Creates Oregon tax subtraction for interest received by financial institutions from loans made for purchase or improvement of agricultural real estate, rural residences and coastal fishing boats.

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83rd OREGON LEGISLATIVE ASSEMBLY--2025 Regular Session
Senate Bill 563
Sponsored by Senator ANDERSON (Presession filed.)
SUMMARY
The following summary is not prepared by the sponsors of the measure and is not a part of the body thereof subject
to consideration by the Legislative Assembly. It is an editor’s brief statement of the essential features of the
measure as introduced. The statement includes a measure digest written in compliance with applicable readability
standards.
Digest: The Act makes a new tax subtraction for banks that loan for rural farms, houses or
boats. (Flesch Readability Score: 72.3).
Creates Oregon tax subtraction for interest received by financial institutions from loans made
for purchase or improvement of agricultural real estate, rural residences and coastal fishing boats.
Applies to tax years beginning on or after January 1, 2026, and before January 1, 2032.
Exempts from commercial activity subject to corporate activity tax interest received by finan-
cial institutions from loans made for purchase or improvement of agricultural real estate, rural
residences and coastal fishing boats.
Applies to tax years beginning on or after January 1, 2026, and before January 1, 2032.
Takes effect on the 91st day following adjournment sine die.
A BILL FOR AN ACT
Relating to tax incentives for financial institution lending in rural areas; and prescribing an effec-
tive date.
Be It Enacted by the People of the State of Oregon:
SECTION 1.
Sections 2 and 3 of this 2025 Act are added to and made a part of ORS
chapter 317.
SECTION 2. As used in this section and section 3 of this 2025 Act:
(1) “Coastal fishing boat” means a commercial fishing vessel that holds a valid boat li-
cense issued under ORS 508.260 and a permit issued under ORS chapter 508 or under the laws
of the State of Washington or California that is valid for operation in the ocean fishery.
(2) “Farm products” has the meaning given that term in ORS 576.006.
(3) “Financial institution” has the meaning given that term in ORS 314.610.
(4) “Interest” means interest on indebtedness attributed to Oregon and incurred in the
ordinary course of the active conduct of any business or interest on indebtedness incurred
that is secured by a single family residence.
(5) “Qualified agricultural real estate loan” means a loan made on real property that is
substantially used for the production of one or more farm products and that:
(a) Has a maturity of not less than five years and not more than 40 years;
(b) Is secured by a first lien interest in real estate, except that the loans may be secured
by a second lien interest if the financial institution also holds the first lien on the property;
and
(c) Has an outstanding loan balance when made that is less than 85 percent of the ap-
praised value of the real estate, except that a loan for which private mortgage insurance is
obtained may exceed 85 percent of the appraised value of the real estate to the extent the
loan amount in excess of 85 percent is covered by the insurance.
(6) “Qualified coastal fishing boat loan” means a loan for the purchase or improvement
NOTE: Matter in boldfaced type in an amended section is new; matter [ italic and bracketed] is existing law to be omitted.
New sections are in boldfaced type.
LC 1058
SB 563
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of a coastal fishing boat that has an outstanding loan balance when made that is less than
85 percent of the appraised value of the coastal fishing boat and is made to an Oregon resi-
dent.
(7) “Qualified net interest income” means total net interest received from:
(a) Qualified agricultural real estate loans;
(b) Qualified coastal fishing boat loans; and
(c) Qualified single family residence loans.
(8) “Qualified single family residence loan” means a loan secured by a single family resi-
dence that is substantially used for the purchase or improvement of the residence.
(9) “Single family residence” means a residence that:
(a) Is the principal residence of its occupant;
(b) Is located in Oregon:
(A) In a rural area as defined by the United States Department of Agriculture that is not
within a metropolitan statistical area; or
(B) In a city that has a population of fewer than 2,500 inhabitants according to the most
recent federal decennial census; and
(c) Is purchased or improved with the proceeds of a loan made by a financial institution.
SECTION 3.
To derive Oregon taxable income, there shall be subtracted from federal
taxable income that amount of interest income received by a financial institution that is
determined by taking the ratio of the qualified net interest income received by the financial
institution over the total interest income earned by the financial institution, multiplied by
the total net income of the financial institution as determined before taking the subtraction
under this section.
SECTION 4.
Sections 2 and 3 of this 2025 Act apply to tax years beginning on or after
January 1, 2026, and before January 1, 2032.
SECTION 5. Section 6 of this 2025 Act is added to and made a part of ORS 317A.100 to
317A.158.
SECTION 6. (1) The definitions provided by section 2 of this 2025 Act apply to this sec-
tion.
(2) Notwithstanding ORS 317A.100, an amount equal to the amount calculated as a sub-
traction under section 3 of this 2025 Act is excluded from the definition of commercial ac-
tivity and is exempt from the tax imposed under ORS 317A.116.
SECTION 7. Section 6 of this 2025 Act applies to tax years beginning on or after January
1, 2026, and before January 1, 2032.
SECTION 8. This 2025 Act takes effect on the 91st day after the date on which the 2025
regular session of the Eighty-third Legislative Assembly adjourns sine die.
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