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Form OR-706-R Instructions
Repayment of Oregon Natural Resource Credit 2023

Use this form only if you inherited natural resource or commercial fishing business property on or after January 1, 2012. If you inherited
natural resource or commercial fishing property before January 1, 2012, use Form IT-1A, Oregon Additional Inheritance Tax Return.

• The property is disposed of or the qualified use of the
Purpose
property stops before it’s used for five out of eight cal-
Use Form OR-706-R to calculate and report the amount endar years after the decedent’s death.
of Oregon Natural Resource Credit that must be repaid. • Involuntary conversions—you may owe additional tax
if you don’t reinvest the proceeds or reinvest only part
of the proceeds from the involuntary conversion quali-
General
fied replacement property.
To qualify for the Oregon Natural Resource Credit, the
property is required to be used as natural resource or As the property owner, you are responsible for reporting
commercial fishing business property for five out of eight and paying any additional estate transfer tax imposed by
years following the decedent’s death. If the qualifying ORS 118.140. You must file Oregon Form OR-706-R to report
property isn’t used for five out of eight years follow- the taxable event. The additional tax is limited to the tax
ing the decedent’s death, or it’s disposed of before this credit claimed on Form OR-706. See example 1 below.
requirement is met, part of the tax credit must be repaid. If you and other qualified family members shared owner-
ORS 118.140. ship of the property and you stop the qualified use, your
additional tax will be based only on your share of the
Definitions property. See example 2 below.

The terms we use in these instructions are defined Nontaxable events for disposition to a family
in Oregon Revised Statute (ORS) 118.140 and Oregon member
Administrative Rule (OAR) 150-118-0110.
Property isn’t disqualified if you transfer the property to:
Additionally, as used in these instructions:
1. Another member of the decedent’s family; or
“Property” means natural resource property or com-
mercial fishing business property used for the natural 2. The decedent’s registered domestic partner; or
resource credit on Form OR-706. 3. Another entity eligible for the credit. Note: Nontaxable
“Property owner” means the person who received prop- events described above relate only to the additional
erty from the decedent. estate transfer tax per chapter 118. If a sale takes place,
even to a family member, the seller may have a capital
“Qualified use” means to use the property as a natural
gain which would be reported on their personal income
resource or commercial fishing business property.
taxes. See example 3 below.
“Disqualified property” means property that:
Even if you don’t owe tax, you must complete and file
• Was disposed of, or stopped qualifying for use, before Form OR-706-R to notify us of a change in property
five out of eight calendar years had passed after the ownership. Complete only parts 1, 2, 5, and 6 of this form.
decedent’s death.
• Was subject to an involuntary conversion and all of Replacement of natural resource property and
the proceeds weren’t reinvested into another natural
involuntary conversions
resource or commercial fishing business property.
Replacement of property. After the credit is claimed,
“Involuntary conversion” is defined in the Internal Rev-
you may replace natural resource property with real or
enue Code (IRC), section 1033.
personal property, as long as the replacement property is
used as natural resource or commercial fishing property
Filing Requirements and all proceeds are reinvested in natural resource or
commercial fishing property. Real property for which
the credit was claimed may only be replaced with real
Taxable events
property. The replacement property must be acquired
The property owner causes a taxable event if the property within one year to avoid a disposition and additional tax.
isn’t used as set out in ORS 118.140. See example 4 below.
150-104-007-1 (Rev. 07-19-23) Page 1 of 4 2023 Form OR-706-R Instructions

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Involuntary conversions. If, within two years of an invol-    penalty charged if the return is filed late and the payment 
untary conversion, you reinvest all proceeds in qualified     isn’t paid by the due date of the return. See ORS 118.260.
replacement property, you won’t owe additional estate 
transfer tax. Complete parts 1–3 and 6 to notify us that an   What to file
involuntary conversion took place, even though you owe 
no tax. If you don’t replace the property within two years    • Form OR-706-R for each property owner.
of the involuntary conversion, you’ll owe additional tax.     • Copy of Schedule OR-NRC.
                                                              • Copy of sales document as applicable.
Partially taxable involuntary conversions. If you paid less   • Supporting documentation for involuntary conversion 
for the qualified replacement property than you received         of property.
in the involuntary conversion or you don’t reinvest the       • Payment—make your check or money order payable to 
entire amount received from the conversion in the quali-         the Oregon Department of Revenue. Include your name, 
fied replacement property, then the conversion is partially      Form OR-706-R, and the year the qualified use of the 
taxable. See example 5 below.                                    property stopped. Don’t include a payment voucher 
                                                                 when paying in the same envelop as your return.
Return due date
File Form OR-706-R and pay any additional taxes due           Where to file
within six months after you disposed of the property or       Note: We are not offering e-file for the Form OR-706-R.
ended the qualifying use.
                                                              Mail to:

