As a reminder for all employers with employees in Oregon, the Department of Revenue is continuing the Agricultural Employer Overtime Tax Credit program. For overtime paid in 2026, the credit percentages step down by employer size and industry. Agricultural overtime remains owed after 48 hours in a workweek. Applications are filed online only each year January 1–31 (the 2026 cycle accepted filings through February 2, 2026). 

What Employers Need to Do

• Review FTE calculation guidelines: Accurately calculate full-time equivalent (FTE) employees by adding all hours worked by all employees—including exempt staff, out-of-state hours, and hours worked through farm labor contractors—then divide the total by 2,080. Double-check totals to ensure correct credit tiering.

• Track Oregon overtime hours: Only overtime wages earned in Oregon (after 48 hours/week in 2026) qualify for the credit. Maintain clear records separating Oregon overtime from any other locations.

• Confirm eligibility and gather supporting documents: Ensure your business qualifies and that you have payroll records and overtime details ready for submission. Farm labor contractors cannot claim the credit; the farm employer must document and claim.

• Forecast credit amounts and impact on cash flow: Use the published credit percentages (based on employer size/type) to estimate refund values and plan for seasonal operations.

• Prepare and submit the application early: Apply online through Revenue Online between January 1–31 (extended to February 2 in 2026). Early and accurate filing reduces the risk of pro rata reductions if credits exceed the annual $55 million cap.

• Use official resources for guidance: Reference Oregon Department of Revenue FAQs and Oregon BOLI overtime rules to clarify eligibility, documentation, and deadlines.

• Train payroll and HR staff: Educate teams on overtime thresholds (48 hours/week in 2026, dropping to 40 in 2027), application requirements, and relevant deadlines.

• Monitor for program updates: Stay alert to changes in thresholds, cap amounts, or filing instructions for future cycles to ensure compliance and maximize benefit.

Overview

What the Credit Covers: A refundable credit on income or excise tax equal to a statutory percentage of the overtime premium (the amount above base pay) for overtime hours worked in Oregon. Statewide credits are capped at $55 million per year (prorated if oversubscribed).

• 2026 Percentages (by Size/Type):  

• Nondairy (Large): If an employer has more than 50 full‑time equivalent (FTE) employees, the credit is 30% (ORS 315.135(2)(c)).

• Mid‑sized or Dairy (Larger): If an employer has more than 25 FTE employees, but no more than 50 FTE employees, or is a dairy employer with more than 25 FTE employees (of any size), the credit is 50% (ORS 315.135(3)(c)).   

• Nondairy (Small): If an employer has 25 or fewer  FTE employees, the credit is 60% (ORS 315.135(4)(c)).

• Dairy (Small): If a dairy employer has 25 or fewer FTE employees, the credit is 100% (ORS 315.135(5)).

• Overtime Threshold in 2026: Overtime is owed after 48 hours in a workweek (time and a half); scheduled to drop to 40 hours starting January 1, 2027.

Why this matters:

• Budgeting and cash flow: Knowing the reduced 2026 percentages helps to forecast labor costs and expected refunds.

• Refundable benefit: If the credit exceeds tax, the excess is refunded, improving cash timing for seasonal operations.

• Competition for dollars: The $55M annual cap means timely, accurate applications reduce the risk of pro‑rata reductions.

Key Risks for Employers

• FTE calculation (why errors matter): The credit percentage depends on full‑time equivalents. Oregon determines FTE by adding all hours worked by every employee (including exempt staff, out‑of‑state hours, and hours worked through farm labor contractors) and dividing the total by 2,080. An incorrect total can place an employer in the wrong tier.

• Claiming non‑Oregon overtime: Only Oregon overtime wages generate the credit, even though all hours count toward FTE.

• Contract labor pitfalls: Farm labor contractors cannot claim the credit; the farm employer must claim and document allocations.

• Late or incomplete filings: Applications are online only through Revenue Online; late, paper, or incomplete submissions risk denial or reduction.

Source References:

• Oregon Department of Revenue – Revenue Online (Log In Portal)
• Oregon – Business – FAQs
• Oregon BOLI – Minimum Wage and Overtime in Agriculture

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