Time to Pay Tax

(1) An executor may request an extension of time to pay the estate transfer tax. The extension request must be submitted on the form that is used to request an extension of time to file an estate transfer tax return by the date the return is due, or 30 days from the date shown on a notice of deficiency. This request must also include a written statement explaining why an extension of time to pay is being requested and how reasonable cause exits as described in (2). Collateral determined acceptable by the department must be secured for payment of the estate transfer tax as described in (5) if an extension of time to pay greater than one year is sought by the executor. An extension of time to pay tax does not eliminate penalties for late filing of a return, and interest continues to accrue on unpaid tax at the rate provided in OAR 150-305-0140. See OAR 150-118-0170.

(a) The request for an extension of time to pay the estate transfer tax must be made on a form prescribed by the department that applies to the year of the decedent's death.

(b) If reasonable cause exists and acceptable collateral is provided to the department, the department may grant an extension of time for payment of estate transfer tax for up to 14 years, or, in the case of an estate transfer tax deficiency, for a period of up to four years.

(2) In general, reasonable cause exists if:

(a) The estate can pay the tax only by disposing of property for less than market value or by borrowing money at a rate in excess of the mortgage money market (on terms that would inflict loss on the estate), or

(b) The gross taxable estate includes a beneficial interest in one or more closely held businesses whose value exceeds either 35 percent of the gross taxable estate or 50 percent of the net taxable estate. For purposes of this rule:

(A) "Interest in a closely held business" means, as determined immediately before the decedent's death, an interest that was:

(i) An interest as a proprietor in a trade or business carried on as a proprietorship;

(ii) An interest as a partner in a partnership carrying on a trade or business, if the gross taxable estate includes 20 percent or more of the total capital interest in that partnership, or the partnership had 15 or fewer partners;

(iii) Stock in a corporation carrying on a trade or business, if 20 percent or more of the voting stock of such corporation is included in the gross taxable estate, or such corporation had 15 or fewer shareholders. Stock, or a partnership interest, that is held by spouses in a marriage as community property or as joint tenants, tenants by the entirety, or tenants in common, is treated as owned by one shareholder or one partner, whichever is applicable.

(B) "Trade or business" does not include an investment or holding company;

(C) An extension only applies to the portion of tax attributable to the closely held business. To determine the portion of tax attributable to the closely held business, divide the value of the interest in the closely held business by the taxable estate amount, and multiply that ratio by the computed net tax.

Example 1: A's estate assets included a retail store valued at $900,000 that had been operated by the decedent. Listed securities, cash, a family residence and miscellaneous personal effects made up the balance. The taxable estate was $1,300,000. The department may grant an extension for the payment of tax on the portion attributable to the value of the store; i.e. $900,000 divided by $1,300,000 multiplied by tax owed.

Example 2: B's taxable estate of $1,400,000 included $950,000 of stock in a closely held corporation. The balance of the property was listed securities and personal effects. The corporation was a holding company with the majority of corporate assets invested in real estate. The estate could not show that money could only be borrowed on terms that would inflict loss upon the estate. The department will not grant an extension of time to pay the tax.

Example 3: C's taxable estate of $2,100,000 included farm land valued at $1,050,000. The balance of the estate was real property, listed securities, cash and personal effects. The estate leased the farm land for cash rent, which is considered an investment in real property and not a trade or business; the department will not grant an extension for payment of tax.

Example 4: D's taxable estate of $1,200,000 included a tree farm valued at $800,000. The farm consisted of all pre-merchantable timber. The estate demonstrated that the farm could only be sold at a sacrifice price in a depressed market and that money could only be borrowed on terms that would inflict loss upon the estate. The department may grant an extension for payment of the tax that is attributable to the tree farm's value of $800,000.

(3) For purposes of subsection (2)(a) of this rule, if a liquid market exists for property, then fluctuations in the market value of the property will not create reasonable cause for an extension of time to pay the estate tax. However, if no liquid market exists for the property and the lack of a liquid market would require the estate to sell the property for less than its market value, the department may determine that there is reasonable cause for an extension.

(4) The department generally shall accept the following as collateral for purposes of extending the date for payment of tax:

(a) A first mortgage or trust deed on real property with a value at least double the amount of the tax paid on extension;

(b) A surety bond executed by a corporation licensed to do business in the State of Oregon. The bond must be at least double the amount of the tax paid on extension and must be renewed every five years.

(5) Collateral required by (1) must be proposed within 60 days from either the date the estate transfer tax return is due or the date the department provides notification that the extension of time to pay has been tentatively approved, whichever is later. The collateral shall be reviewed as part of the determination process to approve or deny a request for an extension of time to pay the estate transfer tax. Proposed collateral that is approved by the department must be received prior to the department agreeing to an extension of time to pay estate transfer tax. If acceptable collateral is not proposed or received, no extension of time to pay estate transfer tax will be granted.

(6) The executor must make payments in at least equal annual installments for the tax paid on extension, plus accrued interest. The department may cancel an extension of time to pay and collect the tax plus interest if any installment is not paid on or before its due date.

(7) The department may cancel an extension of time to pay and collect the tax plus interest if the value of the interest in a closely held business is reduced by one-third or more through sale, exchange or other disposition, or through aggregate withdrawals of money or other property.

(8) Estates of decedents with a date of death before October 1, 2023, may file a request for extension of time to pay the estate transfer tax by following the provisions of OAR 150-118-0150 that were in effect prior to October 1, 2023.

Or. Admin. Code § 150-118-0150

12-31-77; TC 9-1978, f. 12-5-78, cert. ef. 12-31-78; TC 19-1979, f. 12-20-79, cert. ef. 12-31-79; RD 4-1997, f. 9-12-97, cert. ef. 12-31-97; REV 10-2009, f. 12-21-09, cert. ef. 1-1-10; REV 6-2012, f. 7-20-12, cert. ef. 8-1-12; REV 8-2013, f. & cert. ef. 12-26-13; Renumbered from 150-118.225, REV 9-2016, f. 8-10-16, cert. ef. 9/1/2016; REV 82-2016, f. 12-28-16, cert. ef. 1/1/2017; REV 13-2023, amend filed 09/20/2023, effective 10/1/2023

Statutory/Other Authority: ORS 305.100 & 118.225

Statutes/Other Implemented: ORS 118.225