Exchange or involuntary conversion                            Returns:
The tax return and additional tax are due six months from     If you’re including a payment with your return, mail your 
the taxable event. A taxable event takes place only when      return without a payment voucher, to: 
your property isn’t replaced with the qualified replace-      Oregon Department of Revenue
ment property within the allowed time. For example, if        PO Box 14555
your property is subject to an involuntary conversion         Salem OR 97309-0940
on February 7, 2022, you have until February 7, 2024 to 
replace it with the qualified replacement property. If you    If you’re not including a payment with your return, mail 
don’t do so within this time period, a taxable event has      your return to: 
taken place. The additional estate transfer tax return is     Oregon Department of Revenue
due six months from the taxable event (in this example,       PO Box 14110
August 7, 2024 six months from February 7, 2024).             Salem OR 97309-0910

Interest and penalty                                          Payment only:
                                                              If you’re paying by mail, separate from your return, 
Interest owed on additional estate transfer tax starts the    include a payment voucher and mail to:
day after the due date of Form OR-706-R. If you don’t pay     Oregon Department of Revenue
the tax within 60 days of our billing notice, the interest    PO Box 14950
rate increases by 4 percent per year.                         Salem OR 97309-0950
Interest accrues on any unpaid tax. Here’s how to calcu-
late the interest due:                                        Include on your check:
                                                              • FEIN or SSN.
Tax x Daily interest rate x Number of days
                                                              • Tax year.
For periods                                                   • Daytime phone.
beginning                      Annual Daily                   • Tax form the payment is for (such as OR-706-R).
January 1, 2024                8%     0.0219%
January 1, 2023                6%     0.0164%
                                                              Line instructions
January 1, 2022                4%     0.0110%
If you file your return after the due date, add a late filing Specific line instructions are provided for lines not fully 
penalty of 5 percent of the tax due to the tax amount. If     described on Form OR-706-R.
you file your return more than three months after the 
due date, add an additional 20 percent penalty for a total    Part 1—Property owner information
penalty of 25 percent of the tax due.
                                                              • Name: 
If your tax is unpaid as of the due date, add a late payment     — Individuals, complete first name, initial, last name, 
penalty of 5 percent of the tax. There is only one 5 percent      and Social Security number (SSN).
150-104-007-1 (Rev. 07-19-23)                     Page 2      of 4                       2023 Form OR-706-R Instructions

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— Non-individuals (for example, a trust), complete Column A—Enter the acquisition date of the new property.
name of owner and federal employer identification
Column B—Enter the description of the newly acquired
number (FEIN).
qualified replacement property as a result of an exchange
• Enter the address and phone number of the property owner. or involuntary conversion. Also describe which property
• Enter the name of the decedent from whom the prop- was replaced. Note: this property should be listed on part 2.
erty owner inherited the property. Enter the decedent’s
date of death and SSN. Part 4—Additional estate transfer tax computation

Part 2—Description of property Examples
Line 1A—Enter the description of the disqualified property. Example 1
Line 1B —Enter the date the property was sold, exchanged, Jack inherited a farm from his father with a date of death
or converted. value of $1,000,000 and farm equipment value of $200,000.
After running the farm for 18 months, Jack decided to sell
Line 1C—Enter the value of the property listed on line
the farm and all the equipment. His Schedule OR-NRC
1A that was used in the formula to calculate the natural
shows the following information: adjusted gross estate
resource credit (NRC). This amount is from Schedule
OR-NRC, part 2, column D that was filed with the dece- $1,950,000; tax payable $96,125; and natural resource credit
cent’s Oregon Estate Transfer tax return. claimed $59,598. Jack will pay additional estate transfer
tax of $41,719, calculated in part 4 as follows:
If jointly owned property or only part of the property
Line 1 ........$ 1,200,000 Line 7 .................$ 0.00
is disqualified, enter only the value of the disqualified
Line 2 ........$ 1,200,000 Line 8 .............$ 59,598
portion or your share of the property. For example, the
Line 3 ......................$ 0 Line 9 .............$ 59,598
estate claimed natural resource property on Schedule
Line 4 ........ $ 1,950,000 Line 10 .....................42
OR-NRC for a farm with a value of $1,000,000. The farm
Line 5 ....................0.00 Line 11 ................. 0.70
was inherited equally by two brothers. After a year of
Line 6 ............. $ 96,125 Line 12 ...........$ 41,719
farming one brother decides to stop farming his share.
Line 1C will have $500,000. Example 2
Line 1D—Enter the proceeds from the sale, exchange, or Assume same facts as example 1, except Jack inherited the
conversion of the property listed on line 1A. farm equipment and his brother, David, inherited the farm.
Line 1E—Enter the amount from the proceeds that After operating the farm together for 18 months, David
wasn’t reinvested in a qualified replacement property. decides to lease the farmland. Jack sells his farm equipment
for $202,000 and buys a cottage with the sale proceeds.
Line 1F—Divide the amount on line 1E by line 1D. Round David doesn’t have additional estate transfer tax because
to two decimal places then multiply by 100. This is the the land remains in qualified use. Jack will file OR-706-R,
disqualified percentage. completing parts 1, 2, 4 and 6. In part 2, line 1C, Jack will
Example: enter $200,000, the value of the equipment he inherited
and sold. On line 1D he will enter $202,000, the proceeds
Assume line 1D equals $975,000 and line 1E equals
of the sale, and $0 on line 1E. Jack will pay additional estate
$467,000.
transfer tax of $7,402, calculated in part 4 as follows:
Line 1F: (467,000 ÷ 975,000) = 0.478974 Line 1 ........$ 1,200,000 Line 7 .............$ 49,024
(0.478974 rounded two decimal places is 0.48) Line 2 ...........$ 200,000 Line 8 .............$ 59,598
0.48 x 100 = 48% Line 3 ........$ 1,000,000 Line 9 ............. $ 10,574
Disqualified percentage to enter on line 1F = 48% Line 4 ........ $ 1,950,000 Line 10 .....................42
Line 1G—Multiply the percentage on line 1F with the Line 5 ....................0.51 Line 11 ................. 0.70
amount on line 1C. This is the disqualified value. Line 6 ............. $ 96,125 Line 12 ............. $ 7,402
Line 5G—Total the amounts on lines 1G to 4G. Example 3
Assume the same facts as in example 2, except that David
Part 3—Property replacement and Jack sold the farm and the farm equipment to their
If you’ve replaced your natural resource or commercial brother Joseph. Because the property was sold to a family
fishing property with another qualified replacement member, David and Jack don’t pay additional estate trans-
property or have reinvested the proceeds from an invol- fer tax per ORS 118.140. David and Jack may have a capital
untary conversion in another qualified replacement gain as a result of the sale of the property that would be
property complete this section. reported on their personal income taxes.

