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Legislature: What business, tax issues passed

March 28, 2018


By Oregon Business & Industry,

Revenue Forecast Shows $99 million increase in available revenue.

The February 16 revenue forecast came in better than expected, allowing Legislators to breathe a sigh of relief. There would be no imminent budget threat to solve during the Short Session. Projected 2017-19 net General Fund resources were up $69.8 million and projected 2017-19 Lottery resources were up $29.3 million – a combined net revenue increase of $99.1 million. The Legislature made an extra $93 million in General Fund expenditures in 2018 based on the strength of the forecast.

Legislature narrowly passes ‘disconnect’ from new federal tax cuts on one specific item – the 20% pass-through income deduction. (SB 1528)

The most contentious tax issue of the February Session was the passage of SB 1528, which passed with bare majorities in both the House and Senate. SB 1528 disconnected from one piece of the 2017 federal ‘Tax Cuts and Jobs Act’ – the 20% income deduction for pass-through business entities. Oregon Business & Industry (OBI) and other business groups argued strongly for full connection to the federal tax cut legislation, particularly those provisions that benefitted small businesses and incentivized capital investment. SB 1528 effectively denied Oregon small businesses the ability to claim the pass-through deduction on their Oregon tax returns. In doing so, the state will be gaining an additional $200 million per year in additional tax revenue that would have otherwise gone toward small business tax relief. OBI opposed SB 1528.

Legislature eliminates tax haven law. (SB 1529)

A nice win from the 2018 Session was the repeal of Oregon’s tax haven law. OBI and our allies argued that under the newly-passed federal ‘Tax Cut and Jobs Act’ provisions, Oregon’s tax haven law would open the door for potential double taxation of foreign income for Oregon companies with affiliate companies in foreign countries. Ultimately, the Legislature agreed. OBI supported SB 1529.

Legislature allows contributions for Oregon Opportunity Grant program. (SB 1528)

While several states considered ways for high income earners to circumvent the new $10,000 SALT (“State and Local Tax”) deduction limit in the federal ‘Tax Cut and Jobs Act’, the Oregon Legislature enacted a very modest proposal which authorized tax credits to taxpayers that make certified Opportunity Grant contributions to the Opportunity Grant Fund but limited the tax credit to no more than $14 million per year. The Oregon Opportunity Grant program provides support to Oregon higher education students in need of financial assistance. OBI testified in support of this provision, but opposed SB 1528.

Modest PERS ‘Side Account’ payment assistance legislation passes. (SB 1566)

The Governor’s priority bill on PERS was the creation of an ‘Employer Incentive Fund’ that would capture windfall revenues and direct those revenues to bring financial assistance to local governments and school districts in need of paying down their PERS liabilities. The question, however, was how to capitalize the fund. That question was answered with the passage of SB 1529, which directed more than $100 million of one-time repatriated income tax receipts (from the federal ‘Tax Cut and Jobs Act’) into the fund. In a very real way, Oregon’s largest companies are directly buying down the PERS debt of local governments and K-12 districts.

Modest PERS ‘Side Account’ payment assistance legislation passes. (SB 1566)

The Governor’s priority bill on PERS was the creation of an ‘Employer Incentive Fund’ that would capture windfall revenues and direct those revenues to bring financial assistance to local governments and school districts in need of paying down their PERS liabilities. The question, however, was how to capitalize the fund. That question was answered with the passage of SB 1529, which directed more than $100 million of one-time repatriated income tax receipts (from the federal ‘Tax Cut and Jobs Act’) into the fund. In a very real way, Oregon’s largest companies are directly buying down the PERS debt of local governments and K-12 districts.

  
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