Oregon Just Reversed Federal Tax Breaks to Raise $311 Million — Here's What CPAs Need to Know

The Oregon Senate just passed a bill that eliminates three major federal tax breaks from Trump's H.R. 1 spending package, generating an estimated $311 million in new state revenue. If you have Oregon clients, this changes their 2025 tax planning immediately.

Here's the wild part: Oregon's tax code automatically follows federal tax code. So when Congress passed H.R. 1 with new deductions, Oregon taxpayers got those breaks on both their federal and state returns. The state legislature just said "not so fast" and decoupled from the federal changes.

What Got Reversed

The Oregon bill (SB 1507) eliminates three specific federal tax breaks for state purposes:

1. Car loan interest deduction H.R. 1 allowed up to $10,000 in car loan interest write-offs for US-assembled vehicles purchased in 2025. Oregon won't recognize it for state taxes. Phase-out still applies federally ($100K single, $200K joint), but Oregon residents lose the state benefit entirely.

2. Bonus depreciation on equipment Businesses could fully expense new equipment and machinery in year one under federal rules. Oregon reverts to multi-year depreciation schedules. Major hit for manufacturers and capital-intensive businesses.

3. Qualified stock transaction exemptions Oregon eliminated certain federal exclusions for stock transactions (bill didn't specify which ones, but likely QSBS-related). CPAs with startup clients should verify.

What Oregon Did Expand

The bill wasn't all bad news. Oregon boosted the Earned Income Tax Credit (EITC):

- Individual filers: 9% → 14% - Filers with child under 3: 12% → 17% - Affects ~200,000 households

Plus, new tax subsidies for companies creating jobs (details TBD).

The Politics

Every Senate Democrat voted yes (except Mark Meek from Clackamas County). Every Republican voted no.

Senate Minority Leader Bruce Starr called it exactly what it is: "This is a tax increase on Oregonians."

Sponsor Senator Anthony Broadman (D-Bend) countered: "This bill is a practical, balanced, and focused measure intended to make Oregon's economy work for the people who live and work here."

Translation: Oregon needed $311 million to close its budget deficit, and decoupling from federal tax breaks was the easiest revenue grab.

What This Means for CPAs

If you have Oregon clients:

1. Recalculate 2025 state tax estimates Clients who bought a new car in 2025 expecting a state deduction? Not happening. Revise withholding or quarterly payments.

2. Revisit equipment purchase decisions Businesses planning to expense new machinery on their 2025 Oregon return need to switch to multi-year depreciation. This could shift timing of purchases.

3. Check stock transaction planning If you advised clients on qualified stock sales assuming Oregon would follow federal treatment, verify the specific exemptions eliminated.

4. Expand EITC outreach The boosted EITC is substantial (5-point increase). Proactively reach out to low-income clients who qualify — especially those with young children.

The Bigger Trend

Oregon isn't alone. States are increasingly decoupling from federal tax policy when it hurts their budgets. We saw this with SALT cap workarounds, GILTI conformity fights, and now H.R. 1 reversals.

For CPAs: multi-state tax compliance just got messier. You can't assume federal = state anymore, even in states that historically conformed.

What Happens Next

The bill heads to the Oregon House. If it passes (likely — Democrats have the votes), it becomes law.

Even with the $311 million, Oregon still faces a ~$350 million budget deficit for the current biennium. Expect more revenue bills before the short session ends.

Bottom Line

Oregon just demonstrated that state tax policy is no longer a passive follower of federal changes. When Congress cuts taxes, states can opt out — and will, if they need the revenue.

CPAs with Oregon clients: update your 2025 projections, notify affected businesses, and prepare for more states to follow Oregon's playbook.

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