150-104-007-1 (Rev. 07-19-23) Page 3 of 4 2023 Form OR-706-R Instructions

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David and Jack will each complete and file Form OR- Authorization
706-R, parts 1, 2, 5, and 6, to report the sale of the NRC
If you want the tax return preparer to discuss this tax return
property to a family member.
with us, check the box located between the signature line for
Example 4 the owner and the preparer. This is a limited authorization.
Anthony inherited a farm with a value of $1,200,000 from If you want to authorize a person other than the preparer,
his great aunt Vanessa, who passed away June 12, 2019. include a signed Oregon Tax Information Authorization and
The estate claimed an NRC of $45,200 on Form OR-706. Power of Attorney for Representation (POA) form, 150-800-
On April 12, 2021, the city annexed the farm and paid 005, with the tax return, or submit the POA form to us
Anthony $1,200,000. On May 16, 2022, Anthony decided separately. The POA form is available on our website at
to reinvest all of the proceeds from the involuntary www.oregon.gov/dor/forms.
conversion and purchased another farm for $1,200,000.
Anthony doesn’t have to pay additional estate transfer tax
Do you have questions or need help?
because he reinvested all the proceeds from the involun-
tary conversion in another farm within 2 years from the
Internet
involuntary conversion. Anthony will file Form OR-706-R
and complete parts 1, 2, 3, and 6, to notify the Department
www.oregon.gov/dor
of Revenue that the involuntary conversion took place.
• Download forms, instructions, and publications.
Example 5 • Search FAQ.
Assume the same facts as example 4, except that Anthony
purchased another farm for $1,050,000 and purchased an Email
RV for personal use for $150,000. Anthony would need
to pay additional tax on the $150,000 because he didn’t estate.help.dor@ dor.oregon.gov
reinvest that portion of the proceeds. The tax payable on This email address isn’t secure and confidentiality can’t be ensured.
Form OR-706 was $60,250, the NRC claimed was $45,200, General tax and policy questions only. We ask that professional tax
and the adjusted gross estate was $1,600,000. Anthony preparers and attorneys research questions before contacting us.
would calculate his additional estate transfer tax in part
4 as follows: Correspondence

Line 1 ........$ 1,200,000 Line 7 ............. $ 39,765 Estate Tax Unit, Business Division
Line 2 ...........$ 150,000 Line 8 .............$ 45,200 Oregon Department of Revenue
Line 3 ........$ 1,050,000 Line 9 ...............$ 5,435 PO Box 14110, Salem OR 97309-0910
Line 4 ........$ 1,600,000 Line 10 .................... 38 Fax: 503-945-8787, Estate Tax Unit
Line 5 ....................0.66 Line 11 ................. 0.63
Line 6 .............$ 60,250 Line 12 .............$ 3,424
Phone
Part 6—Signature and authorization
503-378-4988 or 800-356-4222
Owner signature Monday–Friday, 7:30 a.m.–5 p.m.
The owner who files the return must sign the return Closed Thursdays from 9–11 a.m. Closed holidays.
under penalties of false swearing, per ORS 118.990. Wait times may vary.
Contact us for ADA accommodations or assistance in
If you paid a tax preparer to complete this tax return, the
other languages.
preparer must sign and date the return, and provide their
identifying information.
In person

Find directions and hours on our website.
www.oregon.gov/dor.

150-104-007-1 (Rev. 07-19-23) Page 4 of 4 2023 Form OR-706-R Instructions

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