What Oregon Business Owners Should Know About QSBS and Bonus Depreciation Changes
Oregon lawmakers have passed Senate Bill 1507, and it is expected to be signed by Governor Tina Kotek. The bill formalizes Oregon’s disconnection from certain provisions in the federal One Big Beautiful Bill Act (OBBBA) and creates meaningful differences between federal and state tax treatment for private companies in Oregon, effective this budget cycle.
“During my testimony to the Oregon Senate Finance and Revenue Committee, I highlighted the challenges this bill could have on Oregon private companies that were looking to reinvest through capital investments,” said Chad Emmert, Partner, Aldrich CPAs + Advisors. “With the bill now close to becoming law, company owners and leaders should be working with their advisors to develop a coordinated plan that includes state-level modeling for expenditures and a reforecasting of cash flows to account for the state’s different depreciation timing rules.”
What is a Disconnect?
Although Oregon starts its tax calculation with federal taxable income, the state is not required to adopt every federal change. When Oregon disconnects from a federal provision, businesses may need to calculate income one way for federal purposes and another for Oregon.
SB 1507 primarily impacts two areas that are significant for private companies:
- The qualified small business stock (QSBS) exclusion
- The ability to use bonus depreciation
When federal and state rules no longer align, planning becomes more nuanced. Exit events, capital expenditures, and ownership transitions now require a dual-lens analysis. This change will mean:
- Greater complexity in compliance
- Increased importance of state-level tax strategy
- A deepened need for more detailed modeling before major transactions or investments
Qualified Small Business Stock: Federal Expansion Versus Oregon Disconnection
OBBBA expanded the federal exclusion for gains from the sale of QSBS. In general terms, this provision allows eligible shareholders to exclude a significant portion, and in some cases all, of the capital gain from federal income tax when selling stock in certain domestic C corporations that meet size and activity requirements.
For sales of QSBS after January 1, 2026, the gain is no longer excluded for Oregon purposes.
Why This Matters for Oregon Business Owners: The divergence between federal and Oregon rules will materially affect net proceeds for Oregon residents selling qualified stock.
A transaction that produces a large federal QSBS exclusion could still generate a substantial Oregon tax liability. That makes state-level modeling a critical part of transaction planning.
Owners should evaluate:
- Entity structure decisions
- Timing of a potential sale
- Residency considerations
- Transaction structure, including asset versus stock sales
Bonus Depreciation for Machinery and Equipment
OBBBA restored or expanded 100% bonus depreciation for certain qualified property, including machinery and equipment. Beginning in 2026, these newly expanded bonus depreciation rules will not apply in Oregon. The new Oregon disconnect will most significantly impact companies in:
- Manufacturing
- Construction
- Agriculture
- Transportation
- Any business making substantial capital investments
Note: Companies acquiring less than $4 million may still be able to annually expense up to $2.5 million of qualified property purchases under a separate provision that remains available in Oregon.
Why This Matters: For capital-intensive businesses, federal full expensing can create substantial near-term tax savings and improved liquidity. However, Oregon’s partial disconnection may create:
- Higher state taxable income in the year of purchase
- Timing differences that complicate projections
- Additional compliance complexity
- Cash flow gaps between federal and state outcomes
Without coordinated planning, businesses may overestimate total tax savings, so business owners and finance leaders should revisit:
- Capital expenditure timing
- Asset classification strategies
- Multi-state tax modeling
- Cash flow forecasting
- Long-term cost recovery planning
Aldrich Insights
With SB 1507 expected to be signed by the Governor Kotek, a holistic approach that integrates tax planning, business advisory, and long-term wealth strategy can help ensure decisions are aligned with operational goals and after-tax outcomes is more important than ever.
For business owners, this is not simply a compliance issue. It is a strategic planning moment. Start by understanding:
- Federal tax savings may not equal Oregon tax savings. State-level modeling is essential before major transactions or capital expenditures.
- Planning now requires careful analysis of entity structure, holding period, residency, and projected Oregon tax exposure.
- Capital-intensive businesses should revisit cash flow forecasts to account for Oregon’s different depreciation timing rules.
- Coordinated planning across tax, transaction strategy, and long-term wealth planning can help protect net proceeds and support sustainable growth.
Make Informed Decisions at Every Stage
If you are an Oregon business owner evaluating a potential stock sale, capital investment, or major transaction, now is the time to reassess your strategy by taking an integrated approach to tax planning and preparation, business advisory, transaction support, and individual wealth management.
Reach out to Aldrich to start the conversation and evaluate how these changes may impact your specific situation.
