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Agricultural Employer Overtime Tax Credit

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 personal or corporate income 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. See the Agricultural Employer Overtime Tax Credit Tables below.

Nondairy - Agricultural Employer Overtime Tax Credit 

Dairy - Agricultural Employer Overtime Tax Credit 

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

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 open January 1, 2024 and 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, 2022 and July 21, 2022 with representatives from different agricultural sectors and groups. Representatives from the Bureau of Labor and Industries (BOLI), Employment Department, Department of Agriculture, and Business Oregon were also at each session. The purpose of the listening sessions was for the department to better understand:

  • The various payment methods, eg., 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 move forward with design of the application process and determine the information employers will 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 out to the team, please email us.

Program implementation timeline

2022

  • Host agricultural sector listening sessions.
  • Establish communications with agricultural employers.
  • Create guidance and draft form for tax 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 tax credit requests exceed the $55 million program cap.
  • Taxpayers are notified of eligible tax 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 tax credit each employer who applied is allowed to claim.​
The bill specifies the tax 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 the business and if the employer is engaged in the dairy business.​​​
The total amount of tax credits allowed is $55 million per year for all eligible applicants 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 tax credit starting in January 2024.
The tax credit is available for six years and it will phase out; see the Agricultural Employer Overtime Tax Credit Tables.​
​
A refundable tax 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 tax 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. ​

​​

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

E​mployers using multiple NAICS codes will need to allocate the employee hours attributed to each activity. The tax credit percentage will be based on the overtime wages allocated to each NAICS code.

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. ​

P​lease see BOLI's website for details for a Farm/Forest Labor Contractor​ and requirements to be licensed .

No, the bill excludes FLC's from the tax.​
An employer using the services of a licensed FLC may apply for the tax credit. See a list of active licensed labor contractors​​ on BOLI's webpage.​

For purposes of the tax credit, each agricultural employer’s share of the overtime paid for actual hours worked will be determined between the employer and the FLC. Employers will apply for the tax credit for overtime paid​

​For purposes of the tax credit, each agricultural employer's share of the overtime paid for actual hours worked will be determined between the employer and the FLC. Employers applying for the tax credit will need information such as the number of employees, total hours worked, overtime hours worked, and amount of overtime wages paid. ​

Please visit BOLI's webpage to determine if you are considered a FLC. Employers may still apply for the tax credit for the actual overtime wages paid to their employees when the employees worked directly for the employer. The employer will need to keep appropriate records to ensure accurate information is reported when applying for the tax credit.​


The bill defines FTE as 2,080 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. ​​

​Yes, all hours worked by all employees exempt or not exempt are included in the calculation of FTE. 

E​mployers need to include the out of state hours worked by all their employees when calculating the FTE. However, the bill only allows a tax credit for the agricultral overtime wages for hours worked in Oregon.

Employers will determine the business code that aligns with their business category using the 2017 NAICS list​. This will be reported on the tax credit application.

N​o, the bill only allows the tax credit above the threshold for the year. See the Agricultrual Employee Overtime Tax Credit Tables​ for the threshold that applies to you. 

Y​es, eligible marijuana employers must have a production license (ORS 475C.065), be registered as a grower and handler (ORS 5​71.281), or be a registered marijuana grow site (ORS 475C.792).

​Please gather your records for January 1, 2023 – December 31, 2023. Even if you are a fiscal filer, you will report on information for the last calendar year. You will need the following documents and information on hand to complete the application:

  • Your Revenue Online username and password.
  • Federal employer identification number (FEIN) if the business is a C Corporation, S Corporation, or Partnership.
  • Social Security number (SSN) or individual taxpayer identification number (ITIN) if the business is a Sole Proprietor or disregarded entity.
  • Your North American Industry Classification System (NAICS) code(s) and percentage of employees hours worked for each business activity.
  • Farm labor contractor (FLC) contracts and FLC license number, if applicable.
  • Dates you performed activities as an FLC, if applicable.
  • Marijuana or hemp producers, growers, or handlers Oregon Liquor and Cannabis Commission (OLCC) license or registration number, if applicable.
  • Total number of employees who received Form W-2 from you, including all in-state and out-of-state employees.
  • Total regular hours (up to and including 55 hours per week) worked by all employees.
  • Total overtime hours (over 55 hours per week) worked by all employees.
  • Payroll records for the year:
    • Total wages paid for all hours including overtime.
    • Total Oregon overtime portion of wages paid for hours worked over 55 hours.
    • Overtime wages paid to exempt employees and out of state employees. (see What employees are exempt from the agricultural employee overtime pay).


If you are a pass-through entity and the credit will be passed to the owners or partners, their information can be entered in Section F of the application. You will need the following information:

  • Entity type (corporation, individual, pass-through entity, trust, or estate).
  • Identification (ID) type: federal employer identification number (FEIN), Social Security number (SSN), or individual taxpayer identification number (ITIN.)
  • ID number.
  • Percentage of credit.
  • Business name, if applicable.
  • First and last name, if applicable.
  • Address of owner or partner.

​No. Answer no to line 6 of Section F on the application. Then file Form OR-TFR, Transfer Notice for Certain Credits to the department within 10 days of filing your application.

Even if you are a fiscal filer, you will report on information for the last calendar year.

Example: Alpha Corp, a C Corporation, will end its fiscal year 2023 August 31, 2024. Alpha Corp will use information from January 1 – December 31, 2023 to complete the application by January 31, 2024. (See What information will I need to complete the credit application?) The department will send a notice of acknowledgement letter by June 1, 2024 with the approved credit amount. The credit amount will be claimed on Alpha Corp's 2023 income tax return when filed after August 31, 2024.​

​Even if you are a fiscal filer filing a short year return, you will report on information for the last calendar year.​

Example: Delta Corp, a C Corporation will end its fiscal year 2023 August 31, 2024. Delta Corp will use information from January 1 – December 31, 2023 to complete the application by January 31, 2024. (See What information will I need to complete the credit application?) Delta Corp merged with Echo Corp, a C Corporation, on January 1, 2024. Delta Corp is required to file a short return for tax year 2023. All applicants will receive an automatic six-month extension to file their Oregon return. The department will send a notice of the acknowledgement letter by June 1, 2024 with the approved credit amount. Delta Corp will wait for the letter to claim the amount on the Oregon short-year return.​

Contact us

For general questions about the employer tax credit for agricultural worker overtime, email: Ag.Overtime@dor.oregon.gov

Resources

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