Update to Oregon Pass-Through Entity Elective Tax

The Oregon Legislature has approved Senate Bill 1510 (SB 1510), which includes a critical extension of Oregon’s Pass‑Through Entity Elective Tax (PTE‑E). The bill has passed both chambers and is currently awaiting Governor Tina Kotek’s signature.

If signed, SB 1510 is expected to renew the PTE‑E for the 2026 and 2027 tax years, preserving Oregon’s workaround to the federal state and local tax (SALT) deduction cap for eligible pass through entities.

Yes, the SALT deduction cap was increased to a maximum of $40,000 this year under the One Big Beautiful Bill Act. However, many high-income taxpayers (generally those with modified adjusted gross income over $500,000) do not receive the full benefit of the increased SALT cap due to their income. Taxpayers with over $600,000 of MAGI are still limited to the “old” $10,000 SALT cap.

What This Means for Pass‑Through Businesses

• The PTE‑E would remain available to S corporations, partnerships, and LLCs taxed as partnerships for tax years 2026 and 2027
• Eligible entities would continue to pay Oregon income tax at the entity level, with owners receiving a corresponding credit on their Oregon personal income tax returns
• The extension provides important planning continuity for business owners who rely on the PTE‑E to mitigate the federal SALT limitation

Additional PTE‑Related Improvement

SB 1510 also allows overpayments of the elective tax to be credited forward as estimated payments for the following tax year, improving cash flow management and reducing administrative friction for participating entities.

Current Status

While the Legislature has completed action on SB 1510, the PTE‑E extension is not yet law. Final enactment is pending the Governor’s signature, which is widely expected. Taxpayers and advisors should monitor final enactment closely but may reasonably begin planning on the assumption that the PTE‑E will continue for 2026 and 2027.

Kernutt Stokes will continue to monitor the bill and provide an update once it has been formally signed into law. In the meantime, contact your Kernutt Stokes tax advisor to discuss further.