Larry's Tax Law

Two of our readers alerted me yesterday afternoon that Oregon lawmakers are attempting to keep the Oregon SALT workaround alive and well. 

Senate Bill 1510 (“SB 1510”) was introduced in the Oregon Senate on February 24 (hours after I put my pencil down from writing the last blog article and awaiting its publication).  The bill has been passed by the Senate and is currently waiting to be voted on by members of the House of Representatives.    

Unlike Senate Bill 211 (“SB 211”), which was introduced in the Oregon legislature during the 2025 session, SB 1510 is not a standalone bill solely focusing on extending the life of the Oregon SALT workaround.   Rather, a provision to extend the SALT workaround is sandwiched between three other provisions, namely a provision extending a property tax exemption for cargo containers, the repeal of a tribal tax exemption and a requirement that the board of tax practitioners register enrolled agents.

Background

Prior to the Tax Cuts and Jobs Act (“TCJA”), there was no direct limitation on an individual taxpayer’s deduction of his or her state and local taxes (“SALT”) on the federal individual income tax return.  Of course, for high-income taxpayers, the SALT deduction often triggered the alternative minimum tax.

The TCJA

As of 2018, the TCJA capped the SALT deduction for individuals at $10,000 per year for both single and married taxpayers filing jointly ($5,000 for married taxpayers filing separately).  Hence, the SALT cap contains an inherent “marriage penalty.” 

The OBBBA

The SALT cap, which was part of a compromise among lawmakers for an increase in the standard deduction under the TCJA, was scheduled to sunset at the end of 2025.  However, as previously reported, the One Big Beautiful Bill Act (“OBBBA”) amended and extended the SALT cap. 

The following are the key elements of the SALT cap, as extended under the OBBBA: 

1. The OBBBA amendment to the SALT cap applies to taxable years beginning after 2024.
2. The cap is now $40,000 ($20,000 in the case of a married taxpayer filing separately).  It increases by 1% each year but reverts to $10,000 ($5,000 in the case of a married taxpayer filing separately) in 2030.  The cap, as reduced in 2030 to $10,000 ($5,000 in the case of a married taxpayer filing separately), does not appear to sunset.  So, it becomes a so-called permanent provision of the Internal Revenue Code.  
3. Under the OBBBA, the cap is reduced by 30% of a taxpayer’s modified adjusted gross income to the extent it exceeds the threshold amount ($500,000 for married taxpayers filing jointly and single taxpayers, and $250,000 in the case of a married taxpayer filing separately).  However, the SALT cap cannot be reduced below $10,000 ($5,000 in the case of a married taxpayer filing separately).

After the SALT cap was introduced as part of the TCJA, the Internal Revenue Service announced in IRS Notice 2020-75, with respect to pass-through entities (LLCs or other entities taxed as partnerships or S corporations), that, if state law allows or requires the entity itself to pay state and local taxes (which normally pass through and are paid by the ultimate owners of the entity), the entity will not be subject to the $10,000 SALT cap.  As a consequence, many state legislatures passed so-called SALT cap workarounds for pass-through entities.  Oregon was among those states.