OAR 150-314-0105
Farm Income Averaging

(1)(a) Overview. An individual engaged in a farming business may elect to compute his or her current year (election year) income tax liability under ORS Chapter 316 (Personal Income Tax) by averaging, over the prior three-year period (base years), all or a portion of the individual’s current year electable farm income (as defined in section (4) of this rule). To average farm income, the individual:
(A) Designates all or a portion of his or her elected farm income for the election year as elected farm income; and
(B) Allocates one-third of the elected farm income to each of the three base years; and
(C) Determines the election year tax under ORS Chapter 316 (Personal Income Tax) by determining the sum of:
(i) The election year ORS Chapter 316 (Personal Income Tax) tax without regard to the elected farm income; plus
(ii) For each base year, the increase in ORS Chapter 316 (Personal Income Tax) tax attributable to the elected farm income allocated to each year.
(b) Individual engaged in a farming business. An individual engaged in a farming business includes a sole proprietor of a farming business, a partner in a partnership engaged in a farming business, and a shareholder of an S corporation engaged in a farming business. Estates and trusts may not use farm income averaging. An individual is not required to have been engaged in a farming business in any of the base years in order to make a farm income averaging election.
(c) Making, changing, or revoking an election. A farm income averaging election is made by indicating the election on an individual’s timely filed (including extensions) Oregon income tax return for the election year.
(A) An individual who has an adjustment for an election year or any base year may make a late farm income averaging election, change the amount of elected farm income in a previous election, or revoke a previous election, if the period of limitation prescribed in ORS 314.415 (Refunds) has not expired for the election year. For purposes of this paragraph, an adjustment is any change in taxable income or tax liability that is permitted to be made by filing an amended Oregon income tax return or a change in taxable income or tax liability made as the result of an examination or a federal audit report received from the Internal Revenue Service.
(B) If the individual does not have an adjustment as described in paragraph (A), the individual may not make a late farm income averaging election, change the amount of elected farm income in a previous election, or revoke a previous election, without the consent of the department.
(2) Calculation of tax for the election year. Determine the tax for the election year by allocating elected farm income to the base years only after all other adjustments and determinations have been made. For example, any net operating loss (NOL) carryover or net capital loss carryover is applied to an election year before allocating elected farm income to the base year. Similarly, the determination of whether there is a net Section 1231 gain or loss in the election year and the determination of the character of the Section 1231 items are made before allocating elected farm income to the base years. The allocation of the elected farm income to the base years does not affect any determination with respect to the election year or the base years. For example, in calculating a deduction or tax credit for Oregon that is computed by using adjusted gross income or is limited by adjusted gross income, adjusted gross income for the election year includes any elected farm income allocated to the base years. Similarly, adjusted gross income for the base year is not recalculated to take into account the allocation of elected farm income. The calculation of tax on elected farm income allocated to a base year is made without any additional adjustments or determinations with respect to the base year. For example, if a base year had a partially used capital loss, the remaining capital loss may not be applied to reduce the elected farm income allocated of the base year. Similarly, if a base year had a partially used credit, the remaining credit may not be applied to reduce tax attributable to the elected farm income allocated to the base year.
(3) Base year was previously an election year or another base year. If a base year for a current farm income averaging election was previously an election year for another farm income averaging election, determine the base year’s Oregon tax after reducing the base year’s taxable income by the elected farm income for the prior election year. If a base year for a current farm income averaging election was previously a base year for another farm income averaging election, determine the base year’s Oregon tax after increasing the base year’s taxable income by the elected farm income allocated to that year by the prior election.
Example 1: In each of years 2015, 2016, and 2017, farmer Joe had taxable income of $15,000. In 2018, Joe had taxable income of $30,000 (prior to any farm income averaging election) and electable farm income of $9,000. Joe makes a farm income averaging election to average all $9,000 of his electable farm income for 2018. Thus, $3,000 of elected farm income is allocated to each of the tax years 2015, 2016, and 2017. Joe’s 2018 tax liability is the sum of:
(a) The Oregon tax on $21,000 (2018 taxable income minus elected farm income); plus
(b) For each of the tax years 2015, 2016, and 2017, the Oregon tax on $18,000 minus the Oregon tax on $15,000 (the increase in tax attributable to the elected farm income allocated to each year).
