Committee hears bill to adjust estate-tax exemption for small forest land owners

Salem — The House Committee on Revenue opened a public hearing Wednesday on Senate Bill 485A, which would revise the natural resource estate tax exemption to clarify how small family forest owners document and qualify their land for the exemption.

The bill, which sponsors described as a technical fix to 2023 changes, would limit the exemption to forest land parcels between 10 and 5,000 acres that were held and managed by the decedent or a family member for at least five years before the decedent’s death and held and managed by a family member for five years after the date of death. It would require documentation ‘‘of management activities that are appropriate or customary for qualified forest land parcels’’ and apply to estates of decedents who die on or after Jan. 1, 2026.

Supporters said the change is meant to reflect the long, cyclical nature of forestry and to prevent forced sales of family forests to cover estate taxes. Representative Darcy Edwards, who testified in support, said the bill ‘‘fixes that’’ gap in current law and urged the committee to support family forest owners. Senator David Brock Smith, who helped lead the 2023 legislation, described SB 485A as a needed technical correction: ‘‘this bill came off the floor unanimously because we needed some technical fixes, which is what this bill does to the forestry side of things.’’

Gordon Culbertson, president of the Oregon Small Woodlands Association, said family forests face unique management cycles and added that ‘‘language defining the requirement for material participation is a difficult hurdle for small forest owners.’’ Nicole Mann, also testifying for the association, explained the change to the material-participation standard and said the bill replaces the 75%-of-days test with a standard that recognizes ‘‘actively managing the land appropriate or customary with silviculture management activities.’’

Clint Bence, a certified public accountant who worked on the natural resource credit rules, said the existing 75%-of-days or day-by-day documentation requirement is administratively difficult for woodland owners and that the bill aligns the standard with how participation is treated for income-tax purposes. ‘‘This one says, we’re gonna materially participate for the year,’’ Bence said, explaining the intended change in documentation and administration.

Not all testimony supported the bill as drafted. Jody Weiser, testifying for Tax Fairness of Oregon, questioned why the 75% provision existed at all and urged removing it rather than redefining it. He also raised concerns about the size threshold for qualifying forest land and suggested the current lower bound of 10 acres is ‘‘unreasonably small’’ to constitute a forest business.

Committee members limited public testimony to two minutes and closed the public hearing on SB 485A after the scheduled speakers finished. No formal committee action on the bill was taken at the hearing; further committee consideration and any amendments would occur in later business.

Background: testifiers referenced changes made by the 2023 Legislature to natural resource exemptions and identified SB 485A as addressing implementation and documentation issues that emerged after that law.