Controversial Oregon Tax Break Faces Major Revisions Aimed at Supporting Small Business, Much Like QSBS

Oregon QSBS

Oregon lawmakers will soon be considering overturning the qualified business income deduction. This law was introduced in 2017 as part of a major legislative overhaul by state Republicans. The deduction is currently available to certain business entities including sole proprietors, partnerships, and S-corporations. These “pass-through” businesses can have a tax exclusion on up to 20% of eligible revenue. 

What Would Happen if QBI Were to be Eliminated?

If the new proposal passes, households with an income of over $400,000 would no longer receive this tax break. Instead, the deduction would slowly reduce, or “phase out,” for those making between $400,000 and $500,000. After that $500,000 threshold, the deduction would be eliminated completely. Additionally, some businesses would no longer qualify for the deduction, at all, above certain income levels. 

How was this Bill Introduced?

The new bill was introduced by Senate Finance Committee Chairman Ron Wyden. Wyden has compared his proposal to the Biden administration’s federal plan, which also raises taxes on those making above $400,000. The goal of the revised legislation is to pay for local priorities like education, health insurance, childcare, paid leave, and green energy. 

Wyden has pointed out that the current tax break “disproportionately” benefits the wealthiest while excluding small business owners. According to a report from the Center on Budget and Policy Priorities, the deduction has been heavily tilted toward higher-income households rather than the middle class. The analysis projected that, if the law remains as-is, by the year 2024 up to 61% of the tax benefits would go to the top 1% of earners in the state. 

Some Small Business Groups Support the Bill

The new bill already has backing from certain small business groups, but opposition is also expected from other interest groups and lawmakers. Regardless of the success of this proposal, the current deduction is scheduled to “sunset” (expire) in 2025 unless Congress intervenes. 

This shift in Oregon legislation highlights the ongoing trend of providing specific benefits to small businesses. Investors can also support the growth of small businesses and receive tax benefits through qualified small business stock (QSBS). On a federal level, QSBS is currently not subject to capital gains tax, as long as the business in question meets IRS requirements.

See our latest article surrounding Qualified Business Income Deduction and the basics surrounding Section 199.

QSBS Expert provides resources to orient you to the benefits and limitations surrounding qualified small business stock. Visit our webpage to explore this investment opportunity. 

This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.

About QSBS Expert

QSBS Expert was founded by a group of entrepreneurs, investors, accountants and lawyers who came together when trying to navigate a QSBS situation of their own. We quickly realized that the regulations left a lot of open questions and the publicly available information was confusing to sift through…so we thought that others may also benefit from having a “go to” resource for all things QSBS.