In 2019, Joe has taxable income of $50,000 and electable farm income of $12,000. Joe makes a farm income averaging election to allocate all $12,000 of his electable farm income for 2019. Thus, $4,000 of elected farm income is allocated to each of the tax years 2016, 2017, and 2018. Joe’s 2019 tax liability is the sum of:
(a) The Oregon tax on $38,000 (2019 taxable income minus elected farm income); plus
(b) For both 2016 and 2017, the Oregon tax on $22,000 ($15,000 + $3,000 + $4,000) minus the tax on $18,000 (the increase in Oregon tax attributable to the elected farm income allocated to these years after increasing each years’ taxable income by elected farm income allocated to each year by the 2018 farm income averaging election); plus
(c) For tax year 2018, the Oregon tax on $25,000 (the 2018 taxable income minus elected farm income plus the $4,000 allocated to this base year) minus the Oregon tax on $21,000 (the increase in tax attributable to the elected farm income allocated to this year after reducing this year’s taxable income by the 2018 elected farm income).
(4) Electable farm income.
(a) Farm income includes items of income, deduction, gain, and loss attributable to the individual’s farming business. Farm losses include an NOL carryover, or a net capital loss carryover to an election year that is attributable to a farming business. Income, gain, or loss from the sale of development rights, grazing rights, and other similar rights is not treated as attributable to a farming business. Farm income does not include wages.
(b) Gain or loss on sale or other disposition of property. Gain or loss from the sale or other disposition of property (other than land, but including a structure affixed to the land) that was regularly used in the individual’s farming business for a substantial period of time is treated as attributable to a farming business. Whether property was regularly used for a substantial period of time depends on all of the facts and circumstances.
(c) Cessation of a farming business. If gain or loss is realized on assets used in a farming business after the farming business stops, the gain or loss is treated as attributable to a farming business if the property is sold within a reasonable time after the business ceases operations. A sale or other disposition within one year of the end of business operations is considered to be within a reasonable time. Whether a sale or other disposition that occurs more than one year after the end of business operations is within a reasonable time depends on all of the facts and circumstances.
(d) Determination of amount that may be elected farm income. The maximum amount of income that an individual may elect to average (electable farm income) is the sum of any farm income and gain minus any farm deductions or losses (including loss carryovers and carrybacks) that are allowed as a deduction in computing the individual’s taxable income. Electable farm income may not exceed taxable income. Electable farm income from net capital gain attributable to a farming business cannot exceed total net capital gain. An individual who has both ordinary and net capital gain farm income may elect (up to electable farm income) any combination of such ordinary and net capital gain farm income.
Example 2: Andrew has farm gross receipts of $200,000 and farm ordinary deductions of $50,000. Andrew’s taxable income is $150,000 ($200,000 – $50,000). Andrew’s electable farm income is $150,000, all of which is ordinary income.
Example 3: Bailey has a farm capital gain of $50,000 and a nonfarm capital loss of $40,000. Bailey also has ordinary farm income of $60,000. Bailey has taxable income of $70,000 ($50,000 – $40,000 + $60,000). Bailey’s electable farm income is $70,000. Bailey can elect up to $10,000 of farm capital gain and up to $60,000 of farm ordinary income.
Example 4: Cameron has a nonfarm capital gain of $40,000 and a farm capital loss of $30,000. Cameron also has ordinary farm income of $100,000. Cameron has taxable income of $110,000 ($40,000 – $30,000 + $100,000). Cameron’s electable farm income is $100,000 ordinary farm income minus $30,000 farm capital loss, or $70,000, all of which is ordinary income.
(5) Miscellaneous rules.
(a) Short taxable year. If a base year or an election year is a short taxable year, the rules of IRC Section 443 and the regulations thereunder apply for purposes of calculating Oregon tax.
(A) Base year is a short taxable year. If a base year is a short taxable year, the increase in Oregon tax attributable to the elected farm income allocated to the base year is determined after the taxable income for the base year has been annualized.
(B) Election year is a short taxable year. If an election year is a short taxable year, any elected farm income is first annualized before being allocated to the base years. The increase in Oregon tax attributable to the elected farm income allocated to the base years is the part of the tax computed on an annual basis that bears the same ratio to the full amount as the number of months in the short election year bears to 12.
(b) Changes in filing status. An individual is not prohibited from making a farm income averaging election solely because the individual’s filing status is not the same in an election year and the base years. For example, an individual who files single in the election year, but filed married filing jointly in all of the base years, may still elect to average farm income.
(c) Changes in residency status. An individual is not prohibited from making a farm income averaging election solely because the individual’s residency status is not the same in the election year and the base years. If an individual’s filing status is as a part-year or nonresident in the election year, the taxpayer still may elect to average farm income. Only Oregon source farm income and Oregon source capital gains and losses are considered elected farm income. If an individual’s filing status is a full-year resident in the election year but some or all of the base years are filed as a part-year or nonresident, elected farm income is allocated over the three prior years and added to amounts in both the federal and state column. The Oregon percentage for allocating deductions and modifications and for apportioning tax is recomputed using the new amounts of income in the federal and Oregon columns. Exemption credits are not computed using the revised percentage.
