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.
In this fourth installment of my multi-part series on the One Big Beautiful Bill Act (the “Act”), Steve Nofziger and I discuss a provision of the Act that impacts pass-through business entities and their owners, Code Section 199A.[1]
Background
Code Section 199A, commonly referred to as the Qualified Business Income (“QBI”) deduction, was enacted during President Trump’s first term in office as part of the Tax Cuts and Jobs Act (“TCJA”). As you may recall, the TCJA changed the C corporation tax rate landscape that came with a top tax rate of 35% to a flat rate structure pegged at 21%. Meanwhile, pass-through entities (S corporations, partnerships and sole proprietorships), which are predominately owned by individuals, were left with a graduated tax rate structure that quickly rises to a rate of 37%.
To create more of an even playing field between pass-through entities and C corporations, the TCJA created a new deduction for pass-through entities with the enactment of Code Section 199A. This provision allows owners of certain pass-through entities a 20% deduction of “qualified business income” (“QBI”).
Like many provisions of the TCJA, Code Section 199A was scheduled to sunset at the end of 2025. The Act, signed into law by President Trump on July 4, 2025, made Code Section 199A a so-called permanent provision. It also made several changes to its deduction framework.
Last fall, the IRS announced, 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 state and local taxes deductibility cap (the “SALT Cap”).
On February 4, 2021, Senate Bill 727 (“SB 727”) was introduced in the Oregon Legislature. SB 727 is Oregon’s response to the IRS announcement (see discussion below).
On June 17, 2021, after some amendments, SB 727 was passed by the Senate and referred to the House. Nine days later, the House passed the legislation without changes. On June 19, 2021, Oregon Governor Kate Brown signed SB 727 into law, effective September 25, 2021. In general, it applies to tax years beginning on or after January 1, 2022. Interestingly, SB 727 sunsets at the end of 2023.
In relevant part, SB 727 allows pass-through entities to make an annual election to pay Oregon state and local taxes at the entity level. For pass-through entities that make the election, their owners will potentially be able to deduct more than $10,000 of Oregon state and local taxes on the federal income tax return. However, it gets even better—SB 727 includes a refundable credit feature that may result in further tax savings for some owners of pass-through entities.
BACKGROUND
Sections 1400Z-1 and 1400Z-2 were added to the Internal Revenue Code of 1986, as amended (the “Code”) by the Tax Cuts and Jobs Act. These new provisions to the Code introduce a multitude of new terms, complexities and traps for the unwary.
The first new term we need to add to our already robust tax vocabulary is the phrase “Qualified Opportunity Zones” (“QOZs”). The Code generally defines QOZs as real property located in low-income communities within the US and possessions of the US. Additionally, to qualify as a QOZ, the property must be nominated by the states or possessions where the property is located and be approved by the Secretary of Treasury.
The Service issued proposed regulations corresponding to IRC § 199A today. As discussed in a prior blog post, IRC § 199A potentially allows individuals, trusts and estates to deduct up to 20% of qualified business income (“QBI”) received from a pass-through trade or business, such as an S corporation, partnership (including an LLC taxed as a partnership) or sole proprietorship.
BACKGROUND
Deduction
The deduction effectively reduces the new top 37% marginal income tax rate for business owners to approximately 29.6% (i.e., 80% of 37%) in order to put owners of pass-through entities on a more level playing field with owners of C corporations who now have the benefit of the greatly reduced 21% top corporate marginal tax rate under the Tax Cuts and Jobs Act (“TCJA”). The concept sounds simple, but the application is complex. The new Code provision contains complex definitions and limitations, requires esoteric calculations, and is accompanied by many traps and pitfalls.
As we have been discussing these past several weeks, the Tax Cuts and Jobs Act (“TCJA”) drastically changed the Federal income tax landscape. The TCJA also triggered a sea of change in the income tax laws of states like Oregon that partially base their own income tax regimes on the Federal tax regime. When the Federal tax laws change, some changes are automatically adopted by the states, while other changes may require local legislative action. In either case, state legislatures must decide which parts of the Federal law to adopt (in whole or part) and which parts to reject, all while keeping an eye on their fiscal purse.
BACKGROUND
The Tax Cuts and Jobs Act (“TCJA”) adopted a new 20% deduction for non-corporate taxpayers. It only applies to “qualified business income.” The deduction, sometimes called the “pass-through deduction,” is found in IRC § 199A. There has been a significant amount of media coverage of this new deduction. Rather than repeat what you have undoubtedly already read or heard, we chose to focus this blog post on the not so obvious aspects of IRC § 199A—the numerous pitfalls and traps that exist for the unwary.
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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.
