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.
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.
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.
For additional details see the Tax Credit Overview (PDF)
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
- 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.
- 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.
- 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
Q: What does HB 4002 do?
A: 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.
Q: What does HB 4002 require DOR to do?
A: 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 apportion the total credit among those employers who applied.
Q: How will the credit work?
A: 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.
Licensed labor contractors cannot claim the credit, but an eligible employer can claim the credit for overtime paid to workers by a labor contractor on behalf of the eligible employer.
Q: How much money is made available for the credit?
A: 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.
Q: When does the credit start?
A: 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 January 1 through January 31, 2024.
For general questions about the employer tax credit for agricultural worker overtime, email: Ag.Overtime@dor.oregon.gov