[Publications: Contact the Oregon Department of Revenue for information about how to obtain a copy of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360 (Publication of rules and orders)(2) and ORS 183.355 (Filing and taking effect of rules)(1)(b).]

Source: Rule 150-314-0105 — Farm Income Averaging, https://secure.­sos.­state.­or.­us/oard/view.­action?ruleNumber=150-314-0105.

150‑314‑0005
Period of Computation of Taxable Income 150‑314‑0010
Mitigation of Effect of Limitations and Other Provisions 150‑314‑0012
Determination by Agreement 150‑314‑0025
Pollution Control Facilities: Revocation of Certificate 150‑314‑0027
Pollution Control Facilities: Facilities Not Eligible for Tax Credit 150‑314‑0035
Formula for Apportionment of Lobbying Expenses Subject to Proxy Tax 150‑314‑0040
Withholding on Real Property Conveyances 150‑314‑0045
REMIC Filing Requirements 150‑314‑0047
REMIC Income Taxable to Nonresidents 150‑314‑0055
Change in Methods of Accounting or Reporting 150‑314‑0060
Election to Use Alternative Apportionment Weightings by Taxpayers Engaged in Utilities or Telecommunications 150‑314‑0062
Apportionment and Allocation of Income of Financial Organizations and Public Utilities from Business Activities Within and Without Oregon 150‑314‑0064
Definitions 150‑314‑0066
Apportionment and Allocation of Income Generally 150‑314‑0068
Allocation of Income 150‑314‑0070
Apportionment Factors Generally 150‑314‑0072
Apportionment Factors 150‑314‑0074
Modified Factors for Carriers of Freight or Passengers: General Rule 150‑314‑0076
Modified Factors for Carriers of Freight or Passengers: Special Rules — Railroads 150‑314‑0078
Modified Factors for Carriers of Freight or Passengers: Special Rules — Airlines 150‑314‑0080
Modified Factors for Carriers of Freight or Passengers: Special Rules — Trucking Companies 150‑314‑0082
Modified Factors for Companies Engaged in Sea Transportation Service 150‑314‑0084
Modified Factors for Companies Involved in Interstate River Transportation Service 150‑314‑0086
Other Methods: Limited Application 150‑314‑0088
Modified Factors for Financial Institutions 150‑314‑0090
Public Utilities: Sale of Commodities 150‑314‑0100
Disallowance of Certain Intercompany Transactions Involving Intangible Assets 150‑314‑0105
Farm Income Averaging 150‑314‑0110
Allocation of Oregon Modifications to Passive Activity Losses 150‑314‑0115
Interest on Deferred Oregon Tax Liability with Respect to Installment Obligations 150‑314‑0120
Reduction of Tax Attributes after Discharge of Debt 150‑314‑0125
Listed Transaction Reporting Requirement 150‑314‑0130
Definition: Final Determination 150‑314‑0135
Returns When Accounting Period Changed 150‑314‑0140
Information Returns 150‑314‑0142
Brokers’ Information Returns 150‑314‑0150
Requirement to File Returns Electronically (Corporation E-file Mandate) 150‑314‑0152
Requirement to File Returns Electronically 150‑314‑0160
Report of Changes in Federal Taxable Income 150‑314‑0165
Filing Returns of Income: Due date 150‑314‑0167
Filing Returns of Income: Extensions, Chapters 316, 317 and 318 150‑314‑0169
Standards for Substitute Tax Forms 150‑314‑0171
Alternative Filing Methods 150‑314‑0173
Time Limitations Affected by Military Service 150‑314‑0175
Time Limitations for Persons Outside United States 150‑314‑0185
Payment of Tax 150‑314‑0187
Responsibility for Tax Payments 150‑314‑0195
Delinquency Penalty 150‑314‑0197
Failure to File Penalty 150‑314‑0199
Interest on Deficiencies and Delinquencies 150‑314‑0205
Substantial Understatement Penalty (SUP) 150‑314‑0207
Waiver of 20 Percent Substantial Understatement of Net Tax Penalty Imposed under ORS 314.402 150‑314‑0209
Substantial Authority, Adequate Disclosure and Reasonable Basis 150‑314‑0215
Listed Transaction Understatement 150‑314‑0220
Additional Assessments 150‑314‑0222
Five-Year Statute of Limitations 150‑314‑0224
Time Limit to Make Adjustment 150‑314‑0226
Notification of Gain Realized Upon the Sale or Exchange of a Principal Residence 150‑314‑0228
Extension of Period for Assessment 150‑314‑0230
Effect of Federal Extension of Period for Assessment 150‑314‑0240
