Senate Bill 1507 (“SB 1507”), which aims to disconnect Oregon’s state tax laws from a few provisions of the Internal Revenue Code (the “IRC” or the “Code”), was recently passed by the Oregon Senate and the Oregon House of Representatives. There is no sign that Governor Tina Kotek intends to veto the legislation. Consequently, in accordance with Section 49 of SB 1507, it will take effect on the 91st day after the date on which the 2026 regular session of the 83rd legislative assembly adjourns sine die. If my math is accurate, SB 1507 will be effective around June 8, 2026.
The revenue impact of SB 1507, as reported by the Oregon Legislative Revenue Office, is a savings for the state of approximately $300 million during the 2025-2027 biennium. The question that follows is how SB 1507 creates the huge revenue savings.
As reported last week, Senate Bill 1510 (“SB 1510”) was passed by the Oregon Senate on February 24, 2026. It was passed by the Oregon House of Representatives on March 4, 2026. Now, it sits on Governor Tina Kotek’s desk awaiting her signature.
One of our readers asked me a simple question: “What happens next in the legislative process?” As I commenced to answer that question, with his assistance, I quickly realized that taxpayers and tax practitioners do have something to worry about. That worry relates to how SB 1510 was drafted.
In accordance with Section 15b of Article V of the Oregon Constitution, after a bill passes both the House and the Senate, before it becomes law, it is presented to the Governor for action. The Governor can take one of three actions: (i) she may sign the bill into law, (ii) she may allow a bill to become law without signature, or (iii) she may return the bill to the legislature or the Oregon Secretary of State with objections.
As reported earlier, Senate Bill 1510 (“SB 1510”), if passed and signed into law by Governor Tina Kotek, would extend the life of the Oregon state and local tax (“SALT”) workaround for eligible pass-through entities for two more tax years (i.e., through the 2027 tax year).
SB 1510 was passed by the Oregon Senate on February 24, 2026. That same day, it was introduced in the Oregon House of Representatives (“House”). Yesterday, March 4, 2026, it received unanimous approval by members of the House (52 “yea” votes, with eight representatives absent). Now, SB 1510 will be delivered to Governor Kotek for signing. She is expected to sign SB 1510 into law.[1]
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:
- The OBBBA amendment to the SALT cap applies to taxable years beginning after 2024.
- 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.
- 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.
As reported on May 13, 2025, several changes to the Washington state tax laws were passed by lawmakers and delivered to the desk of Governor Ferguson in late April, awaiting his signature to make them law. In the aggregate, these changes create what is likely the largest historical increase in taxes the state has ever seen. While there was some speculation that the governor would not sign all of the bills into law, especially since they had been sitting on his desk for more than three weeks, that speculation is no longer. Governor Ferguson signed these bills into law on May 20, 2025.
Oregon House Bill 3115 (“HB 3115”) was sponsored by Representatives John Lively (D) and Kimberly Wallan (R). It was co-sponsored by Representatives Tom Anderson (D), David Gomberg (D) and Nathan Sosa (D).
HB 3115 was introduced in the Oregon House of Representatives (“House”) on January 13, 2025. It passed the House on March 17, 2025. The legislation was introduced in the Oregon Senate (“Senate”) on March 18, 2025. It passed in the Senate on April 29, 2025. The bill was signed by the Speaker of the House and the President of the Senate on May 1, 2025. Governor Kotek signed HB 3115 on May 8, 2025. The bill becomes law 91 days following adjournment sine die (i.e., the final adjournment of the legislative session).
Many individuals, wanting to liberate their wallets from taxes, have moved to states like Washington, Nevada, Texas, Florida and other states that have friendly state and local tax regimes. This trend, especially for residents of high-tax states such as New York, Oregon and California, has increased in recent years.
Until 2022, Washington had been a top choice for many individuals seeking a better tax climate. Effective January 1, 2022, however, Washington lawmakers adopted a capital gains tax, causing several residents to look for residency outside of Washington, including billionaire Jeff Bezos who moved to Florida. Additionally, effective January 1, 2022, the city of Seattle adopted a new payroll tax on certain businesses with payrolls of $7 million or more. On top of that, effective January 1, 2025, the city of Seattle upped the ante, adopting an additional payroll tax of 5% on businesses with high-earning employees (5% of annual compensation paid to any employee in excess of $1 million who is based at a business location within the city).
Rather than let the seas calm, Washington lawmakers are once again changing the tax terrain in the state. Several tax bills have been passed by the legislature and are on Governor Ferguson’s desk waiting to be signed into law. Whether these bills will become law is yet to be seen.
The Wild Journey
I am taking time out from my multi-part series on Subchapter S to report on the Washington capital gains tax. As you know, I have reported in several prior blog posts on the numerous challenges confronting the tax. The long, interesting and turbulent ride of this legislation, however, may be over!
Initiative 2109 was presented to Washington state voters. A “yes” vote for the initiative would repeal the new tax, while a “no” vote would retain the new tax.
On November 5, 2024, the voters spoke loud and clear – they overwhelmingly voted to retain the Washington capital gains tax. A whopping 64.1 percent of the voters (2,341,553 voters) voted “no” on the initiative, while 35.9 percent of the voters (1,312,162 voters) voted “yes.”
As reported last week, opponents of the Washington state capital gains tax, after ultimately losing in the courts to have the legislation stricken as unconstitutional, decided to take the matter to the voters. They have proposed a ballot measure which if successful, among other things, will repeal the tax.
As part of the presentation of the ballot measure in the voters’ pamphlet, the State of Washington election officials recently announced that the explanation of the ballot measure must include a disclosure of the revenue impact its passage would have on the state’s revenue – a drop of roughly $1 billion per year. Proponents of the ballot measure promptly filed a lawsuit in the Superior Court of Washington for Thurston County (“Court”) to block the inclusion of the revenue impact in the voter packets. A hearing in the case occurred on June 7, 2024.
Judge Allyson Zipp, appointed to the Court by Governor Jay Inslee in 2021, presided over the case. The oral arguments were interesting.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Tulsa, Oklahoma. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and business transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. Mr. Brant is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. He is a Fellow in the American College of Tax Counsel. Mr. Brant publishes articles on numerous income tax issues, including Taxation of S corporations, Taxation of C corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC Section 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Since 2019, he has been a multiple-time honoree of the JD Supra Readers’ Choice Awards for Tax, recognizing him as a Top Author for thought leadership and reader engagement on its platform. Mr. Brant was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
