Valerie Sasaki, Samuels Yoelin Kantor LLP
At the beginning of the 2026 regular (short) session, the Oregon Legislature was looking at a budget gap of approximately $750 million. Over the session, the gap decreased, but it never really went away. This was, in part, due to the federal bill HR 1 (One Big Beautiful Bill Act). However, more locally, ongoing angst about the transportation package once again took all the oxygen out of the room. SB1601 moved $218 million from other programs to try and fill the budget hole.
As we’ve seen in the past with SB1507, Oregon disconnected from the Internal Revenue Code in two major ways: it disconnected from bonus depreciation and disconnected from federal treatment of qualified small business stock sales. To their credit, even the legislature knew this was bad. To try to improve the optics on this revenue raiser, the legislature also implemented a $1,000-per-job tax credit for businesses that hire new employees (maximum of 12,500 new jobs). The legislature also increased the percentage of the federal earned income tax credit that Oregonians can take on their returns from 9 percent to 14 percent.
More helpfully, SB1510 extended the preferential tax treatment for owners of pass-through entities to tax years beginning before January 1, 2028 and permits the carryforward of overpayments under this regime to estimated tax payments for those years. It also made commercials eligible for the Film Credit and gave tribal governments more leeway to direct gas tax revenue for sales on tribal lands.
The legislature made a few minor tweaks: HB4052 implemented a new corporate excise tax credit for new Oregon chartered banks that start business between January 1, 2027 and December 31, 2032. HB4130 extended the farm special use assessment to land under agricultural processing facilities. Finally, the legislature did some light housekeeping around who can represent taxpayers at the Oregon Tax Court’s Magistrate Division.
Local governments have been struggling to find funds to provide basic services to their residents. HB4134 increased the transient lodging tax (TLT) from 1.5 percent to 2.75 percent. This will show up on travelers’ invoices as the “nature conservation fee.” HB4148 increases the percentage of the TLT that local governments are able to use for general services.
SB1501 essentially creates a special taxing district and redirects payroll taxes from workers in the Rose Quarter and income taxes from performers who perform there to an Oregon Arena Fund. Talk about a needle to thread—the bill tries to say that Oregonians in general won’t have to pay for this bill, but it also says that the legislature anticipates issuing $365 million in debt to support the construction and renovation project.
Several good ideas went by the wayside, including comprehensive tax reform, an estate tax exemption increase, studying Oregon’s taxation of international income, various proposals to reform the sacred cow that is the kicker, and improve budgeting methodology (which feeds into improving the kicker). I expect we’ll see some of those back in 2027’s long session! ♦