May 2026

Business Client Update — Oregon PTE Tax and Conformity Legislation

Clients,

We want to provide a brief update on recent Oregon tax developments that may affect business owners, particularly those operating S-corporations and partnerships. If we have already prepared your 2025 tax return, you may have noticed in recent business return summaries that we did not include 2026 Oregon estimated tax payments related to the Pass-Through Entity (PTE) election. We wanted to provide a brief update explaining why, as well as outline the current legislative developments that may affect business owners operating S-corporations and partnerships.

Pass-Through Entity (PTE) Elective Tax Update

The Oregon Legislature recently passed Senate Bill 1510, which would extend Oregon’s Pass-Through Entity Elective (PTE) Tax program through tax years beginning before January 1, 2028. The bill has passed both chambers of the legislature and is currently awaiting the Governor’s signature. The PTE election allows certain pass-through businesses to pay Oregon income tax at the entity level, which may provide a federal tax benefit by allowing the tax to be deducted by the business rather than being subject to the individual $10,000 SALT deduction limitation.

Because the bill has not yet been finalized, the Oregon Department of Revenue has provided temporary flexibility for 2026 estimated payments. For the 2026 tax year, the first and second quarter PTE estimated payments may be made together by June 15, 2026 without penalty or interest. This gives taxpayers time to determine whether the program will be extended before making estimated payments.

Estimated Payment Planning Options

Given the current uncertainty, there are two general approaches taxpayers may consider:

Option 1 – Continue making personal estimated tax payments

Some taxpayers may prefer to continue making Oregon estimated payments personally as if the PTE election will not apply. If the PTE program is ultimately extended and the business elects the PTE tax, those personal estimates may simply result in an overpayment on the owner’s individual Oregon return, which would be refunded or applied to a future tax year. If the program is extended and the business elects the PTE tax, the tax will instead be paid at the entity level and owners will receive a credit on their personal return for the tax paid by the business. In this situation, personal estimated payments already made may result in an overpayment on the owner’s individual Oregon return. That overpayment generally would not be available until the next tax filing season, meaning those funds could remain with the state until the following year when the individual return is filed and the refund is processed.

Option 2 - Wait to determine whether the PTE election will apply

Another option is to wait for final confirmation of the legislation before making estimated payments and then make the PTE estimated payments at the business level. Because the Department of Revenue has allowed the first and second quarter payments to be combined and paid by June 15 for 2026, this approach allows additional time for clarity before payments are required. If the program is extended, the business could elect the PTE tax and make the appropriate estimated payments at that time. If the program is not extended, owners would instead resume personal estimated payments.

Our Current Filing Approach and Recommendation

For business returns that have already been filed, you may have noticed in your summary email that we did not include 2026 estimated payments. This was intentional while we await final legislation on the PTE extension. At this time, we are generally requesting that overpayments be refunded rather than applied to 2026 estimates. Once the status of the bill is finalized, we will follow up with clients to assist with estimated tax planning before the June 15 estimated payment deadline.

If your business return has not yet been completed and you have a preference regarding how to approach estimated payments (personal estimates versus waiting for potential PTE payments), please let us know and we can plan accordingly with you.

For many clients, waiting until closer to the June 15 estimated payment deadline may be a practical approach given the current uncertainty and the flexibility provided by the Department of Revenue for the 2026 tax year. This allows additional time for confirmation of the legislation before making payments. However, each situation is different, and some taxpayers may prefer the certainty of continuing with personal estimated payments. If you would like help evaluating which approach may make the most sense for your situation, please feel free to reach out.

Additional Oregon Legislative Update – SB 1507

The Oregon Legislature has also passed Senate Bill 1507, which addresses Oregon’s conformity with certain federal tax provisions. As currently drafted, the legislation may cause Oregon to decouple from several federal tax provisions beginning in future years, including areas such as bonus depreciation and certain business-related tax treatments. This could result in differences between Federal and Oregon taxable income calculations. These changes do not affect the 2025 returns currently being filed, but they may impact planning for 2026 and later tax years, particularly for businesses considering significant equipment purchases or other transactions.

We are monitoring these developments closely and will provide additional guidance as further clarification becomes available.

These changes were signed into law as of May 2026. If you have any questions about this legislation or how these updates may affect your business or tax planning, please feel free to reach out to our team.