Oregon lawmakers recently passed two bills that may affect how Oregon taxes are calculated for individuals and pass-through businesses. Here’s a brief summary of the key developments.

Pass-Through Entity Elective Tax (PTE-E) Extended Through 2027 – Beneficial to Oregon Business Owners

Oregon’s Pass-Through Entity Elective Tax (PTE-E) was originally scheduled to expire after the 2025 tax year. The legislature has now passed SB 1510A, which extends the program for two additional years, through the 2027 tax year.

What this means:

* Pass-through entities will continue to have the option to make the PTE-E election for 2026 and 2027.

* Businesses that have been using the election should be able to continue doing so for the next two tax years.

* Planning opportunities tied to the SALT workaround remain available for now.

Oregon Disconnects from Portions of Federal Tax Law – Delay or Disallow Deductions

Lawmakers also passed SB 1507, which partially disconnects Oregon from several recent federal tax provisions.

Oregon normally conforms closely to federal tax rules. This bill intentionally creates some differences between federal and Oregon tax calculations starting with the 2026 tax year.

Key areas affected include:

* Bonus depreciation: Oregon will not allow the federal rule permitting immediate 100% expensing of certain property. Instead, businesses must generally depreciate the asset over time for Oregon purposes, and/or use Section 179 for immediate expensing.

* Auto loan interest deduction: Oregon will not adopt the new federal deduction for interest on certain new vehicle purchases.

* Qualified Small Business Stock (QSBS) provisions: Oregon will not follow the federal exemption for certain gains on qualifying small business stock (originally issued C-corp stock only).

What this means:

* Oregon taxable income may differ more significantly from federal taxable income going forward.

* Businesses claiming federal bonus depreciation may see higher Oregon taxable income in the year of purchase, with the deduction spread over future years for state purposes.

If you have questions about how these changes affect your business or 2026 tax planning, feel free to reach out—we’re happy to discuss how these updates may apply to your situation.