Refunds Generally 150‑314‑0242
Refunds 150‑314‑0244
Minimum Offset Amount 150‑314‑0246
Interest Computation — Offset 150‑314‑0248
Refund Offset Priority 150‑314‑0250
Refunds 150‑314‑0252
Effect of Federal Extension of Period for Assessment 150‑314‑0254
Separate Refunds When a Joint Return Has Been Filed 150‑314‑0256
Refunds of Tax Overpayments to Spouse or Heirs 150‑314‑0265
Model Recordkeeping and Retention 150‑314‑0267
Requirement to Provide Copies of Documents 150‑314‑0275
Definition: Collection Charge 150‑314‑0277
Payment Secured by Bond, Deposit or Otherwise 150‑314‑0279
Statute of Limitation on Tax Collection 150‑314‑0285
Assessment of Withholding Tax Against Liable Officers 150‑314‑0290
Estimated Tax: When Estimates Are Required 150‑314‑0292
Estimated Tax: When Estimates Are Required For Tax Exempt Corporations 150‑314‑0294
Estimated Tax: Affiliated Corporations 150‑314‑0300
Estimated Tax: Due Dates of Payments for Short-Period Returns 150‑314‑0302
Estimated Tax: Application of Payments 150‑314‑0310
Requirement to Use Electronic Funds Transfer 150‑314‑0315
Corporation Estimated Tax: Delinquent or Underestimated Payment or Both, Constitutes Underpayment 150‑314‑0317
Estimated Tax: Consolidated Return Underpayments 150‑314‑0319
Estimated Tax: Apportioned Returns 150‑314‑0321
Estimated Tax: Application of Net Loss, Annualized Income Exception 150‑314‑0323
Estimated Tax: Interest on Underpayment 150‑314‑0325
Estimated Tax: Computation of Underpayment 150‑314‑0327
Underpayment of Estimated Tax 150‑314‑0335
Apportionable and Nonapportionable Income Defined 150‑314‑0337
Apportionable and Nonapportionable Income 150‑314‑0339
Proration of Deductions 150‑314‑0345
Apportionment and Allocation of Income Generally 150‑314‑0347
Application of ORS 314.610 to 314.667: Allocation 150‑314‑0349
Apportionment and Allocation for a Taxpayer Carrying on a Unitary Business 150‑314‑0351
Two or More Businesses of a Single Taxpayer 150‑314‑0353
Apportionment for Long-Term Construction Contracts 150‑314‑0355
Special Rules: Installment Sales 150‑314‑0357
Modified Factors for Motion Picture and Television Film Producers 150‑314‑0365
Taxable in Another State 150‑314‑0367
Taxable in Another State 150‑314‑0369
Taxable in Another State 150‑314‑0371
Taxable in Another State 150‑314‑0380
Allocation of Interest and Dividends 150‑314‑0385
Apportionment Formula 150‑314‑0390
Property Factor 150‑314‑0392
Property Factor 150‑314‑0394
Property Factor 150‑314‑0396
Property Factor 150‑314‑0398
Property Factor 150‑314‑0400
Property Factor 150‑314‑0402
Property Factor 150‑314‑0404
Property Factor 150‑314‑0406
Property Factor 150‑314‑0415
Payroll Factor 150‑314‑0417
Payroll Factor 150‑314‑0425
Sales Factor 150‑314‑0427
Sales Factor 150‑314‑0429
Sales Factor 150‑314‑0431
Sales Factor 150‑314‑0435
Sales Factor 150‑314‑0437
Gross Receipts Related to Deferred Gain or Loss 150‑314‑0455
Modified Factors for Publishing 150‑314‑0460
Apportionment of Net Loss 150‑314‑0465
Sales Factor for Interstate Broadcasters 150‑314‑0470
Interstate Broadcasters: Net Income Attributable to this State 150‑314‑0475
Consistent Treatment of Partnership Items 150‑314‑0480
Publicly Traded Partnerships Taxed as Corporations 150‑314‑0485
Partnership Information Returns 150‑314‑0487
Partnership Penalty 150‑314‑0495
Corporation Tax Credits — Converting a C Corporation to an S Corporation 150‑314‑0497
Corporation Tax Credits — Converting an S Corporation to a C Corporation 150‑314‑0510
Definitions for Composite Tax Returns and Pass-through Entity Withholding 150‑314‑0515
Oregon Composite Tax Return 150‑314‑0520
Pass-through Entity Withholding Requirements 150‑314‑0525
Exceptions to Pass-through Entity Withholding Requirements 150‑314‑0530
Divulging Particulars of Returns and Reports Prohibited 150‑314‑0535
Information That May Be Furnished 150‑314‑0540
Rewards for Information 150‑314‑0545
Combat Zone Benefits 150‑314‑0733
Partnership Pays Election After Federal Centralized Partnership Audit Adjustments
Last Updated

Jun. 8, 2021

Rule 150-314-0105’s source at or​.us