UI Tax Relief on the Move, A SALT Limitation Work-Around?

Date: April 09, 2021

Register now for NFIB Oregon’s Small Business Day, April 20

State Director Anthony Smith reports from Salem on the small-business agenda for the legislative and political week ending April 9

It’s Day 81 of the 160-day Oregon Legislative Session and that means we’re officially more than halfway to Sine Die. The legislative calendar has a target goal of ending the session by Friday, June 18, but Day 160 actually occurs on Sunday, June 27, so it’s possible (and probable) that the session will conclude sometime between those two dates.

Bills have continued to die, slowly but surely, as the April 13 deadline quickly approaches for bills to pass out of committee. As of today, NFIB is tracking 207 bills – and we hope to see that number shrink significantly by next week’s deadline. After that, we’ll have a better idea about which bills are likely to pass in their respective chambers of origin, which means we’ll be ramping up our outreach to NFIB members to contact their lawmakers to urge support or opposition to the bills that matter most to small business.

And it’s no accident that NFIB’s 2021 Oregon Virtual Small Business Day is happening on Tuesday, April 20. We picked this day specifically so that we would know where the real threats and opportunities exist as we enter the home stretch of the session.

Here are the quick highlights of what’s been going on, and what’s coming up, with more information below on each topic:

  • Unemployment Insurance Tax Relief on the Move: HB 3389 had a public hearing on April 1. NFIB and other business groups testified in support. A week later, the bill was voted unanimously out of committee and is now heading to the floor of the House for a final vote.
  • A SALT Limitation Work-Around?: The Senate Committee on Finance and Revenue has introduced SB 727, a bill that would create a work-around for the limitation on the State and Local Tax (SALT) deduction created by the Tax Cuts and Jobs Act of 2017.
  • NFIB Oregon’s Virtual Small Business Day: If you haven’t done so already, please register to join us on Tuesday, April 20th, when small businesses will gather virtually to help educate policymakers on the issues most important to their business. Don’t miss your opportunity to be part of this important conversation!
Unemployment Insurance Tax Relief

As reported by OPB and The Oregonian, HB 3389 will provide $2.4 Billion in UI tax relief to Oregon employers over the next decade by providing short- and long-term solutions to what would otherwise be an automatic payroll tax increase to replenish the state’s UI trust fund.

The bi-partisan proposal heard public testimony from NFIB and our partner organizations on April 1, and the House Rules Committee has since advanced the measure to the House floor, where it now awaits a final vote.

Once the bill moves over to the Senate, NFIB will continue to advocate for amendments to make this good bill an even better one by allowing the 11% of Oregon employers that improved their experience ratings in 2020 to keep their lower 2021 rates – and most importantly, to use federal American Rescue Plan Act (ARPA) funds to increase the amount of forgiveness offered to those employers most severely impacted by the pandemic and government-issued restrictions on business activity.

The business community made this ask specifically in a letter to Gov. Kate Brown, Senate President Peter Courtney, House Speaker Tina Kotek, Senate Republican Leader Fred Girod, and House Republican Leaders Christine Drazan on April 8. The requests for these dollars from a myriad of interests will undoubtedly be very competitive, but we’re hopeful that the legislature will consider allocating at least some of the $2.6 Billion in ARPA funds toward the UI trust fund.

A SALT Limitation Work-Around?

Along with the 20% pass-through deduction on Qualified Business Income (QBI) that was a major part of the Tax Cuts and Jobs Act (TCJA) that NFIB supported, Congress limited a taxpayer’s ability to deduct State and Local Taxes (SALT) to $10,000. While less of an issue for states with lower taxes, for business owners in Oregon, this significantly impacted their federal tax liability and reduced the overall benefit of the 2017 tax reforms for these taxpayers.

Since then, the IRS has issued guidance on how states can legally address this issue to effectively reduce certain taxpayers (owners of pass-through businesses) federal tax liability by creating entity-level state taxes that are not subject to the SALT cap, yet deductible on federal tax returns.

The –1 amendments to SB 727 propose to do just that. Oregon would create a new, voluntary tax to be paid by pass-through businesses, while at the same time offering a dollar-for-dollar state income tax credit to the owner(s) of those businesses (proportional to their ownership stake in the company).

The challenge with this bill is that it creates a new tax that doesn’t exist today – to address a temporary problem for taxpayers (you’ll remember that all the personal income tax provisions of the TCJA automatically expire at the end of 2025, which is why we have been focused nationally on making the 20% pass-through deduction for QBI permanent). Once a tax is on the books, they rarely go away, so finding a way to make sure the tax can’t survive without the credit is proving to be a sticky situation.

NFIB will be monitoring this bill very closely. We would love to support an effort to help decrease our members’ federal taxes, but not at the expense of risking the creation of a new business tax in Oregon that could be expanded, and made involuntary (and permanent!) by future legislatures, without a three-fifths supermajority.

NFIB’s Oregon Virtual Small Business Day

Join us at Oregon’s Small Business Day, where small businesses will gather virtually to help educate policymakers on the issues most important to their business. Now is the time to tell legislators how the pandemic has impacted your business and what they should be doing to help Oregon’s economic recovery. Don’t miss your opportunity to be part of this important conversation!

DATE: Tuesday, April 20, 2021
TIME: 10:00am – 12:30pm PT
LOCATION:  Virtual Event
RSVP: Please complete this form to register

Agenda: 

  • Welcome
    • Brad Close, NFIB President & CEO
  • NFIB Key Issues in Oregon
    • State Director Anthony Smith
    • Key Issues: Energy, Environment, Taxes, Labor, COVID-19
  • How to Continue the Conversation with Your Legislators
    • Senior Grassroots Manager Stacy Jenkins

There is no cost to attend this event and guests are welcome—please forward an invitation to a friend or colleague.

Previous Reports and Related News

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