SALEM — Amid bills aimed at coronavirus response and police reform, legislation enacted during Oregon’s recent special session also included several tax fixes for farmers.

Last year, Oregon lawmakers approved a corporate activity tax of 0.57% on all “excess” revenues over $1 million, plus a fee of $250.

The tax doesn’t apply to revenue from products shipped outside Oregon, but implementing that provision has been confusing for wholesalers of “commingled” farm goods, such as grains.

House Bill 4202, passed during the special legislative session that ended June 26, has simplified that provision by allowing farmers to exclude revenues from the tax based on the USDA’s statistics on industry out-of-state exports of the commingled commodity.

For example, if 70% of a certain crop grown in Oregon is shipped out-of-state according to USDA’s National Agricultural Statistics Service “and other sources of sales information,” that percentage of crop sales wouldn’t be subject to the corporate activity tax.

The other option for farmers with crops headed out-of-state — obtaining a certificate from the wholesaler — is often a headache for those middlemen, said Jenny Dresler, lobbyist for the Oregon Farm Bureau.

“They’re calculating someone else’s tax liability, which is a tall order,” Dresler said.

Another change to Oregon’s corporate activity tax that’s specific to farmers clears up an accounting inconsistency that prevented many from subtracting a portion of their “cost of goods sold” from their tax liability.

Businesses are allowed to reduce the revenues subject to the corporate activity tax by 35% of either their labor expenses or the cost of producing their goods. However, the law relied on a definition of “cost of goods sold” used in accrual accounting, which many farmers don’t use.

Under the accrual accounting system, revenues and expenses are recognized at the time of the transaction, such as when a customer agrees to buy a product or when the business orders supplies.

Farmers more typically rely on cash basis accounting, under which they recognize the revenues and expenses when money actually is received or is paid out.

Under HB 4202, this problem is solved by allowing farmers to calculate their cost of inputs by subtracting their labor expenses from their overall operating costs, rather than using the “costs of goods sold” definition.

Now, farmers will be able to reduce their tax liability by whichever expense is greater: labor or inputs, Dresler said. “We needed to create a mechanism that actually worked.”

Aside from these revisions, the bill has also clarified that crop insurance payments farmers receive for lost crops aren’t considered taxable revenue, since they generally don’t totally offset financial losses.

Sales to farm cooperatives were exempt from the tax under the original version of the law, which excluded most revenues earned by Oregon dairy farmers.

However, this provision left out a handful of dairies that don’t sell to cooperatives — under HB 4202, their milk revenues will now also be exempt.

Despite these improvements for farmers, Oregon corporate activity tax remains “bad tax policy” that reduces the competitiveness of agricultural businesses, said Jeff Stone, executive director of the Oregon Association of Nurseries.

“We’re not an ATM,” Stone said.

The organization had requested an exemption for the farm industry, which often operates on thin profit margins, or at least a gradual phase-in of the tax, neither of which was approved during the special session.

“Is it what we asked for? No. Does it solve all the problems we foresee? No,” Stone said. “Are we grateful it provides some relief? Yes.”