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Employer Tax Credit for Agriculture Worker Overtime Pay

About the tax credit

The Oregon Legislature approved House Bill (HB) 4002 in February 2022. The measure requires agricultural employers to pay certain workers for overtime hours worked and creates a refundable income or corporate tax credit for employers for a percentage of wages paid as overtime pay to agricultural workers for calendar years 2023 through 2028.

Taxpayers who apply for the tax credit will be granted an automatic filing extension. The bill also specifies the hour threshold at which overtime is paid for different years, industries, and number of employees.

Agriculture Employer Overtime Tax Credit

*FTE is full-time equivalent

Also, Senate Bill (SB) 1524 (2022) added the provision that a three-year net operating loss carryback is allowed.

HB 4002 tasks the Oregon Department of Revenue (DOR) with creating the refundable tax credit program with associated application process, tax forms, and apportionment criteria if all applications exceed the $55 million annual cap on the total credit approved by the Legislature.

Getting started

Applications for the tax credit are due by January 31, 2024.

Written notice to all qualifying applicants will be provided no later than June 1, 2024. The notice will state the maximum amount of the credit the taxpayer is eligible to claim on their return.

Listening sessions

The department hosted several listening sessions between July 11 through July 21 with representatives from different agricultural sectors and groups. Representatives from the Bureau of Labor and Industries, Employment Department, Department of Agriculture and Business Oregon were also at each session. The purpose of the sessions were for the department to better understand:

  • The various payment methods (piece-rate, hourly, salary) used in different agricultural sectors.
  • How different agricultural sectors expect to calculate overtime payments.
  • Challenges to calculating overtime payments.

The information gathered will help the department as we move forward with design of the application process and determine the information employers need to apply for the overtime wage tax credit. We appreciate the knowledge shared and are eager to continue with the implementation process.

A PDF file of the PowerPoint used during the listening sessions and a one-page summary of the information shared with participants is available in the quick links. If you need to reach the Ag OT Team, please email us.

Program implementation timeline

2022

  • Host agricultural sector listening sessions.
  • Establish communications with agricultural employers.
  • Create guidance and draft form for credit application process. This may allow employers to consider pay data – gathering and reporting – during 2023.

2023

  • Employers collect information about overtime paid to employees.
  • Establish the tax credit application process.
  • Create Revenue Online application program.
  • Create taxpayer form(s) and letters.
  • Approve administrative rules for the program.

2024

  • Employers apply for tax credit January 1 through January 31, 2024.
  • Applicants will be granted an automatic filing extension.
  • Department apportions credit to approved applicants, if approved credit requests exceed the $55 million program cap.
  • Taxpayers are notified of eligible credit no later than June 1, 2024.

Frequently asked questions

HB 4002 requires agricultural employers to pay certain workers for overtime hours worked. The bill specifies the threshold at which overtime is paid for different years, industries, and number of employees.
The bill creates a refundable personal and corporate income tax credit available to eligible employers for a portion of overtime paid to agricultural workers. The department will accept applications for the tax credit and determine how much credit each employer who applied is allowed to claim.
The legislation specifies the credit as equal to a percentage of the actual incremental overtime paid to agricultural workers during the calendar year. It also specifies varied credit percentages depending on year, number of full-time equivalent employees employed by taxpayer and if employer is engaged in the dairy business.​​
The total amount of tax credits allowed is $55 million per year for all eligible taxpayers combined. If total tax credit applications exceed $55 million per year, the department must proportionately reduce the amount of credits among all approved applicants.
The bill makes the tax credit available for overtime paid in tax years beginning on or after January 1, 2023. Employers will apply for the credit starting in January 2024.
The credit is available for six years and it will phase out, see table above.
A refundable credit is treated as a prepayment of tax. If the total credit is more than the tax liability, then the excess amount is refunded.
The refundable tax credit will be claimed on a taxpayer's personal income tax or corporation return when filed. If the total credit is more than the tax liability, then the excess amount is refunded to the taxpayer when the department processes the tax return.
The bill defines an agricultural worker as an individual who performs services in agriculture for remuneration or rate of pay.

The bill defines agriculture as:​
  • Farming in all its branches, including the cultivation and tillage of the soil;  
  • Dairying; the production, cultivation, growing and harvesting of any agricultural or horticultural commodities;  
  • The raising of livestock, bees, fur-bearing animals or poultry; and  
  • Any other practices performed by a farmer or on a farm as an incident to or in conjunction with farming operations, including preparation for market, delivery to storage or to market, or delivery to carriers for transportation to market. ​

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Employers using NAICS codes 111 for crop production or 112 for animal production and aquaculture that paid overtime wages to agriculture employees working in Oregon. ​

This answer was removed due to the complexity of the issue. Please contact BOLI for questions regarding overtime hours. ​​

This answer was removed due to the complexity of the issue. Please contact BOLI for questions regarding exempt overtime employees. ​

No, they are excluded in HB 4002.
An employer using the services of a licensed FLC may apply for the income tax credit. See a list of active licensed labor contractors​ on BOLI's webpage.

 FTE as defined in the bill is 2080 hours of one or multiple employees worked in a calendar year.​​​

For example:  10,400 total hours worked in a calendar year ÷ 2080 hours = 5 FTE. ​

Employers will determine the business code that aligns with their business category using the 2017 North American Industry Classification (NAICS) list. This will be reported on the credit application.